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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 2.8 MILLION (US$4.5 MILLION EQUIVALENT) TO THE ISLAMIC REPUBLIC OF MAURITANIA FOR A Report No: MR TRANSPORT SECTOR INSTITUTIONAL DEVELOPMENT AND TECHNICAL ASSISTANCE PROJECT Transport Sector Country Department AFCF2 Africa Regional Office July 8,2008 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective June 30th, 2008) CurrencyUnit = MRO MRO = US$1 US$1.63 = SDR 1 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS ACGF AfDB ANAC BAAC CAS CECAM CFAA CPAR CQS DA DEPC dgmarket DGTT DIR DMM DROTT DSR DTB EDF ESW EU FM FMR FMS GoM HIPC IAs IAS IBRD IC ICAO ICB IDA IDA- 14 Africa Catalytic Growth Fund African Development Bank Agence Nationale d'aviation Civile (National Civil Aviation Agency) Bulletin d 'Analyse des Accidents de la Circulation (Road Traffic Accidents Analysis Report) Country Assistance Strategy Cellule d'etudes et de Coordination des Affaires Maritimes (Maritime Affaires Studies and Coordination Unit) Country Financial Accountability Assessment Country Procurement Assessment Review Cost Quality Selection Designated Account Direction des Etudes, de la Programmation et de la Coope'ration (Directorate of Studies, Planning and Cooperation) Development Gateway's Market Direction Ge'ne'rale des Transports Terrestres (Land Transport General Directorate) Direction des Znfiastructures RoutiBres (Road Infrastructure Directorate) Direction de la Marine Marchande (Merchant Shipping Directorate) Direction de la Re'gulation et de 1 'Organisation des Transports Terrestres (Land Transport Regulation and Organization Directorate) Direction de la Se'curite' RoutiBre (Road Safety Directorate) Departmental Tender Board European Development Fund Economic Sector Work European Union Financial Management Financial Management Report Financial Management Specialist Government of Mauritania Heavily Indebted Poor Countries Implementing Agencies International Accounting Standards International Bank for Reconstruction and Development Individual Consultant International Civil Aviation Organization International Competitive Bidding International Development Association International Development Association Fourteenth Replenishment

3 FOR OFFICIAL USE ONLY IDA- 15 IDB IFR IMO ISA ISPS LCS M&E MANUPORT MARPOL MET MT NCB NGO NTP PAN PANPA PDIAM PDO PDUN PPF PPP PRSP-2 QBS QCBS SAM SAMMA SBD SNIM SOE SOMELEC SSA TAL TORS TSIDTAP TTL UNDB UDP UNDP WCAATSSP International Development Association Fifteenth Replenishment Islamic Development Bank Interim Unaudited Financial Report International Maritime Organization International Standards on Auditing International Shipping and port facility Security (name of a code designed by the International Maritime Organization and enforced since 2004) Least-Cost Selection Monitoring and Evaluation Manutention Transport (Handling and Transport) Convention of the International Maritime Organization on Maritime Pollution Ministry of Equipment and Transport Ministire des Transports (Ministry of Transport) National Competitive Bidding Nongovernmental Organization National Transport Plan Port Autonome de Nouadhibou (Port of Nouadhibou) Port Autonome de Nouakchott-Port de 1 'Amitik (Port of Nouakchott) Programme de De'veloppement de 1 'Irrigation en Aval de Manantali (Down Manantali Irrigation Development Program) Project Development Objective Plan de De'placement Urbain de Nouakchott (Nouakchott's Urban Mobility Master Plan) Project Preparation Facility Public-Private Partnership Second Poverty Reduction Strategy Paper (Cadre Stratkgique de Lutte contre la Pauvrete' - CSLP-2) Quality-Based Selection Quality- and Cost-Based Selection Socikte' des Ahports de Mauritanie (Mauritanian Airports Society) Socie'te' d 'Acconage et de Manutention en Mauritanie (Mauritania Handling and Stevedoring Company) Standard Bidding Documents Socikte' Nationale Industrielle et Miniere (National Industrial and Mining Company) statement of expenses Socikte' Mauritanienne d 'Electricitk (Mauritanian Electricity Company) Sub-Saharan Africa Technical Assistance Loan Terms of Reference Transport Sector Institutional Development and Technical Assistance Project Task Team Leader UN Development Business Urban Development Program United Nations Development Program West and Central Africa Air Transport Safety and Security Project Vice President: Country Director: Sector Manager: Task Team Leader: Obiageli K. Ezekwesili Madani M. Tall C. Sanjivi Rajasingham Ibou Diouf This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

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5 MAURITANIA TRANSPORT SECTOR INSTITUTIONAL DEVELOPMENT AND TECHNICAL ASSISTANCE PROJECT TABLE OF CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE Country and Sector Issues... 1 Rationale for Bank Involvement... 3 Higher-Level Objectives to which the Project Contributes... 4 B. PROJECT DESCRIPTION Lending Instrument Project Development Objective and Key Indicators Project Components Lessons Learned and Reflected in the Project Design Alternatives Considered and Reasons for Rejection... 6 C. IMPLEMENTATION Partnership Arrangements (if applicable)... 7 Institutional and Implementation Arrangements... 7 Monitoring and Evaluation of Outcomes/Results Sustainability... $8 5. Critical Risks and Possible Controversial Aspects Loadcredit Conditions and Covenants D. APPRAISAL SUMMARY Economic and Financial Analyses Technical Fiduciary Social Environment Safeguard Policies Policy Exceptions and Readiness... 14

6 Annex 1: Country and Sector or Program Background Annex 2: Major Related Projects Financed by the Bank and/or Other Agencies Annex 3: Results Framework and Monitoring Annex 4: Detailed Project Description Annex 5: Project Costs Annex 6: Implementation Arrangements Annex 7: Financial Management and Disbursement Arrangements Annex 8: Procurement Arrangements Annex 9: Economic and Financial Analysis Annex 10: Safeguard Policy Issues Annex 11: Project Preparation and Supervision Annex 12: Documents in the Project File Annex 13: Statement of Loans and Credits Annex 14: Country at a Glance Annex 15: Map... 54

7 MAURITANIA Transport Sector Institutional Development and Technical Assistance Project Project Appraisal Document Africa Region AFTTR Date: July 8, 2008 Country Director: Madani M.Tal1 Sector ManagedDirector: C. Sanjivi Raj asingham Project ID: PO89672 Lending Instrument: Technical Assistance Loan Team Leader: Ibou Diouf Sectors: Central government administration (50%); General transportation sector (50%) Themes: Corporate governance (P); Other public sector governance (S); Infrastructure services for private sector development (S); Environmental screening category: Not required [ ] Loan [XI Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 4.50 Proposed terms: The proposed credit would be on standard IDA terms, with a maturity of 40 Borrower: Islamic Republic of Mauritania Responsible Agency: Ministry of Transport Nouakchott Mauritania FY Annual Cumulative ,800,000 1,000, , ,000 1,800,000 2,800,000 3,700,000 4,500,000 I

8 Does the project depart from the CAS in content or other significant respects? Ref; PAD A.2.6. Does the project require any exceptions from Bank policies? Ref: PAD Annex 8. A.2. Have these been approved by Bank management? Is approval for any policy exception sought from the Board? Does the project include any critical risks rated substantial or high? Ref; PAD C.S.36,37. Does the project meet the regional criteria for readiness for implementation? Ref; PAD D [ ]Yes [XINO [ ]Yes [ IN0 [XIYes [ ]No [XIYes [ ]No Project development objective Ref; PAD B.2., Technical Annex 3 Improve land, maritime, and air transport sector management Project description Ref: PAD B.3., Technical Annex 4 The Transport Sector Institutional Development and Technical Assistance Project (TSIDTAP) comprises four components. The first component will help establish the newly created Directorate General of Land Transport with a focus on road safety preventiodmanagement. The second component will support the Government of Mauritania s (GoM) efforts to reorganize the sub-sector through capacity building for the newly created DMM and CECAM. The third component will support GoM s efforts to set up a development program for Mauritanian airports by funding a master plan for the development of airports, including a detailed development plan and an investment plan for Nouakchott airport. The fourth component will support capacity building of the new institutions, under the Ministry of Transport, to ensure efficiency, taking into consideration the need for multimodal coordination. It will also reinforce the overall transport sector planning unit within the Ministry. Which safeguard policies are triggered, if any? Ref; PAD 0.6, Technical Annex 10 No safeguard policies triggered. Significant, non-standard conditions, if any, for: Ref; PAD C.6. Board presentation: July 31,2008 Credit effectiveness: January 30,2009 1, Adopt an acceptable Project Implementation Manual (administrative, accounting, and financial management procedures). 2. Recruit an accountant for the project, with terms of reference, qualifications, and experience satisfactory to the association. 3. Initial deposit in an amount equivalent to one hundred thousand United States Dollars (USD 100,000) in an account opened in the government s name in the Central Bank. Covenants applicable to project implementation: 1. Recruitment of a procurement specialist (three months after effective date). 2. Training of a project financial management team (six months after effective date). 3. Recruitment of external auditor for the Droiect (six months after effective date). I1

9 A. STRATEGIC CONTEXT AND RATIONALE 1. Country and Sector Issues 1. Recent developments in Mauritania underline challenges, as well as opportunities, for the country s future. Over 2005 and 2006, a transition government embarked the country on the path to democracy, with strong popular backing and support from the international community. Following free elections in March 2007, the new government embraced a roadmap for comprehensive reforms, including in the transport sector. In addition, Mauritania became a petroleum-producing country in early 2006; therefore, additional revenues are expected over the coming years. The new government recognizes the importance of proper management of oil revenues as a source of wealth and development for the nation. Support to Mauritania on this promising path is critical to help improve necessary capacity, transparency, and sustained growth in the country. 2. In the Mauritania Second Poverty Reduction Strategy Paper (PRSP-2, 2006-IO), the country s strategy was based on a set of sound macroeconomic, structural, and sector policies. It tackles the fimdamental question of how to manage the natural resources wealth transparently and focuses on growth and poverty reduction. The strategy is articulated around five pillars: (i) accelerate growth and maintain macroeconomic equilibrium; (ii) anchor growth in the economic environment of the poor; (iii) develop human resources and generalize access to basic social services; (iv) strengthen good governance and capacity building; and (v) reinforce monitoring, evaluation, and coordination. 3. PRSP-2 identified four priority areas to support these pillars-education, health, water resources, and infrastructure. Specifically for the transport sector, the government is expected to make important contributions to the development of national and regional trade, the reduction of production costs, the reinforcement of the competitiveness of the national economy, and the integration of rural poverty pockets. In this regard, the Government of Mauritania (GoM) launched comprehensive reforms and undertook the following actions to improve the transport sector performance: (i) issued new regulations liberalizing the road transport industry with a time-bound action plan for supporting this measure; (ii) created an independent National Civil Aviation Agency (ANAC), replacing the former Civil Aviation Directorate; (iii) created the Directorate for Studies, Planning, and Cooperation in the Ministry of Transport (MT); (iv) coordinated the formulation and implementation of sector policies and strategies; and (v) engaged in discussions with its partners to finance the improvement of land, port, and airport facilities. This contributes to support four of the five pillars of the PRSP-2: (i) accelerate growth; (ii) develop human resources and generalize access to basic social services; (iii) strengthen good governance and capacity building; and (iv) reinforce monitoring, evaluation, and coordination. 4. The transport sector in Mauritania has been plagued by numerous institutional problems and deteriorating infrastructure, all of which combine to impede competitive and efficient transport services. There is a general consensus that poor quality and unreliable and costly transport has constrained economic growth, hampered delivery of social services, and slowed efforts at national integration. A holistic and coherent transport sector strategy has not yet been formulated, although sub-sector strategies (land transport, maritime, and civil aviation) have been completed. However, the Bank-financed National Transport Sector (Multimodal) Strategy 1

10 Study and an EU-funded Road Management and Investment Program Study have identified numerous structural problems: institutional (lack of capacity and weak institutionshnadequate institutional arrangements) and physical (deteriorating infrastructures due to insufficient maintenance). Institutionally, most sub-sectors are still characterized by persistent structural and regulatory problems. Until 2007, transport sector management functions were divided up among several ministries and directorates, resulting in lack of coordination for sector planning and management. (a) Land transport sub-sector. The road sub-sector is characterized by a persistent imbalance between constructionhehabilitation and maintenance funds. As a result, sections of the country s core road network are in poor or bad condition. While road maintenance resources have increased since 2002, existing mechanisms for securing longer-term funding are inadequate. The current road classification system is outdated (it is based on a 1968 law) and responsibilities for network management remain unclear. Although rural roads constitute more than two-thirds of the entire network, there has been so far no overall strategy to improve rural access, and many agricultural production areas lack all-weather links to the main network and marketing outlets. Transport services were liberalized in 2006, which led to reduced transport costs (more than 30 percent). (b) Air transport sub-sector. The runways, taxiways, and apron surfaces at Nouakchott and Nouadhibou Airports are in a badly deteriorating state and require immediate intervention. Air transport services are dominated by the current liquidation of the former carrier (Air Mauritanie) and the emergence of a new company (Mauritania Airways) combined with an unclear picture of the exact level of demand given the ups and downs of carriers in Mauritania. Other civil aviation issues include: (i) unclear institutional framework; (ii) weak institutional administrative and financial capacity; (iii) deficiencies in security and safety at the country s main airports; and (iv) inability of the Mauritanian Airports Society (Socie te des Ae roports de Mauritanie [SAMV to finance required infrastructure investments, particularly in safety and security. Finally, the recently created ANAC operates in an ambiguous legal environment and still lacks the capacity to fulfill its mission of ensuring operators compliance with international safety and security standards. (c) Maritime transport sub-sector. The Port of Nouakchott is facing berth capacity and draft limitations to meet its growing traffic (especially containers), while the Port of Nouadhibou (whose wharfs are dedicated to mining, petroleum, and fishing) is facing negative traffic growth due in part to competition from the Canary Islands, depletion of fish stocks, and changes in fishhandling regulations. Until 2007, the control and management of the two main ports (Nouakchott and Nouadhibou) were under the oversight of different ministries, while operations at the mineral pier at Nouadhibou Port were under the supervision of a third ministry. Finally, maritime transport is confronted with the inability of the current port management system to finance its infrastructure growth, though public-private partnership (PPP) prospects exist given the sector s economic and financial potential, especially in Nouakchott. 5. Country context and sector issues are more precisely assessed in Annex 1. 2

11 2. Rationale for Bank Involvement 6. The Bank s Country Assistance Strategy. The new CAS (FY07-11) supports the PRSP-2 and focuses on: (i) economic governance and public sector capacity; (ii) diversified growth through investment climate improvement, and possibly key enabling infrastructure through International Bank for Reconstruction and Development (IBRD) enclave operations; and (iii) continued efforts to fight poverty and inequalities in both urban and rural areas. Consequently, the proposed operation will respond to the improvement of transport sector reforms and management, one of the priority areas identified for International Development Association s (IDA S) intervention. 7. The last World Bank-financed project in Mauritania s transport sector was completed in Since then, many donors have actively contributed to the sector, particularly the European Union (EU) in the road sector, with Spain, Arabic donors, Islamic Development Bank (IDB), and China in the port sector. The economic sector work carried out in 2004l, which highlighted the capacity and institutional issues as critical to the sector sustainability, has helped reopen a dialogue with the government on the transport sector and provided an analytical foundation for developing a transport sector operation comprising sector reform support and road investment. A concept review meeting for a proposed transport sector project was held on January 19, However, given the drop in the country s International Development Association Fourteenth Replenishment (IDA- 14) and prospective International Development Association Fifteenth Replenishment (IDA-15) allocation, the scope and description of the project changed, which led to the proposed Transport Sector Institutional Development Technical Assistance Project (TSIDTAP) operation in recognition of the need for institutional reforms, which remains high regardless of infrastructure lending. World Bank involvement is, therefore, considered extremely desirable. 8. Using the Bank s competitive advantage, the proposed operation will serve as an instrument toward building a sustainable partnership and fostering coordination in sector interventions to achieve greater efficiency and effectiveness in the Mauritanian transport sector. It will provide Mauritania with a platform to maintain collaboration with development partners and sustain the ongoing productive dialogue in the transport sector. In addition, the Bank s support will complement EU and African Development Bank (AfDB) support, as well as support from IDB and Arabic states, which is currently largely focused on investment projects. However, the EU has allocated a 2.2 million Euros grant to Mauritania under the gth European Development Fund (EDF), to support institutional reforms in the road sector comprising road maintenance management and financing and land transport services reforms. Large amounts of funding are also dedicated to road rehabilitation and maintenance. The road transport sector also constitutes a concentration area under the IOth EDF and should therefore continue to benefit from institutional support for funding. 9. The proposed operation would complement other planned World Bank Group supports to GoM as part of the implementation of its policy, namely: (i) a Mauritania component of the regional West and Central Africa Air Transport Safety and Security Project, which will tackle institutional support to the civil aviation sector and reinforce the sector in safety- and security- Islamic Republic of Mauritania, Transport Sector Overview, Report No dated September

12 related equipment; and (ii) a Port of Nouakchott development project, which will complement the government and China s funding to develop the port while addressing the substantial environment issues related to its initial construction. 10. In consistence with the government policy planned under the proposed project, the government may benefit from funding from the Bank-executed Africa Catalytic Growth Fund (ACGF) to complement funding of the priority road network linking Mauritania to its neighbors in coordination with Arabic Donors and the EU. 3. Higher-Level Objectives to which the Project Contributes 11. The project will contribute to the following objectives outlined in the country s second Poverty Reduction Strategy Paper (PRSP-2): (i) accelerate growth; (ii) develop human resources and generalize access to basic social services; (iii) strengthen good governance and capacity building; and (iv) reinforce monitoring, evaluation, and coordination. The project will also contribute to build capacity for Mauritania to better handle the regional integration agenda with regard to the transport sector. B. PROJECT DESCRIPTION 1. Lending Instrument 12. The project will be financed under a technical assistance loan (TAL), which has been selected as the most appropriate instrument. 2. Project Development Objective and Key Indicators 13. The primary project objective is to improve land, maritime, and air transport sector management, 14. The key indicators to monitor and measure the impact of the objectives are given in Annex 3 and are focused mainly on: (i) the adoption of a letter of sector policy; (ii) the definition and adoption of a road safety strategy; (iii) the introduction of a road safety curricula in pilot primary schools; (iv) the update of Merchant Shipping Code and Regulations, including ISPS code provisions; and (v) the update of the civil aviation code. 3. Project Components 15. The project will support the government to update the National Transport Strategy, which was adopted in 1998 as the National Transport Plan (NTP), and to issue a new transport sector policy document. The document will be drafted by the government, with the support of an external consultant, in consistency with the findings of: (i) a Bank-financed multi-modal transport sector strategy study; and (ii) an EU-funded road transport strategy, including road financing and management, both completed in TSIDTAP is designed to support GoM to: (i) carry out institutional reforms; (ii) strengthen its coordination role, and (iii) promote public-private partnerships (PPPs) in transport 4

13 sector infrastructure development. The TSIDTAP will have four components, as described below, and would be financed with (i) the proposed credit of US$4.5 million equivalent, with an additional government s contribution of US$ 1 million. The proposed credit comprises activities for US$ million, an advance already provided for the preparation of the Project of US$1.188 million, and US$0.320 million for price contingencies. Component 1-Institutional Support and Capacity-Building for the Land Transport Subsector (US$1.727 million, including US$1.07 million from IDA) 17. Under this component, a special emphasis will be put on, but not limited to, the newly created Directorate General of Land Transport with a focus on road safety preventiodmanagement, through: (i) institutional capacity-building (with support to road safety directorate); (ii) road safety situation assessment and implementation of a pilot monitoring and evaluation (M&E) system in Nouakchott; (iii) launch of a sensitization campaign; (iv) development of a road safety introduction book for primary education; (v) purchase of equipment for an experimental road safety education base; and (vi) purchase of road signs for strategic points in Nouakchott. This component will also, through the road safety education base, enable the set up of a Road Safety Promotion Association in Mauritania, which would be able to ensure sustainability of sensitization activities. Under this component, the Bank will also ensure technical oversight of two studies relative to: (i) organization and bankability conditions; and (ii) the assessment of dysfunction costs in urban transport sub-sector, which will be financed by EU. Component 2-Support to Institutional and Technical Capacity-Building for the Maritime Transport Sub-sector (US$1.122 million, including US$1.02 million from IDA) 18. The component will support GoM s efforts in reorganizing the sub-sector, through capacity building for the newly created DMM and CECAM. Part of this component s funding will also be used to develop and implement an information system for Nouadhibou Port. The legal and regulatory framework will be improved, with the update of Merchant Shipping Code and Regulations. Component 3-Support to Air Transport System Reorganization and Technical Capacitybuilding (US$0.715 million, including US$0.65 million from IDA) 19. The component will support GoM s efforts to set up a development program for Mauritanian airports by funding a master plan for the development of airports, including a detailed development plan and an investment plan for Nouakchott Airport. It will also support the update of the current aging (more than 30 years) civil aviation code. This component will complement the Mauritanian component of the West and Central Africa Air Transport Safety and Security Project (WCAATSSP), to support the efforts of the GoM in terms of air safety and security. Component 4-Support to the Ministry s Coordination Role and Project Activities Coordination (US$1.584 million, including US$1.44 million from IDA) 20. Given that GoM recently consolidated its transport sector management institutions under the MT, this component will support capacity building of the new institutions to ensure 5

14 efficiency, taking into consideration the need for multimodal coordination. It will also reinforce the overall transport sector planning unit within the Ministry. 4. Lessons Learned and Reflected in the Project Design 21. Further to the recommendations of the economic sector work (ESW) carried out in 2004, the Bank has financed the Multimodal Transport Sector Study, through its ongoing financing of the Urban Development Project (Cr MAU), to integrate the findings of the EU-financed road sector study into a broader strategic vision for managing the country s transport sector. The results of this study can be summarized by the following points: (i) institutional organization for the port sector was largely fragmented, which led to uncoordinated policies; (ii) regulatory framework for both air and maritime transport sectors is not adapted or incomplete; (iii) there are many infrastructure development projects whereas there is no global framework, which often creates a lack of coherence among the different projects; (iv) the competitiveness of operators is reduced, due to costs higher than anywhere else in the region; (v) human resources are poorly managed; and (vi) information systems are largely underdeveloped. This study served as a base to determine the issues that the Mauritanian transport sector had to deal with and the actions that had to be taken to face these issues. 22. In response, the government took a number of concrete steps in 2004 to address institutional problems, notably: (i) the issuance of a joint declaration from the Ministers of Public Works and Finance, which affirmed the government s intention to liberalize the road transport industry, and put forth an action plan of initial tasks to be achieved by the end of 2005; (ii) the enactment in 2005 of a law dealing with the orientation and organization of road transport on a free competition basis; (iii) the creation of ANAC, which replaces the former Civil Aviation Directorate; (iv) the completion of several studies on ports management; (v) the creation of a Directorate of Studies, Planning, and Cooperation in the Ministry of Equipment and Transport (MET), which will coordinate formulation and implementation of sector policies and strategies. In 2007, an MT, which oversees all ports, was also created, as well as a Land Transport General Directorate (DGTT), a Merchant Shipping Directorate (DMM), and a Road Infrastructure Directorate (DIR). 23. Based on these reforms, the project was designed to support the GoM in reorganizing the transport sector. It was especially designed to help strengthen the newly created agencies, so as to improve transport sector management efficiency. 5. Alternatives Considered and Reasons for Rejection 24. The project was initially designed to: (i) support transport sector management and institutional reforms; and (ii) help finance some physical investments to improve Mauritanian transport infrastructures. However, given the drop in the country s IDA-14 and prospective IDA- 15 allocation, the investment part was no longer possible to fund, which led to TSIDTAP in recognition of the need for institutional reforms, which remains high regardless of infrastructure lending. 25. It was originally intended to secure a part of the available funding for the purchase of specific security and safety equipment for Mauritanian airports. However, the project team has 6

15 taken advantage of the preparation of the third phase of the WCAATSSP to add Mauritania to the list of selected countries for this third phase. All activities dealing with security and safety (equipment, specific training, and design of security plans) were transferred to the WCAATSSP, and the TSIDTAP civil aviation component was redesigned to focus on strategy definition and implementation. C. IMPLEMENTATION 1. Partnership Arrangements (if applicable) 26. The Bank has liaised with the European Commission to complement sector strategies, and tailor its support to complement the EU institutional support. Given the small size of the project, the Bank has not looked for pooled funding, but has taken the opportunity to strengthen the partnership with EU. In this regard, EU has agreed that the Bank ensure the technical oversight of the urban transport sub-component under the land transport reforms project funded through the gth EDF. EU will tackle the urban transport issues by carrying out two main studies to bridge the knowledge gap in this area. As far as road safety is concerned, EU will provide support to implement the road safety strategy at national level, while the Bank will focus on the capital city of Nouakchott to pilot a road accidents monitoring and evaluation system. This project will build up a solid platform for the Bank to remain fully involved in donors coordination, to keep an intensive and productive sector dialogue with the government. Close links have also been maintained with AfDB during project preparation. 27. Collaboration with China is also planned under the Port of Nouakchott Development Project. 28. This coordination will be reinforced under the supervision of GoM, which has decided to organize, every semester, a sector review meeting including all donors involved in the sector, including donors of the Arab world. 2. Institutional and Implementation Arrangements 29. Details of project implementation arrangements are provided in Annex 6, while the financial and disbursement arrangements are detailed in Annex 7, and procurement arrangements in Annex The project will be managed by the Directorate of Studies, Planning, and Cooperation (DEPC) within the MT. The DEPC will constitute a project coordination team to implement the project, comprising inter alia a procurement specialist and a financial and accounting staff that will be responsible for financial management and coordinate project accounting, maintain overall records, and manage disbursements of the project. Each beneficiary of the project (DGTT, ANAC, SAM, DMM, and CECAM) will be responsible for the technical implementation of any activities in its respective components but these structures will not have financial management responsibility The MT will be responsible for providing overall project strategic guidance and oversight for the project. The general secretary of the MT shall meet with the project coordination team 7

16 and the agencies benefiting from the project, to review the progress in the implementation of the project. 3. Monitoring and Evaluation of Outcomes/Results 32. The results chain for results monitoring, which will be used as a basis for M&E, can be found in Annex As the DEPC has the mandate to collect and monitor sector performance, it is well placed to undertake the M&E oversight of the project. Also, as this mission falls into its overall coordination role, there will be no M&E budget issue, because the M&E-specific tasks will be carried out within the frame of DEPC s regular activities. The indicators of a technical assistance project as selected and described in Annex 3 also do not require surveys or specific skills that would require external resources. 34. The World Bank supports the development and the joint implementation, together with the government, of a common portfolio monitoring and performance measurement process. These tools will be included in an online system, in which data are supposed to be filled in by implementing agencies, which should reinforce the M&E strength and ownership of the government, and facilitate the Bank s supervision as well as the government s M&E ownership. 4. Sustainability 35. No Bank-financed project has been undertaken in the transport sector for 10 years. However, learning from past experiences in similar countries, the critical factor required for sustainability of the proposed project benefits is a constant government commitment to define and then apply a consistent framework for its transport sector policy. Mitigation measures have been proposed (see paragraph below). Besides, the project will strengthen the agencies capacity to guarantee accountability and transparency, which should lead to long-term sustainability. 5. Critical Risks and Possible Controversial Aspects 36. The main risks specifically raised by the project are listed below. Concerning overall country-level risks, Mauritania has shown strong improvements in terms of macroeconomic framework, governance, and corruption. The main residual concern is linked with the population s strong ethno-tribal linkages, which means that the population s reliance on public administration is weak, and that most rely on a strong traditional system of social safety nets. However, this may change if the new government s strategic vision is followed by concrete implementation measures. (a) Implementation delay (rating: moderate): Weak capacity of public agencies in charge of project implementation could delay the project implementation timeframe. To reduce the risk of time delays: (i) the project team and the government have worked to have all key terms of reference ready by appraisal, and procurement processes launched during appraisal; and (ii) a realistic timeframe for project implementation will be combined with close supervision by the 8

17 Bank team (biannual supervision), and quarterly portfolio monitoring (at the country office level) to mitigate the risk. (3) Project management (rating: substantial to high): After considering several options, the team has opted to anchor project management in the newly created DEPC. This has emphasized the project fiduciary and management risks, stemming from the mainstreaming option, that delegate project management to the DEPC. Although this directorate is a logical choice because it is mandated to assure strategic planning and management for the ministry and has an experienced director, it is a new and untested entity and may not be fully accepted in this role by other well-established directorates. However, a favorable track record was registered during project preparation. To keep on this track and ensure that risk is properly mitigated, the project will provide material assistance and recruitment of personnel for project implementation in the DEPC, as well as resources to establish a procurement and financial management unit within the DEPC. (c) Procurement issues (rating: high): No procurement in accordance with the Bank s procurement and consultants guidelines has been undertaken by the MT for many years, but operations of the Project Preparation Facility (PPF) have been successfully managed by the implementing entity, whose head is familiar with the Bank s procurement rules. Besides, a procurement specialist in the implementation unit of the project will be recruited within three months from project effectiveness and the team will closely supervise the activities. Project governance will also be established through strict implementation scheme and procedures (a manual of procedures is being prepared by the DEPC and will be approved by the Bank before effectiveness). (d) Financial management (rating: substantial): There is very little experience of Bank financial management procedures in Mauritania. To mitigate this risk, in addition to the financial management specialist (recruited under PPF funding), an accountant will be recruited within the DEPC. (e) Reversal in government commitment to reform (rating: low): Due to limited funding offered by the project, there is a risk that stated governmental commitment to reforms is not sustained during the course of the project. However, the government has already agreed and started to implement most of the institutional reforms in the road transport sector with EU support. In addition, successful implementation of the proposed TSIDTAP operation could be used as a lending conditionality for further investments support. 37. A summary of sector- and operation-related risks, as well as mitigation measures associated, can be found in Table 1. 9

18 Risk factors rechnicalhlesign Implementation Capacity and Sustainability Table 1: Critical Risks and Mitination Measures Description of risk The reforms agenda includes sensitive areas such as marine services, which require a comprehensive understanding of sector issues. Weak capacity of public agencies in charge of project implementation could delay the project implementation time frame. Project fiduciary risks stemming from the mainstreaming option to delegate project management to the Directorate of Economic Planning and Cooperation. Rating of risk moderate high substantial Mitigation measures The current government team is dedicated to reforms at director level. The project will supply training, especially in the maritime sector, which will reinforce the administration s strength in case of changes within teams. A realistic timeframe for project implementation will be combined with close supervision by the Bank team, through quarterly portfolio monitoring and review to mitigate the risk. The new director is familiar with Bank procurement guidelines and the project will provide material assistance and support recruitment of competent staff to assist the implementation agency (DEPC) in fiduciary. A favorable track record has been registered during project preparation. The project will also provide resources to strengthen procurement and financial management capabilities. Rating of residual risk low moderate moderate Financial management Inherent financial management: Funds may not be used in an efficient and economical way and exclusively for purposes intended due to poor governance. substantial The team of appropriately qualified and experienced staff may reduce this risk. An adequate administrative, accounting, and financial management manual will guide activities and provide safeguard over assets. moderate Financial management control risks: Lack of clear segregation of functions inherent to the limited staff. substantial An accountant with TOR and condition acceptable for the IDA will be recruited prior to effectiveness to ensure appropriate segregation of duties. moderate Financial reporting delays in the submission of agreed IFRs and annual project financial statements. substantial Agreement will be reach on the IFRs format and content prior to the negotiation of the project, and a project FM team will be trained before and during the six months following the effectiveness. moderate External Audits substantial The government will appoint moderate 10

19 Risk factors Description of risk Supreme Audit Institution has limited capacity. Quality of the project audit reports not to be acceptable. Rating of risk Mitigation measures qualified independent external auditors. Rating of residual risk Procurement No WB procurement has been undertaken by the MT for many years, but activities of the PPF have been satisfactorily undertaken by the implementing entity, whose head is familiar with WB procurement. high Recruitment of procurement specialist in the implementation unit of project within three months after the project is effective and close supervision both by the procurement team and the TTL (based in Dakar). Project governance will be established through strict implementation scheme and procedures (manual of procedures elaborated and approved by the Bank before the negotiations). moderate Social and environmental safeguards No specific issues linked to this technical assistance project. NIA Other Delays in the EU program implementation may limit the government s interest for the road transport sub-sector reforms. moderate Although EU and GoM have signed an agreement of 2.2 million Euros under the 9* EDF for road sector and land transport services reforms, the Bank will maintain the dialogue and the collaborative approach put in place with EU to monitor EU program implementation progress and ensure overall aid effectiveness. low Reversal in government s commitment to reform, possibly due to limited funding. moderate The government has already agreed and started to implement most of the institutional reforms in the transport sector with EU support or on its own initiative. In addition, successful implementation of the proposed TSIDTAP operation could be used as a lending conditionality for further investments support. low Overall Risk (including Reputational Risks) Beside an unlikely reversal in GoM s willingness to reform or some relatively minor technical risks, the overall risk for this project seems to come from three substantial 1, The Bank will ensure close moderate supervision of involved agencies and help to support them, by recruiting competent staff andor providing them with resources or material assistance. 11

20 Risk factors Description of risk main points: (i) Project implementation involves newly created agencies, whose skills and efficiency are difficult to evaluate at the moment and may cause delays and problems in the future. (ii)the Bank s limited funding and delays that occurred during EU s program implementation may lead government to lower interest in facing truly decisive challenges relative to the sector reform. (iii) The Bank has not executed projects in the sector for many years, which may cause problems for financial management and procurement measures. Rating of risk Mitigation measures The Bank will ensure that the government includes the project in a broader spectrum, both within its regular transport portfolio management and by enhancing collaboration with other donors. The Bank will closely supervise the procurement process and provide technical assistance in financial management if necessary. Rating of residual risk 6. LoanKredit Conditions and Covenants Conditions Conditions of Effectiveness: 1. Adopt a Project Implementation Manual (administrative, accounting, and financial management procedures) acceptable to IDA 2. Recruit an accountant on TORS acceptable to IDA 3. Allocation of 100,000 US$ equivalent in counterpart funding Covenants applicable to project implementation: 1. Recruitment of a procurement specialist (three months after effective date). 2. Training of a project financial management team (six months after effective date). 3. Recruitment of external auditor for the project (six months after effective date). By who(m) DEPC DEPC Ministry of Finance D. APPRAISAL SUMMARY 1. Economic and Financial Analyses 38. Because this is a technical assistance project, an economic and financial analysis would not be useful to assess whether it should be undertaken or not. It can be forecast that reforms carried out in this operation will have long-term positive economic and financial impacts on Mauritanian transport sector, but a quantitative analysis would have limited signification. 12

21 2. Technical 39. As no physical investment is involved in this project, no crucial technical issues arise. However, reforms include sensitive areas such as marine services, road safety, and air transport, all of which require a comprehensive understanding of sector issues. That is why the project will support training, especially in the maritime sector, and the organization of awareness campaigns in road safety, and monitor knowledge-raising studies in general. 3. Fiduciary 40. The Country Financial Accountability Assessment (CFAA) carried out in November 2002 revealed that the systems for planning, budgeting, monitoring, and controlling public resources in Mauritania are improving but do not provide sufficient reasonable assurance that funds are being used for their intended purpose. The risk of waste, diversion, and misuse of funds was assessed as partially high. As the CFAA recommendations on financial accountability reforms have not been fully implemented yet, the country risk is still assessed as partially high. 41. Consequently, various measures to mitigate these risks have been taken and thus the project risk from a financial management perspective is assessed as substantial before considering the risk-mitigation measures. Therefore, financial management arrangements are designed to ensure that funds are used for the purpose intended, timely information is produced for project management and government oversight, and to facilitate compliance with Bank fiduciary requirements. Actions outlined in the Financial Management Action Plan will be undertaken to strengthen the financial management system. 42. A financial management assessment of the DPEC was done in February 2008 and the results showed that the overall risk rating of the implementing unit was moderate, which satisfied the Bank s minimum requirements under OP/BP10.02 and therefore is adequate to provide, with reasonable assurance, accurate and timely financial management information on the status of the project required by the World Bank. 43. In terms of procurement implementation of the project, the appraisal concluded that the risk linked to the project was substantial, as no procurement in accordance with the World Bank Procurement and Consultants Guidelines has been undertaken by MT for many years. However, operations of the PPF have been successfully managed by the implementing entity, whose head is familiar with the Bank s procurement rules. Besides, a procurement specialist in the implementation unit of the project will be recruited within three months from project. Project governance will also be established through strict implementation scheme and procedures. The reinforced DEPC is therefore considered to meet appropriate standards for implementation. 4. Social 44. The main social improvement is expected to come from the road safety campaign that will be part of the project. At the moment, Mauritania does not have reliable tools for collection and analysis of road accidents data, and the few data available show that more and more 13

22 accidents take place in Nouakchott every year. Even if the results cannot be expected to be significant from the start, the project will lay the groundwork for positive long-term effects in terms of road safety. 45. The project will thus address the design and editing of a school manual aimed at introducing road safety promotion at the primary school level, which should pave the way for new behaviors in terms of road safety. 5. Environment 46. Because the project will not finance any physical investment, no environmental and social safeguard policies are triggered. However, the project offers a number of valuable opportunities to strengthen environmental management capacity in major infrastructure sectors. A key positive environmental outcome of this project is that it will provide training to the staff of the newly created DEPC. The proposed project category is Cy and safeguard responsibilities are transferred to the sector unit. 6. Safeguard Policies Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OPBP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) X X X X X X X X X X 7. Policy Exceptions and Readiness 47. No policy exceptions are required for this project. 14

23 Annex 1: Country and Sector or Program Background Transport Sector Institutional Development and Technical Assistance Project A. Transport Sector Overview Land Transport 1. The total length of the road network is 10,297 km, including national roads, regional roads, and local roads (see table below). This network is divided in paved roads, earth roads, and rural roads. Because of its large desert area, Mauritania s road density ratio is only 1.0 km of road per 100 km2 of territory compared with average ratios of 3.10 for West Africa and 4.70 for Sub-Saharan Africa (SSA). In terms of road-to-population density, however, Mauritania has one of the highest densities in Africa (13 km per 10,000 people, compared to 2.71 km for SSA). Seventy percent of the paved road network is in good or fair condition, which is higher than the average in Western Africa, whereas the earth roads are generally in poor condition. (Length in km) National Regional Local Total Paved road Earth road Rural road Total 1, ,684 4, , ,404 3,639 2, ,OO 1 10, Based on official figures, the number of vehicles has risen from 12,620 in 1998 to more than 25,000 in 2005, which represents an annual growth higher than 10 percent. Road Safety 3. National reports show that an estimated 138* people a year are killed in accidents on national roads, as well as about 503 people a year in Nouakchott. It has been reported that during the last five years, the fleet has increased by 16 to 20 percent, the occurrence of accidents by 15 to 20 percent, and the number of casualties increased as well around 25 to 30 percent. Beside the human tragedy, it obviously has a huge economic impact; unfortunately, no accurate economic evaluation is yet available. 4. Reasons for accidents (using the average percentage for the whole sub-region) are given in the table below4: Human error 30 percent Disfunction of vehicles 25 percent - Animals 20 percent Deteriorated roads 15 percent Bad weather conditions 10 Dercent 2007 value value. Road safety action plan for (June 2006). 15

24 5. Based on these issues, the Government of Mauritania (GoM) established a road safety improvement strategy in June 2006, based on the following axes: (i) institutional support: creation of the Road Safety Directorate (DSR) and of a road safety committee to design governmental policy in terms of road safety; (ii) regulatory framework: adoption of a national traffic regulations code, laws to reorganize driving license exams, adoption of speed limits in urban areas, and reorganization of drivers training tenters; (iii) sensitization and prevention; (iv) control and fines: creation of technical control centers; (v) supporting measures: development of databases, DSR staff training. Air Sector 6. The airport network in Mauritania is made up of 10 airports and 7 airfields. Three airports (Nouakchott, Nouadhibou, and Atar) are classified as international airports, while the other 7 airports handle only domestic operations. 7. Traffic at Mauritania s airports has been declining in the past 10 years. The number of passengers from the two largest airports in Nouakchott and Nouadhibou is given in the table below. The decline in traffic during the 1990s is not only a Mauritanian phenomenon, but Nouakchott and Nouadhibou passenger traffic growth lagged during this period behind that of most other West African airports. Passenger traffic at these two airports was severely affected by the demise of Air Afrique and poor performance by the national carrier. The other airports in Mauritania handle about 40,000 passengers per year, with Atar airport representing about threequarters of this total as it accommodates a growing number of tourist charter flights. Table 1: Passenger Traffic at Nouakchott and Noudhibou Airports Year Number of passengers (x1000) Maritime Sector 8. Mauritania has two main ports, the main one in Nouakchott and the other in Nouadhibou. Overall port traffic, excluding oil and mineral traffic, has grown slowly but steadily in the past couple of years. Combined traffic at Nouakchott and Nouadhibou ports grew from 1.27 million tons in 1998 to 2.23 million tons in 2005; however, this masks stark differences between both ports. In Nouadhibou, between 1991 and 2005, traffic decreased at an average annual growth rate of -4.0 percent, whereas in Nouakchott, total traffic grew from 843,000 tons to 1,820,000 tons, at an average annual rate of 8 percent in recent years (see figure below). Meanwhile, the share of container traffic in Nouakchott went from 21 percent in 1995 to 28 percent in

25 Table 2: Nouakchott Historic Port Traffic Data (in metric tons) t-l Management and ownership of port infrastructure in Mauritania is fragmented among several ministries, port authorities, and private operators. For the port of Nouakchott, Port Autonome de Nouakchott-Port de I'Amitie' (PANPA) is the port authority, and the Ministry of Transport (MT) oversees its operations. Likewise, stevedoring activities are provided by several private operators under a single company (the Port Facilities Company). For the port of Nouadhibou, Port Autonome de Nouadhibou (PAN) is the port authority, and the Ministry of Fisheries oversees its operations. As with Nouakchott, stevedoring services are provided at the port by private operators such as Mauritania Handling and Stevedoring Company (SAMMA) or Manutention Transport (Handling and Transport [MANUPORT]). Additionally, the National Industrial and Mining Company (SNIM) operates the mineral terminal under the supervision of the Ministry of Petroleum and Mining, and operates the fuel terminal under the supervision of the Ministry of Hydraulic and Energy. Finally, only one private operator (Mashref) provides ship repair services, mainly for fishing boats, at two floating docks with capacities of 1,000 and 300 tons. B. Sector Issues 10. The National Transport Strategy was adopted in 1998 as the National Transport Plan (NTP), and there is therefore a need to issue a transport sector policy document. It will be drafted in consistency with the findings of: (i) sector analytical work undertaken by GoM; and (ii) GoM's assessment of NTP at midterm in This review revealed that its implementation did not focus enough on poverty reduction, while the investment program focused only on road infrastructure, and the institutional reforms were insufficient to meet the plan's strategic 5 Data from the multimodal study. 17

26 objectives. At the same time, the Bank prepared an economic sector work (ESW) in early 2004, which provides a framework for analyzing current transport sector issues, and identifies issues and challenges that can be addressed through international lending operations The ESW concluded that the transport sector has been plagued by numerous institutional problems and deteriorating infrastructure, all of which combine to impede competitive and efficient transport services. There is a general consensus that poor quality, unreliable, and costly transport has constrained economic growth, hampered delivery of social services, and slowed efforts at national integration. 12. In the road sector, there has been an imbalance of funds available for new road construction over rehabilitation and maintenance. As a result, sections of the country's main road system are declining rapidly. While road maintenance resources have increased since 2002, longer-term secure funding to cover the overall network remains problematic. The present road classification system dates from the 1960s and responsibilities for network management remain unclear. Although rural roads constitute more than two-thirds of the entire network, there has been no overall strategy for improving rural access, and many productive areas suffer from lack of all weather links to the main network and marketing outlets. 13. In the air transport sector, although the government intends to build a new international airport for Nouakchott within the next 10 years, the runways, taxiways, and apron surfaces of Nouakchott and Nouadhibou Airports are in a badly deteriorating state and require immediate intervention. In addition, Atar Airport has been opened to international traffic and in general, security measures at all airports are considered inadequate with regard to the minimum requirements of International Civil Aviation Organization (ICAO) standard security measures (obsolete security equipment, lack of comprehensive training and security plan). Safety oversight of airlines by the National Civil Aviation Agency (ANAC) is inadequate due to lack of trained staff and unfinished regulations As far as services are concerned, Air Mauritanie, privatized in the late 1990s, is under liquidation, and a new operator (Mauritania Airways) has recently started. However, the trends in traffic in Mauritania are difficult to analyze given that the traditional demand forecasts are blurred by the inconsistencies of the supply side. 15. In the maritime sector, the Port of Nouakchott is facing wharf capacity and draft limitations to meet its growing container traffic, while the Port of Nouadhibou (which has dedicated wharfs for mining, petroleum, and fishing) is facing negative traffic growth due in part to competition from the Canary Islands, depletion of fish stocks, and changes in fish-handling regulations. Because the Port of Nouakchott does not operate at night, the growing potential to export fruits and vegetables grown in the Senegal River Valley (supported by the Bank-financed rural development project, Down Manantali Irrigation Development Program [PDIAM]) is now diverted to Dakar. 6 These issues will'mostly be tackled through the Mauritania component of the WCAATSSP. 18

27 16. The ESW also found that initiatives aimed at sector institutional reform have not brought about the objectives of more competitive and safer transport services, due to persistent structural and regulatory problems in each sub-sector. In particular: a a a A de facto monopolistic control over the trucking industry had stifled professional service development and resulted in high road transport costs and ineffective fiscal policies and tax-collection procedures. The Airports Authority was unable to generate enough revenue to self-finance urgent safety and security infrastructure needs, in large part because its shareholding structure impedes its ability to collect revenues from airport users. At the same time, the Civil Aviation Directorate has been unable to fulfill its mission of ensuring compliance with safety and security guidelines because of lack of independence from government authorities. The maritime sector was characterized by fragmented ownership, and management of the two main ports at Nouakchott and Nouadhibou is under different ministries, while operations at the mineral quay in Nouadhibou are overseen by a third ministry. 17. The ESW outlined a number of sector-specific actions to correct the most serious deficiencies identified in its analysis, some of which will involve longer-term reform, but some of which may be initially addressed in the near term. These may be summarized as: e a a a Land Transport: (i) correct the imbalance between investment and maintenance; (ii) improve maintenance-financing mechanisms; (iii) carry out a balanced road investment program; (iv) strengthen road management; (v) revisit existing regulations to ensure effective liberalization of transport services; (vi) review fiscal policy and tax-collection procedures in the sector; (vii) improve balance between transport supply and demand; and (viii) support modernization of the trucking industry. Air Transport: (i) strengthen ANAC to make it administratively and financially independent; (ii) carry out emergency rehabilitation work on the airstrips at Nouakchott and Nouadhibou airports; (iii) raise airport security at Nouakchott, Nouadhibou, and other airports to international standards; and (iv) take action to improve airport management. Maritime Transport: (i) unify port administration oversight; (ii) identify true port operational costs; and (iii) reduce stevedoring and port services charges. Institutional Capacity: (i) increase financial and human resources in the sector; and (ii) strengthen monitoring and control of the budget process. C. Government Initiatives 18. The above recommendations were validated at a national workshop held in Nouakchott in June As a result, the government has taken a number of concrete steps to address institutional problems, notably: (i) liberalization of the road transport industry in 2005 (November 10, 2005 decree); (ii) creation of ANAC, which replaces the former Civil Aviation Directorate in 2004; (iii) completion of sectoral studies in transport (road transport strategy and multimodal transport strategy) for which findings/conclusions were adopted at a national workshop on this subject in February 2007; and (iv) creation of a Directorate of Studies, 19

28 Planning, and Cooperation (DEPC) in the Ministry of Transport (MT), which will coordinate formulation and implementation of sector policies and strategies. D. Donor Support 19. Donors in the sector have welcomed and are supporting the government s initiatives. In particular, the European Union (EU) has been the principal donor in the road sector over the last 10 years, and although its past intervention focused mainly on investment, it has now committed itself to take the lead role in supporting institutional reform in the road transport sector. This will complement its continuing investment program, which focuses on main highway construction and rehabilitation. The EU proposes to back this engagement by conditioning its budget support program on the achievement of the road transport sector institutional reforms, as outlined in the ESW and further detailed in the upcoming EU-funded road sector study. Further, the EU has mobilized technical assistance since February 2008 to assist the government in implementing the short-term action plan for road maintenance management/financing and land transport reforms. The African Development Bank (AmB) has joined with the EU in upgrading a key trunk road in the Senegal River Valley (Rosso-Boghe), but has also conditioned its investment assistance on the achievement of a specific study for the establishment of a road maintenance fund. 20

29 Annex 2: Major Related Projects Financed by the Bank and/or Other Agencies Transport Sector Institutional Development and Technical Assistance Project A. Bank Projects 1. Although the Bank has not supported any project in the Mauritanian transport sector for more than a decade, several projects can be related to the Transport Sector Institutional Development and Technical Assistance Project (TSIDTAP). 2. The Bank s past assistance for public sector development in Mauritania over the last decade has focused on public enterprise reform and capacity building: Private Enterprise Sector Adjustment Project (Cr MR, 1990), Public Enterprise Sector Institutional Development and Technical Assistance Project (Cr MR 1990), and Private Sector Development Capacity-Building Project (Cr MR, 1994). Under those operations, the Bank assisted Mauritania to: (i) improve the legal and institutional framework for the public enterprise sector; (ii) reduce the role of the state in the economy, through divestiture and elimination of state monopolies; (iii) restructure key enterprises such as National Industrial and Mining Company (SNIM) and Mauritania s National Airline (Air Mauritanie), which was eventually privatized in 2000; (iv) improve the quality of port services; (v) develop telecommunication services; and (vi) elaborate and implement policy and regulatory reforms in the financial, legal, mining, and fisheries sectors to promote private sector development. 3. A similar sector technical assistance project, the Energy/Water/Sanitation Sector Reform Technical Assistance Project (Cr MR) in the amount of approximately US$10.9 million equivalent, which was fully disbursed, closed on December 3 1, The development objective was twofold: (i) restructuring the legal and institutional framework of the energy sector to create an environment for private sector participation; and (ii) preparing future investment in the energy sector. The principal performance ratings were unsatisfactory in all areas including: outcome, sustainability, and World Bank and borrower performance. In fact, the private sector participation of Mauritanian Electricity Company (SOMELEC), with emphasis on the sale of electricity assets, was one of the principal macroeconomic objectives of the reform and a trigger for the Heavily Indebted Poor Countries (HIPC) completion point. 4. The Urban Development Program (UDP) (Cr 3574-MR, FY02), programmed for a 10- year period, is currently reaching the end of its first phase (US$95 million). Though it is focused on urban development, the UDP has financed the transport sector multimodal study and Nouakchott s Urban Mobility Master Plan (Plan de Dkplacement Urbain de Nouakchott [PDUN]). It technically supports the Nouakchott urban community for the implementation of the PDUN, and will support urban transport, especially in Nouakchott, during its second phase. 5. A proposed financing for the development of the Port of Nouakchott is currently under preparation by the Bank, and should be presented to the Board before the end of Though it is still in a very early phase and not precisely defined, it will be closely linked to the TSIDTAP project, which under the Project Preparation Facility (PPF) has already financed: (i) the designing of a master development plan for the Port of Nouakchott; and (ii) a technical and financial review of Nouakchott Port operations. The task team leader (TTL) in charge of the port 21

30 project is also part of the TSIDTAP project team, and conversely, this should prevent any redundancy in both projects. 6. Last but not least, a Mauritania Fisheries Sector ESW has been carried out in FY08. The purpose of the analytical research behind this report is to assist the Government of Mauritania to respond rationally and sustainably use the country s fisheries resources, while maximizing the returns from the resources to the country. B. Other Projects 7. The European Union (EU), which is the leader among all donors when it comes to road transport, is about to launch a Mauritanian Road Transport Sub-sector Reform Support Project for 2.2 million euros. The project will comprise four axes, as follows: (i) effective implementation of measures included in the new driving code; (ii) strengthening of the Land Transport General Directorate and of the Road Safety Directorate; (iii) car fleet renewal; and (iv) capacity strengthening for all actors in the sub-sector. 8. All current projects related to transport funded (some are at preparation stages) by donors are summarized in the table below: Donor Project Latest Supervision Ratings Amount (Bank projects only) Implementation Development Progress (IP) Objective (DO) IDA Urban Development Program S S $70,000,000 IDA (P069095) Business Environment N/A N/A $5,000,000 IDA Enhancement Project (P ) Port of Nouakchott Development N/A N/A To be determined IDA Project (P108554) West and Central Africa Air NIA N/A $4,500,000 (for Transport Security and Safety Mauritania only) Program-Phase IIB (P108583) BB Mauritania Fisheries Sector ESW N/A NIA $25, EU Support to transport sector reforms S NIA 10,000,000 EU Removal of shipwrecks from NIA N/A 26,000,000 FADESFSD Nouadhibou bay Kseir torchanelchoum road N/A N/A $25,000,000 FADES construction Acheref, Nouatil, and Ntaraxi N/A NIA $7,000,000 AFD passes strengthening Airport fences construction NIA N/A 2,500,000 AFD Support to airport norms N/A N/A 14,000,000 compliance 22

31 Annex 3: Results Framework and Monitoring Transport Sector Institutional Development and Technical Assistance Project Table 1 - Results Framework Project Development Objective (PDO) To improve land, maritime, and air transport sector management Intermediate Outcomes (IO) Component 1: Institutional support a Improvement in efficiency of road safety M&E Project Outcomes Indicators (i) Letter of sector policy7 (ii) Road safety strategy (iii) Road safety prevention curricula implemented by the Ministry of Education in pilot schools (iv) Merchant shipping code and regulations, including ISPS code provisions (v) Civil aviation code Use of Information To ensure the sector is managed under a strategic vision and a coherent framework Intermediate Outcomes Indicators I Use of Information 3 capacity-building for land transport sub-se or (i) Database producing number of accidents in To monitor improvement Nouakchott per 100,000 inhabitants in road safety prevention and urban transport (ii) Action plan for road safety strategy in services Nouakchott Component 2: Support to Institution2 Improvement in port safety and security issues and Technical Capacity-Building for Maritime Transport Sub-sector,..-_ (I) UMM stafting I o monitor the improvement in the (ii) ISPS and MARPOL conventions IegaVregulatory compliance monitoring by DMM framework and operations in the sub- Improvement in airports development planning (i) Airport investment plan To ensure a coherent development master plan for airports Appropriate fiduciary management (i) Procurement schedule (ii) Financial management reports and audits To monitor efficienc) in project implementation 7 More accurate definitions of these indicators can be found at the end of this Annex. 23

32 al r A A A A A A e m

33

34 Table 3 - Arrangements for Results Monitoring Project Outcome Indicators Letter of sector policy Road safety strategy Road safety prevention curricula implemented by the Ministry of Education in pilot schools Merchant shipping code and regulations, including ISPS code provisions Preliminary study done Scattered responsibilities among several agencies without a coordinated framework Lack of road safety sensitization in primary education curricula Code outdated YRl Results of sector studies discussed Framework for a Nouakchott strategy drafted Launch of consultative process and preliminary studies Code updates prepared Target Values YR2 Letter approved Data collected in Nouakchott Production of road safety prevention book Code updated YR3 Strategy definition (linked to action plan) and implementation started Launch of curricula in pilot schools Organization of workshops to disseminate code Data Collection and ' Frequency Collection NIA NIA porting Responsibility for Data Collection Ministry of Transport DGTT DGTT DMM Civil aviation code, in compliance with ICAO standards Code outdated, preliminary update already carried out Code updated Organization of workshops to disseminate code NIA N/A ANAC Intermediate Outcome Indicators Database producing (Number of accidents in Nouakchott per inhabitants) Baseline (2008) TORS for database concept finalized YR1 Action prepared YR2 (MTR) Study procured and launched YR3 M&E system available Yearly Collection M&E system Responsibility for Data Collection DGTT Action plan for road safety strategy in Nouakchott DMM staffing Lack of plan Recruitment of 16 staff Lack of plan International vocational training for one staff, hands-on training for 16 staff carried out by an international Lack of plan International vocational training for one staff, hands-on training for 16 staff carried out by a local expert Action plan drafted, adopted, and implementation started Local training in office software and English DGTT DMM 26

35 I expert ISPS and I Monitoring of I Definition of I Definition of a I M&E system MARPOL conventions compliance monitoring by DMM Airport investment Plan Procurement schedule Financial management reports (FMRs) and audits ISPS started TORS drafted a strategy for ISPS monitoring Study for a master plan procured strategy for MARPOL monitoring Study finalized and adopted after consultation with I I I stakeholders I implemented Investment plan approved and implementation started Procurement Annual Annual Annual Plan adjustment adjustment adjustment established FMR format Annual audit Annual audit Annual audit agreed upon between IDA and government T yearly Reports Yearly quarterly Biyearly progress report FMR, annual reports, and audits DEPC DEPC Description of Outcome Indicators 1, Letter of sector policy: At the completion of the project, the recipient has adopted, further to a broad consultation process involving all stakeholders including civil society, a letter of transport sector policy designed to address policy, institutional, and legal constraints for the efficient operation of the transport sector in Mauritania. 2. Road safety strategy: At the completion of the project, the recipient has, further to (A) a broad consultation process involving all stakeholders including civil society, and (B) consultation of the global road safety partnership for review and comments, adopted a road safety strategy substantially consistent with said comments. 3. Road safety prevention curricula: At the completion of the project, the recipient has, further to (A) the development of a road safety prevention manual for primary schools, in close collaboration with its ministry in charge of education, and (B) a broad consultation process involving all stakeholders, and in particular the education professional organizations and civil society, launched road safety curricula in pilot schools. 4. Merchant shipping code and regulations, including ISPS code provisions: At the completion of the project, the government has adopted a revised merchant shipping code and regulations, which will be consistent with the IMO standards and conventions, including the provisions of the ISPS code. 5. Civil aviation code: At the completion of the project, the recipient has adopted a revised civil aviation code and regulations, which will be consistent with ICAO conventions and standards. 27

36 Annex 4: Detailed Project Description Transport Sector Institutional Development and Technical Assistance Project 1. The proposed project comprises four components, as described below. Component 1: Institutional Support and Capacity-Building for Land Transport Sub-sector (US$1,727.0 million, including PPF activities) Component 1.a: Institutional strengthening 2. The Land Transport General Directorate (DGTT) has just been reorganized, and two new directorates have been created within it, the Land Transport Regulation and Organization Directorate (DROTT) and the Road Safety Directorate (DSR). The project will support the new organization through capacity-building. Component 1.b: Improvement of road safety 3. The creation of the DSR shows the strong willingness of the Government of Mauritania (GoM) to address road safety issues, which have been until recently been given very little consideration. The project, which has already helped translate the new Drivers Licensing and Vehicle Registration Act thanks to the Project Preparation Facility(PPF), will thus help support the national strategy on road safety by funding the development and implementation of a monitoring and evaluation (M&E) system to follow and analyze road accidents data, in parallel with the Road Traffic Accidents Analysis Report (BAAC), which is being developed by the DSR. Large-scale road safety campaigns will also be launched, and the project will fund the acquisition of road signalization material in the most problematic places around Nouakchott. The project will also fund the dissemination of the new traffic regulations code, and support piloting operations to introduce road safety education at primary schools level, including a practical road safety learning program in a dedicated area. 4. The PPF also funded under this component a technical study on periodic maintenance and rehabilitation for the main road network (Kiffa-Tintane), as the project was originally intended to include infrastructure improvement, and the printing of the new traffic regulations code for the purpose of initial dissemination. The partial funding of the Kiffa Tintane road rehabilitation is now envisaged through support from the Africa Catalytic Growth Fund. 28

37 Component 2: Support to Institutional and Technical Capacity-Building for Maritime Transport Sub-sector (US$1,122. million, including PPF activities) 5. The project will bring support to the newly created Merchant Shipping Directorate (DMM) and Maritime Affaires. Studies and Coordination Unit (CECAM) through staff training and purchase of equipment. It will also support institutional reorganization following the recent redefinition of tasks between the Ministry of Transport (MT) and the Ministry of Fisheries. Part of the budget will be used for technical assistance and support to update the merchant shipping code, which is now largely outdated, to help upgrade information system for Nouadhibou Port and to start the building of a port community interconnection among all logistics stakeholders in Nouakchott. Two studies (design of a master plan for the Port of Nouakchott, technical and financial review of the Port of Nouakchott) have also been carried out under the PPF to bridge the knowledge gap in the maritime transport sub-sector. Component 3: Support to Air Transport System Re-organization and Technical Capacity- Building (US$0.715 million, including PPF activities) 6. The project will help design a coherent strategy for Mauritanian airports, as well as a development plan for Nouakchott and other national airports to determine priorities and pave the way for future activities. It will also support the update of the Civil aviation Code, which dates back to A technical assessment of Nouakchott airport s landing strip and steerage areas has also been carried out under the PPF, including detailed engineering for runway rehabilitation, to collect data and therefore pave the way for the design of this development plan. Component 4: Support to the Ministry s Coordination Role and Project Activities Coordination (US$1.584 million, including PPF activities) Component 4.a: Institutional s u~~ort 7. The Bank will support the Directorate of Studies, Planning, and Cooperation (DEPC) through staff training, technical assistance (fiduciary support), and purchase of equipment and vehicles to ensure close coordination of the different sub-sector units involved in the project. Part of this component will also be used to fund annual financial audits, and surveyshechnical assistance for project monitoring and evaluation. The project will also support operating costs for the DEPC. Component 4.b: Development of tools to provide a coherent strategy to the transport sector The Mauritanian transport sector has no clear overall strategy, which impedes getting a clear vision of crucial activities to undertake. One of the main goals of the project will therefore be the adoption of a letter of sector policy, as well as creation of a global framework throughout the whole transport sector. 29

38 Annex 5: Project Costs Transport Sector Institutional Development and Technical Assistance Project Local Foreign YO % Total Project Cost By Component Foreign Base exchange Costs Component 1 Institutional 1,427, ,000 1,727, Support and Capacity-Building for Land Transport Sub-sector Component 2 Support to 752, ,000 1,122, Institutional and Technical Capacity-Building for Maritime Transport Sub-sector Component 3 Support to Air 365, , , Transport System Reorganization and Technical Capacity-Building Component 4 Support to the 1,184, ,000 1,584, Ministry's Coordination Role and Project Activities Coordination Total Baseline Cost 3,698,000 1,450,000 5,148,000~ Physical Contingencies 0,000 Price Contingencies 200, , , Total Project Costs 5,500,000 Interest during construction Front-end fee Total Financing Required 5,500, ' Amount including the PPF reimbursement (US$1.188 million). 30

39 Annex 6: Implementation Arrangements Transport Sector Institutional Development and Technical Assistance Project 1. The Ministry of Transport (MT) will bear the overall responsibility for coordinating all the activities within the project. The framework for coordination, implementation, and reporting will be formalized as follows. 2. The newly established Directorate of Studies, Planning, and Cooperation (DEPC) of MT will be mandated to coordinate the project. The rationale for choosing DEPC lies in its current responsibilities, as it is already managing the Project Preparation Facility (PPF) activities and coordinating the current European Union- (EU) and Bank-financed sector studies. Supervision of activities has until now proved satisfactory. However, the directorate is a recent creation, and it lacks some skills required to deal with the implementation of a complete project. The project will therefore provide technical, operational, and material assistance to DEPC to coordinate project implementation activities. In this regard, one procurement specialist, one financial management specialist, and one accountant will be recruited to reinforce the DEPC project coordination unit, which assumes the overall project planning (the financial management specialist was already recruited as part of the PPF activities). DEPC will report, in formats to be established and agreed upon in accordance with procurement, financial management (FM) and disbursement arrangements agreed upon between the World Bank and the government of Mauritania (GoM). 3. Activities for each component will be managed by implementing agencies (IAs) (see below). Responsibilities 4. Fiduciary (financial management and procurement) responsibilities will be centralized in DEPC, while technical implementation responsibilities will remain with the IAs, namely, Land Transport General Directorate (DGTT), National Civil Aviation Agency (ANAC), Mauritanian Airports Society (SAM), Maritime Affairs Studies and Coordination Unit (CECAM), and Merchant Shipping Directorate (DMM) for their respective institutional activities. Monitoring and evaluation (M&E) of technical activities will be carried out by DEPC, with the assistance of CECAM for the maritime and port sectors, based on data collected from the IAs. This will also help strengthen DEPC s mandate of sector coordination. 5. A summary of responsibilities can be found in the following table: 31

40 Activity Design of the project scope and activities Costing of activities Table 1: Summarv of ResDonsibilities DEPC X Implementing Agencies X X 6. The project framework can be summarized as follows: 1 Ministry of Transport I DEPC/ Coordination Unit Overall project coordination a DGTT DMM CECAM ANAC implementation responsibility Project Governance Oversight 7. Internal controls for the project will be carried out on fiduciary aspects by the inspector general, MT, assisted by the financial controller of MT. 8. Otherwise, the secretary general of MT will be required to provide the overall governance oversight for the project, by judging the risks associated with project activities as well as postreviewing major contracts award and deliverables quality. He will be more specifically required to produce a semester progress report summarizing governance issues, independently from the implementing agencies. 32

41 Annex 7: Financial Management and Disbursement Arrangements Transport Sector Institutional Development and Technical Assistance Project A. Summary of Financial Management Assessment Implementing Entity 1. The project will be coordinated by the newly established Directorate of Studies, Planning, and Cooperation (DEPC) under the Ministry of Transport (MT). DEPC is managing the Project Preparation Facility (PPF) activities and coordinating all the donor-funded studies. The financial management (FM) unit of DEPC will be responsible for FM and will coordinate project accounting, maintain overall records, and manage disbursements for the project. The other implementing agencies (DGTT, ANAC, DMM, CECAM, and SAM) will only have technical responsibilities for the execution of their respective institutional activities but these agencies will not have financial management responsibility. Staffing and Transaction Recording 2. The project will be the first World Bank-financed project executed under MT s authority but DEPC coordination unit is staffed with a qualified and experienced financial management specialist who has already implemented Bank-financed projects. To reinforce the internal control system, the coordination unit will rely on the MT s inspector general and financial controller to control, on a regular basis, project-operational activities. 3. The DEPC already has accounting software that allows proper recording of project financial transactions. The project chart of accounts has already been established. 4. Nevertheless, adequate administrative, accounting, and FM procedures will be required as part of the Project Implementation Manual to guide activities and provide safeguard over assets. An accountant function will be also required to ensure an appropriate segregation of duties with the FM specialist. Conclusion of the Financial Management Assessment 5. An FM assessment of the DEPC was done in February 2008 and the overall risk of the implementing unit was rated moderate. It is considered that the FM system in place, subject to the reinforcement measures listed above, satisfies the Bank s minimum requirements under OP/BP 10.02, and therefore is adequate to provide, with reasonable assurance, accurate and timely FM information on the status of the project required by the World Bank. B. Risk Analysis Country risk analysis 33

42 6. The Country Financial Accountability Assessment (CFAA) of 2002 revealed that the systems for planning, budgeting, monitoring, and controlling public resources in Mauritania are improving but do not provide sufficient reasonable assurance that funds are being used for their intended purpose. The risk of waste, diversion, and misuse of funds was assessed as partially high as the CFAA recommendations on financial accountability reforms have not been fully implemented yet. Therefore, the country risk is still assessed as partially high. 7. However, various measures to mitigate these risks have already been taken and thus the project risk from an FM perspective is assessed as substantial prior to risk-mitigating measures implementation. Risk Assessment and Mitigation Measures 8. FM arrangements were designed to ensure that funds are used for the purpose intended, timely information is produced for project management and government oversight, and to facilitate the compliance with Bank fiduciary requirements. 9. The main inherent and control risks and mitigating measures taken as part of this specific project are tabulated below. Risk Rating Overall Inherent Risk Inherent Financial Management Risks Country Level Funds may not be used in an efficient and economical way and exclusively for purposes intended due to poor governance. M S S The team comprises appropriately qualified and experienced staff, which may reduce this risk I M M Entity & Program Level No experience of WB-executed projects in MT, resulting in delay in the project implementation timeframe due to weak capacity of beneficiary agencies. M The project will provide training to strengthen FM capacity of the implementing agencies L Financial Management Control Risks: S M Budgeting Lack of quality and timeliness of budget reports M Main activities are already planned and well-described in the project document L 34

43 Risk Rating 0 Accounting Delays in accounting and producing financial statements M Internal controls Lack of clear segregation of functions inherent to the limited staff S A qualified accountant will be recruited prior to the effectiveness to ensure appropriate segregation of duties M 0 Flow of funds Delays due to bank foreign transfers 0 Financial Reporting Delays in the submission of agreed IFRs and annual project financial statements 0 External Audits Supreme audit institution has limited capacity. Quality of the project audit reports not to be acceptable M The risk will be mitigated through close monitoring by the project financial management specialist (FMS) Agreement will be reached on the IFRs format and content prior to the negotiation of the project, A project FM team will be trained during the six months following the effectiveness Qualified independent external auditors will be appointed by DEPC within three months after effectiveness L M M OVERALL RISK ASSESSMENT H = High S = Substantial M = Moderate L = Low I M 10. The project residual risk from an FM perspective is assessed as moderate provided that risk-mitigating measures are implemented as indicated in the risk assessment table above. Strength and Weaknesses 11. The DEPC has a qualified financial specialist who supervises the financial and accounting function. Nevertheless, the financial unit has weak reporting capacity with regard to the Bank s procedures by lack of experience. Information Systems 12. A project-specific FM system has been established within the DEPC. The project chart of accounts will accommodate the proposed project to capture sources and uses of funds, assets, and 35

44 liabilities in sufficient detail. The system should also integrate budgeting, operating, and accounting applications to facilitate monitoring and reporting. Accounting Policies and Procedures 13. Project accounts will be maintained on an accurate basis, augmented with appropriate records and procedures to track commitments and to safeguard assets. The chart of accounts will facilitate the preparation of relevant quarterly and annual financial statements, including (i) project expenditures; and (ii) total expenditures on each componentlactivity. 14. All accounting and control procedures will be documented in the Project Implementation Manual (which includes administrative, accounting, and financial procedures), a document that will be updated by the project s coordination team on a regular basis. Internal Controls and Audits 15. MT s inspector general, complemented by the Ministry s financial controller, will carry out the internal auditor function with terms of reference (TORS) acceptable for the International Development Association (IDA). The internal control will ensure the continuing adequacy of the conformity with the project s procedures and other due process. The internal auditor will report directly to the Minister of Transport. External Audits 16. An independent audit firm will carry out external audits. A single opinion on the project financial statements in compliance with International Standards on Auditing (ISA) will be required. 17. In addition to the audit reports, the external auditors will submit a management letter giving observations and comments, and providing recommendations for improvements in budgeting, accounting records, information systems, controls, and compliance with financial covenants. Disbursements and Flow of Funds Table of Yearly Disbursements Annual Cumulative 1,800,000 1,000, , ,000 1,800,000 2,800,000 3,700,000 4,500,000 36

45 Credit Disbursement per Category and Percent of Expenditures Category Amount of credit allocated (expressed in US$) % of expenditures Bank financed I (1) Goods and operating costs 3,3 12,000 I 90% (inclusive of taxes) I (2) Refund of project 1,188, % preparation advance I TOTAL 4,500, Funds will flow from the IDA credit account to the designated account to be opened and maintained by the DEPC for the purposes of this project. These funds will finance IDA S share of expenditures related to the costs of goods, consultants, and trainings. The expenditures will be incurred by the DEPC and implementing agencies. The DEPC will process payment for these expenditures upon confirmation by the implementing agencies that the service has been successfully completed. Management of funds will not be decentralized to these agencies. The DEPC will submit a statement of expenses (SOE), and application requests for subsequent disbursements and replenishment of the designated account and supporting documentation will be kept and maintained by the DEPC for audit purposes and review by the Bank. 19. The financial unit within the DEPC will bear the responsibility to make sure that expenditures are eligible and to process payments and maintain the project accounts. Interim Unaudited Financial Reports (IFRs) 20. Quarterly IFRs to be produced will include sources and uses of funds by project components/activities. They will also include a comparison of budgeted and actual project expenditures to date and for the quarter. 21. Project management will produce the IFRs by no later than 45 days after the end of each quarter. 22. The project will produce annual financial statements, and these statements will comply with international accounting standards (IAS) and World Bank requirements. These financial statements will comprise o f a. b. a balance sheet reflecting the assets, liabilities, and funding of the project based on the cash basis; a statement of sources and uses of funddcash receipts and payments, which recognizes all cash, receipts, cash payments, and cash balances controlled by the entity for this project; and separately identifies payments by third parties on behalf of the entity; It should be noted that the program financial statements should be all inclusive and cover all sources and uses of funds and not only those provided through IDA funding. It thus reflects all project activities, financing, and expenditures, including funds from other development partners and contributions in kind such as labor and accommodation, irrespective of whether the program implementing agency controls the hnds for a particular aspect of the program. 37

46 c. the accounting policies adopted and explanatory notes. The explanatory notes should be presented in a systematic manner with items on the balance sheet and statement of cash receipts and payments being cross-referenced to any related information in the notes. Examples of this information include: d. a management assertion that project funds have been expended for the intended purposes as specified in the relevant financing agreements. 23. The Bank and borrower will agree on the format of both financial statements and IFR at or before negotiations. Disbursement Arrangements 24. A designated account (DA) in US. dollars to be managed by DEPC will be opened in a commercial bank on terms and conditions acceptable to IDA for payment of eligible expenditures. 25. The DA will be managed according to the disbursement procedures described in the Project Implementation Manual and the disbursement letter. It will operate as follows: a a a The IDA will provide an advance that is equivalent to the financing for at least four months of activity. This amount will be deposited in the account held in American dollars with a commercial bank. Project expenditures will be reimbursed by means of reimbursement applications either to the project account pre-financed by the counterpart funds or advances made by IDA to the designated account on the basis of statement of expenditures. All invoices and other supporting documents for expenditures incurred will be retained at the office of DEPC or the offices of the implementing agencies. All expenditures paid through the DA shall be approved by the project coordinator, who shall also co-sign the checks with the FM specialist. 26. The borrower may upon mutual agreement by the government and the Bank request withdrawals from the credit account to be made on the basis of IFRs, to be submitted to the association in form and substance satisfactory to the association. Until such time all disbursement will be transaction based as explained in the disbursement letter. The disbursement letter will be discussed during negotiations. C. Next Steps Action Plan and Covenants 27. The action plans to be implemented and the covenants to be applied are tabulated below. ACTION Adopt a Project Implementation Manual (administrative, accounting, and FM procedures) acceptable to IDA. Recruit an accountant on TORS acceptable to IDA Allocation of US$ 100,000 equivalent in counterpart finding Conditionality Effectiveness Effectiveness Effectiveness 38

47 Financial Covenants 28. The borrower shall maintain or cause to be maintained an FM system including records, accounts, and preparation of related financial statements in accordance with accounting standards acceptable to the Bank. The borrower shall recruit the external auditor in terms and conditions acceptable to the association not later than six months after the project s effectiveness date. The financial statements will be audited in accordance with international auditing standards. The audited financial statements for each period shall be furnished to the association not later than six months after the end of the project fiscal year. 29. The borrower shall prepare and furnish to the association not later than 45 days after the end of each calendar quarter, IFRs for the project, in form and substance satisfactory to the association. 30. The borrower will be compliant with all the rules and procedures required for withdrawals from the DA of DEPC. Supervision Plan 3 1. Supervision activities will include: (i) review of quarterly IFRs; (ii) review of annual audited financial statements and management letter as well as timely follow up of issues arising; (iii) and participation in project supervision missions, as appropriate. The Bank FMS assigned to the project will play a key role in monitoring the timely implementation of the FM arrangements. In the first year after effectiveness, two on-site FM visits will be undertaken. Subsequently, the intensity of on-site FM visits will be based on the assessed FM risk for the project, Le., if the risk rating remains moderate, there will be only one on-site visit per annum. 39

48 A. General Annex 8: Procurement Arrangements Transport Sector Institutional Development and Technical Assistance Project 1. Procurement for the proposed project will be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004 as revised as of October 1, 2006; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004 as revised as of October 1, 2006, and the provisions stipulated in the financing agreement. The various items to be procured under each expenditure category are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and timeframe are agreed between the borrower and the Bank in the procurement plan. The procurement plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. When applicable, standard Bank bidding documents for goods and works and standard Bank requests for proposals for consultants, as well as standard evaluation reports will be used during project implementation. Other bidding documents that do not follow Bank standards, including national bidding documents, may be accepted, provided that they are reviewed by the Bank before first use. 2. National procurement system: Procurement of public markets in Mauritania is ruled by the Public Markets Code, adopted through decree No (February 12, 2002); this code is being updated with support from the Bank. More generally, national procedures in terms of procurement do not contradict Bank policies. No special mention is necessary in the financial agreement, as national legislation gives primacy to Bank rules and policies on national laws and policies. 3. The Country Procurement Assessment Review (CPAR) was carried out in March 1999 and updated in June It led to the identification of the main weaknesses in regulatory framework, in control, and in transparency, as well as weaknesses in institutions and in procurement skills in the country, which has an impact on its absorption capacity. This review has identified several measures to mitigate these weaknesses. 4. The CPAR was updated in June 2002; crucial improvements were noticed but the report also identified persistent weaknesses in the institutional and regulatory framework, especially the lack of separation among functions, particularly regulation, control, allocation, and recourse, which are all overseen by the Central Tender Board, as well as the lack of standard bidding documents and contracts and weaknesses in terms of human resources. This has led to International Development Association (IDA) support, which enabled: (i) the development of a new public markets code, with the set-up of a regulation autonomous agency and separation between incompatible functions (this code is about to be adopted); and (ii) the development of local training in procurement within the National Administration School. 5. Procurement of works: The project will involve no works. 40

49 6. Procurement of goods: Goods procured under this project would include computer hardware, office supplies, road signalization equipment, and vehicles. The procurement will be done using the Bank s standard bidding documents (SBD) for all international competitive bidding (ICB) and national SBD agreed with or satisfactory to the Bank. Contracts estimated to cost less than US$250,000 equivalent for goods available locally would be procured under national competitive bidding (NCB) procedures. Small articles and office supplies as well as small equipment and furniture available locally and whose estimated cost is less than US$30,000 may be awarded through shopping, in accordance with the Bank s procurement guidelines (section 3.5). 7. NCB processes may be adjusted to ensure that: (i) bids are advertised in national newspapers with wide circulation; (ii) bid evaluation, bidder qualification, and award criteria are specified clearly in the bidding documents; (iii) bidders are given adequate response time (minimum four weeks) to prepare and submit bids; (iv) bids are awarded to the lowest evaluated bidder proven the bidder is qualified; (v) eligible bidders, including foreign bidders, are not precluded from participating; and (vi) no preference margin is granted to domestic suppliers. 8. Procurement of non-consulting services: This will include training and capacitybuilding for staff working in several implementing agencies (IAs), and sensitization campaigns on road safety. For contracts estimated to cost the equivalent of US$30,000 and above, NCB will be carried out. For contracts estimated to cost less than US$30,000, shopping procedures may be used, in the same way as for the procurement of goods. 9. Selection of consultants: Activities needing selection of consultants include, but are not limited to: the oversight of road safety sensitization campaigns; situation assessment and implementation of a road safety management system, including a monitoring and evaluation (M&E) system for accidents in Nouakchott; the update of merchant shipping code and regulations, and of civil aviation code; technical support to Merchant Shipping Directorate (DMM) organization and training; the development of an information system for Port of Nouadhibou (PAN); the development of a master plan for Mauritanian airports and of a development plan for Nouakchott Airport; support to developing sector policy; the development of price indices and series aimed at creating a benchmark for price revision in road construction; the development and implementation of an M&E framework; and project financial audits. Consultants will generally be selected through quality- and cost-based selection (QCBS). In some special cases, which will be detailed in the procurement plan, the following methods may be used: (i) quality-based selection (QBS); (ii) selection based on sonsultants qualifications (CQS); (iii) least-cost selection (LCS), which may be used for financial audits; and (iv) IC, who will be selected in accordance with paragraphs 5.1 to 5.4 of Bank guidelines. 10. Short lists of consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the consultant guidelines Operating costs: Operating costs financed by the project are incremental recurrent expenditures including office equipment and supplies, office rental, communications, vehicle- 41

50 maintenance costs, fuel and spare parts, and travel expenses and per-diems, all needed for the supervision of the project. They will be procured according to shopping procedures, grouping together when possible and using shopping for repetitive goods and services. These procedures will have to be detailed in the Project Implementation Manual. 12. Publication: To generate as much interest as possible from eligible bidders, a general procurement notice will be prepared and published in UN Development Business (UNDB) online, Development Gateway s Market (dgmarket) for major consultants services, above US$ 100,000 or equivalent, and in a widely circulating national newspaper for all consultants services for recruitment of firms and ICBs for which specific contracts will be awarded, in accordance with procurement guidelines. The borrower will keep a list of received answers from potential bidders interested in the contracts. 13. Procurement procedures and SBD used for each kind of procurement, as well as standard contracts for works, goods, and consultants, are detailed in the Project Implementation Manual, acceptable to IDA. B. Assessment of the Agency s Capacity to Implement Procurement 14. All procurement activities will be carried out by the project coordination unit, led by the director of MT s DEPC, and through MT s Departmental Tender Board (DTB), for contracts above 5 million MRO and below 40 million MRO (equivalent to US$l50,000) for consultants, above 6 million MRO and below 50 million MRO (equivalent to US$l80,000) for goods, and through the CTB for amounts above these thresholds. 15. An assessment of the capacity of the project coordination unit and the DTB in terms of procurement for the project was carried out in February 2008 by IDA S procurement specialist, based in Nouakchott, within the assessment of the project. The assessment has put an emphasis on the project s forecast organization, the interaction of Ministry s staff involved in procurement, and the structures benefitting from support and in charge of technical implementation of activities within the project. 16. Project coordination unit capacity: Project coordination unit staff includes a coordinator, a main accountant, and a procurement specialist (recruited before project activities start). The coordination unit has satisfactorily carried out operations realized under Project Preparation Facility (PPF), in interaction with the Ministry s services involved in these activities. The director of DEPC has good knowledge in IDA procedures, as he was a procurement specialist in some Bank-financed projects. In addition, procurement within the project will be ensured by a procurement specialist whose recruitment and training in Bank s procurement guidelines will be done, if need be, based on his previous skills and whenever it proves to be necessary during project implementation. 17. MT capacity: According to MT s organization, procurement is ensured by the MT s DTB for contracts under its responsibility (above 5 million MRO and below 40 million MRO for consultants, above 6 million MRO and below 50 million MRO for goods); the other contracts are dealt with by the CTB, which is largely experienced in procurement under IDA procedures. The 42

51 DTB includes a representative from MT, and from financial control from Ministry of Finance and Ministry of Trade, and is assisted by a procurement unit within the Cabinet. This procurement unit is already experienced in IDA procedures and is well-equipped (offices, computer equipment, classification, and filing structures). Among members from the DTB, several have already received training in procurement according to IDA guidelines through other IDA-financed projects, and have gained experience in implementing other IDA-financed projects. 18. Although no specific case of lack of compliance with procurement rules has been noticed during the preparation of the project, the quality of procurement by the staff in charge of implementation is considered weak, and overall institutional, political, and organizational risks are high. Consequently, capacity reinforcement is part of the project, with a strong emphasis on the training of the project team and of the DTB members, in: (i) designing procurement plans; (ii) preparing requests for proposals; (iii) establishing shortlists for services providers; (iv) publishing bidding documents, openings of proposals, and evaluation reports; (v) awarding and signing contracts; and (vi) implementing contracts and settling litigations. 19. Mitigation measures, detailed in Table 1, have been agreed to deal with noticed weaknesses. They consist in: (i) the recruitment of a procurement specialist, who will be kept on the project coordination team during the whole project; (ii) the training of staff involved in procurement to reinforce procurement capacity in the project coordination team, the MT, the implementing agencies, and DTB s capacities; (iii) the recruitment of short-term consultants, if need be, for specific technical activities and capacity reinforcement; (iv) the set-up of a system for the planning and management of contracts, benefiting the project coordination team, in coordination with the DTB and the CTB[spell out and add to abb. and acron.]; and (v) the strengthening of the filing system for procurement documents. Procurement of contracts subject to post review will be reviewed twice a year, together with the project supervision missions. An independent audit will be carried out once a year. 20. The list of agreed actions is detailed in the table below: Weakness Insufficient number of staff dedicated to the procurement activities No manual of procedures procurement document Recommendation I Recruitment of a qualified procurement officer in DEPC Develop and adopt a procedures manual deemed satisfactory to IDA (this could be a section in the PIM) procurement document Table 1: Corrective Measures Activity Recruitment of a qualified procurement officer in DEPC Produce the procurement procedures in the PIM. Approve the manual. Train staff in using the manual Appoint a person in charge of filing Appoint a local for filing and provide Responsibility DEPC DEPC MTIDEPC Timing Before the actual beginning of project procurement activities Manual to be developed and finalized before credit effectiveness First three months of project execution at most I 1 43