world bank document...provide sufficient capacity to support web-browsing and downloading of large...

Document ofThe World Bank

Report No: 18644

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 8 MILLION

(USD10.8 MILLION EQUIVALENT)

TO THE

ISLAMIC REPUBLIC OF MAURITANIA

FOR

TELECOMMUNICATIONS AND POSTAL SECTORS REFORM

PROJECT

MAY 14, 1999

Telecommunications and Informatics Division (EMTTI)Burkina Faso, Mali, Mauritania, Sao Tome & Principe (AFC15)Africa Region (AFR)

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CURRENCY EQUIVALENTS

(Exchange Rate Effective April 30, 1999)

Currency Unit = Ouguiya (UM)1000 JUM = 4.57 USDI USD= 218.75 UMI SDR= 1.355 USD

FISCAL YEAR

January I - December 31

ABBREVIATIONS AND ACRONYMS

AFD Agence Frangaise de DeveloppementCAS Country Assistance StrategyFCC US Federal Communications CommissionGATS General Agreement on Trade in ServicesICB International Competitive BiddingITU International Telecommunications UnionIDA The International Development Association (of the World Bank Group)NGOs Non Government OrganizationsOPT Office of Posts and TelecommunicationsPE Public EntreprisePMR Project Management ReportRA Regulatory AgencySOEs Statement of ExpensesTPU Telecommunications and Postal Unit of the Para-Public Sector Reform ProgramUNDP United Nations Development ProgramWHO World Health OrganizationWTO World Trade Organization

Vice President: Jean Louis SarbibCountry Director: Hasan A. TuluySector Manager: Emmanuel ForestierTask Team Leader: Govindan G. Nair

ISLAMIC REPUBLIC OF MAURITANIA

Telecommunications and postal sectors reform project

TABLE OF CONTENTS

A. Project Development Objective ............................... 2

1. Project development objective .22. Key performance indicators .2

B. Strategic Context .2

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project .22. Main sector issues and Government strategy .33. Sector issues to be addressed by the project and strategic choices .6

C. Project Description Summary .8

1. Project components .82. Key policy and institutional reforms supported by the project .93. Benefits and target population .94. Institutional and implementation arrangements .9

D. Project Rationale .10

1. Project alternatives considered and reasons for rejection .102. Major related projects financed by the Bank and/or other development agencies . 113. Lessons learned and reflected in the project design .124. Indications of borrower commitment and ownership .135. Value added of Bank support in this project .14

E. Issues requiring special attention .141. Economic .142. Financial .143. Technical .154. Institutional .155. Social .156. Environmental Assessment .157. Participatory approach .15

F. Sustain ability and Risks .............................................................. 16

1. Sustainability .............................................................. 162. Critical Risks .............................................................. 16

G. Main Credit Conditions .............................................................. 171. Effectiveness Conditions .............................................................. 172. Other .............................................................. 17

H. Readiness for Implementation .............................................................. 18

I . Compliance with Bank Policies ......................................................................... 18

Annexes

Annex 1. Project Design SummaryAnnex 2. Detailed Project DescriptionAnnex 3. Estimated Project CostsAnnex 4. Cost-Effectiveness Analysis Summary

Annex 5. Financial Summary

Annex 6. Procurement and Disbursement Arrangements- Table A. Project Costs by Procurement Arrangements- Table Al. Consultant Selection Arrangements- Table B. Thresholds for Procurement Methods and Prior Review- Table C. Allocation of Credit Proceeds

Annex 7. Project Processing Budget and ScheduleAnnex 8. Documents in Project FileAnnex 9. Statement of Bank Groups in Mauritania and IFC's PortfolioAnnex 10. Country at a Glance

Map

Islamic Republic of MauritaniaTelecommunications and postal sectors reform project

Project Appraisal Document

Africa Regional OfficeBurkina Faso, Mali, Mauritania, Sao Tome & Principe (AFC 15)

Date: May 14, 1999 Team Leader: Govindan G. NairCountry Manager/Director: Hasan A. Tuluy Sector Manager/Director: Emmanuel ForestierProject ID: 63791 Sector: CC - Telecommunications & InformaticsLending Instrument: Technical Assistance Loan Theme(s): Private Sector Development

(TAL) Poverty Targeted Intervention: [ ] Yes [X] No

Project Financing Data[ I] Loan [xl Credit [] Grant Ii] Guarantee [ ] Other [Specify]

For Loans/Credits/Others:Amount (US$m): 10.8Proposed terms: [ ] To be defined [X] Multicurrency [] Single currency

[ Standard Variable [ ] Fixed [] LIBOR-basedGrace period (years): 10Years to maturity: 40Commitment fee: 0%Service charge: 0.75%

Fi:n -- e . an: [ To be defirei

Government 1.2 0.0 1.2IDA 2.4 8.4 10.8

Total: 3.6 8.4 12.0Borrower: Government of the Islamic Republic of MauritaniaGuarantor: NAResponsible agency: Ministry of Economic Affairs and Development

Estimated disbursements (Bank FY/US$M):FY 2(,00 2001 X , _ 0ZAnnual 4.0 4.3 3.7

Cumulative 4.0 8.3 12.0Project implementation period: 3 yearsExpected effectiveness date: 07/01/00 Expected closing date: 12/31/02Implementing Agency: Telecommunications and Postal Unit of the Para-Public Sector Reform Program

Address: Ministry of Economic Affairs and Development, P.O.B. 238, Nouakchott, MauritaniaContact person: Mohamed Mahfoudh Ould Brahim, Telecommunications and Postal Project Manager

Tel: 222 25 84 90 Fax: 222 25 17 00 E-mail: [email protected]

Project Appraisal Document Page 2Country: Mauritania Project Title: Ttelecommunications and postal sectors reform project

A: Project Development Objective

1. Project development objective: (see Annex 1)

The project aims to expand access to communications and information services at competitiveprices through establishing a legal, regulatory and institutional framework favorable tocompetitive private provision of telecommunications infrastructure and services, and to postaldevelopment.

2. Key performance indicators: (see Annex])

Progress towards the development objective will be reflected in:

1) Increased access and quality of communications and information services at more competitiveprices to be measured by the following indicators:* Increased teledensity* Increased mobile service density* Increased payphone density* Increased rural penetration= Increased completion rate of national and international calls* Reduced waiting period for telephone connection* Decreased absolute and relative levels of telecommunications charges measured by

comparative tariff baskets

2) Increased consumer choice reflected in the variety of new services offered by various privateoperators deploying new technologies and know how:* First cellular license granted to a private operator- Licensing of other new infrastructure providers (e.g. cellular) and new service providers

(e.g. Internet, paging services)* Diversified postal services

3) Increased level of private investment in telecommunications infrastructure and services:- Increased percentage of private investment in telecommunication infrastructure and

services

B: Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: 16595 Date of latest CAS discussion: 05/21/97

The project will contribute to the following core CAS objectives:

(i) Improve living standards and the competitiveness of the economy through expandingaccess to basic infrastructure services: By improving the overall business environment throughenhanced competition and private investnent, the project will help reduce the cost of doingbusiness, which is a benchmark for the poverty reduction strategy of the CAS.

(ii) Promote supply response by creating an environment conducive to private sectordevelopment and attracting foreign direct investment: The new legal and regulatory frameworkand the improved regulatory capacity supported by the project will enable sustainable privateinvestment flows into the telecommunications sector and the possibility of public-privatepartnerships (sub-contracting, franchising, and possibly strategic partnership) to improve postaloperations. In pursuing this objective, the project will help attract foreign direct investment intotelecommunications infrastructure and services sectors. Finally, by helping open the


telecommunication sector to private sector investments, the project will also contribute to triggerthe high-case scenario for Bank assistance envisaged in the CAS.

(iii) Enhance dynamic and broad-based growth in the rural sector by upgrading, diversifyingand raising the technological base: The project will support a regulatory framework based onclear and transparent rules, which will encourage new private entry into the sector and ensure faircompetition. This pro-entry regulatory framework will encourage technological and institutionalinnovations for disseminating information in social and productive sectors including commerce,health and education. This will help develop human capital and create more dynamic growthopportunities in the rural sector, which is identified in the CAS as the most critical area forprivate sector intervention.

2. Main sector issues and Government strategy

Main sector issues

(i) The country is characterized by underdeveloped information infrastructure:Telecommunications, computing, broadcasting and postal services are critical for efficientbusiness transactions and social and economic development in Mauritania, especially given poorroad and railway infrastructure. However,. all these forms of information infrastructure remainunderdeveloped:

Telecommunications: Although Mauritania's teledensity (0.53 main lines per hundred inhabitantsin 1997) is about the average for Sub-Saharan Africa, it is lower than the low-income countryaverage of 2.45%. Telephone tariffs are on average higher than in several neighboring countries,thereby hindering the growth of information services. The expansion of the 1998 base of 250Internet subscribers is constrained by the high cost of service (USD 6 per hour) and dial-upcharges paid to OPT (flat rate of USD 30 a month for a dial up account). Furthermore, Mauritaniais one of the few countries on the continent with no mobile telephone service. Privately operatedpaging services are very limited and are available only in Nouakchott.

Computing: Low penetration of PCs -- 12,500 PCs in 1996 corresponding to 0.53 per hundredinhabitants -- further limits the demand for Internet services. The current Internet link does notprovide sufficient capacity to support web-browsing and downloading of large data files;therefore Internet is mainly used for electronic mail purposes.

Broadcasting: As 70 % of the Mauritanian population have access to radio broadcasting, it is themost frequent communications infrastructure used by development agencies, NGOs and otherorganizations to deliver information on social services in rural areas. However, the costsincluding the purchase of terminal equipment (USD 1250-3000) are too high for broad-based use.There are only 8.2 TV sets per 100 inhabitants (1996), compared to an average of 13.1 for low-income countries.

Postal services: There are 62 post offices in Mauritania, corresponding to 2.48 mail distributionpoints for 100,000 inhabitants and covering 95% of the population. Postal outlets are distributedover 58 localities in the country, compared to a telecommunications coverage of merely 13 cities,providing untapped potential for enhanced nationwide delivery of communications and financialservices. The expansion of express courier services is hindered by the small number of privateoperators (five express courier services) in the country and the limited number of internationalflights in and out Mauritania. The service is often unreliable and has not been responsive tomarket needs and trends. Since considerable commercial and financial transactions are carriedout by mail, any excessive delay in mail delivery leads to higher transaction costs.


(ii) Poor availability and high costs of communications and information services constrainbroad-based private sector led growth, income-generating possibilities for rural and traditionallydisadvantaged groups, and competitiveness of exports: Access to communications andinfonnation services within the country is uneven. Large areas, mainly rural, have virtually noaccess to telecommunications services. Teledensity outside Nouakchott and Nouadhibou is aslow as 0.1% compared to 1.5% in the two main cities. OPT's telecommunications network ispresent in all regional capitals, but 46% of the population has no access at all despite the strongdemand reflected in the reported waiting lists. The postal coverage is more extended with only5% of the population having no access to a postal outlet. Unequal access to communication andinformation services contributes to disparities in income-generating opportunities, particularly forhandicrafts as well as agricultural and micro-enterprises in local as well as export markets.

High telecommunications tariffs by international and regional standards tend to constrain thesupply response to macro-economic reforms in Mauritania. As a result, there is a lack of cost-effective and timely means of generating, transmitting and accessing information on prices,products, customers and suppliers. This perpetuates the fragmentation of markets, particularly inrural areas, impedes new enterprise creation, and constrains enterprise efficiency anddevelopment.

The existing tariff structure applied by OPT does not reflect costs and is barely adjusted tomarket trends. The deposit, installation and subscription charges as well as local, long-distanceand international tariffs have hardly changed since 1994. Installation, monthly subscription andlocal calls are cross-subsidized by long-distance and international tariffs. The disproportionatelyhigh international tariffs, which notably place existing and potential exporters at a competitivedisadvantage, is even more profound in Mauritania than in other West-African countries, many ofwhich have already begun to re-balance their tariffs.

Like other developing countries, Mauritania will have to face major telephone tariff adjustmentsarising from imminent reforms of the international accounting rate system. These reforms willcontinue to lower the rate (settlement rate) which operators in developing countries charge theirforeign counterparts for terminating telephone traffic which the latter originate. For Mauritania,the United States Federal Communications Commission (FCC) has mandated U.S. operators toachieve a settlement rate benchmark of USD 0.23 per minute by 2001/2002, sharply below thecurrent settlement rate of USD 0.85. Given its relatively low dependence on net settlementrevenues, Mauritania can better adjust to reduced settlement revenues than some of its neighbors.

(iii) Current corporate and market structure results in insufficient investment, lowproductivity and unfulfilled demand. Nonetheless, major income-generating opportunities existswithin the telecommunications and postal sectors: OPT became a national company in 1990 whenits relationships, rights and obligations with the state were clarified through a program-contract.However, OPT's corporate structure, which combines postal and telecommunications operations,remains inefficient and unresponsive to market needs and trends. At 22 main lines per employee(1997), labor productivity in telecommunications in Mauritania is low compared to an average of31 in Sub-Saharan Africa, 63 in low-income countries and 139 in the world. The productivity ofthe postal sector is also low: 14,600 mail items processed per employee (1997) can be comparedto 69,211 in South African Post Office Limited.

The potential for efficiency gains as well as new business opportunities in telecommunicationsand postal sectors is significant. Revenue per main line in Mauritania is very high - USD 2689(1996), compared to the Sub-Saharian average of USD 1175, the low-income country average ofUSD 343 and the world average of USD 839. This suggests profitable opportunities, even withlower tariffs and higher service levels.


With its wide network throughout the country, the post office could also offer new and profitableservices. These include: direct mail delivery, specialized postal services such as passportapplication, facsimile, Internet access, business reply service, database services, communityinformation centers which offer products and services with added value related to thecommunications needs of a user; and payment services particularly for periodic funds transfer.

(iv) The existing legal and institutional framework is not adapted to rapid technological,market and policy changes worldwide in the information technology sectors: Operating andregulatory functions in both telecommunications and the postal sector have been closelyintertwined. The Ministry of Interior is nominally responsible for sector policy and regulation andby law OPT has carried out virtually all the regulatory functions (e.g. spectrum management,tariff policy) on behalf of the Ministry. Other countries in the region which have begun to opentheir telecommunications sectors to greater competition have separated these operating andregulatory functions and some of them have vested regulation in an independent regulatory body.

Government strategy

On March 22, 1998, the Government laid down the core objectives of the postal andtelecommunications sectors reform in its new sector Policy Statement and has subsequentlydeveloped the following action plan to implement this policy:

Establishment of a new legal and regulatory framework by end 1999: The new legal andregulatory framework is aimed at putting all operators on an equal competitive footing withrespect to regulatory provisions on tariffs, interconnection, and universal access. A newTelecommunications Law adopted by Government on May 12, 1999 enables the emergence of amulti-operator market structure of both service and infrastructure providers, with regulatoryfunctions vested in an independent regulatory agency. Related decrees to establish the RegulatoryAgency, on universal access obligations, on a new tariff regime and on interconnection policiesare to be issued before end- 1999.

Gradual opening up of all market segments of the telecommunications sector to competition: TheGovemment committed to open up segments such as terminal equipment trade, mobile services,paging, Internet services and value added services as soon as proper regulatory framework basedon the new Telecommunications Law is in place. In addition to services specified above, allservices not commercially exploited and localities not covered by OPT at the time of the PolicyDeclaration of March 22, 1998 will be immediately opened to competition. The gradualintroduction of competition in all other segments, such as fixed wired telephony, will becompleted before June 2004.

Privatization of the main telecommunication operator by end-2000: The Government plans tointroduce private equity and management into the main telecommunications operator through astrategic partnership. The aim is to allow greater flexibility and efficiency in the management of'the main operator and to thereby enable it to better respond to the growing unmet demand fortelecommunications services.

Development of the post office into a financially viable entity: A new Postal Law is to beprepared to accompany the separation of the postal entity from the telecommunications operator.In addition, as part of a comprehensive development plan to transform the Post office into afinancially viable entity within five years the government will provide for a declining subsidy toabsorb the operational deficit over this transition period.


3. Sector issues to be addressed by the project and strategic choices

Sector Issues Addressed by the Project

Project design supports the Government's reform strategy in the following four areas:

(i) Improve the incentive structure for telecommunications infrastructure and serviceprovision: New entry and private investment into the telecommunications sector will beencouraged through technical assistance in setting up a new legal and regulatory frameworkenabling a shift away from state-owned monopoly provision of service to a multi-operator,competitive and private sector-driven market structure. The project will assist in the formulationof appropriate policy and regulatory provisions which lay the basis for a level playing fieldamong the incumbent operator and new service and facilities providers, notably throughregulations on interconnection, tariff policy and universal access, among others.

Regulatory reform in telecommunications has to recognize the increasing tradability oftelecommunications services, given Mauritania's outward-oriented development strategy andcommitment to regional integration. The project will help the Government pay particularattention to developing a legal and regulatory framework which is closely harmonized withemerging global trends, notably those reflected in the Fourth Protocol of the General Agreementon Trade in Services (GATS) under the aegis of the World Trade Organization. As of today, fiveAfrican countries - Cote d'Ivoire, Ghana, Morocco, Senegal, and South Africa - have participatedin the agreement.

The project will also assist to grant the first mobile service license to an independent privateoperator through international competitive bidding and to prepare a license agreement with clearrights and obligations. The project will also help prepare licenses for the privatized main operatoras well as for its affiliate, notably for mobile services. The Government has committed to ensuretransparent competitive bidding for all future licenses and equitable tax and license pricetreatment for all operators.

To help competition work and to address the need to regulate the allocation and use of scarcepublic resources (e.g. frequency spectrum, numbering, rights of way, radio sites) a newregulatory body independent of operators will be created. The project will assist in the planningand implementation of regulatory tasks and decrees needed under the proposed newtelecommunications law and in the development of regulatory capacity. It is expected that thebody will become financially autonomous through its licensing and other regulatory activities.

With the licensing of new private operators, initially in mobile services, demands for the use ofthe radio frequency spectrum can be expected to increase, especially as wireless technologiesbecome more widespread. This increasing demand can be expected not only for radio frequenciesused by telecommunications, but also for broadcasting services. Consequently, the RegulatoryAgency's (RA) responsibilities for spectrum allocation, assignment, billing and enforcementactivities will grow. The project therefore will help prepare the RA for these functions and buildits capabilities in frequency management and monitoring, as well as procure the necessaryfrequency management equipment.

(ii) Introduce commercial orientation with management and capital from the private sector:The project will assist the Government in separating and corporatizing postal andtelecommunications activities and in implementing a new ownership structure for the maintelecommunications operator in which private ownership, management and capital become theprincipal drivers of sector investment and development. Through financing specialist consultantservices, the project will assist the Government in designing and implementing an appropriateprivatization strategy to dilute as well as divest Government shareholding in the existing state-


owned monopoly operator. Initially, this will entail the sale of a strategic equity stake to one ormore experienced international telecommunications operators, and possibly, in a subsequentstage, through a public offering of Government-held shares to domestic and foreign investors.The consultants will also be mandated to profile and attract appropriate potential strategicpartners and to successfully use a competitive bidding and negotiation process to conclude a salestransaction which will be consistent with new provisions on sector competition policy as well asembody sector development targets. The project will finally help the corporatized Post officeprepare a corporate strategy for human resources, products, and financial development.

(iii) Promote a broad-based and participatory private sector development strategy: Acommunication campaign to ensure widespread awareness of the issues and opportunities of thenew regulatory framework among domestic and foreign private investors, existing and potentialhousehold and business customers, and traditionally disadvantaged population will be an integralpart of the project.

The project will include preparation of a strategy to encourage effective, privately providedcommunication and information services using technological and institutional innovations.Improving access to telecommunications and information services to traditionally unservicedsegments of the population requires novel technological and institutional approaches. Pilotactivities testing a number of new technological and institutional approaches will be supported bythe project. Support will also be provided to plan replication and scaling up of success stories inan institutionally and financially sustainable manner. In addition, the project will specificallyexamine the role the restructured post office can play in increasing rural access to informationand communications services.

(iv) Set opportunities for the overall para-public sector reform program: Telecommunicationsreform will provide a flagship for the privatization program and help build skills in corporaterestructuring, assets sales and regulatory reform needed for the privatization of other utilities andenterprises. The project aims to create spillover benefits for other utility reforms through buildingcommon capacity and institutions as the new Telecommunications Law provides an option toextend eventually the ambit of the new regulatory body to other utilities.

Strategic choices

The design of the reform process has confronted the Government with a number of strategicchoices, which have been reflected in the design of the technical assistance project:

Separating sector operation from regulation: A multi-operator environment requires clear andtransparent rules of the game to address both economic (tariff structure, interconnection) andtechnical (frequency management, standards, etc.) issues. The Government has committed todivest the incumbent operator of its existing regulatory functions and to empower and staff anindependent regulatory agency. The regulatory body will initially cover only telecommunications.However, its design will be flexible so that once sufficient regulatory capacity is developed, itcould evolve to a multi-utility regulatory body.

Private versus public ownership: The Government has opted to increasingly introduce privatecapital and management into utilities, thus reducing public involvement in infrastructureprovision and focusing public resources more on social sectors. In the telecommunications sector,additional investments will be needed in forthcoming years to develop new service offerings andapplications, to deploy new technologies as well as to broaden service coverage, notably in ruralareas. The strategic sale of the company is not only expected to bring financial resources but alsoto attract new technologies and management expertise into the company which will help it adaptto a more competitive market environment.


Scope, size and allocation of subsidies: The Government's policy is to shift from traditional crosssubsidies into a more market-based mechanism for mobilizing and allocating any requiredsubsidies for telecommunications development. International experience indicates that, with fewexceptions, universal access objectives in developing countries have not been attained withtraditional cross-subsidies or public financing. On the other hand, market-based mechanisms suchas auctions for subsidies have been shown to result in a lower level as well as more transparentand targeted use of subsidies. A well-designed universal access policy in a competitiveenvironment including, for example, the use of build-out obligations in competitive bidding forlicenses, can considerably contribute to improving access to communications services. Withregard to the Post office, the Government's policy is to make any transitional subsidy transparentand to allow pricing and cost recovery for postal services which will eventually lead to afinancially viable postal entity.

C: Project Description Summary

1. Project components (see Annex 2for a detailed description and Annex 3for cost breakdown)

Indicative % of Bank- % ofComponent Costs Total financing Bank-

(USDM) (USDM) Financing

a) Telecom legal and regulatory framework 3.7 31% 3.5 95%* Consultant services to establish legal and

regulatory framework* Consultant services and equipment for RA* Telecommunications trainingb) Privatization of the main telecom operator 1.7 14% 1.6 94%o Consultant services to structure and execute

the privatization transaction* Consultant services and training to build

capacity in utility privatizationc) Strategy for improvement of information 5.3 44% 4.7 89%

service delivery to rural anddisadvantaged communities and for postaldevelopment

* Consultant services and equipment forpreparation and piloting of a rural strategy

* National rural access workshop* Consultant services and equipment for

preparation and implementation of postaldevelopment plan

• Training on postal reform

d) Information and media campaign 0.2 2% 0.2 100%* Consultant services for preparing and

launching the media campaigne) Capacity building and project 0.7 6% 0.4 60%

management• Consultant services and equipment for

Telecom and Postal Unit and for the SpecialProcurement Commission

* Project Auditf) PPF refinancing 0.4 3% _ 0.4 100%

Total Project Costs 12.00 100.0 10.8 90%


2. Key policy and institutional reforms supported by the project

The project will support five sets of policy and institutional reforms enabled by the newTelecommunications Law: (i) a framework of regulatory decrees and licenses which translatesthe law into concrete rules of the game and actual entry of new operators; (ii) establishment of anindependent regulatory agency to develop and oversee the new regulatory framework; (iii)introduction of a strategic partner into the main operator resulting from the separation of post andtelecommunications; (iv) creation of a corporate postal entity and support towards enabling it tobecome commercially oriented and financially viable; and (v) preparation of a strategy tostimulate information technology applications in rural settings.

Specific institution building goals will be achieved through capacity building within the newtelecommunications Regulatory Agency and within the Para-Public Sector Reform Programwhich is mandated to oversee the process of preparing and executing privatization of majorutilities and public entities through strategic sales and public offerings. International consultantservices financed by the project will embed transfer of skills to local consultants and ensure thatsuitably qualified local counterparts are recruited and involved in the design and execution of theproject as well as receive appropriate training in regulatory and other skills.

3. Benefits and target population

Provision of competitively priced and high quality telecommunications services will help create amodern information infrastructure, which will enhance: competitiveness of traditional products;emerging and new economic activities including tourism and services; and social welfare throughcost-effective means of delivering training and education, health services, agricultural andindustrial extension services and environmental management. Project-supported reforms willgenerate a "win-win" outcome in which all major stakeholders benefit:

* Consumers in general will benefit from improved access, quality and choice oftelecommunications services at more competitive prices.

- The rural access component specifically targets low-income, rural and other disadvantagedpopulations and is expected to improve equitable access to information services.

* Private sector in general will benefit from improved availability and quality as well as fromreduced factor costs and enhanced international competitiveness through lower prices.

* Business opportunities for private telecommunications operators and service providers willincrease through widening of both telecommunications service offerings and investmentopportunities into new information-related businesses.

* Small and medium size enterprises as new service providers, subcontractors to the incumbentand new operators, and providers of customer premises and terminal equipment, will alsobenefit from rising opportunities in the restructured sector.

* Micro and informal sector businesses will especially benefit from the better availability andquality of services at lower costs.

4. Institutional and implementation arrangements

Project implementation period: The project will be implemented over a three-year period fromJuly 1, 1999 to June 30, 2002. The Credit closing date will be December 31, 2002.

Executing agency: The executing agency responsible for the implementation of the sector reformprogram and the project is the Ministry of Economic Affairs and Development. The Ministry ofEconomic Affairs and Development will consult with other Ministries in areas of jointresponsibility through an Inter-Ministerial Committee responsible for setting the policy andespecially with the Ministry of Interior, Posts and Telecommunications responsible foroverseeing the postal and telecommunications sector.

Project Appraisal Document Page 10Country: Mauritania Project Title: Ttelecommunications and postal sectors reforn project

Implementing agency: The implementation agency of the project is the Telecommunications andPostal Unit (TPU) of the Para-Public Sector Reform Program, which was established by aGovernment decision of November 7, 1998. The Para-Public Sector Reform Program is headedby a Director mandated by the Government to execute and co-ordinate overall para-public sectorreforms, and who is directly reporting to the Minister of Economic Affairs and Development. TheTPU is one of four groupings of para-public reforms each to be headed by a Project Managerresponsible for the executing sector-specific reforms in post and telecommunications; water andelectricity; air transport and other sectors.

Project administration: The Project Manager heading the TPU is responsible for supervising theconsultants financed by this project and ensuring proper procurement and financial management.He is assisted by a procurement specialist and an accountant/financial management specialist.

Procurement: Procurement under this project is carried out by the Special ProcurementCommission for the Telecommunications and Postal Sector Reform ("Commission speciale desmarches pour la reforme des secteurs des Postes et Telecommunications"). The SpecialProcurement Commission was established by Decree n. 99-03 of January 6, 1999 in order toexpedite procurement under the telecommunications and postal sector reform while maintainingtransparency in the process of contract awarding. The TPU procurement specialist will carry outthe day-to-day contract management activities and will organize working sessions with theSpecial Procurement Commission to review bidding documents and bid evaluation reports, and tomake decisions on contract awards. An assessment of the procurement capacity of the SpecialProcurement Commission and the TPU was conducted during appraisal. Resulting from thisassessment is an agreed action plan in the Manual of Procedures geared to ensure the capacity ofTPU to administer procurement in an efficient and transparent way.

Accounting, financial reporting and audit: The accountant/financial management specialist of theTPU will be responsible for setting up project financial and accounting systems according to IDAstandards and to keep and monitor project accounts for each component. Project accounts, specialaccounts and all disbursements under Statement of Expenses (SOEs) will be audited annuallyaccording to international standards by an independent auditor acceptable to IDA. The annualaudit report will be submitted to IDA within six months of the end of each fiscal year.

Monitoring and evaluation: TPU will be in charge of monitoring progress via performanceindicators. Monitoring and evaluation will be guided by the Project Design Summary in Annex 1and the Maniual of Procedures. The Manual of Procedures specifies reporting responsibilities foreach component, which will enable the TPU to generate and submit to the Bank quarterlyprogress reports. The Bank will have at least eight supervision missions and conduct annualprogr-ss reviews. A mid-term review will allow the Government and the World Bank to jointlyreview number of issues of the project design and progress. The Government will transmit toIDA a project implementation completion report, within six months of Credit-closing.

D: Project Rationale

1. Project alternatives considered and reasons for rejection

The followinig project design alternatives were considered:

(i) Fixing an exclusivity period for the main operator: The March 1998 sector policystatement, adopted prior to project preparation, envisaged an exclusivity of five to seven years forthe main oprcrator. Within this policy orientation, dialogue with the World Bank during projectpreparation led to two alternative approaches being considered to achieve the project goals ofrapidly introducing competition on1 the one hand and maximizing the prospects for successfully

Project Appraisal Document Page 11Country: Mauritania Project Title: Ttelecommunications and postal sectors reformn project

consummating the privatization transaction of the main operator on the other hand. Fixing anexclusivity period for the main operator prior to launching the privatization process was rejected.A consensus was reached that the exclusivity period and scope should be reviewed at the time thedraft license for the main operator is prepared. The new Telecommunications Law states that theexclusivity period would not, in any case, go beyond June 2004. Moreover, the new Law does notprescribe specific duration or scope for the exclusivity other than to state that the exclusivitycould not cover new services nor markets currently not serviced by OPT.

(ii) Determining destination of privatization proceeds: Funneling privatization proceeds tothe Treasury was rejected; rather the alternative of retaining proceeds within the company waschosen to: (a) make the strategic sale more attractive to potential investors; (b) be consistent withthe Government's priority on network and service expansion over immediate gains to theTreasury; and (c) allow Govemment to benefit from capital gains typically associated with asecond stage of privatization, after the strategic sale, through an offering of Government shares todomestic and foreign investors.

(iii) Targeting first and second-generation reform issues: Limiting the scope of the project toregulatory and privatization reforms envisaged in the macro-economic program was rejected toallow for a specific focus on enabling applications of information technology in rural settings andsupporting postal sector development. The incremental benefits of these additional projectactivities were determined to be high as the incentive framework supported by the other projectcomponents introduces opportunities for innovatively tackling problems of rural access tocommunications, information and other services.

2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing andplanned

Latest SupervisionSector Issue Project (PSR) Ratings

Implementa- DevelopmentBank-financed tion Progress Objective

(IP) (DO)Encourage investor interest in pursuing opportunities in Private Sector Development andthe private sector and strengthen the financial sector. Capacity Building Project S S

Credit 2730-MAU, ActiveStrengthen the Government's long-term capacity to Mauritania Public Enterprise Sectordevise and implement public enterprise (PE) reforms, Institutional Development andincluding better management and development of the Technical Assistance Project S Stelecom services of OPT and encouragement of the Credit 2167-MAU, Closed 06/98creation of postal savings subsidiaries.Support the extension of the Government's structural Public Enterprise Sector Adjustmentadjustment program by deepening the reforms in the PE Programsector, through establishing a legal and institutional Credit 2166-MAU, Closed 04/95 HS HSframework, as well as financial restructuring of key PEsand divestiture.Promote private sector development by improving the Private Sector Development Programlegal and institutional framework and consolidating Credit 2726-MAU, Closed 12/97 S HSfinancial sector reforms.Other development agencies _____________________________...

AFD Studies on digitalization of theNouakchott-Nouadhibou line and onextension of the Nouakchotttelephone network to peri-urbandistricts. Project Costs: FF 689,750


UNDP - Internet Initiative for Africa:Project cost: USD 6 million (co-financing with OPT)- Sustainable DevelopmentNetworking Project-Extension of Internet capacity inNouakchott, reinforcement of thefuture Nouadhibou node andestablishment of Intemet connection

in four regions.Project cost: USD I million (co-financing with OPT)

WHO/ PACTEC Audio communications links to theMinistry of Health in Nouakchottenabling health centers to report onepidemics, emergencies, generalhealth administration and logisticalmatters

UNICEF Rural radio for communications insocial sector campaigns

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design:

Lessons learned from previous projects in Mauritania aiming at private sectordevelopment:

A. Project design has drawn from the following three lessons of the recently closed PublicEnterprise Sector Institutional Development and Technical Assistance Project (Credit 2167-MAU):

(i) There is a need to follow and sustain the Government's first-generation public enterprisereforms by additional sector reforms which enhance competition and private participation inutilities. The project is a first step in assisting the Government's utility sector reform programadopted in 1998 which includes private sector participation.

(ii) Strong Government commitment and broad participation in the design andimplementation of the PE reform is a sine qua non condition to the success of these reforms.Project preparation has been characterized by up-front preparation of a new telecommunicationslaw and appropriate institutional arrangements specific to the needs of project implementation.

(iii) An effective project implementing agency endowed with authority and resources, in thedesign and implementation of reforms, including privatization is critical for project success. Inthe context of preparing this project, the Government has mandated an implementing agencyunder the Ministry of Economic Affairs and Development to oversee the overall para-publicsector reform program covering privatization of telecommunications, other utilities, and thenational airline.

B. In order to respond to chronic implementation problems identified in the jointBank/Government Project Portfolio Review conducted in Mauritania in October 1997, theMauritanian counterparts working with the Bank:

a Ensured up-front procurement planning and IDA review of bidding packages for all major


consultancies prior to negotiations so that all related contracts will be ready to be signed soonafter Credit effectiveness;

* Prepared terms of reference for consultancy services with intensive inputs from both theproject implementing agency and beneficiaries, and drew upon best practices;

* Paid close attention to project financial management by insisting upon completion of acomprehensive and fully specified project manual of procedures to be submitted for IDAreview before project negotiations;

* Clearly distinguished and balanced the roles: (i) of government agencies as beneficiaries ofcapacity building and (ii) the project implementation agency as the accountable entity withfiduciary responsibility for Project funds;

* Included a detailed and comprehensive information and media campaign as a specific projectcomponent;

* Developed a detailed project implementation timetable using project management softwarewhich mapped and sequenced over 250 preparation and implementation tasks;

* Specified time-bound and output-related work program responsibilities and performancecriteria for project management personnel under project-financed contracts; and

* Conditioned project negotiations on completion and formal Government endorsement of ahighly detailed Manual of Procedures which was prepared before project negotiations andreferenced in the Development Credit Agreement.

Lessons learned from other telecommunications operations in Africa

Preparation of this proposed project has been guided by two principal lessons intelecommunications reforms worldwide:

(i) A pro-competitive framework which supports a multi-operator environment tends toimprove service coverage and quality more rapidly and to foster more competitive prices than astate or private monopoly operator. In several African countries, new entrants, notably mobileoperators are adding more subscribers than incumbent wireline operators, even afterprivatization. The new Telecommunications Law adopted by the Government is flexible and bynot specifying an exclusivity for the main operator of specific scope or duration, it is conduciveto developing and sustaining a pro-competitive regulatory framework. The regulatory frameworkin Mauritania will emphasize clear rights and obligations for non-discriminatory interconnectionamong operators.

(ii) A pro-competitive regulatory framework alone, maybe insufficient to realize the fullpotential for new investments and private sector activity as well as more effective use of theinfrastructure. Unclear understanding of the new rules of the game, weak regulatory capacity andincomplete markets for service delivery to remote and traditionally disadvantaged areas andpopulations can constrain new investment. The project features an effective public mediacampaign to generate broad-based understanding of the sector reforms coupled with specificinitiatives to organize market-based delivery of services to remote and rural regions and low-income populations which will help overcome some of these barriers to more effective provisionand use of telecommunications services.

4. Indications of borrower commitment and ownership

An ambitious policy statement was followed by drafting of a new pro-competitiveTelecommunications Law: Prior to IDA's assistance in project preparation, the Government hadalready adopted a Sector Policy Statement on March 22, 1998 that embodies the principles ofsector liberalization and privatization. The Sector Policy Statement envisaged the establishmentof a new legal and regulatory framework, the gradual introduction of competition into the sector,the restructuring and corporatizing the postal and telecommunications operator and the


privatization of the new telecommunications operator within an ambitious overall time frame of24 months. To lay down the foundation of the regulatory framework which will be developedduring the project, the Government prepared, under Project Preparation Facility financing, a newLaw on Telecommunications which it adopted following project negotiations. The law is alignedwith WTO principles and embodies provisions against dominant market power, oninterconnection of operators on transparent and non-discriminatory terms and on allocatinglicenses through competitive bidding. Finally, to promote a level playing field and in anticipationof a more competitive telecommunications sector, the Government asked OPT to suspend itsplans to roll out its proposed cellular network until a competing cellular network operator can beattracted and licensed under the new regulatory framework.

The Government has adapted institutional arrangements to match needs of effective projectpreparation: The state monopoly operator is no longer the primary interlocutor in theBank/Government dialogue at the time of the Policy Statement. Since then, the Governmentestablished an inter-ministerial committee enabling broader dialogue, with two technicalcommittees to prepare the new legal and regulatory framework and the privatization process. Italso integrated the telecommunications sector reform into the global public enterprise reformprogram initiated by a Ministerial Decision of November 7, 1998. Finally, it established a SpecialProcurement Commission for Telecommunications and Postal Sector Reforms by Decree no. 99-03 of January 6, 1999 to handle all procurement under this project.

5. Value added of Bank support in this project

The Government has stressed the value added of the Bank in terms of bringing uniqueinternational experience in helping client countries design telecommunications sector policies andestablish regulatory frameworks. The lessons of Bank experience in assisting similar reforms inother countries have helped the Government develop a realistic time-table of reforms, whichgives due attention to capacity constraints. Perceived as a neutral party, the Bank can continue toplay a facilitating role in translating the Government's Sector Policy Statement into an action-oriented reform program. Bank-financed technical assistance in this project will provide timelysupport to help achieve critical structural reforms under the Government's macro-economicprogram.

E: Issues Requiring Special Attention

1. Economic (see Annex 4)

This project focuses on institutional and policy reforms which, if successfully adopted, willenable supply and demand of telecommunications to evolve favorably for consumers. Given thesmall size and technical assistance nature of the project, a full economic analysis has not beenattemp>ted in Annex 4. However, the qualitative analysis, presented in the annex, explains theexpectation that the reforms supported under this project will contribute positively to sectordevelopment.

2. Financial (See Annex 4)

Fiscal Impact: Three sets of positive fiscal impacts can be expected corresponding to scenarios ofenhanced market response (in terms of both supply and demand for telecommunications services)to the policy and institutional reforms supported under this project. First, the maintelecommunications operator arising from restructuring of OPT will be subject to the same taxtreatment as all other telecommunications operators, consistent with the policy of putting alloperators on a level playing field. Second, direct and indirect tax revenues related to thetelecommunications sector are expected from increased total turnover of the sector as well asfrom increased purchase of telecommunications-related equipment and services by


telecommunications providers and by consumers. Third, a capital gain can normally be expectedfrom Government divestiture of its residual shareholding in the main operator, the size of whichcould depend on whether this is done together with or following the sale of an equity stake to astrategic partner.

3. Technical

The project will establish an enabling institutional and regulatory environment to help attract andsustain investment in the telecommunications sector. Under this framework, technology choice inthe sector will be market-driven. By facilitating opening up of mobile services throughappropriate model licenses and competitive bidding, the project is expected to help introducewireless communications technologies which are expected to become the predominant means ofcommunications in line with regional and global trends.

4. Institutional

The implementing agency faces an ambitious schedule for carrying out a set of closely inter-related project activities which are relatively novel and complex for the Borrower. Project designhas been kept simple to correspond to scarce local expertise particularly in matters of regulation.An extensively detailed Manual of Procedures prepared by the implementing agency definesdifferent roles, responsibilities, individual work programs and a timetable which have to beclosely followed for project success. In order to enhance the quality of project governance,contracts for all project management personnel feature performance criteria linked to the projecttimetable and outputs. Local and foreign technical assistance and training are envisaged for the(I) implementing agency to reinforce its project, financial, and procurement capacity; (ii)SpecialProcurement Commission as needed for evaluation of specific tenders; (iii) the RegulatoryAgency to develop its economic, technical, and legal skills; and (iv) the corporatized Post Officeto help implement the corporate strategy which will also be developed under the project.

Y2K assessment: The only Y2K-sensitive project areas are the purchase of (I) frequencymanagement equipment and information systems for the regulatory agency; and (ii) managementinformation system for the implementing agency, for both of which procurement documents willfeature a Y2K compliance clause. Like most telecommunications operators worldwide, the mainoperator to be restructured and privatized under the project has already started specificassessment, testing and inventory of existing embedded systems, machinery, switches, andequipment. OPT has informed the Bank on its Y2K action plan.

5. Social

There are no resettlement or specific social issues in project implementation. Terms of referencefor consultant services for the rural strategy emphasize the importance of assessing informationand communication needs of local communities, especially in remote and traditionallydisadvantaged areas.

6. Environmental assessment: Environmental Category: "C"

There are no environmental issues in this project.

7. Participatory Approach

Primary beneficiaries and other affected groups: The entire senior management team of OPT hasbeen closely involved in project design from the beginning, including in the preparation of termsof reference for project consultancy services and of the detailed project implementation timetable.


Ministers and senior officials of two key ministries - Economic Affairs and Development (withresponsibility for the overall privatization program) and Interior (oversight of thetelecommunications and postal sector) have participated closely in project preparation.

Other key stakeholders: The national workshop on rural access to communications andinformation services, to be prepared under the project, is designed to draw broad-basedparticipation from Government, private sector, civil society and local communities, NGOs andother development partners.

F: Sustainability and Risks

1. Sustainability

By developing an incentive framework for market-based telecommunications and postal serviceprovision, the project will help accelerate investment and improve service levels as entry by newprivate operators increases. Incentives to sustain project objectives include codification of rightsand obligations of the incumbent and new operators not only in legislation and decrees but also inlicenses. Improved service coverage and quality at more competitive telecommunications priceswill be sustained as private investment grows in both telecommunications infrastructure andservices. Empowering the new regulatory agency to charge levies and fees ontelecommunications operators will enable regulatory functions to be sustained withoutdependence on budgetary support. Unfulfilled demand for various services in remote and ruralregions will be increasingly satisfied as incomplete markets for telecommunications services areredressed through specific initiatives to organize financially sustainable community informationcenters or other institutions.

In addition, the sustainability of the project will benefit from on-going legal reforms. The legalcomponent of the Private Sector and Capacity Building project - (Credit 2730-MAU) undertakenin Mauritania since 1995 was designed to promote private sector development by improving thelegal and institutional framework and consolidating financial sector reforms.Telecommunications and Postal reforms both contribute to and are enhanced by a broader contextof regulatory refonns undertaken by the Government.

2. Critical Risks (reflecting assumptions in the fourth column ofAnnex 1)

Risk Risk Rating Risk Minimization Measure

From Outputs to Objective

The legal and regulatory framework established M The mid-term review agenda agreed by Governmentdoes not embody clear rules of the game (with explicitly covers progress in implementing thespecial regard to the transitory exclusivity regulatory framework.period) including in licensesNot all market segments are opened to S Up-front commitment to fully open market tocompetition at the end of the reform process competition features in the new telecommunications

law.Law and decrees are not enforced by the M In addition to measures to build capacity in theRegulatory Agency Regulatory Agency, license agreements will embody

rights and obligations of operators, which enable legalrecourse for dispute settlement.


Adequate provisions for self-financing of the M Project provides funding to regulatory agency for firstregulatory agency are not enacted three years while fees and levies are defined as new

operator licenses are issued.

Non-transparent competitive bidding process for M Telecommunications law explicitly foresees competitivelicenses bidding for new licenses and public information

campaign will generate constituencies for open,transparent licensing process.

Non-transparent licensing process for strategic M Terms of reference for international consultants clearlyequity stake specify assistance in undertaking an open international

bidding process, to be monitored under Banksupervision.

Failure to implement a sustainable rural access H Implementation strategy will be based on small-scalestrategy pilot initiatives, which will be closely monitored,

replicated and scaled up depending on results.The Govemment sacrifices quality in order to M An implementation calendar with over 250 time-boundmeet an ambitious reform timetable actions was extensively discussed during project

preparation and the realism of time lags tested againstexperience of other countries.

Lack of clear allocation of responsibilities N Roles, responsibilities and performance criteria ofamong different institutions and entities and Project-financed personnel feature in their contracts andavoidance of conflict of interest are detailed in the Manual of Procedures. The Manual

was endorsed by Government and will be closelymonitored during supervision.

From Components to OutputsFailure to separate and corporatize N Government has committed to this structural refonntelecommunications and postal entities under its macro-economic program and is assisted by

consultancy services under the Project PreparationFacility.

High global competition for investor funds in H Proceeds from the strategic sale will be retained as a parttelecommunications of the capital of the privatized company in accordance

with stated Government policy.

Weak procurement implementation capacity M A procurement specialist with knowledge of Bankprocedures was recruited into the TPU. An experiencedSpecial Procurement Commission was created, whichwill be reinforced under the Project.

Overall Risk Rating MRisk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)

G: Main Credit Conditions

1. Effectiveness Conditions

A. Government of Mauritania to deposit the first tranche of the counterpart funds equivalentto 80 Million UM (USD 400,000) representing about a year of project expenditures.

B. Borrower to select an audit firm for the project.C. Borrower to appoint project manager, procurement specialist and financial management

specialist acceptable to IDA.D. Borrower to put in place proper computerized accounting and financial management

system in the implementation agency.

2. Other

Conditions to Negotiations:A. Draft Manual of Procedures submitted to IDAB. Draft Telecommunications Law submitted to IDA


H: Readiness for Implementation

[ ] The engineering design documents for the first year's activities are complete and ready for thestart of project implementation. [x] Not applicable.[x] The procurement documents for the first year's activities are complete and ready for the startof project implementation.[x] The Project Implementation Plan has been appraised and found to be realistic and ofsatisfactory quality.

I: Compliance with Bank Policies

[x] This project complies with all applicable Bank policies.

C, t,JC ~ G indan G. Nair Emmanuel Forestier Nadjib Sefta

Team Leader Sector Manager Acting Country Director

Annex I Page 19

Annex 1

Project Design Summary

MAURITANIA: Telecommunications and Postal Sector Reform TA Project

Hierarchy of Objectives Sector Indicators: Sector/ country reports. (from Goal to BankKey Performance Indicators Monitoring & Evaluation Mission)

.________ _______ _ Critical Assumptions1I I Improve living standards 1. I Increased contribution of - National statistics - Stable macroeconomicand competitiveness of information and communications to - Semi-annual report from environmentMauritanian economy through value added in all sectors the Regulatory Agency - Government of Mauritaniaexpanding access to basic (RA) continued commitment toinfrastructure services macroeconomic adjustment1.2 Promote a strong supply 1.2 Increased level of privateresponse by creating an investments associated withenvironment conducive to commercial and technicalprivate sector development and management and know-how inforeign direct investment various market segments1.3 Enhance a dynamic and 1.3 Introduction of institutional andbroad-based growth in the rural technological innovations forsector, by upgrading, information access to rural anddiversifying and raising the traditionally disadvantagedtechnological base communitiesProject Development Outcome t Impact Indicators: Project reports: (from Objective to Goal)Objective:2. Expand access to 2.1 Increased access and quality of - Semi-annual report from - Continuous Governmentcommunications and communications and information the RA commitment to theinformation services at more services at more competitive prices: - ITU statistics telecommunications reformcompetitive prices through - I main line/100 inhab. by 2002 - UPU statistics agenda and timetableestablishing a legal, regulatory - 0.1 mobile subscribers/l 00 inhab. - National statistics - Sufficient supply responseand institutional framework by 2002 to new incentive structure:favorable to competitive private - 0.8 payphones/1000 inhab. by an uptake of existing andprovision of 2002 new services in response totelecommunications - 0.6 main lines/100 inhab. outside reduction in costs ofinfrastructure and services, and Nouakchott and Nouadhibou by communications andto postal development 2002 information technologies

- Number of faults/line will decrease and servicesby 20% each year after the - Sufficient demandcompletion of strategic sale of the response: adequatemain telecommunications operator capacity exists in various

- Reduced waiting period for sectors i.e. education,telephone connection health etc. to effectively

- Telecommunications tariff basket use new communicationswill decrease by 50% in 2002 and information

2.2 Increased variety of new services technologies and servicesoffered by private operators:

- Cellular service by mid-2000- Internet access in all regions- Increased availability of paging- Diversification of postal service2.3 Increased level of privateinvestment in telecom infrastructureand services:- Private cellular operator by mid-

2000- Strategic stake of at least 30% in

the telecom operator by end 2000

Annex I Page 20

Output from each componentv Output Indicators: Project repots (from Outputtos O *jecive

3.1 A coherent legal and 3.1.1 New legal and regulatory - Telecommunications - Government does notregulatory framework framework: Law and related decrees sacrifice quality of thepromoting a multi-operator - Telecommunications Law adopted published in the Journal reform process to meettelecommunications market by Government by 05/1999 Officiel ambitious timetable

- Related legal text on - Legal and regulatory

interconnection, universal access, framework embodies cleartariffs, etc. adopted by 12/1999 rules of the game (with

special regard to thetransitory exclusivityperiod) including inlicenses

3.1.2 Regulatory Agency (RA): Communicated to IDA: - Law and legal texts are- Legal text establishing the RA - Appointment of Board enforced by RA

adopted by 09/1999 members, Managing - Adequate provisions for- Organizational structure, budget, Director and key staff self-financing of the RA

operating procedures and three - Budget finalized and are enactedyear business plan by 12/1999 approved by Minister

3.1.3 Key telecommunications policy Communicated to IDA: - All market segmentsand regimes agreed on: - Sector reports on opened to competition at- Interconnection regime by 12/1999 regulatory issues the end of the reform- New tariff policy by 12/1999 - Frequency Management process- Universal access policy 12/1999 Plan- Numbering Policy by 06/2000- Frequency Mgmt Plan 06/2000

3.1.4 New licenses to operators - License Agreement for - Transparent competitive- First cellular license tender the first cellular bidding process for

launched by 12/1999 and granted communications systems licensesto a private operator by 03/2000 published and a copy

- Licensing of incremental number sent IDAof other new infrastructure - Semi-annual report fromproviders and new service the RAproviders by end 2002

3.2. Private ownership and Communicated to IDA: - Transparent licensingmanagement of the main - Privatization Strategy process for strategic equitytelecommunications operator - Sale contract stake

- License Agreement

3.3 National strategy of 3.3.1 Strategy for rural access Communicated to IDA: -Implementation of the ruralcommunications and prepared by 06/2000 - Rural strategy and action access strategyinformation service delivery to 3.3.2 National workshop on rural planrural and disadvantaged connectivity and information - Postal development plancommunities applications held in 2000 - .

3.3.3 Pilot program to improve - Agenda and participantsuniversal access designed in 2001 of National Workshop3.3.4 Postal Law adopted by 12/1999 - Institutions and3.3.5 Postal development plan regulatory arrangementsprepared by 03/2000 for the pilot program

3.4 Broad-based understanding 3.4 Media and information campaign - Consultant Report onof the opportunities arising from to increase awareness by all communications strategythe new sector structure stakeholders of new environment sent to IDA

3.5 Capacity developed in 3.5 Project management, - Progress reports from - Clear allocation ofsector reform and project procurement and financial TPU responsibilities amongmanagement management capacity developed different institutions to

avoid conflicts of interest

Ainex I Page 21

Project Components / Sub- Inputs:(budget for each Project reports: (from Components tocomponents: component) Outputs)

4.1 Telecommunications legal USD 3.7million - TPU progress reportand regulatory framework - Semi-annual RA report- Intl. consortium composed of - Draft laws and decrees

regulatory, economic and - Draft class licensestechnical experts to develop - Draft bidding documentsthe new telecom regulatory for mobile services andframework draft license

- Legal, economic and technical - Training plan and studyconsultants to RA tour reports

- Regulatory studies - Recommendations for a- Telecom training frequency management- Frequency management and monitoring system

equipment for RA - Bidding documents

4.2 Privatization of the main USD 1.7 million - Information - Telecommunications andtelecommunications operator memorandum postal entities are separated- Intl. consortium to structure - Prospectus and corporatized

and execute the privatization - Bidding documents - High global competition fortransaction (incl. intl. audit) - Consultant report investor funds in

- Consultant services and telecommunication istraining to build capacity in successfully addressedutility privatization

4.3 Strategy for rural access to USD 5.3 millioncommunications andinformation services andpostal development- Intl. and local consultants to

prepare rural strategy- Workshop on rural strategy- Consultant services and

equipment to pilot institutionaland technological solutions

- Intl. and local consultants andequipment to prepare andimplement a postaldevelopment strategy,including a Postal Law

- Postal Training

4.3 Media and information USD 0.2 million - Communications strategycampaign and implementation plan- Intl. and local consultants to

launch a media campaign

4.5 Capacity building and USD 0.7 million - Periodic progress report - Sufficient procurementproject management from TPU capacity

Local consultants and - Disbursement reportsequipment for project - Audit reportmanagement, procurement andfinancial management of TPUand for the SpecialProcurement CommissionProject audit

Annex 2

Project Description


The project consists of five components, all of which mainly involve consultancy services toprovide assistance to implement the postal and telecommunications sector reform program.

Project Component 1 - Establishment of the Legal and Regulatory Framework for theTelecommunications Sector - USD 3.7 million (31% of total Project Costs)

A. The project will finance international consultants to assist the Government andsubsequently the new telecommunications Regulatory Agency (RA), once it is established, in:

i) Setting up the RA through defining an organizational plan and a training program for itsstaff: Using consultancy services financed under this component, the implementing agency willcommission the preparation of a three-year business plan for the new RA, which will include anorganizational and staffing plan, a human resource development plan, and a three-year forecastbudget. This plan will help establish the new RA, staff it, and set basic operating and accountingprocedures and systems. Once the RA is operational, a detailed training program will beestablished. To assist the staff of the RA to build its intemal capacity as well as discharge keytasks, a semi-resident regulatory expert will be financed, who will spend at least three monthsannually in Mauritania.

(ii) Formulating and implementing a new regulatory framework: Once the RA is established,consultancy services will also help formulate and implement several key provisions of the newregulatory framework which are needed to place the incumbent and new operators on an equalcompetitive footing. These notably include:

• An interconnection regime for multi-operator environment: Consultants will assist the RA inestablishing principles for interconnection covering its technical, commercial, and financialaspects. Consultants will also help the RA prepare model interconnect agreements andmechanisms to resolve interconnection disputes.

* More cost-oriented tariff structure: Consultants will help the RA study existing tariff structureand levels applied by the main operator and to analyze options for a more cost-oriented tariffstructure. This will lead to specific recommendations on how to achieve tariff re-balancingwithin a reasonable time-frame, taking into account key dates in the reform agenda includingthe granting of new cellular licenses and the privatization of the main operator. Options andrecommendations for further tariff adjustments and tariff regulation will be developed alongwith recommendations on how these should be reflected in license agreements.

* National frequency management plan and spectrum management system (assignment,allocation and monitoring): Consultants will assist the RA in formulating a comprehensiveplan for frequency management and assignment, allocation and monitoring of frequencyspectrum use in a more competitive market environment. They will also assist the RA inidentifying specific equipment and information system needs for frequency monitoring and inprocuring such equipment, to be financed under this component as necessary.

* Universal access policy: Consultants will assist the RA in defining a new policy on universalaccess obligations and help identify different options for financing universal access objectives.

They will also help prepare regulations on this issue and recommend how these issues shouldbe treated in licenses.

(iii) Drafting the license and concession agreements for the main telecom operator: Takinginto account related assistance given to the RA on issues of tariff policy, interconnection regime,and universal access obligations, consultants will help prepare a draft license for the mainoperator. This initial draft license document will be the basis for preparing the final main operatorlicense which will be granted once the privatization transactioni is completed (see below).

(iv) Preparing class licenses for all service providers and a bidding process to grant the firstcellular license to an independent private operator: Consultants will assist the RA in preparingclass licenses for all services which do not require a specific license and to draft model licensesfor cellular services. They will also help the regulator launch and coniduct a bidding process forthe granting of the first cellular license to a private operator other than the newtelecommunications entity created after the separation of postal and telecommunications activitieswithin the OPT. Consultants will also prepare the cellular license for the affiliate of the mainoperator, ensuring that there is non-discriminatory treatment of all cellular operators.

(v) Drafting an offer to the WTO: In order for the legal and regulatory framework to beclosely harmonized with emerging global trends, notably those reflected in the Fourth Protocol ofthe General Agreement on Trade in Services (GATS) under the aegis of the World TradeOrganization, and given Mauritania's commitment to regional integration and to an outward-oriented development strategy, consultants will help the Government to prepare an offer to theWTO in this regard.

B. Local consultants will staff three RA positions for technical, legal and economicspecialists to help build local capacity in regulatory areas which are relatively complex and novelfor Mauritania under the new telecommunications policy framework.

C. Hardware and software necessary for the frequency spectrum management will beprocured by the RA the scope of which will be determined by the consultalnt study also financedby this project. Management information system for administrative and finanicial management, aswell as licensing and analytical functions will also be procured by the RA.

D. Further regulatory studies will be undertaken to adapt to market and techniologydevelopments both in telecommunications as well as other sectors. These studies are expected todevelop concrete recommendations of how the scope and structure of the regulatory body shouldfurther evolve to take account of these developments. One set of at least three studies is expectedto look at the prospects and modalities for extending the scope of the regulatory body to coverother utility sectors. Another set of studies is expected to look at issues of licensing utilities andinfrastructure providers (e.g. railways) as alternative telecommunications carriers. A third set ofstudies is expected to look at issues of technological and market convergence acrossbroadcasting, telecommunications and computing and across contenit and carriage providers.

E. Training of RA staff and others in telecommunications and other regulatory mattersthrough national workshops, study visits, and seminars.

Project Component 2 - Preparation and execution of privatization transaction of thetelecommunications operator - USD 1.7 million (14% of total project costs)

A. The project will finance a consortium of consultants who will provide services to theGovernment in three main areas:

(i) Financial audit and valuation of the main telecommunications operator: A financial auditof the main telecommunications operator will be undertaken according to internationalaccounting standards and certified accounts will be produced by an internationally recognizedfirm. An initial valuation of the company will also be prepared.

(ii) Preparation of the privatization strategy for the main telecommunications operator: Toassist the Government in achieving its goal of privatizing the new telecommunications entity,consultants will prepare a detailed strategy in which a range of privatization options will beidentified within the broad parameters set out in the Government policy statement; potentialinvestors will be identified; taking into account the regulatory provisions which will have beendefined earlier, the draft license and concession agreement for the main operator will be furtherdeveloped; and a detailed marketing strategy will be developed.

(iii) Execution of the privatization strategy and finalization of sale transaction: Once aspecific privatization strategy is agreed, consultants will help the Government execute thisstrategy, by preparing an initial prospectus, organizing a data room, inviting initial expressions ofinterest from potential investors, short-listing investors during a second round, selecting andnegotiating with chosen strategic partner; and completing due diligence and finalizing thetransaction.

B. Through consultancy services and training, the project will help build long-term capacityto conduct privatization in other major utilities, the national airline and other sectors, drawing onthe experience and capacity built through the flagship privatization in telecommunications.

Project Component 3 - Strategy for rural access to communications and informationservices and the postal development - USD 5.3 million (44% of total project costs)

A. The project will support the development and implementation of a strategy to improverural access to communications and informnation services:

(i) Consultancy services will be used to prepare a national strategy on improving ruralaccess to communications and information services, by introducing technological andinstitutional innovations enabled by the new telecommunications policy framework, includingcommunity information centers, which may not develop spontaneously owing to poorunderstanding of the needs of rural and disadvantaged communities and fragmentation of thesemarkets. This will include the organization of a national workshop for stakeholders inGovernment, private sector, civil society and local communities, NGOs, and donor agencies, todiscuss this strategy.

(ii) In a second stage, consultancy services, training and equipment will be used toimplement a national strategy for improving rural access to communications and informationservices. They will include needs assessments for specific rural applications of communicationsand information technologies in education, health, etc., workshops aimed at increasing awarenessand co-ordination among stakeholders, and the design, implementation, monitoring, andevaluation of a limited number of innovative and small-scale pilot projects for which either

equipment financing could also be provided by the project or by using mechanism such as theuniversal access fund.

B. Development of the postal sector as a commercially-oriented activity will also be coveredby the project through:

(i) Consultancy services will prepare a new Postal Law, a postal development plan, andtransitional measures to enable the Post Office to become a corporatized and commercially-oriented entity. A detailed business strategy will be prepared including marketing, humanresource and product development plans.

(ii) Training for postal sector restructuring including national workshops, study tours andtraining seminars will be provided.

(iii) Consultancy services and equipment will help the implementation of the integrated postaldevelopment plan to progressively reduce and remove the Government's operating subsidy and toassist the postal entity to evolve into a financially viable postal, communications and informationservice provider.

Project Component 4 - Media and information campaign - USD 0.2 million (2% of totalproject costs)

This component will finance consultants to achieve the following goals: (i) informing potentialdomestic and foreign investors on new business opportunities created by the reforms; (ii)building general public support and investor confidence; and (iii) ensuring transparency of thereform program through wide dissemination of licensing and privatization procedures, disclosureof results of each transaction, and general information on the overall results and impacts of theprogram.

Project Component 5 - Capacity Building and project management - USD 0.7 million (6% oftotal project costs)

This component will finance for the project implementation agency, the Telecommunications andPostal Unit: (i) three locally recruited project management positions -- project manager, financialspecialist, and procurement specialist; (ii) office equipment; and (iii) financial managementassistance. In addition, this component will finance technical assistance to the SpecialProcurement Commission to launch and evaluate tenders under this Project and the annual projectaudit to be undertaken by an audit firm.

I'age 26

Annex 3

Estimated Project Costs

MAURITANIA: Telecommunications and Postal Sector Reforn TA Project

Local Foreign TotalProject Cost By Component USD USD USD

million million million

I. Establishment of the legal and regulatory 0.6 2.6 3.2framework for the telecommunications sector

2. Privatization of the main telecommunications 0.2 1.3 1.5operator

3. Strategy and piloting of communications and 1.5 3.0 4.5information service delivery to rural anddisadvantaged communities and for Postaldevelopment

4. Communications and media campaign 0.1 0.1 0.25. Capacity building and project management 0.6 0.0 0.66. PPF refinancing 0.1 0.3 0.4

Total Baseline Cost 3.1 7.3 10.4Physical Contingencies 0.3 0.7 1.0Price Contingencies 0.2 0.4 0.6

Total Project Costs 3.6 8.4 12.0

Total Financing Required 3.6 8.4 12.0

Local Foreign TotalProject Cost By Category USD USD USD

million million million

Goods and Equipment 1.5 3.5 5.0Consultant Services 1.4 4.0 5.4Training 0.3 0.6 0.9Operating Expenses 0.4 0.3 0.7


Total Financing Required 3.6 8.4 12.0

1/ Includes the refinancing of the Project Preparation Facility of USD 350,000.

Annex 4

Cost-Effectiveness Summary


The proposed operation is a technical assistance project, which provides resources for developingthe regulatory framework and capacity to complete the privatization program and foster acompetitive multi-operator environment in the telecommunications and postal sectors. Thesepolicy and institutional reforms will enable economic benefits which will come from the marketresponse in terms of both supply and demand for telecommunications services. These benefits aredifficult to quantify without building a detailed model which is beyond the scope of this annex.Instead, this annex presents a qualitative description and comparison of three scenarios underwhich the telecommunications sector could evolve, with and without the project.

Scenario 1. High-growth under prevailing monopoly market structure (without projectinterventions)

This scenario envisions a relative optimistic development of the telecommunications sector underthe prevailing monopoly market structure. It is consistent with the target set up by theGovernment to reach a teledensity of 1 main line per hundred inhabitants in the year 2000.However, this target is lower than the one set by the African Telecommunications Green Paperwhich envisages an average teledensity of 2% in Africa by the year 2000. OPT plans to reach ateledensity of 1.3% in 2001 and 1.75% in 2003.

In this scenario, teledensity projections are based on the assumptions that the population and theGDP will grow at a percentage of 3% and 5% per year respectively, with no changes in theexisting market structure. It is assumed that OPT can sustain its levels of revenues by keepingtariffs and revenues per line relatively high even though these are expected to fall in response toworld trends, notably changes in the international accounting rate system.

1996 1997 1998 1999 2000 2001 2002 2003AssumptionsPopulation 3%GrowthGDP Growth 5%Population 2.4 2.47 2.55 2.62 2.70 2.78 2.87 2.95(millions)Urban Population 1.2 1.24 1.27 1.31 1.35 1.39 1.43 1.48GDP ($millions) 1,100.00 1,155.00 1,212.75 1,273.39 1,337.06 1,403.91 1,474.11 1,547.81GDP ($millions) 458.33 467.23 476.31 485.55 494.98 504.59 514.39 524.38per capitaTelecom Revenue 2,686.27 2,068.70 1,861.83 1,657.03 1,458.19 1,268.62 1,091.01 938.27Per line ($)Number of lines 10,200.00 13,100.00 16,637.00 21,128.99 26,833.82 34,078.95 43,280.26 54,965.94(growth rate 27%)CalculationsTeledensity 0.43% 0.53% 0.65% 0.81% 0.99% 1.22% 1.51% 1.86%Telecom Revenue 2.49% 2.35% 2.55% 2.75% 2.93% 3.08% 3.20% 3.33%As % of GDP* * Figures in italics are projection figures.

The main conclusion is that OPT's targets could plausibly be met in a high GDP growth scenario.However, the level of growth in teledensity may be insufficient to sustain the competitiveness ofthe Mauritanian economy if its neighboring and competitor countries in exports continue tobenefit from sector reforms as prices of their telecommunications services decline even morerapidly in line with global trends.

Scenario 2. Telecommunications development with one competing cellular operator

In this scenario, which would be enabled by reforms supported under the project, Mauritaniaopens up its telecommunications sector by granting a license to a new private cellular operatorindependent from OPT. Possible change in fixed and mobile telephone service penetration -based on pattems observed in similar market liberalization elsewhere - is presented below. Notehowever, that given the long waiting list, we do not expect, in the short run, any substitutioneffect of mobile over fixed lines.

1998 1999 2000 2001 2002 2003Fixed telephone lines 16,637.0 21,128.9 26,833.8 34,078.9 43,280.2 54,965.9Cellular subscribers 0 200 1500 2 500 6000 12 000Internet subscribers 250 500 1 500 2 500 3 500 4 500Teledensity (fixed telephone 0.65% 0.81% 0.99% 1.22% 1.51% 1.86%lines)Teledensity (fixed and cellular) 0.65% 0.813% 1.049% 1.225% 1.720% 1.862%

Generally, competition would be expected to induce price reductions, diversification in valueadded offerings, improved responsiveness to customers and better quality of service. Even in theunlikely case depicted above of fixed telephone service levels remaining unchanged relative tothe monopoly market structure scenario, cellular service alone would lead to significant overallservice improvements. In the long run, cellular service could act as a substitute for the oftenunreliable fixed service, competition would expand network coverage and hence make cellulareven more attractive. Service affordability and economic growth prospects would continue toretain their paramount importance in deternining the level of cellular subscriber growth inMauritania. While competition would drive operators to orient their tariffs more closely towardscosts, without a specific strategy to enhance service penetration in rural areas, access totelecommunications would still generally be out of reach for the majority of people in thismarket.

Scenario 3. High growth and convergence of Internet, telephony and broadcasting

In this scenario, which could result from successful implementation of the rural access strategysupported under the project, a strong growth in penetration of internet service and convergence ofvarious communications services is envisaged. A high growth in the usage of e-mail and Internettelephony in Mauritania could be realized through community information centers beingestablished all over the country, particularly given that that a majority of the population inMauritania already has access to radio. In a simple form of convergence of telecommunications;computing and broadcasting technologies, one could envisage development of radio stations intoa kind of paging facility. Radio could be used to announce the arrival of e-mail at a nearbycommunity information center. Through this and other forms of convergence of telephony,internet, paging and FM-radio, a relative high percentage of the population could acquire accessto communication services within a few years of network expansion.

Annex 5

Financial Summary


IMPLEMENTATION PERIODYear 1 Year 2 Year 3

Total Financing RequiredProject Costs

Investment Costs 1 3.8 4.0 3.4Recurrent Costs 0.2 0.3 0.3


Total Financing 4.0 4.3 3.7

FinancingIBRD/IDA 3.7 3.9 3.2Government 2 0.3 0.4 0.5

Central 0.0 0.0 0.0Provincial 0.0 0.0 0.0

Co-financiers 0.0 0.0 0.0User Fees/Beneficiaries 0.0 0.0 0.0Others 0.0 0.0 0.0

Total Project Financing 4.0 4.3 3.7

Main assumptions:

I / Investment costs for the first year of implementation includes the refinancing of theProject Preparation Facility of USD 350,000.

2/ In addition to the above indicated Government counterpart funds, the Governmenthas also committed to financially assist the restructured postal entity by absorbingits operating deficit over five years at the end of whiclh is expected to becomefinancially viable.

Annex 6

Procurement and Disbursement Arrangements

MAURITANIA: Telecommunications and Postal Sector Reform TA Pro'ject

Procurement

Procurement of Goods and Equipment will follow Bank Guidelines on1 Procurement under IBRDLoans and IDA Credits, January 1995, revised January and August 1996, September 1997 andJanuary 1999. Selection of Consultants will be based on1 Bank Guidelines for Selection andEmployment of Consultants by World Bank Borrowers, January 1997, revised September 1997and January 1999. Mauritania's procurement practices allow IDA procedures to take precedenceover any contrary provisions in local regulations.

The project will be implemented by the Telecommunications and Postal Unit (TPU) headed bythe Project Manager. The TPU is overseen by the Para-Public Sector Reforn Program under theMinistry of Economic Affairs and Development, responsible for coordinatilng the overallprivatization program in Mauritania, including the telecommunications and postal sectorrestructuring supported by this project. The Ministry has already extensive experience withmanaging Bank projects and its staff is familiar with IDA procedures. However, given thevolume of consultant contracts envisaged under the project, particularly during the first year ofimnplementation, the TPU will be assisted by a (i) Accountanit/Finanicial Managemenit Specialistsand a (ii) Procurement Specialist to monitor procurement activities and ensure timely projectexecution.

In Mauritania, all public procurement of works, goods and services on behalf of the state,government organizations, public enterprises and local governments should be procured inaccordance to the general rules established by Decree n. 93-011 of January 1O, 1993. Article 56of this Decree establishes the Central Procurement Commission ("Commission Centrale desMarches") which is in charge of the procurement of all contracts with a contract value equal orexceeding 10,000,000 UM (approximately USD 50,000). The Country Procurement AssessmentReview of February 1999 and an Institutional Development Grant have both addressed problemswith the capacity of the permanent Central Procurement Commission and provided for its futurereinforcement. In view of the above, procurement under this project will be carried out by theSpecial Procurement Commission for the Telecommunications and Postal Sector Reform("Commission speciale des march6s pour la reforme des secteurs des Postes etTelecommunications"). The Special Procurement Commission was established by Decree n. 99-03 of January 6, 1999, as derogation to Article 56 of Decree n. 93-01 1 of January 10, 1993, toexpedite procurement under this project while maintaining transparency in the process of contractawarding. In the past, similar provisions have been made for ad-hoc procurement commissionsresponsible for procurement for projects such as the new electric plant of Nouakchott, theelectrification of 13 cities, the Nouakchott-Atar road, a major water managemenit system and apetrol tank. This arrangement is particularly suited for this technical assistance project given thehigh importance of transparency and the short time frame. This Special Procurement Commissionwill work closely with the Project Manager and the Procurement Specialist within the TPU. Itwill expeditiously handle all procurement matters for the project. This model is also foreseen forthe overall sector reform and privatization program of which the telecommunications and postalsector reform program, including the privatization of the main telecommullications operator, will

the overall sector reform and. privatization program of which the telecommunications and postalsector reform program, including the privatization of the main telecommunications operator, willbe the first one.

A General Procurement Notice was published in the Development Business No. 507 of March31, 1999 and will be updated annually for all outstanding procurements. A timetable listing allprocurement steps was prepared with the borrower during identification and has been regularlyupdated. A detailed procurement plan of goods and services is annexed to the Manual ofProcedures.

During appraisal, the Government has submitted: (i) the Manual of Procedures including targettime periods for various procurement phases, (ii) the procurement plan for the first year of projectimplementation, (iii) the program of a one-day training on the Manual of Procedures for allstakeholder involved; and (iv) the draft contract to recruit the procurement specialist into theTPU, to work closely with the Special Procurement Commission.

During negotiations, agreement has been reached on the proper monitoring of procurement. TheGovernment gave assurances that it will: (i) use the Manual of Procedures a finalized version ofwhich was submitted and discussed during negotiations, (ii) use the Bank's standard biddingdocuments and bid evaluation reports for International Competitive Bidding, (iii) use the Bank'sstandard request for proposal, evaluation reports and model contracts for the consultant services;and (iv) apply the procurement procedures and arrangements outlined in the Manual ofProcedure.

The Manual of Procedures was approved during negotiations and is referenced in theDevelopment Credit Agreement. The Government has agreed with the principle that the Manualof Procedures would only be modified with prior IDA approval. The procurement plan will beupdated on regular basis, in particular during semi-annual reviews to compare target times andactual completion. The Government also gave assurance during the negotiations that it will takethe necessary measures to ensure that procurement phases do not exceed the following targetsperiods mentioned below:

Procurement phases: Maximum time frame:- Preparation of bidding document 6 weeks (3 weeks for small contracts)- Preparation of bids by bidders 6-12 weeks (3 weeks for small contracts)- Bid evaluation 4 weeks (2 weeks for small contracts)- Signature of contracts 2 weeks

During implementation, all bidding documents, bid evaluation reports, and draft contractstransmitted to IDA for review will contain an updated copy of the procurement plan. Procurementconfirmation will be collected and recorded as follows: (a) prompt recording of contract awardinformation by the Telecommunications and Postal Unit and (b) comprehensive quarterly reportsby the Telecommunications and Postal Unit indicating: (i) revised cost estimates for individualcontracts and the total program, including best estimates of allowances for contingencies, (ii)revised timing of estimated procurement actions, including advertising, bidding, contract awardand experience with completion time and completion costs for individual contracts; and (iii)compliance with aggregate limits on specified methods of procurement.

1. Procurement methods (Table A)

1.1 Goods and Equipment (USD 5.0 million)

Procurement of Goods and Equipment will followBank Guidelines on Procurement under IBRDLoans and IDA Credits, January 1995, revised January and August 1996, September 1997 andJanuary 1999. The project will mainly support the procurement of (i) frequency managing andmonitoring equipment; (ii) equipment to support postal sector development, (iii) equipment forpilot activities for universal access to communications and information services; and (iv)management information systems (MIS), computer software and hardware, other officeequipment, furniture and supply for the Regulatory Agency, for the Telecommunications andPostal Unit, as well as for the Special Procurement Agency.

1.1.1 International Competitive Bidding (ICB) (USD 3.5 million)Except otherwise provided below, goods and equipment shall be procured through InternationalCompetitive Bidding (ICB) in accordance with the provisions of the Guidelines. Invitations topre-qualify or bid for contracts procured under ICB will be advertised in Specific ProcurementNotices in at least one newspaper of national circulation, and preferably in international press andin the Development Business. To the extend practicable, contracts for goods and equipment forpilot activities shall be grouped in bid packages estimated to cost USD 50,000 equivalent or moreeach.

1.1.2 National Competitive Bidding (NCB) (USD 1.2 million)Contracts for the purchase of goods and equipment valued at less than USD 100,000 per contractmay be procured through National Competitive Bidding (NCB) in accordance with the provisionsof Paragraphs 3.3 and 3.4 of the Guidelines.

1.1.3 International and National Shopping (USD 0.3 million)The management information systems, computer hardware and software, other office equipmentand furniture, estimated to cost less than USD 5,000 per contract up to an aggregate not to exceedUSD 0.3 million may be procured under contracts awarded on the basis of prudent nationalshopping based on price quotations obtained from at least three reliable suppliers and inaccordance with the provisions of Paragraphs 3.5 and 3.6 of the Guidelines.

1.2 Consultant Services, Studies, Training and Workshops (USD 6.3 million)

Consultancy services would be contracted following procedures in accordance with BankGuidelines for Selection and Employment of Consultants by World Bank Borrowers, January1997, revised September 1997 and January 1999. The Standard Request for Proposals andConditions of Contract as developed by the Bank would be used for all contracts. Simplifiedcontracts may be used for short-term assignments, i.e. those not exceeding three months, carriedout by firms or individuals.

The project will support consultant services in the telecommunications and postal sector mainlyfor (i) the establishment of the legal and regulatory framework, (ii) the execution of theprivatization transaction of the main telecommunications operator, (iii) the development of thepost, (iv) the preparation of a rural access strategy, (v) the launching of a communicationscampaign; and (vi) capacity building purposes.

Contracts above USD 200,000 will be advertised in the Development Business to obtainexpression of interest before establishing the short-lists. Two Specific Procurement Notices

requesting expression of interest from consultants interested to assist the Government (i) in thepreparation of the new telecommunications regulatory framework and (ii) in the preparation andexecution of the privatization of the main telecommunications operator; have been alreadypublished in the 491 issue of Development Business, dated 31 July 1998.

1.2.1 Quality and Cost Based Selection (USD 2.8 million)Consultant services for technical assistance, studies and training financed under this project shallbe normally selected through competition among qualified short-listed firms in which theselection is based on Quality and Costs (QCBS) by evaluating the quality of the proposal beforecombining quality and cost evaluation. Short lists may comprise, on exceptional basis and withthe Bank's prior agreement, entirely national consultants, if the assignment is below USD 50,000in accordance with the provisions of Paragraphs 2.7 of the Guidelines.

1.2.2 Consultant Qualification (USD 1.1 million)For specialized assignments, for which the need of preparing and evaluating competitiveproposals is not justifiable, the Borrower may prepare TORs, request expressions of interest andinformation on consultants experience and competence relevant to assignment, establish a shortlist, and select the firm with the most appropriate qualifications and references in accordance tothe provisions in Paragraph 3.7 of the Guidelines. Consultancies such as (i) the implementationof the postal development plan, (ii) the design of institutional and technological piloting toincrease rural access and (iii) the organization of a National Rural Workshop may require theservices oc several consulting firms to be selected based on consultant qualifications. UNAgencies and NGOs may be included in the short list, as participation and local knowledge isessential for carrying out the assignment; and will be procured in accordance with the provisionsof Paragraphs 3.13 and 3.14 of the Guidelines.

1.2.3 Single-Source Selection (USD 0.2 million)In exceptional cases, tasks valued at less than USD 25,000 that represent a natural continuation ofprevious work carried out, where a rapid selection is essential, for very small assignments orwhen only one firm is qualified or has experience of exceptional worth for the assignment, asingle source selection may be used with IDA prior agreement and in accordance with theprovisions of Paragraphs 3.8, 3.9, 3.10 and 3.11 of the Guidelines.

1.2.4 Individual Consultants (USD 2.1 million)Services valued at less than USD 50,000 per contract which do not require firms may be procuredby Individual Consultants e.g. for small assignments, studies, organization of or lecturing at aseminars, workshops or study tours will be selected through comparison of qualification andexperience among those expressing interest in the assignment or approached directly inaccordance of the provisions of Section V of the Guidelines.

The project manager, the procurement agent and the financial management agent/accountant forthe Telecommunications and Postal Unit, as well as the legal, economic and technical experts forthe Regulatory Agency will be recruited with IDA non-objection based on comparison of threeresumes proposed by the Government.

1.2.5 Training (USD 0.1 million)The project will finance training in postal, telecommunications, privatization and other relevantfields in the country and abroad. The program containing names of candidates, cost estimates,courses, period of training and institutions selected would be reviewed by IDA semi-annually.The Government will also submit a final report not later than three months after the training wascompleted.

1.3 Operating expenses (USD 0.3 million)

1.3.1 Project Audit (USD 0.1 million)For audits of standard nature, such as the project audit, the Least-Cost Selection (LCS) will beused: the firm with the lowest price will be selected, provided technical proposals received theminimal score.

1.3.2 Other operating costs (USD 0.2 million)Other operating costs include incremental operating costs incurred in the Telecommunicationsand Postal Unit, the Special Procurement Commission or the Regulatory Agency on account ofprogram implementation, management and supervision, including rent, office supplies and smalloffice equipment, operation and maintenance, administrative and secretarial support but excludessalaries of officials of the borrower's civil service, the purchase of vehicles or petrol.

2. Prior review thresholds (Table B)

2.1 Goods and Equipment

All contracts for procurement of goods costing more than USD 100.000 per contract will besubject to IDA prior review. All other contracts will require post review. The review process isexpected to cover about 80% of the total value of the amount contracted for goods.

2.2 Services

Prior review will be required for consultancy services valued at more than USD 50,000equivalent per contract with firms and at more than USD 10,000 per contract with individuals.The project audit in any case will be subject to prior-review. The technical evaluation report willbe submitted for IDA non-objection before the financial envelops are opened. All other contractswill be subjected to post review. However, this exception for prior review will not apply toamendments of contracts with firms raising the contact value to USD 50,000, amendments ofcontracts with firms raising the contact value with individuals to USD 10,000, to servicesprocured by single-source selection and to assignments of critical nature as determined by IDA.For training abroad or in the country, the program containing names of candidates, cost estimates,courses, period of training and institutions selected would be reviewed by IDA semi-annually.The review process is expected to cover 90% of the total value of the amount contracted forconsultant services. Selective post-review of contracts awarded below the threshold levels willapply to about one in three contracts a year.

2.3 Disbursement

Allocation of credit proceeds (Table C)

The IDA credit will be disbursed against (i) for goods: 100% of foreign expenditure, 70% oflocal expenditure (ex-factory cost); (ii) for consultants, including training, workshops and studytours: 100% of foreign expenditure and 70% of local expenditure; and for (iii) operating expensesincluding project audit: 50% of expenditures. The IDA Credit will be disbursed over a period of36 months (from July 1, 1999 to June 30, 2002).

Use of statements of expenditures (SOEs)

Withdrawal applications shall be fully documented for all expenditures against wlhichi creditdisbursements would be made, except for the following contracts for which credit disbursementwould be based on Statement of Expenditures (SOEs) certified by the Project Manager: (a) goodsunder contacts costing less than USD 100,000 equivalent each; (b) contacts of consulting firmscosting less than US $50,000 equivalent each or with individuals costilng less than US $10,000each, (c) incremental operations costs and (d) training. Documents supporting the SOE shall beretained by the TPU and made available for review as requested by auditors (including technicalaudits) and by the World Bank supervision missions.

Special account

In order to expedite disbursement and ensure that funds for the project are available as needed,the Government would open and maintain a Special Account for IDA share of eligibleexpenditure in a Commercial Bank acceptable to IDA for the duration of the project. Theauthorized allocations of the Special Account will be USD 1,000,000 representing about fourmonths of project expenditures. IDA will make an initial deposit of USD 500,000 once the creditis declared effective and the TPU prepares and submits a withdrawal application for the saidamount to the Bank. The remaining balance will be made available as sooIn as cumulativedisbursements reaches SDR 2,000,000. The Special Account will be managed by the ProjectManager who will be also responsible for certifying disbursement requests.

Government counterparts (USD 1.2 million)

The Government's counterpart funds needed to cover 50% of local operating expenses includingproject audit and 30% of local costs of goods and consultant services and will be deposited by theGovernment in a Project Account at a Commercial Bank acceptable to IDA. The Governmelntwill make an initial deposit of UM 80 million (approximately USD 400,000) representing about ayear of project expenditures which will be a condition to project effectiveness, and willsubsequently replenish the account on a yearly basis. The Government counterpart funds will alsoinclude the financing of a three-year digressive subsidy to the new postal entity.

Financial Management

During appraisal an action plan for the establishment of a financial management system has beenagreed on between the Bank and the Telecommunication and Postal Unit (TPU). According tothis plan, a system for cash management, accounting, internal control and financial reportingwould be fully in place prior to project effectiveness. The TPU will establish a financialmanagement system, acceptable to IDA, which will provide the TPU and fDA with accurate andtimely information regarding resources and expenditures. In addition, before effectiveness a (i)full-time project accountant/financial management specialist will be recruited, (ii) a Y2Kcompliant financial management software will be purchased; and (iii) an external audit firm willbe contracted. The financial management system will include accounting, financial reporting andauditing elements.

Accounting/Financial Management

During appraisal it was assessed by a certified financial management specialist on tlle projectteam that the internal account controls for the project are set out in the finanicial procedures of the

Manuel of Procedures which is satisfactory for providing reasonable assurances that accounts areproperly recorded and resources safeguarded. An action plan was proposed to set up the financialmanagement system prior to effectiveness. It was required that (i) a more detailed description ofthe administrative, accounting and financial management system be annexed to the Manual ofProcedures, (ii) a Y2K compliant financial management software be purchased for the TPU and(iii) its personnel trained in using it. The consultant assisting the Government in the preparationof the Manual of Procedure will assist the TPU in the above tasks strictly following the time-based action plan annexed to the Manual of Procedures. Setting up the financial managementsystem and the purchase of the appropriate software are both conditions to effectiveness.

Financial reporting

The TPU will provide quarterly activity reports. The annual financial statements of the projectwill be prepared in accordance with generally accepted accounting principles in Mauritania andwill include at least (i) a summary of sources and uses of funds, (ii) project balance statement,and (iii) a statement of the special account. The financial statements will be submitted to IDA nolater than six months after the end of the fiscal year.

In accordance to the Loan Administration Change Initiative (LACI), during appraisal it wasassessed by a certified financial management specialist on the project team that the projectsatisfies the Bank's minimum financial management requirement (see above). However, theproject does not have in place an adequate project financial management system that can providewith reasonable assurance, accurate and timely information on the status of the project usingProject Management Reports (PMR) based disbursements. While the assessment has found thatthe PMR procedures would not be appropriate for the Project initially, there is a need to ensurethat the systems put in place are operating effectively. The monitorilg and evaluation processwill include quarterly activity reports, which are consistent with the PMR requirements. A time-based action plan has been designed to strengthen the financial management system and todevelop no later than thirty months after project effectiveness a system acceptable to IDA for thepreparation of quarterly PMRs. The financial, procurement and output monitoring systems willbe reviewed as part of a supervision mission eighteen months after effectiveness to assess whenexactly it would be appropriate to move to PMR disbursements.

Auditing

The financial statements of the project will be audited annually by an independent auditoracceptable to IDA. The auditor will provide an opinion on: (i) the project's financial statements,(ii) statement of expenditures, (iii) special accounts and (iv) a management report on internalcontrols outlining any recommendation for improving internal accounting controls identified as aresult of the financial statement audit. The selection of an appropriate auditor is a condition toeffectiveness.

Table A: Project Costs by Procurement Arrangements(USD million equivalent)

Procurement MethodExpenditure Category ICB NCB Otherl N.B.F. Total Cost

1. Goods and Equipement 3.5 1.2 0.3 0.0 5.0

_(3.5) (0.9) (0.2) (0.0) (4.6)

2. Consultant Services2 0.0 0.0 6.3 0.0 6.3(0.0) (0.0) (5.7) (0.0) (5.7)

3. Operating Expenses3 0.0 0.0 0.7 0.0 0.7(0.0) (0.0) (0.5) (0.0) (0.5)

Total 3.5 1.2 7.3 0.0 12.0(3.5) (0.9) (6.4) (0.0) 10.8

Table Al: Consultant Selection Arrangements (optional)(USD million equivalent)

Consultant Selection MethodServices Total

Expenditure QCBS QBS SFB LCS4 CQ Other N.B.F. CostCategory

A. Firms 2.8 0.0 0.0 0.1 1.1 0.2 0.0 4.2(2.8) (0.0) (0.0) (0.0) (1.0) (0.1) (0.0) (3.9)

B. Individuals 0.0 0.0 0.0 0.0 0.0 2.1 0.0 2.1(0.0) (0.0) (0.0) (0.0) (0.0) (1.8) (0.0) (1.8)

Total 2.8 0.0 0.0 0.1 1.1 2.3 0.0 6.3(2.8) (0.0) (0.0) (0.0) (1.0) (1.9) (0.0) (5.7)

1/ Includes civil works and goods to be procured through national shopping, consulting services,services of contracted staff of the project management office, training, technical assistanceservices, and incremental operating costs related to (i) managing the project, and (ii) re-lendingproject funds to local government units.

2/ Include training, workshops and study tours.3/ Include the project audit, other incremental operating costs and the refinancing of the Project

Preparation Facility of USD 350,000.4/ Includes the project audit, which is part of the operating expenses.

Note: QCBS Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Selection under a Fixed BudgetLCS = Least-Cost SelectionCQ = Selection Based on Consultants' QualificationsOther = Single-Source Selection, Selection of individual consultants (per Section V ofConsultants Guidelines), Commercial Practices, etc.

N.B.F. = Not Bank-financed (includes elements procured under parallel co-financing procedures,consultancies under trust funds, any reserved procurement, and any other miscellaneous items)Figures in parenthesis are the amounts to be financed by the Bank credit.All costs include contingencies

Table B: Thresholds for Procurement Methods and Prior Review

Contract Value Contracts Subject to |Expenditure Threshold Procurement Prior Review

Category (USD thousands) Method (USD millions)

1. Goods and Equipment USD 100,000 and above ICB, NCB Prior Review:USD 4.0 million

Below USD 100,000 NCB, Post ReviewNational/International

Shopping

2. Consultant Services FIRMS:

IUSD 50,000 and above QCBS/CQ Prior Review (DBannouncement,

technical evaluationreceives IDA non-objection before

opening financialproposals.)

USD 3.5 million

Below USD 50,000 CQ Post Review

INDIVIDUALS:Prior Review:

USD 10,000 and above Comparison of 3 CVs USD 2.0 million

Post ReviewBelow USD 10,000 Comparison of 3 CVs

3. Operating Expenses USD 10,000 and above Project Audit: LCS Prior ReviewUSD 0.1 million

USD 9.6 millionTotal value of contracts subject to prior review: corresponding to about 80% of project

cost including PPF refinancing

Overall Procurement Risk Assessment

Average

Frequency of procurement supervision missions proposed:

One every 6 months (includes special procurement supervision for post-review/audits)

Table C: Allocation of Credit Proceeds

Expenditure Category Amount in USD Financing Percentagemillion

Goods and Equipment 4.2 100% of foreign expenditure, 70% oflocal expenditures

Consultant Services' 5.2 100% of foreign expenditure, 70% oflocal expenditures

Incremental Operating Cost 0.1 50% of expenditures

Project Preparation Facility 0.4

Unallocated 0.9

Total Credit 10.8

1/ Include training, workshops and Study Tours.

Annex 7

Project Processing Schedule


Project Schedule Planned Actual

Time taken to prepare the project (months) 9 11First Bank mission (identification) 07/05/98 07/05/98Appraisal mission departure 03/01/99 04/16/99Negotiations 03/15/99 05/03/99Planned Date of Effectiveness 04/15/99 07/01/99

Prepared by:

Ministry of Economic Affairs and DevelopmentMinistry of Interior, Post and TelecommunicationsOffice des Postes et Telecommunications (OPT)

Preparation assistance:

PPF: USD350 000

Bank staff who worked on the project included:

Name SpecialtyCore project preparation team:Govindan Nair Task Team Leader/Senior Economist, EMTTIYann Burtin Operations Analyst, EMTTIMonika Hencsey Telecommunications Specialist, EMTTICina Lawson Telecommunications & Financial Specialist, EMTTICheikh Abdallahi Ould Houeibib Economist, Resident Mission of Mauritania, AFMMRAhmedou Ould Hamed Procurement Officer, Resident Mission of Mauritania, AFMMRAbdoulaye Coulibaly Financial Management Specialist, Resident Mission of Mali, AFMML

Other staff contributing:David Satola Telecommunications Lawyer, LEGPSHans Wabnitz Country Counsel, LEGAFBernard Abeille Principal Procurement Specialist, AFTS2Kashmira Daruwalla Procurement Analyst, EMTTIMagaye Gaye Financial Management Specialist, AFTS2Wolfgang Chadab Disbursement Officer, LOAAFFrancoise Perrot Operations Analyst, AFC 15Maureen Blassou Program Assistant, EMTTILucy Cueille Language Team Assistant, EMTTI

Quality Assurance Team:Paul Ballard Principal Industrial Economist, AFPTIBertrand Ah-Sue Senior Procurement Specialist, EACCFSiaka Bakayoko Financial Management Specialist, AFTS2

Annex 8

Documents in the Project File*

MAIJRITANIA: Telecommunications and Postal Sector Reform TA Project

A. Bank Documents

Project Implementation Plan (in Microsoft Project)

Project Information Document

Telecoms Aide-Memoire to May 1998 Bank/IMF mission

Identification Mission Aide-Memoire

Minutes of the PCD Review Meeting

Pre-Appraisal Aide-Memoire

Identification and Pre-appraisal Missions Back to Office Report

Appraisal Aide-Memoire

Appraisal Mission Back to Office Report

B. Others

Videoconference Document on Logframe (Discussed prior to Pre-appraisal Mission)

Project Preparation Facility Letter of Agreement

C. Documents Provided by the GOM:

Manual of Procedures

Procurement Plan for Goods and Services

Telecommunications Law adopted by Government

* Including electronic files

Annex 9

Status of Bank Group Operations in MauritaniaOperations Portfolio

As of 03-May-99

Difference Betweenexpected

Original Amount in US$ Millions and actualFiscal disbursements a/

Project ID Year Borrower PurposeIBRD IDA Cancellations Undisbursed Orig Frm Rev'd

Number of Closed Projects: 33

Active ProjectsMR-PE-55003 1999 GOV OF MAURITANIE NUTRITION (LIL) 0.00 4.90 0.00 4.90 0.00 0.00MR-PE-35689 1998 MINISTRY OF HEALTH & SOCI HEALTH SECTOR INVEST 0.00 24.00 0.00 23.20 3.52 0.00MR-PE-1875 1997 GOVERNMENT RAINFED NAT RES MGT 0.00 18.00 0.00 15.13 .81 0.00MR-PE-46650 1997 OMVS REGIONAL POWER 0.00 11.10 0.00 8.29 5.64 0.00MR-PE-1874 1996 MINISTRY OF PLAN PUBLIC RESOURCE MGMT 0.00 21.14 0.00 3.90 1.56 -1.47MR-PE-34106 1996 ISL. REP. OF MTA INFRAST & PILOT DEC. 0.00 14.00 0.00 9.24 9.33 0.00MR-PE-1857 1995 GOVT OF MAURITANIA GENERAL EDUCATION PR 0.00 35.00 0.00 18.02 19.15 0.00MR-PE-38661 1995 FIN/PRIV.SCTR.CAPACI 0.00 7.20 0.00 2.08 2.79 2.79MR-PE-1864 1994 GOVERNMENT AGRIC SERVICES 0.00 18.20 0.00 5.92 3.32 0.00MR-PE-1872 1993 GOVERNMENT TECHNICAL/VOCATIONAL 0.00 12.50 0.00 6.24 6.36 0.00

Total 0.00 166.04 0.00 96.92 52.48 1.32

Active Projects Closed Projects TotalTotal Disbursed (IBRD and IDA): 64.75 497.68 r 562.43

of which has been repaid: 0.00 162.04 162.04Total now held by IBRD and IDA: 166.04 322.53 488.57Amount sold 0.00 63.35 63.35

Of which repaid : 0.00 63.35 63.35Total Undisbursed : 96.92 2.74 99.66

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.

Note:Disbursement data is updated at the end of the first week of the month and is currently as of 31-Mar-99.

Annex 9

MauritaniaSTATEMENT OF IFC's

Committed and Disbursed PortfolioAs of 31-Mar-99

(In US Dollar Millions)

Committed DisbursedIFC IFC

FY Approval Company Credit Equity Quasi Partic Credit Equity Quasi Partic1996 AEF Mayo Fish 0.00 0.00 .24 0.00 0.00 0.00 .24 0.001996 GBM 4.00 .20 0.00 0.00 4.00 .14 0.00 0.001997 AEF Codipal 0.00 0.00 .47 0.00 0.00 0.00 .47 0.001997 AEF STEP .69 0.00 0.00 0.00 .69 0.00 0.00 0.001997 BMCI 14.00 0.00 0.00 0.00 14.00 0.00 0.00 0.00

Total Portfolio: 18.69 .20 .71 0.00 18.69 .14 .71 0.00

Approvals Pending Commitment

Credit Equity Quasi Partic

Total Pending 0.00 0.00 0.00 0.00Commitment:

Mauritania at a glance 10/1/98

Sub-POVERTY and SOCIAL Saharan Low-

Mauritania Afrita Income Development diamond*1997Population, mid-year (mitlions) 2A4 614 2,048 Life expectancyGNP per capita (Atlas method, US$) 450 600 350GNP (Atlas method, US$ billions) 1t1 309 722

Average annual growth, 1991-97

Population f%) 2.5 2.7 2.1Labor force (%J 2.7 26 2.3 GNP Gross

per primaryMost recent estimate (latest year available, 1991-97) capita enrollment

Poverty (% of population below national poverty line) 50Urban population (% of total population) 54 32 28Life expectancy at birth (years) 53 52 59 |Infant mortlty (per 1000 live births) 92 90 78Child malnutrition (% of children under 5) 48 61 Access to safe waterAcces tosafe water (% of population) 76 44 71Illiteracy (% of population age 15+) 62 43 47Gross pimary enroltment (% of school-age population) 78 75 91 Mauritania

Male 85 82 100 Low-income groupFemale 72 67 81 el;_

KEY ECON.OMIC RATIOS and LONG-TERM TRENDS

1976 1986 1996 1997Economic ratios*

GOP (US$ billions) 0.52 0.80 1t1 1..Gross domestic investment/GOP 42.4 30.6 22.1 19.0Expofts of goods and sereces/GDP 38.5 56.4 53.6 453 TradeGross domestic sarNngsfGDP 2.9 7.7 13,9 13.2Gross national savings/GDP 20.2 3.2 17;3 15.6

Current account balance/GDP -27.4 -4.7 -3.4Interest payments/GOP 1.S 3.9 27 3.0 Domestic InvestmentTotal debVGDP 77.6 217.8 220.7 216.5 SavingsTotal debt service/exports 12.5 20.6 17.7 17.2Present value of debt/GDP . 1451 Present value of debt/exports . , 248.0

Indebtdness1976-86 1987-97 1996 1997 1998-02

(average annual growth)GOP 1.6 3.3 4.7 :S1 4,6 MauritaniaGNPpercapita 1.1 1.0 1.9 2.9 2.1 Low-income groupExports of goods and services 7.8 -0.9 7:3 -15.6 .o3 _

STRUCTURE of the ECONOMY1976 1986 1996 1997 Growth rates of output and investment (%)

(% of GDP)Agriculture 28.5 26.6 24.8 25.5 40

Industry 33.9 31.1 31.6 29.0 20 /

Manufacturing .. 13.1 12.0 9.7 0

Services 37.7 42.2 43.6 45.5 -20 92 93 9 95 9 -

Private consumption 65.2 80.5 72.2 74.6 40

General government consumption 31.8 11.8 13.9 12.2 GDI O GDPImports of goods and services 77.9 79.3 61.8 51.0

(average annual growth) 1976-86 1987-97 1996 1997 Growth rates of exports and imports (%)

Agriculture 3.2 3.2 3.3 9.6 40

Industry 2.6 2.6 2.9 -1.8Manufacturing . 0.1 9.4 -15.3 20-2/

Services -0.1 3.8 7.2 7.5

Private consumption 3.1 3.3 -3.1 13.4General government consumpton -9.9 6.6 3.1 -8.0Gross domestic investment -2.0 0.0 27.5 -9.5 -20Imports of goods and services 1.6 -0.9 3.0 -11.4 Exports -ImportsGross national product 1.5 3.6 4.5 5.5 . _ r . , .

Note: 1997 data are preliminary estimates.

The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete.

Mauritania

PRICES and GOVERNMENT FINANCE1976 1986 1996 1997 Inflation (%)

Domestic prices(% change)Consumer prices .477.4 4.7 5.0Implicit GDP deflator 6.0 7.3 3.5 5.7

5Govemment finance(% of GDP, includes currentgrants) I

Current revenue .. 24.8 30.5 26.4 92 93 94 95 96 97

Current budget balance .. -0 9 12.8 9.6 GDP deflator -CPIOverall surplus/deficit .. -8.3 6.6 4.2 _

TRADE1976 1986 1996 1997 Export and Import levels (USS millions)

(US$ millions)lTotal exports (fob) -- 418 485 413 900

Iron .. 142 207 216Fish (i 274 277 197 400Manufactures .

Total imports (cif) .. 400 435 380Food .. 91 97 85 200Fuel and energy 27 109 95

Capital goods 161 85 6891 92 93 94 95 96 97

Export price index (1995=100) .. 83 100 101Import price index (1995=100) .. 83 102 96 a Exports A ImportsTerms of trade (1995=100) .. 100 97 105

BALANCE of PAYMENTS1976 1986 1996 1997 Current account balance to GDP ratio (%)

(US$ millions)Exports of goods and services 201 453 586 497 0Imports of goods and services 353 637 676 560Resource balance -152 -184 -89 -63

Net income -59 -70 676 52

Net current transfers .. 34 94 78

Current account balance -220 -52 -37 -10

Financing items (net) .. 210 101 92Changes in net reserves -13 10 -50 -55 |15

Memo:Reserves including gold (US$ millions) 82 53 145 204

Conversion rate (DEC, local/US$) 45.0 74.4 137.2 151.9

EXTERNAL DEBT and RESOURCE FLOWS1976 1986 1996 1997

(US$ millions) Composition of total debt, 1997 (US5 millions)Total debt outstanding and disbursed 407 1,749 2,415 2,376

IBRD 0 69 8 6 A: 6

IDA 19 77 359 372 2 G 218 B 372

Total debt service 26 94 113 96

lBRD 0 10 3 2IDA 0 1 4 5 C:119

Composition of net resource flowsOfficial grants 115 71 176 140

Official creditors 113 130 58 3356Private creditors 53 3 24 -2 E. 1,075

Foreign direct investment 2 5 5 3Portfolio equity 0 0 0 0

World Bank programCommitments 3 29 35 29 A-IBRD E-Bilateral

Disbursements 5 23 36 34 B-IDA D - Other multilateral F - Private

Principal repayments 0 6 4 4 0C - MF G - Short-termNet flows 5 16 32 30 1 8

Interest payments 0 5 3 3Net transfers 5 11 29 27

World Bank 10/1/98

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