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IV. TRADE POLICIES BY SECTOR

(1) INTRODUCTION

1. Mauritania is a country with a rural, mainly livestock economy, with the addition, since independence, of mining and fishing and, to a lesser extent, manufacturing.1

2. The structure of Mauritanian production has remained relatively stable. The traditional sectors continue to dominate the economy in terms of contribution to GDP and employment (chart IV.1). The agricultural sector accounts for about 18 per cent of GDP (nearly 14 per cent from livestock-raising alone) and employs about 60 per cent of the labour force. Agriculture continues to be the second largest contributor to GDP after services, but since the 1980s its importance has decreased, due mainly to the decline in herding. The contribution of the services sector rose from 42.2 per cent of GDP in 1990 to 49.9 per cent in 2001 (including non-market services provided by Government, whose share of GDP fell from 12.9 to 10.7 per cent).

3. The dominant sectors in terms of exports and contributions to the budget are fishing and mining, which alone account for almost 100 per cent of exports and contribute about 40 per cent of Government revenue. At the same time, they make only a minor contribution to GDP (4.2 and 12.8 per cent, respectively). Small-scale fishing represented only 1.2 per cent of GDP in 2001.

4. Manufacturing industry, which consists mainly of the agri-food and chemical industries, is relatively recent and is contributing about 4.2 per cent of GDP. Almost all of its production is consumed locally.

5. In agriculture, after having followed a policy of self-sufficiency, in the 1990s the Government began liberalizing the sector: the State enterprise SOMINEX lost its import monopoly, export taxes and the import quota linking rice imports with the purchase of local rice were abolished and agricultural credit, formerly reserved mainly for rice production, was made available for other crops. The Government's priority in the sector remains food security.

6. Since 1994, the fisheries sector has been gradually liberalized. As Mauritania's coastal waters are considered to be among the richest in the world, the sector is attracting numerous foreign economic partners. Nevertheless, the development of the sector is encountering a number of constraints, such as the overexploitation of certain resources and the ageing of the fleet. In 2000, to improve the management of the sector, the Government adopted a new Fisheries Code aimed at promoting small-scale coastal fishing, which creates jobs and is considered to be more resource- friendly.

1 There is an informal sector which plays an important part in creating jobs. According to a study carried out jointly by the Government, UNDP and ILO, in 1995 the urban informal sector employed about 170,000 people as compared with 41,000 in structured employment. It consists of small and micro enterprises operating in the retail trade, the services sector and the craft industries ("Mauritanie" 1998), Marchés tropicaux et méditerranéens, special issue, March). WT/TPR/S/103 Trade Policy Review Page 56

Chart IV.1 GDP by sector, 1990-2001 Percentage

1990 2001

Horticulture Horticulture Indirect taxes 3.7 Indirect taxes 3.5 10.2 10.0 Livestock Livestock 14.1 21.4 Other Other Small-scale services services fishing 18.7 16.1 1.2

Small-scale Mines fishing 12.8 0.8

Shops, hotels Mines Shops, hotels and restaurants Fishing 12.4 and restaurants 17.7 Industry 12.9 Fishing 4.2 industry Other 5.0 Construction manufacturing Transport and Construction Transport and Other and public industries telecommunications and public telecommunications manufacturing works 4.2 5.1 works 9.9 industries 6.2 5.5 4.2 GDP: UM 82,353 million GDP: UM 245,596 million

Source: Office national de la statistique (1998), Annuaire Statistiqu; and data provided by the Mauritanian authorities.

7. The mining sector is considered to be the sector of the Mauritanian economy with the greatest potential. In 1999, the Government adopted a new Mining Code to provide a more attractive legal and fiscal framework for investors. It simplified the procedures for allocating mineral titles and offered exemptions from duties and taxes during the exploration period and the first five years of exploitation.

8. In the mid-1990s, the Government also began liberalizing the services sector, in particular air transport and telecommunications services, by opening them up to foreign investors and partially privatizing the State enterprises active in these areas.

(2) AGRICULTURE

(i) Overview

9. Agriculture accounts for about 18 per cent of GDP and employs nearly 60 per cent of the labour force.2 Livestock-raising is still the dominant activity and alone accounted for 14.1 per cent of GDP in 2001. The main agricultural activities are growing food crops and the nomadic herding of cattle and sheep. The principal crops are dates, millet, sorghum, paddy rice, maize, vegetables and

2 "Mauritanie" (1998), Marchés tropicaux et méditerranéens, special issue, March. Mauritania WT/TPR/S/103 Page 57

food root crops.3 Almost all agricultural production is consumed locally. As local production covers only about 40 per cent of the country's food requirements, local crops have to be supplemented by imports and international aid during periods of drought.4

10. According to the information available, the principal agricultural exports are cattle, hides and skins, and gum . Exports of cattle on the hoof are difficult to evaluate owing to the lack of official statistics. However, the Mauritanian authorities estimate traditional exports of cattle on the hoof to the Malian, Senegalese and Moroccan markets at 30,000 to 70,000 head of cattle and 300,000 sheep.5 In 1997, the most recent year for which statistics are available, the Central Bank of Mauritania estimated that in value terms exports of hides and skins amounted to UM 51 million.6 Gum arabic production is gradually recovering after declining during the 1980s7, thanks to better weather conditions and increased participation by villagers.8 At present, according to the authorities, production is somewhere between 1,500 and 2,000 tonnes per year; direct and indirect exports9 were estimated at 1,000 tonnes in 1997.10 Mauritania has also begun exporting French beans, okra and melons.

11. Agriculture in Mauritania is heavily dependent on the weather conditions. Although it is a large country, less than 3 per cent of the land (502,000 hectares) is arable and only 1 per cent receives enough rain to grow food crops – mainly in the valley of the River. The country's irrigable potential is 137,000 hectares, of which only 33,600 hectares are currently in use, mainly for intensive rice growing, the rest being devoted to market gardening.11 Some 10 per cent of the country is grazing land.

12. The livestock subsector has been seriously affected by repeated spells of drought during the last 30 years, especially in 1972 and 1982-84. Some herds have still not fully recovered: for example, there were 1,394,000 head of cattle in 2001 as compared with 2,000,000 in 1969. However, in normal times, meat production is sufficient to meet local demand.12

(ii) Agricultural policy

13. Up to the beginning of the 1990s, the Government pursued a policy of food self-sufficiency, under which the importation of staples was controlled by the State trading enterprise SONIMEX. Since 1989, under the Agricultural Sector Adjustment Programme (PASA), the Government has been liberalizing the sector and gradually disengaging itself from direct participation in production. The measures implemented include the progressive elimination of SONIMEX's monopoly between 1990

3 United Nations Food and Agriculture Organization (undated). 4 In 1999, agricultural imports amounted to 36.4 per cent of total imports (table AI.3). 5 Mauritania is traditionally considered to be the region's biggest exporter of cattle on the hoof. However, it is difficult to estimate the volume of these exports as they fall mainly within the informal sector and accordingly are not recorded in the official trade statistics. 6 World Bank (2001b), Volume II, chapter 4. 7 Gum arabic production fell from 5,700 tonnes per year between 1968 and 1972 to 120 tonnes per year towards the end of the 1980s. 8 Ministry of Trade, Craft Industries and Tourism (2001). 9 There is substantial informal trade with Mali and Senegal. 10 Ministry of Rural Development and the Environment (2001). 11 Irrigated rice growing has been developed in the valley of the Senegal River thanks to the construction of two dams by the Senegal River Development Organization (OMVS), of which Mauritania is a Member together with Mali and Senegal. 12 Africa Institute of South Africa, online information. Available at the following address: http://www.ai.org.za/html/Restricted/body_mauritania.html. WT/TPR/S/103 Trade Policy Review Page 58

and 199313; the abandonment, in June 1999, of the former quota system which linked the importation of rice with the purchase of local paddy (box IV.1); and the abolition of export taxes (present in the legislation but, according to the authorities, never applied) on agricultural products such as live animals, meat and edible meat offal, certain dairy products, gum arabic, salt, and hides, in January 2000 (chapter III (3) (ii)).

14. As envisaged in the Letter on Irrigated Agriculture Development Policy to 2010 and the Programme for the Integrated Development of Irrigated Agriculture in Mauritania (LPDAI), the Government has also continued reducing customs tariffs and has standardized VAT at 14 per cent; and some food imports have been zero-rated for VAT.

15. One of the key features of the reforms has been the expansion of rural credit, which is essential to offset the lack of self-financing among farmers. This policy found concrete expression in the establishment, in 1992, of the Union nationale des coopératives agricoles de crédit d'epargne de Mauritanie (National Union of Mauritanian Agricultural Savings and Loan Cooperatives) (UNCACEM), with support from the budget (section (6) (ii)). UNCACEM grants loans to farmers (with the exception of livestock-raisers) at below market rates.14 Until recently, loans were strictly reserved for rice production but in 1997 UNCACEM undertook to diversify credit facilities and grant long-term loans. According to the authorities, broad progress has been made with diversification, whereas a start has still to be made with the granting of long-term loans.15 Within the general context of the PDIAIM (see below), UNCACEM has adopted a development programme which includes the objective of self-financing for 2002.

13 SONIMEX was established shortly after Mauritania achieved independence, to ensure that the country was supplied with staple food. Originally, it was responsible for the importation of staples such as rice, tea and sugar. It also exported a number of products, in particular gum arabic, until the international market for that product disappeared. With time, SONIMEX's imports became more diversified and it also began marketing certain local products such as rice. It had a dual function, simultaneously ensuring that outlying areas were kept supplied and controlling prices. However, with the abolition of the monopoly, numerous private operators began importing agricultural products. At present, it mainly imports tea, sugar and rice. At the Government's request, SONIMEX may also import other products in order to regulate the market, for example in cases of excessive speculation or market disruption (as has already occurred with flour and cement). 14 The difference in rates is tempting some beneficiaries to finance non-agricultural activities with loans intended for agricultural production. According to the World Bank, in some cases, this is causing delays in the repayment of loans allocated for financing agricultural activities, i.e. short-term activities, and holding back the start of the new production season (World Bank (2001b), Volume II, chapter 6). 15 Ministry of Rural Development and the Environment (2001). Mauritania WT/TPR/S/103 Page 59

IV.1: The rice sector in Mauritania

The development of rice growing and its predominance over other rural activities are mainly the result of the Government's efforts in the areas of irrigation, land policy and sectoral support.

Up to the 1990s, the Government pursued a policy of food self-sufficiency and imports of staples, including rice, were controlled by SONIMEX, which held a monopoly. The price of rice was fixed. In 1989, the Government introduced the Agricultural Sector Adjustment Programme (PASA), which marked the beginning of the liberalization of the sector and the withdrawal of the Government from involvement in production. As a result, the rice import monopoly was abolished and collection by the public authorities was liberalized. To prevent a decline in sales of local rice, in 1993, at the Government's initiative, the operators formed a "pool of importers" managed by SONIMEX, with a view to ensuring outlets for local rice and guaranteeing a price for paddy. Under this system, the marketing of rice was characterized by a high fixed price for paddy (whatever the quality of the rice) and by the coupling of imports with the marketing of local rice. To offset their imports, importers had to buy an equivalent quantity of local rice. The financial cost of marketing was borne by the State.

During the 1990s, the Government maintained the incentives for rice production. In addition to the sales guarantee represented by the pool system, the rice sector benefited from government investment and subsidized rice marketing loans, as well as from direct subsidies for rice production. Agricultural credit was aimed mainly at financing the rice crop.

The level of border protection also appears to be one of the highest in the region. In addition to customs duties, value added tax and minimum flat rate tax (IMF) are also applied, although it seems that these last two taxes are not imposed on locally-produced rice. In 1998, total taxes applied to imported rice varied between 48 per cent and 58 per cent depending on the quality of the rice. In 1999, total taxes fell slightly to 45 per cent.

Rice production increased considerably during the second half of the 1980s. The rice-growing area rose from 6,600 hectares in 1986-87 to 21,790 hectares in 1999/2000. However, despite the Government's efforts, progress remained limited and, in particular, yields remained low and sometimes even declined. The cultivated area fluctuated sharply and the quality of the rice failed to match consumers' expectations.

In 1999, within the context of the Letter on Irrigated Agriculture Development Policy (LPDAI), the Government decided to abolish the pool. The importation of rice was liberalized and the purchase of local production was no longer guaranteed. Prices were also liberalized. During the 2000/2001 season, a new rice marketing system was introduced to replace the buyer's pool. Paddy is marketed by the millers and economic interest groups (GIE). Financing is provided by UNCACEM. SONIMEX buys white rice from the operators at the market price.

To help the producers overcome the deficiencies and obstacles with which they are faced, the Mauritanian Government is proposing to maintain the financing of the collection and processing of paddy by UNCACEM, to consolidate the GIE system and to encourage improvements in the storage infrastructure and the installation of new industrial hullers. This system will be in place for the 2001/2002 season.

Sources: Ministry of Economic Affairs and Development and UNDP (2001), Bilan économique et social 1990-1998; Islamic Republic of Mauritania (2001), Bilan des réformes macro-économiques et structurelles 1998-2000 et perspectives pour la période 2002-2004, document to be presented at the Fourth Consultative Group for Mauritania, Paris, 17-19 December; World Bank (2001b), Mauritania - Integrated Framework, Volume II, chapter 6.

16. There are several ongoing projects aimed at encouraging the development of the agricultural sector, the most important of which is PDIAIM, begun in 2000. Under this programme an 11-year strategy has been devised, mainly with the objective of increasing value added in the agricultural sector and improving the employment opportunities and income of the inhabitants of the Senegal River valley. The principal measures envisaged are the establishment of a favourable legal and institutional framework, the development of basic infrastructure, the diversification of production and the mitigation of the impact on the environment. In particular, PDIAIM is financing rehabilitation, advisory and credit operations. Moreover, a programme of reforms in support of export activities, WT/TPR/S/103 Trade Policy Review Page 60

including the introduction of quality labels, the facilitation of transport, the supply of inputs and technical advice, is envisaged for the second phase of the project.

17. In the livestock-raising sector, the existing regulatory framework16 governing the exportation of cattle and meat is out-of-date (introduced during the period 1960-1980) and needs adapting to the current sanitary situation and the international agreements in force.17

18. The main trade policy instrument at the border is still the tariff. The average MFN rate for agricultural products (WTO definition) is 12 per cent. At HS 2-digit level, the maximum rates apply chiefly to imports of meat (chapter 02), vegetables (chapter 07), edible fruit (chapter 08) and preparations of these products (chapters 16 and 20, respectively). Mauritania also applies seasonal duties to a small number of agricultural products (14 lines); the highest rate is applied during the marketing season for local produce.18

(iii) New guidelines for agricultural policy

19. The Government regards agriculture (including livestock-raising) as a priority sector for encouraging economic growth and reducing dependence on imports. The four objectives of the Government's Rural Sector Development Strategy for the period up to 2010, presented in 1998, were as follows: to ensure food security through the development of domestic production; to improve the incomes of farmers and generate rural employment; to protect and preserve natural resources; and to encourage the integration of agriculture into the national and international markets.19

20. The means chosen by the Government for achieving its objectives include the encouragement, liberalization and rationalization of agricultural production.20 The Government also reaffirmed its intention of gradually disengaging itself and transferring all its production and marketing activities to private operators.21 These reforms are to be accompanied by the development of the economic and social infrastructure, the provision of information on local and international markets, and sectoral price and promotion policies. The Government is also intending to encourage private investment, and in particular foreign direct investment, in niche export opportunities for fresh produce and to modernize marketing channels and storage systems.22

21. The Government's strategy for encouraging agricultural production and exports is based on the promotion of small-scale and industrial processing; the use of appropriate seeds and the development of artisanal preservation techniques; the promotion of a local-product preservation industry; support for targeted niche exports (fine French beans, okra, exotic fruits and vegetables); the reduction of transport costs through the liberalization of the sector and the extension of the road infrastructure; and the exportation of fresh produce by air or by refrigerated vessel.23

16 The regulatory framework consists of the following: Decree No. 65 087 regulating the importation and exportation of animals and animal products; Decree No. 69 132 regulating sanitary policy; Order No. 81/206 regulating the exportation of cattle and fresh meat; and Decree No. 75 111 regulating pastoral grazing and the exportation of animals and animal products. 17 World Bank (2001b), Volume II, chapter 4. 18 Only agricultural food products, such as onions, tomatoes, carrots and lettuce, are involved. 19 Ministry of Trade, Craft Industries and Tourism (2001). 20 "Principal Growth Sectors" [online]. Available at the following address: http://www.mauritanieonline.com/investing/principal.htm [16 July 2001]. 21 Ministry of Trade, Craft Industries and Tourism (2001). 22 Ministry of Trade, Craft Industries and Tourism (2001). See also the information available at the following address: http://www.mauritania.mr/Francais/produc_veget_fr.htm [19 September 2001]. 23 Ministry of Trade, Craft Industries and Tourism (2001). Mauritania WT/TPR/S/103 Page 61

22. However, the possibility of increasing production and exports is primarily based on the exploitation of unexploited arable land and off-season production. Nevertheless, the number of products that Mauritania could potentially export remains very limited and the Government's main concern is the production capacity needed to meet local demand.

(3) FISHERIES

(i) Overview

23. Fishing is one of the key sectors of the Mauritanian economy. About 95 per cent of the catch is exported24 and the sector provides 41.5 per cent of foreign currency earnings, as well as 25 per cent of government revenue.25 According to the statistics compiled by the Ministry of Fisheries and the Maritime Economy (MPEM) for 1999, fishing generates 35,000 jobs, including 3,500 in industrial fishing, 14,000 in small-scale fishing, and more than 17,000 on land.26 The main export markets are Japan and the European Union. Almost all fisheries products are exported from the Port of , the only fishing port along more than 700 kilometres of shoreline, which is situated at the northern end of the coast and totally isolated.

24. Mauritania's coastal waters are considered to be among the richest in the world. The exclusive economic zone (EEZ) extends over an area of 230,000 km2. Mauritania's fish reserves (that is to say the stocks that can be fished without risk to regeneration) are estimated at 385,420 tonnes for demersal species, such as cephalopods (51,000 tonnes), crustaceans (5,420 tonnes), demersal fish (28,000 tonnes) and clams (301,000 tonnes)27; reserves of pelagic species (sardinella, mackerel, cutlass fish) are estimated at 1,350,000 tonnes.

25. Mauritania's fish resources are exploited mainly by two types of fleets: a small-scale fishing fleet consisting (in 2000) of more than 2,500 canoes28 and a national and foreign semi-industrial and industrial fleet consisting mainly of trawlers. The foreign industrial fleet, which accounts for about 90 per cent of the catch in the EEZ, operates in accordance with a licensing system under cooperation agreements or private chartering arrangements.

26. The total catch in Mauritania's small-scale fishing sector is about 20,000 tonnes. The number of fishermen is constantly increasing: it rose from less than 3,000 in 1991 to 14,000 at the end of 1999.29 Industrial fishing mainly involves fishing for demersal and pelagic fish. According to the latest data available (2000), there is a fleet of 390 fishing boats, of which 180 are Mauritanian (including charter boats) and 210 foreign.30 The catch of the industrial fishing fleet is estimated at 600,000 tonnes per year.

27. The demersal species are exploited by domestic and chartered or licensed trawlers. In 1999, 159 boats were engaged in bottom fishing, in particular for cephalopods; 110 of these boats were

24 Imports of fisheries products are marginal consisting mainly of small quantities of preserved sardines, particularly fisheries from Morocco. 25 Nevertheless, this sector's contribution to GDP is relatively modest (5.4 per cent), a reflection of the low net value added. 26 Bru and Hatti (2000). According to the same authors, "the figure of 17,000 jobs on land is a very considerable underestimate. At least twice as many jobs are linked with fishing which, when the jobs on land are added to those at sea, gives a total of more than 50,000." 27 Information provided by the Ministry of Fisheries and the Maritime Economy. 28 Bru and Hatti (2000). 29 Ministry of Trade, Craft Industries and Tourism (2001). 30 Bru and Hatti (2000). WT/TPR/S/103 Trade Policy Review Page 62

Mauritanian31, while the other 49 were fishing under Mauritania's agreements with the EU.32 Thus, the Mauritanian industrial fleet is chiefly geared towards fishing for cephalopods, almost exclusively for the Japanese market. The cephalopod catch was of the order of 27,000 tonnes, mainly octopus.33

28. It is mostly foreign boats (about 80), some of which are chartered by Mauritanian companies, that carry out pelagic fishing. Despite the lack of accurate statistics, it is estimated that their catch varies between 336,000 tonnes (1995), 553,100 tonnes (1998) and 380,400 (1999).34 The foreign boats also dominate the other specialized fisheries, such as fishing for shrimp (40 shrimp boats, of which four are Mauritanian), hake (20 boats, of which six are Mauritanian) and tuna (70 boats, all foreign).35

29. In addition to the sea fishing described above there is also some freshwater fishing. This is practised irregularly and seasonally on the Senegal River, its tributary, the Gorgol, and on the nearby lakes. The freshwater catch is generally consumed locally. There are no recent statistics on this type of fishing. The FAO estimated 1978 production at around 13,000 to 15,000 tonnes.36 However, freshwater fish production fell sharply due to the long regional drought and in 1987 amounted to only about 3,000 tonnes. The recent improvement in rainfall has been accompanied by a recovery in production which is estimated to have been about 7,000 tonnes at the end of the 1990s.37

(ii) Fisheries Policy

30. Mauritanian fisheries policy is constantly evolving. Initially, in the 1970s, policy was more protectionist and aimed primarily at encouraging the creation of a national industrial fishing fleet, as a result of the conclusion of bilateral fishing agreements based on chartering or joint ventures. In 1982, the Government made it compulsory to land and market the fish at the port of Nouadhibou and for half the members of every crew to be Mauritanians. In 1984, the Mauritanian Fish Marketing Company (SMCP) was established in order "to strengthen Mauritania's negotiating capacity" and ensure the repatriation of foreign currency. This monopoly over all cephalopod exports lasted until the company was privatized in 1994. During the 1980s, the Government invested considerable sums of money in building up a Mauritanian fleet and constructing on-shore refrigeration and storage facilities.38

31. In 1994, declining resources, mismanagement and other difficulties led the Government to revise its fisheries policy.39 Its main concerns were the protection of resources, the rationalization of

31 According to Article 7 of the Fisheries Code 2000, "Mauritanian fishing boats are fishing boats registered and naturalized in Mauritania in accordance with the provisions of the law establishing the Merchant Marine Code". 32 IMF (2000b). 33 "Les produits de la mer" [online]. Available at the following address: http://www.univnkc.mr/forum/secteurs1.html. 34 IMF (2000b) and Ministry of Trade, Craft Industries and Tourism (2001). 35 Ministry of Trade, Craft Industries and Tourism (2001). 36 United Nations Food and Agriculture Organization (2000). 37 Fishbase, online information. Available at the following address: http://fishbase.org/Training/CountryReports/Dakar/Mauritania.htm. 38 However, these facilities remain underutilized since foreign trawlers are equipped with on-board fish chilling or freezing systems. 39 According to the FAO, another problem encountered in this sector was and still is the non-repayment of loans. The promotion of small-scale fishing was based on a large number of projects, the aim of which was to train the largest possible number of fishermen in the shortest possible time. At the end of their training they were helped to purchase a fishing unit on credit. However, the project often ended without any evaluation of the Mauritania WT/TPR/S/103 Page 63

fishing, the improvement of the sector's performance and the continuing withdrawal of the State from production and marketing activities. The new Fisheries Code 2000 is also based on these principles and stresses the controlled development of commercial fishing, the expansion of small-scale fishing and the reorganization and modernization of the Mauritanian fleet through the acquisition of boats suitable for coastal fishing and the development of exports of processed products.

32. To encourage the development of small-scale and coastal fishing, the Fisheries Code introduced coastal fishing as a third category of commercial fishing, in addition to industrial and small-scale fishing. It is defined as fishing "with motorized vessels with an overall length or at least 12 metres but not more than 24 metres, not provided with means of freezing, trawling or drag- netting". According to the Government, this fishing has the advantage of being easier to manage and control than small-scale fishing from canoes or industrial deep-sea fishing.

(a) Legislation

33. The Fisheries Code (Law No. 2000-025 of January 2000) forms the regulatory basis for fishing activities. The sector is administered by the Ministry of Fisheries and the Maritime Economy (MPEM) which is responsible for "drafting and implementing government policy in the areas of freshwater and sea fishing, the merchant marine and sea transport". In 1998, the Directorate for the Promotion of Fishery Products (DPPP) was established under the MPEM, with the task of developing fishing and promoting national fisheries products at home and abroad.40 The institutions that advise on management policies, such as the National Centre for Oceanographic Research and Fisheries (CNROP)41, the Fisheries Surveillance and Maritime Control Delegation (DSCPCM) and the Mauritanian Fish Marketing Company (SMCP)42 are under the authority of the MPEM.

34. According to the Fisheries Code, Mauritania's fish resources are part of the national heritage and, consequently, the right to fish belongs to the State (Article 4). Any fishing activity in Mauritanian waters, together with the purchase or chartering of fishing boats, is subject to prior authorization. The operations of mother ships, logistical support vessels, transhipment vessels and feeder ships are also subject to special authorization by the Minister for Fisheries (Article 29).

35. No Mauritanian or foreign vessel may engage in fishing without a fishing licence or authorization. The conditions for granting, renewing, suspending, transferring and withdrawing licences are set out in the implementing decree. Licences are issued for a maximum period of one year. Foreign fishing vessels may be authorized to fish in Mauritanian waters under international agreements and other arrangements. However, exceptionally, the Fisheries Code provides for the possibility of foreign vessels operating in Mauritanian waters even where there are no agreements or other arrangements.

results or repayment of the loans (Bru and Hatti (2000)). The Government is now considering revising this training system. 40 It is, in fact, the MPEM that has changed by relinquishing its surveillance and control functions in favour of a regulatory and supervisory role. 41 The CNROP is responsible for data collection and analysis, the preparation of technical opinions and the sanitary control of fishing products. 42 Under the regulations, the SMCP has exclusive responsibility for marketing frozen demersal species or cephalopods. The company is also authorized to levy statistical and municipal taxes. Moreover, in case of non-payment, and solely at the request of the Treasury, it may levy access and territorial duties. WT/TPR/S/103 Trade Policy Review Page 64

36. Fishing vessels are obliged to unload their products and catches (that is to say, effectively land all fished products for storage, treatment, processing or exportation) in Mauritanian ports, subject to exemptions granted to foreign vessels for technical, economic or general policy reasons. No exemption is granted to cephalopod boats or boats designed for catching species protected under the Fisheries Development and Management Plan, unless an international agreement provides otherwise (Articles 17 and 18). Products which have to be landed are liable to payment of the duties and taxes imposed by the legislation in force.

(b) Agreements, conventions and joint ventures

37. Mauritania's principal partner in this area is the European Union, though cooperation with the countries of Eastern Europe has also developed considerably in recent years. The bilateral agreement signed with various countries include the Sea Fisheries Cooperation Agreement between the European Union and Mauritania, with renewal of the protocol in July 2001 for the period 2001-200643, and fisheries agreements with countries such as Japan, Senegal and Russia.44 Mauritania has also concluded fisheries cooperation agreements with Algeria, Morocco and Tunisia.

38. The Government is also encouraging the establishment of joint ventures with technically sophisticated foreign enterprises in order to increase value added and create jobs.45 A number of joint ventures have already been set up. Nevertheless, processing of fisheries products and value-adding activity remain at a low level and there are only a few processing plants in operation.

(c) Fish marketing

39. Since the SMCP was privatized in 199446, its monopoly has applied to the export marketing of fisheries products subject to the landing obligation (demersal fish, cephalopods and crustaceans)47, which account for about 56 per cent of total fish exports (1999).48 The prices for these products are negotiated by the SMCP; the producer receives the export price less the actual cost of handling and storing and a marketing commission of 2.9 per cent of the value. Other fisheries products may be freely exported.

43 The Agreement with the European Union grants free licences (exempt from all tax). In return, the financial contribution in favour of Mauritania has risen from €266.8 to €430 million over five years. The Agreement also provides for financing for sector modernization, including scientific and technical research for analysing the state of fish stocks and measures to improve the monitoring and surveillance of fishing activities to prevent over-fishing or illegal fishing. The zone in which Community vessels are authorized to operate has been pushed further away from the Mauritanian coast to afford greater protection for local small-scale fishing. Moreover, to encourage the local economy and create jobs, the EU has promised that its demersal fishing boats will land more catches in Mauritania. EU vessels will also employ a larger number of local fishermen. 44 There are draft fisheries agreements with the Baltic countries, Poland and Ukraine. 45 United States Department of State (2000). 46 The State still holds 35 per cent of the company's equity and retains the right to appoint the Director-General. 47 Processed products whose value added has been increased are excluded. 48 IMF (2000b). Mauritania WT/TPR/S/103 Page 65

40. In 1996, under the Bilateral Fisheries Agreement between Mauritania and the European Union, fish exports were banned by the EU because the Mauritanian products did not comply with international health standards. Nevertheless, it seems that these problems have been overcome since the EU has now included Mauritania in its List I of countries and territories from which the importation of fish products for human consumption is authorized.49

41. In addition to the requirement that the country appears on List I or II, the EU also requires that the enterprises of the country in question wishing to export to the EU appear on a "list of authorized establishments". In the case of Mauritania, this means that its enterprises must be certified by the Ministry of Fisheries and the Maritime Economy as meeting EU sanitary standards. So far, 63 enterprises have been certified and thus authorized to export fisheries products to EU markets.

42. To meet the quality requirements of the export markets, the Mauritanian authorities are stressing the need for standardization, labelling and eco-labelling, quality control and certification. In this connection, a Centre for the Promotion of Fisheries Products (CPPPM) is in the course of being established.

43. As an LDC, Mauritania benefits from preferential access to the markets of the developed countries under various generalized system of preferences (GSP) regimes. For the fishing sector, the most important of these is zero-rated access to the Japanese market for octopus and squid exports.

44. The level of customs duties and other taxes applied to Mauritanian imports of fish and fisheries products is relatively high. These products are subject to a maximum duty rate of 20 per cent, to which must be added a 3 per cent statistical fee. They are also subject to VAT at 14 per cent and the minimum flat rate tax (IMF) at 4 per cent.50 However, this does not seem to be intended to protect the local industry.

45. Between 1995 and 1997, the export tax (exit duty) on almost all fisheries products and the IMF51 were replaced by an access duty applied to bottom fishing and a territorial duty applied to small-scale fishing for almost all fisheries products.52 To compensate for the fact that it has not been possible to apply the territorial duty in practice, a tax of 8 per cent is levied on fresh products of the small-scale fishing sector at the time of export. Pelagic fisheries products are subject to an export tax which varies between 2 and 11 per cent depending on the species.

49 Any country wanting to export fisheries products to the EU must have the Commission's authorization and appear on one of two lists. Countries whose national fisheries products monitoring systems are considered satisfactory by the Commission are permanently included in List I. List II is a temporary list that includes countries the Commission has found to be partly in conformity or which are awaiting inspection but considered acceptable on the basis of their legislation and other available information. 50 Chapter III (2) (iii) (d). 51 Chapter III (3) (ii). 52 The IMF is now only levied on pelagic fish exports at a rate of 2 per cent. WT/TPR/S/103 Trade Policy Review Page 66

(4) MINING

(i) Overview

46. The mining sector contributes almost 13 per cent to Mauritanian GDP and is considered to be the country's largest employer, just behind public services (it employs around 5 per cent of the labour force).53 Mining products account for nearly 60 per cent of total Mauritanian exports.

47. Mauritania's principal mineral resource is iron ore, which accounts for almost all the sector's export earnings. Mauritanian iron reserves are estimated at six billion tonnes and are considered to be the largest in the world.54 Mauritania is the world's thirteenth largest iron ore producer55 with an annual output varying between 10,400 and 11,700 tonnes, almost all of which is exported.56 The only enterprise exploiting this resource is the National Industrial and Mining Company (SNIM), the country's principal industrial entity (box IV.2), which is 78 per cent State-controlled.

48. Apart from iron, according to the experts Mauritania also possesses, other unexploited wealth, such as gold, diamonds, copper, cobalt, sulphur, gypsum, uranium, aluminium, and phosphates.57 In 1998, for the first time a Mauritanian enterprise obtained a licence to mine phosphate in cooperation with foreign enterprises. Exploration for oil is in progress.58

49. The mining sector is considered to offer great potential for the Mauritanian economy as well as opportunities for foreign enterprises, especially those that supply mining equipment and services. In recent years, Mauritania has witnessed the development of intense exploration activity, dominated by foreign companies and mainly aimed at discovering oil, gold and diamonds. In 1999 and 2000, the Mauritanian Government signed or renewed several exploration contracts with various foreign enterprises. These companies have all confirmed the presence of gold, diamonds, phosphates, aluminium or copper.59 In 1999, Rex Diamond Mining Corporation discovered the first "commercially viable" deposits of diamonds and gold in the north of Mauritania.

(ii) Mining policy

50. The Ministry of Mining drafts mining development policy and monitors and controls the application of the mining regulations. To facilitate its work it has set up two main services: the Directorate of Mines and Geology and the Mauritanian Geological Survey Office (OMGR).

51. A new mining policy, with a greater emphasis on foreign investment, was adopted by the Government in 1997. In 1999, with the assistance of the World Bank, the Government drew up the Project for the Institutional Strengthening of the Mining Sector (PRISM), whose main objective is to improve Mauritania's capacity and competitiveness in order to attract private investment in the

53 Online information. Available at the following address: http://www.worldinformation.com/World/Meat/Mauritania/profile.asp?country=222. 54 South Africa Institute of South Africa, online information. Available at the following address: http://www.ai.org.za/html/Restricted/body_mauritania.html. 55 Online information. Available at the following address: http://www.worldinformation.com/ World/Meast/Mauritania/profile.asp?country=222. 56 IMF (2000b). 57 Canadian Ministry of Foreign Affairs and International Trade, online information. Available at the following address: http://www.infoexport.gc.ca/docs/view-f.asp?did=1605. 58 For the time being, no oil is being produced and all petroleum products are imported. The only refinery in Mauritania – NAFTAL – is an Algerian company and utilizes Algerian crude. All of NAFTAL's production is consumed on the Mauritanian market. 59 United States Department of State (1999). Mauritania WT/TPR/S/103 Page 67

development of the mining sector. At the same time, Mauritania has also begun reforming the mining legislation in force, with the adoption in 1999 of a new Mining Code designed to stimulate and encourage investment in mineral exploration and production.60

52. The new general legal framework consists of Law No. 99/013 of 23 June 1999 establishing the new Mining Code, Decree No. 99.160 of 22 December 1999 defining the conditions and procedures for the application of the Mining Code in respect of prospecting authorizations and mineral titles, and Decree No. 139 of 1 November 2000 defining the application conditions and procedures in respect of mining police. Within the Ministry of Mining, the Government has set up an administrative unit – the Mining Registry Unit – which administers mineral titles and has exclusive responsibility for dealing with investors with a view to facilitating their activities in the country.

53. According to the authorities, the new Mining Code provides a more attractive legal and fiscal framework for investors. It simplifies the procedures for allocating mineral titles, exempts all the products from duties and taxes during exploration and the first five years of exploitation, and guarantees a stable tax regime.61

54. Seven groups of minerals: iron and related ores (group I), other metals and rare earths (group II), coal and other fossil fuels (group III), uranium and other radioactive elements (group IV), industrial minerals (group V), precious stones other than diamonds (group VI), and diamonds (group VII) are subject to the mining regime and are regarded as belonging to the State (that is to say, their ownership is distinct from the ownership of the soil). The rest are treated as belonging to the category of deposits subject to the quarry regime and, consequently, to the conditions of ownership of the soil.

55. Four types of permits and promotional areas have been established to meet the needs of both small-scale mining operations and the exploration companies. A prospecting authorization is valid for six months and can be renewed once only for the same length of time. Applications must be filed with the Mining Registry Unit. Authorization is granted by the Minister for Mining, who must reply within one month of receiving an application. Any natural person may engage in prospecting activities (on the ground or from the air), outside the reserved and promotional areas and to the exclusion of the existing mining zones. Prospecting does not confer any exclusive right on the prospector.

56. An exploration permit confers the exclusive right to prospect and explore for minerals within a maximum area of 1,500 km2 (10,000 km2 for diamonds) and to an indefinite depth. The maximum number of permits that a natural or legal person may hold is 20 (10 for diamonds). Exploration permits are allocated by the Council of Ministers and granted on a first come-first served basis, provided that the applicant possesses the necessary technical and financial capacity. They can be obtained in 15 days if the financial and technical requirements are met. Permits are valid for three years and may be renewed twice for the same period of time.

60 The new Code repeals the 1977 Mining Law No. 77.204 establishing a Mining Code and its amendments and Order No. 84.017 fixing the tax on quarry materials. 61 Ministry of Trade, Craft Industries and Tourism (2001). WT/TPR/S/103 Trade Policy Review Page 68

IV.2: National Industrial and Mining Company (SNIM)

SNIM, the largest iron ore mining company and Mauritania's principal industrial entity, has been operational since 1963. It employs nearly 6,000 people and owns 700 km of railway and its own ore terminal. It is 78 per cent State-controlled and exports almost all of its mining products.

Moreover, it has its own extensive social and industrial infrastructure: two towns, Zouérate and Cansado, with 2,100 and 1,500 homes, respectively, for the workers and their families and all the necessary social facilities. The water and electricity supply systems are also managed by SNIM. Two power stations at Zouérate and one at Nouadhibou generate almost 220 million kWh/year and meet the needs of both industry and residents.

SNIM in brief

Contribution to GDP: about 13 per cent (1999). Contribution to the budget: UM 7.6 billion, or 14 per cent of revenue. Contribution to exports: 58.5 per cent (1999). Turnover, net profit and net cashflow in 2000: UM 44.4 billion, UM 4.5 billion and UM 11.8 billion, respectively. Annual output: almost 11,000 tonnes per year on average. The entire tonnage is sold for export, mainly to Europe.

Customs, tax and foreign exchange regime

SNIM receives special tax treatment. The company is exempt from all internal taxes (except for VAT), as well as from customs duties on imports, but instead must pay a "single annual royalty" equal to 9 per cent (10 per cent before 2001) of turnover (f.o.b.) on iron ore exports. Until recently, it was also exempt from payment of VAT, but since the Finance Law of 2001, the company has been subject to the ordinary VAT regime (now 14 per cent) and receives exemption only for capital goods used exclusively in its mining activities. Consequently, the company is now also obliged to pay VAT on the diesel fuel used in many of its operations. To prevent this from damaging SNIM's international competitiveness and compromising plans for the privatization of the company, in 2001 the Government reduced the single annual royalty from 10 to 9 per cent.

At the beginning of 2000, the transfer obligation applicable to export earnings repatriated by SNIM was reduced to 40 per cent and was then further reduced in stages until it was abolished in June 2001 (30 per cent in June 2000, 20 per cent in December 2000, and zero per cent in June 2001).

Diversification projects

SNIM is studying several diversification projects. Exploration work is proceeding under various exploration licences allocated to SNIM by the Mauritanian Government, including licences for gold and base metals; diamonds and related minerals; ornamental stones and building materials; and iron, base metals and rare earths. Feasibility studies concerning the production of gypsum and solar and rock salt have also been prepared.

The SNIM group

For some time, SNIM has been pursuing a policy of creating subsidiaries for its non-core activities, other than iron ore mining, in addition to taking stakes in existing Mauritanian companies. The SNIM group consists of the following subsidiaries: ATTM S.A. – Société d'assainissement, de travaux, de transport et de maintenance (Sanitation, Works, Transport and Maintenance Company) (100 per cent); SOMASERT S.A. – Société mauritanienne de services et de tourisme (Mauritanian Services and Tourism Company) (100 per cent); COMECA S.A. – Construction mécanique de l'Atlantique (Atlantic Mechanical Construction) (92.5 per cent); SAMMA S.A. – Société d'acconnage et de manutention en Mauritanie (Mauritanian Stevedoring and Maintenance Company) (52.5 per cent); SAFA S.A. – Société arabe de fer et d'acier en Mauritanie (Arab Iron and Steel Industry in Mauritania) (75 per cent); SAMIA S.A. – Société arabe des industries métallurgiques (Arab Metal Industries Company) (50 per cent); and GMM S.A. – Granits et marbres de Mauritanie (Mauritanian Granite and Marble) (62.8 per cent).

Source: Société nationale industrielle et minière, online information. Available at the following address: http://www.snim.fr; and IMF (2000b), "Mauritania: Statistical Appendix", Staff Country Report N° 00/90, August [online]. Available at the following address: http://www.imf.org. Mauritania WT/TPR/S/103 Page 69

57. Exploitation permits are issued only to companies incorporated under Mauritanian law and established by the holder of an exploration permit. Exploitation permits are valid for 30 years and can be renewed several times for 10-year periods. They confer on the holder the exclusive right to prospect, explore and exploit and the right to engage in any concentration, enrichment or marketing operation.

58. The small-scale mining licence confers on its holder the exclusive right to prospect, explore, exploit and dispose of the products mined within a maximum area of 2 km2 to a depth of 150 metres.62 Licences are allocated by the Minister for Mining within one month to the first natural or legal person to apply. Small-scale licences are valid for three years and can be renewed three times, in each case for a further three-year period.

59. Promotional areas, created by the order of the Minister for Mining, have a maximum area of 5,000 km2 and can last for a maximum of two years. The aim is to enable the Government to undertake prospecting and exploration work with a view to promoting the development of the sector. Once the data and the results of the work have been published, exploration licences are allocated to investors, the only difference being that these permits are auctioned off instead of being issued to the first applicant.

60. The tax regimes applicable to the various types of permits are described in table IV.1. Only the prospecting authorization is not subject to any duty or tax.

61. The Ministry of Mining also supervises the activities of five public enterprises: Société national industrielle et minière (SNIM) (National Industrial and Mining Company), Société arabe des industries métallurgiques (SAMIA) (Arab Metal Industries Company), Société arabe des mines de l'Inchiri (SAMIN) (Arab Inchiri Mining Company), Guelb Moghrein Cie (GEMAK), which are responsible for exploiting iron, gypsum and plaster, copper, gold and cobalt respectively, and Société arabe du fer et de l'acier (SAFA), (Arab Iron and Steel Company), which is responsible for processing iron ore.

62. The oil and gas sector is governed by the 1988 Petroleum Code. According to the authorities, new oil and gas legislation has been prepared and should be promulgated in 2002.

63. The only trade policy measure applied by Mauritania to imports of mining products is a duty averaging 5.9 per cent with a maximum of 20 per cent for imports of petroleum gas and other gaseous hydrocarbons and precious (other than diamonds) and semi-precious stones. In addition to this duty, there is a 3 per cent statistical fee, 14 per cent VAT and 4 per cent IMF.63

62 A small-scale operation is an enterprise employing fewer than 100 people whose net fixed assets do not exceed UM 500 million (or approximately US$2.75 million). 63 Chapter III (2) (iii) (d). WT/TPR/S/103 Trade Policy Review Page 70

Table IV.1 Taxation applicable to the various types of mining licences Type of tax Description

Administrative service tax (Article 86) On the granting, renewal and transfer of exploration permits: UM 400,000 (US$180,000) On the granting, renewal, transfer and contribution of exploitation permits: UM 2, 500,000 (US$11,300) On the granting and renewal of small-scale mining permits: UM 1,000,000 (US$4,500) On declaring the exploitation of a large-scale quarry: UM 1,500,000 Annual area charge (Article 87) Exploration permit: – 1st period of validity: 250 UM/km2 (1.10 US$/km2 – 2nd period of validity: 500 UM/km2 (2.2 US$/km2) – 3rd period of validity: 1 000 UM/km2 (4.40 US/km2) Exploitation permit: 25 000 UM/km2 (110 US$/km2) Tax on the industrial and commercial Rate: 30% profits (BIC) of mining enterprises Exploitation permit: (Article 90) – exemption for three years starting from the first financial year Mining royalty (Article 88) Exploitation permit: – royalties calculated on the sales price of the product resulting from the final stage of processing of the ore in Mauritania; – payable on all sales made after the product begins to be marketed. The rate is fixed as follows: – for groups VI and VII: from 3 to 7 per cent; – for gold and materials in groups III and V, apart from industrial or ornamental rocks: 3 per cent; – for materials in groups I, II (other than gold) and IV: from 1.5 to 2.5 per cent; – for industrial or ornamental rock: from 1 to 1.5 per cent; – for quarries: 0 per cent Deductible from the taxable profit up to an upper limit equivalent to 7 per cent of the turnover for the same year (Article 89). Taxes on dividends (Article 91) Reinvested dividends: – exploration permit: exemption – exploitation permit: exemption Exported dividends: – exploration permit: 16 per cent withheld – exploitation permit: 16 per cent withheld Customs duties, fiscal import duties, Equipment, materials, supplies and products of all kinds (including fuel) intended for: taxes and charges (Article 85) – exploration: total exemption or exceptional temporary admission procedure – exploitation: total exemption for the first five years of exploitation; at the end of this period, a single rate of 5 per cent is applicable to all imported goods and products, except for fuel, lubricants and spare parts.

Source: Law 99/013 establishing the Mining Code. Mauritania WT/TPR/S/103 Page 71

(5) MANUFACTURING SECTOR

(i) Overview

64. The Mauritanian manufacturing sector is comparatively undeveloped. The processing of fisheries products excluded, the sector contributes about 4.2 per cent to GDP (8.4 per cent including the processing of fisheries products) (chart IV.1). Almost all manufacturing output is consumed locally.

65. Though a relatively new sector, first set up in the 1960s, manufacturing has passed through several phases. Up to 1979, the State intervened extensively in the sector's activities and launched projects requiring large-scale investment. These projects (including a sugar factory, an oil refinery and seawater desalination) almost all failed. In 1979, to redress the situation, a new Investment Code was promulgated to encourage private investment. This Code offered numerous tax and customs exemptions, tariff and non-tariff protection and plentiful financing. According to observers, as soon as an enterprise was set up, imports were blocked. This policy resulted in the creation of a number of Mauritanian enterprises mainly engaged in import substitution.64 The 1979 Code was amended in 1989 and again in 2002 (chapter II (4)), and prices and commercial procedures have been liberalized, thus permitting certain improvements in the sector.

66. Despite these efforts, the sector remains underdeveloped due to various factors such as the narrowness of the domestic market, but also the lack of skilled labour, the high cost of basic services, and expensive and inappropriate credit.65 It remains concentrated in the country's two main cities: Nouakchott and Nouadhibou. Manufacturing activities are dominated by the agri-food sector and the chemical industry.66 The remaining manufacturing activities mainly involve the production of building materials, metal structures, paper and packing materials.

67. The sector still depends heavily on imported inputs and is dominated by six companies which, alone, account for more than half of the investment in the sector. Nevertheless, it is now possible to observe the emergence of a large number of small informal-sector enterprises (baking, made-up clothing, repair shops, small-scale metal working, joinery and leather goods).67

(ii) Sectoral policy

(a) Legal framework

68. The legal framework governing industrial activities in Mauritania is contained in the Investment Code and the codes applicable to certain specific activities (chapter II (4) (ii)). Any exercise of an industrial activity requires a prior declaration, for which applications should be made to the Single Window.

64 "Le secteur industriel en Mauritanie, le défi de la compétitivité", [online] discussion. Available at the following address: http://www.mauritania.mr/ami/dossiersFr14.htm [8 October 2001]. 65 EIU (2000). 66 In particular, the processing of dairy produce by the TIVISKI enterprise and the processing of fisheries products (section (3) (ii)). In November 2001, a new milling company – Grands moulins de Mauritanie (GMM) – was inaugurated. It is the largest agro-industrial enterprise in the country. The agri-food sector alone accounts for more than 40 per cent of production. Together with the chemical industry, it provides about two thirds of industrial employment. 67 According to a study carried out by the Directorate of Employment in cooperation with UNDP and ILO, in 1995 there were four times as many people in informal urban employment (all sectors combined) than in structured employment (170,000 as compared with 41,000). WT/TPR/S/103 Trade Policy Review Page 72

(b) Trade policy and investment

69. The manufacturing sector, as one of the priority sectors of the 1989 Investment Code, has benefited from the tax and customs advantages of the Code under two regimes: the priority enterprise regime and the establishment agreement regime, which has made possible an increase in the number of enterprises created. It can now benefit from the financial incentives introduced by the new 2002 Investment Code in the form of free points (chapter II (4) (ii)).

70. The Government does not appear to have a special development strategy for manufacturing industry.68 The only export incentives are those accorded under the general framework of the Investment Code. The average duty applied to imports of manufacturing products is about 11 per cent. To this must be added the 3 per cent statistical fee, VAT at 14 per cent and IMF at 4 per cent.69 For most groups of products the rates applied increase progressively with the degree of processing. This is particularly apparent in the case of textiles and clothing, wood and furniture manufacturing, paper and printing, chemical products, and basic metallurgical products (chart IV.2). This escalation indicates that the effective protection provided for producers of finished goods is higher than that indicated by the nominal rates. For two groups of products (agri-food, beverages and tobacco, non-metallic mineral products) the average rate applied to imports of primary products is higher than the rates applied to semi-processed and processed products.

(6) SERVICES

(i) Overview

71. In Mauritania the services sector accounts for about 50 per cent of GDP (chart IV.1). The main branches of the services sector in terms of contribution to GDP are shops, hotels and restaurants, and transport and telecommunications.

72. In the 1990s, Mauritania set out to reform economic policy in relation to services by privatizing the sector and opening up its market to foreign suppliers. However, it seems that free- market forces are not yet operating and investment in the sector appears to be quite limited, due partly to the residual regulatory restrictions.

73. During the Uruguay Round, Mauritania submitted a schedule of commitments for services. Its schedule does not include horizontal limitations or exemptions from the obligation to accord MFN treatment. It undertook specific commitments only in the tourism sector (section (6) (v) below). Mauritania did not participate in the WTO negotiations on basic telecommunications nor in the negotiations on financial services.

68 In the past there was a policy of encouraging import substitution but it was abandoned. 69 Chapter III (2) (iii) (d). Mauritania WT/TPR/S/103 Page 73

Chart IV.2 Escalation of duties applied to manufacturing industry products, 2001

Per cent Primary products Semi-processed products 20 Processed products

15

10

5

0

Source: WTO Secretariat estimates based on data provided by the Mauritanian authorities.

(ii) Financial services

(a) Overview

74. Banking in Mauritania has been completely reformed. In order to overcome the difficulties encountered by the banking sector in the mid-1980s, due to the large high-risk portfolio, the shortage of reserves and the burden of foreign commitments, the Government launched the first phase (1988-1990) of restructuring under the Public Sector Adjustment Programme (PASEP) financed by the World Bank, with a view to progressively liberalizing and privatizing the sector. Two mergers were arranged and the Banque arabe africaine en Mauritanie (Arab African Bank of Mauritania), now the Banque mauritanienne pour le commerce international (Mauritanian International Trade Bank) (BMCI) was privatized.70 Moreover, a start was made on recapitalizing all the banks that were short of capital. The second phase of the reform programme, which began in 1992, was reflected in the withdrawal of the State from the banking sector – all the banks, except for Chinguitty Bank, were privatized and some (such as the Union de Banques de développement) (Union of Development Banks) were liquidated. According to the authorities, the current phase is aimed at consolidating the restructuring, improving the standard of service and reinforcing the credibility of the credit system.71

70 BIMA/SMB and BMDC/FND are now the Banque nationale de Mauritanie (National Bank of Mauritania) (BNM) and UBD, respectively. 71 Ministry of Trade, Craft Industries and Tourism (2001). WT/TPR/S/103 Trade Policy Review Page 74

75. The Mauritanian banking system currently consists of the Banque centrale de Mauritanie (Central Bank of Mauritania) (BCM), seven so-called "primary" commercial banks, two leasing financial institutions, and organizations specializing in the financing of micro and small enterprises.72 The latter are grouped together in the Association des professionels et opérateurs de micro-finance (Association of Micro-Finance Professionals and Operators) (APROMI). According to the authorities, at the end of 1999 the Mauritanian institutions had a combined balance sheet of UM 62 billion (about US$282 million).73

(b) Commercial banks

76. In Mauritania, banking and lending activities are governed by the Banking Law of 17 July 1995 and the Collection Law of 16 January 1993. All banking and financial institution activity is subject to the prior approval of the Central Bank of Mauritania. Banks and financial institutions must be established in the form of a public limited company with fixed capital.74 The legislation currently in force does not discriminate between investors according to their nationality.

77. All the banks, except for the Banque arabe libyenne mauritanienne (Libyan Mauritanian Arab Bank) (BALM), renamed Chinguitty Bank, were privatized in the 1990s.75 Foreign institutions have minority holdings in three of the banks, the other four are owned by Mauritanian investors. A new bank, NISSA Banque (also called the women's bank) is in the process of being established. Despite the absence of limitations on foreign participation, foreign companies have not opted for majority holdings.

78. Credit operations mainly include short-term credit (financing of imports and exports) and advances, due to the banks' lack of stable resources for financing medium- or long-term credit. The recently restructured banks prefer to concentrate their financing on activities connected with foreign trade.76 Access to credit seems to be skewed towards operators associated, in one way or another, with the banks' majority shareholders.77

79. According to the authorities, all the prudential rules have been observed. The banks are also subject to annual external audits to verify observance of the regulations in force.78

80. The Central Bank of Mauritania acts as a regulator of the country's banking and financial services. It plays the part of lender of last resort and can refinance a financial institution short of liquidity at a rate which it itself fixes with reference to the rate for one-month treasury certificates. This is all the more important in that the interbank market is almost non-existent and interbank call money transactions are rare and unregulated. However, the cost of refinancing by the Central Bank is

72 In 2001, two new banks (Banque du commerce et d'investissement en Mauritanie (Trade and Investment Bank of Mauritania) and Compagnie de banque commerciale (Commercial Bank Company)) were granted licences and should commence operations during 2002. 73 Ministry of Trade, Craft Industries and Tourism (2001). 74 With the exception of mutual benefit societies and specialized financial institutions. This also applies to postal cheque centres and savings banks, which are not subject to the provisions of Law No. 95.011. 75 Chinguitty Bank is jointly owned by Mauritania and Libya. 76 Ministry of Trade, Craft Industries and Tourism (2001). 77 World Bank (2001b), Volume I. 78 Online information. Available at the following address: http://www.mauritania.mr/Francais/ systeme_bancaire_mauritanien_fr.htm (19 June 2001). Mauritania WT/TPR/S/103 Page 75

high: the refinancing rate is 13 per cent for all sectors of the economy (discount rate) and the repo rate is 18 per cent.79

81. Initiatives to recover non-performing loans have had limited success.80 In 1999, the government set up, under the BCM, the Agency de recourrement des créances bancaires (Bank Debt Collection Agency). The non-payments centre is ready but, according to the authorities, the banks are slow to make use of it.81 Moreover, lending continues to be concentrated in the fisheries sector, which is considered problematic in itself, in particular because of the heavy investment, the inherent risks and the volatility of international prices.

(c) Specialized financial institutions and micro-finance.

82. Despite efforts to reform the banking system, the sector continues to be confronted by a lack of medium- and long-term investment. Moreover, bank financing continues to be focused on foreign trade, while the traditional sectors are neglected. On 28 January 1998, to correct this situation and support individuals and households unable to take advantage of the banking system, a law establishing savings and credit unions was adopted. This law regulates the establishment of mutual institutions in the form of open stock companies and is additional to the Banking Law of 1995 which authorizes financial institutions to collect medium- and long-term resources. It lays down the rules for ensuring the protection of depositors and the security and transparency of the operations.

83. Another aim of setting up this micro financial intermediation is to encourage the informal sector. The intention is to mobilize small savings and finance business opportunities through savings and credit unions. Sixteen credit unions have already been opened. These are grouped within two main networks: Agence de promotion des caisses populaires d'épargne et de crédit (Agency for the Promotion of Savings and Loan Unions) (PROCAPEC), and CREDIT OASIS.

84. To finance the economic sectors with a strong potential for job creation, such as agriculture and small-scale fishing, the authorities have encouraged the establishment of specialized institutions. Agricultural credit consists of two cooperatives and a federation – UNCACEM – which guarantees the refinancing of their operations. The cooperatives grant short-term (crop loans) and medium term (equipment loans) credit. Maritime credit for small-scale fishing is granted by two cooperatives, which began operating in 1998, and by the Union nationale des coopératives de crédit à la pêche artisanale en Mauritanie (National Union of Mauritanian Credit Cooperatives for the small-scale fishing sector) (UNCOPAM).

(d) Insurance

85. The Mauritanian insurance sector was liberalized in 1993; before that, the Mauritanian Insurance and Reinsurance Company (a liquidated public company) held a monopoly on the local insurance market. Law No. 93-94 of 20 July 1993 establishing the Insurance Code broke up this monopoly and opened up insurance to the private sector and to competition. At present, there are five insurance companies which offer a traditional range of products, such as civil liability, fire and theft, but are also beginning to provide services linked to international trade, such as maritime transport

79 The repo rate relates to a lending arrangement under which one bank transfers securities to another for a price (repo rate) and the transferor undertakes to buy back the securities and the transferee to sell them back on an agreed date and for an agreed price. 80 EIU (2000). 81 Ministry of Trade, Craft Industries and Tourism (2001). WT/TPR/S/103 Trade Policy Review Page 76

insurance.82 There is no Mauritanian reinsurance company, but the national insurers have access to the reinsurance services of foreign companies.

86. Mauritanian and foreign enterprises wishing to engage in insurance activities must obtain prior approval, granted by order of the Minister responsible for matters relating to insurance services. Foreign companies must have the status of an insurance company and be established in the form of a public limited company or mutual association.83 There are no restrictions on the establishment of foreign insurance companies on the Mauritanian market.

87. The legislation regulating the insurance sector in Mauritania consists of Law No. 93-40 of 20 July 1993 establishing the Insurance Code; Decree No. 96-017 of 6 March 1996 on the application of Article 340 of the Insurance Code; Decree No. 98-46 of 18 June 1998 authorizing the approval of insurance and reinsurance enterprises in Mauritania; and Order No. R-717 of 7 March 2000 regarding exemption from Article 199 of the Insurance Code.

(e) The Islamic financial system

88. An Islamic financial system based on law is beginning to emerge in Mauritania with the establishment of Banque Albaraka mauritanienne islamique (Al Baraka Mauritanian Islamic Bank) (BAMIS) and the (TAAMIN).84 This system is based on excluding all "predetermined or guaranteed profitability". The basic principles of the system are as follows: speculation and interest are prohibited (profit margins or cost-plus, i.e. Mourabaha85, are acceptable); risk, i.e. profit and loss, must be shared; and activities must be lawful (not in conflict with the Sharia).

(iii) Telecommunications

89. Under the structural adjustment programme, the Mauritanian Government has undertaken significant reforms by creating a competitive framework for the telecommunications sector. A new telecommunications law (Law No. 99-091) and its implementing decrees defining the legal framework were enacted in 1999. The Law is based on the following main principles: the creation of an independent regulatory body (regulatory authority); the separation of postal services from telecommunications by setting up two independent companies before the end of 1999 (the new telecommunications company was granted a GSM licence and a monopoly on a fixed network up to 30 June 2004); the opening up to competition of certain services such as cellular telecommunications, radio-paging, internet services, voice services, etc.; the opening up of the equity of the national telecommunications company to private individuals; and the opening up of the fixed-line service to competition in 2004.

90. In April 2000, the Office des postes et télécommunications (Post and Telecommunications Department) (OPT) was divided into two separate enterprises – Mauritel and Mauriposte – to prepare for the privatization of the telecommunications sector. In 2001, the Government sold a 52 per cent

82 These companies are: Assurances générales de Mauritanie (General Insurance of Mauritania) (AGM), Atlantic Londongate, Nationale d'assurance et de réassurance (NASR), (National Insurance and Reinsurance) (NASR), Société anonyme d'assurance et de réassurance (Insurance and Reinsurance Corporation) (SAAR) and Société d'assurance islamique (Islamic Insurance Company) (TAAMIN). 83 CIMDET (2000). 84 Like those of the other banks, the activities of Islamic banks are regulated by the Banking Law of 17 July 1995 which, without referring directly to the Islamic financial system, declares the Law to be applicable to "banks which do not resort to the use of interest rates and practice profit and loss sharing" (Article 2.5). 85 Under this system, the bank finances the purchase of a good or asset by buying it on behalf of the customer and increases the price before selling it on to the customer. Mauritania WT/TPR/S/103 Page 77

equity stake in Mauritel to a foreign company (Maroc Télécom).86 The new private company has an exclusive fixed-network licence that expires in 2004.

91. Mobile services have grown rapidly since two licences were granted in 2000 - one to the Mauritel subsidiary and the other to the Société mauritano-tunisienne de télécommunications (Mauritanian-Tunisian Telecommunications Company) (MATTEL). This has made it possible to create competition among operators and to obtain a reduction in international communications costs. However, the prices of local mobile communications remain higher than those for fixed lines for which the Government establishes a ceiling price and which are still the lowest in the region (table IV.2). On the other hand, prices for international services are slightly lower than for fixed lines.

92. In 2000, fixed lines were mainly available in the urban regions and there were about 19,000 telephone lines for a population of 2.6 million. The number of mobile subscribers has risen from about 14,500 in 2000 to 150,000 at present.

Table IV.2 Price of communications: international comparisons (Local tariff in UM per minute) Burkina Morocco Mali Senegal Mauritania France (France (ONATEL) (IAM) (Sotelma) (Sonitel) (Mauritel) Telecom)

Mobile to mobile (a) 62.0 45.0 35.0 69.0 108.5 103.0 Mobile to fixed 62.0 45.0 35.0 58.0 125.4 138.0 Fixed to mobile … 45.0 62.0 … 9.1 … Fixed to fixed (b) 21.0 18.0 29.0 17.0 9.1 21.0 Ratio a/b 2.9 2.5 1.2 4.0 11.9 4.9

… Not available.

Source: Regulatory Authority (2000), Annual Report.

93. The low level of availability of fixed-line telephones and the quality of the services provided by the fixed-line operator continue to be obstacles to the expansion of the Internet in Mauritania. Despite the presence of several Internet service providers, use of the Internet is still very limited.87 According to the World Bank, the monthly charges for high bandwidth capacity (64 Kbps) are relatively high. Consequently, commercial Internet use is accessible only to the largest enterprises.

(iv) Transport

(a) Land transport

94. The road system in Mauritania is not extensive and no passable road connects the two major economic centres of Nouakchott and Nouadhibou. Only 11 per cent of roads are paved, compared with 16 per cent in the average low-income country.88 Maintaining the road system is expensive due to periodic sandstorms. Accordingly, large segments of the country are difficult to access and its economic potential is underexploited.89 Several projects are in preparation, including the road connecting Nouakchott and Nouadhibou and the road alongside the Senegal River.

86 Up to that time, the telecommunications sector in Mauritania had been the subject of a State monopoly exercised by the Post and Telecommunications Department, which was set up in 1959. 87 In May 2000, there were an estimated 849 Internet subscribers (household and business), although this number is likely to have increased substantially since then. 88 World Bank (2001b), Volume I. 89 For instance, roads in the South that would open up a promising agricultural area are not passable in the rainy season and difficult to negotiate during any other season. WT/TPR/S/103 Trade Policy Review Page 78

95. Transport costs are high due partly to the long distances between the centres of economic activity, underinvestment and poor management. Another factor responsible for these high costs is the monopoly granted to the Fédération nationale des transports (National Transport Federation) (FNT), which used to determine the choice of carrier and the price.90 This monopoly was abolished in principle following the promulgation by the Government, in 1998, of a decree opening up road transport to competition and, in 2001, of an order liberalizing road transport prices.

96. Nor is rail transport very developed. The only railway (675 km long) is that linking Zouérate with the port of Nouadhibou, and that is mainly used for transporting iron ore.

(b) River and maritime transport

97. The Mauritanian maritime infrastructure consists of the port complex of Nouadhibou (an ore terminal, an oil terminal, and a fishing and commercial port), through which pass most exports of fisheries products and iron ore, and the deep-water port of Nouakchott – PANPA (Port autonome de Nouakchott) – with a capacity of 1.5 million tonnes per year, which can take container ships and bulk carriers and through which pass most of the country's imports.91

98. This infrastructure has been built or is managed by semi-public economic entities (the ore terminal by SNIM and the oil terminal by NAFTAL) or built by public investment and managed by industrial and commercial entities (Port autonome de Nouakchott and Port autonome de Nouadhibou (fishing and commercial port)).92

99. Prima facie port tariffs are very competitive but it seems that services are poor and not client- friendly.93 There have been reforms, such as the liberalization of handling operations in the port of Nouakchott. These services are now provided by seven operators, which have established the Société d'équipements portuaires (Port Equipment Company) (SEP) in which they hold shares. The role of the SEP is to manage the handling equipment leased to its shareholders.94

100. The river transport infrastructure includes a few river ports on the Senegal River (, and ) and mainly handles ferry traffic.95

101. Mauritania maintains an open policy for international maritime shipping. No cargo reservation policies are in place. Since 1995, the sector has been gradually liberalized and the Government has liquidated its assets in the sector, including the Compagnie mauritanienne de navigation maritime (Mauritanian Maritime Navigation Company) (COMAUNAM), a shipping company jointly owned by the Governments of Mauritania and Algeria. There are no equity limitations regarding the foreign ownership of transport operators in international shipping and the provision of port services (except pilotage, towing and berthing services).

102. Two foreign-owned consortia, Delmas and Maersk, dominate the market for international liner shipping services. These two entities account for 85 per cent of the market. Freight rates seem to be higher than those for comparable destinations, which is probably due to the lack of economies of scale and scope, as well as to the concentrated market structure.

90 Prices were fixed in negotiations between the FNT and the Ministry of Public Works and Transport. 91 According to the authorities, Nouakchott is currently handling about 782,000 tonnes of maritime traffic. 92 "Mauritanie" (1998), Marchés tropicaux et méditerranéens, special issue, March. 93 World Bank (2001b), Volume I. 94 Ministry of Trade, Craft Industries and Tourism (2001). 95 Ministry of Trade, Craft Industries and Tourism (2001). Mauritania WT/TPR/S/103 Page 79

(c) Air transport

103. The air transport sector is regulated by Law No. 78-009 of 18 January 1978 on civil aviation. A new civil aviation code is being prepared. International air services are governed by the bilateral agreements concluded by the Mauritanian Government: in principle, these do not grant fifth freedom rights96 and heavily regulate capacity and tariffs. Mauritania is nevertheless a signatory to the Yamoussoukro Declaration and Memorandum of Understanding which liberalized African airspace for the benefit of the region's airlines.97

104. In the late 1990s, the Mauritanian Government took significant steps towards liberalizing air transport services. In 1988, the Government opened its domestic market to competition, and in 1999 it partially privatized the national flag carrier, Air Mauritanie, by selling a majority stake to a foreign operator. A first domestic competitor, the Compagnie mauritanienne des transports aériens (Mauritanian Air Transport Company) (CMTA), began flying in 2001 and is estimated to command a 5 per cent market share.98 According to the authorities, about thirty cargo licences have been granted to various companies; however, at present only two are really active (CMTA and West African Cargo).

105. Mauritania has three international airports: Nouakchott, Nouadhibou and Attar, which are used by the domestic flag carrier and five foreign companies (Air Algérie, Air France, Air Sénégal, Royal Air Maroc and Tunis Air), plus seven secondary airfields.

(v) Tourism

106. Tourism is a new and promising sector for Mauritania whose potential remains to be fully exploited. It consists mainly of desert tourism, but other activities are emerging, such as fishing, hunting and birdwatching.99 Mauritania's potential for tourism extends well beyond the desert. The nature reserve of Banc d'Arguin and several ancient cities, such as Chinguetti, , and Tichitt, have been granted the status of world heritage site by the United Nations Educational, Scientific and Cultural Organization (UNESCO).

107. The Mauritanian Government expressed its intention of developing tourism in its 1994 Declaration on general tourism policy. In 1996, this objective was given material expression with the adoption of Law No. 96.023 organizing tourism activity in Mauritania. At present, tourism is being promoted partly by the Tourism Directorate of the Ministry of Trade, Craft Industries and Tourism and partly by the SNIM subsidiary SOMASERT. The tourism sector also benefits from specific provisions of the Investment Code.

96 The right of an aircraft registered in a given country to carry out commercial transport operations between two other foreign countries. 97 The Yamoussoukro Declaration was signed in 1988. Its purpose was to integrate and liberalize the African aviation market over an eight-year period. However, its objectives were not achieved. In 1999, a new Yamoussoukro initiative was launched. Twenty-three countries, including Mauritania, are signatories to a protocol of understanding which lays down guidelines for the gradual application of an "open skies" agreement, with the aim of, inter alia, liberalizing freight and passenger transport, granting rights to the five freedoms of the air, abolishing restrictions on capacity and introducing competition rules and non-discrimination requirements. The air space of the eleven States participating in Air Afrique had already been liberalized at the end of the 1980s. 98 For the moment, the company owns only two cargo aircraft and one forty-seat passenger aircraft. 99 At present, desert destinations dominate the sector because of the lack of infrastructure for other activities, poor accessibility or cultural factors, for example, for beach tourism. WT/TPR/S/103 Trade Policy Review Page 80

108. Under the 1996 Law, the exercise of any tourism activity is subject to the approval of the ministry responsible for tourism, which must first consult an approvals committee. The obligations on tourism establishments are those relating to the conformity of the services provided with the standing of the establishment; respect for the cultural and religious values of the Islamic Republic of Mauritania; the obligation to communicate information to the Tourism Directorate; the declaration obligation; the new tax obligations (UM 200 per night); and the obligation to have advertising approved by the Ministries of Trade, Craft Industries and Tourism; Interior; and Information.100

109. The Government has also asked SNIM to promote tourism in the Attar region. The results have been promising. Since 1996 the company SOMASERT S.A. has undertaken various initiatives with a view to developing the sector and has associated itself with a French tour operator to create a charter connection between Attar and Marseille and to organize guided tours in the desert.101 About eighty charter flights between Paris or Marseille and Attar have been scheduled for the 2001-2002 season. Several private sector operators have followed suit and at present thirteen French tour operators, in association with local partners, are organizing tours to Mauritania. The sector is also benefiting from Mauritania's relative political stability, which is helping to put it ahead of its competitors for desert tourism in the region.

110. According to the authorities, following the introduction of the 1996 Law, investment in the tourism sector and the jobs it creates have reached levels (UM 2.24 billion and 529 jobs) well in excess of the total for all previous investment.102

111. During the Uruguay Round, Mauritania undertook specific commitments in the tourism sector.103 It imposes no limitations either on market access or on national treatment for modes of supply 2 and 3 (consumption abroad and commercial presence). As regards cross-border supply of hotel and restaurant services, and travel agencies and tour operator services, Mauritania did not make any bindings for "technical unfeasibility". Mode 4 (presence of natural persons) was not bound, except for managers, senior executives and specialists who possess knowledge essential to the provision of this service.

100 CIMDET (1998). 101 Tourism seems to be developing relatively quickly. Between 1997-1998 and 2000-2001, the number of arrivals at Attar airport increased from 1,500 to 7,000 per year. 102 Online information. Available at the following address: http://www.mauritania.mr/ expo2000/environnement.htm (19 September 2001). 103 WTO document GATS/SC/113, 30 August 1995. Mauritania WT/TPR/S/103 Page 81

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