Documentof The Wcrld Bank

FOR OFFICIALUSE ONLY Public Disclosure Authorized

P-53 cc -P'1AU

MEMORANDUMAND RECOMMENDATION

OF THE

PRESIDENTOF THE

INTERNATIONALDEVELOPMENT ASSOCIATION

Public Disclosure Authorized TO THE

EXECUTIVEDIRECTORS

ON A PROPOSED

DEVELOPMENTCREDIT

OF SDR 7.7 MILLION TO THE

ISLAMIC REPUBLICOF MAURITANIA

FOR A

Public Disclosure Authorized PUBLIC ENTERPRISESECTOR INSTITUTIONALDEVELOPMENT AND

TECHNICALASSISTANCE PROJECT

May 30, 1990 Public Disclosure Authorized

TiUs document bas a restricted distributon and may be used by recipients only in the performance of their ffida! duties. Its contents may not otberwise be disclosed withouxWorld Bankauthorization. CURRENCYECUIVALENTS

Currency Unit - Ouguiya (UK)

USS 1.00 - UM 84.8 1/

Ouguya 1 million US$ 11,790

SYSTEMOF WEIGHTSAND MEASURES: METRIC

ABBREVIATIONS

AIR MAURITANIE - National Airline CRSP - Cellule de Rehabilitationdu Secteur Publique OPT - Office des Postes et T4l4communications PANPA - Port Autonome de Nouakchottdit Port del'Amitie SMCP - SocieteMauritanienne de Commercialisationdu Poisson SMCPP - Socidt6Mauritanienne de Commercialisationdes Produits Petroliers SOHAGAZ - SocieteHauritanie du Gaz SOMIR - SocieteNationale des Industriesde Raffinerie SONELEC - SocieteNationale d'Eau et d'Electricite SONIMEX - SociOtdNationale d'Import-Export

FISCAL YEAR

January - December

11 Exchange rates as of March 1990 FOR OMCIAL USE ONLY

ISLAMIC REPUBLICOF MAURITANIA

PUBLIC ENTERPRISEINSTITUTIONAL DEVELOPMENT AND

TECHNICALASSISTANCE PROJECT

CREDIT AND PROJECT SUMMARY

Borrower: Government of the Republic of Mauritania

Beneficiaries: Ministriesof Plan, Finance and Commerce,Directorates of Energy,Mines and Geology,and key public enterprisesin the energy,telecommunications and transportsectors

Credit Amount: SDR 7.7 million (US$10.0million equivalent)

Terms: Standard,with 40 years maturity

FinancingPlan:

Local Foreign Total -S_------.--¢US$million)------

Government 0.5 0.5

IDA 0.5 9.5 10.0

1.0 9.5 10.5

Economic Rate of Return: Not applicable

Staff AppraisalReport: Not applicable

MaP: IBRD No. 22261

This documenthas a restricteddistribution and may be used by recipientsonly in the performance of their officialduties. Its contents may not otherwisebe disclosedwithout World Bank authorization. MEXORANDUMAND RECOMMENDATIONOF THE PRESIDENT OF THE INTERNATIONALDEVELOPMENT ASSOCIATION TO THE EXECUTIVEDIRECTORS ON A PROPOSEDCREDIT TO THE ISLAMICREPUBLIC OF MAURITANIA FOR A PUBLIC ENTERPRISEINSTITUTIONAL DEVELOPMENT AND TECHNICALASSISTANCE PROJECT

1. The followingmemorandum and recommendationon a proposed developmentcredit to the Republicof Mauritaniafor SDR 7.7 million (US$10.0Million equivalent)is submittedfor approval. The proposed credit would be on standard IDA terms with a maturity of 40 years, and would help finance a public enterpriseinstitutional development and technicalassistance project.

2. Background. After independence,Mauritania pursted a deliberate policy of parastatalintervention to promote economic developmeut. As a result,the parapublic sector grew rapidly. Mauritania currentlyhas 80 parapublicenterprises which are involvedin virtuallyall economic sectors. They account for more than one-fourthof modern sector employment (12,000workers), use up over 50 percent of public investment,and receive almost one-fifth of the credit disbursed through the domestic banking sector. The overall performanceof the PE sector,however, has not been satisfactory. It has been characterizedby high losses,mounting arrears, reliance on monopoly privileges, a rising debt burden and increasing illiquidity.

3. In view of the sector'sunsatisfactory perfor.iance and the emergenceof unsustainablefinancial disequilibria, the governmenthas formulatedand begun the implementationof a comprehensivepublic enterprisesector adjustmentprogram (PESAP). Actions under the proposed programwould include; (i) a modificationof the legal and institutional frameworkwith the objectiveof eliminatingstate monopoliesand facilitatingincreased private sector participation;(ii) a program of divestiture; and (iii) financialrestructuring programs for key enterprisesremaining in the sector,particularly SNIM, the iron ore mining company,which is by far the largestenterprise in the country.

4. Overall responsibilityfor the implementationof the reforms in * the public enterprisesector lies with the Ministry of Plan. The 'Cellule de Redressementdu SecteurPublic' (CRSP),within the Ministry of Plan, will coordinateactivity and monitor progress of the reformsand will be * responsiblefor privatizationand liquidationof enterprises. A division in the Ministry of Financewill also assist and extend the information system developed,help introduceand standardizebudgetary and accounting procedures,and monitor the financialperformance of all PEs. To adequatelydischarge their responsibilities,both CRSP and the unit in the Ministry of Finance,will need technicalassistance. Although qualified, the staff has little experiencewith the variety of complex tasks to be undertaken in a number of sectors. In addition,it is proposed that technicalassistance be providedto enterprisesin the energy, telecommnicationsand transportsectors, sectors of vital importanceto the Mauritanian economy.

5. Rationale of IDA involvement. The origins of the credit stem from the Goverpment's exforts, dating back to 1983, to redress the situation of t.te PE sector. These efforts were supported by a Rehabilitationproject for SNIM (Ln. 2643-MAU),a DevelopmentManagement Project (Cr. 1865). a Rural Sector TechnicalAssistance Project (Cr. 1414- MAU), and a Public EnterpriseTechnical Assistance and Rehabilitation Project (Cr. 1567-MAU),which are either fully disbursedor almost fully committed. Through its past involvement,IDA has built up an intimate working knowledge of the public enterprisesector and has been asked by the Governmentand other financinginstitutions to take a lead in supporting the proposed adjustmenteffort. The proposedproject will complement technicalassistance activity being financed by the Bank and other donors. Experiencewith such technicalassistance has been good. The projectwill help ensure successfulimplementation of the reforms at the same time that it helps develop the institutionalbase for sound managementof the sector. IDA's continuedinvolvement in the energy, telecommunicationsand transport sectors is needed in order: (i) to maintain a dialogue in these sectors which will ensure that appropriatepolicies agreed to by the Government will continue to be implemented;(ii) to ensure that the sector investments are directed to projects of high priority;and, (iii) to ensure that prices and tariffs reflect both economiccosts and fiscal considerations.

6. Proiect oblectives. The objectivesare to provide the technical assistancesupport the Governmentneeds to extend and deepen its PE reform efforts,which would be supportedby the companionPE Sector Adjustment Credit. The project is also to address the long term issue of strengtheningthe government'sability to devise and implementPE reforms as well as to monitor the sector'sperformance and manage its future development.In the energy, transportand telecc-municationssectors, the objectivesare to help the Governmentbetter manage the sectors, to encouragethe creation of a subsidiaryin the 'Officedes Postes et T6lecommunications'(OPT) that would mobilize savings, to put air transport back on a sound financialfooting, to help implementa householdenergy strategy,and to attractprivate companiesto explore for petroleumin Mauritania.

7. Project description. The projectwould provide a specialunit "Cellulede Rehabilitationdu Secteur Public", (CRSP)created to oversee parastatalreform with the (local and foreign)technical expertise (about a.30man-months), logistical support and reso'rcesneeded to execute the reform'smain elements. These include: (a) monitoringsector performance; (b) implementingliquidation, privatization, and other divestiture measures; (c) carryingout externalaudits of enterprises;(d)providing counselingand advice on labor retrenchment;(e) implemientingstudies of subsectors(insurance, fisheries) or enterprises(SOMLR and SOMINEX). The technicalassistance to the Ministry of Financewill consist of short term consultancyservices (about50 man-months)and some trainingto deal with the accountingand budgetaryprocedures and monitoring of financial performanceof PES, as well as servicesof an expert agency to certify the quality, quantity and price of each shipmentof goods to be financed under the PESECAL. The technicalassistance for energy would consist of 180 man- months of long-termexperts to assist SONELEC,about 70 man-monthsof short-termconsulting services to assist with seismicdata processing,data reinterpretationand reprocessingand petroleumexploration promotion, and about 30 man-monthsof experts to help implementthe householdenergy strategy,including the promotionof improvedcharcoal and kerosene stoves and the promotionof gas for householdcooking. The technicalassistance to the Ministry of Commerce is to help it fully liberalizeprices, set up a * regulatoryframework for private insurancecompanies, and to demonopo3ize SONDMEX. OPT would requireabout 50-man-monthsof consultantservices, includingthe servicesof a coordinator,to update the rehabilitationplan, prepare a performancecontract, complete the introductionof a new computerizedbudgeting and accountingsystem, includingfull separationof accounts of the postal checking servicesand the national savingsbank. The technicalassistance to Air Mauritanieand PANPA would consist of 40 man-monthsof consultingservices and includepreparation of performance contracts. The projectwould also provide for training,equipment and other facilitiesfor CRSP and the Directoratesof Energy,Mines and Geology.

8. The project to be carriedout over seven years, is estimatedto cost US$10.5 million equivalent,with a foreignexchange component of US$9.5 million (90 percent). IDA would finance100 percent of foreign exchange costs and 50 percent of local costs due to Government'ssevere budgetaryconstraints. A breakdownof costs and the financingplan are shown in ScheduleA. Amounts and methods of procurementand of disbursements,and the disbursementschedule are shown in Schedule B. A timetableof key projectprocessing events and the status of Bank Group operations in Mauritaniaare given in SchedulesC and D respectively. More detailed informationon the proposedproject is provided in Annex 1. Terms of referencefor sowe of the activitiesare given in Annex 2. Details on the householdenergy are given in Annex 3. A SupervisionPlan is provided in Annex 4. The President'sReport for the accompanyingPE Sector Adjustment Credit is No. P-5293 MAU, dated May 25 1990.

9. Actions agreed upon. During credit negotiationsthe following actionswere agreed upon; (a) full Governmentfunding of CRSP; (b) preparationof annual workplansand budgets satisfactoryto IDA; disbursementswould occur only after such work plans are agreed upon between the Governmentand IDA (includinga detailed trainingprogram) by December 31 of each year; (c) terms of referencefor the studies on the insurancesector, on SOMIR and SONIMEX; (d) completionof annual audits for key enterprises;(e) creationof a unit in the Ministry of Plan to provide counselingand assistanceto those losing their employmentunder the adjustmentprogram; and, (f) financialrestructuring and action plans for Air Mauritar.ie,PANPA and SMCP.

10. Benefits. The main benefits of the technicalassistance componentare expected to be: (a) a strengthenedand streamlined organizationto monitor PE sector performance; (b) timely implementation of the organizationalrestructuring components of the program; and (c) more Governmentability to developand implementPE sector policies. The main - 4 - benefits of the assistanceto the energy and telecommunicationssectors is upgrading local capabilitiesto manage the energy and telecommunications sectors, increasedpetroleum exploration by private companies,increased savingsmobilization, reduction in fuelvoodconsumption and provisionof reliablepower and telecommunicationsservices. RestructuringAir Mauritaniawill ensure a more efficientoperation of transportinggoods and passengers.

11. Risks. The main risk associatedwith the proposed project is that despite the government'swillingness to reform the PE sector, it might fail to carry out the politicallypainful measures. The projecthas been designed to minimize this risk by obtainingpolitical commitments from the highest level.

12. Recommendation. I am satisfiedthat the proposed IDA Credit would comply with tne Articles of Agreementof the Associationand recommendthat the ExecutiveDirectors approve the proposedCredit.

Barber B. Conable President

Attachments Washington , DC May 30, 1990 Schedule A

ISLAMIC REPUBLICOF MAURITANIA PUBLIC ENTERPRISEINSTITUTIONAL DEVELOPMENT AND TECHNICALASSISTANCE PROJECT ESTIMATEDCOSTS AND FINANCINGPLAN

ESTIMATEDCOSTS

Proiect Component LOCAL FOKSIGN TOTAL -__-_U.S.Million-----

Support to CRSP 0.29 2.34 2.63 Support to Ministry of Finance 0.05 0.65 0.70 Support to Ministry of Commerce 0.04 0.36 0.40 Support to SONELEC 0.11 2.39 2.50 Support to Directorateof Energy 0.06 0.34 0.40 Support to Directorateof Mines and Geology 0.04 1.12 1.16 Support to OPT 0.15 0.39 0.54 Support to Air-Mauritanie 0.02 0.18 0.20 Support to PANPA 0.02 0.23 0.25

Base Cost 0.78 8.00 8.78

PhysicalContingencies 0.08 0.30 0.38 PriceContingencies 0.14 1.20 1.34

Total Contingencies 0.22 1.50 1.72

Total ProjectCosts 1.00 9.50 10.50

FINANCINGPLAN LOCAL FOREIGN TOTAL ---- U.S. Million--

Government 0.5 0.5 IDA 0.5 9.5 10.0

1.0 9.5 10.5 6-

Schedule B Page I of 2

ISLAMIC REPUBLIC OF MAURITANIA PUBLIC ENTERPRISE INSTITUTIONALDEVELOPMENT AND TECHNICALASSISTANCE PRO' CT PROCUREMENTMETHODS AND DISBURSEMENTS

Procurement Method Proiect Component Amounts and Procurement Methods 11 ICB LCB Other N.A. Total Cost ------US$ million ------Support to CRSP Resident Advisers 0.45 0.28 (0.45) (0.28) Short-term Consultants 0.65 0.36 (0.65) (0.36) Social impact Adviser 0.14 0.14 (0.14) (0.14) Studies, Audits, Performance contracts, etc 1.20 1.20 (1.20) (1.20) Training 0.31 0.31 (0.31) (0.31) Vehicles, Equipment and 0.32 0.32 other Material (0.32) (0.32)

operat',ngcosts 0.93 0.60 (0.43) (0.10)

SuDDort to MFIN Short-term Consultants 0.67 0.67 (0.67) (0.67) Training 0.23 0.23 (0.23) (0.23)

SuoDort to SONELEC Sanitary Engineer 0.50 0.50 (0.50) (0.50) Customer management specialist 0.35 0.35 (0.35) (0.35) Technicians P 82 0.82 (0.Z2). (0.82) Training 0.23 0.23 (0.23) (0.23)

Support to Minist&y of Conmerce 0.49 0.49 (0.49) (0.49)

1/ Figures in parenthesis are the amounts financed by IDA. -ScheduleB Page 2 of 2

ICB LC_ Other NA. Total Cost __-_----__----USS million ------Suuuort to Directorate of Energy Consultants 0.35 0.35 (0.35) (0.35) Vehicles, equipment, etc. 0.12 0.12 (0.12) (0.12) Suuuort to Directorate of Mines & Geol2oa Consultants 0.93 0.93 (0.93) (0.93) Vehicles, equipment, etc. 0.17 0.17 (0.17) (0.17) Suyvort to OPT Resident Coordinator 0.28 0.28 (0.28) (0.28) Short-term Consultants 0.35 0.35 (0.35) (0.35) SuDDortto Air Mauritanie Consultants 0.24 0.24 (0.24) (0.24)

Suoport to Paiya 0.30 0.30 (0.30) (0.30)

PPF Refinancina 1.26 (1.26) Total 0.61 8.63 1.26 10.50 (0.61) (8.13) (1.26) (10.00) DISBURSEMENT

Categorv Amount I of Exoenditureto be financed (US$ million)

Advisers & Experts 2.22 1002 of expenditures

Consultants Services/ Studies 3.31 1002 of expenditures

Training 0.66 100Z c. expenditures

Vehicles/equipment,etc. 0.53 1007 of expenditures

Operating costs 0.30 50S of expenditures

PPF Refinancing 1.26 Amount due pursuant to Section 2.02 of develop- ment Credit Agreement Unallocated 1.72

Total 10.00 IDA FiscalYear

Estimated IDA Disbursements 91 92 93 94 95 96 97 ------US$ million ------Annual 1.0 1.5 2.0 1.5 1.5 1.5 1.0 Cumulative 1.0 2.5 4.5 6.0 7.5 9.0 10.0 -8-

Schedule C

ISLAMIC REPUBLICOF MAURITANIA PUBLIC ENTERPRISEINSTITUTIONAL DEVELOPMENT AND TECHNICALASSISTANCE PROJECT TIMETABLEOF KEY PROJECTPROCESSING EVENTS

(a) Time taken to prepare s 12 months (b) Preparedby : Governmentwith IDA assistance (c) Appraisalmission departure : January 1990

(d) Negotiations s May 1990

Ce) Planned date of effectiveness: July 1990

(f) List of relevantdocuments : President'sPeport for the Public EnterpriseSector AdjustmentProgram, P-52'3-MAU - 9 - SCHDULED

ISLA IC REPUBLSCOF MAURITANIA PU8LXCPULCET.ERFRISE. ENR1lrlNrTlDINSTITUTIONAL DEVEOETANELOFIMENT AND TECHNICALASSISTANWE PROJECT STATUSOF BANKCPOUP OPERATIONSIN MAURITANIA SUMMARYSTATEMENT Of BANKWLANS AND IDA CREDITS (As of March 80, 1990)

AmountIn USS million (losscancellotion) Fiscal Credit No. Year Borroer Purooso Bank IDA Undleburred 3 loansand 16 Credit. (s) cloed 4S.04 102.8S of whichSALS and SECALs

CAO280-4TA 1987 MAURITANIA SAL I 27.40 L28480-MTA 1086 MAURITANIA SNIMREHAB 20.00 Sub-Totl 20.00 27.40

Cr.12920-MTA 1983 MAURITANIA TECH.ASSIST.II 4.00 1.90 Cr.14140-HTA 1984 MAURITANIA TECH.ASST.TORURAL S 0.10 Cr.16670-MTA 198S MAURITANIA PUBLICENT TAL REHA 1S.40 8.88 Cr.15710-MTA 1985 MAURITANIA SMALLSCALE IRRICATI 7.60 6.76 Cr.1S720-4TA 1986 MAURITANIA IOF II 6.25 3.98 Cr.16580-4TA 1086 MAURITANIA LIVESTOCKII 7.60 7.11 Cr.18120-MTA(S) 1987 MAURITANIA SAL I 16.00 .26 Cr.186E0-MTA 1988 MAURITANIA DEVELOP.MONT 10.00 7.11 Cr.19430-MTA 1989 MAtURITANIA EDUC.SECTORRESTRUCT 18.20 15.07 *Cr.209W0-MTA(S) 1900 MAURITANIA AG SECAI4IRRIOIMPRO 26.10 25.07 TotI 11?.66 69.64

TOTAL 144.00 220.50 of which repaid 100.65 4.78 Totel hold by Bank & IDA 46.36 216.78 Amount sold 6s.35 of which repaid 68.86 Total undisbursed 69.71

Notes *) Approved during or after FY80 b> Ineludes Speclui Fund C) Not yet ffoective * Sol, Scal or Program Loan Annex I Page 1 of 8

- 10 -

REPUBLIC OF MAURITANIA

PUBLIC ENTERPRISE INSTITUTIONAL DEVELOPMENT& TECHNICAL ASSISTANCE PROJECT

A. Project Description

1. Sector Size. After independence,Mauritania pursued a deliberate policy of parastatalinterveution to promote economicdevelopment. Such a policy was viewed as essential,givan the underdevelopednature of

resourcesand markets -. the absence of investiblefunds and entrepreneurialskills. As a result,the parapublicsector grew rapidly in the 1960 and early 19709. Mauritanianow has 80 public enterprises involved in virtuallyall economic sectors. They account for more than half of public investment,and receivealmost one-fifthof the credit disbursedthrough the domesticbanking sector. The PE sector also accounts for more than one-fourthof modern sector employment,or 12,000 jobs.

2. Sector Performance. Twelve enterprisesaccount for over 95 percent of sales and about 75 percent of employmentin the sector. Overall PE sector performancereflects the performanceof these large enterprises. It has been characterizedby high losses,mounting arrears, a rising debt burden, increasingilliquidity, and relianceon monopoly privileges. The causes of poor performancehave been rapid changes in the external environment,poor investmentchoices, weak management,lack of financial discipline,and inappropriateand ill-definedrelations between the Governmentand the PEs. Inadequatedata preclude a completeassessment of the sector's financialperfornance, but operatingresults of a number of the more importantPEs show that more than 60 percent of the public enterprisesincurred losses in 1988, that aggregatelosses exceededUSS 25 million, and that half of those enterprisesshowing any profits,were less profitablein 1988 than in 1987. Even more alarming is that a large number of companieshave their equity capital totally eroded, including enterprisesthat are of crucial importanceto the economy. To cover expenses, a number of enterprises resorted to short-term loans from local banks furtheraggravating their financialsituation as well as that of the banks. The PE sector has, moreover,contracted a considerableamount of external debt (US$520million), or about one third of the public and publicly guaranteedobligations. In fact, PE debt increasedfrom 10 percent of public debt in 1983 to over 30 percent in 1988. Because of their poor financialperformance, PEs have been unable to servicethese debts. This is an increasingproblem for the Governmentbecause of the constant devaluationof the Ouguiya. Results of a cross-debtstudy show Annex I Page 2 of 8

- 11 -

PEs owing considerablesums (over US$40 million) to the Government,banks, and suppliers. Public monopolies-- such as SONIMEX (rice, tea, and sugar imports) and SMCP (fish exports) -- have been collectingimportant amounts of import and export taxes (UM5.9billion in 1989 or about US$71 million) but it is increasinglyevident that these Governmentrevenues might have been higher and raised at less cost to the economywithout going through a monopoly.

3. GovernmentReform Efforts. The Government'smedium-term adjustmentprogram, initiatedin 1985, includedimportant reform initiativesspecifically aimed at improvingthe performanceof public enterprisesand encouragingprivate sector activity. These initiatives were supportedby a StructuralAdjustment Credit (Cr. 1812 MAU), a RehabilitationProject for SNIM, the iron ore mining company (Ln.2643- MAU), a Rural Sector TechnicalAssistance (Cr. 1414 MAU), and a Public EnterpriseTechnical Assistance and RehabilitationProject (Cr. 1567-HAU). Reformswere undertakenin five main areas: (i) revisionsin the incentives policies; (ii) restructuringof the banking sector; (iii) improvementsin the legal and institutionalframework for the public enterprisesector; (iv) rehabilitationof individualenterprises; and (v) introductionof other measures to rationalizeand improvethe efficiencyof the sector. Conside.ableprogress has been made in implementingthese reforms,but serious financialdisequilibrium continues in the sector. Accordingly,and in consultationwith IDA, the Governmenthas formulateda Public Enterprise Sector Adjustment Program. Actions under the proposed programwould include; (i) a modificationof the legal and institutionalframework with the objectiveof eliminatingstate monopoliesand facilitatingincreased private sector participation;(ii) a program of divestiture;and (iii) financial restructuringprograms for key enterprisesremaining in the sector, particularlySNIM, the iron ore mining company,which is by far the largest enterprisein the country. The detailsof the program are outlined in the President'sReport on the accompanyingPESAP.

4. Energy Sector. In the energy sector,a sector of vital importanceto the Mauritanianeconomy, Mauritaniafaces the twin problem of rapid deforestationand high level imports. Energy imports consist mainly of petroleumproducts (300,000tons in 1988), but also includes fuelwoodand charcoal for householdconsumption and representsa significantdrain in the country'sforeign exchange earnings. The problems in the energy sector have been aggravatedby weak sector managementand inappropriatepolicies. In the energy sector,there are five public enterprisesreporting to two ministries. SONELECprovides electricity services in the major urban areas, SMCPP is a petroleumproducts distributioncompany, SOMIR is responsiblefor the refiningof petroleum products (1 million/t.p.a),SOMAGAZ is a gas bottlingand distribution company, and HEPP is responsiblefor storageof petroleumproducts. These enterprisesreport to the Ministry of Hydraulicsand Energy (MHE),with the Annex I Page 3 of 8

- 12 -

Directorateof Energy (DE) within the Ministry,responcible for energy planning and policy coordinatJon. The other ministry concernedis the Ministry of Industryand Mines (HIM) responsiblefor petroleumexploration and productionthrough its Directorateof Mines and Geology DMG).

5. Since 1985, the Governmenthas taken a number of actions relatingto energy supportedby a SAL operation(Cr. 1812 MAU) and a Public EnterpriseTechnical Assistance and RehabilitationProject of (Cr. 1567- MAU). Power networks have been upgraded and servicesrestored. A performancecontract has been signed between the Governmentand SONELEC that is producingsome good results,but SONELECwill continue to need additionaltechnical assistance. Although it caters to more than half of the petroleumproducts market, SMCPP has become unprofitable. The Governmenthas agreed therefore,in the context of the proposed PASEP, to privatizeSMCPP. Similarly,under pressure,the Governmenthas concluded an agreementin 1985 with the Governmentof Algeria that provides for the refineryto be operatedby an Algerian company,NAFTAL for a 5-year period. In addition,the agreementcalls for the ex-refineryprices of petroleum products paid by Mauritaniato be equal to internationalprices. This arrangementhas worked well so far for Mauritania,but the future of the refineryoperation is uncertain,particularly if the Algeriansdo not renew the contract. The Governmenthas thereforeagreed to study the future course of actions to be taken with regard to the refinery. The other two enterprises,SOMAGAZ and MEPP, have considerableprivate sector participationand operatefairly efficiently. However, SOMAGAZwould need to operate in the contextof a comprehensivestrategy for household energy already preparedby the Directorateof Energy with the assistanceof ESMAP. This is essentialbefore the limited forest cover in the country is destroyed,with adverseeffects on the environmentof a region already threatenedby desertification.Finally, effortsto promote petroleum explorationstarted in 1982 have been encouragingbut need to be continued by the Directorateof Mines and Geology so that private companiesare attractedand so that commercialdeposits can be found.

6. Transportsector. Air Mauritaniewill be the target of financialrehabilitation under the proposed PASEP. Air Mauritanie,a company in which the Government is the majority shareholder,plays a useful role in transportinggoods and passengers. Its fleet consists of two Dutch-built70-seater F-28 jets and some smallerplanes, with which it services a number of domesticdestinations as well as a few cities in the region such as Bamako,Banjul and Casablanca. Air Mauritaniehas built a reputationas a reliableairline. A recentmanagement audit confirmed that, taking into account the difficultoperating conditions and market characteristicsin Mauritania,Air Mauritanie'soperational efficiency compares reasonablywell with similarsmall airlines in the world. In Annex I Page 4 of 8

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1989, its operatingexpenses were less than US$ 0.1 per seatlkm, a reasonableperformance. Still, it is losing money -- partly because of low domestic tariffs and servicingof unprofitabledomestic destinations,but mostly because of burdensomedebts it contractedin foreign currency. The depreciationof the ouguiya against the Dutch Guilder has inflated the company'slong term debt and the originaldebt of about DFL. 32 million in 1984, is still valued in Ouguiya terms at about DFL. 30 million, in spite of principaland interestpayments of about DFL 16 million. In 1989, Air Mauritaniewas abas to cover its operatingexpenses, but after financial charges and provisionsfor foreignexchange fluctuations, it lost an estimatedUK 650 million, and was unable to meet its debt service obligationsin spite of three Paris Club rescheduling.

7. Based on the recommendationsof a managementaudit, the Governmenthas proposed a plan to restructureAir Mauritaniethat will be implementedin the context of the proposedPE program. This plan involves an increase in domestic tariffs,a reductionin operatingcosts (including partiallyfreezing salaries)and the sale of one of its smalleraircraft, improvementof the organizationalstructure, management informationand accountingsystems. Other measures includethe settlementof Gov.rnment arrears and developmentof new sourcesof revenue. When implemented, these actions are expected to put the airline on a sound financialbasis. During negotiations,agreement was be sought on the details of the plan, Which are to be reflectedin a performancecontract to be signed between Air Mauritania and the Government. In the medium term, the composition of the fleet needs to be reviewed,including the sale of existing planes and leasingof planes better adapted to the physicaland market conditions.

8. In addition,the port facilitiesat Nouakchott (PANPA)will be providedwith assistance. The PE TechnicalAssistance and Rehabilitation Project concentratedon providingequipment and technicalassistance and improvingthe financialposition of the port authorityresponsible for the existingwharf in Nouakchott (EMN),while a new deep-water port was under constructionwith assistanceof the People'sRepublic of China. EMN's staff was cut 25 percent, tariffs increased25 percent, working methods improved (by revising shifts and work hours), and productivitymore than doubled. As a result, EMN showed a profit in 1987 and paid off its accumulatedarrears. In the same year, the Governmentdecided to create a new public enterprise (PANPA) to operate both the old wharf and the new deep-waterport, which had startedoperations. The transitiondid not go smoothly. Rather than transferringpart of personnelfrom the old wharf to the new port, an entire new staff was recruited. As a result of over staffing and inefficientstevedoring, PANPA suffereda net loss (after depreciationand financialcharges) of UM 199 million in 1988 and an estimatedUM 270 million in 1989. In the context of the PASEP, 255 employeeshave been dismissedand stovedoringactivities are in tae process Annex I Page 5 of 8

- 14 - of being privatized. Also a performancecontract will be prepared and signed as a conditionof Second Tranche Release

9. Telecommunications.In the telecommunicationssector, efforts so far, under the PE technicalassistance project (Credit1567 - MAU) to improvepost and telecommunicationsservices have been modest, and were aimed mainly at the introductionof a new accountingand budgeting system, includingthe separationof telecommunicationsand postal accounts.While in this area reasonableprogress has been made, the implementationof other elementsof the rehabilitationplan approved in 1987 has suffered. The review of the organizationaland personnelneeds of the companyhas not yet started and introductionof a new computerizedaccounting and budgeting system is facing problems because of acquisitionof inadequateand incompatiblesoftware. Much remainsto be done in separatingthe accounts between the postal and checking systemsand the postal savingsbank, on improvingbill collectionand coordinatingOPT's investmentprojects. Moreover,OPT has been asked by the Governmentto implementa number of investmentprojects which are not viable, althoughOPT is expected to service the debt associatedwith these investments.

10. The Governmentplans to update and implementa rehabilitation plan that would greatly enhance the efficiencyand of OPT. It would also create a subsidiarythat would combinethe national savings bank and postal checking servicesof OPT in order to facilitatefinancial transactions and mobilize savingsin areas not served directlyby the banking system. Preparationof a performancecontract also envisagedwould be signed as a conditionof third tranche releaseof the proposed Public EnterpriseSector Adjustmentprogram. OPT would requiretechnical assistance, including the servicesof co-ordinator,to update the rehabilitationplan, prepare the performancecontract, complete the introductionof a new computerized budgetingand accountingsystem, includingfull separationof accounts between the postal checking servicesand the national savingsbank.

11. Project obijectives.The objectivesare to provide the insti itionaland technicalassistance support the Governmentneeds to extend and deepen its PE reform efforts,which would be supportedby the companionPE Sector AdjustmentCredit. The project is also to address the long term issue of strengtheningthe Government'sability to devise and implementPE reforms as well as to monitor the sector'sperformance and manage its future development.In the energy and telecommunicationsectors, the objectivesare to help the Goverrmentbetter manage the sectors,to encouragethe creationof a subsidiaryin OPT in order to mobilize savings, to help implementa householdenergy strategy,and to attract private companiesto explore for petroleumin Mauritania. Annex I Page 6 of 8

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12. Project description. The projectwould provide the special units ("Cellulede Rehabilitationdu Secteur Public",CRSP) in the Ministry of Plan and Finance created to overseeparastatal reform with the (local and foreign) technicalexpertise, logistical support and resourcesneeded to execute the reform'smain elements. These include: (a) monitoring sector performance;(b) implementingliquidation, privatization, and other divestituremeaeures; (c) carrying out externalaudits of enterprises;and (d) providingcounseling and advice on labor retrenchment. The project would also provide technicalassistance and resourcesfor the energy sector. This technicalassistance would consistof about 180 man-monthsof experts to assist SONELEC,70-man-months of consultingservices to assist with seismic data processing,data reinterpretationand reprocessingand petroleumexploration promotion, 30-man-months of experts to help with the promotionof improvedcharcoal and kerosene stoves and the promotionof gas for household cooking. About 50 man-monthsof consultingservices would be used to assist OPT, particularlyin regard to its rehabilitationplan. The projectwould also financea study on the future of the refinery (SOMIR) and of a major public monopoly,SONIMEX, and provide for training, equipmentand other facilitiesfor CRSP and the Directoratesof Energy, Mines and Geology. Assistanceis also envisagedfor the Ministry of Commerce,Air Mauritaniaand Panpa.

B. ProiectAdministration and Implementation

13. Organizationand Management. The TA projectwill help the Ministry of Plan and the individualenterprises to implementthe PE adjustmentprogram. The individualcomponents will be implementedby SONELEC,OPT, the Directoratesof Energy,Mines and Geology,Air Mauritanie and PANPA. It will be closelymonitored by an existingunit in the Ministry "Cellulede Redressementdu Secteur Publique (CRSP). The PE programwill also be monitoredby a public enterpriseunit in the Ministry of Finance from the point of view of the budget. The specific responsibilityof CRSP would includedevelopment of the sector policy recommendations,monitoring implementation of legal reforms,preparation and implementatingdivestiture strategies and facilitatingthe redeployment of redundantPE personnel. The unit in the Ministry of Financewill be responsiblefor monitoringthe financialperformance of enterprisesand assist in the financialrestructuring of key enterprises. It will also manage and expand the informationsystem on the PE sector developedto date. The Directorateof Energy has been working closelywith ESMAP and will be responsiblefor co-ordinatingthe implementationof the household energy strategy. The Directorateof Mines and Geology has been the beneficiaryof an IDA credit (Cr. 1175 - MAU), has successfullyattracted oil companies in the last few years and will continue to do so under the project. Similarly,SONELEC and OPT have been beneficiariesof an IDA credit and will continuewith rehabilitationefforts started in 1985. Annex I Page 7 of 8

- 16 -

14. gmplementationPlan. Implementationof the main activities under the project is anticipatedto take about 5 years, with some activitiesextending beyond that. The project is thus expected to be fully completedby December 31, 1997. Annual work plans are to be reviewed and agreed with IDA in accordancewith the supervisionplan (Annex III).

14. Procurement. The goods and servicesto be financedunder the projectwould be procured in accordancewith proceduressummarized in Schedule B. Consultantsand techr.icalassistance personnel to be financed by IDA would be appointed in acc'ordancewith the Bank Group Guidelines dated August 1981 and would be employedon terms and conditions satisfactory to IDA. Vehicles, equipment and other material for CRSP, DE and DMG (US$0.61 millon) would be grouped whenever possible,into bid packages of not less than US$50,000 and procured through internationaland local shopping after receipt of price quotations from at least three qualified suppliers. IDA-financedcontracts for amountsover US$50,000 equivalentwould be subjectto prior review. Other contractswill be subjectto selectivepost-award review.

15. Disbursement. In line with the average disbursementprofile for technicalassistance projects in the Africa Region, the project is forecast to be disbursedover seven years. However, the Governmentis targetingto complete disbursementin a much shorterperiod, reflectingthe fact that the bulk of the project is composed of short-termtechnical assistance and training to be disbursedduring the first three or four years of the project.

16. All disbursementswould be fully documentedexcept for contracts of less than US$50.000equivalent, as well as training,and operatingcosts (equipmentand vehicle maintenance)which will be made against statements of expenditure(SOB). The Director of CRSP would have the responsibility for the preparationof withdrawalapplications for all components.

17. RevolvingFund. To expedite implementation,the Governmentwould establisha SpecialAccount in CentralBank of Mauritania as Revolving Funds for IDA's contribution. An initialdeposit of US$500,000equivalent would be made from the proceeds of the proposed credit upon effectiveness. Details of the establishmentand operationof the specialaccount and other disbursementprocedures have been agreed. The minimum replenishment applicationwould be US$100,000. Budgetaryprovision for local costs will be inscribedin the annual operatingbudgets for the MFIN and the Ministry of Planning,Ministry of Hydraulicsand Energy,Ministry of Industry and Mines and OPT.

18. Accounts and Audits. The CRSP, MFIN, MHE, MIM, OPT and Air Mauritaniewould establishseparate accounts in accordancewith accepted Annex I Page 8 of 8

- 17 -

accountingprinciples, to record all project expenditures ani to maintain records on all commitments,reimbursements and the status of project funds. Agreement has been obtained that independant auditors acceptable to IDA would audit these accountsand those of OPT, Air Mauritanieand the PESAP annually in accordancewith appropriateauditing principles and in such detail as IDA may request. Audit reportswill be due six months after the end of each fiscal year. The audit reportswill includea separateopinion from the auditor as to whether the disbursementsmade on the basis of SOEs pertainedto expedituresincurred for the purposesof the project.

19. Reportingand Monitoring.The Ministry of Planningwould be requiredto submit semi-annualreports on the progress of project implementation,policy reformsand institutionalchanges, and implementationof the performancecontracts. The scope and detail of these reports have been agreed upon with Government. In addition,it would prepare an annual report summarizingprogress in all key areas of the reform. At the completionof the project, the Ministry of Planningwould prepare the project completionreport. Annex II Page I of 11

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MAURITANIA

PUBLIC ENTERPRISESECTOR INSTITUTIONAL DEVELOPMENT AND

TECHNICALASSISTANCE PROJECT

TERMSOF REFERENCEOF EXPERTSASSIGNED TO SONELEC

Sanitary or HydraulicEngineer:

1. Line manager responsibleof operationand maintenance (O&M) of the water supply and seweragesystems. This specialistwill review the O&M requirementsfor all water supply and sewerage systemsand will reorganizethe O&M service,by making the best use of existingnow-how and equipment. He will establisha rationalreliable O&M program and identify staff and equipmentneeded to carry out the program; this includesthe definitionof all positions (filledand to be filled)including the identificationof plethoricand not qualifiedOWM staff, the recruitmentof qualified staff and their in-houseand external training requirements. This specialistshould have a substantialexperience as O&M manager in a water and sewerageutility and be able to adapt with flexibilityto the actual needs of SONELEC.

Customer ManagementSpecialist:

2. Line manager responsibleof the managementof water and electricitycustomers of SONELEC. Under the supervisionof the commercial manager, he will establishan efficientcustomer management system so that the billing and payment of water and electricityinvoices be systematically carried out and the remedialmeasures (servicecurtailing, payment of service re-establishmentfees, etc.) be rigorouslyapplied. This specialistshall pay particularattention to the reductionof unaccounted for water and electricityin the distributionnetworks. This specialist will optimize the use of existing staff and equipmentto maximize the efficiencyof customer'smanagement, identify staff issues aNd other gaps, propose the remedialmeasures to his supervisorand implementthe agreed actions

Techniciansfor OperationalMaintenance of water distributionnetworks, and seweragenetworks.

3. Under the supervisionof the sanitaryor hydraulicengineer (see para. 1 above), he will be in charge of O&M field operationsaiming at all the water supply and seweragefacilities operating continuously in accordancewith the design capacity. He will be responsiblefor the identificationof staff issues (both in qualityand number) and gaps Annex II Page 2 of 11

- 19 -

relating to O&M equipmentand propose to his supervisorand implement,in agreementwith him, the most appropriateremedial measures.

Technicianfor Operationand Maintenanceof ElectricityDistribution Network

4. Under the supervisionof the electricalengineer, Head of the electricitydistribution networks' O&M, he will be in charge of O&M field operationsaiming at all electricitydistribution networks providing continuousservice and the requiredpower without breakdown. he will be responsiblefor the identificationof staff issues (both in quality and number), and gaps relatingto O&M equipmentand propose to his supervisor and implement,in agreementwith him, the most appropriateremedial measures. Annex II Page 3 of 11

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MAURITANIA PUBLIC ENTERPRISESECTOR INSTITUTIONAL DEVELOPMENT AND TECHNICALASSISTANCE PROJECT SUMMARYTOR FOR STUDYOF THE FUTUREOF THE REFINERY (SOMIR)

Introduction

5. In April 1985, the Governmentof Mauritaniaentered intc an agreementwith Algeria that transferredthe burden of operatingthe local refineryto the Algerian until July 1992. This arrangementhas worked well so far for Mauritania,but the future of the refineryoperation is uncertain,particularly if the Algeriansdo not renew the contract.

Scope of the Study

6. The objectiveof the study is to determinethe least cost alternative,in economic terms for the refinery,particularly if the contractwith the Algeriansis not renewedand to propose a plan of action. The consultantswill examine the followingalternatives:

(a) renewal of the agreementwith Algeria and on terms that are advantageousto Mauritaniabut which would continue to be attractiveto Algeria;

(b) interestof other investorsand/or operatorsin buying andlor operatingthe refinery;and

(c) closing down the refinery,and importingpetroleum products directly from world markets at internationalprices.

7. The study is expected to last five months and involve a maximum of six man-monthsof work of a petroleumeconomist, a refineryengineer, a financialanalyst and a lawyer. - 21 -

MAIJRITANTA Annex SI

PUBLIC ENTERPRISE SECTOR INSTITUTIONAL DEVELOPMENTAND Page 4 of 11

TECHNICALASSISTANCE PROJECT

ASSISTANCE TO THE DIRECTORATEOF MINES AND GEOLOGY

TERMSOF REFERENCE

Inuction

Los rapports de synthise et d'ivaluation petrollUre du bassin c6tier et offshore de Mauritanie ont mis en evidence plusleurs thames d'exploration qui niavaient ete quo peu oun mal reconnus par les explorations pric6dentes. Les perfectionnments techniques des methodes sismiques (acquisition, retraltement et lnterpretatlon) et des methodes modernes de simulation des bassins et d'evaluation des potentiels gdochdmlquesen sont largement la cause. U est donc normal dsperer un regain d'int6rSt des compeies pitroUeres dans les annees qui viennent. Certains travaux dolvent tre reallss pour presenter dans les meelioures conditions, ces themes d'explora4on et les rendre concretement plus attractlfs.

PRogrwammtecdquen

1) Mod6llsation du bassin

Un apport esentiel des travaux rallss ces dernlres amin a ete de prouver Pexlstence de rodios mres, souvet rlcdes et de maturation posslWe de la mFFatlroorgmnque. U slt donc maintenant d'utllser un programme permettant de mJou dr ls p&rfodes de g.' ratlon et de m4ration des hydrocw1 e, les quantitis d'hydro ues ginf6es et les dcmins possibes de migration. Tenant compte d l'voutiono a et sidimentalre du bassin, en ut iLisnt Its donnf t phlque, ologqu et de forage, ce proamme devralt apporXtr des ld1e swr ie zones ul paauent les plus favales pour des accumulations edet*t de cete mAthotee tenvisage. dwns to Sud du bui ka dos es f sont asez complAtes, sclon une sectIon Est-Oust I d6finrr. Les rssultata wont ersAte extrpolis i l'ensemble dubIn

2) Retraltementsnlau et ntertion shsmostratlarwhigue

a) Pexstence de p_meu d6iImits I la fols par des fllies de bassin et pdes tallies lisiques demand. des retealtements simques et des interprwtatlons elabor6es pour dhtermi les vrations de fades, lVlnfluence des falliles, l%xiestee Eobjectlfs possbles & 1extremiti Ourst do b platefforme ckrbonatde. Un retnaltement e%nviron400 Kms do profUs dons la rigon centrale du basn (ou ces phinomenes sont dej& blen document6s) pourralt valorlser de tes objectf qul se poursuivent dan la r4gon du Nord oul Us sont moins blen connus Le rehaltement envism fournirait un modile qu} devralt ensuAte8tre etendu a lensemble du bassin. Les 6volutions structurales et sidimentalres darns un cadre tecvique - 22 - Annex II Page 5 of 11

global devront etre prises en compte. b) Rieion Nord (blocs 2 et 10) La presencode Canyonssous marins dans la partle au Sud du bloc 2 a empkh6 jusqt'alors d'obtenir des resultats convaincants. Toutefois le prolongemeontdes problemes 114sa des failles listriques et autres est tres probable. D'autre part une grande partle de cotte region (Banc d'Arguin) ast pratiquoment inconnue car elle so situe en eaux peu profondes ot lobtention de refklxions est compliqu6e par loexistence de bancs calcaires proches de la surface. Le Gouvernement est actuellement en contact avec lindustrie pour realiser l'acquisitlon de profiUssismiques dans la region (environ 800 kms dans le bloc 2 et 100 kms sur le banc d'Arquin). Le retraitement eventuel et lInterpr4tation de ces lignes devront ttre reallses par le consultant. Enfin une interpretation sismostratigraphiqut devra Ste realisee dans la reglon dAl Kinz au Nord, utilisant des lignes anciennes -ventuellnementretraitees.

3. ASIstance m Une assistance technique sera fournie a la Direction des Mines et de la G6ologle. Sescomposantes principales sont les suivantew a) Integration aux rapports precedents des donnres nouvelles acqulses par les Socliets Op6ratrices. Priparationde rapports de promotion lorsque necessaire.

' mols Ingenleurs par an sur 4 ans. b) Supervisiondes Operations p4trolieres. 8 mols Ing6neurs. c) tance uaxnegociations avec les Compagnies

* mois ng6nieurs. d) Assistance pour un programme de formation des ing6nieurs Mauritaniensdu Service Hydrocarbures de la D.M.G. e) Assistance pour l'achat dWupements. f) Realisation des promotions

- Impression rapportsbrochures, articles etc... _ Voyages et logistique - Participation des ingenieurs Mauritaniens. 23 _ Annex Ii MAURIT Page 6 of 11 PUBLIC ENTERPRISESECTOR INSTITUTIONAL DEVELOPMENT TEC1NICALASSISTANCE PROJECT

INSURANCESECTOR

TERlS OF REFERENCE I mRnzn-:

A) Pratique et exercice actuels de l'assurance en Mauritanie basee sur son 6volution durant les cinq dernieres annees. a) - Assurance automobile, coit, risque, pratique, motivation de l'assur4 et sa perception de l'assurance automobile. Chiffre d'affaires, dossiers traitds, paiements realises au profit de la client6le, delai d'instruction des dossiers: pourcentage des dossiers rejet6s et pourcentaqe des dossiers contentieuxsounis aux tribunaux. b) - Assurance transport des marchandiseset marchandise; ammes 6lements quo pour le a): en plus l'6tude devra d6termin,er s'il existe un syst4ae do double assurance ( lea assur6s payant des primes dans lea pays d'oriqin. de la narchandiseJet 6valuer la moins value qu'il constitue pour la SMAR et pour l'6conomie etaq6n6ral. c) - Assurances navires: adm4s 6l6ents quo pour a) mais l'6tude doit 6tre trds vigilante concernant l'6valuation du risque on rapport avec l'&gqede la flette de p6che. d) - Autres assurances:Incendies, tout risque etc... m6me 4l6ments que pour a). L'dtude sera done en mesure de d6terminer le chiffre d'affaires Ptentialde l'activit6 d'assurance, l comparer au chiffre daatfaires r"lis6s par la SKAR et analyser la cause des *carts 6ventuels.

5) Une partie des risque. de l'assurancesont couverts par la rswurance ext0rieure,l'4tude dovra examiner sur cinq ans l'6volution du cost de la rassurance et l'*valuer en le comparant aux pratique international"s en vigucur par rapport aux pays africains. C) Una autre partie des codt do l'assuranceprovient de l'expertise, l'6tudo dovra *valuer co coet et examiner son *volution sur cinq an. L'6tude devra aussi analyser 1'ad6quation do la qualit6 de l'expertise dans 1e cadre de l16valuationdes sinistroset des risques. En conclusion,l'ftude serait a ame do ventiler le coits de l'assurance suivant les activit6s suivantes: - Expertise - Courtage t s'il y a lieu) - Assurance - 24 - Annex II Pagef 7of 11 - R*assurance et donner une appreciationraisonnable selon los pratiques de cette rdpartition. ii Ljaiulatio2 des Assuranoes: L*dtude abordera onsuite la l&gislation en vigueur en Mauritanie sur les assurancesdu point de vue de son addquation pour la promotionde cette activit6. En particulierl'6tude examinsra - les lois, ordonnances,decrets et arr46ts constituantla trame juridique de lVactivitt dos assurances et leur degr6 d'application. - A travers le contentioux soumis aux tribunaux, le traitement que ceux-ci accordent & ces contentieux. - Dans une perspective d'ouverture d l'activitd dWassurance au secteur priv6, 1'*6tude proposera 1'arsenal do textes ldqaux qu'il conviendraitdo prendre, lea modificatio'ns & introduire dans les anciens textes de manitre a 'assurer qu'un cadre leqal ad6quat a ot6 mis en place assurantt 1. maximum de s6curit6 & l'assur6. - Sp6cifiquement, l'Etude proposora un. N.hier o charaes qui devra etre respect6 par toutes los soci6t. d'assurances qui d6siroraient s'install-r en Kauritanis et qui explicitera los procedures d'aqredment.Co cahi-r dovra vouillez A co quo leasconditions morales techniques et financi6res necessaire & l'exercicede cette activit& soit bion explicit6es. - Pour 1. contr8le, le suivi et la supervision des assurances, 1'Etude proposora la cr6ation d'une entit6 administrative situ6 dana 1 cadre du finist6recharq6 du commerce et en expliciterales pr6roqativeset 1 organisation. - 25 -

Annex I I Page 8 of 11 MAURITANIA

PUBLIC ENTERPRISE SECTORINSTITUTIONAL DEVELOPHENT

TECHNICALASSISTANCE PROJECT

SONIHEX

TERMSOF REFERENCE

QMKCIZZ L'objectif do l'tude est d'effOctuer le contr6le g6n6ral de qestion et la v6rification detaillde des comptes de la SONIMEX. A ce titre, il sera procidd &

- l'audit comptable et financier dos comptes de la-socidVd pour l'exercice clos au 31 D6cembr. 1988 et 1989 s - levaluation des insuffisances de l'exploitation ot : - l'examen d6tailld de l'orqanisation et de la structure administrative de l'ontroprise.

A chaque fois le consultant proposera le essures de redressement n4cossaires pour am6liorer les performances de la soci4td.

DUE:OOUUN YU&YUZ Au titre de sa mission 1. consultant so livrera A 1)- L'audit c outable t fiM at des too SR a - v6rifiant les comptos de l'ontreprise clas au 31 Ddcembre 1988 et 1989 en dgqagant toutes lex anomalies comptables par rapport au plan comptable do la socift4, apr*s examen de la conformit4 de celui-ci & travors los prescriptions du Plan Comptable Mauritanien (PCX) ; - v4rifiant les proc4dures comptables en vigueur, leur fiabilitd et lour degr d'application ; - dvaluant 1- patrimoino et la structure financifre de la soci4td ; - evaluant la capacit& technique du personnel comptable, comp4tences, effectife, niveaux, organisation ; - dvaluant l'utilisation d l'outil informatique dans l'elaboration des comptes de la soci6t6. Le consultant devra accorder uns attention particuliere aux 6ldments suivants - cl6ture do l'exercice - gestion des stocks et inventaire des immobilisations ; - systme de controle interne - provisions s - C1 qseiopt Aq.q ii FV 6 v, _"n A,* - 26- Annex II Page 9 of 11

Au terme de cette premiere dtape de l'6tude, le consultant devra eventuellement: - d6ga;er un avis motiv6 sur les comptes : - faire des propositionsde redressementdes comptes et des procwdures comptables ; - proposer une structure financibrerefbtant la r6alitd du patrimoine de la societe ; - proposer une meilleure utilisationde l'outil informa- tique dans le cadre d'un syst6me d'intormationint6qr ;

2')- 1an10ltatlo, t Dans ce domaine, le consultantdevrait : - 6tudier la politique g6n6rale d'approvisionnementet celle de la distribution ; - Cvaluer les coats d'achat des marchandiseslors des cinq derni6res ann6es et leurs colts de transport vers la Mauritanie en les comparant aux co8ts du marche interna- tional et aux coats pay6s par des pays de la rqi on - 6valuer le systbme d'informationde la SONINEX sur lo march6 internationaldu sucre et du riz notament :

- Cvaluer do manibre aussi prciso quo possible les d6perditionsde marchandisesdurant les transports et durant le stockage dans les entrep8ts et maqasins do la SONIMEX

- .*valuer le coat de distribution des produits au consommateur on distinguant la part qui en revient & la SONINEX - et co & partir du d6barquement des marchandises au Port - et co qui eat imputable au circuit priv6 de distribution s - *valuer la politique commerciale interne de la SONINEXen relation avoc lea accords passes avec la Conf6ddration G6ntrale des Employcurs de Nauritanie (CGEN) et lea obligations a elle imposies par l'Etat. Dans une perspectivehistorique retracer les evolutions internes des prix de produits SONIMEX en lea mettant en parall6Ue avec le 6volutions des prix de ces mames marchandises sur le plan internationals - en utilisant los prix de 1980 comm. base A l'indice 100 comparer l16volutiondes prix des produits SONINEX a celle des prix impot*s suivants: farin lait en boite, lait frais a lonque conservatior.,pates alimentaires et a celle des prix locaux de la viande et du poisson. - #valuer la politique de s6curit6 d'approvisionnement de la SONINEXen examinant l'4volution de ces importations, et des stocks do s6curitd qu'elle maintient. Etablir sur 10 ans l'Cvolution de ceo stocks et do leurs coats pour l'entreprise ; - 27 - Annex II Page 10 of 11

- comparer 1'6volution our les cinq derni&rea ann6es des prix des denr6ea SONIMEX en Mauritaniepar rapport A celle de doux ou plusieurs pays de la r6gion ; - cerner le coat de transport encouru par la SONIMEX A partir de son propre parc et le comparer au coit de transport en vigueur dans le secteur prive ; - evaluer les mAthodes de gestion de tresorerie et les comparer & ce qu'elles devraient 6tre pour une soci6t6 de commercialisation; - examiner los rapports avoc la clienthle ; - examiner les mdthodes d'6laborationde plan de diveloppement(justification, qualite, horizon) : - 6valuer les politiquesde recouvroment; - 6valuer les politiques et uathodes de prospection des marches internationaux : - examiner les methodes de passation des march6s (appel & la concurence,grd-&-grd, etc...) et son application effective. 1

3*)- struaturaM ia6rala at oraanoiatiog de la Geation: L*Atuat

i) Paarsonnel: - 6volution des effectifs et leur qualification - qestion des carri6res; - 6volution des salaires et de la masse salariale; - statut du personnel en comparaison avec lea statuts existant dans des entreprisessimulaires en Mauritanie; ii) wgxgaa1gum - niveau et rapports hi6rarchiques,d6finition des reponsabilit6set descriptiondes postes; - circulairedo I'informationhorizontale et verticale au sein de l'entreprises - prise do decision a quelle niveau elle s'effectues

4 ) Strat6gi-s *t arasootiva- do I& 3031NM1 A la lumidre de I , Tr at III analyser les strat6gies applicables par l'entreprise dans le sons d'une plus grande efficacithet les perspectivesqui a'ouvrenta elle. - En particulier,si un systdme do v6rit6 des prix eot mis en place en 1991, qu'elle serait son influence sur l'exploitationfuture do l'entrepriseainsi que our sa capacitd d'autofinancement. - Quel peut *tre I'incidenced'une croissance annuelle de 10% de la production rizicole (paddy et riz blanc) our l'avenir de l'entreprise. - 28- Annex II Page IT-of 11

- Dans le cas ou l'entreprise east sounise a la concurence quel serait avec sea cotta actuels d'exploitation son volume d'opdration sur chacun des produits.

Au terme de cette analyse, l'6tude proposera un train de mesures pour assecir de r6elles politique d'approvisionnement, de commercialisation et d'organisation interne hautement dynamique et orient6e vers la transparence des prix au consommateur dana le cadre d'une activit4 soumise A la concurence.

De plus le consultant devra pour l'4valuation de la proqession de l'entrepris. developper des criteres de performance tendant vers des objectifa fix4s au d6part.

S* ) - C_a*iZ1nat*n :

Etant donn6 la nature de la mission, l'tude devra 6tre men6e par une 6quips pluridisciplinaire compos6 d'experts hautement qualifi6s et exp4rimentds dans lea domaines suivants:

- comerce international de denrdes alimentaires (riz, sucre... ) ; - diaqnostic et redressoment d'entreprises commerciRles en difficult6s s - expertise comptable des entreprisos publiques. Une mission de 20 a 24 houros par mois serait necessaire pour ce faire et l'6tude couterait entre 200 et 300.000 Dollars.

3 }- DoC=e*tS do Base

Le consultant aura esa disposition toutes les informations necessaires pour mener A bien ea mission. Annex III

- 29 - Page 1 of 6

MAURITOANI

PUBLIC EfTERRUISESECTOR IESTITUTIOMAL DEVESTOPNEN AND

TECHNICAL ASSISTACE PROJCT

BOUSWOW R:Y STRAEGY

1.1 The proposed household energy strateRv is principallyan urban strategy. The strategy vill initially focus on Nouakchott while other cities will be taken into account at a later stage. This choice is justifiedwhile reviewing and relating the projected energy consumptionfigures for the different areas: savings will have most impact on Nouakchott's situation. Fuel consumption projectionsare presentedunder two scenarios:a trend based, status quo scenario,and an interactive,policy based scenario.Total populationand fuel consumptionprojection figures for 1988 and 1998 under the trend based scenario are presented in table 1.1 and for the interactive scenario in table 1.2. If no action is taken (statusquo structure, extrapolationof '83 - '88 trends based scenario),charcoal consumption will have grown in ten years by more than 26% to 93 thousandMT per yea*, LPG consumptionwill have more than doubled to 13.3 thousand MT per year. Wood consumptionwill be reducedsomewhat to 386 thousandNT per year, reflecting the fast rate of urbanization and the related modernization.

Table1.1: 1998POPULATION ('000) AND FUEL CONSUMPTION ('000 NT) PROJECTIONS - Trend basedScenario

Scenario 1 - Population - - Charcoal - -- LPG- - Vood - 1988 1998 1988 1998 1988 1998 1988 1998

Nouakchott 550 976 42.8 62.7 3.3 9.5 8.3 8.3 Nouadhibou 110 155 4.3 5.5 1.5 2.2 0.0 0.0 Other urban 182 256 9.9 11.4 0.5 0.8 31.2 44.1 -Rural 998 991 16.6 13.5 0.8 0.8 369.3 333.9

Total 1,840 2,378 73.6 93.1 6.1 13.3 408.8 386.3

Source: SONELEC,mission estimates:

1.2 The Household Energy Strategy presented will, among other things, aim to reduce charcoal consumption. Table 1.2 presents the projected 1998 consumption figures under the following assumptions: Annex III - 30 - Page 2 of 6

improved charcoal stoves will be used in 1998 by 80% of the charcoal consumers in Nouakchott,by 75% in Nouadhibou and 45% in the other cities; the LPU consumptionlevel in Nouakchottfor 1998 will be similar to the currentlevel in Nouadhibou:75Z of the total populationuses LPC as their primarycooking fuel.

1.3 Total fuel savingsas result of the HouseholdEnergy Strategy are presentedin Table 1.3. Charcoalsavings would amount to 30,500 MT per year in 1998, of which 92% in Nlouakchott;wood savingsrelative to the trend based scenariowill be negligible. LPG consumptionwill grow faster and will have reached a consumptionlevel of almost three times the currentlevel.

Table 1.2: 1998POPULATION ('000) ANDFUEL CONSUMTI ON ('000 )T)PROJECTIONS - InteractiveScenario

1986 1998 1988 1998 1988 1998

aNoukchott 42.8 34.5 3.3 14.0 8.3 8.3 Nouadhibou 4.3 4.6 1.5 2.2 0.0 0.0 Otherurban 9.9 10.4 0.5 0.9 31.2 44.1 Rural 16.6 13.0 0.8 0.9 369.3 333.9

Total 73.6 62.6 6.1 17.9 408.8 386.3

Source:Mission estimates.

Table1.3: RELATIVEWOOFFUEL SAVINGS AND ADDITIONAL LiP CONSUMPTION ('000MT per year in 1998)

Difference -- Charcoal-- -- LPG - ---- Wood

Nouakchott -28.2 92% +4.5 97% 0.0 0% Nouadhibou -0.9 3% +0.0 0% 0.0 0$ Otherurban -0.9 3% *0.1 2% 0.0 0% Rural -0.5 2% +0.1 2% 0.0 0%

Total -30.5 100% +4.7 100% 0.0 0%

Source:Mission estimates. Annex III Page 3 of 6 - 31 -

1.4 Four strategicoptions present themselvesto relieve pressure on precariousforestry resourceswhile meeting the energy needs of the urban consumers,focussing primarily on Nouakchott:

(a) acceleratedinter-fuel substitution;

(b) demand management;

(c) improving biomass supply system, including an inventory; production,distribution and management;stumpage and taxation policy collectionand remittanceto forestrydepartment; and

(d) economichousehold fuel pricing.

1.5 The supposed status of biomass resources is such that short term actions are stronglyrecommended over longer term actions. On the demand side, one of the highest priorities is to accelerate the introductionand use of LPG in the urban areas, mainly in Nouakchott,to replace charcoal as a cooking fuel. Demand management measures as improved charcoal stoves will be a complementaryaction to reduce charcoal fuel consumptioneven further. Both actions together will eventuallyreduce the charcoalconsumption and stabilizeit at below the 1988 level. On the resourceside, it is imperativeto know the status of both the existing resources, their rate of clearing, and a precise determinationof all the actors involvedbefore any recommendationscan be made. It is clear though, that a larger degree of control and managementof resourcesis requiredfor its optimalutilization. Pricing policy should be geared more towardseconomic fuel prices which will not only enhance the use of substitutefuels and improvedstoves, it can also generate a source of income to develop forest activitiesto protect the environment. 1.6 The strategy outlined thus concentrates on short term action and to a lesser extent on longer term activities: energy problems are acute at this time, requiringimmediate attention: people will have to continueto cook their meals. Governmentinvolvement should only be incurred through a least-costsolution, i.e. a minimum increase in the number of civil servants,stimulating competitiveness of the household fuel productionand distributionsystem by the private sector, requiringstove and energy prices to be as close as possible at their economiccosts. People shouldbe allowedto use the stove and fuel of their choiceas long as these are priced at their true economiccosts.

Which householdfuel shouldbe importedif importsare to take place

1.7 The difference in primary energy consumptionfor households using LPG or charcoalis significant. As shown earlier,the averageper capita energy consumptionin Nouakchott(where the majorityuse charcoal) is 50% higher than in Nouadhibou(where the majority of the households Annex III Page 4 of 6 - 32 -

use LPG). In other words, if large-scalecharcoal imports take place, 50 more energy is imported (and paid for) compared to when LPG is imported.

1.8 The economiccosts of usefulenergy for LPG are much lower than for charcoal: approximately UM2.6/MJ for LPG versus UM4.9 to UJM6*9/MJefffor charcoal(for use withtheU improvedand the traditional charcoal stove respectively). Thus, when fuels have to be imported, imports of LPG are economicallymore attractivethan importsof charcoal: a smallerquantity of LPC has to be importedthan charcoalto satisfythe energy needs and in addition,the CIF costs for LPG are lower than those for charcoal.

Quantificationof Objectives

1.9 The strategyrecommended is based on the followingtargets

(a) by 1998, the populationof Nouakchottwhich uses LPC as primary household fuel increasesfrom 27X to 75Z of all households, which is equivalentto the currentrate in Nouadhibou;

(b) the number of householdsin Nouakchottusing improvedcharcoal stoves increasesfrom 0 in 1988 to a saturationrate of 831 of the charcoal consuminghouseholds in 1998; similarly,it will rise from 01 in 1990 to 751 in 1998 in Nouadhibou;and from 0% to 45% in the other urban areas.

(c) the number of householdsusing LPG in the other urban areas will double from about 141 in 1990 to 301 in 1998;

(d) wood use will not increasesubstantially in either of the urban areas;

(e) a more effectivecharcoal productionptransport and marketing controlsystem will be in place beforethe year 1991;

(f) economic costs will be charged fot all householdfuels before 1991; and

(g) securityof supply,and a well developeddistribution system of L°G, in particularlyof the 3 kg and the 6 kg bottles,will be guaranteed.

1.10 In the first phase, the following will be done, which is expected to cost about US$ 440,000as summarizedin the attachedtable.

(a) acceleratingthe use of LPG. In the light of the different projectionsfor the use of LPG, SOMAGAZwould be assisted in executing an LPG market study, as well as in designing a Annex III Page 5 of 6 - 33 -

development plan to attain these projected levels of utilization. Furthertechnical assistance would be providedto SOMACAZ with special emphasis on maintenance and security issues, as well as training for staff. Lastly, a publicity/sensibilizationcampaign will be organizedto promote the safe use of LPG throughoutthe country; it is envisaged that a local publicityagency is hired to be the lead agent for this work.

(b) disseminatingand commercializingthe use of improvedcharcoal stoves. Until now, improved charcoal stove activities have been research oriented. This should change towards a commercialapproach to disseminatethese more efficientstoves as quicklyas possible. The proposedactivities include hiring a local technical specialist, to provide technical and financialassistance to existing stove producers/artisans,and to launch promotionalactivities which could be linked with similaractivities under (a).

(c) strengtheningof the "Directionde l'Energie". This consists mainly of technicalassistance to improvethe in-houseplanning and analyticalcapacity, and providinglogistical support. - 34 - Annex III Page 6 of 6

LPGcompoWu uss

TA exem (ma,ketstudy) 20000 TA eapmna(dew. plan. sensub.) 20000 TA SOMAGAZ(Sdety. maintenance) 45000

Tcainmgof pasonnol - 50W0 Studyvihis SOMAGAZI 10000 Suawy(natket stu) t uvtarna PubNaaySpeali 200 PubIct/SmaibIIaIo campiWs 5000

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3 Annex IV Page 1 of 5

- 35 -

MAURITANIA

PUBLIC ENTERPRISESECTOR INSTITUTIONAL DtiELOPMENT AND

TECENICALASSISTANCE PROJECT

SUPERVISIONPLAN

1. Bank Supervision Input into Key Activities

The staff input indicatedin the table below is in addition to regular supervisionneeds for the review of programs reports,procurement act!ons, audit statements,correspondence, etc.

Borrower'sContributions to Supervision

(a) Progress reportswill be submittedby the Ministry of Plan on the progress of project implementation,policy reforms and institutionalchanges, and implementationof performance contractsat the end of Januaryand July.

(b) Annual work plans and budgetswill be submittedin November and discussedand agreed to in December of each year.

(c) Annual audits of key enterpriseswill be submittedno later than June 30 of each year.

(d) Projectmonitoring and co-ordinationwill be the responsibility of the Cellule de Redressmentdu SecteurPublique (CRSP).

(e) Monitoringof financialdata will be done by a unit in the Ministry of Finance. - 36 - Annex IV Page 2 of 5

Bank Supervision Input into Key Activities

Approximate Activity Expected Skill Staff Input date and Requirements (Staff-weeks) monthlyear

7-9190 Supervision Economist, 10.0 mission financial Start-up analyst. activities transport specialist, PE expert, disbursement officer

9-10190 Review TORs Economist. 2.0 for various Financial experts and Analyst studies; review work plans and budgets; approve contract for certification agency

10-12190 Supervision Economist, 2.0 mission Financial Discuss and analyst agree on work plans and budgets

1-3190 Review conomist, 2.0 budgets; Fine ;al review SNDM Analy-., production and Mining efficiency Engineer, targets; Power Engineer SONELEC progress reports, CRSP progress reports - 37 - Annex IV Page 3 of 5

Bank SupervisionInput into Key Activities

1-3191 Supervision Economist, 6.0 mission and Financial specifically Analyst, on SNIM, Public SONELECand Utilitiesand OPT Mining Engineers, Telecommunica- tion specialist

2191 Review Economist, 2.0 'contrat Financial plans", Analyst, and contractsfor PE expert technical assistance etc.

4-6191 Supervision Economistand 3.0 mission Financial Review Tranche Analyst, and Release PE expert Conditions, includiug liquidation and privatization of PEs, 'contra:t plan' fi)rAir Mauritania, reductionin arrearsetc.

5/91 Review Economistand 2.0 contractsfor Financial various Analyst experts and consultancy reviews - 38 -

Annex IV Page 4 of 5 Bank Supervision Input into Key Activities

7-9191 Review study Economist, 4.0 on SOMIR and Financial SMAR and Analyst, SONIMEX; Energy Experts review TOR and etc contractsfor various experts and consultancy services; review programs reports

10-11/91 Review work Economist, 2.0 plans and Financial budgets Analyst

12191 Supervision Economist, 10.0 mission Financial Agree on work Analyst, plans and Transportation budgets; and Review Telecommunicat budgetingand ion experts; accounting Fishery expert plan implementation of Ministry of Finance,OPT, Panpa and Air Mauritania. Review situationin the fishing sector and SMCP

1-3/92 Review Economist, 2.0 progress Financial, reports, review drafts of 'contrat plans for Panpa and OPT, review budgets - 39 - Annex IV Page 5 of 5

Bank SupervisionInaput into Key Activities

3-6192 Supervision PS expert, 10.0 mission Economist, Review Tranche Financial Release Analyst, Conditions, Mining includingon Engineer liquidation and privatization of PEs. Reductions4 arrears, - ~~~~~SNDM's performance SONIME

3-6(92 Review Economistand 2.0 contracts, Financial audit reports Analyst

FY93 3 supervision missions

FY94 2 supervision missions

PY95 2 supervision missions IBRD22261 MAURITANIA PUBUCENTERPRISE SECTOR ADJUSTMENT PROGRAM

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