Special Report : Proposals for a Public Investment Program in Mauritania

Document of 4 The World Bank FOR OFFICIAL USE ONLY FILE t;PY CONFIDENTIAL Report No. 1346-MAU SPECIAL REPORT PROPOSALS FOR A PUBLIC INVESTMENT PROGRAM IN MAURITANIA December 14, 1976 Country Programs II Western Africa Region 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. CURRENCY EQUIVALENTS Currency Unit = Ouguiya (UM) US$1.000 = 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) - 0.62 mile (mi) 1 square kilometer (km2) 2 0.386 square mile (sq mi) 1 kilogram (kg) = 2.2 pounds (lb) 1 metric ton (m ton) = 2.204 tons 1 liter (1) = 0.22 US gallon (gal) = 0.26 British gallon (imp gal) FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY CONFIDENTIAL MAURITANIA PROPOSALS FOR A PUBLIC INVESTMENT PROGRAM TABLE OF CONTENTS Page No. Introduction Abbreviations,used Map Summary and Conclusions ............. ....................... i-viii PART ONE: MACRO-ECONOMY AND THE OVERALL PUBLIC INVESTMENT PROGRAM Chapter 1 The Economy from 1970 to 1975 The General Character of the Economy ................... 1 Recent Trends in Output and Incomes .................... 1 Use of Gross Domestic Product .......................... 2 New System of Foreign Exchange Transactions ............ 3 The Balance of Payments ................................ 3 Savings of the Public Sector, 1970-1975 ................ 5 Total Gross Fixed Investment ........................... 7 Public,Investment, 1970 to 1974 ........................ 9 Public Investments in 1975 ............................. 10 Chapter 2 Outline of Third Plan, 1976-1980 ................ 12 Status of the Plan ..................................... 12 Sector Distribution of Planned Public Investment ....... 12 Need for Priority Projects ............................. 14 Chapter 3 The Minimum Level of Public Investment, 1976-1980 ..................................... 15 General .................................. . ........ 15 On-going Projects ................................. 16 Replacement Investments ................... ... ....... 16 Priority New Projects ...................... . ........... 16 The Total Proposed Program .....o......o............... 19 Longer Term-Outlook ..*................................ 20 Private Investment .......... 21 Chapter 4 The Macro-Economic Framework, 1976 to 1985 ...... 23 Growth of Gross Domestic Product ....................... 23 Public Sector Savings ......... *...***................... 27 Financing of the Public Investment.Program ............. 29 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. - 2 - PART TWO: THE SECTOR INVESTMENT PROGRAMS Chapter 5 Mining, Manufacturing and Small Scale Industries Growth Trends . ......................................... 35 Investment and its Relation to Growth .................. 36 Growth of the Public Sector ........................... 37 Past Investment ..... ............................. .o.. . 38 Mining .................. ....... ......... ......... ...... 38 Mining Survey ................................... .. 38 Iron Ore e.... . .. . ....*......*...... 39 Copper Mining .............. ..... * ... .. ......... ... . 40 Other Mining Operations ....................... 41 Public Manufacturing Projects .......................... 42 Fish Processing Industries ............................... 44 Small Manufacturing Enterprises ......................... 46 Public Utilities ............... o.........6................ 50 Chapter 6 The Rural Sector Population ... . .s......... 0..................... 52 Agricultural Production .............. ...... o ......... .. 52 Livestock ........... * ...........*...... 54 Forestry Production ..................................... 54 Public Investment in the Rural Sector: 1970-1975 ....... 54 The Public Investment Program, 1976-1980 ................ 55 Irrigation .... o.......o....o.........o...........*...... 55 Economic Analysis of Irrigation Schemes ............ 56' Priority Irrigation Projects ...................... 57 Flood Recession Cultivation ........................ 58 Other Major Projects ... ...............*......*. 58 The Tagant Mountains ...... s .... ............ ....... 58 Requirements for Qualified Agricultural Workers..... 59 Chapter 7 The Transport Sector Description .... . ................... .. . . .. . . . 61 Road Transport ........ ............. ...... ... . ... ..*. 62 Ports *...*..... ..................................* 62 River Navigation *********...........*....... .......... 62 Air Transport ** * * * * * * * * **.....................60 0 . 0 .* . . . . 63 Railways ................. o.........*........ s.** ... so. 63 Government's Objectives and Strategy .................... 63 Transportation Investment and the Bank Group's Share .... 64 Past Investment (1970-1975) ........................ 64 Planned Investments under the Third Development Plan (1976-1980) ............ 0........0....0......... 65 Construction of the Nouakchott-Nema Road ........... 65 Priorities in the Senegal River Valley ............. 66 Road Maintenance Execution and Financing ........... 66 Construction of a Deepwater Port at Nouakchott ..... 67 -3- Table of Contents (Cont'd) Improvement of the Air Transport Infrastructure ........... 67 Langthening and Modification of the ?.ailwy..1 67 Need for Improved Transport Planning, Coordination and Resource Allocation ................................ 67 Chapter 8 Social Sectors Education . ............. * ........... ...... .......... 68 Health ..........o.. .................. * ................ 71 Tourism ...... ...................... ..................... 72 Housing . . ..... ............... ................... .. 72 ANNEX I: Back-to-Office Report on the discussions of the draft report 1-9 STATISTICAL APPENDIX This report is based on the findings of a mission that visited Mauritania in December 1975. The mission consisted of: Jacob G. Kleve (consultant) Chief of mission G,rard Boulch General economist Kathryn M. Larrecq General economist Adhemar Byl Transport economist INTRODUCTION At the request of the Government, the Bank sent an economic mission to Mauritania in December 1975 to comment on the outline of the new five-year Development eian 197b-1980. Its draft-report was sent to the Government in June 1976 and was discussed extensively in Mauritania in late July. The back-to-office report en that discussion is attached as Annex I to this report; it points out that, at the time of the July visit, the Ministry of Planning had already finalized its oTwn proposal for the Third Plan. Thus, the discussion consisted largely of a critical comparison of the Bank proposals with the draft Plan, which is consi- derably more ambitious. Considering: (a) that the Bank mission was undertaken primarily at the request of the Government and for the Government, and (b) that its findings in December 1975 were based on preli- minary plan data which have substantially changed in the meantime, it was agreed with the Government not to issue this report in final, but to keep it in green cover. For the Government's use, a revised green cover version is being prepared in French. In'Part I, the plan's outline is presented against the background of Mauritania's economic history during 1970-1975. The first chapter of the report reviews this period, focussing in particular on fixed investments. Chapter 2 presents the plan's outline. As the sum of all projects is immense it was necessary to advise which projects deserve priority, and in Chapter 3 the mission's proposals is tested within the framework of a macro-economic projection, which is the object of Chapter 4. The projections cover the period 1976 to 1985 and thus permit the exploration of a feasible public investment level in the period 1981 to 1985. Part II of the report consists of four chapters concerning, respectively, industries, the rural sector, the transport sector and social infrastructure. Tables showing public development projects being considered in each sector follow the relevant chapters. ABBREVIATIONS USED ALMAP Soci6te Algero Mauritanienne de p6che A Mauritanian para-public fishing company with Algerian participation BCEAO Banque Central des Etats de 1'Afrique de 1'Ouest The Central Bank of the West African Monetary Union (UMOA) BCEOM Bureau central d'6tudes pour les 'quipments d'outre mer A French para-public consultant firm BCM Banque Centrale de Mauritanie The Mauritanian Central Bank BRGM Bureau de recherches geologiques et minieres A French para-public office for geological research and mining CCCE Caisse Centrale de CooD6ration Economique A French public institution providing loans to developing countries CFA Franc Communaut6 Financiere Africaine Franc The currency of the West African Monetary Union (UNIOA) CCMAIr)C C3Mpagric 'a"ritanienne pour l'armement, 1'industrie et le commerce A private company with a small Government participation, managing the SOMIP fish meal factory COMINOR Compagnie Mini6re du Nord A subsidiary of SNIM, running the ex-MIFERMA iron ore mine EDF European Development Fund, see under FTD ENA Ecole nationale d'administration National School of Administration, a Mauritanian institute of higher education ENECOFA Ecole nationale pour l'ducation commerciale et familiale National School. for Commercial and Family Education, a specialized secondary school ENI Ecole national d'instituteurs Primary Teacher Training College FAC Fonds d'Aide et de Coop6ration A French public institutuion providing assistance to developing countries 2 FED Fonds Europ6ens de Dveloppement An institution of the European Communities providing assistance to developing countries associated with the EC IMAPEC Industries Mauritaniennes de piche A Spanish vara-vublic fish processing company established in Mauritania MAFCO Mauritania Fishery Company A Mauritanian para-public fishing company operating a cold storage with Japanese participation MIFERMA Soci6t6 des Mines de Fer de Mauritanie A private iron ore mining company, nationalized in late 1974 MT Metric ton OMVS Organisation pour la mise en valeur du fleuve S6n6gal Organization for the Development of the Senegal River SE Mauritania South-east Mauritania SEDES Soci6t6 d'4tudes pour le dveloppement 6conomique et social A French para-public consultant firm SNIM Socit nationale industrielle et mini6re A Mauritanian public enterprise in charge of mines and manufacturing development SOBOMA Socit6 de boisson de Mauritanie A private soft drink factory SOCOGIM Soci&6 de construction et de gestion immobilire A Mauritanian public enterprise in charge of medium and low cost housing SOFRIMA Soci6t6 Frigorifique Mauritanienne A Mauritanian para-public fish freezing company with Japanese participation SOMACAP Socit6 Mauritano-Koweltienne pour 'armement et la p@che A mixed Mauritanian Kuwaiti fishing company SOMAP Socit6 Mauritanienne d'armement de piche A Mauritanian para-public fishing company, liquidated in 1969 3 SOMAURAL Societe Mauritanienne d'Alumettes A Mauritanian public enterprise producing matches SOMIMA Societe miniere de Mauritanie A private copper mining company (with a minority Government participation) that was nationalized in early 1975 SOMINEX Societe nationale d'importation et d'exportation A Mauritanian semi-public enterprise engaged in import and export funds SOMIP Soci6te Mauritani6nne des industries de la pche A Mauritanian public enterprise owned by a fishmeal factory leased to COMAPIC SONADER Societ6 nationale pour le developpement rural A Mauritanian public enterprise in charge of designing and managing agricultural projects T Metric tons UM Ouguiya The Mauritanian currency 以 SUMMARY AND CONCLUSIONS i. This special report is an assessment of the level and composition of prospective public iLvestLiefiL in Zau!inia during the period of the Third Plan 1976-1980 against the background of the country'c recent economic history and within the framework of a macro-economic projection covering the years 1976 to 1985. Investment proposals in Mauritania run quite high and it will be necessary for the Government to select priority projects amongst the many proposed for implementation during the period 1976 to 1980. At the time of the mission's visit the third five-year Plan was still in the prepa- ratory stage - not all projects had been selected nor were the investment volumes and the availability of domestic and foreign financing fully deter- mined. The recommendations made here are intended to give guidance on the total volume of public investment taking into account absorptive capacity and financing constraints (part one of the report) as well as its project content (part two). Historical time series and projections are given in the Statistical Appendix. The last report was entitled: "The Current Economic Situation and Prospects of Mauritania" (Report No. 273-MAU, May 6, 1974). Recent Economic Trends (1970-75) ii. Mauritania is an extreme case of a dual economy with little inter- action between the modern sectors (mining, fish processing industry, public administration) and the traditional sectors (livestock, agriculture and traditional fishing). Productivity levels between these two sectors are widely divergent: in 1973, 75% of the population was active in the tradi- tional sector which contributed less than a quarter of gross domestic pro- duct at factor cost. This explains why gross domestic product and fixed investment continued to grow during the drought period and it also explains the high investment and savings ratio. iii. In late 1974 and early 1975 the two largely private foreign-owned mining companies (MIFERMA iron ore, SOMIMA copper) were nationalized, reflecting domestic pressures for greater Mauritanian control over the exploitation of national mineral resources as well as concern that a large share of the proceeds was being diverted abroad at the expense of the coun- try's development. It is difficult to determine the actual net outflow of factor payments attributable to these two mines, since on the one hand there appears to have been some undervaluation of exports, while on the other hand MIFERMA used part of its depreciation for replacement investment. Nevertheless, the financial importance of the mines can be seen from the fact that in 1975 after nationalization, public corporations turned over an amount equal to 25 percent of current receipts and thus made a significant contribution to public savings. Debt service on the funds Mauritania borrowed to pay off private shareholders in the mining companies will be substantial, amounting to more than $15 million per year through 1982. The mining compa- nies accounted for the preponderance of private savings and investment prior to their incorporation in the public sector following nationalization. Thus, after nationalization in 1974, the share of private investment in the total went down from two-thirds to one-third. Nevertheless, private investment - ii - in mining surveys, including petroleum exploration, took a big jump in 1975 reflecting the Government's recognition that research and development in the sector was mainly dependent on the technology available to foreign firms and its willingness to make acceptable arrangements with them. iv. The period from 1970 to 1975 has been characterized by the drought: the output of the rural sector decreased from 1970 to 1973 by one-third and despite improved weather in the following years was in 1975 still below its 1970 level. The output of the industrial and services sectors was not af- fected by the decline in agricultural production and actually increased through an enlarged capacity of the iron ore mine, the new copper mine and an expansion of government services. Consequently, total gross domestic product continued its growth at a quite reasonable rate. However, the decline in rural sector output lead to a decrease in per capita consumption between 1970 and 1974 and to a concentration of the population in urban centers. As the modern sector employs only about one-third of the urban labor force, most immigrants to the city had to find work in the low productivity informal sector. v. In the years 1970 to 1974 fixed investment took one-quarter of gross domestic product and national savings financed two-thirds of these investments. This situation, rather peculiar for a poor country, can be explained by the dominant mining industry: a large proportion of fixed investments concerned primarily replacement of equipment of the mining com- panies, firanced out of depreciation allowances. Replacement investments, of course, serve primarily to maintain output and do not contribute to increased production. In these early years, public fixed investment remained modest compared to private investment; moreover, public savings only con- tributed one-quarter to the financing of its own investment program, most of it being financed by foreign aid. vi. The current account of the balance of payments showed a small deficit from 1970 to 1973, but a much larger one in 1974 when imports in- creased strongly, due, among other factors, to food and other supplies for drought relief. However, the overall balance of payments was in surplus in 1974, not only because of the financing associated with the drought relief but also because of important balance of payments support from OPEC countries. The same source also provided project-tied grants and loans. Consequently, capital inflows in 1973 and 1974 outstripped the deficit on current account, leading to a build-up of foreign exchange reserves. In 1975, the balance of payments deteriorated mainly due to the impact of lower world copper prices on Mauritania's export earnings. vii. From 1970 to 1974 the current budget of the general government always generated some surplus. Moreover, in 1974 the treasury was further strengthened by the inflow of OPEC funds in anticipation of project imple- mentation. The situation changed dramatically in 1975. First, public fixed investment increased considerably as the implementation of the - iii - Nouakchott-Nema road started. Second, direct and indirect taxes only increased slowly and the current budget surplus was severely reduced. Thus, public investments in 1975 were financed not only by fresh capital inflows but also by drawing on reserves. The Proposed Volume of Public Investment, 1976-1980 viii. In a small country like Mauritania, individual projects loom large and the total volume of public investment depends more on the selection of projects and of the timing of their implementation than on macro-economic parameters like the national savings rate. This is particularly valid for the period 1976-1980 when the total volume of public investment will be determined by the weight of ongoing projects and by those new projects the implementation of which cannot be delayed without endangering the future growth of the country. The planner's freedom to select or reject projects would seem particularly narrow for the coming five years. The minimum package of proj- ects already is so large that it is at the same time the maximum level of public investment, in terms both of absorptive capacity and the availability of financial resources. In reviewing the program the Government will need to attempt to identify those projects which can be postponed if financing is not available. In this report, strategies underlying the mission's selection of projects will be reviewed briefly in discussing each sector. The proposed package is not ideal, as it inevitably represents a compromise reflecting Government desires, absorptive capacity and available foreign aid. In parti- cular planned investment in the rural sector is small. Total public invest- ment, proposed by the mission for the 1976-1980 period amounts to 30 billion UM (in 1975 prices) about half the total, envisioned by Mauritanian planners at the end of 1975 but double the volume of the first half of the seventies. After 1980 the volume of priority new projects becomes less important and for this period Mauritanian planners still have a certain freedom of project selection. ix. The proposed public sector program of 30 billion UM will stretch the absorptive capacity of the country to the maximum: the layer of capable Mauritanian administrators and technicians is thin; project implementation has always lagged behind schedule and project costs are higher in Mauritania than elsewhere. Moreover, the implementation of the proposed public invest- ment program will have important financial consequences which should be under- stood against the background of a,macro-economic projection for the period 1976 to 1985. x. Gross domestic product is expected to grow at 6 percent which is rather low given the huge investment effort. However, it should be remembered that some major projects are meant just to continue already existing opera- tions without expanding them. Gross national product will increase faster as price prospects for Mauritania's major export products - iron ore, pro- cessed fish and cattle - are quite good. Investment is projected to reach an exceptionally high one-third of gross national product throughout the period 1976 to 1985, even assuming a slowing down of the rate of growth in public investment after 1980. However, the large volume of investment will not -iv - prevent a rise in public and private consumption, partly as a result of higher national income from improving terms of trade and partly also because total available resources will be increased through higher net imports of goods and non-factor services. Factor service payments will also increase substantially because of higher interest payments and worker remittances. xi. Implementation of such a public investment program will have the following financial impact. First, public sector contribution to the financ- ing of its own program will not exceed about 25 percent in the period 1976 to 1985. According to the projections of the mission, government budget sur- pluses albeit improving quite considerably will just about be sufficient to cover the increasing foreign debt service charges, and the public sector contribution towards the financing of its own program of new investments will come entirely from public corporations. These assumptions are quite optimis- tic, considering that the current budget showed a very small surplus only in 1975 and public consumption is expected to rise fast because of increased maintenance charges and as a consequence of the extension of Mauritania to the North. Prospects for public corporation savings are clouded as a number of mining and industrial operations presently contemplated or already under construction will most likely not pay for themselves. Small as they are, it seems certain that the projected public sector savings constitute a maximum. As the public sector should at least contribute a quarter to the financing of its own investment program, financing constraints impose a first definite limit on the volume of future public investments, that should not go beyond the mission proposal. Second, debt service in 1980 and 1985 will come close to 15 percent of exports, a considerable burden in view of Mauritania's overwhelming dependence on ore export commodities with their uncertain future in world markets. Third, the implementation of the mission's proposal will require a substantial increase in the inflow of foreign capital (in current prices) from nearly US$90 million in 1976 to over US$170 million in 1980, as compared to only US$62 million in 1974. Out of the estimated $633 million of foreign funds required for the proposed public sector investment program during the entire five-year period nearly $240 million is already committed but not disbursed, and a further $160 million is likely to be forthcoming for the iron mines and Senegal river valley dams. Thus, there remains a residual $233 million required to finance the minimum program; while it does not appear to be unmanageable to mobilize such an additional amount, it certainly comes close to the maximum Mauritania can reasonably expect to raise during the 1976-1980 period, thus imposing another limit to the overall size of the public investment program. Still, in order to sustain commitments and dis- bursements at this scale, an intense effort in project preparation and imple- mentation would be required. The Industrial Sector xii. The mission believes that Mauritania's resource endowments and alternative opportunities are such that the country has a comparative advantage in mining and therefore supports the Guelbs iron ore and the sulphuric copper ore projects. Furthermore, without the implementation of these projects gross domestic product and exports would actually drop in the - v - eighties. However, Mauritanian planners consider that even greater efforts in the development of manufacturing industries would lead to an accelerated and more sustained growth rate of gross domestic product, and the plan out- line contains a number of large scale public industries like the oil, sugar and copper refineries, some of which have already been committed or are being constructed. In the opinion of the mission many of these enterprises will have negative or negligible foreign exchange earnings, and in relation to their investment costs will add little to national value added or to employment, which is a major issue in Mauritania. The Mauritanian government would be ill advised to invest 'new resources in this direction, except in cases where actual investments have already progressed so far that positive returns can be earned from their completion. xiii. The fish processing industry contributes positively to gross domestic product and to the balance of payments, and the expansion of the Nouadhibou fishing harbor would justify a much larger capacity of the industry. However, the expansion of the fish processing industry faces two problems: first, at present even existing processing capacity is under- utilized as the quantity of landed fish is not sufficient. The Rauritanian government should use its licensing policy to ensure sufficient supplies to the processing industries. The mission does not believe that the creatLon of Mauritanian fishing fleets would supply an answer in the short term, even though increased local participation in fisheries should certainly be considered in the long term. Second, water and electricity are essential to the further growth of fish processing, but supply reached its maximum capacity in 1973 and new capacity is urgently needed. By 1985 the fish processing industry is projected to be the second largest foreign exchange earner and a failure in the expansion of the output for lack of water or electricity would strongly increase the foreign trade deficit. xiv. Presently, small-scale industries are underdeveloped in Mauritania, and many intermediate and consumer goods are imported that could readily be made locally on the basis of existing or imported raw materials. One activity in which there is much scope for improvement is repair and maintenance services. Lack of maintenance capacity imposes high costs in imported replacement parts and delays. Building materials, such as bricks, plaster and limestone, are another example; the construction industry at present relies on imported materials and foreign labor as well, making construction costs very high. Other opportunities might be found in such activities as rugs, leather work, and small hardware. Small-scale enterprises could not only help to lower maintenance and construction costs, they have the added potential to absorb much more informal sector labor than they now do, and at lower capital costs per job. The mission recom- mends to set up a special agency for the promotion of small-scale indus- tries. In due course the effort of such an agency could be supported by the creation of specialized financing facilities. The Rural Sector xv. As the majority of the people still lives in the rural sector and given their very low standard of living the mission considers that public investments should be stepped up as far and as fast as circumstances - vi - permit. Unfortunately, lack of research now prevents major investments in certain fields (traditional livestock herding, cattle fattening) and in certain areas (Southeast Mauritania, Tagant mountains), at this time. However, the mission concurs with the plan outline in its emphasis on irrigation from the Senegal and Gorgol rivers. The plan outline does not mention the construction of Diama Dam. However, as this dam permits double cropping in the lower valley of the Senegal River and in the delta, many of the irrigation projects in the plan outline will require its speedy construc- tion. The Diama Dam has therefore been included in the investment program proposed in this report. xvi. As to the irrigation projects themselves, the mission supports the implementation of three medium-size schemes: Gorgol Valley, Boghe Plains and Lake R'Kiz depression. So far, the big foreign contractors able to carry out such projects either have not been interested in irrigation projects or demanded exhorbitant prices. The simultaneous execution of three medium- sized irrigation projects is a major undertaking in Mauritantan circumstances and achieving it would appear to require considerable strengthening of the implementing agency, SONADER, which is now under consideration. Non imple- mentation of these irrigation projects would result in substantially lower growth of rural output and much higher food imports by 1985. Moreover, the country would remain exposed to the drought hazards in much the same way as beforc. In addition, however, important gains are also expected in rainfed grain output and yields by 1985 with relatively modest investments assuming the availability of extension services and appropriate inputs (seed, insec- tLcides). Transport Infrastructure xvii. The Government's own priorities in the transport sector can be sum- marized as follows in order of importance: (a) shift the orientation of external transport from the airport and port of Dakar in Senegal to the Mauritanian ports, especially to Nouakchott; (b) link the most remote parts of the country with Nouakchott to achieve national unity and reduce the wide discrepancies in living standards in different areas of the country and the reliance of some remote parts of the country on neighboring countries such as Mali and Senegal; (c) establish a reliable transport system necessary to develop the more populated and agriculturally productive regions of the South and Southeast. xviii. ObjectLve (c) would appear to be of highest priority in economic terms. The basic need in these two regions is a good system of feeder roads in the river valley and a reliable connection to Nouakchott. Otherwise, sur- plus production cannot reach the consumers and the growing demand in urban - vii - centers cannot exert its influence on agricultural production. As to the link between the river valley and Nouakchott, the mission would recommend a realignment of the Aleg-Kiffa portion of the Nouakchott-Nema road via Boghe and Kaedi. If the Government should decide otherwise, the Kaedi-Boghe-Aleg road should be upgraded to link up with the Nouakchott-Nema road. xvix. The Nouakchott-Nema road which is now under construction and is the principal means to achieve objective (b) will cause an upsurge in the cost of maintenance, although it will not be completed until 1982. The first objective has almost been achieved with the construction and extension of the wharf at Nouakchott, but the Government considers to go one step further and build, with Chinese assistance, a deepwater port at Nouakchott, to be able to handle all categories of imports, even the most bulky ones, which in the meantime keep coming in via Dakar. The mission fears that construction of a deep water port at Nouakchott would also entail large maintenance costs not covered by port revenues and recommends that implementation of this project be postponed. xx. Upgrading of Nouakchott airport and of a number of secondary airports would help to increase the utilization of existing aircraft and be a relatively low cost means to improve communications in this large, sparsely populated country. For the time being replacement of the Nouakchott airport would seem premature. xxi. The Guelbs project should include partial realignment of the Nouakchott-Zouerate railway in order to avoid the Choum tunnel, thus permitting to increase train load by 25 percent. Social Infrastructure xxii. The discrepancy between available and required Mauritanian technicians constitutes the single most important bottleneck for Mauritania's agricultural and industrial development. However, training facilities for technicians in Mauritania only exist at the intermediate level and concern the technical second cycle secondary school (lycee technique) and the national school for commercial and family education (ENECOFA). The technical school has a very limited number of students, who, moreover, prepare them- selves for further study abroad. The national school for commercial and family education trains secondary school graduates in administrative skills. Thus, for practical purposes, all upper and intermediate level Mauritanian technicians are trained abroad. xxiii. The plan proposes establishment of a polytechnical institute for the training of 80 upper level technicians during a three-year course. This institute seems of prime importance to the country and has been retained among the priority projects. The establishment of technical training centers at all levels would in fact deserve higher priority than extension of formal elementary and secondary education, and proposals to this effect are contained in the report. - viii - xxiv. In the field of health the mission recommends not to extend the present infrastructure but to concentrate instead on the training of medical personnel. It seems urgent to establish in Mauritania itself a school for midwives. In certain disciplines (pharmacy, dentistry) Mauritania is entirely dependent on foreign expertise and the number of Mauritanians studying these disciplines abroad should be increased. xxv. Most of the recent migrants who were driven to urban centers during the drought still live in tents and are usually under-employed.' They would be prepared to build their own houses when helped sufficiently. Given this situation, the Mauritanian urban centers seem good places for sites and services projects. Government intervention in the field of housing should help the lowest income groups by providing them with materials and basic services. In the present Mauritanian circumstances, it is doubtful whether the public sector should participate through direct investment. PART I MACRO-ECONOMY AND THE OVERALL PUBLIC INVESTMENT PROGRAM Chapter 1 The Economy From 1970 to 1975 The General Character of the Economy 1.1 Mauritania is an extreme case of a dual economy with little in- teraction between the modern sector (mining, fish processing industry, pub- lic administration) in the North and the traditional sector (livestock, agriculture and traditional fishing) in the South. In 1973, 75 percent of the population was engaged in traditional activities but this sector only contributed 24 percent to gross domestic product at factor costs. Thus, there is a huge difference in productivity between the modern sector and the rest of the economy. The importance of the modern sector is not so much due to its dimensions as to the very low output of the rest of the economy. This particular situation explains why gross domestic product and fixed investment continued to grow during the drought period and it also explains the high domestic investment and savings ratios. 1.2 Mining operations which account for the largest shares of exports, imports, and contribute considerably to tax revenues were in the hands of private firms, MIFERMA for iron ore and SOMIMA for copper ore. The companies were nationalized towards the end of 1974. Consequently, the distribution of fixed investments and savings between the public and private sector changed completely between 1974 and 1975. 1.3 In 1975 the population of Mauritania is estimated to be about 1.26 million, of which some 60 percent are nomadic herdsmen and their families. About 27 percent of the population is of school age (5-14) and a little more than half is in the economically active age group (15-59). People aged 60 or over account for less than 5 percent of the population. The population growth rate during 1973-80 is estimated at 1.8 percent per year, which though high is nevetheless lower than in many African countries, and may be attributable to the somewhat lower reproduction rates of the large nomadic population. Recent Trends in Output and Incomes 1.4 The period from 1970 to 1975 was characterized by drought: the output of the rural sector decreased from 1970 to 1973 by one-third and in 1975 was still below its 1970 level. Value added in the industrial sector increased annually by 5.3 percent during the period 1970 to 1975 whereas value added in the services sector, which consists mainly of services pro- vided by the Government, also increased regularly (by 6.4 percent annually). Industries and services constitute the modern sector and its output was not at all affected by the decline in agricultural production, which is typical for a country with little integration between the traditional and modern sector. The annual growth of total gross domestic product was low (4 per- cent) during the first half of the seventies, but this is still quite rea- sonable given the shocks sustained in the rural economy. The decline in agricultural production led to strong growth of the city population: urban - 2 - population made up some 10 percent of the total population in 1965 and 25 percent in 1973. The same pheonomenon has also been responsible for part of the accelerated rise in prices: an annual increase of about 5 percent during the sixties and 9 percent during the first half of the seventies. 1/ 1.5 Gross domestic product at factor cost, expressed per head of pop- ulation, stood at $223 (average for years 1970 to 1975, 1973 prices) which, for a Sahelian country, is a respectable figure. However, this average hides large differences between urban centers (over $600 per head) and the rural sector (less than $100). The rapid urbanization certainly contributed to narrow the gap in average income between the cities and the rural area as so many of those that flocked into the cities during the drought remained underemployed: in 1973, the modern sector only employed one-third of the male labor force in cities, the others being more or less occupied by the large but unquantified informal sector in Mauritanian cities. In the past, the differences in per capita production between the urban and the rural part of the country were much larger. In 1964 and 1970 for instance, production in cities, expressed per head of population, was about 12 times larger than its equivalent in rural areas. Though the rural exodus diminished the dif- ferences in average standard of living betwen the countryside and the cities, this does not necessarily mean greater income equalization between the rich and the poor, as the rural poor do not automatically become better off by turning into urban poor. In the long run, however, immigration toward the urban centers may have beneficial effects. These will be discussed in more detail in the beginning of Chapter 4. Use of Gross Domestic Product 1.6 The lack of integration between the traditional and the modern parts of the economy is also reflected in the use of gross domestic product: fixed investments and public consumption increased in 'real terms but this was not so with household consumption. Consequently, the share of fixed investments rose from 19 percent of gross domestic product in 1970 to 22.5 percent in 1974. These high ratios are explained by the importance of the modern part of the economy and particularly by replacement investments and savings in the mining sector. During the same period the share of household consumption decreased from about 58 percent in 1970 to about 56 percent in 1974. In facc, total household consumption in current prices was stable from 1970 to 1973 which implies an important decrease in real per capita consump- tion during this period, corresponding to the general decline of the rural sector due to the drought. Household consumption increased strongly in 1974 but over the whole priod 1970 to 1974, total household consumption did not increase in real terms, implying a per capita decline of 1.8 percent per year. 1.7 During most of these years, the deficit in the balance of trade and non-factor services was insignificant, but in 1974 imports increased 1/ European consumer price index in Nouakchott, the only price index available. -3- from 6.2 to 10.1 billion UM, while exports only rose from 6.4 to 8.4 billion UM. Thus in the period prior to 1974, the external resource gap was negli- gible. Moreover, during 1970-1973 the negative balance in factor services was also small (1.0 billion UM or less) and national savings financed the largest share of investments. These savings originated exclusively in the private sector since the public sector, as a whole, had dissavings. New System of Foreign Exchange Transaction 1.8 On June 29, 1973 Mauritania left the West African Monetary Union and established its own national central bank, the Banque Centrale de Mauritanie. On the same date a new national currency, the ouguiya (UM), replaced the CFA Franc at the rate of UM 1 = CFAF 5. This change did not involve any appreci- ation or depreciation of the currency. When first it was introduced into circulation, the ouguiya was maintained in a fixed relation with the French Franc. On January 22, 1974 this fixed relationship was discontinued, and the Central Bank has since used a representative basket of currencies as a basis for establishing the rate. 1.9 Along with the establishment in mid-1973 of the national Central Bank and the new currency, exchange controls were brought under the authority of the Central Bank. Commercial banks were required to settle their foreign exchange balances with the Bank at the close of each business day. Approval authority for all foreign exchange operations, with only a fe- exceptions, was transferred to the Bank. The obligatory repatriation and surrender was specified for all foreign claims arising from exports of goods and services, loans, and in general all income or earnings abroad. In early 1974 a new law consolidated the regime applicable to financial relations with foreign countries. While exchange controls were thus tightened in connection with Mauritania's withdrawal from the CFA Franc system, an attempt has since been made to bring about a gradual easing in their application. In certain in- stances, approval authority for the sale of foreign exchange was transferred back to the banks. With the exception of the foreign exchange limits which continue to be applied in the case of travel and salary remittances, all payments and transfers for current international transactions are being approved freely and without undue delay. The Balance of Payments 1.10 The balance of payments has been estimated for the years 1970 to 1974 but it should be stressed that many components have a weak statistical basis. A large part of the foreign trade, especially on the imports side, was unrecorded prior to the introduction of the national currency and the subsequent imposition of exchange controls. -4- Table 1: RECORDED AND UNRECORDED FOREIGN TRADE, 1971 TO 1974 (in billion U) 1971 1972 1973 1974 Exports Total 5.7 5.9 6.3 8.4 Recorded 5.0 5.4 5.7 8.2 Unrecorded 0.7 0.5 0.6 0.2 Imports Total 5.1 5.8 6.2 10.1 Recorded 3.5 3.9 4.7 9.9 Unrecorded 1.6 1.9 1.5 0.2 1.11 The composition of exports and imports as recorded by the Mauritanian authorities is available only through 1973, and the latter data appear to be very incomplete. According to those data, exports consist of a very limited number of products: iron and copper ore (around 80 percent of total exports), fish products, gum arabic and cattle. Recorded imports are dominated by intermediate and equipment goods (65 percent). Imports of foods and other supplies financed by exceptional foreign drought-relief aid were important beginning 1973. It appears that these drought-related imports financed by grants are somewhat understated in the balance of pay- ments and that no accounting is taken of foreign-financed imports for capital projects. 1.12 The surprisingly small deficit in factor services is due in part to the fact that MIFERMA used part of its depreciation for replacement in- vestment. Moreover, profits were taken abroad (in effect subtracted from the value of merchandise exports) and for this reason did not show up as a payment of factor services. 1.13 The overall current account deficit remained about UM 1 billion through 1972, but with sharply rising imports grew to UM 2.5 billion by 1974. The corresponding capital inflow was heavily augmented by foreign grants and loans beginning 1973. Grants for drought relief and lending for balance of payments support alone amounted to over U1 1.8 billion a year in 1973 and 1974. Foreign capital inflows were again augmented in 1974 by a similar amount of grants and loans for public investment as a number of larger proj- ects got under way. Direct investment, principally for mining surveys, also figured significantly among foreign capital inflows in 1974. -5- Table 2: CAPITAL INFLOW IN 1973 AND 1974 (in billion UM) 1973 1974 Drought relief 1.1 1.9 Capital grants 0.1 0.5 Balance of payments support 0.9 0.7 Project loans 0.5 1.7 Private direct investments 0.5 1.6 Various 1.0 -1.6 Total 4.1 4.8 1.14 While the substantial capital inflows of 1973 were absorbed in large part by imports, the even larger inflows of 1974 led to an important rise in foreign exchange reserves, reflecting a pipeline of foreign funds destined for capital projects. At the same time, the relative abundance of foreign exchange in 1974 led the Central Bank to short term lending abroad. This would explain the large short term capital outflow in 1974, as well as the rise in Central Bank interest earnings in that year. Savings of the Public Sector, 1970-1975 1.15 From 1970-1974 the public sector comprised mainly receipts and expenditure of the central and local governments. As a consequence of the nationalization of MIFERMA and SOMIMA at the end of 1974, surpluses of these enterprises, which previously had accrued to the private sector, thereafter accrued to the public sector, and public savings were augmented accordingly. At the same time, however, public debt service also increased. 1.16 Table 3 shows the evolution of public sector savings. Receipts and expenditure against the current budget constitute the principal part of general government operations. The current budget showed rising sur- pluses during the years 1970-1974, but a significant decline in 1975. - 6 - Table 3: CONSOLIDATED PUBLIC FINANCE (millions of UM in current prices) 1970 1971 1972 1973 1974 1975 Current Budget Receipts /a 1,447 1,805 2,035 2,445 3,501 3,480 Expenditure lb 1,315 1,494 1,776 2,026 2,516 3,392 Surplus on current budget 132 311 259 419 985 88 Special accounts Receipts 305 162 141 342 385 434 Expenditure 194 344 288 575 697 728 Surplus on special accounts 111 -182 -147 -233 -312 -294 Local Government net -57 -63 -72 -96 -109 -145 Public Corporations net - - - - 18 876 Gross Government savings 186 66 40 90 582 525 Less: Debt Service 35 47 37 34 206 127 Net Government savings available for investment 151 19 3 56 376 398 Less: Technical Assistance 272 280 342 437 568 700 Public savings /c -121 -261 -339 -381 -192 -302 /a Includes current receipts of development budget. /b Excludes debt service, including interest which cannot be separated. Ic As defined in national accounts. 1.17 The reduction in the current budget surplus in 1975 is due to stagnating receipts and to a fast increase in expenditure. Actually, following important increases in indirect tax revenues in 1974, there was a decrease in export tax receipts and in receipts from taxes on net income and profits and local sales taxes in 1975. The decrease in export and income and profit taxes is linked to a lower volume of exported iron and copper ore but the decrease in other tax revenues is more difficult to explain. As to the increase in expenditure, in 1975, this was due on the one hand to salaries, goods and services and on the other hand to an important rise in transfers (SOMINEX). The increase in public consumption took place for administrative and social purposes. 1.18 Apart from the current budget, general government savings are determined by certain operations against the development budget, the special accounts, local government budgets, and, since 1974, the net surpluses of -7- the two important public mining enterprises. The development budget has current revenue, the major source of which is fees for fishing rights from foreign fleets operating in Mediterranean waters. These are considered to augment the current surplus and have been included in the receipts of the current budget. Current operations against the special accounts were in deficit after 1970, and these deficits became substantial in 1973-75. Ex- penditure of local government also exceeded receipts throughout the period. Finally, the net surplus of public enterprises made a significant contribu- tion to general government savings in 1975. 1.19 For the period as a whole, 1970-75, general government savings totaled some 1.5 billion UM before debt service, but most of this accrued during the last two years, as noted above, in 1974 because of large increases in both import and export tax receipts and in 1975 because of the inclusion of the net earnings of the mining companies. Service on public debt was very low prior to 1974 but rose six-fold in that year. Still, public savings available for investment were positive, especially so in the latter two years of the period. Finally, technical assistance is shown separately, to permit a reconciliation with national savings as shown in the national accounts. For national accounts purposes these expenditures are treated as part of public consumption, financed by current transfers received in kind by the Mauritanian Government from abroad. The reason for this treatment is that without tech- nical assistance the Mauritanian Government would itself be obliged to hire the services of foreign teachers, doctors, etc., while the foreign transfers which finance technical assistance must be excluded from national savings. Calculated on this basis, net public savings have been negative throughout the whole period. Total Gross Fixed Investment 1.20 In constant 1973 prices, total private and public fixed investments have been fluctuating at around 3 billion UM from 1970 to 1974, taking up between 20 to 25 percent of gross domestic product. This proportion is larger than normal for a poor country, to be explained by the sharp distinc- tion between the modern and the traditional sector. Part of private invest- ments did increase the productive capacity of the country: installations for the copper mine were completed in the early seventies. Moreover, some expansion of the iron mine took place in 1973. However, a large part of private investment consists of replacement of railway track and of rolling stock by MIFERMA and therefore the high rate of investment did not result in a high growth rate. Replacement investments were financed mainly out of depreciation allowances, as noted in paragraph 1.15. 1.21 In 1975 fixed investments rose to 4.3 billion UM (in constant 1973 prices), equal to over 30 percent of gross domestic product. Originally, Mauritania's third plan should have started in 1975, but though plan formu- lation lagged, investments already got under way. As to the distribution of fixed investments by economic sector, there were also great differences between the period 1970 to 1974 and 1975. Fixed investments during the period 1970 to 1974 were characterized by a small share of the rural sector, a dominant industrial share and a relatively modest amount for transport -8- infrastructure. In 1975, investments in the rural sector and in transport infrastructure became more important. In fact, the pattern of investment realized in 1975 already resembles the structure foreseen by the third plan. Table 4: FIXED INVESTMENT PATTERNS (in percent) 197.0-1974 1975 1976-1980 (Actual) (Preliminary) (Plan outline) Rural sector 2.1 7.0 8.9 Industries and mining 77.1 45.9 53.8 Transport infrastructure 9.3 27.8 25.8 Social infrastructure 11.5 19.3 11.4 Total 100.0 100.0 100.0 1.22 Thus, in respect to investment volume as well as to investment patterns, 1975 appears to mark a departure from the past and anticipates future investment policies. Moreover, institutionally the nationalization of MIFERMA and SOMIMA also represents a change in the pattern of investment by source. The share of private investments went down from two-thirds of total fixed investments in 1974 to one-third in 1975. However, when series are adjusted for the two nationalizations, the fluctuations in private fixed investment are smoothed out. Table 5: ADJUSTED PUBLIC AND PRIVATE INVESTMENTS IN 1973 PRICES (in billion UM) 1970-1974 1970 1971 1972 1973 1974 1975 Average Public 0.3 1.0 0.7 0.7 0.9) 1) 3.2 2.5 Miferma and Somima 1.8 1.7 2.0 1.5 0.7 Private without Miferma and Somima 0.5 0.4 0.4 0.7 0.8 1.7 0.6 Total 2.6 3.1 3.1 2.9 2.4 4.9 3.1 Price Index 75 83 87 100 118 132 1.23 Even excluding MIFERMA and SOMLIMA from the private sector private investment increased both in absolute and relative amounts between 1970-75, - 9 - rising from about one-fifth in the early years to one-third in 1974 and 1975. The big jump in 1975 is due almost entirely to mining surveys (1.6 billion UM in 1975) 1/ and tourism (0.3 billion UM) 1/. This development may seem unusual in view of the government's intervention in the established mining enterprises, but it is in line with the readiness of the Mauritanian Govern- ment to keep certain sectors open to private enterprise. Public Investment, 1970 to 1974 2/ 1.24 Public investment covers not only outlays of the centtal government for investment purposes but also*investment financed through the direct spend- ing of foreign donors, such as FED and FAC grants, and supplier credits, which are not recorded in treasury accounts. Table 6 compares realized investment during 1970-74 with plan proposals for the period 1970-73. Table 6: PUBLIC SECTOR PROJECTS PROPOSED AND IMPLEMENTED, IN 1973 PRICES /1 In billion UM In percent Implementation Plan Implementation Proposals 1970-1974 proposals 1970-1973 Rural Sector 0.4 1.7 11.4 14.5 Industries, mining 0.5 4.4 14.3 37.6 Transport infrastructure 1.4 4.1 40.0 35.0 Social infrastructure 1.2 1.5 34.3 12.9 Total 3.5 11.7 100.0 100.0 /1 133 percent of 1970 prices. 1.25 Actual implementation covered only 30 percent of plan proposals. The delay between planning and implementation can be understood in terms of the extremely difficult circumstances in Mauritania and many projects of the second plan figure again in the list of projects for the third plan. The volume of implemented projects in social infrastructure is more or less in line with plan targets but in all the other sectors realizations fell far short of proposals, especially industries (10 percent only). The share of rural sector projects implementation comes close to plan proposals, but original proposals gave the sector rather low priority. Transport infrastruc- ture, which was planned to receive 35 percent of public investment, in fact achieved about this priority, but fixed investment in industry has been much less than foreseen, absolutely as well as relatively.- I/ In current prices. 2/ A detailed discussion of past public investments by major sectors is provided in Part II of this report. - 10 - 1.26 As to the financing of public sector investment, capital expendi- ture allocated against the development budget.and special accounts comprises not only fixed investment, but also financial operations, such as the purchase of shares in existing enterprises. Table 7: CUMULATIVE FINANCING OF PUBLIC SECTOR INVESTMENTS IN CURRENT PRICES, 1970-1974 (in billion UM) Source of Financing Mining companies Mining companies excluded from included in public sector public sector Local resources -0.8 6.1 (Savings) (1.0) (7.9) (Transfer from other sectors) (-1.8) (-1.8) Foreign resources 4.2 4.2 (Grants) (1.5) (1.5) (Loans) (2.7) (2.7) Errors and omissions 0.7 0.7 Total 4.1 11.0 (Fixed investments) (3.5) (10.4) (Financial operations) (0.6) (0.6) 1.27 During the period 1970 to 1974 foreign grants and loans were equal to total capital outlays including financial operations of the general gov- ernment. A considerable part of these, mostly from OPEC countries, was re- ceived by the Treasury in 1974, which, since they were not immediately spent, lead to transfers to other parts of the economy, mainly in the form of ad- vances and the building up of reserves with the Central Bank. Grants and loans received from abroad but'not immediately spent were intended for the Nouakchott-Nema road and for industrial projects. 1.28 During the period as a whole, the 1 billion UM in gross savings of the general government was equivalent to about a quarter of its capital out- lays. However, when the nationalized companies are included with the public sector the contribution of savings to the financing of investment, including replacement, becomes much higher (over 70 percent), even though total fixed investment also goes up. Public Investments in 1975 1.29 From 1975 onwards, the two mining companies, MIFERMA and SOMIA, are part of the public sector. Thus in order to compare the period 1970 to - 11 - 1974 with the years thereafter it is necessary to define the public sector with and without the two mining companies, not only for investment but for its financing as well. Balance of payments data which would permit a break- down of the financing of investment in 1975 are not yet available, but it is certain that the picture is much lesb favorable than for the preeceding period. As was pointed out, savings for the public sector as a whole, in- cluding the nationalized mining companies, did not increase in 1975. Yet investments rose strongly and the gap was doubtless filled by a combination of large capital inflows from abroad and of transfers from other sectors of the economy, especially the repayment of advances made the year before. - 12 - Chapter 2 Outline of Third Plan, 1976-1980 Status of the Plan 2.1 So far Mauritania has had two medium term plans: the first one covering the years 1965-67 and the second one the period 1970-1973. From the point of view of elapsed time the third plan is not exceptional: it is supposed to start in 1976 which means a gap of two years between the second and third plan. 2.2 When the mission visited Mauritania, preparation of the third plan was not yet complete: not all projects had been selected nor was the invest- ment volume determined. At the end of 1975, the "plan" consisted of (1) a series of economic policy papers and (2) declared intentions in respect of (a) firmly selected projects and (b) projects still under consideration. The following evaluation is thus not based on a comprehensive government document, but rather on how, at the end of 1975, Mauritanian planners envisaged the third plan. The final document may well be different from what is presented here, but we believe that the economic policy papers and the status of public sector projects at the end of 1975 provide a useful framework for a review of Mauritanian long-term economic development. 2.3 The projects considered here are confined to the public sector, i.e., to those for which either the general government or public corporations will be the implementing agencies. However, the plan does not fully cover the public sector. Notably, it leaves out projects to be implemented by the Senegal River Valley authority (OMVS) of which the Diama dam is the most im- portant in the short term. Furthermore, the plan only contains new projects; for example, it does not mention replacement investments required by COMINOR. As to private investment, the outline of the plan does not provide any fore- cast and it is unlikely that the final plan document will be any more explicit in this respect. Sector Distribution of Planned Public Investment 2.4 According to Mauritanian planning authorities, project selection should be guided by three objectives: - national integration - modernization of the agricultural sector - accelerated industrialization The mission endorses the first two objectives considering Mauritania's re- source endowments, constraints, and the options available for development. However, it has reservations as to the third objective, accelerated indus- trialization, as presently interpreted by Mauritanian planners. As to the objective of national integration, Mauritania is a vast country with three - 13 - centers of economic activity, located far away from each other: the agri- cultural south, the administrative center of Nouakchott, and the industrial north. Better road connections between these three centers are of potential benefit, especially between the south and Nouakchott. 'Concerning the mod- ernization of agriculture this means in the first place development of irri- gation, to make Mauritania less vulnerable to drought and less dependent on imported food. The last objective concerns accelerated industrialization. Existing industries are limited to iron and copper ore mining. The plan aims at further industrialization, firstly through mineral processing and secondly through a number of import replaoing industries. 2.5 The total estimated cost and sector distribution of the Government's public investment plan for the period 1976 to 1980 are as follows: Table 8: TENTATIVE SECTOR DISTRIBUTION OF PLANNED PUBLIC INVESTMENT IN 1975 PRICES, 1976-1980 (in billion UM) Rural Indus- Transport Social Total Sector tries, infra- services mining structure infra- structure Ongoing 1.0 4.4 8.4 0.6 14.4 Firmly selected 4.2 21.0 3.0 5.0 33.2 Under consideration 0.4 8.4 4.8 1.5 15.1 Plan Total 5.6 33.8 16.2 7.1 62.7 In Percent 8.9 53.9 25.8 11.4 100.0 2.6 The most important single sector is industry, with projects amounting to more than half the plan total. This is due to proposed new mining ventures (19.2 billion UM) and to new manufacturing (12.8 billion UM). Transport infrastructure comes in second place with more than one- fourth of the plan total, which indicates the importance Mauritanians attribute to the objective of national integration. 2.7 The share of plan investment allocated to the rural sector is very small, given the fact that even by 1980 nearly 70 percent of the total pop- ulation will live in the rural areas. This imbalance has already been ob- served in the past; in fact, public investment in the rural sector has never exceeded 15 percent of total public investment. There are several reasons for this, the main one being limited absorptive capacity in the conception, elaboration and implementation of projects in the rural sector, which is a particularly demanding sector in these respects. It is simply not possible to push investment in the rural sector beyond a certain limit. Even a share of less than 9 percent would mean a 14-time increase (at constant prices) over - 14 - average annual investment in the rural sector during the second plan and more than twice what was achieved in 1975, an exceptional year. Need for Priority Projects 2.8 In principle the plan total of public investment is meant to be implemented between 1976 and 1980. In practice, matters are less clearcut as industrial projects included in the plan are valued at their,total in- vestment cost whereas their implementation will often extend beyond the plan period. Even with these adjustments the outstanding feature is the sheer size of the plan. Its annual average is nearly three times as big as public investment in 1975. When projects still under consideration are left out, the average, based on ongoing and firmly selected projects, would still be more than twice the 1975 public investment volume. The high level of total investment proposals is not purely wishful thinking but appears to stem from two developments that occurred during the first half of the seventies. First, the drought focused the attention of the entire world on Sahelian contries, resulting in more foreign funds and technical assistance. Second, as a member of the Arab League, Mauritania may reasonably expect to benefit from the assistance of the highly liquid OPEC countries. 2.9 A priority, and even without detailed analysis, it is safe to say that the level of public investment implied by the plan goes beyond the absorptive capacity of the country and would in any event create financial problems. More precisely, since it will not be possible to implement even all the firmly-selected projects during the years 1976 to 1980, it is nec- essary to decide what projects among them deserve priority, and which other projects should be included. Ultimately only the Mauritanian Government can make such decisions, but in line with its request for an external opinion, a minimum package is proposed here for the consideration of the authorities for implementation during the next five years. Expenditure on selected proj- ects before 1976 or on projects which might be executed after 1980 is not considered part of this package, although overall estimates of public invest- ment are included in the macro-economic projections through 1985. - 15 - Chapter 3 The Minimum Level of Public Investment, 1976-1980 General 3.1 The mimimum level of public investment is here defined as the investment volume that the Mauritanian Government ought to try to achieve, taking into account existing obligations and the need for reasonable prog- ress, towards the Government's development objectives. In practice, the minimum is made up of (1) ongoing projects; (2) replacement investments; and (3) high priority new projects. Ongoing projects are those that started before 1976 or for which firm commitments from foreign donors were obtained at the end of 1975. They are included in the proposed program because the marginal returns to those which are already underway are expected to be adequately high, while it would be impractical to advise the cancellation of existing financial commitments. Replacement investments (not including normal maintenance expenditure) include only those done by COMINOR. Priority new projects are those the implementation of which cannot be delayed beyond 1980 without serious consequences for Mauritiania's development, but for which no financing was available at the end of 1975. Estimates of the cost of each project are based primarily on documents of the Ministry of Plan. For some projects better information from donor organizations or from loan applications was available. 3.2 The total cost and sector distribution of the proposed minimum level of public investment is as follows: Table 9: MINIMUM PUBLIC INVESTMENT IN 1975 PRICES /1 (1976-1980) Priority Ongoing Replacement new Sector projects investment projects Total % Rural sector 1.0 - 3.5 26.5% 4.5 15.0 Mining 0.2 2.5 6.6 50.0% 9.3 30.9 Manufacturing and utilities 4.2 - 0.6 4.5% 4.8 15.9 Transport infrastruc- ture 8.4 - 1.7 12.9% 10.1 33.5 Social infrastructure 0.6 - 0.8 6.1% 1.4 4.7 All sectors 14.4 2.5 13.2 100% 30.1 /2 100 % /1 Equals 132% of 1973 prices. /2 Equals UM 22.9 billion in 1973 prices. - 16 - Ongoing Projects 3.3 The largest ongoing projects are the Nouakchott-Nema road (6.5 bil- lion UM), the petrol refinery in Nouadhibou (3.4 billion UM), the Nouadhibou port expansion (1.2 billion U) and the sugar factory in Nouakchott (0.7 billion UM). Transport infrastructure dominates the composition of ongoing projects (58 percent) because of the Nouakchott-Nema road. In total ongoing projects amount to nearly 50 percent of the total, and it is assumed that they will be fully implemented during 1976-1980. The total estimated cost of ongoing projects alone is equal :o that of all public investment undertaken during the five years 1970 to 1974 (14.9 billion bM in constant 1975 prices), including MIFERMA and SOMIM.A for the sake of comparison. Replacement Investments 3.4 Replacement investments relate exclusively to track renewal and rolling stock for the Zouerate-Noadhibou mining railroad and the mineral port at Point Central. Priority New Projects 3.5 The broad strategy underlying the mission's proposed program of new projects is as follows: Development of the rural sector is the prime objective because of the large size and relative poverty of the agricultural population. In several key fields - nomadic herding, rain-fed cultivation, cattle feeding - lack of research alone excludes the possibility of initiat- ing new large scale action within the coming five years. Such action is possible within this time frame only in irrigation, and the mission proposes to go as far and as fast as constraints permit. Irrigation projects deserve priority because they (1) diminish vulnerability to drought; (2) lessen de- pendency on imported food; and (3) build on concrete experience in Mauritania. What's more, at the present time, there are few - if any - alternative strategies in the rural economy of Mauritania which could have a significant impact on the output and incomes of farmers. The main constraints to the development of irrigation are firstly, the lack of trained manpower, secondly, high construction costs, and thirdly, problems of land tenure. Even allowing for these constraints, rural sector projects with an irrigation component constitute more than one-quarter of all priority new projects proposed here. 3.6 As to industrial projects, the mission believes that Mauritania has comparative advantage in mining and the minimum public investment program comprises new developments in iron and copper ore mining. Small-scale man- ufacturing and an expansion of fish processing industries also offer con- siderable scope for development in Mauritania's circumstances, but such enter- prises are normally part of the private sector. From preliminary calculation we would not recommend public involvement in heavy industries. Because of the size of the mining projects, the industrial sector still claims more than half of the total of public investments in new projects. - 17 - 3.7 Whereas the mission supports the Guelbs iron ore and the sulphuric copper ore projects, two points should be remembered:-First, mining invest- ments are necessary to maintain the long-term level of minerals output and therefore gross domestic product, and they will not increase it. Secondly, mining invescments do nut provide a durable basis for accnomic development since mineral resources will eventually be exhausted. Eventually, it will be necessary to concentrate investments in other sectors. These two points will be taken up in the industrial chapter. 3.8 Transport infrastructure will be substantially developed -- though at high cost -- through ongoing projects and the suggested share in new proj- ects is relatively modest (13 percent). The strategy proposed here is to strengthen the outlets for production in southern Mauritania either through a realignment of the Aleg-Kiffa part of the Nouakchott-Nema road or through a feeder program linking the river valleys to the Nouakchott-Nema road (see chapter 7). Such a system of feeder roads is indispensable for the develop- ment of the river valley and would greatly increase the economic benefits Mauritania can expect from the East-West axis. 3.9 The availability of qualified technical manpower is clearly a prob- lem which needs to be tackled by the Mauritanian Government and the mission feels that the emphasis should be put on the establishment of training centers for upper and intermediate level technicians. Otherwise investment in social infrastructure will be severely constrained by budgetary resources, and hence it receives a small share of the minimum package program. 3.10 Non-implementation of these priority new projects would have seri- ous consequences on the Mauritanian economy. It would result in a drop of the level of gross domestic product in the first half of the eighties, as mining operations would cease because of the exhaustion of deposits. It would also take away more than half the exports and a considerable part of government revenue, directly (export taxes, surplus of public corporations) and indi- rectly (import taxes and direct taxes on salaries). The value added of the rural sector will only grow slowly if the medium-sized irrigation schemes are not implemented. Moreover, food imports would be much higher in that case. Without a good connection between the river valleys and the capital, part of the surplus agricultural productiqn might not reach the consumer centers. Fi- nally, without due attention to technical training the country is going to depend even'more on foreign expertise. - 18 - 3.11 The composition of priority new projects is as follows: Table 10: PROPOSED PRIORITY NEW PROJECTS, 1976-1980 (billion UM in 1975 prices) Rural sector 3.5 of which: Gorgol development (1.7) Mauritanian part.of Diama dam (0.9) Boghe Plains (0.4) Lake R'Kiz (0.3) Industry and mining 7.2 of which: Guelbs iron ore exploitation (5.5) Sulphide copper ore exploitation (1.1) Power production in Nouakchott and Nouadhibou (0.4) Water supply in Nouadhibou (0.2) Transport infrastructure 1.7 of which: Southern roads (1.2) Secondary airfields (0.4) Services 0.8 of which: Polytechnic Institute (0.7) Institute of agriculture and livestock (0.1) All Priority New Projects 13.2 3.12 A full listing of the priority new projects is given in the Annex Tables. Some of them are not included in the plan outline. This is the case for the Diama dam and the water supply to Nouadhibou. Another group of priority new projects is still under consideration by Mauritanian planning authorites, and some of these are also included in the mission's program. This is the case with the sulphuric copper ore exploitation and with the feeder roads between the river valleys and the main road axes. The sectoral chapters, in the second part of this report, will explain in detail why these projects have been included among the priority new projects. 3.13 Certain major projects, proposed by the Government for inclusion in the Third Plan, have been excluded from the list of priority new projects. In the rural sector these are the development project for S.E. Mauritania; a livestock fattening farm near Kaedi, and 100 deep wells. The mission is of the opinion that large scale projects in the industrial field, like the copper refinery in Nouakchott, the spinning and weaving mill in Rosso and the electric iron furnace in Nouadhibou, should not be implemented. In the field of transport infrastructure it is recommended to postpone the implementation of the new harbor and airfield in Nouakchott. As to social infrastructure, - 19 - the list of priority new projects does not include six regional health centers, 1,000 elementary classes, youth centers and stadiums. The sectoral chapters spell out why it is recommended to postpone the implementation of these projects. The Total Proposed Program 3.14 The total sum of all public sector projects which comprise the program proposed to be implemented during the Third plan period, amounts to 30.1 billion UM, 1/ roughly half the plan total as envisaged tentatively by Mauritania at the time of the mission's visit. In this sense, the program may be considered a minimum, in relation to Mauritania's own investment objec- tives. With respect to the constraints on achieving the program, however, it may well be a maximum. Thus it implies a doubling of public investment in real terms during the coming five years compared to the period 1970-1974 (14.9 billion UN public investment in 1975 prices, adjusted for nationaliza- tion). This increase will have important financial consequences and without foreign technical assistance would exceed the absorptive capacity of the country. In fact, implementation of this program will certainly increase the dependence of the economy on foreign financial and human resources. 3.15 Because of the increase in factor payments abroad associated with it (first of all, interest on the sharply increasing foreign debt), an in- vestment program of this magnitude will lead to a decrease in the national savings rate from 16 .percent in 1973 to 13.5 percent in 1980. The net investable surplus of the public sector including the mining companies to the financing of its own investment program will drop from over 70 percent in the 1970-1974 period to about 26 percent for the whole period 1976 to 1980. These ratios are low, but comparable to the public savings performance of the Mauritanian Government prior to the extension of the public sector to mining enterprises. In consequence, foreign capital inflow needed for the implemen- tation of the minimum public investment program will rise from a level of about $100 million in 1974 and 1975 to $130 million in 1976 and to $180 million in 1980 (in current prices). These are very large sums indeed, and Mauritania can expect to mobilize foreign capital in such amounts only if the various large scale projects included in the program are acceptable to foreign donors. Finally, the running and maintenance costs of the new projects will claim about half the increase in public consumption, leaving scope for only modest growth (about 4 percent p.a. in real terms) of non-project-tied public current expenditure. From the financial point of view, then, the public investment program could not be larger. 3.16 As to absorptive capacity, a distinction should be made between the stage of implementation and the stage of operation once construction is completed. Absorptive capacity is probaly greater at the implementing stage than when it comes to running the project. Foreign contractors can be entrusted with the execution of projects but rarely with their mainte- I/ At 1975 prices. - 20 - nance and running. Even when a foreign contractor does the actual construc- tion job, all aspects of the project need careful,preparation and supervision. In this connection it may be noted that the Nouakchott-Nema road required the establishment of a separate ministry. These considerations also limit the number of new projects that the Mauritanian Government is able to cope with in a proper way. 3.17 As for maintaining and running the numerous new projects, one can easily foresee discrepancies between the required and available.number of national upper level and intermediate technicians. Between 1975 and 1985 some additional 800 agricultural engineers and middle level technicians will be needed to operate the planned irrigation projects, but only 300 Mauritanians will become available. In other technical fields these num- bers are 4,000 and 1,000 respectively. Thus to achieve this program the country will need substantially more technical assistance and will have to employ more foreigners. In 1975 there were about 500 technical assistants and 2,500 foreigners active in the economy. Our estimates of manpower re- quirements and availabilities of technicians at the upper and intermediate levels indicate the need to double foreign expertise within the horizon of 1985. A much larger investment program would further increase the require- ments which anyway will not be easy to fulfill. 3.18 It is of interest to compare the sector distribution of this pro- posed program with the composition of the plan outline. In relative terms, the main differences between the public investments proposed here and in the plan concern the rural sector and social infrastructure: in the proposed package, the rural sector is relatively more important than in the plan and the inverse applies to social infrastructure. Table 11: SECTOR DISTRIBUTION OF PUBLIC INVESTMENT 1976-1980 In billion UM at 1975 prices In Percent Minimum Plan Minimum Plan Rural sector 4.5 5.6 15.0 8.9 Industries 14.1 33.8 46.8 53.9 Transport infrastructure 10.1 16.2 33.5 25.8 Social infrastructure 1.4 7.1 4.7 11.4 Total 30.1 62.7 100.0 100.0 Longer Term Outlook 3.19 It has already been pointed out that the proposed priority new projects cover only 34 percent of the plan total of firmly selected projects, - 21 - which implies that implementation of certain projects like Nouakchott harbor and many projects in health and education will need to be postponed until the eighties. Moreover, the Government's own program still contains a number of projects that are conditional on feasibility studies, but which might well lead to project preparation and implementation at a later time. This applies in particular to the rural sector: development of the Tagent area and of the Aftout-el-Sahel depression are examples of projects that might become of interest in the beginning of the eighties. Nevertheless, it would be premature to define a minimum project package for 1981-1985 in the same way as has been done for the Third plan period. 3.20 In 1973 prices public investment is projected to increase regularly from 3.2 billion UM in 1975 to 6.1 billion UM in 1980, an average annual in- crease of 13-1/2 percent. After 1980 the rate of growth of public investment will be limited by the impact of increasingly heavy debt service. In general, the public sector financial objectives should be to contribute at least 25-30 percent to the financing of its own investment program and keep total debt service at around 10 percent of total exports of goods and non-factor services. Under these conditions, public investments could increase to about 9 billion UM in 1985, i.e., an average annual real increase of 8 percent. This may appear high but it is considerably less than the rise from 1975 to 1980 and assumes that development will remain the Government's prime concern. Enough is known about the project content of public investment to assess the effects on the growth of gross domestic product and export. However, the macroecono- mic projection also requires a number of assumptions regarding investment in the private sector. Private Investment 3.21 According to Mauritanian planning authorities, the organization of production will continue to be based on a combination of public corporations, private enterprise and cooperatives (in irrigated agriculture). Private enterprise is active in certain fields such as mineral survey, fish process- ing, tourism, urban services and housing. As to manufacturing, public cor- porations are deeply involved and they will be the implementing agencies for all large projects. However, official Mauritanian policy also maintains, and very rightly so, that there is room for small manufacturing enterprises. The same holds true for repair services and similar activities. 3.22 Foreign-financed mineral surveys, exploration and development, which constitutes the main component of direct private foreign investment, will definitely continue and the balance of payments projection therefore incorporates direct investment of 1.5 billion UM in 1980 and 1.9 billion UN in 1985 (at 1975 prices). 3.23 Investment in private fish processing and other manufacturing industries will be dealt with in the chapter on industrial development. The volume of fixed investment projected for 1980 and 1985 in small manu- facturing and fish processing is quite small, 0.3 and 0.5 billion UM respec- tively, but these may still contribute effectively to employment creation as the investment/labor ratio is usually much lower in small enterprises - 22 - than large industrial ventures. Private investment in new hotels, housing and other buildings has been put at 0.1 billion UM in 1980 and at 0.2 billion UM in 1985. Companies from other Arab countries have shown an interest in urban real estate and tourism. Very little is known about the level of pri- vate home building. 3.24 Total private investment is thus estimated at 1.9 billion UM in 1980 and at 2.5 billion UM in 1985. In 1975 private investment contributed more than one-third to the total volume of fixed investments. On the above assumptions, its share would drop in 1985 to about 20 percent. - 23 - Chapter 4 The Macro-Economic Framework, 1976 to 1985 Growth of Gross Domestic Product 4.1 Recent and projected future growth rates are given in .the following table: Table 12: GROWTH RATES OF GROSS DOMESTIC PRODUCT IN CONSTANT PRICES percents Sectors 1970-1973 1973-1975 1975-1980 1980-1985 Rural sector -14.0 12.2 4.0 3.8 Industry, mining and construction 8.3 0.0 4.8 8.0 Services 4.5 13.2 8.1 6.0 Gross Domestic Product at Factor Cost 0.0 9.3 6.0 5.5 Gross Domestic Product at Market Price 0.0 10.4 6.5 5.7 The main source for the projected acceleration in real growth is the rural sector. In the years 1970 to 1975 the drought and stagnation in rural sector output depressed the overall growth rate. Long-term annual growth of nearly 4 percent in the rural sector depends in large part on whether rice output can be increased from 4,000 T in 1975 to 60,000 T in 1985. This increase would require an expansion of the irrigated area from 1,000 ha in 1975 and 16,000 ha in 1985. Without the increase in rice production rural sector output would only grow by 3 percent p.a. from 1975 to 1985. Mining production actually declined in 1975 and the projected level of output in 1980 is still below the peak achieved in 1974. Hence growth of the secondary sector after 1975 is largely a result of the low base year plus anticipated development in other industries and construction. Services are expected to grow quite rapidly between 1975-80, tapering off somewhat in the eighties. The share of the rural sector in gross domestic product at factor cost will go down from about 30 percent in 1975 to 25 percent in 1985. Conversely, the shares of industries and services will become more important (from 39 and 30 percent respectively in 1975 to 42 and 33 percent in 1985). 4.2 Gross domestic product at factor cost expressed per head of popula- tion is expected to rise from the 1970-75 average of $223 (in 1973 prices) to $359 in 1985, that is by 4 percent annually. The 1970-75 average production in cities, $607 per head, was more than six times as high as the corresponding figures for rural areas ($94). The difference will narrow somewhat between 1975 and 1985. In the latter years, output per head in cities might amount to $800, that is somewhat less than 6 times the average output in rural areas - 24 - ($140). Thus the process of rapid urbanization in Mauritania will continue to reduce the disparity between incomes in the city and countryside. However, the equalizing impact will be felt less than before 1975 as it is expected that unemployment among the male population in cities will diminish. In 1973 the modern sector employed 35 percent of the urban male population in the active age group. It is expected that this proportion will rise to 45 percent in 1985. The largest increase in urban employment will come from manufacture, especially in small scale enterprises, and construction. 4.3 For several reasons it-can be expected that in the long run the standard of living of the urban poor will improve. Firstly, the municipal- ities are extending communal services (water, schools, dispensaries) to the disticts of recent settlement. Secondly, the immigrants will become active in a number of informal activities like the building of their own houses. Thirdly, small-scale industries and repair shop are expected to absorb an increasing share of immigrants. The large urban centers constitute an at- tractive market for a number of agricultural and manufacturing activities, as well as for all sorts of services. This will not only provide employ- ment: more local supplies will also bring down the very high price level of consumer and intermediate goods in Nouakchott. 4.4 During 1973 to 1985 the terms of trade will move favorably for Mauritania. This is due to expected relatively high export prices in 1980 and 1985 for iron ore, processed fish and cattle and to low import prices for wheat and rice. Consequently, real gross domestic income will rise con- siderably faster than gross domestic product at market prices. - 25 - Table 13: RESOURCES AND USES (billions of 1973 UM) Growth Rates Pcrcent of GDY 1973- 1980- 1973 1980 1985 1980 1985 1973 1980 1985 GDP 12.3 20.6 27.1 7.6 5.7 Terms of trade adjustment 0.0 1.8 5.5 - - GDY 12.3 22.4 32.6 8.9 7.8 Imports /a 6.3 14.8 22.0 12.9 8.2 Available resources = Uses 18.6 37.2 54.6 10.5 8.0 Consumption 9.4 16.8 23.6 8.2 7.0 76.4 75.0 72.4 (Private) (6.5) (11.5) (16.5) (8.5) (7.5) (Public) (2.9) (5.3) (7.1) (9.0) (6.0) Investment 2.9 8.5 12.6 16.6 8.2 23.6 37.9 38.6 (Private) /b (2.2) (2.4) (3.6) (1.2) (8.5) (Public) (0.7) (6.1) (9.0) (36.0) (8.0) Exports 6.3 11.9 18.4 9.5 9.1 Memo items Domestic savings 2.9 5.6 9.0 9.9 10.4 23.6 25.0 27.6 Resource gap 0.0 2.9 3.6 - - 0 12.9 11.0 National savings 2.4 4.2 6.9 19.5 18.7 21.1 Savings gap 0.5 4.3 5.7 4.1 19.2 17.5 /a Includes net non-factor services. /b Includes change in stocks. 4.5 The minimum level of public investment, combined with our assump- tions concerning private investment, would result in an important increase in the share of fixed investments in gross domestic product in 1980. In the years 1970 to 1974, some 20 to 25 percent was allocated to fixed investment; by 1975, this proportion had already risen to 31.5 percent. In 1980, 38 percent of gross domestic product will be used for fixed investment and about the same is projected for 1985. 4.6 These high investment rates do not, unfortunately, correspond to a very high growth rate of gross domestic product at factor cost, estimated at 6.1 percent for the years 1975 to 1985. The most important reason is that the huge sums required by the new Guelbs iron ore mine are essentially meant to permit continuation of an already existing operation. Without them, mining - 26 - production would actually drop, and along with it, gross domestic product. Another reason, of course, is the importance of transport infrastructure in the public investment program. In other words, the projected capital output ratio will be unavoidably high, on the order of 5:1. This adverse trend will, however, for the reasons noted earlier, to a large extent be compen- sated by the improvement in the terms of trade. The favorable effect will, in fact, be equivalent to a lowering of the capital/output ratio down to about 3.8:1. 4.7 The high investment rates do not exclude a satisfactory growth in public and private consumption. Firstly, the strong rise in gross domestic income itself permits a faster growth in comsumption than in the past. In addition, however, faster growth is made possible by the fact that an in- creasing share of investments is projected to be financed from abroad as shown by the increasing deficit of the balance of trade and non-factor ser- vices. The likely trend of public consumption is assessed in paragraph 4.14 below. Private consumption, which had declined by nearly one-third in real terms on a per capita basis between 1970 and 1974 is likely to rebound considerably up to 1980, assuming the effects of the past drought will be overcome; however, even the projected substantial growth of 8.5 percent p.a. in real terms between 1973 and 1980 will raise real per capita consumption in 1980 only marginally above the level achieved ten years ear- lier. Once this catch up effect is over and considering the slower overall economic growth projected for the 1980-1985 period, private consumption is likely to increase less fast than before. Nevertheless, a rate of 7.5 per- cent p.a. or about 5.7 percent per capita and per year can still be consid- ered very satisfactory. Thus, from the point of view of public and private consumption the high investment rates in 1980 and 1985 seem acceptable. However, they can only be sustained by running increasing foreign trade deficits to be financed by large foreign capital inflows. 4.8 The excess of imports over exports contributed substantially to available resources for the first time in 1974 and it is expected that this will remain so in 1980 and 1985 (11 percent of available domestic product in 1985). In 1985 both trade and non-factor services will show rather large deficits. As to exports, by 1985 mining products will be much less important than in 1975 but will represent nevertheless more than half the total value. The other important exports are refined petroleum products and processed fish (one-eighth and one-fifth of total exports respectively). The projected rise in imports is particularly strong, with raw materials of all sorts and equip- ment. These two categories made up 65 percent of total imports in 1973 and their share will rise to over three-quarters in 1985. Imports of basic food items will remain stable in constant 1973 UM which is mainly due to a projected increase of rice production and to lower prices for imported food. It has been assumed that rising imports will lead to higher stocks by 0.5 billion UM in 1980 and by 1.1 billion UM in 1985. 4.9 In the period 1970 to 1974 the deficit of the balance of factor services averaged around 1.0 billion UM, but this will worsen considerably over the next 10 years. This might seem surprising in view of the nation- alization of MIFERMA and SOMIMA. However, interest on public debt and re- mittances by foreigners working in Mauritania, which already accounted for - 27 - 60 percent of net factor services in 1974 (excluding exceptional earnings on Central Bank deposits abroad) are expected to be far heavier by 1985, pushing the overall factor service deficit to over 2 billion UM (in 1973 UM). 4.10 Because of the negative factor Service balance and the rise in investment, the share of total investment financed by national savings will decline from about 80 percent in 1973 to under 50 percent in 1980. From another point of view this assumes the Government will use the financial capacity of the mining sector to expand its foreign borrowing to finance the much higher level of public investment. Thereafter, the ratio between national savings and total investments will remain more or less the same, equivalent to a national savings rate of close to 20 percent of GDY. 4.11 Public savings, which were very small for the public sector as a whole, will become quite substantial in 1980 and 1985, making up between 60 and 65 percent of national savings. This development is mainly attributable to the nationalization of MIFERMA and SOMIMA, which as discussed before had already resulted in higher public savings in 1975. Table 14: ADJUSTED PUBLIC SAVINGS 1973, 1980 and 1985 (in billion 1973 UM) 1973 1980 1985 Adjusted Public Saving 1.1 /1 2.7 4.1 Adjusted Private Savings 0.9 /2 1.5 2.8 National Savings /3 2.0 4.2 6.9 /1 Including MIFERMA/SOMIMA /2 Excluding MIFERMA/SOMIMA /3 After interest on foreign debt but before debt amortization. The share of private savings in financing private investment was high in 1973 (86 percent after the same adjustment is applied to public savings). It will become lower thereafter (65-75 percent) mainly as a consequence of anticipated foreign participation in mineral surveys. Public Sector Savings 4.12 General Government and public corporations comprise the main part of the public sector. The corporations have become important from 1975 onwards with the nationalization of the two mining companies, and new public corporations will be created to run the petroleum and sugar refineries. Average annual savings from 1972 to 1975 were between I and 2 billion UN. - 28 - The iron ore mining operation should be capable of generating higher savings. However, the copper mine is actually operating at a loss, and prospects for the two refineries also are not very brilliant. Therefore, in our projection we have assumed rather low public corporations savings--2.0 billion UM in 1980 and 3.0 billion UM in 1985. These are domestic savings, that is before payment of interest on foreign debt. 4.13 As to general Government, a distinction was made between four types of revenue: import taxes, taxes on local sales, export taxes antd other direct taxes, including non-tax revenue; Projections for 1980 and 1985 were made for each class of revenue separately. Total general Government revenue will more than triple in real terms from 1973 to 1985, implying an elasticity with respect to domestic income of 1.2. This rather high figure reflects the fact that general government revenue is more linked to the modern sector than to total gross domestic product, and the elasticity is close to one when the rural sector which reduces the overall growth rate, is excluded from gross domestic product. 4.14 Annual growth in current budget expenditures from 1961 to 1975 in constant prices has been as follows: Total Budgetary Expenditures . . . . . . . . . . 6.4% Administrative Services. . . . . . . . . . . . . . 6.2% Social Services. . . . . . . . . . . . . . . . . 6.9% Economic Services. . . . . . . . . . . . . . . . . 2.0% Unallocated Expenditures (excluding debt service). 6.2% Projected general Government expenditure in real terms is based on overall growth of 8 percent from 1975 to 1980 and of 6 percent thereafter. As pub- lic consumption jumped between 1974 and 1975, the average annual increase between 1973 and 1980 is much higher, 9.5 percent. These high rates assume that incorporating the Southern part of the former Spanish Sahara will lead to a rapid increase of expenditure of an administrative nature (this type of expenditure made up somewhat less than half of central budget expenditure in 1975) and that economic services were neglected in the past and need strong growth. 4.15 To estimate the impact of public investment on general Government expenditure, we exclude industrial sector investment as current expenditure should be met from commercial revenues. Without public industrial investment the proposed level of public investment for the years 1970 to 1980 would amount to 16.0 billion UM in 1975 prices, and on this basis the relevant public investment for the whole period 1976-1985, measured in 1973 prices, can be put at 32.6 billion UM. Data available for the Nouakchott-Nema road and other information, show that one unit of public investment requires subsequently 5 percent of one unit in current expenditure. Using this ratio for illustrative purposes, the public capital program for 1976 to 1985 would require 1.6 billion UM additional current expenditure (in 1973 prices). Since total increase of public consumption projected for the period 1975 to - 29 - 1985 amounts to 3.5 billion UM, this would leave 1.9 billion UM for an increase in non-project linked expenditure, that is growth of only 4.2 percent annually from 1975 to 1985. This is not much, and suggests that the 8 and 6 percent growth rates projected for total expenditure are certainly not high. It also means that more public investment projects would lead to pressures for even higher growth rates of public consumption. Table 15: PROJECTED PUBLIC SAVINGS /1 (in billions UM at 1973 prices) 1973 1980 1985 (actuals) (projections) Central and local government current revenues 2.8 6.3 8.9 current expenditures 2.7 5.1 6.8 gross current surplus 0.1 1.2 2.1 Public corporations gross surplus - 2.0 3.0 Total gross public savings 0.1 3.2 5.1 Debt service (interest + amortization) - 1.5 2.1 Total net investable surplus 0.1 1.7 3.0 /1 Excluding technical assistance. Financing of the Public Investment Program 4.16 The figures given in the preceding pages suggest the problems likely to be encountered in the financing of the proposed public investment program. The magnitudes are summarized in Table 16 below. - 30 - Table 16: PUBLIC INVESTMENTS FINANCING GAP (in billions UM at 1973 prices) 1973 1980 1985 (actuals) (projections) Public savings: net investable surplus 0.1 1.7 3.0 Public investments 0.7 6.1 9.0 Financing gap 0.6 4.4 6.0 4.17 In brief, the problem is not so much an unacceptably low share of local participation in the overall financing, nor Mauritania's capacity to service the expanded foreign borrowing (although both factors are important as well) but primarily the sheer size of the financing gap in absolute terms. This gap increases 10 times between 1973 and 1985, in real terms, i.e., ex- cluding any price increases in the world economy, and it will be much higher in current terms. To permit a more realistic assessment of foreign capital requirements the following analysis is carried out in current prices, based on five-year planning periods, rather than on any single year. Table 17: FINANCING OF PUBLIC PLAN OUTLAYS (in billion UM at current prices) 2nd Plan - 1970-74 /1 3rd Plan - 1976-80 billion UM Percents billion UM Percents Actual Projected Gross public savings 7.9 71.8 14.1 38.2 Debt service -0.4 -3.6 -6.5 -17.6 Net investable surplus 7.5 68.2 7.6 20.6 Local borrowing - - 0.8 2.2 Total local contribution 7.5 68.2 8.4 22.8 Gross foreign capital inflow 4.2 38.2 28.5 77.2 Total investments 11.0 100 % 36.0 100 % Surplus -0.7 6.4 - - /1 considering MIFERMA and SOMIMA as public enterprises - 31 - 4.18 As shown in Table 17 above, under the proposed financing scheme there would be a sharp decline of the rate of local financing, from nearly 70 percent during the Second Plan to about 23 percent in the Third Plan. Although there is no clear criterion as to what is adequate or inadequate, 23-25 percent is probably a minimum in that foreign sources of aid prefer to have some local participation in projects they finance, and there are always a number of projects that have to be financed entirely out of local resources because of their size or nature. This is true for instance for replacement investments, that account for over 8 percent of total proposed public investments during the Third Plan. The marked decline in the share of local financing notwithstanding both a high national savings rate and satisfactory growth in gross public savings is evidently due mainly to the proposed sharp rise in total public investment outlays. Debt service, how- ever, also rises fast and absorbs a much higher share of investable public resources. Finally, because the macro-economic projects indicate a slight surplus of investable funds (savings plus capital inflow) in the private sector, a small amount of local public borrowing has been foreseen. 4.19 The foreign debt service burden depends not only on the amount but on the sources and terms of new foreign borrowing which in turn are related to the nature of the projects to be financed and Mauritania's access to new aid donors. Concerning the first factor nearly half of the proposed public investment outlays in the Third Plan consist of a small number of large mining and manufacturing projects, which typically are financed in part by supplier credits. Concerning the second point, the fact that Mauritania is a Muslim country as well as a member of the Arab League appear already to have facilitated access to OPEC credits. Taking these factors into account, the following average borrowing pattern has been assumed: 1/5 suppliers' credits 9%, 2 years grace plus 6 years amortization 1/5 loans from int'l inst. 8%, 5 years grace plus 17 years amortization 2/5 OPEC loans 3%, 4 years grace plus 6 years amortization 1/5 soft loans and grants 0.75%, 10 years grace plus 40 years amortization On this basis, total debt service on the foreign borrowing shown in Table 17 above would reach about 13 percent of total exports of goods and services in 1980 and 11 percent in 1985. These proportions would appear to be acceptable for a country as poor as Mauritania. 4.20 The question remains whether Mauritania can realistically hope to mobilize 28.5 billion UM ($633 million) from abroad at conditions not harder than assumed above and to disburse those amounts during the five years of the Third Plan. The country has the advantage of starting its new plan period with a substantial amount of already committed but not yet disbursed funds, amounting to nearly $240 million; furthermore, financing up to an additional $160 million for three specific projects (Guelbs, Gorgol, Diama dam) could be forthcoming without major problems if the projects are indeed implemented; - 32 - this leaves an amount of $233 million for miscellaneous projects for which little shopping around has been done. Even though the amount of foreign capital that remains to be mobilized is much smaller than the $633 million needed altogether, it is not certain that it can be raised early enough in the planning cycle to allow its full disbursement before the and of the plan period. This is indeed the major factor limiting Mauritania's public invest- ments during the Third Plan and thereafter. 4.21 In the last two years Mauritania has shown the ability to raise substantial and growing sums of foreign capital; $59 million in 1973 and $96 million in 1974. However, about $40 million in each of these years took the form of drought relief and balance of payments support. Capital grants and loans excluding technical assistance amounted to only $15 million in 1973 and to $62 million in 1974. We assume there will be no drought relief after 1975, though a repeat of balance of payments support cannot be excluded. Still, most of the required capital inflow will be destined for project fi- nancing. As disbursements on project tied grants and loans demand a greater effort on the Mauritanian side by way of project preparation and implementa- tion than drought relief and balance of payments support, the future capital inflow targets will be more difficult to realize than past achievements. 4.22 Large inflows in 1973 and 1974 came from OPEC countries, which accounted for two-thirds, and an important question thus becomes whether the OPEC countries will continue their support of Mauritania. More precisely, should the recent large inflow of OPEC money be considered a once-for-all phenomenon that will not repeat itself or as a regular flow? In this con- nection a distinction should be made between grants and loans. Project tied grants from OPEC countries were important in 1974 only ($12 million) and there were none before or after. These grants seem to have been a once-for- all phenomenon. 4.23 As to loans (both project tied and balance of payments support) the following table suggests a rising level of new commitments, which in turn should result in higher disbursements. Table 18: LOAN COMMITMENTS BY SOURCE, 1970 TO 1975 (in million $) OPEC countries Others Total 1970 2 2 4 1971 20 27 47 1972 - 2 2 1973 37 5 42 1974 37 141 178 1975 61 28 89 From this table it seems that the interest of OPEC countries in Mauritania is both sustained and increasing. Moreover, the level of disbursement in relation to committed amounts is generally more rapid for OPEC loans than - 33 - other sources of funds. Thus it would seem that OPEC countries will contrib- ute substantially to the future capital needs of Mauritania. On this basis we estimate OPEC country disbursements at around $50 million in future years. 4.24 As to the foreign capital inflow from other sources, project tied grants from non-OPEC countries amounted to $4 million in 1973 and 1974 and to $12 million on 1975. The future contribution might be put at about $15 million. With respect to laons, a large part of the total commitments in 1973, 1974'and 1975 ($117 million out of $174 million) consists of a loan from China ($51 million) and of supplier credits ($66) million. Thus commit- ments of traditional lenders amounted to a cumulative total of $57 million in the 1973 to 1975 period, i.e., an annual average of $19 million. On this basis it seems a reasonable assumption that traditional lenders will contrib- ute around $20 million per year of the foreign capital inflow, of which about one half in the form of soft credits and one half in the form of loans on conventional terms. Soft loans and grants might thus together supply some $25 million of the total foreign capital inflow. Loans on conventional terms would in all likelihood be greater if the Guelbs and the sulphuric copper ore project are implemented. The annual capital inflow on conventional terms could well run from $10 to $25 million. 4.25 The 1974 Chinese loan of $51 million is not yet designated for specific projects. Some of the major projects to which Chinese aid might be allocated (Nouakchott harbor, large diesel power station in Nouakchott, olympic stadium, Kounde irrigation scheme) do not seem urgent and are not part of the public sector investment program proposed by the mission. Thus the actual capital inflow from China might remain limited in the coming years. 4.26 Supplier credits have not been significant, with the exception of a 1974 loan from Austrian suppliers for the oil refinery ($50 million). Supplier credits will, however, probably play a role in financing the Guelbs project and the sulphuric copper ore project. We estimate the value of future drawings on supplier credits at $25 million per year. 4.27 This analysis of recent capital inflows leads us to project the following pattern of annual commitments: $50 million from OPEC countries; $25 million grants and soft loans; $25 million long term loans on conventional terms; $25 million supplier credits. This level of commitments would imply that the capital inflow could be of the required order of magnitude. Moreover, the composition is consistent with the pattern of project proposed for the investment program; in partic- ular, the borrowing on relatively hard terms might well be associated with projects in the mining and industrial sectors. However, the pattern of com- mitments shown here is not meant to suggest that foreign aid donors shift to non-concessionary terms. Concessionary finance will be needed to keep debt service and national savings (savings after debt service) at sustain- able levels. The commercial borrowing included in the financing pattern is exclusively associated with industrial and mining ventures in which such - 34 - borrowing is considered typical and probable. Finally, Mauritania's capac- ity to service this level of borrowing is obviously dependent both on the real productivity of the projects financed, which underlies our projections of growth in output and exports, and on the assumed rate of inflation. If either productivity or the international price level rise at slower rates, new foreign borrowing needs would have to be reassessed. 4.28 The longer term outlook beyond the period of the Third Plan is considerably better, with local financial resources (net investable public savings plus some local borrowing) sufficient to finance 35-40 percent of public investments. In absolute figures, however, necessary foreign bor- rowing will continue to increase heavily during the Fourth Plan and might well reach twice the amounts in current dollars projected for the Third Plan. this makes continuous careful foreign debt management indispensable, so as to safeguard Mauritania's creditworthiness in the world financial market, which is an indispensable pre-condition to future heavy foreign borrowing. PART II THE SECTOR INVESTMENT PROGRAMS - 35 - Chapter 5 MINING, MANUFACTURING AND SMALL SCALE INDUSTRIES Growth Trends 5.1 The share of the industrial sector in Mauritania's gross domestic product at factor cost increased.from 36 percent in 1970 to 39 percent in 1975 and it is projected to increase further to 42 percent in 1985. Thus growth of the industrial sector has been and is projected to be higher than growth of total GDP at factor cost: 5.3 percent and 3.8 percent respectively for 1970-1975 and 6.6 percent and 5.9 percent for the years 1975-1985. The difference is larger in the first period due to the stagnation in output of the rural sector. 5.2 Growth expressed in terms of gross domestic product at factor cost does not take into account the adjustment for gains from changes in the terms of trade nor the costs attributable to higher debt services charges. Of these two adjustments, the terms of trade is no doubt the most important. Thus measurements in terms of GDP at factor cost underestimate both the growth in and the contribution of the industrial sector. 5.3 Growth performance is very uneven among the various industrial sub-sectors. Table 19: COMPOSITION AND GROWTH OF INDUSTRIAL SUB-SECTORS (PERCENTS) Share in Industrial Sector Growth rates Sub-Sector 1970 1975 1985 1970-1975 1975-1985 Mining 61.0 56.7 39.0 3.8 5.4 Manufacturing 4.9 5.7 23.0 8.5 21.0 Construction 14.6 18.8 24.0 10.7 9.2 Other 19.5 18.8 14.0 4.6 3.5 100.0 100.0 100.0 5.3 6.6 5.4 Mining is the dominant industrial acitivity but manufacturing is the most dynamic. Projected growth in the 1975-1985 period is due to petroleum refining, fish processing and various manufacturing industries. However, due to the limited numer of large projects, the growth rate could be considerably lower should any one of those projects be dropped or post- poned. Thus, were the petroleum refinery (projected to enter production in 1980) delayed by 5 years, industrial value added would fall by more than 10 percent in 1985. The fish processing industry is the most dynamic sector - 36 - of the economy, with a growth rate in real terms of 19 percent during the period 19701974 and a projected growth rate of 12 percent until 1985. The high growth rates of the construction industry are linked to the rapidly increasing investment level. Investment and its Relation to Growth 5.5 It has already been observed that industrial investments loom quite large in Mauritania's Third Plan outline for 1976-1980. The mission proposal for public invesment in that period maintains the mining projects but deletes a number of large industrial projects. As the plan outline does not quantify private investment prospects, the mission made a number of assumptions concern- ing future private investments in certain sectors open to private investors. These areas are fish processing, small manufacturing and service enterprises, tourism, and housing and urban development. Before discussing in detail the mission investment proposal it may be interesting to compare it to the plan outline. Table 20: PUBLIC INDUSTRIAL INVESTMENT in UM billions in 1975 Prices in Percents Plan Mission Plan Mission Outline ProDosal Outline Proposal Public Utilities 1.8 0.9 5.3 6.4 Mining 19.2 9.1 56.8 64.5 Manufacturing 12.8 4.1 37.9 29.1 33.8 14.1 100.0 100.0 5.6 The reduction of the total public investment volume is in reality less drastic than it appears, as the investment total in the plan outline is based on total project costs and does not take into account the fact that the implementation of some projects will by necessity extend beyond the 1976-1980 period. Whereas the absolute amount of the mission proposal is vastly different from the plan outline, the sub-sector distribution is rather similar to the mission's proposal being somemwhat more oriented towards min- ing than manufacturing. 5.7 In the field of public utilities the mission suggests continuing a gradual expansion of power compared to the sizeable increase in installed capacity proposed in the plan outline. On the other hand, the mission feels that the plan outline gives too little attention to the water supply in Nouadhibou, which has become a bottleneck to industrial development in that area. Regarding telecommunications, at this moment Mauritania's connection to a Pan African network would not seem of paramount importance. - 37 - 5.8 In the field of mining the mission supports the Guelbs and the sulphuric copper ore projects. Preliminary calculations of cost and foreign exchange earnings show a large positive result. Two major points should, however, be made. First, mining investments are necessary just to maintain mining output and will not increase it. A reduction in investments in mining would cause a drop in gross domestic product that, due to the large dominance of mining, could not be compensated for a long time by an increase in output of other sectors. The result of this situation is an economy extremely expen- sive to run with a high level of investment (about one-third of'GDP), one- quarter of it is necessary to maintain GDP. A direct consequence of this is the scarcity of available funds for net growth investments, and the probable balance of payments debt service problems which may arise due to a need for additional imports and borrowing while net output does not increase. These problems are not likely to disappear as long as such a proportion of invest- ment is necessary just to maintain the level of gross domestic product and not its growth rate. Secondly, mining investments do not provide a durable basis for economic development since mineral reserves will eventually be ex- hausted. One immediate conclusion is that in the long run, since a sharp drop in gross domestic product is unacceptable, the degree of freedom left to the planners is considerably reduced. However, extra care should be paid to the long-run consequences of every investment and additional help should be secured in the form of concessionary aid to insure a gradual structural change of the Mauritanian economy without placing an unduly heavy burden on its inhabitants. 5.9 In the field of manufacturing industries, preliminary calculations show negative or negligible foreign exchange earnings for all the new major manufacturing enterprises proposed by the plan outline. These include oil, copper and sugar refineries, the clinker grinding plant and the small electric iron furnace. Moreover, where foreign exchange calculations show large gross earnings (the petroleum refinery) a large part of their earnings depend on a highly volatile and thus risky export market. For this reason these new public manufacturing enterprises should not go forward. On the other hand, small manufacturing and service establishments can make an important contri- bution to value added and employment, especially in the urban areas. Support organizations are needed to assist them with credit and technical managerial assistance. The mission also recommends an expansion of the fish processing industries. Growth of the Public Sector 5.10 Since the nationalization of MIFERMA in November 1974, the Public sector, which had been until then extremely small, has dominated industry. The SNIM (Societe Nationale Industielle et Miniere), a public autonomous corporation, which was created in 1972 with 518 million UM in capital took over MIFERMA in 1974 and SOMIMA (Societe de Mines de Mauritanie) in 1975. This sudden and massive public involvement in the industrial sector reflects the will of the Government to push industrialization at a rather fast rate, as well as the need to step into a sector conspicuous for its lack of entre- preneurship outside of mining. The nationalization of MIFERMA and SOMIMA - 38 - also were a reflection of internal political pressure for Mauritanian control over an important economic sector, and a feeling that a diversion of the min- ing sector's proceeds was taking place which was detrimental to the country. This frame of mind is significant in that it has encouraged the view that Gov- ernment control of resources increases the industrial sector's contribution to GDP, and that a vast effort to develop a public industrial sector is there- fore justified. The following analysis examines the potential contribution of the various industrial projects contained in the Third Plan. Past Investment 5.11 From 1970 to 1975 the share of the industrial sector in total investment declined from 87 percent to 46 percent, and represented an average of 66% of total investment over the period. Private investment represented during the same period 11.9 billion UM out of a total of 13.7 billion invested in the industrial sector, i.e., in 1973 private investment accounted for over 99 percent of industrial investment while in 1975 it represented 59 percent, subsequent to the MIFERMA and SOMIMA nationalization. The following table gives public and private investment per sector during the period 1970-1975: Table 21: INDUSTRIAL INVESTMENT, 1970-1975 - - - (in UM billions) - - - of Industrial of Total Sector Invest. Private Public Total % % Mining 10.9 0.7 11.6 85 57 Fish Processing 0.4 - 0.4 3 1 Other Manufacturing 0.6 0.5 1.1 8 5 Utilities - 0.6 0.6 4 3 Industrial Sector 11.9 1.8 13.7 100 66 Total Investment 12.8 7.6 20.4 - - 5.12 In mining most investment went into replacement of rails and rolling stock. In fish processing the last sizable investment was made in 1970 when new freezing capacity was installed. In other private enterprises investment was minimal and public investment was confined to pubic utilities. This is in sharp contrast with the investment program contained in the plan outline. Mining Mining Survey 5.13 Mining surveys became important from 1974 onwards when foreign companies invested 1.6 billion UM through direct investment. The number - 39 - of permits which were in force in 1975 is quite impressive. Mining research is conducted in oil, copper, phosphates and uranium outside of SNIM and in iron, copper and tungsten by SNIM. As intensive exploration only started recently it is too early to say anything definite about the outcome of mining research. Preliminary results are negative: oil research permits have now expired, without results, and the uranium research was suspended due to the troubled situation. Hopes to find highly valuable minerals have been frus- trated so far. The mission nevertheless is assuming that mineral prospecting will continue. Direct investments for the purpose have been projected at 2.0 billion UM in 1980 and at 2.5 billion UM in 1985 (1973 prices). Iron Ore 5.14 The reserves of the Kedja mines of Tazadit, Rouessa and F'Derick, which entered into activity in 1963, were at first estimated at 152 million tons, but later estimates put these reserves at 197 MT. Very close to 100 MT have so far been extracted from the existing mines. The capacity was gradually build up from 7.5 MT in the mid-sixties to 11.4 MT in the mid- seventies. The latest important expansion took place in 1973, bringing into production lower grade deposits (55 percent) and expanding yearly capacity from 9 MT to 11.4 MT. The extraction rate at capacity (11.4 MT) can continue well into the eighties. Since low grade ore is more difficult to sell and mining sites are scattered, one may expect a drop in the output of the present mine in the first half of the eighties. By this time the Guelbs projcct should have begun operation. Iron ore exports reached their peak in 1974 with 11.6 MT. There was a sharp drop (25 percent) in 1975 due to the recession in Europe. This decline has been more than compensated by an increase in prices which went up faster than the overall world iron ore price increase. 5.15 In 1973 the total accumulated investments of MIFERMA amounted to 16.7 billion UM (US $397 million at the present exchange rate) half of which was amortized. MIFERMA was nationalized in December 1974. In the beginning of 1976 an agreement between the government of Mauritania and the shareholders of MIFERMA was reached calling for a down payment of US $50 million in April 1976 and equal annual payments of US $10 million for the four following years. Shareholders also agreed to buy no less than 3.5 million tons of Mauritanian ore per year for an undetermined period. The compensation agreement opens the way for a new iron ore project. The high grade ore from the Kedia will be exhausted in the first half of the eighties and the long-term outlook for iron ore production in Mauritania depends entirely on the Guelbs project. 5.16 In the Tiris region, billions of tons of low grade (37 percent) ore exist. Impurities (phosphor, sulphur, chromium ...) are not unmanageable, however, and the ore is easy to process. Two main groups of deposits have been studied so far because of their proximity to the present operation and their characteristics: the western Guelbs have probable reserves of 980 MT while the eastern Guelbs have proven reserves of 480 MT. The former are closer but the eastern Guelbs have a coarse grain ore easier to concentrate. Thus, the project concerns the eastern Guelbs. - 40 - 5.17 The total estimated cost of this project is about 18 billion UM (US$428 million) in 1975 prices. It will allow production of a high-grade ore concentrate for 20 years at 12 MT annually. The project consists firstly of a concentration plant in Zouerate transforming the 37 percent ore into a 52.8 percent concentrate ,that will be shipped through Nouadhibou. Secondly, two concentration plants are foreseen in Nouadhibou; one producing higher concentrates of about 65 percent and one transforming part of the 65 percent concentrate (the magnetic Sinter feed) into pellet feed. The final output of the plant would be as follows: Table 22: OUTPUT OF THE GUELBS PROJECT (in million tons) Product Fe Content Output (%) Sinter Feed - magnetic 65.6 7.42 - oxydized 64.5 2.77 Pellet Feed 70.0 2.00 Total 12.19 5.18 The technical aspects of the concentration process have been stud- ied in a Zouerate pilot plant and the results are positive. However, the economics of this project have not been analysed in any definite way. Ac- cording to preliminary calculations of the mission the project would yield substantial annual foreign exchange and therefore the mission recommends it for further study. The basic reason the project might be economically feasible is the fact that it can make full use of the existing transport infrastructure and of the existing labor force. Nevertheless the amount to be invested is enormous. Recently, iron ore deposits have been discovered in several other West African states (Ivory Coast, Gabon, Guinea) and the Guelbs project will face competition for capital. Successful implementation of the project will also claim a large part of the organizational capacity that Mauritania can master. 5.19 SNIM is already considering doubling the capacity of the new proj- ect (24 MT) by simultaneous exploitation of the western and eastern Guelbs. It is unlikely that economics of scale would result from such an increase as it would require an entirely new mine, as well as new railways and port facilities. Moreover, it is not certain at all that the market would sus- tain a doubling of capacity. Concentration on the Guelbs project as it is now conceived would avoid these risks and provide greater assurance of a reasonable rate of return. - 41 - Copper Mining 5.20 SOMIMA (Societe de Mines de Mauritanie) was created in March, 1967 by a British firm, Chartered Consolidated (45 percent), BRGM (6 percent), Pennaroya (6 percent), Cogei (6 percent), IFC (15 percent) and the Mauritanian Government (22 percent) to nne the copper deposits of Akjo"jt, The first shipment of copper concentrate took place in 1971. 5.21 One-third of the ore reserces at Akjoujt is heavily oxydized and, for copper production requires a process known as "Torco", which is costly in fuel. SOMIMA is the only plant in the world using the process. Moreover, the arsenic content of the copper concentrate makes marketing difficult and thus the Mauritanian concentrates command a lower price than the world average. Consequently, SOMIMA has not been able to reach capacity (50,000 T) in its five-year existence. In addition it has experienced financial difficulties; only in 1973 did SOMIMA turn out a profit (UM 137 million) while it registered a loss of UM 747 million in 1972 and UM 680 million in 1974. 5.22 In 1974 the shareholders closed the mine as a result of the increase in fuel prices and the crash in copper price: the share of fuel costs in the export price went up from 2.3 percent in 1972 to 18.5 percent in 1975. In 1975, SOMIMA did not function at all for five months. To maintain jobs, the Mauritanian government bought the operation, and SNIM put the mine into operation again in the second half of 1975. The processing of oxide remnants represents two years of operation at capacity. Given the present and future fuel and copper concentrate prices, it is certain that exploiting the oxides is a losing operation. 5.23 In the face of these difficulties, SNIM has considered several alternatives: 1) Stop the copper operation and treat the oxide remants for gold and silver. A study in this regard is under preparation. 2) Scrap the remanants and process the sulphides, which are amenable to a more standard process. About 1 million tons of sulphide reserves exist at 2.3 percent, the proces s- ing of which would represent 10 years of operation at capacity. Preliminary calculations of the mission show that returns to investment in sulphuric ore exploitation could be adequate. For planning purposes the mission has retained this project among the priority ones, but recommends it for further study. Other Mining Operations Gypsum 5.24 Large deposits of gypsum have been found North of Nouakchott and have been exploited by SNIM since 1973 for sale to the Rufisque SOCOGIM cement plant in Senegal (gypsum represents 3 to 5 percent of the weight of cement). There is an agreement between SNIM and SOCOGIM according to which - 42 - SOCOGIM buys Mauritanian gypsum and gives a 12 percent rebate on the price of cement sold to Mauritania. The total production, 9,000 T out of a.15,000 T capacity, is sold to Rufisque. Gypsum is also used frequently in the local building material industry, but this has not been developed in Mauritania. Salt 5.25 SNIM is presently developing salt marshes with a capacity of 25,000 T of salt per year in the first period (1977) of which 15,000 T.would go to the fisheries, 7,500 T to consumption and 2,500 T to SOMIMA. At a later date the production could be expanded to 100,000 T. Manufacturing: Public Manufacturing Projects 5.26 From the plan outline it is clear that the Mauritanian Government is presently betting on large-scale industry to promote growth and develop- ment. The outline contains the following public manufacturing projects: copper refinery (UM 6.9 billion), oil refinery (UM 3.2 billion), spinning and weaving mill in Rosso (UM 1.3 billion), sugar refinery (UM 0.8 billion), small electric iron furnace (UM 0.7 billion), clinker grinding plant (UM 0.2 billion), and another clothing factory. The mission investment program for 1976-1980 includes the two ongoing projects -- the petroleum and the sugar refineries, since financing has already been firmly committed, but has serious reservations as to their economic justification. Further, for reasons spelled out below, the other manufacturing projects are not advis- able, with the possible exception of the second clothing unit. However, since the first clothing factory has just entered the operational stage im- plementation of the second unit should be postponed for a few years. 5.27 Implementation of these industrial projects raises serious ques- tions of economic viability. First, a number of them, the oil, copper and sugar refineries show negative foreign exchange earnings. Net foreign exchange earnings are negligible in the small electric furnace and in the clinker grinding plant. Second, the domestic market is small and the new enterprises would have to export too large a share of their output, while importing most of their inputs (capital, labor, intermediate products). These projects therefore subject the economy of Mauritania to the uncer- tainties of international market conditions, especially in the case of cop- per and oil refineries and the spinning and weaving mill in Rosso. Third, the projects, although representing a maximum in terms of the financial size of the country, are very small compared to industry standards, and, lacking economics of scale, have small margins on sales. This represents a particular danger for enterprises depending on exports. Fourth, it is doubtful whether the Mauritanian Government, having no previous experience with large industrial projects, has the necessary administrative capacity to prepare and run these industrial projects. SNIM did conceive and rapidly execute an industrial project (explosives) but it was not on the scale of several envisaged in the plan outline. Thus there is a substantial risk of delays and mismanagement which would seriously affect the efficiency of these public industrial projects. Fifth, Mauritania lacks trained man- power at every level on both the technical and managerial sides. Running such large-scale industrial projects is mostly likely to be expensive in terms of foreign labor which in any event involves additional administrative - 43 - costs for the country. Finally, due to limited domestic financial resources, foreign borrowing to implement the projects will add heavily to debt service charges. 5.28 The oil refinery, the small electric iron furnace, and the sugar and copper refineries involve a number of issues which are specific to these undertakings: Grcss foreign exchange earnings of the oil refinery are quite high but it is assumed that the refinery will work at full capacity and be able to export the half of its production not consumed locally at prevailing world market prices. Even then, sales margins between the cost.of crude oil imports and refined products expgrts are at present low -- on the order of $2.50 per barrel -- and are not expected to rise much in the medium-term. Export of such a high share of output is also risky; particular when sold on a day to day basis in the so-called "Rotterdam market" where wide price fluc- tuations occur and oil refineries exporting more than 10 percent of their output to this market are known to have encountered difficulties. Moreover, due to high capital costs the margin for price declines open to such a small plant is narrow since economies of scale are sizable in oil refineries. If the refinery is obliged to work at less than capacity, costs per barrel would increase sharply (almost in inverse relationship with capacity utilization) and the plant might be required to produce only for the local market at a cost higher even that the CIF value of refined products, or shut down. The best way to reduce the risk is to find steady customers to avoid the "Rotterdam Market" but the outlook for markets in West Africa is dim due to the prolife- ration of refinery projects, and penetration of the European supply market seems to be difficult. Alternatively, crude oil suppliers might be prepared to supply Mauritania at concessionary prices, but there is not concrete evidence of this so far. At best, the refinery is a marginal undertaking and at prevailing and projected world market prices faces a high probability of incurring higher foreign exchange costs than benefits. 5.29 The electric iron furnace has a marginal profit in terms of foreign exchange but it should be noted than in the project's dossier 1) the cost of raw materials (used rails of COMINOR) is set at zero. If these could be re- exported, profits would be reduced by the FOB value of scrap metal; 2) avail- ability and volume of such a supply of scrap metal has not been fully ascer- tained. This should be done before going ahead with such a project; 3) UNIDO report found that this project barely balances on financial grounds. 5.30 The sugar refinery does not seem to be a sound operation since it would cost more (in terms of foreign exchange) to refine sugar than to import it, notwithstanding local costs. This situation is mainly due to the neces- sity to import all raw sugar, while the margin between raw and refined sugar is low. 5.31 The copper refinery is just too small to operate profitably on the margin between concentrate and copper. On the other hand a bigger plant would need to be partly supplied by imports of copper concentrate or extra investments in copper mining to step up extraction, therefore exhausing the reserves faster. Since at the present rate the mine's expected life is about 10 years, it seems unreasonable to try to double or triple production (requiring the amortization of those investments in five or three years) to justify a copper refinery which would thereafter depend on the international market both for its supply of concentrate and its exports. - 44 - Fish Processing Industries Catch and Landings 5.32 The fish processing industry is the oldest in the country and con- tinues to be of great importance to the economy. The stock of fish off the Mauritian coast has been estimated at 3 million T by an FAO mission and at 4 million T by a Russian mission, giving a yearly potential catch of 500,000 T in one case and 750,000 T in the other. The decline in mullet and yellow cowbine catches seems to point to exhaustion of some species, and a regional system to monitor the supply deserves consideration. 5.33 A small fleet of about 70 ships is linked to the Nouadhibou port fish processing plants while a much larger number of boats actually fish in Mauritanian territorial waters (30 nautical miles from the coast) and call at Nouadhibou. The total number of foreign ships increased to 225 in 1974, i.e., double the amount in 1972. Many of them are freezer trawlers which do not need to land their catch, whereas other trawlers transship their catch on large factory ships, and only a small part of the total catch is landed in Nouadhibou. Table 23: TOTAL CATCH AND LANDINGS IN NOUADHIBOU 1969-1972 Number of Total Landed at Landing as a % Year Ships Catch Nouadhibou of total catch (1,000 T) (1,000 T) 1969 80 72.0 26.0 36 1970 125 159.5 56.5 35 1971 127 269.4 80.4 30 1972 139 356.0 55.9 16 1973 ... ... 86.0 1974 ... ... 70.0 The quantity of landed fish determines the output of the fish processing industry. Not only is the percentage of landed fish in relation to total catch low; it fell by more than half between 1969 and 1972. The total quan- tity of landed fish did not increase at all between 1971 and 1974. 5.34 The rate of capacity utilization for the fish processing industry was a low 31 percent in 1973. As the utlization rate of the Nouadhibou port is far from being close to 100 percent (63 percent), it does not seem that the port is the limiting factor in the level of fish processing activity. The critical element in the supply of fish to the plants seems to be the relation between the ownership of boats and the ownership of plants. Only MAFCO and SOFRIMA, which are each 44 percent Japanese owned, seem to be free of supply problems. IMAPEC has not been supplied adequately, although a sizable fleet of Russian trawlers is earmarked for them. COMAPIC also suffered problems to a lesser degree. - 45 - 5.35 The value of exports per ton of landed fish is highest for frozen fish, canned fish and mollusks, then for salted fish, and is lowest for fish meal. This ranking also corresponds to private profitability. In effect, despite some industrialized capacity, the only profitable proces- sing activity seems to be freezing, which apparently encounters no marketing problems. Canning operations are marginally profitable (IMAPEC had a small profit in 1973 and a deficit in 1974). Fishmeal prices, which peaked at $700/ton, fell to $350/ton in October 1974 and to $220 in July 1975. Since IMAPEC's costs were running about $330/ton, it has recently had to close down. SOMIP restricts its operation to-the peak fishing period (Sept./Jan.). Projections 5.36 Projections for the fish processing industry have been made taking into account the doubling in capacity of the port and the increase in plant capacity (doubling for freezing, 20 percent for fishmeal, triple for canned fish). Assuming full capacity utilization of the port, and reallocating capacity so that the export value of landed fish increases in 1985, one arrives at a rate of utilization of 100 percent for freezing capacity, 48 percent for salting/drying, 63 percent for production of fishmeal and 89 percent for canning. The average export value per kg of landed fish would increase by 63 percent (from UM 18.2 to UM 34.1 in constant 1973 prices). Thus, while the quantity of processed fish would increase by 371 percent (from 307,000 tons to 114,000 tons) production value would increase six-fold between 1973 and 1985. The only problem is how to get the foreign fleets that are not associated with fish processing plants to land sufficiently in Nouadhibou. After a review of the alternatives, perhaps the only solution is to impose licensing agreements in order to ensure that the most profitable plants of any kind, from the point of view of the country, be served in priority. A National Fishing Fleet 5.37 Past experience with Government participation in the fishing in- dustry has not been satisfactory. The first attempt at a national fishing industry comprised establishment of a fully state-owned fishing fleet (SOMAP) linked to a fish processing plant (SOMIP). Lack of trained crews and ill- adapted equipment were the cause of poor performance and a high rate of ac- cidents leading ultimately to a discontinuation of the experience, the sales of SOMAP's 14 trawlers and the leasing of SOMIP to a privately controlled firm (COMAPIC). Two new efforts are currently being made to create the basis of a national fishing fleet: ALMAP (Societe Algero Mauritanienne de Peche) with four vessels (115 gross tons each) and SOMACAP (Kuwaiti/Mauritanian), equipped with four French trawlers (160 gross tons each). Both have so far shown poor results due to technical and commercial weaknesses and, it seems, unfair treatment by ice suppliers (SOFRIMA). For example, ALMAP vessels had to wait up to 10 days to receive only a partial load of ice. The mission assumed that by 1985 most of the fish landed in Nouadhibu would still come from foreign fleets. - 46 - Small Manufacturing Enterprises 5.38 Small manufacturing enterprises in Mauritania are usually in pri- vate hands. Exceptions are very few: matches (SOMAURAL) and rugs are made in public enterprises. The Gover-ment's philosophy regarding small business, as stated in the plan, is laissez-faire and provides for minimal support. The import licensing policy, for instance is rather liberal: only a small amount of equity capital and a limited volume of activity are necessary to obtain a license. It seems, however, that the withdrawal of Mauritania from the BCEAO and the creation of the UM in 1973 together with the stringent ex- change control may have hurt private business. This set of circumstances made the regular supply of raw materials and other intermediate goods more difficult. The match factory and the new soft drink factory (SOBOMA) are reportedly working below full capacity (40% in the case of SOMVRAL) because of raw short supplies. Such problems may explain the apparent stagnation in turnover between 1970 and 1974 though data are too uncertain to make a strong case. 5.39 The manufacturing sector in Mauritania, outside the fish process- ing industry, is quite small. Turnover is about 0.3 million, most of it in building materials. The quality of the small manufacturing industry also needs improvement. There is a shortage of skilled manpower and credit facil- ities and a lack of standardization. Moreover, industrial activities are often combined with trading and transport activities, which hinders the de- velopment of specialized manufacturing skills. As a consequence, a whole range of intermediate goods, supporting services and consumer goods are not available locally and must be imported. Those that are available are extremely expensive. Finally, the contribution of manufacturing industries to exports is negligible. 5.40 One activity in which there is much scope for improvement is re- pair and maintenance services. Usually vehicle sales and repair services are associated with each other, but while sales have been doing well, the repair shops (with the exception of maintenance of mining equipment, and one garage in Nouakchott) are fairly poor. Inadequate maintenance capacity imposes a high cost in imported replacement parts and in long delays. Build- ing materials, which are largely imported, are also costly. Furthermore, the building industry relies largely on foreign labor: about 80% of manage- ment is foreign and foreigners occupy even the lower positions of foremen and skilled workers. These factors result in high building costs and high rents. Rugs are another area for improvement; efforts are being made to develop a rug weaving industry. Unfortunately low productivity and mediocre quality render Mauritanian rugs uncompetitive for the export market. The absence of tanneries also testifies to the early stage of the manufacturing industry in Mauritania. Although hides are dried and shipped raw abroad to Italy, the establishment in Kaedi only works at 10% of its capacity. 5.41 These problems in the small scale enterprise sector are directly related to the high cost of project implementation in Mauritania. For exam- ple industrial projects have to provide for complete maintenance and other supporting services, which increases project costs. The absence of small - 47 - manufacturing and service workshops has become a real bottleneck to Mauritania's development, which could be alleviated through more effective policies by the Mauritanian Government to encourage and support them. 5.42 Small manufacturing enterprises have the added potential to absorb much more labor than they do now. This is an important feature, given the fact that in 1973 the modern sector employed only one-third of the male labor force in towns. Capital requirements per employee are much lower in small establishments than in large-scale industries. An estimate of the average capital-labor ratio in small manufacturing industries is about UM 0.1 million per worker, where the capital required in a few of the big industries 1/ amounts to UM 2.3 million, that is 23 times as much as in small industries. The manufacturing sector in Mauritania has recently been reviewed by a UNIDO study 2/ that also provides a list of priorities for future development of small manufacturing enterprises: 1/ The electric iron furnace, the petrol and sugar refineries, the spinning and weaving mill in Rosso, the clothing unit, the milk factory, the clinker grinding plant and the gypsum factory. 2/ UNIDO/IPPD 199, T. Damiro 11/27/75 - 48 - Mauritania Table 24: POSSIBLE PRIVATE INVESTMENT PROJECTS IN MANUFACTURING Per Order of Priority First Second Third Priority Priority Priority WOOD Saw mill X Furniture X Toys X Packing boxes X METAL Mechanical workshops X Bolts, screws, washers X Small hardware X Small machines (pumps) X Cycles assembly X Agricultural implements X itchzn ware X Tin cans X Beds, mattresses X Metallic construction X Metallic furniture X Stamping forging X Body shop X Automotive repairs X Ship repair X CHEMICALS Pharmaceutical conditioning Castor oil X Oil, soap X Ink X Paint, varnish X Plastic molding x Plastic clothing X Plastic footwear X Fertilizer X Oxygen, acetylen X Carbon dioxide X Glass works X Recapping - 49 - First Second Third Priority Priority Priority CONSTRUCTION MATERIALS Bricks, tiles X Sanitary equipment X Plaster X Plaster panels X Limestone X Prefabrication X ELECTRICAL Coils X Electrical repairs X FOOD AND DRINKS Bakery X Biscuits x Noodles, x Sweets, chocolate X Chewing gum X Rice ginning X Dates X Mineral Water X OTHERS Brooms, brushes X Small boats x Tannery X Ceramics X Paper (copy books, etc.) X Sacks X Tobacco x Leather work X Number of Sub-Sectors 24 13 19 Source: UNIDO report and mission findings - 50 - 5.43 The most urgent need in manufacturing is for maintenance and re- conditioning facilities for just about everything. This requires, first, mechanical workshops, repair shops for cars and fishing boats, electrical repair shops, and, secondly, local manufacture of bolts, screws, other qmall hardware, and coils The gpcond grpPrt need would be construction materials and metallic construction, the former substituting for imports. Such development could be based partly on local raw materials (gypsum for plaster and plaster panels, river lime for brick and tiles) and partly on imported raw goods (logs for saw mills). The list of highest priority projects in the preceding table also includes other repair services (tire recapping), supporting services (industrial gas), other intermediate goods (paper bags and sacks), simple consumer goods (beds, mattresses, bakeries, rice growing) and export commodities (tanneries and leather work, condition- ing of dates). 5.44 This list suggests that with appropriate policies there are consid- erable opportunities to develop small-scale industry in Mauritania. There is also substantial evidence of the existence of private savings and the will to create small enterprises. What is needed first is an organization that will give technical assistance to future businessmen in the setting up, operation and financial and commercial management of these enterprises and, second, a specialized bank for them. As to the first point, existing public agencies, whose resources have been preempted by large projects, have been unable to undertake any meaningful action in industrial promotion. A separate center for indutcrial promotion would now seem to be an appropriate step in Lhis direction 1/. Once this center is created, it would then be possible to strengthen the promotional effort by the creation of a specialized develop- ment bank. Public Utilities Electricity 5.45 Electricity production in Nouakchott doubled between 1970 and 1975 and the installed capacity has been regularly increased by small units of 1,500 kw. The plan outline proposes to deviate from this policy by installing 24,000 kw at one time under a Chinese loan. This presents the technical risk that the new machinery might not match the already installed equipment. Moreover, the establishment of the unit would create idle capacity for a long time. 5.46 Nouadhibou obtains its power from the COMINOR generator. Electric- ity production from this source reached its capacity in 1973. While installa- tion of additional capacity is clearly needed, the 24,000 kw proposed by the plan outline appear excessive. Given the required extensions in Nouakchott 1/ Such centers are being set up in many West African countries, and already are showing signs of success. - 51 - and Nouadhibou, the mission proposes to postpone the electrification of a number of secondary centers which figure among the firmly selected and considered projects in the plan outline 1/. Water 5.47 In the first half of the seventies, Nouakchott obtained a large water supply system that should be sufficient until 1985. In Nouadhibou, however, the water supply constitutes a bottleneck to the town's further economic growth and substantial investments are needed. The plan outline contains only a feasibility study for providing more water to Nouadhibou, but the mission proposes to give priority to the implementation of this project. 1/ The same observation is valid for the proposals to supply piped water to a number of secondary centers. - 52 - Chapter 6 The Rural Sector Population 6.1 Mauritania's rural population in 1973 is estimated at'913,000 of which the majority are nomads (73 per cent). The rest live in villages in the southern part of the country. Among the settled rural population two groups can be distinguished: those in the Senegal and Gorgol river valleys (112,000 in 1973) and the inhabitants of the southwestern part of the country (65,000). 6.2 As the process of rapid urbanization is expected to continue during the coming decade, the rural population as a whole will grow slowly (0.7 percent per year), arriving at 977,000 in 1985. Planning authorities expect that the absolute number of nomads will slightly decrease but that the population of the river valleys will grow rapidly (4.6 percent annually, nearly the same growth rate as urban centers) as a consequence of the imple- mentation of a number of large rice schemes. The growth rate of the south- east will be in between: a slight increase from 65,000 in 1973 to 80,000 in 1975. Agricultural Production 6.3 Agricultural production figures are notoriously unreliable in Mauritania. Therefore, population data and projections are a useful point of departure for assessing trends in production of the country's principal crop, millet. There are two types of cultivation: rainfed and flood re- cession. The average farm size in rainfed cultivation is 2.5 ha is south- eastern Mauritania and somewhat smaller (1.3 ha) in the river valleys. In a year of normal rainfall, average millet yield is 0.3 t/ha which is very low indeed. It can be much lower still in a dry year. Flood plains in Mauritania are estimated at 60,000 ha in a normal year but they are much smaller in a dry year. With flood recession cultivation, the average yield is 0.4 t/ha, somewhat better than rainfed cultivation but still very low. Under these assumptions normal production in the 1970 to 1975 period should have been arround 65,000 tons which is about one-third lower than the figure normally quoted. However, in a very dry year like 1973, millet production might fall to 10,000 tons. 6.4 Variations in production are accompanied by wide price fluctua- tions. Thus, the drop in production in 1973 was followed by a strong price rise (200% between 1972 and 1973). Production went back to normal after 1973 and millet prices in 1975 went down by about 50 percent compared to 1974. - 53 - 6.5 Projections of future millet and sorghum production should take account of,,the above demographic trends and of the reduction in flood plains available for millet production as a consequence of new irrigation schemes. Moreover, it does not seem unreasonable to expect that by 1985 extension services will have succeeded in piqhing yiplds from 0.3 t/ha to 0.5 t/ha in the area with rainfed cultivation and from 0.4 to 0.8 t/ha in flood recession cultivation. Under these assumptions production could increase to 111,000 tons in 1985. 6.6 Rice will be Mauritania's other major agricultural product. Output in 1975 was still very small (2,600 tons) but may reach 62,000 tons in 1985. Such production assumes an extension of the irrigated area from 1,000 ha in 1975 to 16,000 ha in 1985, double cropping on half this area and an average paddy yield of 4 t/ha. An expansion of irrigation by 15,000 ha in 10 years might seem an ambitious target but it should be pointed out that national planning authorities reckon on 34,600 ha under irrigation by 1984. In Mauritania it is reckoned that 0.5 ha under irrigation will occupy one active person. The expansion of the irrigated area will thus supply employment to an additional 30,000 farmers whereas the total increase of the active popula- tion of the Senegal and Gorgol river valleys during the period 1973 to 1985 can be put at 36,000 persons. It thus appears that the latter is indeed based on an expansion in irrigation. 6.7 By the mid-seventies, about half the national consumption of cereals was satisfied by imports. The projected rise in grain production -will stabi- lize such imports and by 1985 imports will contribute to only one quarter of national cereal consumption. A much larger increase of rice production would become necessary before Mauritania could become a net exporter of cereals. 6.8 Regarding Mauritania's other agricultural products, a rather sharp increase has been projected for fruits and vegetables (doubling of production between 1975 and 1985). This rise would come in particular from commercial gardening in the Senegal river valley. The production from such gardens should satisfy the rapidly expanding market in Nouakchott where, at the end of 1974, prices of fruit and vegetables were much higher than in Dakar. Road connections between the river valleys and the capital should improve tremen- dously during the next decade. At the end of 1975, two commercial gardens had already been established near Rosso. Normally, production of dates is somewhere between 10,000 and 15,000 tons per year out of a potential estimated 30,000 tons. Some productivity gain has been assumed for 1985. Concerning other products (niebe, wheat, maize, yams, etc.) the value of their output is estimated a quarter the value of millet production. This proportion was derived from past series and was applied to 1980 and 1985. 6.9 Total agricultural production is expected to rise by 6.3 percent annually during the period 1975 to 1985. Such a growth rate contrasts favorably with the quasi-stagnation in agricultural production during the period 1959 to 1975. - 54 - Livestock 6.10 The drought resulted in a decrease of Mauritania's cattle herd by about one quarter whereas goats, sheep and camels suffered less. Part of the herd decrease was pure loss, but in the years 1970 to 1973 even though the herds were smaller exports were higher. Therefore, livestock production did not diminish as dramatically as agricultural output (the decrease between 1970 and 1973 was 17 percent in the case of livestock production and 70 percent for agricultural production). 6.11 Growth of future livestock production will be slow (2 percent annually in the 1975/85 period) as herds have to be built up again. Even though the relative meat price is likely to move very favorably during the coming decade, the horizon of 1985 is too short for a breakthrough to rational livestock management for a significant part of the nomads. We simply assumed an increase of the off-take ratio from 12 percent in 1975 to 14 percent in 1985. The incremental output that will be used for the local market and meat exports are expected to remain stable at the equivalent of 100,000 cattle annually during the coming 10 years. Forestry Production 6.12 As a consequence of the drought, gum arabic exports practically disappeared after 1970. As it is a very slow growing tree, exports in 1985 (2,500 tons) will still be at about one-third the pre-drought level. Public Investment in the Rural Sector: 1970-1975 6.13 Past investment has been characterized by major projects,in all parts of the rural sector: irrigation along the Senegal river, dams in the southeast (the Hodh), and deep wells and livestock projects in the southwest and southeast. All projects must contend with harsh natural conditions, lack of transport infastructure and problems with the administration that make it difficult to get them off the ground. Each type of project has also expe- rienced specific problems. The small rice schemes have been badly maintained and extension services are too few. Most of the dams in the Hodh are in poor shape. Nine out of the ten deep wells are not utilized, because in the initial stage, needed budgetary funds were not available. Finally, livestock projects do not supply an answer to the problem of how to avoid over-grazing or how to convert nomads to rational livestock management. It may be that in the past, project formulation underestimated difficulties that prevent proj- ects from having a beneficial and lasting impact on the economy. In Mauritania, it is hard enough to construct projects, but even when this phase is completed, the mere availability of irrigation schemes, dams, deep and suface wells does not assure a benefit to the economy. - 55 - 6.14 These problems are, of course, not overlooked by the Mauritanian Government and several solutions have been proposed. In the case of small irrigation schemes supplementary projects have been formulated concerning. first, maintenance and expansion of these schemes and, second, extension services Lo farmers. In the case 3f livestock, the large projects are no- paralleled by small experiments in southwest Mauritania and in the Selibaby area. Their object is to find an effective approach to nomadic herders. The Mauritanian Government's objective to promote rural sector for the com- ing decade should fully take into account the experience of the.first half of the seventies. The Public Investment Program, 1976-1980 6.15 The investment program is partly shaped by ongoing projects, that is by decisions made in the past. In agriculture and forestry on-going proj- ects are of minor importance, but in livestock they are more important than the firmly selected new projects. 6.16 As to these new projects, the outline of the plan 1976-1980 is built on a clear strategy: about 80 percent of all firmly chosen projects concern irrigation from the Senegal and Gorgol rivers. As to new projects for other parts of the country, the plan outline proposes a major development effort for southeast Mauritania, 100 deep wells, a green belt around Nouakchott and a fattening farm near Kaedi. Emphasis on irrigation seems a good choice but reservations could be expressed regarding some of the other major projects. The list of priority new projects for 1976-1980 has the same emphasis on irrigation as the plan outline. However, except for the green belt around Nouakchott, it does not retain the other large projects. Irrigation 6.17 The plan outline does not mention the Diama dam, which will be built in the delta of the Senegal river and will permit double cropping of 30,000 ha. There is no doubt a formal reason for this omission as the dam will be part of an international investment program under the auspices of the Senegal river authority (0.M.V.S.). The absence of the Diama dam from the plan outline may also reflect the fact that Mauritanian planning authorities show a keener interest in the Manantali dam than in Diama. The Manantali dam will be located in Mali and will permit double cropping of a much larger area, 425,000 ha out of which 140,000 ha could be located in Mauritania. 6.18 The main interest in the Diama dam lies in the fact that it prevents the salt tongue from creeping up the Senegal river where it actually goes as far as Boghe. For this reason Senegal also has a large interest in the dam, and its construction in the second half of the seventies seems likely. It is much less clear when construction of the Manantali dam will start. - 56 - 6.19 Mauritania wishes to cut off the salt tongue as it prevents double cropping in the M'Pourie area, in the small perimeters between Rosso and Boghe, and later, in the Kounde scheme and the Boghe plains. It is true that Mauritania has not yet actually developed sufficient irrigated area to make use of its share of Diama dam water during the dry season (sufficient for 15,000 ha), whereas Senegal has already developed sufficient area to use its share immediately. As we see it, Mauritania will have developed 7,000 ha by 1985 in the relevant area - the delta and lower valley. However, the poten- tial for irrigation in that area is much larger and has been estimated at 20,700 ha. It is therefore recommended to include in the plan Mauritania's share of the cost of Diama dam construction in order to reserve for Mauritania the use of double cropping on 15,000 ha. 6.20 Construction of the Diama dam will moreover, raise the level of the river during the flood season thus ensuring annual flooding of the Aftout Es Saheli depression (behind the dunes between Nouakchott and Rosso) and of the Lake R'Kiz depression (east of Rosso). These depressions are now only filled in years of particularly high floods. 6.21 The plan outline foresees the implementation of three medium-sized irrigation schemes: Gorgol development, Lake R'Kiz depression and the pilot scheme in the Boghe Plains. Furthermore, the implementation of the Kounde scheme is still under consideration. The feasibility study for this project is part of the firmly selected new projects. The latter also contains feasi- bility studies for the M'Bagne depression and Sarak scheme but its implemen- tation is not forseen during this plan period. In the field of small irri- gation schemes, two projects have been firmly selected: four small schemes upstream of Kaedi and 15 small schemes between Rosso and Kaedi. Economic Analysis of Irrigation Schemes 6.22 An economic analysis of irrigated rice cultivation is only available for small rice schemes. Yields are satisfactory (nearly 4 tons of paddy per ha) and producer prices, fixed by the Government, have followed world market trends, although with certain delays. Table 25: RICE: LANDED PRICE NOUAKCHOTT AND PRODUCER PRICE (UM/kilo) Producer Price Landed Price Nouakchott Paddy Rice Equivalent 1973 rainy season 5.0 7.7 8.42 1974 dry season 5.0 7.7 1974 rainy season 8.0 12.3 13.00 1975 dry season 8.0 12.3 - 57 - 6.23 These yields and prices provided the farmer with a net revenue of UM 4,000 (US$91) per cropping season in the agricultural year 1974/75. This is rather low, given the fact that average per capita income in the country- side has been calculated at US$94. Therefore, it might be of interest to in- crease the producer price of paddy: an increase of UM I per kilo paddy would increase the farmers' revenue by about UM 1,000. 6.24 The small schemes require elaborate extension services and when the cost of these services (foreign technical assistance not included) is taken into account the benefit of these schemes disappears. In principle, there- fore, the plan outline is correct in shifting emphasis to medium-sized rice schemes. The only one in operation is the M'Pourie but because of lack of data no analysis is available. The Gorgol engineering report calculated an internal rate of return of 14.6 percent. However, the result is no longer valid as the costs of construction on the Mauritanian side of the river have gone up tremendously from around $2,000 per ha at the time of the evaluation of the Gorgol engineering project to $10,000 in 1976. The sensitivity analy- sis of the Gorgol engineering project shows a drop of the internal rate of return from 19.6 percent to 11.4 percent with a cost overrun of only 15 percent. The small irrigation schemes are nevertheless useful in providing training to farmers in irrigation and cooperative organization. For this reason these small schemes should continue to be looked into very carefully. Priority Irrigation Projects 6.25 The mission concurs with the plan outline in its emphasis on irrigation. Flood recession and rainfed cultivation are too vulnerable to climatic hazards, and the development of irrigation diminishes this de- pendency. Moreover, crops grown in the irrigation schemes, principally, rice and sugar cane, will serve local consumption and will have no market- ing problems. The development of irrigation will also enable a rapid in- crease of domestic food production and diminish the degree of dependence on an outside food supply. Lastly, irrigation is a field where Mauritania has obtained concrete experience in recent years. 6.26 Implementing medium-sized schemes will nevertheless encounter several obstacles: scarity of qualified manpower, land tenure problems and high investment cost per ha. The latter problem is currently being looked into by the Government of Mauritania in cooperation with interna- tional organizations. Efforts to modernize agriculture are complicated by land ownership rights with numerous examples of collective ownership involving both Moors and black Africans. Irrigation projects which re- quire land reallocation are hampered by the rigidity of the system. High investment costs per ha were already mentioned in connection with the Gorgol project. Sometimes a tender does not provoke any offer at all, as was the case with Boghe plains in 1975. Recently the government entrusted the implementation of irrigation schemes to a public corporation, SONADER. This organization might well be a practical means to increase absorptive capacity in the field of irrigation. - 58 - 6.27 The plan outline envisages the implementation of three medium-sized schemes (Gorgol, Lake..R'Kiz, Boghe) and the mission is of the opinion that this is definitely the maximum. It would recommend postponing the implementa- tion of the Kounde project and the feasibility studies for the M'Bagne depress- ion and the Garak scheme. As to small schem!P, because of their value as a training ground in cooperative organization and irrigation, the four projects upstream of Kaedi are kept among the priority items. However, the proposed 15 new schemes between Rosso and Kaedi would mean duplicating the efforts already going on in 10 small schemes existing in that area. Flood Recession Cultivation 6.28 Projects in the river valleays only concern modern irrigation, and nothing is planned to increase the present very low productivity of flood recession cultivation (0.4 t/ha). It has already been pointed ou that this productivity could be doubled by other kinds of cultivation methods requiring no fertilizer or spraying. It is generally felt that such an effort is not worthwhile as long as floods cannot be controlled. construction of the Diama dam will remove this obstacle for the lower valley and for the delta. It is recommended that the feeder road program in the Senegal river valley, proposed in the transport sector (Chapter 7), be combined with agricultural extension services. 6.29 Apart from irrigated agriculutre, the other major rural sector projects consisted of the development of the southeast, a fattening farm near Kaedi and 100 deep wells. Other Major Projects 6.30 The southeast consists of the Selibaby area (in the western part of the southeast) and of the Hodh (the east). A large general project has been elaborated, comprising both parts of the area. Moreover, a new series of small dams will be constructed in the Hodh as the general feeling is that it is too early fro large-scale projects. In a first stage sufficient informa- tion should be collected through pilot schemes. Such pilot projects would in fact be made up of two distinct sub-projects, one in the Selibaby area and the other in the Hodh. The purpose of these projects should be to explore low-cost methods of increasing agricultural productivity in this region, which presently stands at a very low level (0.3 t/ha for millet). 6.31 The proposed large-scale fattening farm near Kaedi seems premature as at present there is simply not enough knowledge about appropriate fodder varieties and feeding patterns. The government proposes to explore this issue through an experimental unit near Rosso. Finally, it seems better not to con- struct new deep wells before the existing ones are fully utilized. The Tagant Mountains 6.32 All the projects discussed so far are located in well-known agricul- tural regions. Typically, the Tagant Mountains in central Mauritania receive - 59 - less attention. Recently, there has been a renewal of interest in this area as the Nouakchott-Nema road will provide ready access. Three projects have been idetified in this region: (i) a series of small dams; (ii) restructuring Tamour en Nay, the main water collecting valley in the Tagant Mountains; and (iii) a number of deep wells in the Achram Diouk area, on the southern slopes of the Tagant Mountains. Feasibility studies of the tirst two projects will be completed by 1976. In this area, many groups are competing for a small quantity of water and any project needs very careful preparation and monitor- ing. Requirements for Qualified Agricultural Workers 6.33 For the period 1976-1980 the planning authorities estimate they will need the following number of qualified agricultural workers: 800 upper level technicians (ingenieurs de conception et des travaux, project managers, agro- nomists) 1,800 medium level technicians (adjoints techniques, bookkeepers); 3,300 skilled workers (agents techniques, tractor drivers, office workers). By 1980, according to the same sources, the area under irrigation would cover 14,000 ha, which is close to our estimate of 16,000 ha for 1985. Thus, the required number of qualified workers, as estimated by Mauritanian sources, could be taken as applicable to the period 1976-85. 6.34 At present, the upper level technicians in Mauritania receive their training abroad. The number of graduates coming back to the country during the period 1976-1985 is not likely to go beyond 100. The plan outline therefore proposes the establishment of an agricultural training institute at the academic level in Rosso or Kaedi. In view of the many rural projects to be implemented during the coming years, this project deserves priority. In a normal year, this institute would produce 20 agronomists and 20 livestock engineers. As the establishment of such as school demands a certain amount of time and as the course offered would be four years, the first graduates would become available only in the early eighties. If everything goes very well, the school might produce 200 engineers by 1985. Thus, during the period 1976-1985, a maximum of 300 Mauritanian engineers might become avail- able while 800 are needed. 6.35 In Kaedi a training school already exists for the intermediate level from which 20 adjoints techniques become available every year. 300 is an optimistic estimate of the total number of adjoints techniques for the whole period 1976-1985, whereas 1,900 are needed. The same school also trains lower level extension workers, 15 annually. The total number of graduates during the whole period till 1985 would be around 200, compared to a much larger required number (some 3,000). 6.36 The Bank's first education loan to Mauritania includes a proposal to establish a village training center in the Gorgol area. Its key activity would be the training of heads of groups (generally the family) in the teach- ing of successful exploitation of individual lots or in the communal main- tenance of water ways and management of water. The number of farmers that - 60 - could be trained by this center within the 1985 horizon could not go beyond 2,000, compared to..a total number of 30,000 that need training in irrigation techniques. Though helpful, this center does not really change the imbalance between supply and the necessary number of trained manpower. 6.37 It is thus clear that there is a huge discrepancy between required and available Mauritanian staff at all levels. There is no doubt that this will constitute the single most important bottleneck for implementing and running agricultural projects. In such a situation the Mauritanian Govern- ment is well advised to concentrate on-a limited number of projects and not to disperse its efforts. It is certain that there will be a considerable need for foreign expertise, whether in the way of technical assistance or by indirect contact with foreign consulting firms. - 61 - Chapter 7 The Transport Sector Description 7.1 The combined effects of late modernization, low population density, long distances between town and settlements, climatic conditions, and poor road-building soils make the provision and maintenance of transport infra- structure in Mauritania expensive and technically difficult, and the opera- tion of vehicles costly, ardous and often hazardous. The country's trans- port infrastructure is therefore new, rather simple, very decentralized and unintegrated. 7.2 There are basically three regional transport networks. The northern portion consists of the deepwater port of Nouadhibou, which was last expanded and improved in the early 1960's for the benefit fo the MIFERMA iron mine project, and a 675 km railway from Nouadhibou to Zouerate, the site of the ex-MIFERMA iron mine. The central portion of the transport infrastructure consists of a wharf at the capital, Nouakchott, first opened in 1966 and later expanded to a capacity of about 200,000 tons per year by the European Development Fund (EDF) and a paved road from Nouakchott to Akjoujt. A dirt road further connects Akjoujt with Atar, and with Choum or the railroad. The southern portion of the transport system consists mainly of two L-shaped road-river systems linking Nouakchott and Dakar, via paved roads, with Rosso (a border town on the Senegal River 215 km south of the capital and one- third of the way towards Dakar from Nouakchott) and then via the Senegal River to the southwestern regions. However, river traffic is impossible during certain periods of the year and unreliable the rest of the time. Although once rather well organized with five Senegalese power craft and several barges plying the river, it almost completely dried out during the recent long Sahelian drought. Hence the desire to extend the road system westward to the the Guidamaka region and Nema. 7.3 The only real national network is the air transport system. The country's air capacity consists of some 19 airports of which only one (Nouad- hibou) is of international standard, and only four (Nouadhibou, Nouakchott, Zouerate and Kaedi) are able to handle turo-prop aircraft of the Fokker type, of which Air Mauritania owns two. Besides the two FH-227 American-built Fokker Friendship planes, 1/ Air Mauritania, which is 60 percent Government owned, owns two DC-4, two DC-3 and one Piper plane. The DC aircrafts are, however, in poor condition and may soon have to be retired, especially the two DC 3's. One DC-4 is used only for cargo transport and the other for spare parts to keep the cargo plane aloft. The 15 other airports can handle only DC-3 and DC-4 aircraft and need fuel storage facilities and/or other improve- ments before they can become accessible to the presently underutilized turboprops. I/ FH stands for Fairchild Hiller, a plane with 40 seats. - 62 - Road Transport 7.4 The highway network is about 7,000 km long of which about one- third are bituminous roads (520 km) or improved gravel and earth roads. The remaining 4,600 km are mainly desert ttacks of which almost 2,000 km are unusable during part of the year. 7.5 During IDA's Second Highway project an attempt was made to set up and gradually improve a Government highway maintenance and betterment organization. This organization.has been further strengthened through technical assistance and financial support under the ongoing Third Highway Project. 7.6 Apparently as a result of increased urbanization and the shift of economic activity toward Dakar, Saint Louis, and Senegal in general, and most probably also as a result of increased highway construction activity, the number of new vehicle registrations in Mauritania has increased rapidly since 1973 (25 percent more registrations in 1974 than in 1973). Conse- quently the total vehicle fleet, which increased on the average by 2.5 per- cent per year between 1969 and 1973, must have increased by some 6.3 per- cent in 1974. In spite of the energy crisis, fuel consumption continued to increase through 1975 as did the already high road transport freight rates, as fixed by the Government. However, rates may still be below the level necessary to pay for operating cost and equipment renewal. Ports 7.7 The port of Nouadhibou consists of three different installations; the Point Central ore pier operated by SNI/COMINOR; the fishing harbor; and the commercial berths, both operated by the Nouadhibou Port Authority. The mineral port handles about 12 million tons per year and will need en- largement and/or repair in the near future. Expansion of the fishing and commercial berths, now under way under IDA's Nouadhibou port project, will increase the total capacity of the fishing berths and of the commercial berths to about 225,000 tons per year each. This should be adequate until 1983. The wharf of Nouakchott is now processing about 180,000 tons per year and is expected to be used to capacity before 1980. The Government intends to replace it with a deepwater port to be constructed and financed by the Chinese. In case this project does not materialize, a second extension of the wharf would become necessary before 1980. The port of Dakar is now used practically only for goods that cannot be unloaded in barges because of their size etc. River Navigation 7.8 The OMVS sponsored study on the use of the Senegal River for traffic from the southeastern regions of Mauritania to Kaedi, Boghe and Rosso indicates that the major obstacle hindering river navigation is its season- ality and the existence of three rockbeds beginning downstream from Boghe. In periods of drought like the end of the 1960's and the beginning of the 1970's these obstacles make regular river navigation almost impossible. - 63 - 7.9 Under the auspices of OMVS (Office for the Development of the Senegal River Valley) several dams are to be constructed on the Senegal River which should regulate the water level. However, this is a diffi- cult and costly scheme and even in the best of circumstances no regular- ization of the river is to be expected before, and most probably much later, than 1982-1983. There is a paved road on the Senegalese side of the river up to MATAM, about 50 km upstream of Kaedi, but it is used less by the Mauritanians because of customs formalities. Air Transport 7.10 In spite of a rather extensive network of airports around the country, passenger demand has been limited, principally because the cost of fares remains far beyond the means of the averge local traveller and is considerably higher than in other developing countries. Traffic figures of Air Mauritania, the only national airline with regularly scheduled flights 1/, have nevertheless increased by more than 5 percent per year on the average over the same period. Clearly, some attention should be focused on this sector. Railways 7.11 The only railway in the country is owned by SNIM-COMINOR and operated by former MIFERMA employees now working for the new national company. Although traffic is largely limited to ore shipments, there are small amounts of general merchandise and passenger service. To allow development of this general traffic, the Associations's Third Highway Project provides funds for improvement of the road linking the midway railway stop at Choum with Atar, the trade center of the northwest on the road to Akjoujt. Government's Objectives and Strategy 7.12 The Government's objectives in the transport sector can be summarized as follows in order of importance: (a) shift the orientation of external transport from the airport and port of Dakar in Senegal to the Mauritanian ports, especially to Nouakchott; (b) link the most remote parts of Mauritania with Nouakchott to reduce their reliance on neighboring countries such as Mali and Senegal, as well as to diminish the wide discrepancies in living standards in different areas; (c) establish a reliable transport system so as to develop the more populated and agriculturally productive regions of the south and southeast. I/ There is also an air taxi company, TRANSAIRG, that charters small aircraft on an hourly basis. - 64- 7.13 These objectives are generally sound although one may quarrel about the order of importance of (b) and (c), and it is clear that in selecting individual projects more emphasis could have been given to projects of a reasonable size and better adapted to overall economic priorities. 7.14 The first objective has almost been achieved with the construction and extension of the wharf at Nouakchott. However, the Government wants to go one step further and build, with Chinese assistance, a deepwater port there to be able to handle all categories of imports, even the most bulky ones. These so far have come in via Dakar. The Government is trying to achieve objective (b) in the long run through the construction of the Nouakchott-Nema road. While the road is being constructed, however, the Government wants to improve secondary airports in outlying cities such as Aioun El Atrouss and Nema. The Governemnt wants also to build a new and larger Nouakchott airport to accommodate larger aircraft. The third objective appears to have a too low priority in the eyes of the Government, although it is more justifiable from an economic point of view. Transportation Investment and the Bank Group's Share Past Investment (1970-1975) 7.15 The major transport investments in Mauritania were made in the period between 1960 and 1969 when railroad, the wharf at Nouakchott, the port at Nouadhibou, and the Nouakchott-Rosso and Nouakchott-Akjoujt roads were built. Less than 10 percent of investment between 1970-1975 was for transport, and this was largely for roads (78 percent). About half of the transport investments in this period occurred in 1975, when the execution of several Arab-financed road projects started. Previous road investments in the 1970's were mainly financed by the Association and the EDF, Avia- tion investments took second place (14 percent) in the 1970-1975 period, but they unfortunately consisted mainly of the construction of an international airport at Kaedi, which remains basically unutilized. Instead of the thousands of tons of meat planned for export by plane, only a few animals per day are slaughtered in the ultra-modern slaughterhouse. Investment for ports (8 percent) consisted mainly of the EDF-financed extension and subsequent equipment of the wharf at Nouakchott. 7.16 More than 84 percent of all transport investment was financed from abroad. The EDF was the largest source of foreign financing until 1974 (37 percent of the 1970-1974 total). In 1975 all transport investment was financed from abroad and more than 81 percent came from a group of six Arab States. The Bank Group's participation in transport investments in the 1970-1975 period amounted to 17 percent for disbursements for the First and Second Highway Projects which consisted mainly of the construction of the Nouakchott-Rosso road (co-financed by EDF) and a highway maintenance project. - 65 - Planned Investments Under the Third Development Plan (1976-1980) 7.17 Transport infrastructure accounts for 25 percent of investment in the original proposals of the new plan, and, mainly because of the weight of on-going projects, for -bout onc-third of total investment proposed by tha mission. A few large projects dominate the transport sector: the Nouakchott- Nema road, the Nouakchott deepwater harbor and a new Nouakchott airport. Construction of the Nouakchott-Nema Road 7.18 The planned construction of this 1,139 km east-west artery is one of the major projects in the outline of the Third Plan. The road will link the capital and wharf at Nouakchott with the capital of the most easterly region of the country via the sparsely populated semi-desert Morrish area. In the following we discuss several aspects of this road: its overall eco- nomic justification, design standards, and the alignment of individual sec- tions. 7.19 The Government justifies the road mainly on social and political grounds with little consideration for alternative uses for the scarce invest- ment funds. The studies that have been done on individual road sections have not included feasibility studies and the projects in the plan have not been ranked according to an economic priority system based on such criteria as their expected internal rate of return. In addition, the road appears to be over-designed for the amount of traffic that can be expected, especially on some sections. The design standards call for a six meter wide bituminous surface road over the total length. In the selection of the alignment, not enough attention was paid to the possibility of obtaining a combination of economic and social benefits by putting the road through the more inhabited regions. 7.20 It would be a mistake to consider the alignment of the whole road as irrevocably decided. All 1,139 km of a road are not decided upon all at once. In spite of the fact that after only a few months of construction the first 75 km of the road are already in service, (surfacing to be completed), a whole set of new decisions can still be made. 7.21 The Nouakchott-Aleg Section can be considered as a "fait accompli"; however between Aleg and Kiffa a major change in alignment could be made, which would make the whole road much more justifiable economically. At Aleg the road is closest to the Senegal River valley, and in fact closest to the most densely populated section of the valley, Boghe-Kaedi. The Government has already given a contract to an Italian firm for the study of the Aleg- Boghe road, and BCEOM studied the Boghe-Kaedi road in 1964 after a SEDES study 1/, recommended that the construction of Boghe-Kaedi-Kiffa was the 1/ "Propositions pour l'Amelioration de l'Infrastructure des Transports en Mauritanie". - 66 - most urgent road project in the Senegal River valley. The Association, under the Third Highway Project, will supply funds for betterment works on the axis. In the opinion of the mission, the Government should con- sider seriously whether it would not be more economic and faster to build Alcg-Kiffa first via Bogho and Kacdi, as prt of those roads already exist or will exist at the relevant time (EDF and IDA financing). Nema could thus be reached faster, the Senegal River valley would be linked up with the road system sooner, and the direct link Aleg-Kiffa, could always be completed later. Priorities in the Senegal River Valley 7.22 The mission was particularly struck by the lack of transport infra- structure of almost any kind in the most populous and most fertile part of the Senegal River valley, especially between Boghe and Kaedi, the most densely populated region of the country. In any case, therefore, and especially when the Government finds the necessary funds to construct Aleg-Kiffa, via the Northern alignment, a feeder road program in the Senegal River valley and particularly in the Boghe-Kaedi area is immediately and surely justified economically. The program could either be combined or not with agricultural extension services. 7.23 The mission gives strong priority to the roads connecting the Senegal River alley to the main axis. It is of the opinion that the other road projects considered (chiefly Akjoujt-Atar-F'Derick) could be delayed without endangering the country's economic development. Road Maintenance Execution and Financing 7.24 Until the period of the Third Plan, expenditure on road mainte- nance, although doubling between 1970 and 1975, has been very small: UM 78 million in 1975, equivalent to about 2 percent of public consumption. This is far too little: the existing 500 km bituminous roads (thus excluding the Nouakchott-Nema road), and the 5,000 km of other roads and track, need at least UM 200 million in maintenance every year. It is obvious that the new Nouakchott-Nema road will add heavily to these charges: routine main- tenance will cost UM 205 million and periodic maintenance between UM 200 and 300 million. It is calculated that total maintenance expenses will amount to UM 672 million in 1975 or to UM 540 million in 1973 prices. This means that by 1985 some 7.6 percent of all public consumption must be set aside for road maintenance charges, which will increased by about UM 600 million in 1975 prices or by some UM 500 million in 1973 prices, which is equivalent to 14 percent of the total increase in public consumption between 1975 and 1985. The rise in maintenance charges is such that it is very difficult to imagine that the required financing could be obtained through normal budgetary procedures and that the existing government machinery could provide the necessary manpower and equipment to carry out such maintenance. Maintaining the new areas and the roads feeding into them will indeed demand a complete overhaul of the existing road maintenance department and the creation of new institutions and new ways of funding. - 67 - Construction of a Deepwater Port at Nouakchott 7.25 The major reason for the expected full capacity use of the existing wharf in Nouakchott before 1980 is the Government's desire to shift more of its import and export traffic away from the port of Dakar. If the alleged commitment to finish construction of a deepwater port at Nouakchott by 1981 is not followed up, the possibility of reerouting traffic towards Nouadhibou by the construction of a Nouadhibou-Akjoujt road should be studied. This would complete a bituminous road link between Nouadhibou and Nouakchott, thus eventually decreasing the need for a deepwater port at Nouakchott. In any case the existing wharf will have to be expanded in the 1980's if a deepwater port is not built. Improvement of the Air Transport Infrastructure 7.26 The Government is also planning to relocate the Nouakchott airport and to improve several other airports with West German and Russian assistance. These improvements are at present in the study stage and the Government is looking for additional financing. The mission is of the opinion that it might be interesting to postpone the somewhat premature relocation of the Nouakchott airport in exchange for investments in the lengthening of the existing runway at Nouakchott and the improvements of three or four secondary airports, which urgently need upgrading. A program for improvement of secondary airports has been retained on the list of priority projects. Lengthening and Modification of the Railway 7.27 The implementation of the Guelbs project will require an expansion of the railway line by 40 km, the cost of which is included with the total cost of the Guelbs project. In the newly acquired Saharan territory it would be possible to reconstruct 20 km of the Nouadhibou-Zouerate railway line to avoid the Choum tunnel. This would allow an increase of 25 percent per train load which obviously would have a high economic return. In the long run, there is possibility of straightening out the Nouadhibou-Zouerate line between these two places through the new Saharan territory, which would shorten the distance by 100 km. It is recommended to include the elimination of the Choum tunnel in the investment program for the Guelbs. However, apparently 25 years of operation at double the present rate of production would be necessary to make the other change economically justifiable. Need for Improved Transport Planning, Coordination and Resource Allocation 7.28 The need for a transport plan has long been an issue in Mauritania, but, the Government's decision to go ahead with the construction of the East- West Highway from Nouakchott to Nema (1,100 km through semi-desert areas) and a deepwater port at Nouakchott will make transport planning for the future rather simple. Only if these plans do not materialize would there remain a need for a transport plan. Under the present circumstances there seems to be room only for consideration of variations in the road and port projects now in progress. - 68 - Chapter 8 Social Sectors Education 8.1 The major challenges confronting educational development in Mauritania concern primary education and the discrepancy between the re- quired and available number of upper and intermediate level tecnicians. 8.2 As to primary education, there is a need to find viable alter- natives to the high-cost, urban-oriented and culturally foreign primary education system in order to provide a majority of Mauritania's young people with a relevant basic education. Such an alternative might be pro- vided by the indigenous and traditional Koranic schools. Within the frame- work of the Bank's first education project in Mauritania, an experimental study is underway in order to ascertain whether modest amounts of support through radio, television, and simple instructional materials can increase literacy and quantitative skills. 8.3 The Koranic school experiment is still underway and results are not yet available. In the meantime, the plan outline intends to increase school attendance rates from 14.5 percent to around 25 percent. This target requires the construction of 1,000 new elementary school classrooms and an expansion of the national school for teachers (E.N.I.). It would seem prudent to postpone the expansion of the elementary school system till the results of the Koranic school experiment are available. Therefore, no primary school projects have been retained among the priority projects. 8.4 Generally speaking, it would seem advisable at this stage to avoid any expansion of the formal system of education. This also applies to the secondary level. The plan outline considers 19 new secondary schools, but instead of expanding the system of formal education it would seem preferable to concentrate on an expansion of technical training, given the discrepancy between the required and available number of skilled Mauritanians. In quantifying this discrepancy, two employers (government and non-government) and four levels of qualification are distinguished: - upper-level technicians and administrators: those who receive specialized training after completion of second cycle secondary education; - intermediate technicians: those who receive profess- ional training after the first cycle secondary school; - skilled workers: those who receive professional train- ing after completion of primary school; and - unskilled workers. - 69 - 8.5 As to employment with the general government, our assumptions about growth of public consumption would imply that the number of govern- ment employees might double between 1975 and 1985. This would mean that the general government would employ another 7,000 persons, consisting of 900 upper-level technicians and administrators, 3,400 intermediate tech- nicians and 2,900 skilled workers. In addition, the government also should replace some of the foreign technical assistants (around 500 at present). 8.6 Upper-level administrators in Mauritania come from the National School of Administration (E.N.A.; Cycle A). There are also at present about 200 students abroad in non-technical subjects and a large part of them, once back, will be absorbed into the upper echelons of the general govern- ment. Intermediate administrators are trained in the B Cycle of E.N.A. Moreover, every year about 350 graduates of the first cycle of secondary school leave the school system and no doubt many will be absorbed by the general government at the intermediate level. Secondary school teachers receive their training in the Ecole Nationale Superieure. Primary school teachers receive their training in the National School for Teachers (E.N.I.). At the skilled worker level, there are no special training schools for jobs in the general government. However, every year, 2,000 primary school gradu- ates leave the school system. This constitutes a source of supply to the general government at the level of skilled workers. 8.7 In summary, it would seem that the general government would exper- ience no major difficulties in matching demand for and supply of trained manpower at all levels. In general, the plan outline does not foresee an expansion of the training facilities for government service, with the ex- ception of a project to expand the national teachers' school. In view of what has been said above about primary education, this project has not been retained as a priority item. 8.8 Outside the general government and rural sector, about 30,000 modern sector jobs will be created during 1975-1985. These will be dis- tributed roughly among the following categories: 1,400 upper-level tech- nicians, 2,800 intermediate technicians, 11,500 skilled workers and 14,200 unskilled. These requirements do not take into account the need to replace some of the 2,500 foreigners actually working in Mauritania outside the general government. 8.9 Training facilities for technicians in Mauritania only exist at the intermediate level and concern the second cycle technical secondary school (lycee technique) and the national school for commercial and family education (ENECOFA). The technical school has a very limited number of students, who, moreover, prepare themselves for further study abroad. ENECOFA trains secondary school graduates in administrative skills. Thus, for practical purposes, all upper and intermediate level Mauritanian tech- nicians are trained abroad. - 70 - 8.10 The plan proposes the establishment of a polytechnical institute for the training of 80 upper-level technicians during a three-year course. This institute seems of prime importance to the country and has been re- tained among the priority projects. If everything goes very well, some 500 upper-level technicians might be trained during the period 1976-1985. The absence of training facilities for intermediate level technicians will continue to remain an important gap. The reorientation of the "lycee tech- nique" towards practical training might constitute a solution. The Bank's education loan to Mauritania proposes to establish, near the Maniadou Toure Center in Nouadhibou, a training*center for intermediate level technicians in the mining industry. Over a six-year period, 150 persons would be prepared for on-the-job training during 2 years, or, assuming they eventaully enter supervisory posts, would fulfill about 50% of the Mauritanization requirement of presently identifiable posts at this level. Thus, the graduates of this center would replace foreigners in already existing jobs and not fill new positions. Training at the intermediate level will be integrated with the facilities now being instructed by SNIM in Cansado. 8.11 As to studies abroad, until recently some 100 Mauritanians were pursuing technical subjects in foreign universities. Assuming a four-year course, 100 students abroad would mean 250 graduates over 10 years. In 1975, SNL4 sent quite a large number of its employees abroad for technical training. In this way it is perhaps possible to double the number of upper and intermediate-level technicians that will become available in the next ten years. 8.12 Thus, out of a total required number of around 4,000 upper and intermediate-level technicians, it would seem that around one-quarter will become available (500 from abroad plus 500 from the polytechnical institute). There is no doubt that this discrepancy will constitute a very important bottleneck for the implementation of industrial sector projects. 8.13 The situation is less desperate in respect to skilled workers. First, there is a much better possibility for on-the-job training. More- over, a number of training institutes already exist that recruit at the level of primary school graduates: the First Cycle Technical Secondary School (college d'enseignement technique) in Nouakchott, the Mamadou Toure Accelerated Vocational Training Center in Nouadhibou, the Maurelec Training School in Nouadhibou, the National School for Commercial and Family educa- tion, including a cycle for clerical workers, and training facilities of COMINOR in Zouerate and Cansado. The COMINOR facilities seem the largest, but the exact number of trainees is not known. They only provide some general knowledge to unskilled workers. This type of training will be phased out and replaced by real professional training to be given in a new center that is now under construction by SNL4 in Cansado. 8.14 The Bank's education loan to Mauritania proposes to establish training courses in Nouakchott. Moreover, the plan outline contains two more projects in the field of training skilled workers: a training insti- tute for fishermen in Nouadhibou and a further expansion (the third phase) - 71 - of the technical sedondary school in Nouakchott. At present, the capacity of the school is not fully utilized and it seems better to postpone the im- plementation of the third phase. Health 8.15 In 1975, Mauritania had a doctor to.population ratio of 1:22,000. This is certainly far from the 1:10,000 norm set by WHO. The plan therefore proposes to bring this ratio to 1:13,000 by 1980. Most of the doctors work- ing in Mauritania are foreigners*(59 out of 63 in 1975), and while the number of nationals studying medicine abroad is sufficient to supply the newly required number of doctors, the dependency on foreign doctors will continue. The situation is much worse for dentists and pharmacists. In 1975 there were only two dentists and three pharmacists in the country, and very few Mauritanians are studying these disciplines abroad. In these two fields Mauritania remains totally dependent on foreign technical assistants. 8.16 All upper level medical staff are at present, trained abroad and the plan outline does not propose to change this. It would seem of interest, however, to increase the number of medical students and to stress an orienta- tion towards dentistry and pharmaceutical studies. 8.17 Nurses are trained at the nursing school in Nouakchott. Its output is sufficient to satisfy future requirements. Midwives are a category apart. At present there is no local training center and nearly all midwives are foreigners, mostly Guineans. The Government of Mauritania plans to establish a school of midwifery at the nursing school. This project does not figure in the plan's list of projects but should indeed receive priority. 8.18 The plan outline does propose two new health education institutes: one for hygiene and one for school health. A nutrition institute is also mentioned although this does not figure in the list of projects. Given the scarity of upper-level medical staff and the total dependence of foreign financing and technical assistance, it seems better to strengthen the existing organizations rather than create new ones. Instruction at the National School for Commercial and Family education already contains elements in the field of hygiene and nutrition. The regional health centers should continue to look after the schools. 8.19 Regarding new health infrastructure, the addition of a wing to the Nouakchott national hospital will soon start. Furthermore, the plan outline proposes the following projects: six regional health centers, a polyclinic in the fifth Nouakchott district, two new national hospitals. At present, the country seems well covered by 17 health centers and as an alternative to six new centers, it is perhaps possible to use the original facilities more intensively. The polyclinic in Nouakchott is one of the two created for those who fled the countryside during the drought. It has been retained in the list of priority projects. The proposal for the two national hospitals - 72 - is still under consideration. Given the fact that the national hospital in Nouakchott is going to be enlarged, it seems desirable to delay con- struction of further national hospitals. Generally speaking, the existing health infrastructure seems sufficient and all attention should go towards utilizing it better, especially through improved and expanded training, as indicated before. 8.20 We have seen that rural sector development is largely based on irrigation from the Senegal and Gorgol river. Sufficient attention needs to be paid to the health hazards.of such projects. Tourism 8.21 Before 1975 hotel capacity in Mauritania was limited to 300 beds, 185 of which were in Nouakchott. A major expansion took place in 1975 when the number of beds was increased by 400. This effort was undertaken com- pletely by the private sector. According to already known projects, there will be a further expansion by 700 beds during the plan period 1975-1980. The greater part of this will come from one hotel in the public sector, the Almoravides (400 beds). New private projects might be initiated, as in 1975, and actual hotel expansion might well be larger. 8.22 Most tourism growth to date has taken place along the coast, in Nouakchott and Nouadhibou. The majority of visitors are still coming on business rather than on vacation, but it is likely that tourism will in- crease. Access to the interior will become easier through better roads, and this will in turn require larger inland hotel capacity. Housing 8.23 The long Sahelian drought generated a stream of rural migrants most of whom still live in tents in the cities and are usually under- employed. These people would be prepared to build their own houses if helped sufficiently; the Mauritanian urban centers seem logical places for sites and services projects. Government intervention in the field of housing should be oriented to help provide the lowest income groups with building materials and basic services. In Mauritania's present cir- cumstances, it is doubtful whether the public sector should participate through direct investment. However, SOCOGIM, a public corporation, created for project implementation in the field of housing, has a program for the construction of 3,000 houses, of which 1,800 are low cost. A first phase of 250 houses (150 low cost) should soon be implemented, financed out of its own funds and by CCCE. SOCOGIM's program has not been retained in the priority list. Little is known about recent developments in private house construction. It is certain that the very high rents in Nouakchott stimulate speculative house building. To bring down building costs, cheaper materials should be used and the supply of skilled labor increased. WORLD BANK / INTERNATIONAL FINANCE CORPORATION ANN&T I Page 1 of 9 OFFICE MEMORANDUM TO: Messrs.Xavier de la RenaudiBre and M.J. Gillette DATE: August 9, 1976 FROM: Heinz Bn SUBJECT: Mission to Mauritania: Back-to-Office Report 1. From July 21 to 24, Mr. Boulch and myself were in Mairitania to discuss with the Government the Bank's draft report on the Third Development Plan. The mission was very well received and had extensive discussions at the Ministry of Planning. In six meetings of 2-1/2 - 3 hours each we discussed in detail the macro-economic framework and-projections, the overall strategy, financing of plan investment, and the proposed list of projects, with discussions covering a broad range of subjects, from the possibility and limits of using macro-economic models in a country like Mauritania to the possibility of adapting coranic schools to the requirements of today's education system. Most of the meetings were chaired by the Director of Planning and attended by about ten staff members of the Ministry, half Mauritanians and half foreign advisers. In a sum up meeting our conclusions were discussed with the Minister of Planning, Ibrahima B6. 2. As the Ministry had finalized its own proposals for the Third Plan shortly before our arrival, the discussions almost automatically did not only relate to our report per se, but largely consisted of a critical comparison of our proposals versus theirs, bringing out the differences and the underlying reasons for it, as well as the areas of common agreement. Our draft had arrived coo late in Mauritania to have a major impact on the formulation of their Plan proposals, but nevertheless was"taken very seriously by the Mauritanians, who had read it carefully before our arrival (including the Minister), and had prepared written comments. As a consequence, it was possible to have very useful discussions, in which the training aspect for the Mauritanian staff was not the least important, as underlined by the Minister. 1. The Overall Investment Program and Its Financing 3. The Plan proposals prepared by the Planning Ministry, and already approved by the "Bureau Politique" of the Party are substantially more ambitious than what our report considers to be the possible maximum level for public investments. Including the special program for Tiris el Charbia (the Mauritanian part of the former Spanish Sahara), the new investments by SNIM (ex MIFERMA) and SOCOGIM (low cost public housing), as well as the necessary track renewal for the COMINOR (ex-MIFERMA) railway, the plan foresees a total five-year public investment program of TUM 44,356 million in 1975 prices (M 54,4 billion in current prices) or US$930 million and $1,140 million respectively. This is nearly 50 percent above our own proposals and reflects the substantially more optimistic assumptions concerning public savings, the amount and conditions of foreign aid disbursements, as well as absorptive capacity. However, it is much below the UN 62,100 million mentioned in our report as the Mauritanian Plan goal. The Mauritanian experts strongly contested that they had ever contemplated such a high investment volume. ANNEX I Page 2 of 9 Messrs. de la Renaudi6re and M.J. Gillette August 9, 1976 4. Concerning the overall Plan volume, three main questions were discussed: - f.inancing of the Mauritanian proposal; - absorptive capacity; - its sectoral composition. The analysis revealed that the Mauritania Plan proposal is an internally consistent document that makes a lot of sense if one believes in the very optimistic basic assumptions. tased on the expected high level of public savings, the proportion of local financing is even higher than in our own proposals; based on the expected very favorable conditions of foreign aid, the projected debt service is as low as ours; the bulk of the additional public investments above the level proposed in our own report is devoted predominantly to well-justified social infrastructure, that had been heavily reduced in our own proposals, due to the fact that we were operating within much narrower limits, concerning the overall program. However, a serious flaw in the Plan is the absence of a schedule of implementation matching timed resources (both financial and human) with timed uses. This is essential for monitoring the execution and for continuous planning revision, without which the Plan is little more than a declaration of intent. Moreover, without a schedule of implementation it is not even sure that the Plan is operationally feasible. 5. On the possibility of financing a nearly 50 percent higher program, we agreed to disagree. Due to the absence of the Canadian expert who had prepared the public finance projections for the Mauritanian Plan, it was difficult to discuss in detail the underlying assumptions. However, we pointed out that the assumed taxation rate (40% of GNP) by 1980 seems highly unrealistic and would be politically unacceptable. Thus, while there was little disagreement in the projection of public consumption, the likely much lower level of revenues will almost necessarily result in substantially lower budgetary savings. Furthermore, public enterprises savings seem largely exaggerated, particularly considering that two large public enterprises presently under construction (the petroleum and the sugar refineries) are likely to become serious money loosers, thus substantially reducing the surplus of COMINOR (ex-MIFERMA). If our own projections of public savings were applied to the total program as proposed by Mauritania, the total local contribution would hardly exceed 15 percent of total Plan outlays; clearly, an unacceptably low level. 6. Concerning the inflow of foreign aid the Mauritanian planners are substantially more optimistic in regard to the volume of aid they will be able to mobilize as well as to the conditions of foreign borrowing. They are quite confident that they can obtain up to 80 percent of their foreign capital requirements at very concessionary terms (0.75 - 2% interest for 40-50 years) and so to achieve average terms of not more than 3.6 Z interest for 40-45 years, as compared to our assumption of 9.4% for about 21 years. Obviously, this has a major impact on the projected debt service. Different from the situation concerning public savings, the Mauritanians said that they were able to back up these assumptions by detailed figures showing the large amunt of aid committed already at very concessionary terms, primarily from ANNEX I Page 3 of 9 Messrs. de la Renaudire and M.J. Gillette August 9, 1976 Table 1: The Proposed Financing of Public Investments during the Third Plan (in billion UM at current prices) Ministry of Planning IBRD million UM % million UM % Budgetary savings 3.2 5.9 1.6 4.3 Public enterprises savings 13.1 24.1 6.0 16.3 Local borrowing - - 0.8 2.2 Total local resources 16.3 30.0 8.4 22.8 +94% Foreign grants 6.5 11.9 3.0 8.1 Foreign borrowing 31.6 58.1 25.5 69.1 Total foreign resources 38.1 70.0 28.5 77.2 +3*.7% Total public investment program 54.4 100.0% 36.9 100.0% +47.4% Arab oil-producing countries. They promised to send this information to the Bank within a few days. An analysis of this material might make it possible for us to increase our projections of foreign borrowing somewhat, although the possible adjustments will certainly remain limited. We pointed out that the Mauritanian projections of foreign capital inflow assumed an annual level of aid exceeding $130 per capita (or 42% of GDP), which is extremely high by any standard. 7. Even if there were sufficient local savings and foreign aid to finance a $1.1 billion public investment program, absorptive capacity constraints would make it doubtful whether it could be implemented. From the Mauritanian point of view, the fact that a substantial part of proposed investments consists of turn key manufacturing projects would alleviate considerably that constraint. While there is some truth in this, even turn key operations require a minimum of local planning and management capacity; furthermore, as indicated below, in our opinion, many -if not most- of these manufacturing projects have a very doubtful economic justification and for this reason should not be undertaken. On the other hand, however, there might be some additional absorptive capacity concerning social infrastructure and if additional financing becomes indeed available it could most usefully be employed there. 8. Tn the final conclusion we agreed with the Mauritanians, that it did not matter too much that we had substantial discrepancies concerning the overall amount of public investments; what is more important is the quality of the projects included in the Plan. Whatever the total figure finally included in the Plan, we remain convinced that Mauritania will not be able to implement much more than what we proposed, so that during Plan implementation reductions will become inevitable. In such a situation it would be good policy ANNEX I Page 4 of 9 Messrs. de la Renaudiare and M.J. Gillette August 9, 1976 to subdivide the investment program in two or three tranches according to priorities, so as to guarantee an orderly process of plan reduction. While the principle was welcomed, political pressures do not seem to allow the Planning Ministry to follow such a procedure. 8. Concerning the sectoral composition of the public investment program, there are three main differences between the Mauritanian proposals and our own: Mauritanian propose: - much lower investments in mining; - much higher investments in manufacturing industries; - much higher investments for social infrastructure. Table 2: Global Comparison of the Sectoral Composition of Plan Investments (billion UM at 1975 Prices) Planning Ministry IBRD billion UM % billion UM % Directly productive sectors Rural 5.6 12.6 4.4 14.6 Mining 5.1 11.4 9.1 30.3 Manufacturing 10.4 23.5 4.2 14.0 Energy 1.6 3.6 0.4 1.5 Sub-total 22.7 51.1 18.1 60.4 Transport and communications 12.2 27.4 10.1 33.6 Social infrastructure 8.5 19.2 1.9 6.0 Special Program Tirs El Gharbia 1.0 2.3 -- Total 44.4 100.0% 30.1 100.0% On the other hand, the two proposals are reasonably close, concerning rural sector investments and transport infrastructure. For mining, the difference is basically a question of timing of the huge Guelbs iron ore project for which a new -slightly delayed- timetable has been established. For manufacturirg industries, there are basic disagreements about a number of major projects which we consider unjustified. Concerning social infrastructure, the difference is due to the fact that our overall program being much more limited, we were forced to cut down social infrastructure more heavily than the Mauritanians within their more generous overall program. These differences are discussed more in detail in the following paragraphs. ANNEX I Page 5 of 9 Messrs. de la Renaudikire and M.J. Gillette August 9, 1976 2. Sectoral Strategy and the Project List 9. Mautitanians' main criticism of our proposed List of projects concerned two sectors, rural and education, while they generally accepted our negative stand on most manufacturing projects. In the rural sector they criticized severely our exclusive interest for irrigation to the detriment of more traditional type dry farming and livestock, pointing out that this was very much against the officially declared policy of the Bank which stresses the importance of integrated rural development projects, based on the improvement of existing traditional agriculture. In particular, they noted the omission of the South-East rural development project, the Ka6di ranch and the Rosso livestock project. They were clearly fearful that these omissions (and quite outspoken negative comments on some of these projects) would make it difficult for Mauritania to have them financed by other sources of foreign aid, not to mention the fact that they had hoped the Bank itself would finance some of them. 10. We pointed out that we agreed in principle with their point of view that irrigation alone is not the answer for the development of Mauritania's rural sector, particularly in the short and medium term. However, we also pointed out how difficult it was to conceive, prepare and implement rural projects other than Ln irrigation, and that past experiences in this sector were not particularly encouraging. Thus, considering the'absorptive capacity of the country, which is particularly limited in the rural sector, it was essential to use the limited human capital in the most economical way. However, considering the fact that modern type irrigation in general and rice production in particular are completely new types of activities for the Mauritanian farmers, our assumptions were seriously questioned that irrigation was indeed the best use of scarce local human resources. Finally, we made it clear that the draft report as presented to the Government was only the mission's report and did not necessarily reflect the thinking of our Projects Departments, with which it had not been cleared yet. 11. Concerning the South-East development project, we confessed our ignorance about the exact position of the Projects Division at this time, but indicated that there were difficulties and problems. Clearly, the Mauritanians are most eager to be told as soon as possible where we stand on this project, that figures very high on Minister BA's priority list. On the Aftout-es-Sahel and the Tagant projects we expressed interest, pointing out however the many technical problemsremain to be resolved. We had not included these projects in our list, only because our mission in december was not told about the preparatory work going on -and not because were a priori against these projects. Concerning the Ka6di ranch, we advised strongly that the project not be undertaken, as long as there is no acceptable road connection between Ka6di and the rest of the country. On the Rosso livestock project, the Bank's position had been made clear to the Government before. While we are not in a position to finance it ourselves, we are not against the project per se, but feel that it might indeed produce interesting results leading to a new approach in the development of livestock in Mauritania. Formulated in this somewhat more balanced way, the Government does accept ANNEX I Page 6 of 9 Messrs. de la Renaudiare and M.J. Gillette August 9, 1976 our position and can live with it, except for the South-East project, for which it urgently awaits a positive answer. 1/ 12. No major discrepancies in the mining sector. Since our figures were based on an earlier -faster- implementation schedule of the Guelbs project and in addition included the costs of track renewal on the COMINOR railway, our figures are much higher. 13. On the other hand, thete are major differences concerning the manufacturing sector which however are more apparent than real, in the sense that several manufacturing projects included in the Mauritanian Plan proposals but excluded in ours are regarded as very doubtful also by the Planning Ministry; thus, the Mauritanians were not at all unhappy about our devastating critique, which to the contrary strengthens their own position in the power struggle going on within Mauritania, mainly between the Plan (e.g. Ministers Sidi and B9) and SNIM. This concerns particularly the pro- posed steel mill in Nouadhibou and the copper refinery with a combined cost of US$ 750-800 million of which about 10 percent to be spent during the Third Plan. The Minister urged us to spell out in more detail our misgivings about the two projects. Concerning the textile factory in Rosso we slightly modified our position from an absolute "no" expressed in our report to one of cautious approval under the condition that detailed studies carried out by a reputable consultanLt can clearly demonstrate the economic viability.,of"the project, and that the management problem can be solved in a satisfactory way. We pointed out that the simple fact of an increasing unemployment problem in the Rosso area is not a sufficient justification to invest $50 million in a project that might well become a major money looser, the more so as our medium and long term projections for the Senegal valley show an increasing lack of labor once irrigation is developed on a large scale. Again, the Ministry welcomed our position, pointing out that the Abu Dhabi Fund, which is interested in financing the project does itself insist strongly on thorough studies proving an acceptable rate of return. As the small steel mill in Nouadhibou, processing worn out railway rails seems to have found financing already by Saudi Arabia (SAMIA) it ought to be included in our Plan proposals as "acquis". 14. The large differences concerning electric energy result from a substantial upward revision of the costs for the two power stations in Nouakchott and Nouadhibou. 15. Concerning the road program three major points emerged: - Mauritania foresees a much faster pace of construction for the Nouakchott-Ngma road and thus included a higher disbursement figure in the Plan, as we did; the speed of actual implementation seems to justify the more optimistic Mauritanian schedule; 1/ The Gorgol project was not specifically discussed, as it figures prominently in both our report and in the Mauritanian Plan proposal, so that there were no differences between us. We were not aware at the time of these discussions ,of the technical difficulties that might jeopardize this project. ANNEX t Page 7 of 9 Messrs. de la Renaudiare and M.J. Gillette August 9, 1976 - it was generally agreed that linking Ka6di with the rest of the country as soon as possible was of very high priority. The most rap;id way of achieving that would be through building a good all weather road from Ka6di to Bogh (105 km) and from Lhere to Aleg (70 km) where it would link up with the new Nouakchott-N6ma road. Such a road connection would seem to command higher priority than the Rosso-Boghg link (215 km) presently studied by the Bank. The Ministry of Planning would welcome any suggestion from the Bank to change the orientation of this project from Rosso-Bogh6 to Ka6di- Boghg-Aleg; - the Mauritanian Plan proposal includes as a pro memoria item a study of the Nouadhibou-Nouakchott road. I propose that we think seriously about such a project. With the oil refinery being built at Nouadhibou, and the recent acquisition of the southern part of former Spanish Sahara, such a connection becomes more and more justified. The fact that Nouadhibou is no longer so excentrically located right on the border of a territory with an unknown future, clearly has changed the Mauritanians' thinking about the long term role of that town and its port, and I feel that there is a real chance to kill the Nouakchott port project by seriously discussing the idea of a road link between Nouadhibou and the rest of the country. We were told that there is a paved road almost all the way from Nouadhibou to Dakhla (ex-Villa Cisneros) and further north to El- Aioun and to the road network in Southern Morocco. Thus, the Nouadhibou road could well be seen also as part of a -nearly completed- road link with Europe. 16. In this context, it is interesting to note that the Planning Ministry got away with including in its Plan proposals only a minimum amount for the port of Nouakchott ($15 million) which will cover little more than the neces- sary studies and some preliminary works to be started towards the very end of the planning period. The Minister would certainly appreciate the Bank coming forward with alternative projects proposals that might be used to kill the port project altogether. Better management of the wharf for instance would go a long way to make the port project unnecessary. 17. The Planning Ministry also managed to exclude the large Nouakchott airport project from the Plan as we have recommended. 18. As mentioned before, our proposals excluded almost all social infra- structure projects not already in the pipeline, except for some technical education at the University level and this for two reasons: (a) the large number of high priority projects in more directly productive sectors, that have to be undertaken during the Third Plan, so as to prevent a sharp decline in the economy during the next decade, made it unavoidable to reduce to a minImn the number of social projects; (b) considering the fact that the Mauritanian education system is in a state of change without the new direction clearly spelled out yet and generally agreed upon, it would seem premature to ANNEX I Page 8 of 9 Messrs. de la Renaudiare and M.J. Gillette August:9, 1976 plan a major extension of the system at this time. While these arguments were accepted to some extent by our "interlocuteurs" they pointed to the discrepancy in our report which in many instances points to the lack of trained manpower as a major bottleneck for future growth but then foresees very little in the.way of improving this situation. They agreed that the present education system was far from satisfactory, as it is not adapted to the needs of the economy and much too expensive to be expanded on a large scale, and thus has to be improved. However, they felt that improvement and expansion should go hand in hand and that it was politically unacceptable and economically unjustified to freeze the system completely during this period of reorganization. We had taken this same attitude, under similar circumstances, in Cameroon. 4. Where Do We Go From Here? 19. There is no doubt that the report, as it stands now, should not be issued in grey cover. First, it has been overtaken by events in Mauritania and thus has become misleading in many respects and second, the Government would strongly oppose its distribution in the present form. Thus, considering (a) that the mission was being undertaken primarily as a form of technical assistance exercise for the benefit of the Ministry of Planning more than for our own purposes and; (b) the severe staff constraints at headquarters, we suggested to the Minister of Planning to leave the report in its present' form and in its present cover, in which it has no doubt served a useful purpose. 20. However, the Minister did not agree with this suggestion; he remains very much interested in a final report, mostly to serve two purposes: (a) to strengthen his position in the many areas where he and we take the same position against other ministries and public enterprises; (b) to be used as a lobbying document vis-a-vis other sources of foreign aid. He was not worried about the fact that on the macro-economic level our report would continue to show substantial differences with his Plan proposals, particularly concerning the overall volume of public investments and its financing. Clearly, his main interest is in what we say about individual projects, where indeed there are large areas of common agreement, that could be brought out much more clearly in a revised draft. Thus, he asked the Bank to produce a revised report in green cover that be could look at very carefully and decide afterwards whether it should be issued in grey. One of his concerns was clearly that the fact of our Bank mission was already well known by other aid agencies which in all events would press to see a report. ANNEX I Page 9 of 9 Messrs. de la Renaudiare and M.J. Gillette August 9, 1976 21. We reluctantly agreed to make an effort to produce a green-cover version in a substantially revised form but without indicating any date. cleared with and cc: Mr. Boulch cc: Messrs. de Azcarate, Payson, Schmedtje Ms. Ono, Messrs. Wadsworth, Berg, Whyte Cole, Brandreth, Soges, Salazar, Cash, Hidalgo HBBachmann:mtc STATISTICAL APPENDIX Table of Contents 1.1 Distribution of Population by Broad Region in 1973, 1980 and 1985 1.2 Population Growth Rates 1.3 Population by Sex and Age Groups, 1973, 1980 and 1985 1.4 Urban Emplovment in 1973 1.5 Increase in Urban Employment, 1973-1985 2.1 Gross Domestic Product in Constant 1973 Prices, 1970.to 1985 2.2 National Resources and Uses, 1970-1985 3.1 End-Use Classification of Total Imports in Current Prices, 1970-1973 3.2 Exports by Principal Commodities in Current Prices, 1970 to 1974 3.3 Imports by End-Use in Constant 1973 UM 3.4 Exports by Principal Commodities in 1973, 1980 and 1985 3.5 Imports of Cereals, 1970 to 1985 3.6 Estimated Balance of Payments in Current Prices, 1970 to 1974 3.7 Balance of Payments in 1973 UM, 1973, 1980 and 1985 4.1 External Public Debt Outstanding Including Undisbursed as of December 31, 1975 4.2 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt, 1967-1996 4.3 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt Projections Based on Debt Outstanding Including Undisbursed as of December 31, 1975 4.4 Debt Service in Constant 1973 UM, 1980 and 1985 5.1 Government Current Receipts, 1970 to 1985 5.2 Government Current Expenditures, 1970 to 1985 5.3 Public Savings, 1970-1985 6.1 Fixed Investment Levels, 1970 to 1985 6.2 Gross Fixed Investments, 1970 to 1975 6.3 Financing of Investments in 1980 and 1985 in Constant 1973 UM 6.4 Public Sector: 3rd Plan Projects in 1975 Prices, 1976-1980 6.5 Summary of Public Sector Projects in 3rd Plan by Broad Sector, 1976-1980 6.6 Public Sector: Priority New Projects in 1975 Prices, 1976-1980 Table 1.1: MAURITANIA - DISTRIBUTION OF POPULATION BY BROAD REGION IN 1973, 1980 AND 1985 In Thousands In percent of Total 1973 1980 1985 1973 1980 1985 Nomads 735 730 702 60.4 52.9 46.6 Senegal and Gorgol Valleys 112 153 195 9.2 .11.1 12.9 South-East Mauritania 65 73 80 5.3 5.3 5.3 Total settled rural population 177 226 275 14.5 16.4 18.2 Total rural population 912 956 977 74.9 69.3 64.8 Urban centers 305 423 531 25.1 30.7 35.2 Total population 127 1 ,508 100.0 100.0 100.0 Table 1.2: MAURITANIA - POPULATION GROWTH RATES (in percentages) Mauritania 1973-1980 Total population 1.8t Urban population 4.8 Rural population 0.7 Nomads -1.0 Settled rural population 3.5 Senegal and Gorgol river valleys 4.6 South-East Mauritania 1.5 /1 1.5 before 1973. Sources: 1973, 1980: Ministry of Plan 1985: Mission estimates. Table 1.3: MAURITANIA - POPULATION BY SEX AND AGE GROUPS 1973, 1980 AND 1985 (in thousands) Age Group M/F 1973 1980 1985 Population under school age (0-4) IM 104 121 132 F 100 117 128 Total 204 238 260 Population of school age (5-14) IM 165 184 197 F 161 180 194 Total 326 364 391 Economically active age grosp (15-59) M 317 357 395 F 311 355 390 Total 628 712 785 Age group 60 and over M 27 32 35 F 32 33 37 Total 59 65 72 Total Population M 613 694 759 F 604 685 749 Total 1,217 1,379 1,508 Source: Ministry of Plan Table 1.4: MAURITANIA - URBAN EMPLOYMENT IN 1973 Activities Total Male Female Agriculture and fishing 200 200 - Industry 11,250 11,050 200 Public utilities 150 150 - Mining 5,200 5,100 100 (Cominor) (4,300) (Somima) ( 900) Manufacturing 1,900 1,800 100 (Fishing industries) ( 800) ( 800) ( - (Other manufacturing) (1,100) (1,000) (100) Construction 4,000 4,000 - Services 18,700 16 00 2, Transport 1,200 1,200 - Tourism 200 200 - Banking, trade, insurance 4,500- 4,000 500 (Enterprises) (2,500) (2,000) (500) (Shopkeepers) (2,000) (2,000) ( - Repair services 1,000 Liberal professions 1,oo 1,00- General government 9,000 7,500 1,500 Household services 1,400 1,100 300 TOTAL 30,150 27,650 2 0 Various sources. Table 1.5: MAURITANIA - INCREASE IN URBAN EMPLOYMENT, 1973-1985 (in thousands) .1973 Increase 1973-1985 1985 Total M F Total M F Total M F Agriculture 0.2 0.2 n.a. 1.2 1.2 - 1.4 1.14 Industries 11.3 11.1 0.2 17.8 16.1 1.7 29.1 27.2 1.9 Public utilities 0.2 0.2 - 0.2 0.2 - 0.4 0.11 - Mining 5.2 5.1 0.1 - - - 5.2 5.1 0.1 Manufacturing 1.9 1.8 0.1 5.6 3.9 1.7 7.5 5.7 1.8 (Fishing industries) (0.8) (0.8) ( ) (0.8) (0.8) ( - ) (1.6) (1.6) ( - ) (Other private manufacturing) (1.1) (1.0) (0.1) (1.6) (1.5) (0.1) (2.7) (2.5) (0.2) (Public corporations) ( - ) ( - ) ( - ) (3.2) (1.6) (1.6) (3.2) (1.6) (1.6) Construction 4.0) l.0 - 12.0 12.0 - 16.0 16.0 - Services 18.7 16.4 2.3 19.9 17.5 2.4 38.6 33.9 _.7 Government 9.0 7.5 1.5 9.0 7.5 1.5 18.0 15.0 3.0 Household services 1.4 1.1 0.3 1.4 1.1 0.3 2.8 2.2 0.6 Other services 8.3 7.8 0.5 9.5 8.9 0.6 17.8 16.7 1.1 TOTAL 30.2 27.7 2.5 38.9 34.8 1.1 69.1 62.5 6.6 Sources: 1973: Ministry of Plan 1973-1985: Mission estimates Table 2.1: MAURITANIA - GROSS D0MESTIC PRODUCT !N CONSTANT 1973 PRICES, 1970 to 1985 (in billions of TM) 1970 1971 1972 197713 1974 197 .80 1985 Rural Sector Agriculture 1.0 0.9 0.4 0.3 1.2 1.3 1.8 2.3 Livestock 2.9 3.1 2.6 2.4 2.h 2.6 2.) 3 Ferestrr 0.2 0.1 0.1 - - - - 0.1 Fisheries 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0. S ub to0 t al 4.3 4.3 3.3 2. Indstrial Sector Public Utilities 0.1 0.1 0.1 0.2 0.2 0.2 0.h o.6 Minir.g 2.5 2. 2.7 3.4 4.o 3.0 3.4 3.8 Fish Processing C.1 0.1 0.2 0.1 0.2 0.2 . 0.T Yerrl ?efir-ery - - - - - - 0.2 1.2 Other Manuf. Ind. 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.3 Handicrafts 0.7 0.8 0.3 0.8 0.8 0.8 0.8 0.8 Ccnstruction 0.5 0.7 0.6 0.6 0.8 1.0 1.8 2.3 Suttoral 4.1 IL.2 4.5 5.2 6.1 5.3 7.2 9.7 ervices Tra=spcrt, Comrerce : ervices 1.L 1. 1.3 1.3 1.6 1.6 2.7 Public Administration :.4 1.5 1.6 1.9 2.0 2.5 3.T Subtotal 2.8 2.9 2.9 3.2 3.6 4.1 5.8 7.6 GD? et FactCr Costs 11.2 11.4 10.7 11.3 13.5 13.5 18.0 23.2 Indirect Taxes 1es gubsidies 1._ ..0 7.0 1.3 !.r 2.9 ODEP at Market Prices 12.3 12.5 11.7 12.3 l.8 15.0 20.6 27.1 Adjustments for Changes in terms of trade - - - - - - 1.8 5.5 GDY at Market Prices -_ - - -. - 22.L 32.6 Source: Mission Estimates Table 2.2: MAJTANIA - NATIONAL RESOURCES AND USES, 1970-1985 In Current Prices in 197,3 Prices 1970 1971 1972 1973 1974 1973 1980 1985 Domestic Resources Gross available Domestic Product in Market Prices 10.3 10.6 10.5 12.3 16.9 12.3 22.4 32.6 Less: Balance of Trade and non Factor Services -0.1 0.3 -0.1 - -1.7 - -2.9 -3.6 Total 10.4 10.3 10.6 12.3 18.6 12.3 25.3 36.2 Use of Domestic Resources Ccnsurmticn 8.4 7.7 7.9 9.4 12.8 9.4 16.8 23.6 Irvest=ents 2.0 2.6 2.7 2.9 5.8 2.9 8.5 12.6 Total 10.4 10.3 10.6 12.3 18.6 12.3 25.3 36.2 Eomestic Savi-ngs Investment 2.0 2.6 2.7 2.9 5.3 2.9 8.5 12.6 Plus: Balance of Trade and non Factor Services -0.1 0.3 -0.1 - -1.7 - -2.9 -3.6 Total i.9 2.9 2.6 2.9 h.1 2.9 5.6 9.0 Uross National Product Gross _Vailable Domestic Pro- dUct in Market Prices 10.3 10.6 10.5 12.3 16.9 12.3 22.4 32.6 Plus: .,6 7actcr Frymnts and Ferittances -0.7 -1.0 -1.0 -0.9 -0.8 -0.9 - -2.1 Oross National Product 9.6 9.6 9.5 11.L 16.1 11. 21.0 30.5 Consumotlon Private .7 5.8 5.7 6.5 9.4 6.5 32.5 16.5 bi 1.7 1.9 2.2 2.9 3.4 2.9 5.3 7.1 Total . T.7 7.9 9.4 62.8 9.h 16.8 23.6 nvestments -ublic Fixed Carital -ormation 0.2 0.8 0.6 0.7 _._ 0.7 5.. 9.0 _ aze F ixed Carizal Formation 1.8 1.8 2.1 2.2 2.7 2.2 i.9 2.5 Change in Stocks - - - - 2.0 - 0.5 2.1 Total 2.0 2.6 2.7 2.9 5.8 2.9 8.5 12.6 .National Savings Domestic Savinxs 1.9 2.9 2.6 2.9 4.,1 2.9 5.6 .0 Plus: Net Factcr Pay- ment and Remittances -0.( -1.0 -.0 -0.9 -0.8 -0.9 -1. -2.1 National Savings 1.C 1. 1- 2. 3 2.2 . c 6, of which: ?ufblic -0.1 -0.3 -0.4 -0.4 -0.2 -.) 2.T 4.- Private 1.3 2.2 2.0 2.4 3.5 2.4 1.5 2.8 1/ 1975 lacks as balance of payments fcr that year not yet available. Source: - Mission estimates Table 3.1: MAURITANIA - END-USE CLASSIFICATION OF TOTAL IMPORTS IN CURRET PRICES, 1970-1973 (in millions UM) 1970 1971 1972 1973 Consumer goods 3,123 ).2,833 2155 Basic food items 440 720 1,034 1,293 Other consumer goods 2,683 1,738 1,799 862 Intermediate goods 1,361 1,414 1,682 1,673 Fuel 278 346 338 445 Building materials 331 350 493 375 Raw fish 256 267 3L8 335 Others 496 451 503 518 Equipment goods 887 1,205 1,318 2,390 Total imports CIF 5,371 5,077 52833 6,.1 Source: Mauritanian foreign trade statements. Table 3.2: MAURITANIA - EXPORTS BY PIUNCIFPAL COMMODITES IN CURRENT PRICES, 1970 TO 197) Commodities Unit of quantity 1970 1(71 1972 1973 19T4 Q V Q V Q V Q V Q V Mill UM Mill UM Mill 11M Mill UM Mill UM Recorded exports: Iron ore 1,000 T 9,270.0 4,299 8,601.0 11,169 8,618.0 3,978 10,270.0 4,580 10,759.0 5,$53 Copper concentrate 1,000 T - - 5.3 207 16.8 549 14.2 570 115.1 1,773 Fish products 1,000 T 20.6 h06 21.7 127 32.8 568 30.7 547 28.0 734 Gum arabic T 4,361.0 98 2,573.0 87 h,1b62.0 136 677.0 14 467.0 41I Various 390 - 108 - Gi - - -5 ,13 L,)9 10 8 Total recorded exp. - - 5 -711 - 8,25 Unrecorded exports: Gum arabic T 2,939 66 2,927 99 1,238 ho 323 7 33 3 Cattle 1,000T 80 161 375 601 350 560 263 632 h5 199 ToLal. unrecorded exp. - 227 - 700 - 600 - 639 - 202 Total exports - 5,420 - 5,698 - 5,975 6,350 - 8 of which: Gum arabic T 3,)000 164 5,500 186 5,700 176 1,000 21 500 47 1/ Adjustment Sources: Total of recorded and unrecorded exports: balance'of payments data, Individual commodities, 1970--1973 : Mauritanian foreign trade statistics. 197 : balance of payments date Total gum exports equals production (Table 8) Value of cattle exports residual. item Table 3.3: MAURITANIA - IMPORTS BY END-USE IN CONSTANT 1973 U14 1973, 1980 AND 1985 (in million UM) 1973 1980 1985 Consumer Goods 2,155 3,130 Basic food items 1,293 1,106 1,16k Other consumer goods 862 2,024 2,940 Intermediate Goods 1,673 ha,925 8,714 Fuel 445 1,000 2,900 Building materials 375 1,500 2,159 Raw fish 335 1,350 2,111 Others 518 1,075 1,553 Equipment Goods 2,390 4M TOTAL 6,218 12,755 19,418 Sources: 1973: Table 3.1 1980, 1985: mission estimates. Table 3.h: MAURITANIA - EXPORTS BY PRINCIPAL COMMODITIES YN 1973, 1980 AND 1985 Unit of Quantity 1973 1980 1985 P in V in P in V in P in V in Q ,000 UM million UM Q l,000 Um million UM Q 1,000 UM million UN Iron ore 1,000 T 10,270.0 0.)A6 J1,580 10,280.00 0.698 7,175 11,700.00 0.7h 8,658 Fish products 1,000 T 30.7 18.11 5h7 96.83 25.820 2,333 116.00 34.1i 3,957 Gum arabic T 1,000.0 20.68 21 1,000.00 100.00 100 2,600.00 100.00 260 Cattle 1,000 T 263.0 2.40 632 118.00 10.88 1,284 100.00 13.10 1,320 Refined Oil nrodiicts - - - - - - - - - 2V300 Conner roncentrate 1,000 T 1h.2 b o.08 570 25.3 31.03 785 34.5 35.35 1,220 Various - - - - - - 200 - - 550 Total reports 6- -61350 - - 111877 - - 18265 Source: 1973 foreign trade statistics 1980, 1985: mission estimate2 Tle 3.5: MAURITANIA - IW'ORTS OF CEREALS. 1970 TO 19F85 ( 1.0o0 0 ) Cormodity Recorded/ Item 1970 1971 1972 1973 1974 1975 1980 1985 unrecorded Cereals Total 7490 86,0 10700 119,0 66,0 67.0 58,0 50,0 Recorded Grains and rice 1100 344 36,8 77.3 69,3 ... - - Flour 4,9 7 3 897 8.6 8.6 ... Grain equivalent of flour imports(100/76) 64 9,6 11,4 11,3 11,3 ... - - Total cereal imports in grain equivalent 17,4 44,0 48 2 88.6 80.6 ... 58,0 50,0 Unrecorded 56,6 42,0 5808 30,4 ... - - Tea Total consumption 1,300 1,300 1,300 1.300 1,300 1,300 2,4 2,8 Recorded imports 0,401 0,436 0,604 0,813 1,110 ... - - Unrecorded imports 0,899 0,864 0,696 0,487 0,190 ... i PI т� �i� ,О �пI .н и J� �� 1 N i, й О Т т j fP.�I b h г,�I �I �О � Р PI т о� U c��I � ��� л С � у R ^ ^ I й й �' и � PI ^� �� N .°I ~ о мI � � Г1 ,^ и �^ ~II О b о� О dJ h KI ^ �� о � :г� о� й и о.. йI .. .. 'и ,-�I .и i � и т е п о 11 о и О � � -, •1 И с 7 U с � С б v.. Р О. v у , .-. � P) У� м� т �I .. пI -? ri й й[м N n rvI - . .. и т п, О �� , Р ы �� � � ��� �( �� �, � и� i �I ° и и� �� � �, •л, а 4 1 ` � � Т � �� 4. А ; О с О �. :и тI .+ т т о о� и рΡг нрΡ -й и � п °. t а. U'"� PI vl1 �� и PI . . д� С� щ Т �� . . ш � •1I i i .1�I ��I . . пI �1 �А C�i •� �I и . � "� L О• + 7 ? .С. и � � ы п �- � й а �,' й � 4 и й т и , � � 1 i; �' ё н �I й� � .. �OI 1.t о о д�! � ° � °и� �•° о п1 .. .. r. 4� т и' .-, о� �. � �,J :� �� ; �, .( а��� �i � •� � � 11 �i I с _ I ° z i' г. < у п � � и v с С, 1 г „ •, 1� 7 �) й �l . У ы а .°. " '� у� �. •: � � а . Е ,. Й .-. r О и 9 V � т ^I у U С � { & и " у с �I �+I О U � вi r� � и в. Л д R с й т ^ с О � U ro J� I у уΡ У U ы r и у г ° aI .)Сот v .- •iы о 5 � 'ён � о`� w и11 а а спап ы ,�� � 4� Аи с. и. • с r `J W°.ui У � � :: :: д и и � n , п � с $I Ч и ц ..С. .�. ` и ., .,I т к о � з i й ,.. ы гЗ � п С п .- � " и М х •+ У �� .ю. у °5' ° й ё л п п � й .°. .7а'. и С .. 'п' ,� I F ' Э ` �,= '- ' {.. уА Ы' с� v ,. Е. Ч �У п и N v �) '�' �� � �� д д ч. ".. �1 V.� А н U. г Н К и J й н д О '° � J'О j:.� т и н и п� с о � )) .g . .� `д •"I с r. л " т н .и+ '� а i� .. � п . .. н _ � а и и �+ ). и . й . - • ; � °) -о � v v а й ai л с й � н v �.� т Ч-�� п у v � Е. Н F- �• � и г � .� - r� и а � М й �_ � а �. ) � . � .ci н ю V н iw н и о:: и г о У о н i Н и ш v � •� � `� -• .-) о г. % >� й с т _ » �� . п о .г, л � ( и.' о ,д д и7 п Fi �. м <.) � � н ^ и r� д о н м' п. � - . i ' и а й � � п О и Г . . L .) :i - v. т Р: _ , F. � _ . о'.� v �; J �IC:;J Table 3-7: -AURITANLA. - BALANCE OF PAYV= IN 1973 UM 1973, 198o AND 1985 (in -millions UTW 1973 1980 1985 CURRENT ACCOUNT Merchandise Exmorts 6.3 11.9 18.3 Imports -6.2 _1. . 8 19.4 Trade Balance 0.1 -0.9 -1.1 Non I'actor services (net) -0.1 -2.0 -2.5 '_.: Iesource Balance - -2.9 -3.6 Factor Services interest on Dublic debt -1.0 TecTI-mical assistance o.4 1.0 J.--z Other -0.9 -1.9 -2.4 Total -0.5 -1.4 -2.1, Current Account Balance -0.6 -4.3 -5.7 CAPITAL ACC01717 Private Sector (net) Direct investment a. 1; 1 . C; 1.9 Other icng term -0.4 0.2 0.1 Short term 1.1 - - Total (net) 11.2 1.7 2.0 Public Lending Loan disbursements 1.4 4.2 5.5 Debt repayment -0.1 -1.0 -1.1 Total (net) 1.3 3.2 4.4 Public Grants 1.1 - - Cai)ital Account Balance 3.6 4.9 6.1L Balancing items: Errors and omissions -2.7 - Change in reserves (+ increase) +o.4 +0.6 +O.f Table 4.1: MAURITANIA - EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1975 INCLUDES ONLY DEBT COMMITTED JANUARY 1, 1900 - DECENBER 31, 1975 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (in thousands of US dollars) CREDITOR CRUDTR DEBT OUTSTANDING IN ARREARS Disbursed Undisbursed Total Principal Interest Suppliers Credits Auatria - 50,297 50,297 - - France 444 - 444 - - Norway 1,187 - 1,187 - - United States 11 - 11 1 TOTAL SUPPLIERS CREDITS 1 51,939 Private Bank Credits France 5,000 - 5,000 - United States 321 4,299 4,620 - TOTAL PRIVATE BANK CREDITS 53 46 Publicly Issued Bonds France 9 - 9 - TOTAL PUBLICLY ISSUED BONDS 9 9 Loans from International Organizations African Development Bank 115 880 995 - - African Development Fund 115 4,111 4,226 - - Arab Fund for Economic and Soc. Dev. 4,541 - 4,541 - - European Development Fund 2,522 - 2,522 - - IDA 14,048 19,934 33,982 - - TOTAL LOANS FROM INTERNATIONAL ORGANIZATIONS 21 24.5 - - Loans from Governments Abu Dhabi 7,800 4,006 11,806 - - Algeria 4,363 - 4,363 - - Canada - 4,132 4,132 - - China, Peoples Republic of 2,460 77,811 80,271 - - France 22,139 1,408 23,547 524 187 Germany, Federal Republic of 3,120 9,043 12,163 - 2 Korea, Democratic Republic of - 1,500 1,500 - - Kuwait 10,000 57,624 67,624 - - Libyan Arab Republic 42,662 5,067 47,729 - - Morocco 15,000 - 15,000 - - Qatar 7,000 - 7,000 - - Saudi Arabia 11,000 10,496 21,496 - - United States 717 4,299 5,016 45 9 TOTAL LOANS FROM GOVERNMENTS 126 261 1536 301 569 198 TOTAL EXTERNAL PUBLIC DEBT 2 IaQ 4 NOTES: (1) Only debts with an original or extended maturity of over one year are included in this table. (2) Debt outstiading inc;.udes principal in arrears but excludeas interest in arrears. Table 4.2: MAURITANIA - SERVICE PAYMENTS, COMMITMENTS, DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT INCLUDES ONLY DEBT COMMITTED JANUARY 1, 1967 - DECEMBER 31, 1975 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (in thousands of U.S. dollars) Year Debt Outstanding at Beginning of Period Transactions During the Period Disbursed Including Commitments Disbursements Principal Interest Total only Undisbursed (1) (2) (3) (4) (5) (6) (7) 1967 10,135 27,967 4,274 10,975 771 332 1,103 1968 20,346 31,476 7,057 5,116 950 202 1) 132 1969 24,534 37,604 6,444 5,078 1,707 393 2,100 1970 26,027 39,672 3,721 4,293 2,974 350 3,324 1971 27,262 40)333 41{,228 10,609 2,914 496 3,410 1972 36,988 87,898 2,280 5,966 6,773 423 7,196 1973 35,412 82,916 42,801 29,213 2,408 494 2,902 1974 65,174 132)294 178,396 64,617 51346 2,444 71790 1975 145,035 3'6,133 ---- The following figures are projections 1975 145,035 336,133 89,252 72,119 26,856 4,503 31,359 1976 186,991 387,663 - 78,366 17,416 61237 23,653 1977 247,939 370,245 - 60,067 22,458 9, 050 31,508 1978 285,545 347,784 - 21,453 25,591 8,658 34s249 1979 281,410 322,196 - 13,873 251098 7,750 32,848 1980 270,187 297,099 - 12,913 23,387 6,810 30,197 1981 259,713 275,713 - 11,851 21,241 5,925 27,166 1982 250,320 252,469 - 1,179 23,090 5,019 28,109 1983 228013 229,83 - 645 46,764 3,538 50,302 1984 182,291 182:616 - 325 19,719 2,065 21,784 1985 162,900 162,900 - - 16)730 1,516 18,246 1986 146,167 146,167 - - 16,117 1,105 17,222 1987 130,054 130,054 - - 12,322 732 13,054 1988 117,726 117,726 - - 8,786 553 9,339 1989 108,943 108,943 - - 7,844 449 8,293 1990 101,101 101,101 - - 7,878 371 8,249 1991 93,220 93,220 - - 5,979 294 6,273 1992 87,242 87,242 - - 5,939 268 6$207 1993 81,306 81,306 - - 5,812 249 6,061 1994 75,494 75,494 - - 5,455 234 5,689 1995 70,042 70,042 - - 5,750 224 3,974 1996 66,291 66,291 - - 3,744 211 3,955 Source: IBRD Table 4.3: MAURITANIA - SERVICE VAYMENTS, COMMLITMENTS, DISBURNEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1975 INCLUDES ONLY DEBT COMITTED JANUARY 1, 1900 - DECEMBER 31, 1975 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (1n thousands of US dollars) Year Debt outstanding at TR AN SACTIONS DU RI NG PERIOD Other beginning of period changes Disbursed Including SERVICE PAYMENTS only undisbursed Commitments Disbursemerts Principal Interest Total Cancellations Adjustment (1) (2) (3) (4) (5) . (6) (7) (8) (9) 1968 20,346 31,476 7,057 5,116 930 202 .1,132 -1 1969 24,534 37,604 6,444 5,078 1,707 393 2,100 - -2,669 1970 26,027 39,672 3,721 4,293 2,974 350 3,324 57 -29 1971 27,262 40,333 47,228 10,609 2,914 496 3,410 - 3,251 1972 36,986 87,898 2,280 5,966 6,713 423 7,196 2,212 1,723 1973 35,412 82,91h 42,801 29,213 2,408 494 2,902 1,118 10,103 1974 65,174 132,294 162,263 48,484 5,346 2,444 7,790 - 37,622 tft 1975 135,735 32b,833 119,814 44,919 25,335 3,756 29,091 * -11,831 1976 154,574 409,481 ------------- 'h0 following figures are projections ---------------- 1976 154,574 409,481 - 106,773 25,829 5,479 31,308 - 1977 234,938 383,072 - 76,387 21,479 8,623 30,102 - 1978 289,840 361,584 - 25,613 23,791 8,629 32,420 - 1979 291,665 337,796 - 15,858 24,114 7,903 32,017 - 1980 283,412 313,684 - 13,522 23,919 6,999 30,918 - 1981 273,016 289,765 - 12,202 21,843 6,096 27,939 - 1982 263,374 267,921 - 1,718 23,477 5,174 28,651 - 1983 241,614 244,442 - 1,258 47,137 3,688 50,825 - 1984 195,746 197,316 - 890 20,015 2,218 22,233 - 1985 176,623 177,301 - 678 16,947 1,671 18,618 - 1986 160,356 160,356 - - 16,741 1,264 18,005 - 1987 143,618 143,618 - - 12,846 882 13,728 - 1988 130,778 130,778 - - 9,596 695 10,291 - 1989 121,183 121,183 - - 8,890 574 9,464 - 1990 112,297 112,297 - - 8,469 479 8,948 - 1991 103,830 103,830 - - 6,516 395 6,911 - 1992 97,315 97,315 - - 6,587 362 6,949 - 1993 90,731 90,731 - - 6,459 337 6,796 - 1994 84,276 84,276 - - 6,099 314 6,413 - 1995 78,180 78,180 - - 4,394 297 4,691 - 1996 73,790 73,790 - - 4,388 277 4,665 - 1997 69,401 69,401 - - 4,388 258 4,646 - ** This column shows the amount of arithmetic imbalance in the amount outstanding including undisbursed from one year to the next. The most cosmon cause of imbalances are changes in exchange rates and transfer of debts from one category to another in the table, *:k* 1974 adjustment includes $24.8 million debt outstanding of MIFERMA assumed by State upon nationalization. Table 4,4: MAURITANIA - DEBT SERVICE IN CONSTANT 1973 UM, 1980 AND 1985 1980 1985 Interest 0.5 1.0 Debt (0.2) ( -) New debt (0.3) (1.0) Reimbursement of principal 1.0 1.1 Debt at end 1975 (1.0) (0.3) New debt (-) (0.8) Total debt service 1.5 2.1 Exports of goods and services 11.9 18.4 Debt service as a % of exports 12.6 11.4 Source: Mission estimates Table 5.1: MAURITANIA - COVERNMENT CURRENT RECEIPTS, 1970 TO 1985 In Current Prices In 1973 Prices 1970 1971 1972 1973 1974 1975 1973 1980 1985 Normal Budget Indirect Taxes: Import taxes 537 567 746 621 1,041 1,346 On local trade 167 184 258 478 602 541 (Turnover taxes, etc.) (155) (145) (203) (208) (444) (359) (Other taxes) ( 34) ( 39) ( 55) (270) (158) (202) Total 204 751 984 1,099 1,64 1, Export Taxes: Miferma/Cominor 355 380 409 271 612 315 438 646 /1 775 Somima - - - 15 31 1 21 79 114 Other - - - 16 30 53 21 - - Total 355 :L0 409 302 3 A49 480 745 889 Other direct taxes and non-tax revenue Taxes on revenue 280 310 400 405 626 528 Other taxes 54 39 55 271 150 202 Non-tax revenue 94 102 125 - - 148 Total 408 451 560 676 84 878 Total revenue 1AL41 1_52 5 -.Q 100 1 Development Budget Non-tax revenue - 82 368 401 366 Special Funds Direct taxes 152 81 70 171 192 217 Indirect taxes 153 81 71 171 195 217 305 162 141 342 385 4 All Budgets.Total 1Y52 1I287 2x176 2.7-7 3886 2u92j 2_787 6,301 8 914 of which; Import taxes ( 557) ( 567) ( 746) ( 621) (1 041) (1.546) ( 621) (13611) (2,568) Other Indirect taxes ( 320) ( 265) ( 309) ( 649) ( 795) ( 758) ( 649) ( 968) (1 302) Export taxes ( 335) ( 580) ( 409) ( 302) ( 675) ( 549) ( 502) ( 745) ( 889) Other Direct taxes and non-tax revenue ( 560) ( 755) ( 712) (11215) (1,377) (1,461) ( 215) (2,977) (4,155) Subsidies given by SOMINA - - 86 500 400 320 400 6 301 8,914 Indirect taxes les subsidies 857 852 969 970 1456 1 784 8709 /1 9% of export value /2 10% of export value Source: 1970-1975 IMF data 1980-1985 mission esti,ites Table 5.2: MAURITANIA - GOVERNMENT CURRENT EXPENDITURES, 1970 TO 1985 (in thousands of UM) In Current Prices In 1973 Prices 1970 1971 1972 1973 1974 1975 1973 1980 1985 Central Government Central Budget: Salaries 752 854 995 1,144 1,304 1.647 Goods and Services 391 41l 544 642 807 1035 Transfers and Subsidies 39j1 4 62 87 1 Debt Service, Interest 172 249 237 240 405 710 240 732 '1 980 35 47 37 34 206 127 34 155- 27 L1 Total 14_YO 1 11 296 gX122 11§19 Special Funds: Salaries 97 172 144 287 348 364 Goods and Services 97 172 144 288 349 364 Total Current Expenditures 194 344 288 575 6 728 Technical Assistance: Salaries 272 280 342 4217 568 700 TOTAL 1816 2.165 2A443 122 JA987 4 Local Government (4%) Salaries 36 40 48 58 65 92 Goods and Services 21 23 28 38 44 53 Total 57 63 72 96 109 145 Total Salaries 1 157 1,326 1,525 1,926 2,285 2,803 1,926 3,668 4,915 Total Goods and Services 509 606 716 968 1,200 1,452 968 1,639 2,196 Total consumpticn of goods and services 11666 1,932 2,241 2,894 3,485 4,255 2,894 5)307 7,111 Mauritanian Price Index 80.0 86.1 93,1 100.0 112.7 124,5 Salaries in 1973 prices 1,446 1,540 1,638 1,926 2,028 2 255 Government consumption in 1973 prices 2,083 2,244 2,411 968 3,092 3 418 Transfers, Subsidies, Drought Relief 172 249 237 240 405 710 240 732 980 Debt Service, Interest 35 47 37 34 206 127 34 155 27 Total Expenditures 1 84 096 1 028 /I On debt contracted before 1976. Source: 1970-1975: IMF data 1980-1985: Mission estimates Table 5.3: MAU-RITATIA - PUBLIC SAVINGS, 1970-1985 (in thousands of UiM) In Current Prices In 1973 Prices 1970 1971 1972 1973 1974 1975 19T3 1980 1985 Central Government Current Receipts Normal 2udget i,h7 1,672 1,953 2,077 3,100 3,114 Development Budget - 133 82 368 401 366 Special Accounts 305 - 162 141 342 385 434 Total 1.752 1,96 2,176 2,T 3.886 3,91 Current Exrenditure Mormal Budget 1,390 1,5å1 1,813 2,060 2,722 3,519 Specicl Accounts 19 - 34h 288 575 697 728 Technical Assistance 272 280 342 437 568 700 Total 1,6 2165 2,3 3,072 3,987 .4,97 Lccal Government Expenditure 57 63 72 96 09 145 Central and Local GoverrmeT Total Recei.ts 1,752 1,967 2,176 2,787 3,886 3,914 2,77 6,3r01 891 Total 7xpendit-ures 1,8T3 2,228 2,515 3,168 ,6 5,02 3,168 6,196 8.118 issavir.s -121 -261 -339 -381 -210-1,178 -381 107 796 7ublic Corrorazions - - - - 18 876 - 2;000 3,000 Total Public Savinzs eer-e additional interest -121 -261 -339 -381 -192 -302 -381 2,107 3,756 Inzerest on Additional .nzeresz - - - - - - - i00 1,300 Public Savirgs -12 -261 -339 -381 -92 -302 -381 1,70 2,96 Source: IMF and Mission Esti=ates. Remarks: Technical Assistance is cons`dered a current exrenditure and this deducted fron, total Public savings. Table 6.1: MAURITANIA - FIED INVESTMENT LEVELS, 1970 TO 1985 (in billions of UM) 1970 1971 1972 1973 1974 1975 1980 1985 In 1973 Prices Public Sector 0.3 1.0 0.7 0.7 0.9 3.2 6.1 9.0 Private Sector 2.4 2.2 2.4 2.2 2.3 1.7 1.9 2.5 Total 2.7 3.2 3.1 2.9 3.2 4.9 8.0 11.5 In 1975 Prices Public Sector 0.4 1.2 1.0 0.9 1.2 4.2 7.9 11.6 Private Sector 3.1 2.9 3.1 2.9 3.0 2.2 2.5 3.3 Total 3.5 4.1 .1 3.8 4.2 6.4 10.4 h.g Source: Mission Estimates Table 6.2: MAURITANIA - GROSS FIXED INVESTMENTS, 1970 TO 1975 (in billions of UM) Type of Classification Category 1970 1971 1972 1973 1974 1975 Current/Constant prices Total in current prices 2.0 2,6 2.7 2.9 3.8 6.4 Total in 1973 prices 2.7 3.2 3.1 2.9 4.0 4.9 Total in 1975*prices 3.5 4.1 4.1 3.2 4.2 6.4 In current prices by agent General Government 0.2 0.8 0.6 0.7 0.9 3.0 Public Corporations - - - - 0.2 1.2 Total public 0.2 0.8 0.6 0.7 11 4.2 Total private 1.8 1.8 2.1 2.2 2.7 2.2 Total 2.0 2.6 2.7 2.9 3.8 6.4 In current prices by economic sector Rural sector - - - 0.1 0.2 0.5 Industry 1.7 1.8 2.0 2.4 2.9 2.9 Transport 0.2 0.4 0.2 0.2 0.3 1.8 Other services 0.1 0.4 0.5 0.2 0.4 1.2 Total 2.0 2.6 2.7 2.9 3.8 6.4 Source: Mission estimates Table 6.3: MAURITANIA - FINANCING OF INVJESTMENTS IN 1980 AND 1985 IN CONSTANT 19073 UM (in billions UM) 1980 1985 Public Private Total Public Private Total Investments 6.1 2.4 8.5 9.0 3.6 12.6 National savings 2.7 1.5 ~4.2 ~ 4.1 2.8 6.9 Savings gap 3.4 0.9 4.3 4.9 0.8 5.7 Inflow ffrom abroad (net) 3.2 1.7 4.9 4.14 2.0 6.4 Local public borrowing 0.2 -0.2 - 0.5 -0.5 - Increase in reserves - o.6 0.6 - 0.7 0.7 Source: Mission estimates Table 6.4: MAURITANIA - PUBLIC SECTOR: 3rd PLAN PROJECTS IN 1975 PRICES, 1976-1980 (in billion of UM) Rural Sector Industry Transport Services Total On-going projects 1.0 4.4 8.4 0.6 14.4 Firmly selected projects 4.2 21.0 3.0 5.0 33.2 Projects still under consideration 0.h 8.4 4.8 1.5 15.1 TOTAL 5.6 33.8 16.2 7.1 62.7 Table 6.5: MAURITATA - SUTMTMARY OF PUBLIC SECTOR PROJECTS IN 3RD PLAN BY BROAD SECTCR, 1976 - 1980 (in millions of U-M) On-going New Considered All projects projects projects projects Rural sector 1.050 4,171 380 i001 A. Agriculture 498 3,!06 304 3,908 1. Irrigation from Senegal River (347) (2,611) (170) (3.128) 11. Projects in S.E. Mauritania (109) (240) (3a9) III. Projects in Central Mauritania (6) (35) (24) (65) rV. Other Projects (36) (220) (110) (366) 3. Livestoc. 426 325 31 782 C. Groundwatar 126 540 _66 D. Forestrv 177 45 222 Z. Extension services 23 23 Industrv 4.379 21.020 8 33.820 A. Public utilities 275 1,207 350 1,832 3. Mining 18,084 1,125 19,209 C. Manufacturing 4,104 1,729 6,946 12,779 Se --vices 8.978 7,873 635 2,9 A. Transport infrastructure 8,390 3,034 4,756 16,180 T. ,oad transport (7,176) - (3,490) (10,666) II. Sea transport (1,212) (3,000) ___ (4,212) III. River transport _ (18) 'Is) IV. Air Lransport (2) (16) (1,266) (1,234) 8. Tourism 100 212 56 C. Housing 151 151 D. General government 488 4,476 1,523 6,487 I. Heal:h (222) (228) (592) (1,032) 'I. Education (220) (2,911) (852) (3,983) III. Other social (46) (795) (79) (920) I'!. Administrative (552) (552) All projects 14,407 32,066 15,146 62.611 Source: Ministry of Plan Table 6.6: MAURA:ALA - PUBLIC SECTOR: PRIORITY NEW PROJECTS IN 1975 PRICES, 1976-1980 Sector ?roject Amount Rural sector Diama Dam (Mauritania's share) 900 4 small rice schemes upstream of i4edi 12 Lake R' Gin 347 Pilot scheme Bogh6 plains 414 Gorgol development 1,663 Feasibility study Achram El Diouk 16 Feasibility study: 14 dams in Tagant 19 Green belt around Nouakchott 147 Total 3.518 Industries Extension of power producticn in Nouakchott and Nouadhibou x) 400 Water supply to Nouadhibou 200 Guelbs iron ore exploitation 5,500 Production of sulfuric copper ore Xx) 1,125 Total 7.225 Transport Southern roads xx) 1,245 infra-structure Secondary airfields 423 Total 1,668 Services Pol.clinics in Nouakchott (8th district) 20 Polytechnical institute 670 Institute of agriculture and livestock 125 Fisheries training center 30 Total 845 All sectors 13,256 Outside plan Xx) Among projects still under consideration