Mauritania - The economy

RESTRICTED Uf r oe tN 0. EA-107a This report was prepared for use within the Bank. In making it nm ilikin f^n#%thnre th^ DOfnlt ft siman -s mon,%n& .I *lt +n fkm f-r uwmuu U Lw Lu1., use vaLa a uInIIIU 11U tUQ1UallLy LU UIIII OUR the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT THE ECONOMY MAURITANIA February 18, 1960 CURRELNCY EQ'.UIVALE,kNTS $U.S. 1 - Francs CFA 246.85 1 Billion Francs CFA - $4,051,044 1 Franc CFA - 2 old French Francs 1 new Franc - 50 Francs CFA THE ECONO,Y OF AURITAFIA Table of Contents SUIARY AND CO1FCLUSION,S Page No. TPRODUCTION 1 Physical Background 2 The People 2 PRESENT ECONOAIC SITUATION 2 Production 2 Settled Agriculture 3 Foreign Trade 4 :1oey anu Cudit 4 Public Finance 5 nrnvnns ,rrmnentr / FUTUE UUILUU 6 Unused Resources 6 The 11iferma Project 7 Government Policy towards Investments 8 Investment Plans Depending upon Miferma 9 The Effect of Hiferna on Public Finance iu Impact of Miferma on the Economy il Conclusions 12 STATISTICAL APPEUDIX Annex I - National Income Estimates 1 & 2 Annex II- Tables No. 1 to 7 NAP - Mauritania MAP - North-West Africa SUrf.ARY AND CONCLUSIOPS 1. Mauritania is an autonomous republic within the Community es- tablished by the French Constitution of October 1950. It is thus responsible for its own domestic economic and financial policy, while the Community is responsible for currency and for economic and finan- cial questions common to the Community as a whole. 2. The population is small and scattered over an immense area; numbers are uncertain, being variously estimated at from 650,000 to one million. Somewhat over 100,000 are negroes, settled on the banks of the Senegal River. The remainder are Maures, of predominantly Arab and Berber blood, most of them living as nomads with their herds further to the North. The present Government rests on widespread sup- port from both main groups and seems determined to steer a middle course between the various pulls from North and South. 3. The traditional agricultural and pastoral economy is primitive and the severity of natural conditions sets narrow limits to its expan- sion. Industry is practically non-existent. Incomes are thus very low and the capacity for saving is nealigible. Mauritania is heavily de- pendent on foreign aid to meet current budgetary expenditures as well as to finance investment. L. The key to economic develonment lies in the countrv's mineral re- sources, notably the high grade iron ore deposits at Fort Gouraud which Miferma nrono.qP tn ennit_ The nroiptt i.q immennn in nomnarison with the present size of the economy; the investment involved would be equi- valent t nPrhn sin time the nrpent natinnnl income The value of iron ore to be exported would be at least five times the value of all Port Etienne, now little more than a barracks and a fishing village, uld? kbeome thelarest+ ton in the contwr and an impor+ant market for fish and livestock products. The government is well aware of the annnrtiini+.i +.hnt. M4frnrm ml un onf Pl A hn a1-rPqr1v tqkPn qtpn. to attract other new activities. When 1-1ferms starts operations, the tial surpluses. Mauritania would be able to contribute to financing .j %jM=J~±JV~ iiL~ U j9 J.L6.L1L CULU UI.LUZ U U .,U. I.US JU. ~ U ~ UV dence on foreign aid. 5. The creditworthiness of M4auritania is inseparable from the suc- cess of Tj4pe- T-. I , th rjetsoudfilwi a A-h +p of the proposed loan were still outstanding, the country would be in no il poin fL U L anLJkJ..rLU±LV±1 Wloan Lt U UifUeOuld, iLjJte ls 1 resor cial point of view, a Bank loan to 11iferms would, in the last resort, 1-' - 7 3 _ J_ _ I_ _ 47 _ - _.L . . -'. llov UU±, Vt_1 LJ.±jtcu V._1iXL_j1 U11 U.r2t::± gUa1cL11L(_U U. THE ECO1O1Y OF MAURITANIA INTRODUCTIONT 1. The Islamic Republic of n1auritania is an autonomous republic within the Community established by the October 1958 Constitution of the Fifth Republic of France. Except for defense, foreign affairs, currency, common economic and financial policy which are defined as Community matters, Mauritania has full sovereignty. Legislative power is vested in a one-chamber Assembly elected for a five-year term on the basis of universal suffrage. The Assembly elects the head of the Government. The present Prime Minister, Moktar Ould Daddah, is also the head of the dominant political party which occupies all of the seats in the Assembly. The constitution of Narch 1959 names Islam as the religion for the Mauritanian people but guarantees religious freedom. Arabic is defined as the "national" language, whereas French is the "official" language. 2. Under the Fourth French Republic, Mauritania was both an over- seas territory of France and a member of the Federation of French West Africa. In the Referendum of October 1958 Mauritania chose, as did all of the other members of the Federation with the exception of Guinea, to remain within the Community as a self-governing republic, but the Federation itself broke up. The former members are now bound together only by ties of convenience -- a customs union (again with the excep- tion of Guinea) and, at least for the time being, the CFA franc as their common currency. 3. Mauritania is traditionally a bridge between North and West Africa. The n-eent Government ranins stronglv sare of this role. dependent as it is on the support both of the nomadic Arab-Berber tribes in the JJorth and of the negroes of the qnanl Vll v_ The Prime tinis- ter has succeeded in uniting the two groups in one political party which last May retained all t in the Nationl As.qemblv in elections in which 901p of the electorate took part. While closely dependent on Sene- al nnri SAndnn for nomminintinn snr trrlp. Mnuritni h held loof from the nationalist movements which have led to the creation of the Feertw-v~..n libtwe Senegal and the Sudan _rpublic. 4. Of all the form.er.onre of the Feeaio, _uitania is least endowed with natural resources. Most of the country is desolate, barren anid empty. *in an area twice the size of France Ivet r somewhere from 650,000 to one million people, most of whom are illiterate; only r7l'~ - -k-a, renh..1 op -n,tn e a aa+w, aA n+4m ao +nAair National income may be of the order of only $30 million equivalent a tence farmers or live off their livestock, the farmers settled in the genegad xiscL Uin UUUlt NLUo rith U.'UD1t;U1 LOtIIjJ1±±eU :U .LVZ . gely nomadic existence in the Forth. -2- Physical Background 5. auritania extends over 800 miles North and North-Eastward from ne valLey or the Senegal River into the Sahara. The country is flat except for a central ridge of low rock formation. Settled agriculture is encountered only along the Senegal River which periodically floods the lower parts of the valley. Further North there is a belt of semi- arid steppe, the Sahel, usable only for extensive grazing, and beyond the twentieth parallel the desert is relieved only by waterholes and the rare oasis. 6. The climate in most of the country is hot and very dry. Regular rain is limited to the Southern regions where an annual total of 10-25 inches falls in three to five months. Although rain is very rare fur- ther North, heavy dew at night provides some vital moisture. Tempera- tures well above 1000F are usual all over the country in the summer but there are great variations between seasons and between night and day. Most of the year a hot and desiccating wind blows from the East or North- East. The sea breeze benefits only a narrow strip alone the Atlantic Coast. The People 7. Although actual ponulation is probably higher, official fiures show something over 650,000, divided into two broad groups: the various hegro tribes numbering about 100,000 wh are setd++ many on the Ior- thern bank of the Senegal River, and perhaps 550,000 Ivaures spread over the remaining inmenity of' tlhp t.,r-ri.ny The rs a re divided into different tribal groups of varying Arab and Berber origin, sometimes with a stronp n9mixtur of nego 8- Thenegro peasants in thetSouth live maily in1 smal-l VIILagesi. Ihile some Maures are settled in oases where they grow dates and vege- tables. most of them are noMandic i-n some degree C'- Some, suc as te c.- l raising Reguibat, range six hundred miles each year from the Valley of Draa in t.~l-)P r± ~~m-a+ I,- ~ IT1 - -- 41- 1 .LL. -__ -. -~ _- r C';J. VL- L ii _LI- Wi! UUUle. PRESENT ECONOMIC SITUATION Production 9. The economy of Iauritania is primitive and the average level of inco L0 is amU the loweu i West Africa. Probably v07 or the people live from agriculture, largely on a subsistence basis. There are not mre than abu 2,u000 wage and salary earners, of whom 18,000 belong to the public sector, including military personnel, and they receive half or more of their pay from France. Other income-producing activities are practically non-existent. Livestock 10. During the rainy seasons, the arid plains up to the 20th paral- lel become immense grazing grounds where the greater part of the popu- lation live with and by their herds, drifting Southrards in the dry season in search of food and water, and trading live animals and live- stock products for cereals and other basic necessities. 11. In the nature of things, any estimate of livestock numbers is highly tentative. A 1955 study estimates 750,000 head of cattle, 3,500,000 sheep and Roats, and 370,000 camels, donkeys and horses; but these figures may be on the low side. Perhaps as many as 40,000 cattle and 250,000 sheep. goats and camels are exported each year on the hoof to the Senegal and Sudan Republics. 12. Every year, large numbers of animals die from disease, thirst, or starvation during the dry qpason. Tn rpent vprA- thn nHTiniqtra- tion has endeavored to improve conditions through drilling for water, fightingr animalpet,adtahnseetvbreig Lcko quate transportation from the pastures to the market remains an in- tractable prnom: whenp dlrivetyn over theni loney dsac,thobasts suffer serious loss of weight and many never arrive. -'--' - --L ' A'J.~ .LL"UJ . U _ %.;V U.I.L _.L L U UV. 0 , U UU.L UU VCZ"U: C"IU UJ.lu k'L.LN of the Senegal River. A limited area has been added by irrigation. The only other cereal is maize, of which 6,000 tons were grown in the same year. Peanuts, fruit and vegetables are also grown but vegetables are the only product traded in any quantity. About 10,000 tons of dates are grown yearly in the oases; they are, nowever, of inferior quality. 14. The fishing grounds off the Mauritanian coast are said to be very rich. The Maures themselves have shown little interest but French trawlers and, more frequently, trawlers from the Canary Islands, land part of their catch at Port Etienne, where the fish is dried or salted and between 2,000 and 3,000 tons a year re-exported to other West Afri- can countries. 15. 1huritania had formerly some importance as supplier of gum arabic, particularly to the cosmetic industry, but the quality of its product is uneven and the lead has now been lost. Salt is another traditional pro- duct which has lost most of its former importance for the economy. The traditional transit trade between Nlorth and West Africa and its r,odern counterpart -- the newly established regular air ser,'ice - are also in- significant as sources of cash income. Foreign Trade 16. There are no direct data for imports and exports, as these statis- Sudan. For what must be the most important export, livestock, there are no reords.A wh1-atsoever, .,.- el.-nUMMlls drivn on +,e I-Aool' ac.nrss th, fr_-t_Jne-" of the Sudan Republic and Senegal largely escape administrative control. 17. The export of live animals in 1956 are estimated roughly at 700 million francs Ora a year. Other exports, 01 wrch fish represents more than half, amounted in the same year to about 300 million francs CFA, making a total of the order of 1,000 million Irancs UIA ( R1. millIon equivalent) in that year. What information there is on livestock num- bers and rates of natural increase suggest that current exports of live animals may be double the above estimate. 18. Imports of consumer goods -- largely tea, sugar and cloth -- have been estimated at 1,000 million francs CFA (in 1956), out of a total of 1,750 million (see Table 4 in Annex). Virtually all imports, whatever their origin, come in through Dakar and pass through Senegal. 19. Constitutional change has not led to noteworthy changes in foreign trade. Mauritania remains a member of the franc area and, therefore, con- tinues to pool its foreign exchange with France and. other member coun- tries. The free circulation of goods which existed within the former Federation of French West Africa has been continued through the estab- lishment of a customs union among the participating countries (except for Guinea). Tariffs on products originating outside the franc area are likely to remain substantially unchanged, since members of the Com- munity have agreed not to alter their customs regulations without con- sulting the appropriate community body in advance. 20. More important changes may come from Mauritands association with the European Economic Community. The tariff and quota preferences which French exports at present enjoy in the Mauritanian market will be grad-- ually eliminated; a first step was taken on January 1, 1959 and a second one is scheduled for June 30, 1960. Increased competition from suppliers in other Common Market countries may help keep some import prices lower. Since Mauritania at present exports scarcely anything outside West Africa. any preferences her products might enjoy in France are insignificant. The advantages of protected sales in the Common Market for iron ore and fish might, however, be of some importance in the future. Money and Credit 91o Tmne Mandritdnin ecnoM nedul gu anthe in tc r the ar of monetary and credit institutions. Throughout the country there are only five or six places where even part-time bank services are available. territories of the former Federation of French West Africa which itself ~ t~ ~ ±'.J± a jJVJLJ.,Y ±1UJC± C I vtJill WL, U . i t- _L1 iV C I cLlU a c2 CLC a whole. I ULLc 1£I v. iu_riania s owni ual resources are aL present Lar Irom suni- cient to pay for the administration and infrastructure with which France has endowed it. Apparently, about hail of all budgetary receipts in pre- vious years consisted of a subsidy from other members of the former Fed- eration. The disappearance or this contribution, with the disappearance of the Federation itself, will probably be made good through direct French subsidies as long as Mauritania remains within the Community. 23. In 1959 taxation was expected to cover only 40% of total budgetary expenditures, amounting to 2,150 million francs CFA (:18.6 million equiva- lent). The remainder is being covered by French subsidies and a final contribution from the former federal budget. Taxes on imports and ex- ports account for half of all tax proceeds. Current administrative expenses represent the main part of total expenditures, but there is also a contribution to capital expenditures (chiefly construction) which, in 1958, represented 9% of the total. 24. Public debt is a modest burden on the budget. In 1958, debt ser- vice and old age pensions amounted to 20 million francs CFA ("o80,000 equivalent at the present exchange rate), requiring only 1.3% of the total revenue. This figure takes no account of Mauritania's share, not yet determined, of the debts of the former Federation. If the service payments on the federal debt in 1958 were divided in proportion to the population of the former member countries. Mauritania's share would have been about 85 million francs CFA, that is, four times her own debt pay- ments in the same year, or less than 6% of the budgetary expenditures. The Federation's debt was due entirely to the French Government. Investments 25. Since the second World War. Mauritania has participated in two four-year development plans which covered the former Federation of French West Africa as a whole. A third federal program was due to come into effect in the course of 1958, but was interrupted as a result of the constitutional changes. These nroLrams had only limited success in Mauritania, because of insufficient preparatory studies and the ab- sence of an adeonate ndministrative framework Thp first nroram con- sisted of a number of projects without a basic plan to coordinate them. -6- The second was more cohesive, but individual projects proved in many cases to be unsuccessful: some could not he carried nut because of lnk of trained personnel, others suffered from superficial planning. Some ir- rigation projects. for examnle- were found to be mnisplace in the lioht. of geolo-ical and topographical conditions. Despite these weaknesses, the develonment plans have, no doubt, been of some ls+tng value Thisc is particularly so in the pastoral sector, where vaccination, well drill- ing and theR -nnq+.ruio+. n of' dayrmVnr _ hav i+roe codtin ^- -r- +' ing. Moreover, the investments made outside the framework of the four- year plnsn!, rnotablyT cnsruction- ofP admnitraiv buldng 1-4 ical research, have made some permanent contribution. 26. It is estimated that total civil investment in Mauritania since exchange rates), about equal to 70 of ordinary budget expenditures over the same period . OfI th 11e toal Frnc fiane d ' UUI- iecl.y orI indirtt,ly as much as 5.5 billion francs CFA, the greater part through a special government velimot agency for the former overseas territories, and the remainder via contributions to the budgets of Mauritania and the former FUeration. How much France will be ready to contribute in the future is not yet known, but there is a reasonable presumption that, so long as rauritania continues to maintain the present good relations with Trance, aid in one form or another will be kept on the level of recent years (i.e., about 1 billion francs CFA or '4 million a year). 27. A new source of financing is available through the development fund of the European Economic Community (FEDOM), from which the French Community countries are assured a contribution of '511 million equiva- lent during a five-year period. France herself is, of course, a major contributor to this Fund, from which Mauritania has so far been allocated 500 million francs CFA (about '2 million), and has applied for a further 3,700 million U,14.8 million). (See also paragraph 42 below). FUTURE OUTLOOK Unused Resources 28. There is doubtless room for expansion of output even in the current lines of production. In agriculture there are possibilities of more in- tensive cultivation as well as of some extension of land under irrigation. There are rich fishing grounds just offshore but lack of suitable ports has hampered their exploitation. 29. The main economic potential of the country lies in its mineral resources. It had been known for many years that the hills near Fort Gouraud and Akjoujt contained iron and copper, respectively, but it is only in recent years that serious studies have been undertaken. - 7 - 30 Dimrin the last thrPP venr the Sncipte des Mines de Cuivre de Mauritanie ("Micuma"), has operated a pilot plant employing some 150 npnnlo tn rminP they Pnr.rni-Pl fPqqihilitv (nf Ymnloiting tIhe conner ore deposits at Akjoujt. The cost position does not appear to be par- even if there is no early prospect of production, even at less than the Or)000 tons a year originll eniae,tepojc a1ie h Maures an opportunity to show their adaptability to the regular work measure of underemployment exists in stock raising and in agriculture. Awill be seen later, the question of' fi IL-- .L_nding skil-1led 'labor Is,aowever, a problem. Ine Nilerma Project 31. The project of the Societe Anonyme des Mines de Per I e maurianiL (Hiferma) to exploit the iron ore at Fort Gouraud is large by most criteria and immense in relation to the present economy of JNaurianamI. Total investments are estimated at 47 billion francs CFA, or '>190 mil- lion. This would correspond to almost six times the total investment in H1auritania in the last fifteen years. The proposed Bank loan of about 'bb million would be equivalent to about 100 per inhabitant of the officially estimated population and is itself probably equivalent to more than two times the present national income of Mauritania. 32. The project provides for an eventual capacity of b million tons of iron ore a year, i.e., about one-third of the present output in Sweden. A railway of 425 miles will connect Fort Gouraud with Port Etienne where port facilities will be substantially enlarged. Important works will be undertaken to assure the supply of water in both towns. 33. A new town of 3,500 people will be created in Fort Gouraud, and the population of Port Etienne, now 1,000, may eventually go up to 10,000, to become by far the largest agglomeration in the country. The company itself expects that 3,500-4,500 persons would be supported from Miferma's operations. The project includes construction of houses for Itiferma's skilled and semi-skilled personnel and their families, who will constitute almost the whole of the population of Fort Gouraud and close to half of the population at Port Etienne. At Fort Gouraud where the temperature goes up to 11L0Pduring the summer, air-conditioning will be installed in the houses. Water, sewerage, electricity, a telephone system and roads will be provided. The project includes also the building of hos- pitals, welfare centers, public recreation centers, schools and kinder- gartens. For some of the collective facilities which are not to be re- served for 'Iiferma personnel, the Government is expected to take part in the financing, but by far the larger cost will be met by the company. 34. In its first full year of operations, 1-aferma expects sales receipts of about $45 million from exports of iron ore. At full capacity exports of iron ore will reach an estimated $60 million a year. Miferma would necessarily spend much of its receipts on imported goods and ser- vices required for the operation of the company, but the amounts to be paid out locally would still be very substantial. At full output, labor costs would be well above $7 million, of which certainly some would be remitted to France. Government direct revenues from the project are es- timated at about $4.5 million in the first full year of operation, grad- ually increasing to about $15 million in later years. It does not seem unreasonable to expect that when the project is in full operation, about one-third of I-iferma's export earnings, or some $20 million, would be snent in Mauritania in the first instance. That would be about equal to two-thirds of the present estimated national income. There are not sufficient data to estimate the total balance of payments effect. but the meager supplies from local production suggest that a high propor- tion of the sums naid out. by Mift.rms in t_xys and wages would be spent in due course on imported goods and services. 35. Some 1,400 jobs are expected to be available for local recruit- ment when pro nction is runnin a+ fuil canncity r.nPrnment noliv is to reserve the permanent jobs created for Mauritanians as far as appro-- (as in construction) by importing labor. In order to avoid unemployment "I'nb th rojectn,an s comp-rleted,r. cnrocto-n+-nrs w-J-1 'k- moAIn o.n~hof repatriating the foreign workers they take on. To ensure that skilled ~ .L U~ 3~. .LJ...L U ~ _l L_LdUJL .L UJI U11U UJJU1±CLU. J1i0l' 1J4 L'-4 -11- training center is to be constructed by the Government at Fort Etienne, 36. Known reserves of high grade ore are sufficient for only 20 to 25 years of operation at the output now planned. Continued operaion beyond that period would depend on the discovery by further prospec- tion of sizable amounts of additional high grade ore, or on the dev- elopment of an economic beneficiation process to permit exploitation of the large quantities of low grade ore Known to be available. Government Policy Towards Investments 37. The facilities to be built by Miferma and the employment to be provided offer a unique opportunity for further development. The Gov- ernment is actively planning to take advantage of this opportunity, and is adopting laws favoring foreign investment and promoting specific projects. Miferma itself has been accorded specific tax concessions and guarantees of fair treatment for a period of 30 years. Other com- panies could benefit from the same general rules on which these agree- ments are based. The scope of the agreements and the spirit of coopera- tion in which they were negotiated should go far to establish a favorabLe investment climate. Investment Plans Depending upon Iferma 38. The first direct initiative of the Government is a proposal to set up a semi-public investment company for the development of Port Etienne. M1iferma, together with other private companies, and the French Government's Caisse Centrale de Cooperation Economique, have already shown interest in such a body, which would have as a main task to fin- ance further investments in infrastructure and to participate in pro- ductive investments in Port Etienne. 39. The first large-scale project under study for the proposed in- vestment company is a fish freezing plant. A French concern which al- ready has the predominant share of the frozen fish market in France has proposed to build the plant together with a fish-meal animal food by- product plant. The project is based on the availability of about 40.000 tons of fish a year compared to the 10,000 tons now landed at Port Etienrie, and thus involves creatinu q fishing fleet Ps well 1,0 Altogethepr, n tet ) 'nhe finanned byr tlip -n-rn-Pt new invest- ment company are expected somewhat optimistically to total 900 million construction period of Miferma. This amount includes the freezing plant and the fahmla fo+nvy T aln 4nldes /4f6r+aninfc nnribution to works of public interest to be undertaken by liferma, such as part of In designing these installations, M-iferma has agreed to take into account the prospective needs.- of +Ve ton o nPlort Etinne.a 'i1Ve iC2o~ +n finance and carry out the works in order to fit them into its over-all water installations, the Government may ask Miferma to transfer them to Wle investmienit company i wnzcn case vaL_emua w±L ue uuUIpe11.neou fu tI.Le fair value of the installations at the end of the construction period wrn payment to be made over 15 years at 470 interest. 41. In addition to investments by M\iferma, oil prospecting has been started by two companies -- one purely French, (SAP), and one with French and foreign capital, (TETROPA) -- which have signed conventions to spend 1,500 million francs CFA each over the next five years. 42. The Government is to equip the new development area with adequate public facilities, such as health and educational services. Finance con- stitutes, of course, a serious problem and the Government is relying heavily on foreign aid. Applications for aid have been made both to France and the European Economic Community, and the Government expects to receive contributions over the coming five years at an annual rate of 700 mil- lion francs CFA from the former and 800 million from the latter. The first commitments have reportedly been made. In both cases, allocations would cover productive investments in agriculture and stockraising as well as in transport and social equipment. Of Mauritania's budget resources, - 10 - 520 million francs CFA over five years are earmarked for infrastruc- ture, equally divided between Fort Gouraud and Port Etienne. Tn ad- dition, there will be continued outlays ox, the construction of a new capital at Nouakchott at an estimated cost of 2,000 million francs CFA ($8 million equivalent) over the first five years, of which 250 million will come from the budget; France is to contribute 900 mil- lion directly and the remaining 850 million will have to be borrowed. The Effect of liferma on Pubiic Finance 43. The 1iferma project would expand Government income very con- siderably within a few vears. The basic idea of the long-term tax agreement is that the company and the Government should share equally the profits before taxes. Tmnort taxec and certain nthr i-nirP.t taxes closely related to the implementation of the project are during construction neriod eynnntnd tn viplr l mwrimum of 5/.n miilion francs CFA annually at its peak, that is 15% of estimated total public revenue. Tn 1961. thp first yeai- noF nopran, export and profit taxs would together yield 1,000 million francs CFA and, at full capacity in 1967- ITOrJ'11 +,n+_-q rnm-a~ .Inn-n D lr)() Tni-Ilinin TI-, ; , --__ _ _ -) - - - -P-s-for~ec-stS assure that total output is sold at a conservative average price of 09.90 per ton f-no'h- Po-rt -ten * lrevr,a 1-~-'- fPor -e-A~"~ sp tion which the company is entitled to make has been deducted from its estimated+vel na4 4I. J nw Ucn U ecou . o 04 e e ag U IS a proviiSon UniatU at least 35% of the revenue from the export tax is to be channelled to aspe ual development fund wIen is to be kept apart from the budget in order to assure that it is devoted to investment. The Prime Minis- t;I io Ulmpowered to draw on the fund on the advice of a special devel- opment body and without prior approval by the Assembly. 45. The additional public investments required as a consequence of the private investments have already been referred to. Moreover, cur- rent expenses will grow due partly to economic and social development and partly to the higher administrative costs arising out of Mauritania's new political status as an autonomous republic. 46. The Government expects that the growth in revenue will largely outstrip the prospective rise in public expenditure, thus bringing about a rapid amelioration in public finances. According to estimates submit- ted to the Bank and summarized in the table below, the Government fore- sees annual deficits of 1 billion francs CFA or more until 1963, when the new receipts from Miferma's operations are expected to wipe out the deficit. As from 1964, the present French assistance in balancing the budget will not be needed. According to the same forecasts there will be a continued improvement which, by 1967, would result in a surplus on current account of an amount similar to the present deficit. - 11 - Expected Evolution in the Public Finances 1959 1963 j 1967 (million francs CFA) Tax payments;/ by Miferma 0 540 1,440 2,275 Other fiscal receipts 890 1,785 2,035 2,82 Total fiscal revenue 890 2,325 3,475 5,110 Total current expenditure2/ 2.159 3,330 3,290 3,900 Balance: -1.269 -1.005 +185 +1.210 J.*~4A W L..d± U±. bV.LI.. V &SJL.* 4T' iir +Inn o 1 1 rn v +I-, - _ n1 AZr.T1 ^-rnvn+ f,IVIA rn?1 tioned in paragraph 44. 2/ Includes also a relatively small amount for investment. Source: See tables 6 and 7 in Annex II. 4( Ihe~ estimates o re~venueIz ares L11 _"J W-L4 U11 L L~± WU U.L come forecasts of the company itself. On the expenditure side, the es- timates appear to take account of all the relevant items altnougl pru:U±' estimates of current expenses may very well be increased when the rapid increase in revenue becomes apparent, at least after balance has been reached. Impact of Miferma on the Economy 48. In addition to its direct tax contribution to the public finances, Piferma will bring about fundamental changes in the economic structure of Mauritania, primarily through the payment of wages andsalaries and, to some extent, the local purchases of supplies. This is, perhaps, in contrast to the impact on a similar economy of an investment in petroleum, where payments for wages and supplies would probably represent a smaller, and tax and royalties a larger proportion of total receipts than in the case of Jiferma. Because of the size of the project, the country will pass from a predominantly agricultural stage to an industrial one, at least as measured in value of commercial production. In terms of employ- ment, however, agriculture and stockraising will remain the dominant sec- tors. 49. Industrial development will in no way be detrimental to agricul- ture and stockraising. The demand for labor will be relatively small whereas the traditional economic branches will receive a major stimulus from the new and comparatively high income consumer centers at Port Etienne and Fort aouraud to which they will have easy access. 50. The installation of Miferma will create a new East-West economic axis through Port Etienne and Fort Gouraud which will tend to araw traf- fic away from the traditional Yorth-South route through Dakar. As the economic center of the new industrial area, Port Etienne should consti- tute a pole of attraction. It is expected to become the largest town in the country, and its functions as railway terminal and single commer- cial port should attract and create business. The new railway would be essentially a mineral line, necessarily under the full operational con- trol of Hiferma. The company would bear no part of the cost of any other traffic that might be carried in due course in agreement with the Govern- ment of cauritania. At the present time, there would in any case be little likelihood of any non-mineral traffic other than supplies for the population of Fort Gouraud and Port Etienne. Nevertheless, the possibility of easier transport between the region of Atar and Port Etienne may in the future act as a stimulus to livestock production and marketing. Conclusions 51. In the absence of Miferma and in the light of present knowledge of its resources. Mauritania could look forward at best to slow economic: development. Some scope for expansion is offered by livestock produc- tion and perhaps also in agriculture. but nature sets definite limits. Moreover, any appreciable progress depends on continued grants from abroad. 52. The Mifrna proinct is thus the key to Pnnnnmied vP-1.nernt bth because it will introduce the industrial age to the country and provide the Onnortunity for Mnritania n heo)me alf-supporting O n five- year period, the present hopeless budget deficit should be replaced by urninese available for in~voe+ment Even if the Go-vernent should nrove successful in its efforts to attract further enterprises in the wake of to rem.in the backbone of the economy in the foreseeable future. 53. The project is so large in relation to the rest of the economy ttJ;+ ri0f.at nlbili+ir to ... I,,ane a- loa 4t4fer- is-i-epaa1l from the success of the project. In the event of a failure, it is barely 0U140J O. I.,±IO.U 1 L U;LIL _L U _LJ. W'AULU Wu~ CL_L UF~ i LA UII1. OVI1 V4UV 11-LJ-1 out outs.ie help. In considering a loan to iferma, the Bank would, there- guaranteIsU oMUUra Ushe hUUolUders ad intbb the lJast'L esr t th guar- garanteeo of Miferma's shareholders and, in the last resor", to the guar- - anuee ofs .Crance. LIST OF TABLES ANNEX I National Income Estimates - Page 1 and 2 ANNFX II - Tables 1 to 7 1. Population 2. Production by Sectors 1956 3. Agricultural Production 1956 4. Estimated Imports into Mauritania in 1956 by Source 5. Estimated Exports from Mauritania 1956 6. Budgetary Revenue 1956-1959 7. Forecasts of Public Finance Developments ANINEX I National Tncome Estimates 1. Tn a study (see source of table below) recently published by the High Commissariat General in Dakar, an attempt has been made to establish national accounts for members of the former Federation of French West Africa. Population and Production, 1956 Production at Current Market Prices (Commercial Country P2pulation margins included) (thousancb) Total Per Head (francs CFA) (billions) (thousands) Mauritania 616 111 23 Senegal 2,230 164.5 74 Tvorv ront 2 /A IFIP 1 _ 5 6 iiger 1,615 48.9 30 Gluinea 2,507 A676 -A27 Sudan 3,643 83.3 23 Upper Volta 326 44_1 13 A.0.F. 1 5 602.6 32 Source: Comptes Economiques de l'Afrique Occidentale Francaise 1956. Rapport No. !I!, p. 104, Earch 1959. 2. The data hich relate to the year 1956 include interesting new statistics on the eight separate countries. Owing to incomplete prim- ary statistics, the data nave, to a large extent, been supplemented by rough estimates. The approximate nature of the figures is emphasized in the publication. 3. The values of total production, in absolute terms, appear to be particularly doubtful. For Mauritania, total production, which con- ceptually amounts to the same as gross national product, is valued at 14.1 billion francs CFA, at current market prices. Divided by the of- ficially estimated population of 616,000, this gives an average income of 23,000 Fr. CFA, which on the basis of the official exchange rate at that time (175 francs CFA per $), would be equal to over $130. Ob- viously, this figure gives a very exaggerated impression of the income level, which would be of an order corresponding to half of the income in Spain and Portugal. - 2 - 4. A very rough check of the data in the table may be made by as- suming average income in the Ivory Coast and Ghana to be equal, an assumption which seems to be fairly reasonable in view of the simil- arity of resources and stage of development. On the basis of available estimates of per capite. income presented for a long series of countries, including Ghana, and applying the proportion between income in the Ivory Coast and Mauritania as set out in the table above, income per head in Mauritania comes out at about one-tenth of the level in Spain and Portu- gal, which appears much more plausible. 5. In a recent submission by the Government of Mauritania, average income is stated to have developed from 12,000 francs CFA in 1950 to somewhere between 13,000 and 14,000 francs CFA in 1959. No information is given on the calculations which led to these results. However, they are consiitent with the impression that income per head in Mauritania is about one-tenth of that in Spain and Portugal. 6. Although the table above exaggerates incomesin absolute terms, it should aivn rFq.onab1P annroximations of rplntive innomes between the countries listed in it since the estimates have been made in the same currencyr byi thei samen pennopl a-ndl iT+h 11P s!PMPmh Neve.rthp.le.s country to country comparisons are distorted because local prices which dif'fe-r fvrom r^v ^i-A to -+In' I- 'kn ii n& W~~~~'~+.a~er admissible to conclude that Mauritania's income per head is much the same exception of Senegal and the Ivory Coast, which enjoy a distinctly higher an ume. TA"rLT I a. Total Population in 1956: 616.000 of whom: Ion-fricans (French and Canarians) 1,600 4aures 500,000 Negroes 115,000 Note: The administration estimates the 1959 population at 650,000, but states that it may, in fact, run up to one million. . onulation in main Centers Africans Non-Africans Kaedi 8,500 25 Tidjikdja 6,000 6 Atar 4,000 150 Rosso 21200 100 Ahjoujt 2,000 150 "Kiffa 1,300 28 Port Etienne 800 410 Selibaby 1,100 5 Aleg 1.000 10 Sources: AOF 1957 and Supplement to l'Economie, No. 630 TABLE 2 Production by Sectors 1956 Mauritania A.0,F, Nvon-Comn- Non-Com- Cow.mer- % of mercial- % of Commer- % of mcrcial- % of r oAuctin Oactor c iized Total ized Total cialized Total ized Total Million fr. CFA Ingricul Lue, I ive- -1ock 2,278 30 1,630 40 66,682 22 90,480 61 Food products 2,190 29 1,130 28 47,500 15 26,870 18 Energy 30 - 500 12 4,220 1 15,000 10 Raw materials and semi-finished products 100 1 Pf 2 9,993 3 1,790 1 Engineering and elec- trical products 40 1 - - 6,380 2 - - Textiles and hides 325 4 300 8 12,585 4 3,400 2 Miscellaneous indus- trial products 200 3 80 2 5,820 2 2.240 1 Uunstruction, public works 680 9 300 8 33,960 11 10,000 7 Services 400 5 - - 39,000 13 - Salaries and wages 1,400 18 - - 86,000 27 - Total: 7.643 100 4,020 100 314A680 100 149,80 10 Source: Comptes Economiques de 1A.O.F, 1956, Rapport No. III, pp. 99-104 TABLE 3 Agricultural Production 1956 A.- Crops Mauritania A.0.F. Commercial Non-commercial Commercial Non-commercial (tons) Millet and sorghum 2,000 78.000 156,650 2,552,000 Maize 1,000 5,000 36,075 375,150 Potatoes 400 1.600 24.150 25-..650 Beans 1,000 4,000 8,050 92,050 Peanuts (in shell) - 1-Lo 89272A5 187.555 Vegetables 9,000 1,000 110,000 460,000 Fruits 2-no 8-000 10mo0 100.000 P_ TA woo+^t-V A +-C+4w' W+4ma+n Oeep an goats ,Yu,Juvh,au Cattle 750 890 1,200 Lamels I 4U Donkeys ) 370* 150 Horses j 10 Poultry 420 Probably dividea between 4uu,UUU camels, Lou,uu aonkeys ana 10,000 horses (see AOF 1957, p. 228). Sources: For a - Comptes Economiques de 1AUF -19 b. Rapport No. Ill pp. 33-34. Reference year is 1955. For b - L'Economie, Supplement to No. 630. The reference year is not given, but is likely to be 1955 or 1956. For c Submission by the Government of Mauritania to the Bank. September 1959. Reference year of estimates is not indicated, but is probably 1959. TARTR . Estimated Imports into Mauritania in 1956 by Source French All Africa-/ Sourcei Total =f -- 1 -1 .2 9, -r' Agriculture ana livestocK proaucts 137 ' L40 Food products 282 304 580 Fuel -134 134 Raw materials and semi-finished goods 56 45 101 Engineering and electrical products - 399 399 Textiles and hides 235 73 308 Miscellaneous industrial products - 72 72 Total: 710 1,036 1 746 Of which from: Senegal 1,315 Sudpn 61 Smuggled imports 370 1/ Includes goods from other origins smuggled through I. r h.West Arica. IN o 11 IaJ.ulLJ. UUiII) imot W.o not .L1a.LY with U fiur i.41 LIe surce, asilea imports for Mauritania have apparently been treated erroneously. Nor does tune figure given here correspond to the one appearing in the table of total resources, apparently because of a revised estimate of food imports. Source: Comptes Economiques de 1'AOF 1956 Rapport No. vI. TABLE 5 Estimated Exports from Mauritania 1956 Total Exports chiant.it.v Millinn FrR- CFA Cnattl 1pi in-nn hpntj Ain OthePr livep AnimasI 915,000n hezA 1 '171 eat products 52 tons Other Total / 1Q of which to: Senegal) for consumption 847 ) in transit 244 Sudan 1O400 Note: Deliveries of live animals in this table appear to be on the high side. Compare the following rates of annual natural in- crease without allowing for domestic consumption: cattle 75.000, sheep and goats 1,050,000, camels, donkeys and horses 37,000. Source: Comptes Economiques de 1VAOF 1956, Rapport No. VI. TAT, 6 Budgetary Revenue_1956 - 1952 1_95 .15 = _°68 I959 (million frs. CFA) A. Direct taxes and other local revenue 240 255 419 438 Import and export taxesi - - - 452 Transfer from federal budgetdJ 931 956 1,097 326 Direet subsidy from France -- 10 - -_ 943 Total receipts 1.171 1j.91 1,516 2.159 B. Administration expenses borne directlv by Frannp ýnn nn 69n Ac1 1/ Up to 1958, all taxes on imports and exports accrued to the budget of the Federation of French West Africa. Transfers from the federal bugti those' yer are ~ , therefore,/. not.. puessde fromJ .O~'JC oL ert members of the Federation. Proceeds of the taxes on importsand ex- ports arising from economic aciv- in Maurtania are not knowni The figure for 1959 represents 5% of taxes on imports and exports throug D-a acodn to tem o -4~4. .- f agemn wit G 4 41 overnment ofp 14 ii4(j L .j oUJ. Clr'.cr_vjucliu IV.LL-Å 'JU Mali. Source: Government of Mauritania TABLE 7 Fcrecasts oIf_ubli. Finar.e Developments Assuming Miferma Construction to be ste.rted uoon in 1960.9eratiors begiring in 1964 and Full Sca~le_0ierations in 1967 Construction Period Quera-ation Prid 1960 11 962 1963 1964 2.965 1966 1967 (million frs,CFA) i. REVENUE Exiating Fiscal Sourcos Direct taxes 460 500 550 650 700 800 900 1,000 Import duties 600 650 800 850 900 900 1,000 1,000 1Mif ermai/ Import duties and certain other indirect taxes 161 430 530 540 440 400 230 145 Export ard profit taxes - - - 1,000 1,060 l,705 2,130 New activities in Port Etienne 22 50 131 225 335 450 510 555 icuma - 5 30 60 100 180 200 Total Revenue: 123 1,635 2,041 23_2 375 3790 4LL5 5 j-L 13. EXPENDITIE Expenditure caused by new activities Investmert 80 200 200 220 110 Admi±istration 180 450 580 72C 710 Traditional ibudget items 2 20_0 2,300 22 2390 2470 Total public expenditure: 2,/75 220 100 32 330 2290 3500 3,700) 39 C. OV1-R-ALL BAT ANCE: -1232 -1 315 -1059 -11005 + 185 + 290 + 745 +]1. 210 1/ These figures differ somewhat from the tax data given in the Technical Report i:o. 225 which are based on later submiissions Ly the comneny. The over-all picture is not substantiallv nffentei. Source: Governmert of i aur5tana. E~ A u m Bu A E4P6iEE4 *A #4 mm mmmE mEm mmRm. ISLAMIU KL'ULIC UF MAUKITAIkoA 0 '00 200 300 Knm 0 i00 200, 300 M DURATION OF DRY SEASON IN MONTHS PER YEAR Nationa Road - Date Palms M , - =R Local Roods -- -- -7(NvM y Airfields Peonuts 8 (Oct -May) Proposed Ro Iway ++- -# Fishing 9 (oc t -June) Copper10(c-Juy Meat Pock'ng Iron il (Sept-July 2 S A G UI A E L H A M R ASAHARA vi- Csneros -- R 1 O D E O R O PORT ETIEN \:N E c s ocuetti 20° NOUAKCHOTT F/T.E LOl, DAKRé (F (FEDERATION OF MALI) FEBRUARY 1960 IBRD-641RI NORTHWEST AFRICA A LG IERS Internationo/ boundories - - Administrative boundory RABAT £ 00 IF ~sAGI NS A H A R A SA G , C illa io DE ORO - - - - - - - - - - - - - - Port Go Etienne NOUAKCHOT T GAMB A<k...G(FEDERATION OF MALI) C \ C3 B -SS " U B A M A K O L O U BISSAU ~.eJ ~ OUAGADOGOU<N( CONAKRY FREETOWN LEONE V O R Y S A i GHA NA N I G E R I A MONROVIA ABIJA AC CRA 4700 1 2 0 3n- 0 4- 5-- M-e- o 100 200 30o 500 iOHOmeters FEBRUARY 1960 IBRD-647RI