Report No. 30039-MR Report No. 30039-MR Islamic Republic of Mauritania Transport Sector Overview Public Disclosure Authorized Authorized Disclosure Disclosure Public Public

September 29, 2004

Africa Transport Sector (AFTTR)

Islamic Republic of Mauritania Public Disclosure Authorized Authorized Disclosure Disclosure Public Public

Transport Sector Ov Public Disclosure Authorized Authorized Disclosure Disclosure Public Public

erview

Document of the World Bank Public Disclosure Authorized Authorized Disclosure Disclosure Public Public

Acknowledgements

This report was prepared by a team led by Alexandre K. Dossou, Senior Highway Engineer - AFTTR, which comprised Pierre Pozzo di Borgo, Senior Transport Specialist - AFTTR, Felly Kaboyo, Senior Program Assistant - AFTTR, Meriem Tamarzizt, Intern - MinesPonts, Brahim Ould Abdelwedoud, Municipal Engineer, AFTU2 and Aoufa Ezzedine, Consultant. It was prepared in close collaboration with the Africa Transport Management and the Mauritania World Bank’s Country Office. The report benefited greatly from extensive comments provided by Jean Charles Crochet, Senior Transport Economist - MNSIF, Christian Diou, Senior Municipal Engineer - AFTU2, Stephen Brushett, Senior Transport Specialist - AFTTR, Olivier Le Ber, Senior Transport Specialist - ECSIE (peer reviewers); C. Sanjivi Rajasingham, Sector Manager - AFTTR, Alain Labeau, Lead Specialist - AFTTR, Yves Duvivier Country Manager - AFMMR.

Contents

... Executive Summary ...... 111 1. Background ...... 1 2 . Objectives of the ESW ...... 3 3 .Transport Sector Role and Challenges ...... 3 4 . Transport Sector Issues ...... 3 Road Transport ...... 3 General Characteristics of the Road Network ...... 3 Financing for Road Construction and Maintenance ...... 6 Road Network Management and Regulation ...... 9 Trucking Industry ...... 10 Rail Transport ...... 11 Air Transport ...... 12 Airport Infrastructure and Operations ...... 12 Air Transport Operators ...... 15 Air Transport Regulation ...... 17 Maritime Transport ...... 18 Port Infrastructures and Operations ...... 18 Port Operators ...... 21 Maritime Sector Regulation ...... 23 River Transport ...... 23 5 . Transport Fiscal System and Infrastructure Cost Recovery ...... 23 6 . Cross-cutting Issues ...... 25 Transport and Poverty ...... 25 Transport and Safety ...... 25 Trade and Transport ...... 26 Regional Integration and Transport Facilitation ...... 26 Institutional Capacity ...... 27 Public-Private Partnerships ...... 27 Environmental and Social Dimensions of Transport ...... 28 7 . Recommendations ...... 28 Road Transport ...... 28 Road infrastructures ...... 28 Transport Services ...... 29 Air Transport ...... 30 Maritime Transport ...... 31 Institutional Capacity ...... 32

i Annexes: Annex 1. Status of NTP Investment Projects at Midterm...... 33 Annex 2 . Road Infrastructure Investment Program...... 35

11 Executive Summary

1. The Poverty Reduction Strategy Paper (PRSP) for Mauritania was adopted by the Government on December 13, 2000. The main PRSP objectives for general transport policy are: (i)lower costs and ensure safe transport for passengers and goods; (ii)foster consistent national planning(?) through multimodal links between the country’s major development centers; (iii) promote national integration and linkages with the global economy; and (iv) involve more private capital in financing the sector. The PRSP also includes specific objectives for transport modes, which are taken into account in this Economic and Sector Work (ESW). ii. The World Bank’s Country Assistance Strategy (CAS) for fiscal 2003-2005 was prepared in 2001 on the basis of: (i)the PRSP framework; (ii)a focus on capacity building; (iii)a programmatic approach; and (iv) fiduciary issues. PRSCs are expected gradually to make up a larger part of the lending program, although the World Bank will continue with select investment projects that target poverty reduction, institutional strengthening, and core diagnostic ESW. iii. The last World Bank funded transport project in Mauritania was completed in 1996. Since then, support to the transport sector has been provided by other donors, especially the European Union (EU). Because the World Bank is now considering resuming its support to the sector, this ESW has been prepared with a view to identify the steps required to strengthen the contribution of the transport sector to economic growth and to achieving the transport-related objectives ofthe PRSP. iv. More specifically, the purpose of this ESW is to : (i)provide a framework to help the Government analyze transport sector issues and develop a transport sector strategy for the 2004- 2009 period ; and (ii)identify issues and challenges that can be addressed through donor funded operations. This ESW focuses on road, air, and maritime transport and analyzes strategic and cross-cutting issues important to the sector as a whole. v. This ESW will be supplemented by two more comprehensive studies planned to begin shortly-the EU-funded Road Management and Investment Program Study; and the World Bank-financed Transport Sector Strategy Study. The latter will focus on the non-road transport modes and take into consideration the findings ofthe EU-funded study.

Road Sector

Findings vi. The present road classification is based on Law No 68-244 dated July 30, 1968, regarding the creation of national road network, that determined that Mauritania’s road network is 10,300 km long, with about 2,400 km of paved roads. Its overall condition is not known because of a lack of data. The condition of paved roads is known to be satisfactory, however, with about 70 percent in good to fair condition, compared with an average of 65 percent for paved roads in the

... 111 rest of West Africa. Earth roads are generally in bad condition, although precise data are not available to confirm this observation. vii. Since decentralizationcame into effect, responsibility for maintainingthe road network is divided between the central government and local communities. In fact, only the central government has resources to maintain the road network, leaving large sections ofthe road without proper maintenance. Accordingly, the current division ofroles in the sector needs to be reviewed along with the current road classification. viii. More than 90 percent of passengers and about 80 percent of goods in Mauritania are transported by road. Despite the precarious state of the network, traffic levels are growing rapidly. Passenger traffic is projected to increase by 6 percent per year and freight traffic by 8 percent per year in the foreseeable future. ix. The implementation of the first phase of the National Transport Plan (NTP) illustrates the inherent imbalances in spending priorities in the road sector. Not only were planned NTP road rehabilitation programs not implemented fully (only 70 percent of budgeted funding was spent), but spending for road construction under the NTP was more than three times greater than the spending for reconstruction and maintenance (US $100 million compared to US $27 million). x. Despite a sharp increase in financial resources for routine and periodic road maintenance since 2002 (from UM 800 million [US$2.8 million] in 2001 to UM 2,200 million [US$7.6 million] in 2002), spending continues to fall short of the estimated US$14 million needed yearly for routine and periodic road maintenance. This financing gap jeopardizes the long-term sustainability of Government investments in new road construction. Furthermore, with only US$2.3 million generated by user taxes each year (not including fuel tax), the road sector covers today only about 16 percent of its estimated maintenance financing needs. xi. The trucking industry is made up almost entirely of used vehicles (98 percent), which in spite of their average age (i-e., 12 years) are in relatively good mechanical condition thanks to intense maintenance work. The industry is dominated by the National Carriers Association (FNT), which regroups the majority of trucking companies. Other associations exist but are not in a position to challenge the FNT’s dominance. Because of FNT’s interference in transport tariff fixing, the industry is plagued by low profitability. xii. Following the liberalization of the transport sector in June 1998, a National Transport Bureau (BNT) was created by the Ministry of Equipment and Transport (MET) to manage truck depots. The BNT’s incorporating papers.requirethat it designates one of its members (which are transport carrier associations) to manage these depots, and it has given that role exclusively to the FNT. Furthermore, the BNT’s incorporating document instituted an exit tax to be levied on truck depot users to finance operations of these depots. Depot users also are subjected to a system of service rotation, freight sharing, and imposed tariffs that stifles competitiveness in the sector and burdens them with extra operational costs estimated at US$10 million a year. xiii. The main mission of the Road Management Bureau (BGR) created in 1995 is to collect, analyze, and manage road data. This mission is essential for planning and programming of the Public Works Department’s (DTP) interventions. A lack of operational resources meant,

iv however, that the BGR was unable to carry out its mission until 2003, when financial assistance from the EU enabled it to resume data collection.

xiv. The Road Maintenance Agency (ENER) was created in 1994 as a public company operating as a commercial entity. It is responsible for the execution ofmaintenance works under a rolling three-year contract with the DTP. However, because of insufficient funding, it has been unable to ensure the maintenance ofmore than 3,000 km of the road network (i.e., only the paved network and some earth roads). Likewise, although it is supposed to outsource 25 percent of its road maintenance workload, it has been unable to do so for various reasons, including the lack of technical and financial capacity ofsmall and medium enterprises (SME) in the local public works sector, a shortage of financing for maintenance work, and a perceived absence of incentives to outsource work.

Recommendations

xv. Correct the imbalance between investment and maintenance. The Government should review how funding during the second phase of the NTP could be better shared between new construction and rehabilitation than in the first phase ofthe NTP. In addition, and more important, the Government should seek to provide the DTP and the ENER with sufficient resources to cover maintenance needs to stop the network from deteriorating further.

xvi. Improve road maintenance financing mechanism. The Government should look into designing a mechanism to increase resources, with contributions from the National Mining Industries Association (SNIM), to cover routine maintenance needs of the priority network. It should also quickly launch the EU-funded study on a second generation road find to identify sustainable ways to complement SNIM resources in funding the road maintenance program;

xvii. Pursue road investment program. Despite investments already implemented, the density of the Mauritania road network warrants the continuation of an investment program designed to improve mobility of goods and persons. This program should ensure that donors’ road investment programs complement each other. The program also should enhance the regional dimension of the country’s transport network by improving north-south as well as east-west corridor connections.

xviii. Strengthen the road management system. The proposed clarification ofresponsibilities among the agencies and entities managing the road sector will put pressure on the limited capacity of these organizations to take on new roles and responsibilities. More specifically, improvements in BGR operations will affect DTP’s ability to manage the road network. Likewise, the division of planning and maintenance oversight roles between the DTP and urban and rural communities will require a transfer of know-how from the central to the local governments. Finally, ENER’s role will need to be revisited to ensure growth of SMEs’ participation in road maintenance works.

xix. Update regulations. To ensure effective liberalization of transport services, regulations (e.g., decree of liberalization, regulation of BNT) need to be reviewed and updated when necessary. The system of truck depot management also should be reviewed, and a regulatory agency framework designed for the sector.

V xx. Review fiscal policy for the sector. To formalize the use of the revenues generated by the BNT/FNT truck depot management system, a fiscal policy review should be conducted. The review can provide an opportunity to distribute the tax burden among the different categories of users as well as help assess how much revenue can be collected without hurting the competitiveness ofthe sector. xxi. Improve balance between supply and demand. Promoting competition among private operators will help create a better balance between supply and demand in the road transport industry, as will strengthening operators’ technical and financial capabilities. xxii. Identify a mechanism for supporting the trucking industry. This mechanism should seek to professionalize the industry through training or other means to improve the trucking companies’ performance.

Aviation Sector

Findings xxiii. Mauritania has 10 airports and 7 airfields. Three of the airports-at Nouakchott, Nouadhibou and Atar-are classified as international, while the others handle only domestic operations. Traffic at Mauritania’s airports has declined in the past 10 years. For the two largest airports, Nouakchott and Nouadhibou, with 95 percent of air traffic, traffic peaked at 369,000 passengers in 1993 before declining to a low of 282,000 passengers in 1999. In 2002, it stood at 294,000 passengers. xxiv. Prospects for growth at Mauritania airports are good, however, on the basis of projected robust economic growth, increased premium international traffic linked to oil exploration, fleet expansion and modernization by regional carriers (e.g., Air Burkina, Air Ivoire and Air Senegal International), including Air Mauritanie, and potential tourism growth. Indeed, recent passenger traffic projections by the Chinese Consulting firm ZTC are for growth to average 7 percent per year through 2015. Growth remains uncertain, however, because of serious deficiencies in aviation security and safety at Mauritania’s main airports; the paving of the 450 km Nouakchott- Nouadhibou road, which is likely to result in a significant decline in passenger traffic on this air route making up 50 percent of the airports’ combined traffic; the inability of the national airport authority to self-finance required infrastructure investments because of low traffic volumes; and the financial unsoundness of Air Mauritanie’s operations.

Recommendations xxv. Strengthen Civil Aviation Directorate. The Civil Aviation Directorate’s inability to implement and enforce most International Civil Aviation Organization standards threatens Mauritania’s civil aviation. The Government therefore should accelerate its efforts to develop an immediate action plan to transform the Civil Aviation Directorate within one year into a financially and administratively autonomous agency capable of retaining skilled professionals (following the reform model already adopted by Senegal, Cap Verde and C6te d’Ivoire) and obtaining Category Icertification from the U.S. Federal Aviation Administration.

vi xxvi. Raise airport security to ICAO standards. Security standards at Mauritania’s airports are woefully inadequate. This situation requires immediate action on the part of the Government because lax security is not acceptable in a post-September 11 context. xxvii. Emergency airport rehabilitation. Operating conditions at Nouakchott and Nouadhibou airports raise serious safety concerns, as runways, taxiways, and apron pavement have deteriorated so much that the possibility ofa tire explosion on takeoff and landing is unacceptably high at these two airports. xxviii. Enforce contract of airport authority. The enforcement of Mauritania Airports Corporation’s (SAM) contract is ineffective, as shown by SAM’s inability to collect payment arrears from delinquent airport users or raise revenues necessary for investment. Within the boundaries of its contract, the Government should help SAM clean up its finances by clearing outstanding payables and receivables, and review its shareholding structure with the aim of bringing a majority owner to the concession through a sizeable increase in capital (preferably from a recognized airport operator), thus bringing SAM’s financial ratios to healthier levels.

Maritime Sector

Findings xxix. Mauritania port activities are centered on two ports-Nouakchott and Nouadhibou. Port traffic, excluding oil and mineral traffic, has grown steadily in recent years, with combined traffic at the two ports reaching 1.42 million tons in 2001, a 2.8 percent annual growth rate since 1997. This moderate growth rate masks stark differences between the ports, however. In Nouadhibou, between 1991 and 2001, total non-oil and mineral traffic actually decreased from 672,000 tons to 428,000 tons, an average annual growth rate of - 4.0 percent, while in Nouakchott, total traffic grew at from 843,000 tons to 1,447,000 tons, an average yearly growth rate of 9.4 percent between 1998 and 2003. xxx. The, diverging growth pattern between the ports reflects primarily the rapid growth of Nouakchott’s population and economy and Nouadhibou’s struggling fish export activities, which declined to a low of 162,000 tons in 2001 from a high of362,000 tons in 1996. Although traffic at the two ports is hard to predict, these diverging growth patterns can be expected to continue in the foreseeable future because the underpinnings of growth are unlikely to change rapidly. For Nouakchott, the rapid growth of recent years could slow, however, if the capacity constraints facing the port operators are not addressed rapidly and if any of the imported goods fueling this growth (cement and food items) experience demand volatility. The Government is seeking financing for a US$SO million program to build a fourth quay at Nouakchott that will allow larger ships with a draft ofup to 12 m to serve the port (i-e., Abidjan and Dakar ports can accommodate ships with up to 13.5 m draft). xxxi. Furthermore, port activities in Mauritania benefit from large exports of iron ore from the northeast part of the country and from imports ofpetroleum products. Iron ore is exported from a separate port terminal in Nouadhibou, and petroleum products are imported and distributed from Nouadhibou as well. Starting in 2005, Nouadhibou will lose its fuel import monopoly because a petroleum jetty and a storage area are nearing completion in Nouakchott.

vii xxxii. Management and ownership of the port infrastructure in Mauritania is fragmented among several ministries, port authorities, and private operators. The port authorities for the port of Nouakchott @e., PANPA) and the port of Nouadhibou (Le., PAN) have operational leadership of all port operations (e.g., pilotage, towing, berthing, and cargo warehousing) with the exceptions of stevedoring services, which are handled by private companies. PANPA falls under the oversight of the Ministry of Equipment and Transport, while PAN is regulated by the Ministry of Fisheries and Maritime Economy, and the operations of the mineral quay in Nouadhibou are overseen by the Ministry of Mining and Industry while the operations of the petroleum jetty are overseen by the Ministry of Energy. xxxiii. With relatively high productivity, low customs clearance times (less than a day on average) and low cargo pilferage problems, both Nouahdibou and Nouakchott ports offer a positive operational environment for importers and shippers. Port tariff levels, however, seriously weaken these advantages, as data gathered show that port charges in Nouakchott are two to two- and-a-half times higher than those at other West African ports, and stevedoring charges are four to eight times higher. Likewise, the environmental costs of port operations in Mauritania are unusually high (specifically in the case of PANPA) as sand accumulation to the north and erosion problems to the south of Nouakchott port have reached dramatic levels, resulting in a potential threat of flooding for a large part ofNouakchott.

Recommendations xxxiv. The Government should consider developing rapidly a comprehensive maritime sector strategy to gather information necessary to make informed, consistent decisions on Mauritania’s port development goals and objectives. The strategy should seek to answer the following questions: (i)What is the role of the port system in the country’s transport sector? (ii)Should the port system be geared towards serving the nation’s needs by achieving the lowest user costs, or towards competing against other large regional port systems (e.g., Dakar, Abidjan, Tema) for regional impodexport traffic (especially for landlocked countries such as Mali)? (iii)What should be the role and financial obligations of the Government in this sector? and (iv) How should investment priorities be assessed? The answers to these questions should help the Government clarify its position on the following issues: xxxv. Port administrative oversight. The current division of port administrative oversight among multiple ministries is detrimental to achieving consistency in the nation’s port policy. Investment plans in the port sector (Le., the fourth quay at Nouakchott) need to be evaluated according to their benefits for the network as a whole instead of on a port-by-port basis, as is currently the case. xxxvi. Identification of true port operational costs. The current port sector organization has resulted in a worrisome understatement of the true cost of building and operating port infrastructure in Mauritania. Without such a basic understanding, Government authorities are ill- equipped to make decisions on port infrastructure investment or review the adequacy of port tariffs. It is important, therefore, that PANPA and PAN accounts reflect the financing and depreciation costs of the port infrastructurethey manage, if not their environmental costs.

viii xxxvii. Lower stevedoring services and port charges. Although stevedoring services are fully liberalized, and both PANPA and PAN’S operations are subsidized (i.e., no debt service or environmental cost penalties), the Government has tolerated high stevedoring and port facility charges at both ports. The Government therefore should devise a strategy to lower gradually both types of charges to foster productivity and operating cost improvements at PANPA and PAN.

ix

1, Background

1. The Poverty Reduction Strategy Paper (PRSP) for Mauritania was adopted by the Government on December 13, 2000. The main PRSP objectives for general transport policy are: (i)lower costs and ensure safe transport for passengers and goods; (ii)foster consistent national planning through multimodal links between the country’s major development centers; (iii) promote national integration and linkages with the global economy; and (iv) involve more private capital in financing the sector. The PRSP also includes specific objectives for transport modes, which are taken into account in this Economic and Sector Work (ESW).

2. The World Bank’s Country Assistance Strategy (CAS) for fiscal 2003-2005 was completed two years ago. For this reason, the CAS is not used as a reference for this study. It is useful to note, however, the context in which the CAS was designed:

0 PRSP framework-The Government is committed to the PRSP process and has implemented its program successfully for more than 12 months. The World Bank’s CAS should be regarded as a business plan that outlines World Bank support to PRSP implementationduring the period ofthe CAS;

0 Focus on capacity building-Recognizing that the Government’s weak administrative capability was limiting Mauritania’s ability to absorb concessional assistance, the World Bank, in the CAS, emphasized capacity building for core government ministries and agencies, both central and local. The World Bank has shifted away from adjustment and investment operations and towards cross-cutting public sector management and capacity- building operations;

0 Programmatic approach-The World Bank is supporting implementation of the PRSP through a series of Poverty Reduction Support Credits (PRSC), disbursed when progress is made in policy reform and institutional capacity building; and

0 Fiduciary issues-Mauritania has made great progress in implementing the fiduciary safeguards required by the Bank for phasing in PRSC. The World Bank, in coordination with other donors, will continue to assist the Government in implementing the National Good Governance Program. The World Bank’s strategy is to assist the Government in building an efficient, market-oriented public sector apparatus and a strong civil service able to practice sound economic management.

3. PRSCs are expected gradually to make up a larger part of the lending program, although the World Bank will continue with select investment projects that target poverty reduction, institutional strengthening, and core diagnostic ESW. The shift to PRSCs will be supported by core diagnostic ESW as well as continued support to the Government in preparing public expenditure reviews and medium-term expenditure frameworks (MTEF) and in conducting social impact and poverty analyses.

1 4. The World Bank’s last project in Mauritania’s transport sector was completed in 1996. Since then, support to the transport sector has been provided by other donors, especially the European Union. However, because the World Bank is planning to resume support to this sector, this ESW aims to identify the challenges to strengthening the transport sector’s contribution to economic growth and to implementing the transport-related objectives ofthe PRSP.

5. In 1998, the Government of Mauritania adopted a National Transport Plan (NTP) and a priority investment program for the period 1998-2007. The strategic objectives ofthe NTP were to enhance the sector’s operational efficiency in the medium term by: i) developing a sound basis for competition between transport modes and enterprises; ii) improving infrastructure conditions; iii) applying a suitable maintenance policy; and iv) promoting greater accessibility to remote areas. Reforms and the investment program were implemented with support from the European Union and other donors. However, the investment program focused only on road infrastructure, neglecting other modes. In addition, the reforms implemented were insufficient for reaching the strategic objectives ofNTP.

6. The midterm review of the NTP in 2002 found that the NTP did not focus enough on poverty reduction. Therefore the Government, with its partners in the transport sector, is preparing two major studies-the EU-funded Road Management and Investment Program Study, and the World Bank-financed Transport Sector Strategy Study. The EU study will address the organization of the Ministry of Transport and Facilities as well as road transport organization, services, and fiscal policy issues. The World Bank study will cover the other transport modes and will include (i)an action plan for implementing the reforms recommended in the poverty reduction strategy framework; (ii)a priority investment program and proposals for institutional and organizational reforms for both the public and private sectors; (ii)a general policy for enhancing the organization and regulation of road, air, and maritime transport. The World Bank and the EU reviewed the terms of reference for the two studies to avoid redundancies and reached an agreement on managing procurement so that both reports could be finalized by the end of 2005.

7. The Transport Sector Strategy Study will take the findings of the EU-funded study on road transport into consideration when finalizing the general policy. It will focus on:

Port development options; Short-term national road network development and management issues; The rural road network and associated management challenges; Transport costs, including comparisons to international benchmarks; Domestic and international road transport issues; Air transport and air transport infrastructure development challenges; The transport fiscal system, including recovery ofinfrastructure costs; and Statistics and economic transport activity data.

8. The focus of the proposed sector strategy is in line with Mauritania’s PRSP and is taken into account in this report.

2 2. Objectives of the ESW

9. This Transport ESW has two primary objectives: (i) provide a framework to the Government for analyzing transport sector issues until the sector studies are complete, in support ofthe development of a transport sector strategy for the 2004-2009 period; and (ii)identify issues and challenges that can be addressed through international lending operations. These objectives are consistent with those for the transport sector in the PRSP and the CAS and complement those of the EU- and World Bank-funded sector studies. Accordingly, this ESW is intended not only to help the Bank resume a dialogue with the Government about the transport sector but also to provide the analytical foundation necessary for developing a transport sector operation in fiscal 2006.

3, Transport Sector Role and Challenges

10. Mauritania is a vast country (1.030 million km2) with a small population (about 2.5 million in 2002) spread thinly along the Senegal River valley and in Nouakchott, the capital, and several regional centers (such as Nouadhibou). About 55% of the population lives in urban areas, which usually means long distances-hundreds ofkm-between centers of production and centers of consumption. Because transport linkages between production and consumption centers are often weak, geographical dispersion hinders economic growth. For example, agricultural production in the Senegal River valley does not reach its potential because producers cannot transport their goods efficiently to consumption centers such as Nouadhibou and Nouakchott.

1 1. Transport sector challenges include: (i)addressing the need for institutional reforms to support a successful national transport strategy; (ii)identifying the priorities for investment in transport infrastructure-particularly the road sector-while taking into account other donor interventions in this subsector and seeking maximum synergy with investment activities in related sectors; and (iii)required investment and maintenance funding.

4. Transport Sector Issues

Road Transport

General Characteristics of the Road Network

12. The PRSP defined three priorities for road transport besides investment programs: (i) obtain the budget resources needed to strengthen routine maintenance work and clear sand from the roads; (ii)encourage private sector participation in sand removal and periodic maintenance by fostering the development of a network of local small and medium enterprises (SMEs); and (iii) establish an appropriate financing mechanism for maintaining rural roads.

13. The present road classification is based on Law No 68-244 dated July 30, 1968, regarding the creation of national road network, that set the total length of the road network at 10,297 km,

The budget allocated for this ESW was US$55,000 for variable costs only. This sum falls between the amount considered necessary for a formal ESW and an informal ESW. This ESW is considered informal.

3 including national roads, regional roads, and local roads (see Table 1). This network is divided in paved roads, earth roads, and rural roads. Because of its large desert area, Mauritania’s road density ratio is only 1.O km ofroad per 100 km2of territory compared with average ratios of 3.10 for West Africa and 4.70 for Sub-Saharan Africa. In terms of road-to-population density, however, Mauritania has one of the highest densities in Africa (13 km per 10,000 people, compared to 2.71 km for Sub-Saharan Africa).

Table 1: Length of Road Network Road category Class (km) Paved Earth Rural Total National 1,800 425 2,684 4,909 Regional 389 447 91 3 I,749 Local 235 0 3,404 3,639 Total 2,424 872 7,001 10,297 Source: MTEF for the Transpotf Infrastructure Sector

14. The general condition ofthe road network has improved since the investment program in the first phase of the NTP (1998-2002) was implemented. Today, about 70 percent of paved roads are considered to be in good to fair condition, while only 30 percent remain in poor condition. These numbers compare favorably to those of the Economic Community of West Africa Countries (ECOWAS), where the comparable averages are 65 percent and 35 percent, respectively (see Figure 1). The condition of the paved road network in Mauritania would be better than it is, however, if it were not for delays incurred during the implementation ofthe road construction and rehabilitation program during the first phase of the NTP. Indeed, this program, which included reinforcing and rehabilitating 970 km ofroads and paving 1,004 km ofroads, has not been completed (see Table 2 and Annex 1). At the time of this study, information on the conditions of the earth and rural road networks, which make up 76 percent of the total road network, was not available. The condition ofthese roads is known to be generally poor, however.

15. The road infrastructure maintenance program that is planned and implemented by the Public Works Department (DTP) in the Ministry ofFacilities and Transport (MET) targets only a limited portion ofthe country’s road network (defined as the priority network). This selectivity in the DTP maintenance program reflects both the lack of resources available for maintenance work and the fact that the poor condition of the network (mainly earth and rural roads) creates maintenance needs that significantly exceed DTP resources.

16. The priority network covers mainly paved roads (including some urban roads but not the national roads where they cross the urban areas ofNouakchott and Atar), as well as a few earth roads. It leaves out most earth roads and all rural roads, which consequently do not benefit from any regular maintenance program. These are for the most part local roads (urban and municipal roads), that, according to Mauritania decentralization laws, are supposed to be maintained by local communities. Because these communities do no have the financial resources to fund such maintenance programs, a sizeable portion of Mauritania’s network is not maintained. This situation raises, therefore, the issue of division of responsibilities and resources among the various entities responsible for maintaining the nation’s road network. Likewise, it underscores

4 the problems inherent in the road classification, which needs to be updated to account for the realities of road maintenance program funding and implementation capacity of the DTP and urban and rural communities.

100%

90% 21Yo 80% 70% 60% 50% 40% 30% 20% 10%

0 Yo UDEAC ECOWAS SADC COM €SA

Figure 1: Condition of Paved Roads in Various African Regions

Table 2: Implementation of First Phase of the NTP

Total Cost Amount Spent Shortfall Percent Length (km) Project Type (US$ million) Funded

Rehabilitation 970 39.5 27.8 11.6 70.5 New construction 1,004 100.5 100.5 0.0 100.0 Not Planned 343 9.2a 9.2 0.0 100.0 Total 2,317 149.2 137.6 11.6 92.2 a 100% Government-funded Source: Preparation mission for the Transport Strategy Study report by B. Baylatry, April 2003

17. Current data on freight and passenger traffic in Mauritania are not available -as a result 1997 data were used for this study. These data indicate that, in 1997, more than 90 percent of passenger traffic and about 80 percent of freight traffic was handled by the road network. At that time, Mauritania’s vehicle fleet was composed of about 3 7,500 passenger vehicles and about 1,000 trucks, 98% of which were used trucks, averaging 12 years of service. In 1997, these trucks offered a capacity of 444 million ton-km, compared with a demand of about 358 million ton-km, while passenger traffic amounted to 1.13 million passenger-km.

5 18. A 1998 study indicates that these traffic levels were expected to increase by 6 percent per year for passengers and 8 percent per year for freight2 According to these projections, total traffic would reach 1.80 million passenger-km and 660 million ton-km by 2005, and 2.02 million passenger-km and 773 million ton-km by 2007. Such growth in freight traffic would require acceleration of the 3% per year historical growth rate of Mauritania’s truck fleet, raising a question about the capacity of this industry to face the projected rise in demand. To respond to this challenge, the Government undoubtedly will have to improve the overall condition of the road network and create an environment that encourages private investment in the trucking industry.

19. Rural roads. The length of the rural road network (under the current road classification) is about 7,000 km. This network is not included in the DTP’s maintenance and management program. Generally, service on these roads is poor and unevenly distributed; most rural roads are not maintained unless they are in a critical location. Maintenance is not coordinated between local and central governments, and doubts often exist about which entity is responsible for doing the work. Furthermore, an absence of quality benchmarks prevents accurate planning oftreatment or maintenance for each road in the network, and a lack of resources allocated to the MET for road maintenance prevents the DTP from including rural roads in its maintenance program.3 Particular attention, therefore, must be paid to this network because poverty reduction goals cannot be achieved if the rural population does not have adequate access to work and social services.

20. Urban roads. The urban road network is composed of national roads crossing city and local roads. The DTP is responsible for national roads that cross cities, while local roads are supposed to be local communities’ responsibility, although the transfer of local roads to communities as dictated by the decentralization law has not taken place. The urban road sector will not be included in the scope ofthis ESW because it is being addressed in the ongoing Urban Development Project. A study for the design of an urban transport plan is proposed in the Urban Development Project, and will provide recommendations and an action plan for designing future World Bank interventions in this sector.

Financingfor Road Construction and Maintenance

21. The implementation of the first phase of the NTP clearly illustrates the inherent imbalances in spending priorities in the road sector. As Table 2 shows, not only were planned road rehabilitation programs not implemented fully (only 70 percent of planned funding was spent), but overall spending for road construction under the NTP was more than three times greater than the spending for road reconstruction and maintenance (US$lOO million compared to US$27 million). Furthermore, only US20.1 million ofthe US$137.6 million spent was financed by the Government, and of this sum, 55% (US$10.9 million) went to the construction of new roads. These figures underscore vividly the discrepancy between the Government’s stated strategy to give priority to road maintenance and rehabilitation over road construction. They also

These rates, from a draft report of a study on the NTP conducted by Louis Berger S.A./ SCET-RIM, were dropped from the final report (March 1998). From a World Bank mission report of January 2003 for a mission conducted by an intemational consultant to support the IntegratedDevelopment Project for Irrigated Agriculture and the Rainfed Natural Resource Management Project.

6 point out the impossibility of sustaining the current road financing scheme (less than 15% funded by the Government).

22. During the first phase of the NTP, an average of about US$20million per year was allocated for new road construction (US$100.5 million total), while the amount allocated for road maintenance reached a maximum (in 2003) of only about US$7.6 million equivalent (UM 2,264 million - see Figure 2). The national budget contributed UM 800 million of the UM 2,2264 million for maintenance (about US$2.8 million), and the National Mining Industries Association (SNIM-Socie‘te‘ Nationale des Industries MiniBres) contributed UM 1,400 million (about US$4.8 milli~n).~SNIM funds are expected to be available until 2015, but resources to supplement or replace them after that date have not been identified. Total routine road maintenance funding therefore is expected to remain stable at about US$7.6 million per year through 2015, which falls far short of the US$14 million that the Road Maintenance Agency (ENER) estimated in 2003 was necessary to cover routine and periodic maintenance.

2,500

2,000

I 1,500 I 1,000

500

1996 1997 1998 1999 2000 2001 2002 2003 2004

National Budget %r~illSYSMIN Resources -Global Budget 1

Figure 2: Historical Road Maintenance Budget

23. The recent increase in road maintenance funding, nevertheless, should help DTP advance towards its goal of maintaining 4,600 km of road annually by 2007 (see Figure 3).5 Although this is almost 70 percent of DTP’s priority network, and an increase of 50% in the length of the road network that DTP maintains, about 6,000 km of the total road network will still remain without

The Government has received a grant from the EU to provide a loan to SNIM. The Government and the EU have agreed to allocate SNIM repayments on this debt to funding part of the road maintenance program. These resources from the repayment of the SNIM loan are called SNIM’s resources. Currently the UM 2.2 billion available for maintenance work is insufficient to cover the maintenance needs of ENER’s 3,000 km network.

7 proper maintenance by 2007. This problematic situation, in a context of continued new road construction, will need to be reviewed quickly by the Government to confirm and optimize the nation's road expenditure priorities.

4,500 90%

4,000 80%

3,500 70%

3,000 60% E -E 2,500 50% 2,000 40%

1,500 30%

1,000 20%

500 10%

0 0% 1997 2002 2007

~~~ ~ ~~ ~~ ___ Figure 3: DTP Targeted Road Maintenance Length during the NTP

24. Judging from the low and declining share of road expenditures in Mauritania's gross domestic product (GDP) (about 1.1% in 2003 compared to 2.1 % in 1998-see Table 3), it would seem that the Government could increase spending on roads substantially to address road maintenance funding needs. It also could identify new funding sources, independent from the budget, to ensure the long-term availability and sustainability of those funds. It could be useful for the Government to analyze the current fiscal environment, both at the transport sector level and generally, to assess the fiscal impact on the cost of transport infrastructure and the recovery of transport infrastructure charges. Such an analysis would be especially welcome because the current road funding system (budget and SNIM contributions) is not tied to the transport sector fiscal system, nor does it have an adjustment mechanism that would allow it to adapt to meet actual road maintenance needs @e., the SNIM contribution will remain at the same level until 201 5).

8 Table 3: Road Spending in Consolidated Investment Budget, 1996-2001 (US$ million) 1996 1997 1998 1999 2000 2001 Road infrastructure 10.0 8.9 12.3 7.6 10.4 7.9 Total consolidated investment budget (wlo SNIM) 40.3 46.5 51.5 53.6 71.9 91.3 Share of road infrastructure in budget 24.9% 19.0% 23.9% 14.2% 14.4% 8.7% Share of road infrastructure in GDP 1.8% 2.1% 1.3% 1.7% 1.1% Source: MTEF for Transport Infrastructure, June 2002

25. Any review of ways to secure additional road network maintenance funding should include the impact on the Government’s budget of oil production, which is expected to begin in Mauritania in 2005. Because this industry is likely to increase national budget resources significantly, the Government may have the unique opportunity to increase direct budget contributions to the road sector or raise a fuel levy to finance a road fund as increased national wealth should permit a higher tax burden. Additionally, great effort should be made to use the results of the EU-funded study on a second-generation road fund to choose the best solution for financing this fund. Examples from Benin and Togo show how significantly such a fund can improve road maintenance funding.6

Road Network Management and Regulation

26. The most recent major changes in Mauritania’s road network management system occurred in the 1990s. In 1994 the Road Maintenance Agency (ENER) was created with exclusive rights to implement the country’s road maintenance work program on behalf of DTP. In 1995 the Road Management Bureau was created as part of DTP and was charged with the collection and management of road data. DTP therefore is responsible for defining the country’s policy on road development and maintenance (routine and periodic) as well as for supervising works.

27. After 1995, the Road Management Bureau was unable to collect data because of a lack of resources in DTP. But in 2003, with EU support, the bureau resumed data collection and analysis. The data collected are expected to be made available to the DTP for developing an efficient road management strategy. This strategy should take into consideration the various types of roads as well as changes in funding and management responsibilities that are expected when the road network is reclassified. A primary output of this strategy should be the definition of periodic and routine road maintenance needs for which work will be shared between ENER and local SMEs through one-year or multiyear performance-based maintenance contracts.

28. In 2000 ENER began a 3-year maintenance contract with the DTP. The contract is subdivided into flexible annual programs defined jointly by DTP and ENER that are designed to meet the goals and objectives of a 3-year program. ENER is also responsible for hiring local firms in outsourcing about 25 percent of its annual workload. This objective has not been

Indeed, in Togo and Benin, the institution of a second generation Road hnd has increased the maintenance resources from about US$3 million to US$13 million in five years and from about US$5 million to US$22 million in six years respectively.

9 achieved, however, mainly because funding shortages have led the DTP to focus on routine maintenance rather than periodic, while SMEs are most interested in periodic maintenance work.

29. Assuming that additional funding is mobilized for road maintenance, and that this funding goes in part to periodic maintenance, the goal of outsourcing a portion of ENER maintenance work to SMEs still may not be met, for several reasons. First, ENER lacks an incentive to outsource its own work. Second, the maintenance work is geographically dispersed, and third, SMEs have weak financial and technical capacity to take on such public works assignments. Finally, the maintenance work, due to constant sand road intrusion, is repetitive.

30. Solutions for the outsourcing process (Le., transferring the public works procurement responsibility away from ENER) and the SMEs’ weak capacity need to be developed. These solutions probably will result in an environment in which ENER will continue to play a major role in maintenance work and SMEs gradually acquire the technical skills and financial strength to increase their participation in road maintenance. This transition from quasi-force account to private contracting will require government assistance to SMEs: training, an adequate and stable workload, and easy access to credit for buying equipment and modernizing operations.

31. Rural Road Financing and Management. As mentioned briefly, DTP, local communities, and ministries do not coordinate their work on rural roads, preventing the Government from knowing the condition of the network or from developing a clear action plan for investment and maintenance. The Government has attempted to improve rural accessibility by implementing rehabilitation and maintenance programs but has not taken institutional issues into account in these programs. This omission explains, in part, the absence of a rural accessibility strategy. A World Bank mission report (January 2003) presented the results of a review of rural road issues in Mauritania and made recommendations for the design of a rural accessibility strategy. Recommendations included: (i)take stock of current rural accessibility conditions, including level of access to social services and economic areas; (ii)define an accessibility policy clarifying problems and orientations and specify the general economic framework for the strategy’s design; (iii)reclassify roads after taking stock of existing road networks in close collaboration with DTP managers and local communities; and (iv) design an accessibility strategy, including technical and institutional aspects and leading to a multiyear investment and maintenance program. These programs could be implemented under two ongoing World Bank- funded projects, the Integrated Development Project for Irrigated Agriculture and the Rainfed Natural Resource Management Project.

32. Rural Road Transport Regulation: Regulations should be developed as part of the effort to devise a strategy for rural road accessibility. Because MET is in charge of managing the road network and thus of updating its classification (through DTP), it would make sense for it to coordinate activities affecting the rural road network and develop its strategy.

Trucking Industry

33. The trucking industry is composed of 98% of used vehicles, which in spite of their average age (Le., 12 years), are in relatively good mechanical condition, thanks to intense maintenance work. It is dominated by the National Carriers Association (FNT), which regroups

10 the majority of trucking companies. Although there are other carrier associations, the others are not in a position to challenge FNT.

34. In 1998, following the liberalization of the transport sector, the National Transport Bureau (BNT) was created by MET to manage truck depots. Its membership is made up of transport carrier associations. The BNT’s incorporating papers require that it designate a member association to manage the truck depots under its responsibility. Thus far, this delegation of authority has benefited only one member, the FNT, because ofits prominence within the sector.

35. To finance its operations, the BNT has instituted a tax based on truck size and destination. Over time, this tax, which was intended to be levied only against trucks using BNT’s facilities, has been extended to cover all trucking activities, regardless of their actual use oftruck depots. A truck driver cannot obtain a “departure authorization voucher” from BNT unless he pays this depot tax. Without the voucher in hand, he cannot leave a city where truck depots are located because he cannot pass police checkpoints. Furthermore, the BNT has instituted a system whereby a freight forwarder is obligated to contract a trucking company at a set price according to a queuing system that does not allow users to choose trucking company. This rotation system of fixed pricing is associated with the notion of the public obligation of ensuring service to all areas ofthe country.

36. This aspect of the liberalization of the transport sector raises serious issues that will be addressed in the forthcoming World Bank sector strategy study. In the meantime, the Government should devise solutions to the following problems:

0 The FNT’s monopoly on managing truck depots puts it in a position to negotiate tariffs with freight forwarders and allocate loads to truck companies; 0 The BNT was created as a regulatory agency, but the dominance ofthe FNT in the BNT and its monopolistic position in the trucking industry does not ensure a genuinely competitive environment in the industry; 0 The requirement for trucking companies to obtain an operating license has been overshadowed by the need to acquire a departure authorization voucher at the truck depot; and 0 Ensuring that all areas of the country are served by trucking companies should not preclude competitive pricing oftransport services.

Rail Transport

37. The rail network is a single 853 km track built in the 1960s to provide an important export link between the Zoueiratt mine and Nouadhibou port. It has 717 km of main lines, 136 km of secondary lines, and eight stations, and an annual capacity of 15-1 8 million tons, and helps supply Zoueiratt and secondary areas such as Choum and F’derick. The train transports people as well, although this activity is marginal for the operator.

38. SNIM manages the rail network and is in charge of maintenance and other work on it. The network is considered part of the mine’s means of production; SNIM funding for mineral exploitation therefore covers activities needed to maintain the rail network as well. SNIM estimates exports at 12 million tons annually, according to the NTP report, meaning no

11 rehabilitation, reinforcement, or network extension is necessary. This ESW, therefore, does not address this issue.

Air Transport

39. According to the PRSP, the air transport sector strategy is to implement an ambitious investment program: (i)building a new international airport in Nouakchott with some private financing to replace the existing airport, whose current downtown location raises serious safety and security concerns, (ii)expanding and upgrading Nouadhibou airport, and (iii)continuing development for secondary airfields.

Airport Infrastructure and Operations

40. The airport network in Mauritania is made up of 10 airports and 7 airfields. Three airports-at Nouakchott, Nouadhibou, and Atar-are classified as international airports. The other seven airports handle only domestic operations. Regular passenger traffic at the 10 airports is hampered by the following problems:

Firefighting equipment. Seven airports have equipment but only three have more than one fire truck, which leaves four airports without permanent firefighting capabilities; Lighting for night operations. Three airports have lighting equipment and a fourth airport, at NBma, is having it installed. Refueling. Only six airports offer refueling capabilities. Perimeter fencing. Only three airports are fenced. Runway, taxiway, and apron surfaces. Surfaces have deteriorated, especially at Nouakchott, Nouadhibou, and KaBdi. Apron dimensions. Nouakchott has a recurring problem in the evening for regional and international flights; Runway length. Aioun, Kiffa, SBlibaby, and Tidjika airports have runways of only 1,600 meters.

Despite the airport investment program implemented under the NTP (UM 4,600 million [US$15.9 million], including UM 1,400 million [US$4.9 million] for Nouakchott and Nouadhibou) and the recently approved US$1.5 million investment for Atar ,airport, much remains to be done to improve operational security and safety at Mauritania’s airports. The immediacy and importance of these needs present the Government with a development policy dilemma because:

Airport investment in Mauritania cannot be self-financed because traffic levels are too low (see Figure 4). Aviation must compete for a limited pool of Government investment money. Runways, taxiways, and apron surfaces at Nouakchott and Nouadhibou airports have deteriorated, often beyond repair. They require immediate investment with Government funds because the Mauritania Airports Corporation (SAM) does not have the resources to fund these investments; New international security and safety measures following the September 11, 2001, terrorist attacks on the United States require immediate and costly action to address

12 shortcomings in aviation security and safety in Mauritania. These requirements must be met quickly or the consequences could cripple the country’s economic development- access restrictions to foreign markets could be imposed on domestic air operators, and international airlines may decide to abandon the Mauritanian market altogether. 0 Regardless of the financing scheme adopted for the new Nouakchott international airport (BOT, BOO, conce~sion),~substantial Government funding will be required to build it. This raises the question of the Government’s financial capacity to simultaneously renovate its airports, upgrade aviation security and safety infrastructure, and build a new international airport in Nouakchott.

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 I 1 HNouadhibou LlNouakchott I I

Figure 4: Passenger Traffic at Nouadhibou and Nouakchott Airports8

42. Traffic at Mauritania’s airports has been declining in the past 10 years. At the two largest airports in Nouakchott and Nouadhibou, combined air passenger traffic peaked at 369,000 passengers in 1993 before declining to a low of 282,000 passengers in 1999, then climbing again, to 294,000 passengers in 2002 (see Figure 4). The decline in traffic during the 1990s is not only a Mauritanian phenomenon, but Nouakchott and Nouadhibou passenger traffic growth lagged

Construction cost estimates for the new Nouakchott intemational airport are US$170 million. The airport would be located 25 km northwest of Nouakchott on a site already identified along the road between Nouakchott and Nouadhibou. In April 2004, a delegation from Mauritania went to China to explore the possibility of obtaining BOT financing for the project. The outcome ofthis trip has yet to be ascertained. Source: ASECNA. Traffic data for other airports were not available at the time of this study. Traffic is known to be very limited, however-a few thousand passengers at most-because no airport in Mauritania besides those in Nouakchott and Nouadhibou have regularly scheduled flights.

13 during this period behind that of most other West African airports (see Figure 5). Passenger traffic at these two airports was severely affected by the demise of Air Afrique and poor performance by the national carrier. The other airports in Mauritania handle about 40,000 passengers per year, with Atar airport representing about three-quarters of this total as it accommodates a growing number oftourist charter flights.

Niamey 59% - bmC 1 67%

Nouadhibou 177%

Nouakchott 187%

Ouagadougou 114%

Cotonou 115%

Bamako 1 143%

Dakar 145%

Abidjan 149% , I I , I ,

Figure 5: 2002 Passenger Traffic Compared to 1992 Passenger Traffic at Some West African Airports (%)9

43. Prospects for air traffic growth in Mauritania are relatively good for several reasons. Robust economic growth is projected to continue in the foreseeable future, rapid growth in the country’s petroleum exploration and exploitation activities should generate premium international traffic, and any slight upturn in tourism should yield significant passenger traffic. Furthermore, the fleet modernization of regional carriers (Air Burkina, Air Ivoire, and Air Senegal International), including Air Mauritanie, allows airlines to offer more routes and capacity to prospective passengers. Finally, prolonged traffic stagnation in the 1990s has increased the likelihood of strong traffic growth in the near future in order to make up for lost growth years.

44. Indeed, if one believes the passenger traffic projections made by the Chinese Consulting firm, ZTC, for the new Nouakchott airport, traffic should grow by about 7% per annum through 2015. This optimism should be tempered, however, by other factors that could depress airport traffic demand in Mauritania, such as the serious deficiencies in aviation security and safety already noted; the impact of paving 450 km of road between Nouakchott and Nouadhibou, an

9 Source: ASECNA

14 important air route, which is likely to result in a significant decline in passenger traffic on this route; and uncertainties regarding the future development of Air Mauritanie operations.

Air Transport Operators

45. The aviation sector in Mauritania is organized around four main entities: (i)the Civil Aviation Directorate; (ii)the air traffic control agency for Nouakchott and Nouadhibou airports, ASECNA; (iii)the national airport authority, SAM; and (iv) the national carrier Air Mauritanie.

46. The Civil Aviation Directorate’s mission is to oversee and regulate aeronautical activities in Mauritania. Its main purpose is to ensure compliance with the International Civil Aviation Organization (ICAO) guidelines on safety and security. Today, the Civil Aviation Directorate is unable to fulfill its mission because of a lack of independence from Government authorities as well as meager financial and human resources (in 2003, the agency’s budget was only UM 4 million [US$14,000]). ICAO audits have identified these shortcomings on several occasions. The Government is aware of these problems and has initiated a review of ways to provide greater financial, technical, and administrative autonomy to the Civil Aviation Directorate. Likewise, Mauritania has joined the West African Economic and Monetary Union (WAEMU) in signing an October 2003 agreement with the ICAO for the 3-year, US$3.6 million Cooperative Development ofOperational Safety and Continued Airworthiness Project (COSCAP), designed to strengthen on a regional basis each member country’s civil aviation safety oversight capacity. Additionally, in the next two years Mauritania could become eligible to receive financial and technical assistance for aviation and airport security and safety as part of a regional multidonor project under consideration by the World Bank, AfDB, French Development Agency, and the EU.

47. ASECNA, an international organization with a presence in 15 French-speaking African countries, provides meteorological, overflight air traffic control, ground and approach control and fire fighting services for Nouakchott and Nouadhibou airports. Similar services are provided, to some extent, at Mauritania’s other airports by the SAM. Aside from providing these services, the SAM, under a 30-year concession contract signed in 1994, has a primary mandate to operate Mauritania’s two main airports (Le., Nouadhibou and Nouakchott) as well as manage, under a separate contract on behalf ofthe Government, Mauritania’s other eight airports. The SAM is also responsible for providing meteorological services to aircraft operators at these eight airports (ASECNA provides these services at the Nouakchott and Nouadhibou airports).

48. Between 1995 and 2003, the SAM has invested a total of UM 1.6 billion (US$5.5 million) in airport infrastructure and equipment, or about 37 percent of its cumulative turnover for this period. Future investments in airports other than Nouakchott, Nouadhibou, and Atar raise serious issues, however, because under its current contract, the SAM must provide free air traffic control and meteorological services to users ofthese airports. SAM’s equity ofUM 173 million, or US0.59 million, is divided between multiple shareholders, including Air Afrique, ASECNA, Air Mauritanie, and the Mauritanian Government. This unusual capital structure is problematic because it can produce conflicts of interest among shareholders-Air Mauritanie is both a shareholder and its largest, delinquent, client. This structure also makes it difficult for SAM management to take important actions (investment decisions) because no single shareholder has more than 11 percent of the company’s voting rights.

15 49. A quick review of the company’s financial situation reveals that between 1995 and 2003, overall revenues rose in real terms from UM 480 million (US$1.7 million) to UM 656 million (US$2.3 million), an increase of 36 percent (see Figure 6). During this period, the SAM achieved an apparently decent average gross profit margin of 13.3 percent. These financial results, although they may appear to be positive in a context of limited and declining passenger traffic, require cautious interpretation.

700

600

500

400

300

200

100

0 1995 1996 1997 1998 1999 2000 2001 2002 2003 1 -100 I El Operating Revenues 0 Operating Costs El Gross Profit 1

Figure 6: SAM Financial Results, 1995-2002 (2003 UM million)lO

50. First, they conceal the fact that the SAM has difficulties in collecting revenue, especially from its largest customer, Air Mauritanie.” Indeed, by the end of 2003, the national carrier had accumulated arrears of UM 605 million or US$2 million (equivalent to 92 percent of turnover for that year), for which no provision for payment has been made. Likewise, these numbers fail to reflect the fact that the SAM’s total debt at the end of 2003 stood at UM 1,800 million (US$6.2 million), equivalent to 2.8 times its turnover and 10.3 times its equity for that year.12 Such debt levels make the company’s current financial structure highly leveraged by any standard and should trigger an immediate restructuring of its finances through a combination of debt reduction and capital and revenue increases. Finally, the figures do not show the fact that the Government has repeatedly failed to abide by the contract terms by either blocking attempts by SAM to raise user fees or by creating new fees for airport users (to a cumulative total of UM 1.6 billion [US$5.5 million] by the end of2003), thus limiting SAM’s revenue base.

10 Source: SAM. SAM’s numerous requests to the Government as well as to ASECNA to seize Air Mauritanie’s planes to force the national carrier to pay its arrears have gone unanswered. l2This debt is contracted mostly from the Govemment and the French Development Agency (AFD).

16 51. Detailed operational and financial data on Air Mauritanie was not obtained. The information that was available, however, indicates that the national carrier was privatized in 2000 through the sale of a majority of its shares to a group of investors that included Air Afrique (a strategic investor), Nasr (an insurance company), and Star (an air refuelling company). The Government still retains 17 percent of Air Mauritanie’s shares, and the future of Air Afrique’s holdings is uncertain because the defunct airline has yet to be liquidated.

52. Since the privatization ofthe airline, the new management of Air Mauritanie has sought to modernize its fleet. It is in the process of retiring the last of its two Fokker 28 jets and replacing them with two leased 737-700 aircraft.13 The use ofthese newer airplanes has allowed the national operator to extend its network from domestic routes to regional and international routes. It now serves Dakar, Bamako, Abidjan, Lome, Cotonou, Ouagadougou, Casablanca, Las Palmas, and Paris. These important changes made revenues soar, from UM 2,500 million (US$8.5 million) to UM 8,000 million (US$27.3 million). Nevertheless, Air Mauritanie’s profitability, future growth, and independence remain questionable, for the following reasons:

0 It has accumulated more than US$6.3 million in payment arrears to ASECNA and the SAM; 0 It is subjected to a 4 percent flat income tax rate regardless ofits profitability; 0 It faces increased competition in its regional market from competitors that are better capitalized (e.g., Air Ivoire, Air Senegal International, Air Burkina) and have financially and technically more capable shareholders (e.g., Air France for Air Ivoire and Royal Air Maroc for Air Senegal International); 0 Its is handicapped by the incapacity of its civil aviation to meet international certification standards for its pilots and aircrafts; and 0 It suffers from a continued lack of qualified staff, and generally poor on-board service and on-time performance.

53. Today, both Air Mauritanie and the SAM face an uncertain future as the privatization of both companies has failed to deliver expected results. With each company in a precarious financial situation and heavily dependent on the other, the Government has yet to show that it understands the gravity of the situation or that it is willing to correct a failed privatization process.

Air Transport Regulation

54. The current regulatory framework is inconsistent with ICAO conventions as well as with regional agreements,14 especially in the areas of safety and security. On the institutional side, the regulatory oversight of Air Mauritanie and the SAM is vague because there is no independent regulator for the transport sector, and the Civil Aviation Directorate lacks sufficient capacity to carry out its technical oversight role in the sector.

l3Air Mauritanie is also currently operating a modernized 727-200 on its regional route. The ownership status and the long-term operating plan for this airplane are unknown at this time. l4As Mauritania is no longer a member of ECOWAS, its position vis-his the regional efforts to harmonize civil aviation codes and regulations needs to be clarified.

17 Maritime Transport

55. The objective of the PRSP in maritime transport is to improve the competitiveness of the manmade port of Nouakchott and the natural port of Nouadhibou, which handle much of the country's commerce. To reach this objective, the following actions have been given priority: (i) improve the quality and level of services; (ii)continue the investment program in capacity- building and modernization; (iii)strengthen and modernize management; and (iv) involve the private sector in capitalizing and managing the sector.

Port Infrastructures and Operations

56. Mauritania port activities are centered on two primary ports, Nouakchott and Nouadhibou. The Port of Nouakchott (PANPA-Port Autonome de Nouakchott, Port de 1 'Amitie'), which started operations in 1987, is the larger of the two with:

0 585 m of quays with draft of 8.5-9.5 m; 0 67,000 m2 of unprotected storage area, including 22,000 m2 allocated to a container terminal and 8,000 m2of warehouse space (weight resistance limited to 3 ton/m2); 0 One operational rail-mounted gantry crane of 1O-ton lifting capacity; 0 Several wheel-mounted gantry cranes operated by the Port Facilities Company; 0 Three tug boats; 0 A 4,5000-hectare industrial zone; and 0 A wharf located 5 km north of this primary facility that became operational in 1966 and has an 86 m quay and a 55 m extension quay equipped with 4 fixed cranes, two with a lifting capacity of 30 tons each. Usable draft at these quays is 4.5-6.6 m, with a storage area of 1,200 m2.

57. The port complex of Nouadhibou (PAN-Port Autonome de Nouadhibou), is the second- largest port in Mauritania. This complex is composed of four sites, including:

0 A series of quays with a total length of 1,000 m that includes: (i)a 650 m quay with a 6-7 m draft dedicated to fishing activities, and (ii)a 120 m commercial quay with an 8 m draft. These quays are serviced by two rail-mounted gantry cranes and four wheel- mounted cranes. Behind these quays are located surface and covered storage areas totalling 47,2 10 m2; 0 A dedicated mineral quay operated by the SNIM with a 12 m draft; 0 A dedicated petroleum terminal with a 10 m draft operated by the SociBte Mauritanienne des Hydocarbures (SOMIR); and 0 A craft fishing port at Baie du Repos.

58. Overall port traffic, excluding oil and mineral traffic, has grown slowly but steadily in the past couple of years. Combined traffic at Nouakchott and Nouadhibou ports grew from 1.27 million tons in 1998 to 1.42 million tons in 2001, a 2.8 percent annual growth rate; however, this moderate growth rate masks stark differences between both ports. In Nouadhibou, between 1991 and 2001, total non-oil and mineral traffic actually decreased from 672,000 tons to 428,000 tons, an average annual growth rate of -4.0 percent (see Figure 7), whereas in Nouakchott, total traffic grew from 843,000 tons to 1,447,000 tons, at an average annual rate of 9.4 percent between 1998

18 and 2003 (see Figure 8). Meanwhile, during these five years, container traffic in Nouakchott increased by 12.7 percent annually, or from 19,300 TEUs in 1998 to 39,600 TEUs in 2003, resulting in a slight growth in total share ofthe port’s traffic represented by containerized traffic (from 19 percent to 23 percent).

59. The diverging growth pattern between the ports reflects:

0 The rapid growth of the Nouakchott population and economy compared to that of Nouadhibou. Using electricity consumption as a measure of growth, Nouakchott grew by 29 percent between 1998 and 2002, compared Nouadhibou, which had a 3 percent decline; l5 0 The sharp reduction in total fish exports at Nouadhibou port from a peak of 362,000 tons in 1996 to a low of 162,000 tons in 2001 (see Figure 7) under the combined effect ofstiff competition from the Canaries Islands, depletion of fish stocks, and changes in fish handling regulations (fishermen are no longer obligated to discharge their catches at the port); 0 The rapid growth of clinker and wheat imports at Nouakchott port between 1998 and 2003 as a result of the development of a national cement production company and a deepening food production deficit. Combined volumes for these two items increased from 190,000 tons in 1998 to 612,000 tons in 2003, or from 22 percent to 42 percent of the port’s total traffic, respectively (see Figure 8).

60. Although traffic growth at these two ports is hard to predict, one would expect, nevertheless, that the diverging growth patterns between the ports will continue into the foreseeable future because the underpinnings of growth upon which each port activity relies are unlikely to change rapidly. For Nouadhibou, in fact, the negative trend may accelerate as the port’s over-reliance on fishing products exposes it to potential declines in fish catches and the completion of the paved road between Nouakchott and Nouadhibou may bring some shippers to seek economies of scale by importing all of their goods at a single port-Nouakchott. For Nouakchott, the rapid growth ofrecent years could slow if capacity constraints16 such as the draft limitation at this facility (less than 10 m) are not addressed rapidly or if some ofthe few imported goods fueling this growth (cement and food items) experience volatility. Accordingly, the Government is seeking financing for a US$80 million program to build a fourth quay at the port that will allow ships with 12 m drafts to serve the port.

l5Source: SocietC Nationale de I’EIectricitC - SONELEC l6The design capacity of the port of Nouakchott is estimated at anywhere from 1.3 to 1.5 million tons annually. However, the wharf has a capacity of about 320,000 tons, which could be brought in line through light rehabilitation, bringing total port capacity at Nouakchott to as much as 1.8 million tons.

19 800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

1 W Imports - Goods Import - Others Export - Fish Export -Others Transit 1

Figure 7: Nouadhibou Historic Port Traffic Data (metric tons)17

1,600,000

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

1998 1999 2000 2001 2002 2003

W Wheat El Ciment 0 Clinker 0 Sugar W Flour 0 Others * Figure 8: Nouakchott Historic Port Traffic Data (metric tons)18

61. Port activities benefit from large exports of iron ore from the northeastern part of the country as well as from imports of petroleum products. For now, iron ore is exported exclusively from a port terminal in Nouadhibou that is managed and maintained by the SNIM. This terminal,

Source: Port Autonome de Nouadhibou Source: Port Autonome de Nouakchott

20 which has a landing stage capable of receiving ships with 12 m drafts, has an annual capacity of about 15 million tons per year. Exports of iron ore from the terminal have declined slightly in recent years. From 1 1.4 million tons in 1998, exports declined to 10.0 million tons in 200 1 before increasing again to 10.5 million tons in 2002. Future export levels are expected to remain stable or increase slightly when additional sites are brought into production.

62. Imports of fuel products are also handled by SOMIR at a separate terminal at the port of Nouadhibou that can accommodate ships with up to 10 m drafts. It currently handles more than 300,000 tons of petroleum products a year. Prospects for its activities remain uncertain, however, because despite rising petroleum consumption in Mauritania (423,000 tons in 1998 to 501,000 tons in 2002) and the start ofoil production in 2005, PAN is about to lose its import monopoly to Nouakchott because a petroleum jetty and a storage area are nearing completion at PANPA.

Port Operators

63. Management and ownership of port infrastructure in Mauritania is fragmented among several ministries, port authorities, and private operators. For the port of Nouakchott, PANPA is the port authority, and the Ministry of Equipment and Transport oversees its operations. Likewise, stevedoring activities are provided by several private operators under a single company (the Port Facilities Company);

64, For the port of Nouadhibou, PAN is the port authority, and the Ministry of Fisheries and Maritime Economy oversees its operations. As with Nouakchott, stevedoring services are provided at the port by private operators (Le., SAMMA, MANUPORT, SAC, SCAM). Additionally, SNIM operates the mineral terminal under the supervision of the Ministry of Mining and Industry, and NAFTAL operates the fuel terminal under the supervision of the Ministry of Energy. Finally, two private operators (i.e., MASHERF and MAURITAMAR) provide ship repair services, mainly for fishing boats, at two floating docks with capacities of 1,000 and 300 tons.

65. Both port authorities have retained operational leadership of all port operations (e.g., piloting, towing, berthing, and cargo warehousing) with the exceptions of stevedoring services, which are handled by private companies. In both cases, importers and freight forwarders have indicated that waiting and turnaround times are reasonably short, that customs clearance occurs within hours instead of days, and that cargo pilferage problems are almost nonexistent. This positive operational environment makes both ports very competitive in the Sub-Saharan context, where clearance times are often expressed in days or even weeks. Port tariff levels, however, seem to diminish these advantages; data show that port charges in Nouakchott are two to two- and-one-half times higher than those levied at other West-African ports, and stevedoring charges are anywhere from four to eight times higher (see Figure 9).

21 ‘ $6,000 I $5,450 I $5,500 $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Nouackchott Tema Abidjan Dakar Port Charges E! Stevedore Charges for a 40 Foot Equivalent Container - Import d Figure 9: Comparative Port Costs in 2001 (in US$)I9

66. In terms of financial results, only information on PANPA’s operations was made available for this study. A quick review indicates that PANPA’s revenues reached UM 2,800 million in 2003, (US$9.6 million), while its net profits came to UM 352 million (US$1.2 million), which translates into a 12.7 percent net profit margin. Although these numbers appear good, they are somewhat misleading because PANPA pays only UM 120 million (US$0.4 million) in the form of an annual infrastructure fee to the Government to reimburse PANPA’s initial construction costs. Likewise, the figures account for only UM 427 million (US$1.4 million) in depreciation and receivables costs. Both figures (i.e., infrastructure payments and depreciation and receivables costs) significantly underestimate the real financial burden associated with the initial port construction cost during the 1980s. Furthermore, neither number reflects the high environmental costs of port operations since 1987 (i-e., sand accumulation north of the port and beach erosion to the south have created significant and costly environmental problems that have yet to be mitigated satisfactorily, and whose true costs are unknown).

67. A recently published report20 suggests that the impact of PANPA construction on the coast north and south ofNouakchott (the area covered by the study extended 15 km to the north and 25 km to the south of PANPA) is extensive, with as much as one million tons of sand accumulating northward ofthe port each year (resulting in an additional widening ofthe coast of as much as 35 meters per year in some areas) and as much as 750,000 tons ofsand missing south of the port, resulting in accelerating beach erosion of 25 meters a year. On the south side of the port, sea water incursion during high tide is becoming frequent in spite of the construction of a

l9 Source: Grand Domaine de Mauritanie. Port charges are based on invoices paid in 2001 for a 9,000 tons freighter calling at these ports and include: pilotage, towing, berthing and. 2o Etude de 1 ’Environnement aux Abords de Nouakchott, February 2004, CCPiUrban Development Project.

22 levyldyke system to prevent such a phenomenon. This incursion constitutes a direct menace to a large portion ofthe city ofNouakchott that is below sea level. Measures proposed to address this problem in the long run are expensive and range from extending and raising the levy/dyke system over a 5 km stretch to installing a pumping station at the port to continuously transfer sand from the north side to the south side ofthe facility.

68. The combination ofthe serious environmental problems created by the port and the lack ofaccounting ofthe port’s real construction and depreciation costs indicates that the real financial picture of PANPA’s operations is unknown. Considering the magnitude of these “hidden” costs, PANPA’s profitability may be illusory. A similar situation prevails in Nouadhibou, where PAN does not pay investment costs, although in this case the port does not appear to impose any dire environmental costs. Thus, the true overall costs of the port sector for the country remain uncalculated.

Maritime Sector Regulation

69. The oversight of the port infrastructure of Mauritania currently exercised by multiple ministries, along with the important participation of private operators in the port sector, raise many questions about regulatory consistency and fairness. First, it remains unclear which among the various ministries can ultimately act as an economic regulator to ensure fair and equitable access to the nation’s port infrastructure. Second, the effectiveness of the technical oversight is questionable because the regulatory oversight of these operations is also dispersed among ministries and agencies whose capacity to administer existing and proposed regulations is not strong. In such an environment, past and current efforts by the Government to develop a new maritime code as well as to ensure that Nouadhibou and Nouakchott ports comply with the International Standards on Port Security enacted by the International Maritime Organization by July 1, 2004, constitute some first, but insufficient, positive steps.

River Transport

70. The major river transport in Mauritania is at the stopping-over point ofthe Senegal River. The main stopping point is the Rosso Ferryboat station. A second point was opened in 1997 at Kaedi, but with limited access. A third crossing point is over the Diama dam, but it is not authorized for trucks, although it is free for light vehicles and has no waiting time. The SociCtC des Bacs de Rosso (SBREPIC) was created in 1994 and is under the jurisdiction ofthe Ministry ofEquipment and Transport. It has two 80-ton ferryboats, one that began service in 1977 and one that began service in 1988. The ferryboats were renovated in 1992 and 1997. Recent traffic statistics and the price, composition, and sharing ratio between the SBREPIC and the municipality of Rosso were not made available for this ESW. More analysis is planned of the impact on agricultural development of road projects with lending from the Organisation pour la Mise en Valeur du Fleuve Sinigal (OWS).

5. Transport Fiscal System and Infrastructure Cost Recovery

71. The expected expansion of private investment and production (in mining and oil production), combined with growing demand for social services and an increasing need to finance

23 the economic cost of social and economic infrastructure, will put more pressure on the Government’s budget. More revenue will be needed to finance increased spending following the Government’s strategy of enhanced growth and poverty reduction. However, raising fiscal revenues in the short and medium terms could be difficult unless the tax base is expanded, revenue collection is strengthened, and discretionary measures are implemented.

72. Mauritania needs to broaden its tax base and improve tax administration and collection. Tax exemptions (to the Government, SNIM, and diplomatic institutions) create substantial losses (up to 6 percent of GDP during the 2000-2002 period). A portion of these transport sector losses should be calculated and their impact analyzed. Integrating the informal sector into the formal economy can help increase fiscal revenue collection.

73. Fiscal policy for the whole sector as well as for each transport mode (air, roads, and maritime) should be reviewed, including the sector’s contributions to the budget through fiscal revenues. Particular attention should be given to how to assess and collect fiscal revenues for each subsector. The data provided during the ESW mission show that fiscal revenues from the road sector are almost double those of the maritime and air transport sectors, which confirms the importance ofthe road sector in Mauritania (see Table 4).

Table 4: Tax Revenue Generated by the Transport Sector (US$ thousand) 2001 2002 2003 Road Vehicle tax 882 999 1,585 Tax on profit 474 428 374 License fees 316 326 339 Subtotal I,673 I,753 2,298 Air Minimum taxa 388 506 81 2 License fees 21 21 21 Airport Tax 533 668 979 Subtotal 942 1196 1813

~~~ Maritime Minimum taxa 293 310 247 License fees 11 14 12 Value-added tax 429 45 1 545 Subtotal 733 775 804 Total 3,348 3,723 4,915 Share of Road Transport 50 47 47 Share of Air Transport 28 32 37 Share of Maritime Transport 22 21 16 a The minimum tax is 4% of gross revenues. For the aviation industry, the applicable tax is the greater of 4% of revenue or 20% of profit, which means in effect 4% of revenue, because aviation industry firms rarely make a profit.

24 6. Cross-cutting Issues

Transport and Poverty

74. The potential of transport to improve the lives of the poor is significant. However, an analysis ofthe factors affecting the daily mobility of the poor is required to better understand the link between transport and poverty. Such an analysis carried out under an investment program would help establish transport’s contribution to economic growth and address the issue of accessibility to social services, production, and rural areas. The following factors should be included in any analysis conducted:

0 Proportion of household spending on transport (including the cost oftravel by foot) 0 Proportion of transport costs to the total value of imported goods (A significant reduction in transport costs can greatly lower the price ofgoods purchased by the poorest people.) 0 Travel time, which is highly correlated to geographic location 0 Vulnerability to transport externalities such as road accidents 0 Accessibility and reliability of services.

Transport and Safety

75. The high accident rate along Mauritania’s roads (800 per 10,000 vehicles, compared to 92 per 10,000 vehicles in Tunisia) is a source of loss and damage to trade and a major cause of injury and death. The road sector carries 90% of passenger transport and about 80% of goods transport and is, by far the most dangerous transport mode. Insurance companies give the following reasons for road accidents:

0 Private and commercial vehicle fleets are old and unsafe to operate; 0 Driver knowledge and police enforcement oftraffic laws are minimal; 0 Vehicle inspection rates are low because of a lack of enforcement of inspection rules on the part ofthe police and gendarmerie; e Road traffic management and signaling equipment is lacking or deficient; 0 Facilities and infrastructure (parking facilities) at roadside stations are inadequate; 0 Parking facilities in urban centers near shopping centers and schools are lacking. It was reported that 70 percent of accidents occur at non-designated parking facilities or with abandoned vehicles on the road; 0 20 percent of accidents are a result of collisions with animals, 7 percent are due to illegal trespassing, and 3 percent come from rollovers caused by inadequate tires; and 0 Accident data, when reported by enforcement officials, are usually incomplete, which makes detailed analysis ofaccident conditions unverifiable.

76. It is therefore imperative that the Government develop a road safety strategy that is based on improving infrastructure, driver knowledge, and vehicle condition. The strategy should address the following issues: (i)reform ofthe institutional setup, including establishment of clear legislative guidelines defining the responsibilities of the police, transportation agencies, public works agencies, and insurance agencies in coordinating safety programs at local and national

25 levels; (ii)safety initiatives to identify and improve road safety conditions at blackspots;21 (iii) the causes and locations of road accidents in relation to local initiatives; (iv) the implicit economic costs of accidents, and cost-effectiveness comparisons with other interventions; (v) how to raise public awareness of the risks involved in transport, especially road safety issues, through public information campaigns and education programs, particularly in primary schools; (vi) how to enforce driver skills requirements, vehicle safety inspection, and vehicle weight restrictions.

Trade and Transport

77. Mauritanian exports rely in part on the country’s ability to liberalize its economy, remove hidden barriers to trade, harmonize trade procedures with those of its neighbors, and monitor fair market access to all traders (ie., dismantle transport cartels). The Government’s ability to attract private investment in the sector will depend, in part, on its implementing these initiatives, lowering transport costs, and developing adequate regulations and laws.

78. The link between trade and transport will rely on the competitiveness of the various modes of transport. Competitiveness depends on both the quality and the cost of services. According to users, prices in Mauritania are high for all transport subsectors. For example, truck transport price per ton/km is US$0.21 in Mauritania compared to US$ 0.06 in Senegal and Benin. As mentioned, a study ofsector costs and the fiscal system would be useful, and is included in the terms of reference for the sector strategy design study. As road conditions have improved and rehabilitation has begun on airport infrastructure, the cost question has become increasingly important.

Regional Integration and Transport Facilitation

79. Mauritania has a favored position between the United Arabic Maghreb and ECOWAS and WAEMU. It should take advantage ofthis position to diversify its trade with its neighbors. Its position should provide an alternative to part of Mali’s international trade. Along these same lines, ongoing construction work on the Nouakchott-Nouadhibou road, and planned rehabilitation under the OMVS road construction program to link the Diama Dam with the Nouakchott-Rosso road, should reinforce Mauritania’s international trade linkages, especially with Senegal and Morocco, and beyond, with Europe. Indeed, once these transport infrastructure improvements will have been completed, international goods will be able to travel from Dakar to Morocco toward Europe by paved road. Furthermore, the construction ofthe Nouakchott-Nouadhibou road will create a competitive environment among different transport modes and have an impact on air and maritime transportation.

80. Closing Mauritania’s transport infrastructure and services gap can be done by: (i) reducing the costs and improving the quality oftransport services; (ii)increasing both public and private financial investments in transport infrastructure; (iii)improving maintenance oftransport infrastructure assets; (iv) removing formal and informal barriers to movement of goods and people; and (v) supporting regional cooperation and integration with markets for transport services.

21 Locations where road traffic accidents occur repeatedly.

26 Institutional Capacity

8 1. Institutional capacity in public expenditure management must be strengthened. Only 2 percent of public spending in the transport sector is currently devoted to operating expenses, while 98 percent goes toward investments. This situation has resulted in investment programs implementationand timing problems as monitoring capacity for these programs has been found to be weak. Therefore, sufficient funds must be allocated to operating expenses so that investments can be monitored and implemented in a timely manner. This would enhance the absorption capacity for projects and the speed at which transport investments are executed.

82. Monitoring and control ofthe budget process need to be strengthened as well. The budget law must be structured along programs and activities lines in order to determine, through outcome indicators, the links between human and financial resources input and output. The 2002 transport MTEF which covers the period 2003-2007 supported an increase in operating expenses to 5 percent of capital investment spending as well as an increase in total spending for the transport sector, currently standing at 3 percent of GDP, to 7 percent of GDP.

83. The 2002 public expenditure review should be updated to estimate current sector spending as well as related cost-recovery factors and to determine additional funding needed. In addition, the ESW should provide an opportunity to review the 2002 MTEF to ensure that future budget planning is based on the following methodological approach: (i)define sector objectives and related indicators (process, result, and impact indicators); (ii)implement a validation process for planning activities to ensure that only financial and institutional needs are planned yearly to reach these objectives; and (iii)carry out multiyear activity programming to achieve these objectives and the correct ratio of operating expenses to investments. This exercise should be conducted using a participatory approach with a team including the Ministry of Finance, the Ministry of Transport, and the Ministry of Planning. The exercise could also benefit from experience acquired from the ongoing MTEF for the transport sector in Mali which is using a similar approach.

84. Changes are required in the composition of public spending to facilitate the role of the private sector in providing transport services and launching new economic activities. An action plan should be established as part of the regulatory and institutional framework, defining detailed activities to be carried out and allocating related resources;

85. General MTEF allocations should be based on a vision for each sector and planned programs rather than on past trends. Because there is no reliable analysis of the link between ongoing and new programs, the global MTEF was based on past trends and current policies instead of on possible changes and planned programs. This resulted in a large discrepancy (UM 13,000 million [US$44.8 million]) between the amount earmarked for the global MTEF in the transport sector (UM 7,300 million [US$25.2 million]) and the amount that was actually estimated to be needed (UM 20,300 million [US$70 million]).

Public-Private Partnerships

86. Experience elsewhere with public-private partnerships should be reviewed, in the transport sector as well as in other sectors, to identify the factors that enable private participation.

27 For example, the regulatory system put in place with the creation of the BNT has failed, whereas the regulating agency in the telecommunications sector is more successful. Promoting public- private partnerships calls for clarification of the existing legal framework as well as other sector- wide actions.

Environmental and Social Dimensions of Transport

87. The environmental impact and the social dimensions of transport need to be considered in all future transport programs. Any new sector strategy should address environmental impacts and offer guidelines to define, identify, and mitigate them. Because of the relatively low impact of rehabilitation and maintenance work on the environment and social context, a matrix of impact and mitigation activities should be developed and serve as reference point. However, for new construction, environmental impacts and the social dimension should be specified and included as part of the justification of any investment program.

7. Recommendations

88. The transport sector in Mauritania is plagued by a series of problems that in many ways relate primarily to the lack of a strategic vision to guide development policies for the sector and its subsectors. The recommendations in this report acknowledge this important problem in each subsector while trying to put forward critical actions that could be taken by the Government to try to correct the most serious deficiencies identified in the prior sections of this ESW.

Road Transport

89. In road transport, the Government could make a strong case for donor support by committing to: (i)adjust current imbalances between investment and maintenance spending; (ii) improve road maintenance financing mechanisms; (iii)carry out a balanced road investment program; (iv) strengthen road management; (v) revisit existing regulations to ensure effective liberalization of transport services; (vi) review the fiscal policy and tax collection procedures in the sector; (vii) improve the balance between transport supply and demand; and (viii) support the modernization of the trucking industry.

Road infrastructure

90. Correct the imbalance between investment and maintenance. The Government should take urgent action, while the second phase of the NTP is beginning, to avoid the funding imbalance observed in the first phase of the NTP between new construction and road rehabilitation. This action could consist of reviewing how available funding could be better shared between new construction and rehabilitation works. In addition, and more importantly, the Government should seek to provide the DTP and the ENER with sufficient resources to cover current maintenance needs to stop the network from deteriorating further from a lack of maintenance.

91. Improve road maintenance financing mechanism. The Government should look into: (i)designing a mechanism to increase actual resources to cover, with SNIM contributions, the routine maintenance needs of the priority network; and (ii)launching quickly the EU-funded

28 study for the institution of a second generation Road Fund to identify sustainable ways to complement SNIM resources in funding the road maintenance program. Depending on maintenance needs and the resources available, the periodic maintenance program could be financed by donors’ contributions during a transition period until road fund resources are sufficient to ensure proper financing of routine and periodic maintenance.

92. Pursue road investment program. Despite the investment program already implemented as part of the NTP, Mauritania road network density continues to prove insufficient and, therefore, warrants the continuation of an investment program designed to improve the mobility of goods and persons. This program, which will be defined in the sector strategy study, should ensure that the current EU road program (the 2002-2007 Nineth European Development Fund program for €88 million) will be complemented by other donors’ road programs. The new program should also consider the regional dimension of the country’s transport network by enhancing north-south and east-west transport corridor connections.

93. Strengthen road management. The proposed clarification of responsibilities among the agencies and entities managing the road sector will raise the problem of the capacity of these organizations to take on new roles and responsibilities. More specifically, improvements in Road Management Bureau functioning will affect DTP’s ability to manage the road network. Likewise, the division of planning and maintenance oversight roles between the DTP and urban and rural communities will require the transfer of know-how from the central to the local governments. Finally, ENER’s role will need to be revisited to ensure the proper growth of SMEs’ participation in road maintenance works.

Transport Services

94. Update regulations to ensure effective liberalization of transport services. The control and rotation systems in place at the truck depot as well as the police controls outside the depots ignore the issues of carrier licensing and free competition. This situation results in a lack of progress in professionalizing the trucking industry and in increasing its productivity. Any regulatory changes should, therefore, seek to address these outstanding issues.

95. Review fiscal policy and tax collection procedures in the sector. According to data provided from some transport federations (other than the FNT), the amount of taxes paid under the current departure authorization voucher scheme exceeds fiscal revenues significantly (Le., UM 3 billion [US$10.3 million] compared to UM 666 million [US$2.3 million]). This imbalance is prejudicial to the sector’s competitiveness and, thus demands a review of current fiscal policy and tax collection procedures.

96. Improve balance between transport supply and demand. After updating the sector’s regulations, the Government should review rapidly the role and responsibilities of the BNT and FNT in the trucking industry. The review should aim primarily at ensuring that competition can flourish in the trucking industry. Greater competition will improve the quality and level of services provided by truck operators while lowering the cost of transport, including to areas of the country covered under public service obligations.

29 97. Support the modernization of the trucking industry. Discussions with transport operators have revealed how important it is to ensure that these operators have access to credit for modernizing their fleets. The upcoming sector strategy study is expected to provide recommendations on this important issue. However, expectations for a definitive solution should be managed carefully because no perfect solution has been reached anywhere in West Africa.

Air Transport

98. The Government should consider the following priority actions in the aviation subsector: (i) strengthen the Civil Aviation Directorate to make it administratively and financially independent, (ii)carry out emergency rehabilitation work on the airstrips of Nouakchott and Nouadhibou airports, (iii)raise airport security at these two airports to international standards, and (iv) take action necessary to ensure that the SAM concession contract clauses are enforced.

99. Strengthen the Civil Aviation Directorate. The Civil Aviation Directorate’s inability to implement and enforce most ICAO standards for the civil aviation sector represents a significant threat to Mauritania’s civil aviation growth. Accordingly, the Government should accelerate efforts to develop an action plan for transforming, in a year’s time, the Civil Aviation Directorate into a financially and administratively autonomous agency capable of retaining skilled professionals (following the reform model adopted by Senegal, Cape Verde, and CGte d’Ivoire). As part ofthis endeavor, the Government should ensure that an adequate portion of current taxes (e.g., airport security taxes) collected ‘-from users and operators is made available to this autonomous entity to secure its financial and technical viability. The gravity of the current situation cannot be stressed enough because any attempt to modernize the sector’s infrastructure and operators will not yield the expected return unless the agency in charge of overseeing the sector is capable of enforcing international civil aviation standards. In the medium term, inaction on this important issue will result inevitably in market-access limitations by aviation operators and increase operating costs significantly. This reform will require a long-term commitment from the Government because recruitment, training, and retention of qualified experts will be an expensive and arduous task, for which the ultimate goal is Category Icertification by the U.S. Federal Aviation Administration.

100. Carry out emergency airport rehabilitation work. Current operational conditions at Nouakchott and Nouadhibou airports, which handle more than 90 percent of all passenger traffic in Mauritania, raise serious safety issues. Indeed, deterioration of the runways, taxiways, and apron pavement is so bad that the possibility of tire explosion on takeoff and landing is unacceptably high. Because the airport service provider, the SAM, does not have the resources to finance the resurfacing of these aprons, taxiways, and runways, the Government should take on this responsibility with the goal of completing this rehabilitation program within a short timeframe (i-e., before the end of2009, even if this means delaying other investment programs.

101. Bring airport security to ICAO standards. As observed, current security standards at Mauritania airports are woefully inadequate. This situation needs immediate action on the part of the Government because lax security is neither acceptable nor tolerable in a post 9/11 context. Mauritania’s security problems are not so much related to deficiencies in security equipment as they are to personnel training and political leadership. Accordingly, based on the example from Senegal, Ghana, and Cape Verde, police personnel in charge of airport security in Mauritania

30 should be specifically trained to ensure proper security at the nation’s airports. This means, more than likely, the creation of a dedicated elite group of security personnel reporting directly to the Prime Minister or the President. Likewise, it means conducting a thorough diagnosis of current airport infrastructure to identify any security gaps as well as creating a crisis management center, adopting appropriate legislation to enhance airport security (i.e., including a security component within existing civil aviation code, adopting conventions on explosives markings, etc.), and strictly enforcing access to restricted zones in each airport through the use of electronic badges for airport, airline, and law enforcement personnel. Partial or complete financing of these measures should be ensured by collecting a reasonable airport security tax whose administration initially should be left to the SAM and then, once fully operational, to the new civil aviation agency to ensure the tax is spent only on airport security purposes. As for the other priority actions listed above, the Government actions in the area of security should be in place by no later than the end of2005.

102. Review the SAM’s concession. Enforcement of the SAM’s concession lacks effectiveness, as shown by the SAM’s inability to collect payment arrears from delinquent airport users or raise revenues necessary for investment. Furthermore, SAM shareholding is too divided, and its capital is too low to make it a credible airport operator. While keeping to the terms ofthe current concession contract, the Government should help the SAM clean up its finances by clearing outstanding payables and receivables and review its shareholding structure to bring in a majority owner (preferably a recognized airport operator) through a sizeable increase in capital, thus bringing SAM financial ratios to healthier levels. This reform should be carried out as quickly as possible (i.e,, in the next two years), with the additional aim of securing private investment for the new Nouakchott international airport.

Maritime Transport

103. In the maritime sector, the Government should consider developing rapidly a comprehensive maritime sector strategy to gather the information necessary to make informed, consistent decisions on Mauritania’s port development goals and objectives. The development of this strategy could be envisaged as a result ofthe general review of the maritime sector slated to be organized by the Government during the first half of2005. The strategy should seek to answer the following questions: (i)What is the role ofthe port system in the country’s transport sector? (ii)Should the port system be geared towards serving the nation’s needs by achieving the lowest user costs, or towards competing against other large regional port systems (e.g., Dakar, Abidjan, Tema) for regional import/export traffic (especially for landlocked countries such as Mali)? (iii) What should be the role and financial obligations of the Government in this sector? and (iv) How should investment priorities be assessed? The answers to these questions should help clarify the Government’s position on the following issues affecting the port system in Mauritania: (i) unifying the port administrative oversight, (ii)identifying the true operational costs of the port system, and (iii)lowering stevedoring service and port facility charges.

104. Unify port administrative oversight. It is obvious to all involved in the port sector that the current division of port administrative oversight among multiple ministries is detrimental to achieving needed coherence and consistency in the nation’s port policy. This problem must be solved quickly, because current investment plans in the port sector (such as the fourth quay at

31 Nouakchott) need to be evaluated according to their benefits for the network as a whole instead of on a port-by-port basis, as is currently the case.

105. Identify true port operational costs. The current port sector organization has resulted in a worrisome understatement of the true cost of building and operating port infrastructure in Mauritania. Without such a basic understanding, Government authorities are ill-equipped to make decisions on port infrastructure investment or review the adequacy of port tariffs. It is important, therefore, that PANPA and PAN accounts reflect the financing and depreciation costs ofthe port infrastructure they manage, if not their environmental costs. This consolidation of financial accounts should finally give the Government an accurate understanding ofthe true operating cost of its port system. If this exercise reveals the need for the Government to subsidize PANPA and PAN, it will have the value ofmaking existing de facto subsidies visible.

106. Reduce stevedoring and port services charges. Although stevedoring services are fully liberalized, the Government has tolerated, at least in Nouakchott, the creation of a single stevedoring company whose service offering is, by nature, quasi-monopolistic. Because the size of the market at the country’s ports may not be sufficient to allow for effective competition, the Government should look into the possibility of regulating maximum stevedoring prices, with the stated goal of lowering them gradually to at least West African averages. The same approach should be considered for other port charges to foster productivity and operating cost improvements by PANPA and PAN.

Institutional Capacity

107. Improve the institutional capacity and the efficiency and effectiveness of public expenditure. Only 2 percent of public expenditures in the transport sector has been devoted to operating expenses, while 98 percent has gone to investments. As human and financial resources are too low, problems in term of investment program implementation and timing have emerged. Accordingly, the Government should seek to increase financial and human resources to more appropriate levels in order to meet investments implementation needs.

108. Strengthen the monitoring and control of the budget process. The budget law must be structured along programs and activities lines in order to determine, through outcome indicators, the links between human and financial resources inputs and outputs, based on the following methodological approach: (i)define sector objectives and related indicators; (ii)implement a validation process for planning activities to ensure that financial and institutional needs are planned yearly to reach these objectives; (iii)carry out multiyear activity programming to achieve these objectives and the correct ratio ofoperating expenses to investments.

32 Annex 1. Status of NTP Investment Projects at Midterm

Status of NTP Investment Projects at Midterm (1998-2002)

Length 1997 Cost a Road Project (km) (UM million) Financing Source Status in 2003 Rehabilitation and Reinforcement Projects with Confirmed Financing 1. Aleg-Magta Lahjar 108 1,625 AFSEDIIRM Completed 2. Magta Lahjar-Djouk 134 2,003 EU Completed 3. Djouk-Kiffa 106 1,585 IDBIIRM Completed 4. Nouakchott-Tiguent 106 861 EU Waiting for launch of studies 5. Tiguent-Rosso 98 849 EU Waiting for launch of studies

6. Boutilimitt-Aleg 108 1,148 EU 8 Waiting for launch of studies Subtotal 660 8,071 Rehabilitation Projects for Which Financing is Still Needed for Studies and Works 7. Kiffa-Tintane 140 1,512 To be determined TOR for studies available 8. A’ioun-Timbedra 170 1,866 To be determined TOR for studies available Subtotal 31 0 3,378 Paving Projects with Confirmed Financing 1. N’Beika-Tidjikja 123 2,878 IRM Works completed 2. Zravia-Tamchekett 96 273 IRM Works completed in Earth Road 3. Aioun-Hassi 53 EU Work at beginning level Hassi-Gogui 72 2,925 IDBIOPEPIIRM Works ongoing Bidding document under 4. Rosso-BoghB 190 9,880 EU preparation 5. Nouakchott-Nouadhibou 470 13,198 AFSEDIIDBIIRM Work at beginning level Subtotal 1,004 29,154

Total 1,974 40,603

a Including taxes Note: IDB-Islamic Development Bank AFSED-Arab Fund For Social and Economic Development IRM-Islamic Republic of Mauritania Source: DTPI MET (Baylatiy report, April 2003).

33 Non-project Works Executed During First Phase with Government Financing

Length cost Road Project (km) Tvae (UM million) Status ~~ 1. Tiguent-Mederdra 52 Earth road 102 Completed 2. Atar-Kseir-Torchane 25 Paved road 920 Ongoing 3. Mederdra-R’kiz 56 Earth road 510 Ongoing 4. Niabina-M’Bagne 16 Earth road 96 Completed 5. Nouatil Pass 3.5 Paved Road 440 Completed 6. Atar-Chinguetti 80 Earth road 200 Completed 7. Chinguetti-Ouadane 110 Earth Road 400 Completed Total 342.5 2,668 Source: DTP/ MET (Baylatry report, April 2003).

34 Annex 2: Road Infrastructure Investment Program

Cost (Including Taxes) Length Road Project (km) UM million US%million Financing Observations Rehabilitation and Reinforcement on Paved Roads Phase l(1998-2002) Aleg-Magta-Lahjar 108 1,625 6.50 AFSED Financing underway or under negotiation Magta-Lahjar-Djouk 134 2,003 8.01 EU Djouk-Kiffa 106 1,585 6.34 IDB Nouakchott-Tiguent 106 861 3.44 EU Financing to be determined Tiguent-Rosso 98 849 3.40 EU Boutilimit-Aleg 108 1,148 4.59 EU Kiffa-Tintane 140 1,512 6.05 IDB, AfDB, others Aioun-TimbCdra 170 1,866 7.46 IDB, AfDB, others Subtotal Phase 1 970 11,449 45.79 Phase 2 (2003-2007)

~~ Boghe-Kaedi 100 849 3.40 TOR prepared, studies to be completed Tintane-Aioun 70 768 3.07 IDB, AfDB, others TOR prepared, studies to be completed Timbtdra-Nema 106 1,126 4.50 IDB, AfDB, others TOR prepared, studies to be completed Boghe-Aleg 65 484 1.94 TOR prepared, studies to be completed Subtotal Phase 2 341 3,227 12.91 Subtotal Rehabiliation 1,311 14,676 58.70 Paving of Unpaved Roads Phase l(l998-2002) N’Beika-Tidjikja 123 2,878 11.51 IRM Financing confirmed Aioun-Kobtni-Gogui 125 2,925 11.70 EU/IDB Rosso-BoghC 190 9,880 39.52 EU, AfDB, OPEP, IRM Nouakchott-Nouadhibou 470 13,198 52.79 Subtotal Phase 1 908 28,881 115.52

~~ Phase 2 (2003-2007) Atar-Tidjikja 395 17,720 70.88 IDB, AfDB, AFSED, others Feasibility studies completed Kaedi-Maghama 105 2,948 11.79 TOR prepared, studies to be completed Earth Road by IRM. Studies to be Nema-Amourj-Nara 230 6,459 25.84 completed Kiffa-Kankoss-Selibaby 240 5,616 22.46 TOR prepared, studies to be completed Sangrafa-Letfetar 40 936 3.74 IRM TOR prepared, studies to be completed KaCdi-Mbout-Selibaby 230 5,382 21.53 EU Works to be planned Kseir-Torchane-Choum 100 2,808 11.23 EU Bidding document available Maghama-SClibaby 110 2,574 10.30 TOR prepared, studies to be completed Selibaby-Gouraye 40 936 3.74 EU Works to be planned NCma-Oualata 120 1,040 4.16 Atar-Chinguetti 80 1,872 7.49 Works to be planned Subtotal Phase 2 1,690 48,291 193.16 Subtotal Paving 2,598 77,172 308.68 Total 91,848 367.38

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