Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 25961 PROJECTAPPRAISAL DOCUMENT ONA PROPOSED CREDIT INTHEAMOUNT OF SDR13.1 US$l8 MILLIONEQUNALENT TO THE ISLAMICREPUBLIC OF MAURITANIA FORA SECONDMINING SECTOR CAPACITY BUILDINGPROJECT June 11,2003 Oil, Gas, Mining and ChemicalsDepartment(COCPD) Burkina Faso,Mali, Mauritania, Sao Tome and Principe(AFC15) Africa RegionalOffice This document has a restricteddistributionand may be usedby recipientsonly in the performanceof their official duties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April 30,2003) Currency Unit = Ouguiya (UM) UM1,000 = US3.75 U S S l = =UM267 SDR 1 =US$ 1.37915 SDR 1 =UM368.23. FISCAL YEAR January 1 -- December 3 1 ABBREVIATIONS AND ACRONYMS BGS BritishGeological Survey (UnitedKingdom) BRGM Bureau o f Geological and Mining Research (France) CDD Community DrivenDevelopment CNRE National Center for Water Resources CGS Council o f Geo-Sciences (Republic o f South Africa) cso Civil Society Organization DATAR Land Management Directorate DEAR Environmental and Rural Management Directorate DMG Miningand Geology Directorate (MMI) DCL Directorate o f Local Communities EA Environmental Audit EIA Environmental Impact Assessment GIRM Government o f the Islamic Republic o f Mauritania GIS Geological Information System GPS Global Positioning System GSO Geological Survey Organization IDA International Development Agency IDB Islamic Development Bank JICA Japanese International Cooperation Agency LED Local Economic Development MMI MinistryofMinesand Industry MHE MinistryofHydraulics and Energy MDRE Ministry o f Rural Development and Environment NGO Non Governmental Organization OMRG MiningResearch and Geological Office (Mauritania) OMVS Organisationpour la Mise en Valeur du fleuve Senegal PANE National Environmental Action Plan PDU Urban Development Project (IDA) PMI Public MiningInstitution PRISM 1 FirstMiningSector Capacity BuildingProject PRISM 2 Second MiningSector Capacity BuildingProject SAE Service o f Environmental Affairs (DMG, MMI) SEA Sectoral Environmental Assessment SIGE Environmental Information and Management System SIGM Geological and Mineral Information System SME Small and MediumEnterprise FOROFFICIAL USEONLY SNIM Societe Nationale Industrielle et Miniere SOE State Owned Enterprise SOPHOSMA Societe des Phosphates de Mauritanie U C M MiningCadastre Unit (MMI) U C P M MiningProject Coordination Unit(MMI) WB World Bank ZNC Zouerate-Nouadhibou Corridor Vice President: Callisto E. Madavo Country ManageriDirector: A. DavidCraig Sector ManageriDirector: Peter van der Veen Task Team LeaderiTask Manager: Paul0 de Sa This document has a restricted distributionandmay be usedby recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. MAURITANIA SECOND MININGSECTOR CAPACITY BUILDING PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported bythe project 3 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 6 C. Project Description Summary 1. Project components 7 2. Key policy and institutional reforms supported by the project 8 3. Benefits and target population 9 4. Institutional and implementation arrangements 10 D.Project Rationale 1. Project alternatives considered and reasons for rejection 11 2. Major related projects financed by the Bank and/or other development agencies 11 3. Lessons learned and reflected inthe project design 12 4. Indications o f borrower commitment and ownership 13 5. Value added o f Bank support inthis project 13 E. Summary Project Analysis 1. Economic 13 2. Financial 13 3. Technical 14 4. Institutional 14 5. Environmental 15 6. Social 16 7. Safeguard Policies 18 F. Sustainability and Risks 1. Sustainability 19 2. Critical risks 19 3. Possible controversial aspects 21 G. Main Credit Conditions 1. Effectiveness Condition 21 2. Other 21 H. Readiness for Implementation 21 I.CompliancewithBankPolicies 22 Annexes Annex 1: Project Design Summary 23 Annex 2: Detailed Project Description 30 Annex 3: Estimated Project Costs 37 Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 38 Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 41 Annex 6: (A) Procurement Arrangements 42 (B) Financial Management and DisbursementArrangements 51 Annex 7: Project Processing Schedule 53 Annex 8: Documents in the Project File 54 Annex 9: Statement o f Loans and Credits 55 Annex 10: Country at a Glance 56 Annex 11: Sectoral Environmental Assessment Summary 58 MAP(S) NOIBRD-25935 MAURITANIA SECOND MINING SECTOR CAPACITY BUILDINGPROJECT ProjectAppraisal Document Africa RegionalOffice COCPD Date: June 11,2003 Team Leader: Paulo De Sa Sector ManagedDirector: Peter van der Veen Sector(s): Mining and other extractive (100%) Country ManagedDirector: A. DavidCraig Theme(s): Export development and competitiveness (P), Project ID: PO78383 naturalrc"U-ceS management (s), Other Public sector Analysis of economic growth (S), Other environmentand Lending Instrument: Technical Assistance Loan(TAL) governance (S) [ ]Loan [XI Credit [ ] Grant [ ] Guarantee [ ]Other: For LoanslCreditslOthers: Amount (US$m): $18.00 Proposed Terms (IDA): StandardCredit Grace period (years): 10 Years to maturity: 40 Commitment fee: 0.00-0.50% Service charae: 0.75% Foreign Total BORROWER 1.oo 0.20 1.20 [DA 8.87 9.13 18.00 [SLAMIC DEVELOPMENTBANK 1.57 3.43 5.00 JAPAN: JAPANINTERNATIONAL COOPERATIONAGENCY 0.80 1.20 2.00 `JICA) Total: 12.24 13.96 26.20 Tel: 222.525.6861 Fax: 222.525.6861 Email: prism@toptechnology.mr(UCPM) Estimated Disbursements ( Bank FY/US$m): Project implementation period: 5 years (2003-2008) Expected effectiveness date: 0911512003 Expected closing date: 0311512009 uPADPOm/IS"u_n x a A. Project Development Objective 1. Project development objective: (see Annex 1) The proposed project i s a follow-up to the successful on-going operation, the Mining Sector Capacity BuildingProject (Credit 3206-MAU), as it maintains the maindevelopment objectives of that project - to strengthen the Government's capacity to act as a facilitator and regulator o f mining activities and to significantly increase private investment in Mauritania's mining sector. In addition, the proposed operation will build upon the project design and objectives to the developments in the mining sector during the last two years, by bringing in two new components: (i)strengthening of the mining sector public management capacity, and (ii)an increased focus on activities related to local economic development, efficiency inthe delivery o f services and improvement o f socioeconomic impacts inmining areas. The development objectives o f the proposed project would be to: (i)Build-upand consolidate the Government's long term institutional and technical capacity to manage the country's mineral resources, including social andenvironmental management; (ii)Promote private investments in the minerals sector; (iii) Improve miningsector contribution to national and regional socioeconomic development. 2. Key performance indicators: (see Annex 1) The project will support the strengthening o f Government's capacity to efficiently manage the minerals sector, including social and environmental issues. 0 An important objective o f the project is based on the reinforcement o f public mininginstitutions and capacity buildingo f other stakeholders affected by miningactivity. Capacity o f the different entities under the authority o f the Ministry o f Mines and Industry (MMI), Ministry o f Rural Development and Environment (MDRE), National Center for Water Resources (CNRE), local governments and NGOs to promote and effectively manage in a transparent way the minerals sector will be strengthened. This objective involves the government commitment to offer adequate salaries inorder to strengthen the technical and financial autonomy o f the institutions and ensure their sustainability. The project also includes a training program o f professionals involved inminingsector management. The specific performance indicators would be: - 100% o f the miningrelated personnel at the MMIand Mines and Geology Directorate (DMG) and at least 100 representatives o f local government and NGOs actively involved in social development inminingareas have participated inthe project training program before project closure. - Average time to grant a miningtitle maintained below 30 days at project closure Mauritania i s actively promoting the private sector-led growth of the mining industry as a means to achieve economic and social development. The increase o f sector (a) investments and (b) exports over many years will represent indicators o f the success and impact o f this Government policy, supported by the project. A more direct indication o f the project performance regarding investment promotion will be (c) the increased coverage and access to geological information. As a result o f the investments induced by this project, the contribution o f the mining sector to the country's exports and GDP i s expected to increase. The specific indicators o f increased private sector participation would be: --- 10%increase in average cumulative annual investment inthe miningsector by project end 10%increase inaverage cumulative annual minerals exports by project end Decision by private companies to proceed with the development o f two new mines before project - 2 - closure - Railway and harbor facilities in NW Mauritania available to regional economic operators by midtermreview 0 The project will support diversification o f economic activities in mining areas through the small grants program, which will fund local entrepreneurs and artisans, feasibility studies, and a few pilot studies to determine the particular characteristics o f the programs. Local economic development programs will support sustainability o f local communities and empower municipalities. The specific indicators o f the social sector development would be: - At least 35 sub-projects established under the small grants program, with project completion reports submitted and evaluated by project end. - 20% increase inhousehold income inareas where local economic activities are implemented In addition to these indicators, the project will be evaluated according to an Institutional Sustainability Index, which will be developed during implementation starting in 2004. The Sustainability Index will measure the following: (i) staffing against mandate o f the institution; (ii) staff level skills; (iii)level of remuneration; (iv) financial autonomy and the ability to function independently; (iv) audit o f financial accounts; (v) client satisfaction; (vi) budget procedures; and (vii) delays incompliance with proceduresllegal deadlines. B. Strategic Context 1.Sector-related Country Assistance Strategy (CAS) goal supportedby the project: (see Annex 1) Document number: 24122 MAUDate of latest CAS discussion:June 18, 2002 Since 1992, the Government o f the Islamic Republic of Mauritania (GIRM) has been implementing a wide range o f policy, economic and sector reforms. Duringthe preparation o f the previous CAS, in 1997, the GIRM was deepening the implementation o f second-generation structural reform program aimed at eliminating macro-economic imbalances and liberalizing the economy. The GIRM then acknowledged that sound economic management, conducted by dynamic and competent institutions, i s crucial to ensure efficiency both as a promoter o f economic development and as a regulator o f economic activities. Over the past five years, considerable progress has been achieved on both fronts. Mauritania was one o f the first countries to present a full Poverty Reduction Strategy Paper (PRSP) to the Board o f the Bank and the IMF in February 2001. The GIRM has set its priorities on poverty reduction. Between 1990 and 2000, the incidence o f poverty in the country fell from 56.6 to 46.3 percent, which i s clearly a major achievement for the country. The first MiningTA project was designed and its implementation initiated within the 1997 CAS context, to support the development o f the mining sector, a key contributor to the national economy. The sector structural reform included a successful restructuring of the major state-owned iron producer SociCt6 Nationale Industrielle et Miniere (SNIM), now operating mostly as any other private operator, and the enactment in 1999 o f the new MiningCode providing access to mineral resources to private investments. The proposed project supports the following objectives o f the 2002 Mauritania CAS: (i)Institutional development and governance. As stated in the 2002 CAS, the "Government is aware that institutional development and good governance are essential for making substantive progress. Actions 'I detailed in the "General Framework for the National Program of Good Governance" adopted by the Government in 1999 revolve around five main themes: (i)consolidation o f the rule o f law, (ii) strengthening o f civil service capabilities, (iii) support for decentralization, (iv) effective management o f public resources including use o f Information and Communication Technologies and websites to achieve greater transparency, and (v) involvement of the poor and strengthening o f civil society capabilities. - 3 - Most o f these activities have already been supported under the first MiningTA, and will continue to be bolstered and extended under the second operation, including La., respectively, (i)clear rules and procedures for sector administration; (ii) training as well as implementation o f mechanisms to ensure and sustain adequate human and financial resources; (iii) continued development o f information systems and web sites (mining rights, geological information for mining, environment, hydrogeology); and (iv) participatory development activities within the Zouerate-Nouadhibou corridor. The project will closely coordinate its activities with the Ministry o f Mines and Industry (MMI),and also work on institutional strengthening with other relevant public sector institutions, such as the Service o f Environmental Affairs (SAE), the DMG, and Environmental Informationand Management System (SIGE). (ii)Accelerating private sector-led growth. Through the reforms mentioned above, the GIRMhas demonstrated its commitment to promoting the development o f the mining sector and to ameliorating the sector contribution to the country's economic growth. However, there still remain structural issues that need to be addressed before the country's economic and export base can be expanded beyond miningand fisheries. The 2002 CAS identified that private sector's growth in the country would require the development o f "an adequate infrastructure, improved trade facilitation, certification to allow product standards to be met, an effective financial sector and business services, the removal o f remaining private sector constraints and lowering of high transaction costs." In that sense, the project would further strengthen the environment for mining investments. Inthe miningsector, the project will facilitate (i)the opening o f access to the existing infrastructure (a 600 km long railway and harbor facilities) within the Zouerate-Nouadhibou corridor in NW Mauritania, today controlled by SNIM, to other economic activities within the area o f influence; (ii) a further increase inthe coverage o f geological data to promote a diversified miningproduction; and (iii) further reduction of transaction costs in the long term through continued support to increased efficiency in the granting o f mining titles and EIAs improvement o f procedures. (iii)Fostering infrastructure. As stated in the 2002 CAS, "the development of the economic infrastructure is essential to developing trade, reducing production costs, and enhancing the competitiveness of the national economy." This is certainly true for the development o f the mining sector, and the proposed project would assist in creating conditions aimed at optimizing the use, through opening access to already existing infrastructure, namely the Zouerate-Nouadhibou railway and the Nouadhibou harbor facilities in NW Mauritania, to other economic operators. This liberalization would enhance the feasibility and facilitate the development o f new mining projects within the region. In addition, increased exploitation and sharing of maintenance costs would improve the profitability o f existing infrastructure. It would also help to develop other industrial or artisanal activities. In addition, the proposed project would, in selected areas, contribute to the increased availability and access to water resources, both for mining operators and local communities through hydrogeological mapping and studies, in cooperation with CNRE, the government water authority. 2. Main sector issues and Government strategy: The Government's mining sector policy i s in line with the broader socioeconomic agenda and i s formulated by the Ministry o f Mines and Industry (MMI). In the past years, the MMI has resolutely pursued the reform o f the mining sector through actions which have already yielded positive results in terms o f increased foreign and national investment in exploration. Investment in mining activities more than doubled from US$4.4 million in 1997 to US$13.5 million in2001. Mauritania i s known for its diverse composition o f minerals, given that a part o f its territory represents a structural extension o f the mineral provinces o f Western Africa, mostly Ghana and Mali. The country's geological potential i s being confirmed through the surveying activities funded under the on-going sector TA project. There are still vast uncovered areas in need o f examination, however. Current mining - 4 - activity i s dominated by iron ore. Other than majority state-owned iron ore producer SNIM, there i s a copper-gold project, which has been adversely affected by low metal prices. In parallel to these more traditional activities, the country has been experiencing in recent years a surge o f exploration activities mainly financed by private foreign companies. Their work has resulted in the recent discovery o f promising gold and diamond deposits. In addition, the iron mineral resources in NW Mauritania are far from being fully exploited and their development potential i s high. Phosphate resources are also identified in Southern Mauritania. Although the economic potential o f most o f these districts still needs to be fully evaluated, these discoveries confirm Mauritania's mineral resources and reinforce the Government's commitment to attract more private investment to the sector. There i s now a need to prepare the miningadministration for the forthcoming development o f two o f these new mines. Mauritania's MiningPolicy Declaration approved by the Council o f Ministers in 1997 states that one o f the Government's objectives i s to increase revenues through the diversification o f production in the miningsector. Government is therefore seeking to accelerate the growth o f the miningsector by creating favorable conditions through the removal o f obstacles which constrain private sector development. The main sector issues addressed by the Government strategy are: (i) Rationalizingthe role ofthe State byreducingits involvementinminingexplorationand development activities. Given the high-risk nature o f exploration, the role o f the State i s now largely confined to the administration o f the sector and the provision o f basic geologic information, leaving the high cost, risky exploratory activities to the private sector. The Government's strategy is to reduce its involvement in mining exploration. For example, the state-owned exploration unit, the Office Mauritanian des Recherches Geologiques (OMRG) i s now mainly dedicated to more upstream activities like geological reconnaissance and mapping. SNIM also tends to work under the same conditions and requirements as any other private operator. (ii) Sustainability o f MMI's agencies involved in monitorinp and regulating mining activities. Institutional capacity o f the MMI, the Directorate o f Mines and Geology (DMG), and o f the OMRG i s being strengthened. Their organization has been streamlined to improve the State's regulatory role in administration o f the country`s mineral resources, and their performance improved in the discharge o f their services and responsibilities (such as enforcement o f laws and regulations, provision o f reliable geological database, administration o f mineral rights and monitoring o f environmental liabilities). These roles and functions are critical for the efficient operation o f a private sector-led mining industry. However, there i s still a need for strengthening, particularly in the fulfillment o f investment promotion; and, most important, the sustainability o f the institutions still needs to be fully ensured. The project would provide technical assistance for consultancy services for training and procurement o f essential modem equipment for these institutions and would further support their institutional capacity. (iii) Environmental management capacitv building. Although Mauritania has now developed a legislative and a regulatory framework to address environmental impact assessment issues, the procedures for the execution o f these regulations still need to be strengthened, in particular with respect to production activities and inter-institutional relationships improved. Technical assistance would be provided to further reinforce the capabilities o f the institutions responsible for monitoring and regulating environmental management, as well as other stakeholders affected by mining activities. The program will be conductedincooperationwith the Ministryo f Rural Development and Environment. (iv) Promoting private sector investment in the mining sector. With regard to promotion o f private sector participation in exploration and mine development, the mininglaw approved in 1999 reduced the discretionary power o f Government, increasing transparency and improving investment security. The Mining Code, the recently approved Investment L a w for mining activities, and the Mining Cadastre Office provide an adequate legislative framework for regulating and for monitoring activities in the - 5 - sector, and make a major contribution to attract foreign investments into mining. Of particular importance to providing a sense o f security to potential investors i s the stabilization o f the legal, fiscal, and institutional arrangements prevailing at the time o f the investment, as well as the set-up o f a professional system to manage the granting o f mining rights. In addition, the geological information generated under the first miningsector project already provides an improved tool to guide the exploration efforts o f private mining companies in Mauritania, especially in remote and difficult to access areas. Mauritanianeeds a systematic effort o f promoting its mineral sector potential to foreign investors. 3. Sector issues to be addressed by the project and strategic choices: The on-going Mining Sector Capacity BuildingTechnical Assistance project i s already yielding positive results in addressing a number o f mining sector issues mentioned above, namely the increase o f exploration investments as a consequence o f the modernization o f the legal framework - part o f the improvement o f the country's overall investment climate, and the strengthening o f the governmental capacity to manage sector development, including the administration o f mining rights, environmental permits and follow-up. The information provided by the recent regional geological and geophysical surveys confirms the mineral potential o f the country and will likely further stimulate exploration in the minerals sector. Exploitation development projects are expected in the near future. Continuing o f the Bank support for miningactivities would address the following issues: i)the development of production projectswillrequireamore systematic partnership buildingamong operators, government and communities, in order to ensure a sustainable socioeconomic contribution from the mining sector to the national and local economies and to optimize the benefits resulting from mining; (ii) thetechnicalcapacityofthepublicmininginstitutionsisbeingimproved,theirsustainability in while terms o f human and financial resources still needs to be ensured, and their capacity strengthened to manage the development o f miningexploitation - and not only exploration - as i s presently the case; (iii)attractiveness o f exploitation mining investment can be reinforced by improving the infrastructure and facilitating access to existing facilities and mineral resources; (iv) with respect to geo-information infrastructure, the success o f the data produced so far over selected areas with the first TA financing, motivates an increased mapping coverage o f mineral potential areas, including environmental baseline data; and, (v) further processing o f the same geological information would benefit significantly other sectors such as, principally, water - a priorityfor the GIRM. Inorder to achieve a sustainable contribution o f the sector to the economy, the proposedproject would assist the GIRM in addressing the sector development issues mentioned above through the following specific actions: - Facilitation o f local economic development activities in existing production districts, as a pilot activity which could later be extended to the national level; - Further development o f the geological information infrastructure and management, including water resources management and promotion; - Further strengthening o f the environmental management capacity o f the state and increased awareness and capacity o f local populations and private operators. Funds from the Islamic Development Bank will finance aerbome geophysics, and Japanese International Cooperation Agency (JICA) will pay for mineral resource assessments. IDA financing will provide - 6 - supplementary fundingfor both o f these activities, as necessary. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description andAnnex 3 for a detailedcost breakdown): The proposed project would include four components: Component 1 Local economic developmentin the mining areas. This component would support the - empowerment of local communities and municipalities for the development o f alternative economic activities and increased efficiency in the delivery o f social services. The project will work on local economic development around the SNIM exploitation site and along the Zouerate-Nouadhibou corridor inNW Mauritania. The project will support activities aiming to (i) diversify the local economic base by seeking alternative economic activities, (ii) a small grants program to provide necessary funds to fund small businesses and entrepreneurs seeking to increase or diversify their productive capabilities; (iii) strengthen the capacity o f local authorities for the delivery o f social services; (iv) develop hydrogeological studies and works to improve the availability o f water in the region; and (v) strengthen the regional development management capacities, especially inthe environmental and social areas. Component 2 - Geo-information and development. This component would provide the geoscientific information necessary to enhance the economic development o f Mauritania. Geo-data are fundamental for good governance and proper land use management, and would support many sectors, such as water resources and environmental management, promotion o f investments in the miningsector and others. The project would continue the work started under the first project in upgrading the existing information and increasing its availability. The component would include the following: (i) airborne geophysical surveys o f about 480,000 square kilometers over three selected areas with mineral potential; (ii)geological mapping o f about 185,000 square kilometers, o f which about 35,000 square kilometers with the support o f parallel financing; (iii)metallogenic studies o f selected ore districts and/or minerals (platinum, palladium) based on outputs from the first Mining project; (iv) update of the country's hydrogeological map, in collaboration with the National Center for Water Resources (CNRE), through (a) merging and processing data from the SIGM and the CNRE databases (b) carrying out hydrological pilot studies over selected areas with identified mining potential and poor water availability to improve water resources; and (v) supervision assistance regarding complex technical activities, inparticular geophysics. Component3 Capacitybuilding of public mininginstitutions.This component would strengthen the - mining sector management capacity by establishing a Mining Sector Promotion Unit (UPM) and reinforcing DMG and the Mining Cadastre created under the first project. The sector monitoring and control capacity o f Mining and Geology Directorate (DMM) would be reinforced. The project would thus consolidate the sustainability o fpublic mininginstitutions established under the first Miningproject and strengthen inter-institutional relationships, especially with the Ministry o f Rural Development and Environment and the DMG's SAE. Sector activities under this component would lead to improved environmental management. This component would also carry out a comprehensive training program. The training program would build capacity o f the employees involved in sector activities directly - such as employees o f SNIM and staff o f the Ministry o f Mines and Industry, or indirectly - such as local authority representatives, to further sector capabilities through training and seminars. Component 4 - Project management Project management will buildupon the existing MiningProject Coordination Unit (UCPM). Current operations will be reinforced by an assistant accountant and a project evaluation specialist. U C P M will link with all concerned partiedentities and will carry out financial management, procurement and disbursement activities. A regional project coordination unit would be established in Zouerate to coordinate local economic development activities envisioned for the - 7 - Zouerate-Nouadhibou corridor. Some o f the U C P M responsibilities, such as procurement, will be transferred to local agencies during the life o f the project. 2. Geo-information and development 12.49 47.7 5.79 32.2 3. Capacity buildingo f public mininginstitutions 4.49 17.1 4.15 23.1 4. Project management 2.07 7.9 1.49 8.3 Total Project Costs 26.20 100.0 18.00 100.0 Total Financing Required 26.20 100.0 18.00 100.0 2. Key policy and institutional reforms supported by the project: Policy reform, The Project will help the Government to: (i) consolidate key reforms attempting to create an enabling environment for an economically, socially and environmentally sound development o f the mining sector; and (ii)strengthen the government's capacity as a regulator - in a transparent and nondiscretionary manner - o f mining activities. Government's regulatory role will continue to be supported and strengthened by improved information management and availability. Increased availability o f geological and hydrogeological information, assembled during the proposed project, would help the Government in carrying out its regulatory function. Institutional reform coordination. The sector and cross-sector institutional reform initiated inthe context o f the first miningproject will be consolidated for the mining sector through cooperation with different involved organizations. The project will work closely with the Ministry o f Mines and Industry on coordinating efforts with other agencies - such as the CNRE and the Ministry o f Rural Development. N e w inter-institutional ties would be developed and strengthened as a result. The establishment o f additional services, such as the MiningSector Promotion Unit and support to the operation of the Mining Cadastre Office, would streamline mining sector performance. Training o f staff involved directly and indirectly in the mining sector i s envisioned under the proposed project. Employees o f the involved ministries, liaison offices and private sector operators will be able to increase their capacities by attending workshops, training seminars and study tours. Institutional reform would take place on the level o f SIGE, the Environmental Information and Management System, which supports environmental management through collecting and disseminating relevant information. The project would provide additional resources for SIGE adjustment and modernization. Environmental Affairs Service (SAE) o f the DMG, will receive technical support and expertise to conduct Environmental Impact Assessments and environmental audits. Institutional reforms provided over the scope o f the proposed project would thus touch upon improved environmental management o f the miningsector. Emphasis on hydrogeology, envisioned by the proposed project, would enhance the necessary information on the country's water resources and thus assist in sector environmental management. An important aspect o f the reform will be to ensure the sustainability o f the institutional framework established under the first MiningCapacity Building Project. Inparticular, procedures and rules to apply the recently approved Decree allowing the use o f 40% o f financial resources generated through services provided by the sector institutions will be strengthened. The money available in the created account will be allocated to: (i) operation o f the Mining Cadastre; (ii) supervision o f mining operations and the the - 8 - enforcement o f the sector laws and regulations, including the environmental point o f view; (iii)the acquisition o f new geoscientific data; and (iv) training and seminars. A financial simulation shows that the proposed sector organization could be financed out o f the sector generated funds (including cadastral fees). In addition, a Mining Sector Promotion Unit will be set up under the auspices o f the Ministry o f Mines and Industry. The responsibility o f the Unit would be to process and disseminate mining sector data in order to attract private investment in the sector and provide support to natural resources and land use management in other sectors, Increased availability of geological information assembled during the project would facilitate improved mining sector management. Further support to the Mining Cadastre will be providedby the project to modernize and improve the system. Local economic development and social sector reform The project would strengthen local economic development and empower municipalities in the Zouerate-Nouadhibou corridor. The project would finance studies to identify alternative economic activities in the area, through workshops, studies, and surveys o f stakeholders. Pilot studies would be financed by the project to determine the initial demonstration effect o f the program. The project would then be adjusted based on pilot performance. Once potential economic activities are established, feasibility studies would identify local community needs and abilities to carry out local economic development programs. A small grants program would finance social infrastructure, service delivery and entrepreneurial activities in the areas affected by miningactivities inorder to diversify each particular region's economic base. Community dependence on mining operations would thus be reduced and new actitivies in the services sector, agriculture, manufacturing and tourism would be created. Such developments would assist Mauritania in its fight against poverty. Increased community participation would lead to social sector reform by granting impacted communities more control over their economic involvement. 3. Benefitsand target population: The following benefits are expected: fi) induced by the project: (a) Increased sector related foreign and local direct investment and increased export revenues; (b) development o f capacity in private services to the mining industry, such as environmental impact studies, laboratories, mining construction works and earth removal, maintenance and others; (c) development o f infrastructure related to miningwith a regional development impact (e.g. roads, energy, water resources); (d) increased income-generating opportunities inremote areas, increased education opportunities and reduced migration outflow; (e) contribution to a better regional distribution o f productive activities; and (f) sustainable development and fair distribution o f benefits to local communities located around miningareas. (ii) as a direct result of theproject: (a) establishment o f a modem, consistent and homogeneous legal and regulatory system in the mining sector; (b) better understanding o f how Government, private sector, communities and donors can work together dealing with foreign investors and the contract negotiations process; (c) improved efficiency in MMI's mining agencies (e.g. faster and nondiscretionary administration and improved understanding o f issues involved inmanaging mining rights), and improved enforcement capacity o f environmental, health and safety regulations; (d) continued security o f tenure for miningrights through nondiscretionary procedures and accurate geological location o f concessions; (e) improved knowledge o f existing environmental and socioeconomic conditions, as a basis for improved management and participation o f local communities; (f) protection o f the environment from potential damage caused by mining and a better grasp o f how to design future environmental protection measures in the sector; (g) generation o f baseline regional information that can be used by all sectors (e.g. water resources, geological data); (h) access to economic opportunities in the Zouerate-Nouadhibou corridor; and (i) improved access to social services by the population living along the Zouerate-Nouadhibou - 9 - corridor. Target populations and sectors: - Local communities inminingdistricts, inparticular along the Zouerate-Nouadhibou corridor -- National Private foreign and national mininginvestors/operators -- Wateruse and regional sector authorities management authorities Land management authorities 4. Institutional and implementationarrangements: Proiect implementation period. The project would be implemented over a period o f five years. The Project Completion date would be September 15, 2008 and the Credit closing date would be March 15, 2009. Executing agency. The Ministry of Mines and Industry (MMI) would be responsible for the implementation o f the project. Implementing agency. The MMI,through an officially designated coordinator, will be responsible for the overall implementation o f the project. MMI's line units will be strengthened for the Mining Cadastre Unit, and, within the Directorate for Mining and Geology, the Environmental Affairs Service and the Geological and Mining Information System. Proiect administration. The MMI will maintain the Mining Project Coordination Unit (UCPM), established under the first Mining Sector Capacity Building Project, to (i)coordinate project implementation, and (ii) manage (a) procurement - including all contracting for works and purchases and the hiringo f consultants, (b) project monitoring, reporting and evaluation, (c) the contractual relationship with IDA, and (d) financial record keeping, the Special Account and disbursements. Accounting, financial reporting and audits. The financial section o f the UCPM, with a very satisfactory track record, will also be responsible for the financial management o f the proposed project. The computerized financial management system set up under the first project will be updated. The U C P M will maintain accounts and payments o f the proposed project, clearly separated from the first mining project. A summary financial report will be included in the quarterly progress reports. Project accounts, the Special Account, all procurement and compliance with the financial and legal covenants o f the Credit Agreement and all procurement, including Statements of Expenditure will be audited annually by independent auditors satisfactory to the Bank. The audit reports would be submittedto the Bank not later than six months after the end o f each calendar year. An updated financial management assessment o f the U C P M was carried out duringpre-appraisal, and minor adjustments to the procedures implemented under the first TA were agreed upon with the UCPM. Monitoring and evaluation. The U C P M will be responsible for monitoring and evaluation o f the Project, according to the indicators and benchmarks included in the Project Implementation Plan (PIP) and the Credit agreement. N o t later than 45 days after each quarter, the U C P M will submit to the Bank quarterly progress reports covering all Project activities, including procurement and financial summary reports. Bi-annual reviews, the first one to take place not later than 6 months after effectiveness, would provide detailed analysis o f implementation progress towards development objectives, and include an evaluation o f financial management as well a post-review o f procurement matters. A mid-term review, about 30 months after effectiveness, would provide detailed analysis o f implementation progress. - 10- D. Project Rationale 1. Project alternatives considered and reasons for rejection: The following options have been analyzed: a) Discontinue the support of the Bank afer completion of the on-going project. The on-going first mining project is yielding positive results in terms of exploration investments as a result o f the modernization o f the legal framework and o f the administration o f mining rights, including environmental management capacity (see section B.2 and 3). The goal o f the Second Mining Capacity BuildingProject would be to use the successes achieved by the first project as a base for an expansion o f activities based on the needs identified over the scope o f the first project. Bank support i s required for the creation of Local Economic Development activities, which would seek to empower local communities in mining areas by supporting sustainable alternative economic activities. In addition, the Second Miningproject extends the activities o f the first project in the institutional sector, especially with regard to environmental management. The Second Mining project would fund exploration o f water resources, which would benefit other sectors and enhance the information base on water, In addition to expanding the above activities, the project would continue to conduct geological and geophysical surveys. The information provided by the regional geological and geophysical surveys confirms the mineral potential o f the country and will likely generate additional areas o f interest for exploration. Continuity o f the Bank support i s however important, taking into account the following issues: i)a number o f private investments for exploitation development are expected in the near future (partly as a result o f the present project) and experience within the government i s still weak regarding monitoring o f sector performance during the exploitation phase, especially regarding environmental and social management; (ii)the development o f exploitation projects will require the creation o f a more systematic partnership among operators, government and communities in order to ensure a sustainable socioeconomic contribution from the mining sector to the national and local economies and optimize the benefits resulting from mining; (iii) exploitation o f identifiediron and other mineral resources and the use o frelated existing the infrastructure could be optimized and increased; (iv) while the technical capacity o f the public mining institutions has been improved, their sustainability in terms o f human and financial resources after closure o f the present mining project still needs to be consolidated; and (v) with respect to geo-information infrastructure, success o f the project outputs over selected areas financed under the first mining project motivates an increased coverage o f mineral potential areas, including environmental baseline data. b) Extension with allocation of a supplemental credit to the existingproject. The option o f continued support to the mining sector through a supplemental credit to the present project has also been analyzed. However, this option has been rejected considering that the project implementation objectives o f the proposed operation would be rather different because o f (i)a shift towards the development o f socioeconomic activities in a closer partnership with the private sector and communities; and (ii) a more systematic approach to the identification o f water resources in Mauritania. In additoin, the identified total project costs needed to implement a meaningful program would exceed amounts which could be considered under a supplemental credit. Latest Supervision Sector Issue Project (PSR) Ratings (Bank-financed projects only) -11 - Implementation Development Bank-financed Progress (IP) Objective (DO) Capacity buildingfor Government Private Sector Development S S institutions and promotion o f private and Capacity BuildingProject sector development. (Credit 27300-MAU, closed) Modernization o f the Mauritania MiningSector Capacity S HS mining sector legal and regulatory BuildingProject (Credit framework; buildingo f government 32060-MAU, on-going) capacity for the administration o f miningrights and environmental management o f miningactivities; development o f a geo-information infrastructure Management capacity buildingof Urban Development Project S S municipalities, improvedprovision and (Credit 35740-MAU, on-going) management o f services, development o f urban infrastructure Legal assistance to the government in Energy, Water, and Sanitation S S adjusting water and energy regulatory Sector Reform Technical framework, studies on water Assistance Project (Credit management and distribution systems. 33770-MAU, on-going) Ither development agencies Highly Unsatisfaory) 3. Lessonslearned and reflectedinthe project design: Lessons have been learned from the ongoing activities carried out under the first Mining Sector Capacity BuildingProject and earlier sector activities, as well as from other countries where the Bank has financed similar capacity building operations (e.g. Algeria, Bolivia, Burkina Faso, Ghana, Guinea, Mali, Papua N e w Guinea, Peru, Tanzania, Madagascar, Mozambique and others) and from a number o f recent Bank studies and reviews on miningsector reform, environment and communities. Experience in other countries indicates that improving the enabling environment increases the ability o f a country to attract and retain appropriate private investment. For instance, Ghana in the late 1980s undertook significant reforms, supported by the Bank and other donors, to improve the enabling environment for private sector investment in mining. The result has been a four-fold increase in gold production, a mining investment climate that i s consistently ranked among the best in the world by investors, and the privatization o f state-owned miningenterprises. Experience with establishing capacity for environmental management in other countries, namely in Argentina, Bolivia, and Ecuador indicates that the central agency mandated with environmental responsibility needs to adopt an integrated approach and establish close linkages with sector agencies in implementing environmental policies and regulations. Experience in Mauritania with capacity building, for instance as part o f the on-going mining project, suggests that emphasis o n beneficiary participation in project preparation, intensive supervision, organization and coordination in the field are critical for timely and effective implementation. Ownership and political commitment to project objectives are key to ensuring strong local leadership, availability o f counterpart funds, and clear delineation o f ministerial authority and responsibilities. As a result o f the mid-term review (April 2002) o f the project mentioned above, the following specific conclusions are applied to the design o f the proposed project: - Adjust the status o f the institutions, particularly the Miningand Geology Directorate to facilitate an - 1 2 - effective and swift management capacity and eradicate the present bureaucratic obstacles: - Ensure an adequate human resources policy and salary structure in all sector entities, to optimize the contracting o f adequate staff and minimize the migration o f the project trained professionals. - Further strengthen capacity o f the institutions to fulfill their functions, particularly with respect to environmental monitoring and regulatory enforcement, in relation to the development o f mining operations. - Further strengthen inter-institutional relationships, in particular regarding environmental management. 4. Indicationsof borrowercommitment and ownership: The proposed project i s based on a request presented by the GIRM at the Consultative Group meetings in Paris in December 2001. It has been further discussed with the Bank during the identification and preparation missions which took place since then, together with the adjustment to the sector policy framework which would strengthen and sustain in the long-term the socioeconomic contribution o f the miningsector to the national and local economies. A number o f decisions, mainly regarding institutional capacity and sustainability have been taken so far, including: - The GIRM has recently approved a Decree allowing the MMI to use funds generated by the sector institutions (e.g. surface fees related to the miningrights to ensure their financial sustainability - The implementation o f the on-going mining project i s progressing according to schedule and has achieved several o f its implementation and development objectives in a highly satisfactory way, showing the GIRMcommitment to develop the sectors under MMIresponsibility. 5. Value added of Banksupport inthis project: The Bank has been the leading provider o f assistance to mining sector reform in African and Latin American countries during the last decade and in this capacity has contributed to the present mining "boom" inboth continents. Since 1992, Mauritania has been making good use o f the Bank's experience insector reform, particularly with respect to sector policy and modernization ofits institutional and legal frameworks. Given its experience and established presence in the country, Bank involvement would facilitate the implementation o f the project in a timely and efficient manner and ensure that the Government maintains its focus on the objectives o f the project. The Bank would also play a critical role to facilitate interaction among the different stakeholders, in particular with respect to participatory processes and local economic development. Bank involvement would also be catalytic in attracting additional funds and support from bilateral donors particularly for the implementation o f the social mitigation measures, and inproviding the environment for encouragingprivate sector investment. E. Summary Project Analysis (Detailed assessments are inthe project file, see Annex 8) 1. Economic(see Annex 4): - Costbenefit ? NPV=USS million; ERR= % (see Annex 4) 0 Cost effectiveness 0 Other(specify) See Annex 4. 2. Financial(see Annex 4 andAnnex 5): NPV=US$ million; FRR = % (see Annex 4) The Project i s a capacity building operation and, as such, does not lend itself easily to quantitative investment analysis. However, a number o f economic indicators can be projected and compared, such as value o f mineral exports, fiscal revenues coming from the sector, and the amount o f investments. - 13- Mauritania's total exports in 2001 were about US$400 million, or almost 12% o f the country's GDP, o f which 50 percent corresponded to a single mineral export (iron ore). The value o f iron ore production currently stands at approximately US$200 million. Most o f the foreseeable expansion i s in base and precious metals, as well as diamonds, and the majority o f this production will be exported and will generate foreign exchange. Mining investments other than SNIM are still limited to exploration and have increased from less than US$4.4 million in 1997 to about US$13.5 million in 2001. To test the robustness o f the possible contribution o f mining to the economy, two scenarios (low and high case) have been constructed. The results o f this analysis, projected to the year 2010 and 2015 are shown in the table below (please also see Annex 4): Scenario Gross Production Gross Export Value Exploration Value (US$million) (US$million) Investment (US$miIIion) 2002 197 197 11 Low 2010 300 300 25 High 2010 340 310 30 Low 2015 385 380 50 High 2015 440 430 60 Fiscal Impact: Fiscal revenues are expected to increase from existing and new mining operations through implementation o f the 1999 Mining Code, the Decree on MiningTitles (1999) as well as the 2002 Law on Model Mining Convention. SNIM, a State owned enterprise (SOE) and present main operator, benefits from a special regime that limits its contribution to the budget to 10% o f sales (average o f US$20 millioniyear). The mining code enacted in 1999 introduced a fiscal regime for mining consistent with what is considered international good practice. Income tax for miningis set at 25%, and a three-year tax holiday applies to new mining operations. In addition, a law defining a model agreement for large mininginvestments has been enacted in January 2002. It provides fiscal stability and conflict-resolution guarantees during the life time o f the miningtitle to which it i s attached. 3. Technical: The introduction and use o f straightforward state-of-the-art technology has been successful under the on-going mining project, particularly within the fields of data processing and information management (e.g. GIS and related data bases). The best example i s represented by the use of IT to manage the mining title system, which has been working without failure since 1999. The installation o f similar IT i s presently under implementation to manage environmental permits and monitoring, as well as the geological information infrastructure. Under the proposed project, mining sector capacity will be strengthened. In addition, through the development o f inter-institutional activities (see Project Description), similar support would also be provided to the agencies in charge o f overall environmental management and o f water resources (CNRE). 4. Institutional: The institutional capacity of the GIFM to manage the miningsector i s being strengthened under the first project, and has achieved positive developments. The project will further strengthen existing institutions and work to increase their operational capacity. 4.1 Executing agencies: The mining institutions are being strengthened under the on-going credit operation in terms o f human - 14- resources, technical capacity and stream-lining o f operational procedures. An important remaining issue in the sustainability o f the institutions capability to operate and fulfill their functions in the longerterm. The GIRM has recently approved a Decree allowing the sector institutions to use part o f the revenues they generate to support their activities. However, the implementation o f this Decree in practice as well as the further strengthening o f the Mining Directorate (DMG), Mining Cadastre (MCU) capacity to access, plan and manage properly the use o f these financial resources will need adequate attention and support from the MMI and the Ministry o f Finance. In this regard, the "Cour des Comptes" and /or Inspection Gtnerale des Finance would perform annual audit on behalf o f the Government. The proposed project will provide assistance in terms o f training and technical advice to improve the management and accounting capacity o f the institutions. 4.2 Project management: The proposed project will be managed by the same Project Implementation Unit ("UCPM") and Project Coordinator as the on-going project. The U C P M has demonstrated its capacity in terms o f project, procurement and financial management. I t will be strengthened according to the need to respondto an increased volume o f accounting work, inorder to keep clear and separate records for the two loans, which will run simultaneously duringa period o f about one year. 4.3 Procurement issues: The proposedproject will benefit from the satisfactory experience gainedby the UCPM under the implementation o f the first project, and no particular procurement issue i s foreseen. 4.4 Financial management issues: Financial management has been satisfactory as well under the ongoing project and no particular issue i s foreseen. The consolidated financial statements o f the project will be audited for each fiscal year by an independent auditor acceptable to IDA in accordance with standards on auditing also acceptable to IDA. 5. Environmental: Environmental Category: B (Partial Assessment) 5.1 Summarize the steps undertaken for environmental assessment and E M P preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. Under the on-going MiningTA, extensive work has been implemented to develop the sector capacity for environmental management in relation to mining activities. Environmental requirements and procedures have been introduced in the Mining Code (including consultation mechanisms) and specific regulations will be passed shortly by the GIRM; an environmental management unit has been formally established, trained and equipped within the DMG; an Environmental Information and Management System (SIGE) has been set up; pilot environmental base line studies inmineral prospective areas o f northern Mauritania and a study on the environmental and socioeconomic impacts o f the SNIM iron exploitation in Zouerate have been completed. This information and the studies' recommendations have been included in the sectoral environmental assessment (SEA) carried out as part o f the preparation o f the proposed project. A very important achievement so far consists in the development o f awareness regarding environmental and social management within the government. The main issues, to be addressed by the proposed project include: - Increase awareness and improve the interface between operators and government in order to facilitate the preparation o f EIAs and audits according to the regulations, including consultation processes, and their timely presentation and assessment. - Improve coordination between the different authorities responsible for enviornmental permitting and monitoring - Facilitate and improve the participation o f civil society in the monitoring o f the sector environmental - 1 5 - performance. 5.2 What are the main features o f the E M P and are they adequate? One o f the key objectives o f this TA project is to improve and strengthenthe management o f the sector in an environmentally sound manner. A sector environmental assessment (SEA) has been conducted prior to appraisal to obtain recommendations for achieving this objective. This SEA systematizes and complements the extensive experience and lessons already gathered through activities implemented under the first sector project, which include (i)the drafting and approval o f environmental regulations for mining activities; (ii) setting up and training of an environmental management unit at the DGM the responsible for the review and approval coordination o f EIAs presented by mining operators, as well as the monitoring o f the sector performance; (iii)set-up o f an Environmental Information and Management System (SIGE); and (iv) environmental and social baseline studies over selected areas in Northern Mauritania. 5.3 For Category A and B projects, timeline and status o f EA: Date o f receipt o f final draft: April 2003 The project i s a capacity buildingoperation which will not involve direct investments in mining activities and, consequently, will not generate direct environmental and social impacts. However, if succesful, the project will induce development o f mining and oil activities in Mauritania. In that sense the potential environmental and social impacts of such a development need to be assessed and an Environmental Management Plan designed to ensure that regulatory, institutional and monitoring measures and mechanisms are inplace to properly protect the environment and communities. 5.4 H o w have stakeholders been consulted at the stage o f (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms o f consultation that were used and which groups were consulted? The SEA has been carried out by an independent consultant under the supervision o f a steering committee involving all stakeholders, including representatives from the environmental administration outside the sector, NGOs, local governments and operators. The document has been made publicly available and distributed to all interested parties for review in April 2003. The findings, conclusions and recommendations are being discussed during a series o f public workshops. 5.5 What mechanisms have been established to monitor and evaluate the impact o f the project on the environment? Do the indicators reflect the objectives and results o f the EMP? As already stated, the project as such will not cause direct impacts on the environment. Indicators reflectingthe capacity o f the administration to monitor the sector such as the systematic presentation o f - EIAs by companies, substantial responsiveness o f EIAs according to the procedures established, timing for appraisal o f EIAs and absence of back-log and effective monitoring o f activities - are being set-up, not only to monitor project results but as parameters measuring the routine and longer term management capacity o f the institutions in charge. In addition to the consultation procedures already in place, monitoring mechanisms involving the various stakeholders authorities as well as companies - will - civil society, NGOs, local and national be developed and implemented duringthe proposed project. Such participatory monitoring mechanisms will benefit from the emerging experience in other countries (e.g. Bolivia, Ecuador, and others). 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. As stated inthe environmental section, the project as such will not cause a direct social impact. However, the project will provide assistance to develop tools, mechanisms and procedures to identify and mitigate - 16- negative social effects which might be caused by the development o f mining operations, as induced by the sector reform supported by the proposed project. Many o f the social impacts o f potential mining operations in Mauritania are similar to those o f comparable projects in other parts o f the world. The following issues are o f particular relevance in the Mauritanian context: +(i)In Potentially positive: addition to the mining employees and workers, other populations would be attracted by new and existing mining operations, with the expectations o f employment in related industries, which do not require particular qualifications. Such migrations would cause positive and negative impacts, as stated +below. With the opening of mines, there is a parallel development of social infrastructure and services which +canMining benefit other sectors (health, education). operations would induce an increase injob opportunities and a contribution to local economic +development, ifproperly managedbythe different stakeholders. The development o f an access infrastructure would induce an opening for trade and communication, for products from the mine and from other sectors. (ii)Potentially negative: - One very important issue in the Mauritanian context consists o f the competing use o f resources, most particularly water (e.g. agriculture, lifestock, human consumption and others versus mining) - The poorly managed migration movements o f population towards mining centers might generate conflicts between the settled community and migrants; also, social (criminality, prostitution and others) and health problems (AIDS and other sexually transmitted diseases, diseases related to the contamination o f water and air) would likely increase. - Income differences among miningworkers and the rest of population, particularly if no local economic -development i s induced, would generate social conflicts. Poorly managed at the regional level, mine closure would generate very negative social impacts regarding local employment and economic development. The project would address these issues through component 1 within the Zouerate-Nouadhibou corridor (ZNC), in connection with the existing iron ore mines as well as potential new mines (e.g. gold in Tasiast), by promoting local economic development, building social (and environmental) management capacity, in partnership with municipalites and the SNIM company, developing water resources, improving community services management and establishing a regional development plan involving all involved stakeholders. The capacity o f the involved central and decentralized administrations would also be improved regarding social management inrelation to miningsector development. While the main focus under the proposed project would target the ZNC, the findings and experiences would later be applied to other potential miningdistricts (Akjoujt, Bophal and others). 6.2 Participatory Approach: H o w are key stakeholders participating inthe project? The main stakeholders are the miningcommunities, inparticular within the ZNC; development NGOs and regional CSOs; miningoperators (with a particular emphasis on SNIM; and local (municipalities), regional (wilayas) and central authorities. Involvement o f stakeholders i s part o f several activities o f the proposedproject, including participatory development diagnostic and planning, definition and monitoring o f the activities related to local economic development; and regional development planning in the Zouerate-Nouadhibou area. 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? The strengthening and further development and implementation o f participatory consultation processes i s - 1 7 - an integral part o f the project. The observations, suggestions and recommendations o f key stakeholders as part o f the SEA and Resettlement Policy Framework (RPF) processes, through the monitoring committee set-up by the GIRM. Extensive participation o f communities, authorities and companies has already been included in the development and validation o f the legal and regulatory framework for mining, as well as in the implementation o f the studies which are about to be completed (e.g. environmental and socio-economic impacts of the SNIM operation; and the environmental baseline studies in Northern Mauritania). The mentioned SEA synthesizes the participatory actions and procedures already in place (e.g. as part o f the EIA procedure for mining activities), as well as proposes the formal definition, development and implementation o f mechanisms for ensuring a participatory approach related to environmental monitoring. 6.4 What institutional arrangements have beenprovided to ensure the project achieves its social development outcomes? The capacity o f the environmental unit (SAE) established under the first sector TA will be strengthened to manage social issues related to the enforcement o f regulations. In addition, the monitoring o f social issues will be part o f the participatory monitoring mechanisms to be developed for environmental impacts (see 5.6 above). The development o f an institutional set-up for the management o f socio-economic impacts and the local economic development o f communities in miningdistricts will be implemented under the proposed project on a pilot basis in NW Mauritania. Further discussions with involved stakeholders have been carried out as part o f the SEA process, as well as during pre-appraisal and appraisal, inorder to determine more precisely the mechanisms to be set-up. With respect to the social development activities in the Zouerate-Nouadhibou corridor, NGOs and specialized consultants would be contracted to support participatory planning and development activities and small grant implementation. 6.5 H o w will the project monitor performance in terms o f social development outcomes? - Participatory monitoring mechanisms, involving civil society and NGOs, to be developed and -- Stakeholders implemented under the proposed project surveys Specialized consultants would be contracted to specifically monitor and provide advise to the LED and social development component o f the proposedproject - A Consultative Committee, animatedby an eminent person and involving representatives o f civil society, miningcompanies, regional and local authorities, would be constitued to follow-up and provide -orientationto the LED and social development component in the Zouerate-Nouadhibou corridor. The Environment Information and Management System, established under the first MiningTA and to be further developed under the proposedproject, will provide internal and public reporting on progress towards the overall environmental and social objectives. 7. Safeguard Policies: Natural Habitats (OP 4.04, BP 4.04, GP 4.04) 0 CYes NO Forestry (OP 4.36, GP 4.36) Yes 0 NO PestManagement (OP 4.09) L'Yes 0 NO -18- Cultural Property (OPN 11.03) C Yes 0NO Indigenous Peoples (OD 4.20) uYes 0 NO Involuntary Resettlement (OP/BP 4.12) 0Yes 2 NO Safety of Dams (OP 4.37, BP 4.37) C Yes 0 NO Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) C; Yes 0 NO Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* - \ Yes 0NO 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. A reference framework regarding safegard policies applicable to the sector has been developed under the first miningTA project, and more precisely defined duringpreparation o f the proposed project as part o f the Sectoral Environmental Assessment and the Resettlement Policy Framework processes. Awareness o f stakeholders has been increased as part o f those activities. Under the proposed project, methodological and on-the-job training on safeguard policies and their application would be provided to the public entitites responsible for environmental and social management o f the sector - principally the Environmental Affairs and the Inspectorate Services o f the miningpublic administration. Duringproject implementation, emphasis will be put on EIAs assessment capacity as well as the development and implementation o f consultation procedures. F. Sustainability and Risks 1. Sustainability: Mauritania has good miningpotential as demonstrated by the results from the surveys carried out under the on-going project and confirmed by the increased interest shown by major international mining companies in developing exploration campaigns during the last years. However, the GIRM will encounter difficulty in sustaining this interest and in ensuring the maximum contribution to economic and social development during the exploitation phase unless the institutional and regulatory framework in the sector i s consolidated. The project will provide the funds required to obtain the human and financial resources for this task. This includes a training program for Mauritanian experts geologists, engineers, environmental specialists, IT specialists, economists, lawyers - - in the mining sector as well as a government policy to pay these trained experts competitive salaries. In this respect, the GIRM has recently adopted the standards that will allow (i)recruitment o f local specialists under competitive conditions and, as such, will ensure maintaining the best possible staff inthe existing institutions; and (ii) funding o f core functions such as administration o f mining rights, environmental permitting and monitoring, follow-up o f sector performance and operation o f the sectors information systems. As under the first TA project, sustainability will be enhanced through the project's strong emphasis on institutional building, training, human capital development, and environmental as well as social awareness in the public and private sectors, and partnership development with civil society. 2. Critical Risks (reflecting the failure o f critical assumptions found in the fourth column o f Annex 1): Risk I Risk Rating Risk Mitigation Measure From Outputs to Objective Government continued commitment to N - Government's program for mining sector sector reform reform was confirmed and reinforced during the December 2001 Consultative Group meeting. Staff awareness and commitment to the M Allocation o f sizeable training resources and reform set-up o f a sustainable human resources policy, - 19- including an adequate remuneration scheme under the recently approved Decree lffective and transparent information M - A policy will be defined and approved by iromotion policy and effective MMI,spelling themainprinciples for anopen ommunication between government and informationmanagement tperators - Capacity building and training regarding investment promotion informationmanagement - Public access through internet and other means to policies, legal framework, and geo-data. ltakeholders (communities, operators, S - Implementation o f participatory processes nvestors in addition to govemement) regarding the improved contribution from ommitment miningto local economic development jentification o f feasible alternative M - Implementation under the project o f conomic activities for Local Economic identification surveys and diagnostic studies Ievelopment inmining districts -(parto f the participatory process). Sentificationo f economically feasible M Implementation o f promotion activities re deposits - Optimization o f infrastructure (transport, water) - Continued development o f the geological information infrastructure Leasonably stable world minerals market M Diversification o f mineral production onditions and prices -- Although the general trend inmineral prices will continue to be flat or down over the long term, it i s expected that, as a result o f the project, potential investors will findpromising targets that will allow them to position themselves favorably inthe next minerals investmentcvcle. rom Components to Outputs /IMIcommitment M - Sector policies supported by the project are in-line with the country's overall development and economic policies. - A smooth, trust-based dialogue has been established duringthe on- going project between MMI,the project management and the WB project team. {ffective procurement and financial N - The existingproject management unit has nanagement demonstrated its efficiency under the first sector TA project. 2onsultants quality inputs and outputs M - Quality control mechanisms for foreign consultants established under the first project have proven their efficiency and will be implemented as well under the proposed project - Improved, output-based mechanisms will be implemented for national consultants iwareness and stability o f staff within M - A comprehensive training program will be nstitutions implemented - 20 - - The recently approved (July 2002) Decree regarding the use of part o f the revenues generatedby the sector institutions to fund their budget will improve the availability, motivation and sustainibility o f staff as well as Effective inter-institutional coordination S -provide the necessary means to operate Activities incoperation and actively volving the principal extra-sectorial institutions (environment, water) have been incorporated in the project design Political interference M - Project implementation guidelines to be included inthe Credit Agreement will aim at minimizing political interferences - Detailed and concrete outputs and indicators. Qualified external auditor appointed on M -Timely shortlisting o f possible candidates approved terms o f reference before effectiveness Overall Risk Rating M Jegligibleor Low Risk) 3. PossibleControversialAspects: None G. Main Loan Conditions 1. Effectiveness Condition (i)TheProjectaccounthasbeenopenedandcounterpartfundsdeposited.(ii) auditorshavebeen The appointed. (iii) The U C P M Project Director has been confirmed by the Government, a deputy accountant (Nouakchott) andthe Zouerate U C P M regional coordinator (responding to UCPMDirector) have been contracted. And (iv), the Project Implementation Plan (PIP), includingthe Administrative, Financial and Accounting Procedures (AFAP) manuals have been adopted by the Government and are acceptable to IDA 2. Other [classify according to covenant types used inthe Legal Agreements.] Financial Covenants :(i) UCPM shall maintain or cause to be maintained records and accounts to The reflect in accordance with sound accounting practices the operations, resources and expenditures; @)Records, accounts, special accounts, SOEs shall be audited by independent auditors acceptable to IDA; (iii) Productiono f quarterly FMRs. H. Readiness for Implementation 0 1. a) The engineering design documents for the first year's activities are complete and ready for the 8 start o f project implementation. 1.b) Not applicable. e! Theprocurement 2. documents for the first year's activities are complete and ready for the start o f -21 - - - project implementation. 3. The Project ImplementationPlan has been appraised and found to be realistic and of satisfactory 04.Thefollowing quality. items are lackingand are discussedunder loanconditions (Section G): I. Compliance with Bank Policies 1. This project complies with all applicable Bank policies. 02.Thefollowing exceptions to Bank policies are recommendedfor approval. The project complies with all other applicable Bank policies. Paul0 De Sa A. David Craig Team Leader Sector ManagerlDirector Country Manag- - 22 - Annex 1: Project Design Summary MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT ance Da Strategy S Sector-related CAS Goal: Sector Indicators: Sector1country reports: from Goal to Bank Mission) Accelerate private sector-led - Increased investment inthe ' Sector production and 2ontinued supportive and growth miningsector :xports statistics ragmatic macroeconomic - Increased minerals exports mdsector policies Favorable international nineral market prices and lemand Institutional development .Consolidationofpublic Resources analysis studies Development o f partnership and governance mining institutions and Socio-economic surveys Lndeffective coordination long-term sustainability o f 'Sector statistics jetween stakeholders :heir core functions Stakeholders surveys operators, government and .Improvedmanagement o f EIAs :ommunities) social and environmental Government awareness and mpacts :ommitment .Average time to grant a niningtitle maintained below 30 days at project closure Basic infrastructure for 'Access for private operators Macroeconomic studies and Government commitment sector development o existing infrastructure itatistics Effective inter-institutional inked to the Sector statistics md sectoral coordination for Souerate-Nouadhibou corridor Socio-economic surveys lata sharing and optimization .An increased number and MiningCadastre review iiversification o f economic ictivitiesiexports including ninerals and others 'Improved knowledge o f ocation, access and quality o f uater resources - 23 - Data Collection Strategy 'roject Development Outcome I Impact Project reports: from Objective to Goal) 3bjective: Indicators: Buildup and promote - MMIable to promote, . Sector and institutional 'Government capable o f nstitutionaland technical manage and monitor Jerformance appraisals: :atalizing and promoting :apacity to manage the performance o f the mining .Mid-term and ICRreports niningsector development :ountry's mineralresources, industryby further training o f :overing institutional issues mvironmental management - Systematic application o f ncluding social and professional staff. tnd improvesector consultative processes :ontribution to nationaland -Sustainability Index ofpublic *egionaleconomic mining institutions measuring levelopment staffing competence level, financial accounts, budget procedures, and staff remuneration Jromoteprivate investments - 10%increase inaverage . Macro-economic and sector liversified mining production n mining cumulative annual investments statistics rojects -in10%increase inaverage mining ' Continued monitoring by Favorable intemational MMI nineral market prices and cumulative annual minerals ' Base line studies iemand -exports by project end . Stakeholders surveys Stable, politically neutral Improvedcoverage and - Macroeconomic statistics nacroeconomic and sector access to geological ' Socio-economic surveys iolicy environment information Environmental and social - Baseline of mining sector . Project impacts assessment 'eports iwareness and commitment o f impacts assessment and 'Mid-term and I C R reports ;takeholders improved capacity for EIA :overing environmental and Favorable intemational monitoring ;ocio-economic issues nineral market prices and - Socially and economically iemand conflict-free industry Jreation and support to - 35 subprojects created before oca1economic development project end n-ograms - At least 5 new economic activities identified and feasibility studies completed inthe Zouerate-Nouadhibou -corridorincrease inaverage 20% household income inthe areas where local economic activities are implemented I - 24 - Data Collection Strategy htput from each Output Indicators: Jrojectreports: from Outputs to Objective) Zomponent: I.Improve the conditions for Stakeholders surveys Stakeholders commitment :ontribution o f mining to - 35 small grants projects Socio-economic studies Identification o f feasible iustainable local economic successfully implemented by U C P M quarterly, annual and dternative economic activities ievelopment in the project end, with project nid-term progress reports, and Commitment o f independent Couerate-Nouadhibou completion reports submitted inal report )perators to small grants :orridor and reviewed WB aide memoires, PSRs :omponent objectives -SNIM environmental audit md I C R presented and evaluated 18 months after effectiveness. -Regional development action plan, agreed upon by all stakeholders by midterm review -20% increase inaverage household income inareas where local economic development activities are implemented !. Optimize and promote the - Sharing o f existing Sector statistics Governement commitment levelopment o f mineral infrastructure (railway or port) U C P M quarterly, annual and S N I M commitment and ixploitation inNW Mauritania with other private operators by nid-term progress reports, and :ooperation midterm review inal report Identification o f feasible ore - A joint miningventure, or a WB aide memoires, PSRs leposits new mining operator with a md ICR feasible project in the Zouerate-Nouadhibou region byproject end. I, Increase and add value to - Airbome geophysical survey Maps, data-bases and reports Highquality consultants ;eo-data to improve completed 18 months after U C P M quarterly, annual and ngaged for project nulti-sectoral use o f earth effectiveness. nid-term progress reports, and :omponents ciences information, in - Geological mapping inal report Effective information and ,articular with respect to completed and products WB aide memoires, PSRs lata sharing strategy nanagement and promotion o f published 48 months after mdICR nineral and water resources effectiveness. - Processing o f geo-data: products published 48 months after effectiveness. At least 5 mineral resource studies and a Mauritania Mineral Resource Assessment guide published by project end. - Hydrogeological map published 36 months after effectiveness. .. Consolidate the - SIGE continuing to operate E A s and EIAs evaluation Continued availability o f nvironmental management and sustainable at project end 'eports inancial and human resources - 25 - capacity o f the minerals sector - SAE staff stable and in - U C P M quarterly, annual and - Staff awareness and capacity to fulfill its functions mid-term progress reports, and commitment on a continuous basis. final report - Operators commitment - Coordination with the - WB aide memoires, PSRs - Effective inter-institutional MDREoperating on a routine and I C R relationships basis. -Timely, accurate processing o f EIAs and EAs -Sustainability index, measuring client satisfaction, staffing requirements, financial autonomy o f institutions. 5. Consolidate the public - SIGM operating ina - Customers surveys I- Effective and transparent institutional and technical continuous and sustainable Sector statistics information policy capacity for management o f way. -- U C P M quarterly, annual and - Effective inter-institutional the mineral sector, including - DMGand MiningCadastre mid-term progress reports, and relationships inter-institutional relationships staff stable and committed to final report - Continued availability o f (environment, water) project objectives. - WB aide memoires, PSRs financial and human resources - No back-log o f documents to and I C R - Staffawareness and be processed by the Mining commitment -Cadastre, Sector Promotion DMGandMMI. Mining Unitoperational by midterm review. - 100% o f DMGand MMI staff trained by project end. - 26 - Jroject Components I nputs: (budget for each 'roject reports: (from Components to Sub-components: :omponent) Outputs) Local Economic JS$ 7.15 million DevelopmentinMining ireas I.1 Developmentand . Stakeholders surveys iiversification o f local JSEl.82 million . Consultants reports - Commitment o f stakeholders :conomic activities U C P M quarterly, annual and (SNIM, communities, NGOs, nid-term progress reports, WB and others) inal report - Ownership o f project WB aide memoires, PSRs md ICR -objectives institutional set-up Effective and coordination to supervise and orient activities - Quality and commitment o f contracted consultants - N o negative political interference .2 Improvedservice delivery JS$0.75 million Stakeholder surveys -Stakeholder cooperation nthe Zouerate-Nouadhibou Consultant reports -Government support to :orridor PSRs and ICRs, WB aide carrying out project objectives nemoires .3 Hydrogeological studies JS$2.88 million Grant evaluation reports - Government commitment Recipient surveys -Staff ability to administer and Sector statistics and reports -monitor the grants program Effective supervision activities -Timely processing o f grant requests .4 Strengthening o f JSs1.53 million Sector reports and statistics -SNIM cooperation levelopment management -Government commitment iapacity .5 Supervision o f local JS$O.17 million Interimreports and -Staff stability and continuity conomic development :valuation :eo-Information and LJSffJ2.49million levelopment :.1 Airbome geophysical JS$4.72 million Databases, CD-ROMs and - Government cooperation and urveys naps produced as a result o f assistance he surveys covering the - High quality o f recruited ,equired areas. consultants :.2 Geological surveys JS$2.84 million - Consultants reports and - Timely procurement o f iroducts surveys and studies U C P M quarterly, annual and - Quality o f works and nid-term progress reports, contracted consultants inal report - Effective inter-institutional - WB aide memoires, PSRs coordination md ICR - Awareness and stability o f - 27 - iational staff N o negative political nterference . Operators commitment 2.3 Hydrogeological mapping US$0.74 million - Consultant reports and ' Timely procurement o f and water database o f products ;urveys and studies Mauritania - Number o f maps published . Quality of works and and sector infrastructure :ontracted consultants studied. . Effective inter-institutional :oordination ' Awareness and stability o f iational staff 2.4 Synthesis o f geological JS$3.26 million - U C P M quarterly, annual and ' Timely implementation o f data and mineral resources mid-term progress reports, xocurement procedures information final report Effective inter-institutional .WB aidememoires, PSRs :oordination mdICR . Continued ownership o f iroject objectives . Staff stability and awareness 2.5 Supervision o f the JS$0.93 million .Consultantsurveysand .Adequate project geological infrastructure reports :oordination and supervision component -Number o f maps published 3. Capacity building of JS$4.49 million private mininginstitutions 3.1 MiningSector Promotion JS$1.3 1million - Number o f investor demands . Quality o f contracted staff Unit snswered .Effective inter-institutional :ooperation 3.2 Miningcadastre unit JS$0.3 1 million .Ownership o fproject follow-up -- Client consultation, surveys Number o f exploration 3bjectives licenses issued .Timely implementationof xocurement procedures .Quality andcommitment of :ontracted consultants 3.3 Environmental JSSl.36 million - Stakeholder surveys, client .Continuous SIGE management o f the mining consultations sommitment sector -Cooperationwith stakeholders and effective information sharing 3.4 Institutional strengthening JS$0.66 million - Production and exports - Government commitment o f the Directorate for Mining statistical data and Geology -- Consultants reports -- Timely procurement Quality o f contracted U C P M quarterly, annual and Sonsultants mid-term progress reports, - Operators commitment -final aide memoires, PSRs report WB and ICR 3.5 Training programs JS00.74 million -Number o f staff trained -Quality o f consultants - Surveys done before and recruited and selected for - 28 - after training training 3.6 Supervision o f institutional USSO.11 million -Interim reports and evaluation -Staff stability and quality o f reinforcement activities recruited international consultants 4. Projectcoordination and US $2.07 million - Quarterly, annual and - U C P M staff continuity and management mid-term progress reports, stability final report, all including --- Continued Continued project ownership financial and procurement No political interference assessments commitment to -- Yearly financial audits WB procurement and -reform Continued satisfactory -financial memoires, PSRs reviews performance o f staff WB aide and I C R - 29 - Annex 2: Detailed Project Description MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT By Component: Project Component 1 US$7.15 million - Localeconomic developmentin mining areas This component would support the empowerment o f local communities and municipalities. The project will work on local economic development around the SNIM exploitation site and along the Zouerate-Nouadhibou corridor in NW Mauritania. The project will support activities aiming to (i) diversify the local economic base by seeking alternative economic activities, (ii) a small grants fund program to provide necessary funds to small businesses and entrepreneurs seeking to increase or diversify their productive capabilities; (iii)strengthen the capacity o f local authorities for the delivery o f social services; (iv) develop hydrogeological studies to improve the availability o f water in the region; and (v) strengthen the regional development management capacities, especially inthe envrionmental and social areas. Subcomponent 1.1Development and diversification of local economic activities (USSl.82 million). The subcomponent would include the following activties: (a) Participatory identlJication of potential economic activities (US80.17 million). This program would identify in a participatory way potential new local economic activities and initiatives in mining areas, feasible within a regional development framework, through workshops, studies and surveys. Participatory diagnostic i s a key element in establishing partnerships among local communities, local authorities and mining societies, as it opens the dialogue and consultation among the different actors on local and regional development, and would identify potential demand and supply from the different groups o f stakeholders. The participatory diagnostic would take place in the Zouerate area and seek to establish the demand for social infrastructure, service delivery, and alternative economic activities in line with development potential and priorities, and provide orientation and information to existing and potential artisans and small entrepreneurs. The diagnostic would be conducted among the local population, religious and regional authorities, local associations, NGOs and civil society, as well as SNIM representatives and employees providing an opportunity for consultation and active involvement o f stakeholders. S N I M previous experience with diversification o f economic activities, will be incorporated into the study. Specialized development NGOs and consultants would be contracted to carry out the planned activities. (b) Feasibility studies of social infrastructure, service delivery and alternative economic activities (US$0.29 million) This component would identify the feasibility o f alternative economic activities, identified under the participatory process. A small number o f activities will be selected as pilots and on the basis o f this experience procedures will be adjusted as required and further activties will be selected. The feasibility studies would determine the local development needs, along with the necessary infrastructure. The studies would be completed by local and international consultants, specialized in desert zone development in agriculture, tourism, artisanal and industrial activities. The studies would develop the implementation strategy, which would include a multisectoral approach. Coordination o f activities with relevant ministries and institutions i s implied as part o f the studies. The feasibility studies would also calculate the costs o f carrying out the diversification o f economic activities. (c) Small grants program to support diversification of local economic development and technical assistance (US$1.21 million) The small grants program would be established in zones o f influence o f mining activities, principally along the Zouerate-Nouadhibou corridor and, at a later stage, in other miningareas. It will be administered by the project management unit, UCPM. The target group o f the - 30 - small grants program includes: (i)artisanal and small-scale economic activties by associations, cooperatives or firms, in order to improve the incomes and living conditions o f the local communities; (ii) infrastructure selectedbylocalcommunitiesthroughaparticipatoryapproach; (iii) social transfer o f services. The grants program would provide the necessary funds to artisans and small entrepreneurs to diversify andor increase their productive capabilities through improved level o f expertise, increased capacity, purchase o f new equipment, training and new business development. The grants program would also seek to diversify economic activities in the area by engaging small-scale operators in supply-chain activities, services, agriculture, manufacturing, packaging, tourism and others. The program would work with already-established and to be established small businesses, NGOs, community organizations, which would use the grant money to create, expand or diversify their activities either through the provision o f supplies or services, to mining companies, or in sectors not related to mining in order to reduce the community dependence from mineral operations. A small number o f pilots will be selected and pilot funding will be provided up to 90% o f project costs to provide an initial demonstration effect o f the program. Based on the experience o f the pilots, procedures and criteria will be adjusted as required to improve effectiveness. Following the pilot projects the percentage o f grant funding provided will be reduced. Maximum grant amount would reach US$20,000. Conditions to benefit from the program would be applied to ensure a substantial vested interest by grant recipients in the projects outcome. Such conditions will include an appropriate cost sharing formula or other commitments, depending on socio-economic threshold and criteria. Concessional cost sharing percentages will apply to vulnerable groups including women and the elderly. On the basis o f periodical invitation to present proposals (about three times a year), the projects would be screened, selected and approved through a three steps procedure, involving a technical and institutional evaluation by a committee involving representatives from the MMUUCPM, from the Civil Society, external experts and the Bank. Results will be publicized to ensure transparency. Projects completion reports would be collected and evaluated twelve months after the start o f the project. The credit would fund the contracting o f a development NGO to provide on-site assistance for the program management and implementation. (d) Information and monitoring (US$O.15 million). Stakeholders surveys, workshops and information campaigns would be carried out during implementation in order to assist in management o f community expectations and to to keep informed the various parties, including populations, local and national authorities, companies, the government and donors regarding activities progress and outcomes. Subcomponent 1.2 - Improved service delivery in the Zouerate-Nouadhibou corridor (US$O.75 million) This subcomponent would provide technical assistance to streamline and improve the provision o f services to local communities situated along the Zouerate-Nouadhibou corridor. The project would act as a link in the definition and implementation o f a sustainable system for the delivery o f certain services, including by private sector contractors, in coordination with, i.a. other Bank's projects such as the on-going Urban Development Project (PDU), or the Agence d'Acces Universel. The project would, if feasible, support short- to mid-term improvements o f delivery mechanisms o f certain services, to be identified in the context of participatory diagnostic, in coordination with longer term initiatives (e.g. the PDU). Subcomponent 1.3 - Hydrogeological studies (US$2.88 million). Any new development - and even, at term, the mere survival of existing activities - dependon the identification o f new water resources within the region, both for industrial and community uses. The subcomponent will finance hydrogeological studies in the Zouerate -Choum segment o f the corridor area (Fig.1). The objective would be to locate new water reservoirs, through inventory o f existing information, satellite imagery and aerial photo data interpretation as well as detailed geological and ground geophysical and exploration surveys. Development o f identified resources would be carried out within the framework o f other initiatives. National and international consultants and works would be contracted with credit funds to implement the program. -31- Fig.1 Locatiin of selected area for hydro-geological studies Subcomponent 1.4- Strengthening of development management capacities (US$1.53 million). This component would consist o f three parts, namely (i) support to municipalities for the set-up o f community development plans through participatory approach, technical assistance and training; (ii) reinforcement o f the regional capacity to manage social and environmental impacts o f miningdevelopment, including SNIM's social and environmental management capacities and (iii) assistance to strategic long-term economic development planning o f the area, namely through the optimization o f SNIM's contribution to such development. SNIM, (Societe Nationale Industrielle Miniere) was established in 1974 and i s currently the largest exporter inMauritania. Iron ore deposits inthe North o f the country are substantial, and deposit exploration over the long term is an important theme inthe country's macroeconomic development. Mineral resource exploration i s also crucial for Zouerate regional growth. Under this component, the project would finance technical assistance to muncipalities and to SNIM, as well as goods to municipalities. SNIM would provide the funding for environmental studies, field work, chemical analyses, personnel hiringand training as well as field and office infrastructure. Subcomponent 1.5 - Supervision of local economic development (US$0.17 million) Consultative process with the stakeholders, as well as the diversification o f local economic base is an involved process, which requires continuous supervision throughout implementation. This component includes international consultant services to supervise local economic development activities in the targeted areas. The supervision activities would include the consultative process with local stakeholders, expansion o f the local economic base, and presentation o f international best practice to guide the development efforts. Project Component 2 US$12.49 million - Geo-information and Development The main objective o f this component i s to provide geoscientific information necessary to a variety o f sectors to enhance the economic development o f Mauritania. The provision o f geo-data i s fundamental for good governance and proper management o f territory. The information would support activities related to many sectors, such as water resources and environmental management, promotion o f investments in the mining sector and others. PRISM-1 funded the production o f environmental, geological, geochemical and geophysical data and mineral resources maps over selected areas o f Mauritania. That information raised awareness regarding the country's mineral potential in the investment community. In addition, further processing would extend the benefits o f this knowledge resource and improve access - since i t clearly constitutes a public good - to a broader spectrum o f stakeholders. Additional geological information will also be used to improve the identification and management of water resources. Nevertheless, there still remain important areal gaps to be surveyed. This component would seek to address these issues and would consist o f the following activities: - 32 - Subcomponent 2.1 - Airborne geophysical surveys (US$4.72 million) Airborne geophysics represents a key methodological, cost- and time-efficient tool for providing information on surface and sub-surface rocks characteristics and geology. The areas to be flown will amount to a total o f about 680,000 line kilometers, covering about 480,000 square km, over three selected areas complementing the works carried out under PRISM 1 (see Fig. 2). Measurements will be done at an average altitude o f 100 meters above ground and at 700 meters intervals between lines and would include magnetometry and spectrometry. Financing would be provided under the IDA Credit as well as under an Islamic Development Bank (IDB)parallel funding. __ Fig.2 Schematic map showing areas surveyed under Prism 1and selected to be surveyed under Prism 2. Subcomponent 2.2. - Geological surveys (US$2.84 million) Geological mapping carried out under PRISM-1 (a synthesis covering the whole country at a 1:500,000 scale and 32 mapsheets surveyed at a 1:200,000 scale) already confirmed and identified parts o f the country's mineral potential. The raw data produced so far contributed to attracting the attention o f private mininginvestors and the interest o f other sectors. As already mentioned, there i s a needto extend the coverage o f areas not yet covered under the first survey. This component would finance the production by international consultants o f about 17 geological maps at the 1:200,000 scale (ca. 185,000 square kilometers) over selected areas o f the country. Financing would be providedunder the IDA Credit and IDBparallel funding. Subcoponent 2.3 - Hydrogeological mapping and water data base of Mauritania (USSO. 74 million) In the context o f Mauritania, the availability o f water resources determines social and economic development o f the country. The present drought, inaddition to the arid, desert climate, makes water one o f the most precious natural resources in Mauritania, where exploration o f water resources is an essential component for the populations. In most parts o f the country, availability o f water i s a pre-requisite for any miningproject development, as it i s needed at several stages of the production cycle. This component would assist the development o f a national computerized water wells data base and information system, in close cooperation with the National Water Resources Center (CNRE), based on CNRE own data and on that generated under PRISM 1. A hydrogeological map done at the scale o f 1:500,000 would be completed, compiling geological and geophysical data assembled during PRISM-1 and CNRE data. International and national consultants would be contracted under the IDA credit to develop the information system, disseminate the information and produce the map. Necessary hardware and software, equipment, and training would be procured under the credit. Subcomponent 2.4 - Synthesis of geological data and mineral resources information (US$3.26 million) - 33 - This component would provide assistance to further process geo-data generated under PRISM-1 and PRISM-2 and prepare maps, documents and materials aiming at promoting the mining sector as well as spreading the use o f the information to other sectors and users, including foreign ivestors, local administrations and civil society. Geological, geophysical, gitological, geochemical and satellite imaging data would be integrated, and products would include La. the publishing o f a geological map o f Mauritania at the 1:1,000,000 scale as well as regional mineral resources assessments, ore deposits modelling and exploration o f methodology guidelines, thematic studies on geo-environment and other documents wouls be generated. Financing would be provided under the IDA credit to contract international and national consultants. Parallel financing would be provided by JICA (Japanese International Cooperation Agency) to train OMRG (Mauritanian Geological Research Office) in ore deposits modelling and mineral resources assessment documents production, to be promoted by the MMI'sMiningPromotion Unit(UPM, see 3.1 below). Subcomponent 2.5 - Supervision of the geological infrastructure component (US$0.93 million) The highly technical nature of the airborne geophysical surveys and cartography requires engineering supervision to ensure the best possible quality o f output. The role o f the supervising team would be to ensure smooth progress o f the activities by hiring a team o f consultants, as has been done under PRISM-1. The team would advise the Project Management Unit, evaluate bidding documents, oversee works progress, evaluate the product's quality, assist in the coordination o f training programs to strengthen the capacity o f institutional technical staff, and disseminate products and information generated by the project. Project Component 3 US$4.49 million - Capacity buildingof public mininginstitutions Significative progress has been achieved under PRISM-1 regarding the development o f sector management capacity. However, as demonstrated under this project as well as inmany others worldwide, institutional strengthening i s a long process, mostly with respect to involved cultural and methodological changes required to modernize the system. At the PRISM-1 mid-term review, inApril 2003, a number o f issues have been identified which will need to be adressed under the proposed project. Such issues are mainly: (i) to improve sector information management and promotion aiming at potential investors and - likewise important - civil society, authorities and other involved stakeholders; (ii)to consolidate the sector management capacity regarding the administration o f miningtitles, environmental permitting and monitoring o f sector compliance with respect to the regulatory framework; (iii) to further develop the sector human resources knowledge and capacity through continued training programs; and (iv) to ensure the long term sustainability o f the sector public institutions. Sector sustainability will be insured through the application o f 40% o f funds generated by sector institutions. The funds generated will be put in a special account and used for sector reinforcement. Subcomponent 3.1 - Mining Sector Promotion Unit (US1.31 million) The objective o f the Mining Sector Promotion Unit (UPM) would be to increase the Government's capacity for sector promotion in a broad sense - programs - by allocating adequate human, operational and financial means. The entity would be established under the auspices o f the Minister o f Mines and Industry and would benefit from the operational and legal status similar to the successor users regarding mineral development. It would prepare or commission development studies, e.g. regarding the contribution o f miningto socio-economic and environmental improvement, or identification of possible new projects. It would assist national and intemational investors, authorities and CSOs, and would be responsible for the coordination o f collection, storage, maintenance and distribution o f the available data on the country's mineral resources. The component would provide funds for the establishment o f the unit through procurement o f goods and works, including hardware, software and office equipement; for contracting intemational as well as national consultants to set up the unit, for preparing studies and materials and for carrying out promotion - 34 - and dissemination activities. Subcomponent 3.2 - Mining cadastre unit follow-up (US$0.31 million) Created under PRISM-1, the MiningCadastre Unit (UCM) has become a successful and examplary operation, facilitating access and security o f tenure to mining titles for exploration and exploitation activities. The Cadastre has become fully operational, and assistance to its organizationwill endwith PRISM-1, After operation for two-three years without supervision, the Cadastre would face the need for monitoring, upgrade, and evaluation o f its activities. This component would finance a modernization o f the system, gradual replacement of equipment, and international consultant services. Subcomponent 3.3 - Environmental management of the mining sector (US$1.36 million) PRISM-1 initiated the institutional capacity building for environmental management o f the mining sector. PRISM-1 assisted the Government to set up the sector environmental regulatory and institutional framework, developed pilot studies o f the social and economic impacts produced by mining activity, as well as a study o f environmental conditions in the potential mining zone in the Northern part o f the country. The component would follow the activities initiated under PRISM-1. The component would finance: (a) Coordination of activities with the Ministry of Rural Development and the Environment (MDRE)and the Environmental Affairs Service (SAE), part of the MMI'S Directorate of Mines and Geology (DMG) (USSO.15 million). This program would finance activities to optimize cooperation between the two organizations for the issuance o f environmental permits, as defined under the environmental regulations. The component would streamline the procedures involving the MRDE and DMGsEnvironmental Affairs Service (SAE), and would develop EIAs assessment capacity, mainly by means o f on-the job training to staff through technical assistance to be provided by international and national consultants to be contracted under credit funds. (b) Support to DMG'S Environmental Affairs Service (SAE), NGOs and civil society to implement the regulatory framework (USSO. 86 million). The Environmental Decree for MiningActivities, expected to be approved in 2003, defines a clear framework o f regulatory responsibilities for mining companies and for the state regarding environmental management. During the PRISM-1 project, a unit responsible for processing environmental permitting has been set up under the DMG, equiped and trained to handle environmental matters related to miningactivities. However, the unit still lacks hands-on experience and practice for EIAs assessments. In addition, the defined procedures have only been tested on a virtual basis. The component would provide technical assistance to develop such capacity mainly by means o f on the job training to SAE, NGO and other stakeholders' staff on the critical aspects o f environmental management from consultations to preparation and evaluation o f EAs and EIAs and preparation for mine closure through technical assistance to be provided by international and national consultants to be contracted under the credit funds. Within this framework, an important activity would consist o f carrying out, by national consultants with participation o f SAE staff, an environmental assessment o f the closed Akjoujt copper mine, in order to train the SAE personnel regarding the planning, implementation and technical constraints o f environmental audits. (c) Strengthening of the Environmental Information and Management System (SIGE) (US$O.35 million). The SIGE has been established under PRISM-1 and the information generated so far inputted into the systems. However, the functioning o f the system as a tool supporting environmental management and dissemination o f information has not yet been tested yet under fully operational conditions (partly because the Environmental Decree for Mining Activities had not yet been passed. This activity will therefore provide resources to adjust and improve the SIGE, including its operationality regarding the transparent and efficient processing o f environmental permitting, dissemination and access to information by all concerned stakeholders and links with other sectoral or non-sectoral data bases. International and national consultants would be contracted and equipment renewed as needed. - 35 - Subcomponent 3.4 - Institutional strengthening of the Directorate for Mining and Geology (DMG) (USS0.66 million). Further support would be provided to the DMG to strengthen its sector management capacity, including limited infrastructure improvement as needed. Particular emphasis would be given to DMG abilities to properly monitor the sector compliance with respect to regulations in providing technical assistance to the Mining Inspectorate services and the means to carry out actual field work. The DMG would also provide resources to strengthen the Geological and MiningInformation System (SIGM), set up under PRISM-I through contracting o f international and national consultants and provisioning o f goods to upgrade the system, and to link it to other institutions (e.g. CNRE, OMRG). Subcomponent 3.5 - Training programs (USSO. 74 million) This component will provide training to further develop the capacities o f people involved directly - agencies responding to MMI, SNIM and others or indirectly (e.g. CSOs, representatives o f local authorities and others) in sector activities and - - to improve mineral resources governance. The training program will consist o f i)creation o f a training network throughout Mauritania; ii)on the job training under the different components; iii)publicly and privately organized workshops and study programs in Mauritania; iv) short international study tours; v) participation in international seminars and conferences for qualified staff. International training will consist mainly o f programs in Europe, South Africa, North America and/or Australia to increase existing qualifications, or in other African countries and in Latin America for staff to share experiences in the execution o f similar sector development activities. Subcomponent 3.6 - Supervision of institional reinforcement activities (USSO. II million) The high complexity of the institutional capacity building process requires expert advice and supervision throughout the duration of the activity. This component would include services o f international consultants to facilitate interinstitutional dialogue, manage the coordination o f efforts, integrate component activities, and consolidate institutional strengthening. Project Component 4 US$2.07 million - Project coordination and management MiningProject Coordination Unit (UCPM), established under the first project, would continue operating under this component. Current project staff will be reinforced by an evaluations specialist and a staff accountant. During the period o f overlap o f the two projects (PRISM-1 closes on December 31, 2004, while PRISM-2 will become effective in 2003), the U C P M will coordinate project activities in parallel to make sure that the two budgets, procurement and disbursement activities are run separately. The U C P M staff, already well trained during PRISM-1, would be responsible for a) closely following the project plan, including follow-up and evaluation activities; b) establishing annual program budgets and assuring adequate mobilization o f resources; c) procurement, including consultants, goods and works; d) disbursement. In addition, a regional unit, subordinate to the national UCPM, will be established in Zouerate to manage and coordinate the activities to be developed in the Zouerate-Nouadhibou corridor (ZNC), principally under component 1. Also, an eminent person would be engaged to lead and facilitate the activities o f the monitoring Committee which would be established to monitor and assess the actions to be implemented in the ZNC. The U C P M will serve as a liaison between the project and the World Bank office, as well as the Ministryo f Mines and Industry(the Executing Agency), the Ministryo f Rural Development and the Environment (MDRE), the National Center for Water Resources (CNRE), the National Industrial and Mining Company (SNIM), local governments, NGOs and civil society and provide direct information on project implementation and outcomes. -36 - Annex 3: Estimated Project Costs MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT U 1. Local economic development in miningareas 4.56 2.26 6.82 2. Geo-information and development 3.32 8.88 12.20 3. Institutional consolidation o f the miningsector 2.05 2.22 4.27 4. Project management 2.01 0.00 2.01 Total Baseline Cost 11.94 13.36 25.30 Physical Contingencies 0.10 0.20 0.30 Price Contingencies 0.20 0.40 0.60 Total Project Costs1 12.24 13.96 26.20 Total Financing Required 12.24 13.96 26.20 Local Qn oje y Cat US $million illio Goods 1.30 0.31 Works 3.13 3.97 Services 5.73 8.33 Training 0.06 0.64 Small Grants 0.80 0.00 Incremental Costs 0.92 0.11 contingencies 0.30 0.60 Total Proiect Costs' 12.24 13.96 Total Financing Required 12.24 13.96 26.20 I 1 Identifiable taxes and duties are 0 (US$m)and the total project cost, net o f taxes, is 26.2 (US$m). Therefore, the project cost sharing ratio is 68.7% of total project cost net o f taxes. - 37 - Annex 4: Economic Analysis MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT Miningproduction in Mauritania consists today o f iron ore (produced since 1961) and, to a less extent, industrial minerals. Copper has also been exploited at the Akjoujt mine between 1970 and 1980. Iron ore accounts for one-third to one-half o f the country's exports, and hence greatly influences the gross value o f minerals production. Miningrevenues contribute 12% to the country's GDP. Mauritania's total exports in 2001 were about US$393 million, o f which iron ore exports, at USS197 million, amounted to 50% o f the total. The state-owned SNIM has been generally responsible for 35-50% o f the country's total exports, owing to the dependence on iron ore for export revenues. Future mining exploration belongs to expansion in gold miningand diamonds. Average annual investment in the mining sector has been expanding, rising to USS13.5 million in 2001 from USS4.4 million in 1997 and almost nil in the early 90s. The positive investment trend is likely due to the new sector policy and to the Mining Law, which was enacted in 1999 and established a modern framework for sector development (e.g. abolishing the local partner association requirement for new investments), and the set up of an efficient Mining Cadastre facilitating the access to mineral resources and ensuring the security o f tenure for miningtitles -- a pre-requisite for sector investments. Mauritania i s currently trying to expand and diversify the export base through the promotion o f new mining activities. In addition to iron ore, salt and phosphates are also produced, and there i s a good potential for minerals such as diamonds, gold, copper, platinum and paladium, among others. Mauritania's diamond potential i s being explored by Rex Diamond MiningCorporation, Diamet, Ashton Mining, Brick Capital Corporation, Dianet, and De Beers. As o f 2002, 34 exploration licenses for diamonds were being held by different companies, concentrating in the Northern part o f the country. With respect to gold, 54 exploration licenses have been issued, also as o f 2002, with BHP, Rex Mining, Luchosol and Brick Capital active in this sector. There i s also a good potential for the quarrying and export o f ornamental stones. Furthermore, the iron ore resources in the Zouerate region are far from being exhausted and the potential to further develop this sector i s deemed to be very attractive, either in association with the national SNIM company or through new grass root projects. The existence o f the railway transport infrastructure and o f the mineral harbour in the so-called Zouerate-Nouadhibou Corridor represents an attractive element to promote growth for iron production. Inaddition to an increase inmineral export value, and potential impacts on local economic development (see component 1 o f the proposed project), the impact o f the projected sector development on fiscal revenues (other than SNIM, which generates about USS15 to USS20 milliodyear) as a result o f the new sector policy, can be estimated in the range o f USS5 to USS10 million per year, depending on the scenario. Under the 2002 Model Mining Convention, mining companies are subject to miningroyalties, calculated on the basis o f selling price o f the mineral for the given year. The rate i s fixed according to the substance group to which the mineral belongs. To test the robustness o f the possible contribution o f miningto the economy, two scenarios (low and high case) have been constructed. - 38 - MauritaniaMineral Production and Export Projections by 2015 (US$ million) Scenario Gross Production Gross Export Value Exploration Value (US$million) (US$million) Investment (US$million) 2002 197 197 11 Low 2010 300 300 25 High 2010 340 310 30 Low 2015 385 380 50 High 2015 440 430 60 Economic benefits o f mininginclude the development o f supply networks, transfer o f technology, and direct and indirectjob creation. Environmental regulations will be put inplace as a result o f the project, along with monitoring capabilities to minimize damage to the environment from miningoperations. Low Case Scenario: SNIM iron ore exports decreaseto US$l50 millionper year. One diamond mine starts operating by 2008. Akjoujt project i s delayed until2009. HighCase Scenario: SNIM iron ore exports remain aroundUS$200 million. Two small goldminesstart production by 2008, and a third one starts production by 2010. A diamond mine i s commissioned in 2008, and another one in 2012. Industrial minerals production for the domestic market reaches about US$5 million by 2010. Iron Ore: Current reportedproduction: 10,7 million tons in2001. Low Case Scenario: average iron ore prices decreasing to about $18 per ton by 2005, and remaining at that level until 2010; Pellet plant starts operating by 2005 with an annual capacity o f 4 million tons per year. HighCase Scenario: average iron ore prices increasingto US$23 per ton between 2008 and 2012; Pellet plant starts operating by 2004, with an annual capacity o f 7 million tons per year. The opening o f new iron ore operations has not been included, but this would nevertheless remain a plausible hypothesis boosting the projected figures by an estimated 30%. Copper: Current reportedproduction: none. Low Case Scenario: Akjoujt delayed 6 years; copper prices remain at US$ .80 per pound. HighCase Scenario: Akjoujt delayed 4 years; copper prices recover to reach US$l.OO per pound. Gold:Current reportedproduction: none. Low Case Scenario: Average annual investment: US$lO million2003-2012; Annual Exports: US$5 million in 2005, and $10 million by 2012; HighCase Scenario :Average annual investment:US$15 million(2002-2012); Annual Exports: US$10millionin2005, US$25 millionby 2012. Diamonds:Current reportedproduction: none; Low Case Scenario: Average annual investment: US$15 million (2005-2015); Annual Exports: $10 million in2007, and $20 million by 2010; HighCase Scenario: Average annual investment: US$20 million (2005-2015); Annual Exports: US$10 million in 2005, and USS50 million by 2012. - 39 - Mining industrvinMauritania Explorationinvestment in the Miningsector inMauritania since 1997to 2001 developed as the chart below illustrates (inmillion $US): Years 1997 1998 1999 2000 2001 SNIM 0.9 1.5 2.1 3.2 REX 2.8 2.4 2.5 2.5 J.M.ASHTON- 1.5 1.9 2.3 2.5 1.8 DIA MET NORMANDY 2.6 2.2 2.5 2.8 2.7 There were 88 miningpermits issuedinMauritania in 2002, covering 304,240 kmsquared. 72 o f the 88 permits were held by foreign enterprises. Foreign and local enterprises paid more than US$500,000 in taxes for permits and exploration rights. Explorationtitles are held by Ashton, Rex, SNIM, D e Beers, Sophosma, and Samin, among others. -40- Annex 5: Financial Summary MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT Years Ending December 31 1 Year1 I year2 I Year3 Iyear4 IYear5 I Year6 IYear 7 Total Financing Required Project Costs Investment Costs 0.4 3.6 5.5 7.0 5.5 2.5 0.5 Recurrent Costs 0.1 0.2 0.3 0.3 0.2 0.1 0.0 Total Project Costs 0.5 3.8 5.8 7.3 5.7 2.6 0.5 Total Financing 0.5 3.8 5.8 7.3 5.7 2.6 0.5 Financing IBRDllDA 0.4 3.1 4.5 4.5 3.5 1.5 0.5 Government 0.1 0.2 0.3 0.3 0.2 0.1 0.0 Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Co-financiers 0.0 0.5 1.o 2.5 2.0 1.o 0.0 User FeeslBeneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 0.5 3.8 5.8 7.3 5.7 2.6 0.5 I TotalFinancing Required I Project Costs Investment Costs 0.1 0.2 0.4 0.5 0.3 0.7 0.4 Recurrent Costs 0.2 0.2 0.3 0.3 0.4 0.4 0.4 Total Project Costs 0.3 0.4 0.7 0.8 0.7 1.1 0.8 Total Financing 0.3 0.4 0.7 0.8 0.7 1.1 0.8 Financing IBRDllDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Government 0.3 0.4 0.7 0.8 0.7 1.1 0.8 Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User FeeslBeneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 0.3 0.4 0.7 0.8 0.7 1.1 0.8 Main assumptions: -41 - Annex 6(A): Procurement Arrangements MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT Procurement General 1. A Country Procurement Assessment Review (CPAR) for Mauritania has beencarried out in 1999 and updatedjune 2002. It concludes that, as a rule, national procedures for procurement o f works, goods and services are acceptable to IDA subject to a few amendments. So far, the findings o f the CPAR remain valid. A new Procurement Code has been enacted in February 2002, based on the Bank's CPAR recommendations. and will be partially amended in a near future to take into account a few observations suggested by the Bank. 2. N o special exceptions, permits or licenses need to be specified in the Credit documents for International Competitive Bidding ICB) since Mauritania procurement regulations allow IDA procedures to take precedence over any contrary provisions o f local regulations. National Competitive Bidding (NCB), advertised locally, would be camed out in accordance with Mauritania procurement law and regulations, acceptable to IDA, provided they ensure economy, efficiency, transparency, and broad consistency with key objectives o f the Bank Guidelines. . Use of Bank Guidelines 3. Goods and works financed by IDA will be procured in accordance with IDA Guidelines for Procurement under IBRD Loans and IDA Credits dated January 1995 and revised in January 1996, August 1996, September 1997, and January 1999. Bank Standard Bidding Documents (SBD), and Standard Evaluation Report (SER) will be used for International Competitive Bidding (ICB). For N C B procedures, the Government gave assurance during negotiations that the following principles would be adhered to: (i) bids are advertised in national newspapers with a wide circulation; (ii) evaluation and bid bidder qualification criteria would be clearly specified in bidding/pre-qualification documents and will not be applied arbitrarily; (iii) bidder would be given adequate response time (at least four weeks) for any preparation and submission o f bids; (iv) all bids would be submitted in one envelope to be opened publicly; (v) point systems would not be used for bid evaluation for works; (vi) the award o f contracts would be announced to all bidders; (vii) eligible firms would not be precluded from participation; (viii) no preference margin i s granted to domestic contractors and suppliers; (ix) contracts would be awarded to the lowest evaluated bidder in accordance with predetermined and transparent methods; (x) bid evaluation reports would clearly state the reasons to reject any non-responsive bidand (x) prior to issuing the first call for bids, draft standard bidding documents prepared as annexes to the Administrative, Financial and Accounting Procedures Manual would be submitted to and found acceptable by IDA. 4. Consultancy services financed by IDA will be procured in accordance with IDA Guidelines for the Selection of Consultants by World Bank Borrowers dated January 1997, revised in September 1997 and January 1999 and May 2002. The standard Request for Proposals (RFP) as developed by the Bank will be used for the selection o f consulting firms. Simplified contracts, acceptable to the Bank, will be used for short term assignements, i.e. those not exceeding six months, or for those costing less than USD200,OOO. The Government has been briefed during appraisal as well as negotiations about the features o f the most recent consultants Guidelines, in particular with respect to advertisement, proposals opening and the various steps o f IDA review. 5. Small Grants. Procurement o f services, works and goods under Small Grants contracts would follow the procedures defined in the PIP and in accordance with the simplified procurement procedures referred to in Section 3.15 o f the Guidelines for Procurement under IBRD Loans and IDA Credits, and with the Bank's Guidelines for Simpliped Procurement and Disbursement for Community-based - 42 - Investments (February 1998). Procurement methods (Table A) 6. Procurement o f Works. The project will finance works contracts for an estimated total amount o f USD7.33 million equivalent, o f which IDA will finance USD24.55 million, including (i)civil works related to the rehabilitation and improvement o f existing facilities to provide adequate office space to municipalities within mining areas and to sector institutions; (ii) publication o f promotion and educational materials, scientific documents and maps; and (iii)airborne geophysical surveys. The contracts estimated to cost more than USD500,OO each, related to water exploration and to the airborne geophysical survey to be funded under the IDA Credit, represent an estimated cost o f USD1.70 million and 2.20 million respectively, and will be procured according to International Competitive Bidding (ICB) procedures, with post-qualification. Other airborne surveys would be procured according to the procedures o f the respective parallel financiers. Civil works procurement, representing an amount o f USD0.35 million, shall be carried out through National Competitive Bidding (NCB) procedures for contracts estimated to cost more than USD100,OOO each, including 1 package for works at DMG and UCM. Other contracts, including publications, smaller civil works and maintenance, each estimated to cost less than USD100,OOO and representing an aggregate amount o f USD0.25 million, will be procured through small work contractsprocedures. 7. Procurement o f Goods. The project will finance the purchase o f goods for an estimated total amount o f USDl.68 million equivalent, o f which IDA will finance USDl.45 million, including (i) office equipment, hardware and software, (ii) vehicles and (iii) equipment and instruments. All identified field good contracts and included in the Procurement Plan, agreed at negotiations, are estimated to cost less than USD200,OOO. Most o f the goods will be procured as packages using (a) NCB procedures when costing more than USD50,000, including vehicles (2 packages at an estimated cost o f USD0.40 million) and hardware and software (2 packages at a total estimated cost o f USD0.38 million); office and IT supplies would be mostly purchased through annual based supply contracts ("marche de clientele"), following N C B procedures; (b) National Shopping (NS) procedures acceptable to the Bank, based on the evaluation o f at least three price quotations and in accordance with provisions o f paragraph 3.5 and 3.6 o f the Guidelines, for items costing less than USD50,000, including office equipment, furniture, training materials and documentation; and (c) InternationalShopping (IS) procedures, acceptable to the Bank for contracts costing less than USD100,000, and based on the same procedures as NS, for specialized small equipments (e.g environmental monitoring instruments) and foreign documentation and technical litterature. In the case goods contracts estimated to cost more than USD200,OOO each would be needed and agreed between the Borrower and the Association, they would be procured according to I C B procedures 8. Consultancv Services and Training. The project will finance the contracting o f consultancy services for studies, technical assistance and training up to an estimated total amount o f USD14.6 million, o f which USD9.8 million will be financed by IDA. Firms. Firms will be recruited on the basis o f the Quality and Costs Based selection (QCBS) method, for an estimated aggregate o f USD6.86 million, using the Bank's Standard Request for Proposals, to provide services including (a) within selected mining areas in NW Mauritania (i) community driven and local economic development, (ii)improvement o f services provision to communities, (iii)hydrogeological studies and (iv) environmental and social management capacity building for municipalities and mining companies; (b) over selected areas of Mauritania (i) regional geological mapping, (ii)development o f hydrogeological data bases and maps, (iii)processing and synthesis o f available geo-data and production o f thematic maps, documents and promotion materials, and (iv) supervision of geo-information related services and works; (c) public mining sector institutional - 43 - strengthening: (i) assistance to the DMG environmental unit (SAE) to review and assess EIAs and audits; and (d) the project's financial audits. Exceptions to the QCBS method, for an estimated aggregate o f USD2.04 million, will include the use o f Selection Based on Consultant's Qualification (CQ) for the contracting o f services related to (a) in selected mining areas o f NW Mauritania (i) feasibility studies regarding the development o f local economic activites, (ii) municipal management capacity building, and (iii) monitoring workshops and information; (b) over selected areas o f Mauritania (i) mineral resources thematic studies and (ii)supervision o f hydrogeological data-bases and investigations; and (c) public mining sector institutional strengthening (i)sector promotion, (ii)follow-up o f the mining cadastre (UCM), (iii)support to the DMG environmental unit (SAE), including the information and management system (SIGE), and (iv) continued assistance to the modernization o f the DMG.For contracts based on a short list of consultants estimated to cost USD50,OOO or less per contract, the short list may consist entirely of national consultants if a minimumo f three qualified ones are available. Individuals. Individuals will be recruited in cases where a firm i s not needed. Such individuals will be selected and recruited on the basis o f qualification and experience (CQ) in accordance with Bank Guidelines, for an estimated total amount o f USD1.36 million. Commercial Practices. Services to assist Beneficiaries in carrying out Subprojects pursuant to Component 1.1 o f Annex 2 o f the Project, may be procured in accordance with commercial practices acceptable to the Association and specified in the Project Implementation Plan (see also paragraph 9 o f this annex). 9. Small Grants. Small grants for a total o f USD0.84 million equivalent will be awarded to artisanal and small-scale associations, cooperatives, or enterprises within the zone o f influence o f mining operations, and to CSOs and private organizations working with communities in such areas, to carry out projects aiming at the diversification of local economic activities, and improvement o f livelihood, environmental, social andor working conditions. Financing would not exceed USD20,OOO equivalent per project and they will have a maximum duration o f 12 months. They will be implemented by the beneficiaries themselves. On the basis o f periodical invitation to present proposals (about three times a year), the projects would be screened, selected and approved through a three steps procedure, involving a technical and institutional evaluation by a committee involving representatives from the MMVUCPM, from the Civil Society, external experts and the Bank. Elegibility criteria and procedures are defined ina special chapter o f the PIP, to be approved by the Borrower and acceptable to IDA before project effectiveness. The implementation may involve a mixture o f work force accounted by the beneficiaries, consultancy services, small civil works, purchase o f equipment or materials and/or expenditures related to training. Conditions to benefit from the program would be applied to ensure a substantial vested interest by grant recipients in the projects outcome. Such conditions will include cost sharing formula or other commitments, depending on socio-economic threshold and criteria. These activities would come under a Grant Agreement between the U C P M and the beneficiary. Monitoring and ex-post audits will be carried out by U C P M and, on a randombasis, by the Bank and through independent technical audits. 10. Incremental Recurrent Costs. The project would finance incremental recurrent costs up to an amount o f USD1.06 million equivalent, of which USD0.55 would be financed by IDA. Incremental recurrent cost would include (a) expenditures for the contracting o f auxiliary personnel required for the implementation of the project; and (b) expenditures and supplies for the operation and maintenance of facilities required for the implementation of the project (such as expenditures for office supplies, rental fees, services, operation and maintenance of equipment financed out o f the proceeds o f the Credit), as well as for domestic and international travel and per diems related to project implementation activities. All procurement within this category shall be done according to the procedures defined in the Project Implementation Plan manual (PIP). The approval by IDA and the adoption by MMI o f this manual i s a condition o f effectiveness of the Credit, and any amendment to such manual will have to be also - 44 - acceptable to IDA. Advertising 11. A general procurement notice (GPN) will be prepared and issued upon Board Approval in the United Nations Development Business listing all contracts above US$ 500,000 for works and US$ 200,000 for consultants. It would be updated annually for any outstanding major procurement contracts. Specific Procurement Notices for works to be procured by I C B will be advertised inthe national press o f wide distribution and internationally. Requests for expression o f interest will be published in local newspapers and in the UNDB for consultancy contracts estimated to cost more than US$ 200,000. Responses will be recorded in a register established at the UCPM. Since a large portion o f the Credit funds will be used for technical assistance and consulting assignments, early attention will be given to advance planning of recruitment and timely search for expressions o f interest through international advertising to obtain the best possible pool o f candidates from which strong short lists can be compiled. The related bidding documents, as applicable, will not be released - or the short list for consultant services will not be prepared - before eight weeks after the GPN has been published. Specific procurement notices (SPN) will be advertised in the national press o f wide circulation and internationally for large contracts. Sufficient time will be allowed to obtain bid documents and to prepare bids. IDA Review 12. All contracts for works above USS500,OOO and for goods above US$200,000 will be subject to IDA'sprior review procedures. The use o f IDA's standard biddingdocuments will considerably expedite the prior review process as IDA review will primarily focus on invitations to bid,bid data sheets, contract data, technical specifications, bill o f quantitieshchedule o f requirement and other contract specific items. The review process would cover about 76 percent of the total value o f the amount contracted for works. Procurement post review o f contracts awarded below the threshold levels will apply and should cover 15 % o f contracts in term o f number. In the event samples o f post reviews indicate major problems, additional reviews, financed by the Borrower, should cover the remaining portion o f contracts. Draft standard bidding documents for N C B will be reviewed and agreed upon with IDA prior to Credit effectiveness. 13. For consultant services, prior review will include the review o f budgets, short-lists, selections procedures, terms o f reference, letters o f invitation, proposals, evaluation reports and draft contracts. Prior IDA review will not apply to contracts for the recruitment o f consulting firms and individuals estimated to cost less than US$ 200,000 and US$ 50,000 equivalent, respectively. However, IDA prior review will apply to the Terms o f Reference o f such contracts, regardless o f value, to single-source hiring,to assignments o f a critical nature as determinedby IDA or to amendments o f contracts raising the contract value above the prior review threshold. Documents related to procurement below the prior review thresholds will be maintained by the borrower for ex-post review by auditors and by IDA supervision missions. The Project Unit will be required to maintain all relevant procurement documentation for subsequent review by IDA. The Project Unit will submit to IDA periodic procurement schedules detailing each procurement package in progress and completed as part o f the normal project reporting exercise. ProcurementImplementationArrangements 14. Procurement responsibility for the project rests with UCPM. Under the proposed project, it will be responsible for the quality of these procurements and adherence to Bank procedures. The tasks of U C P M will comprise: (a) maintaining a register o f all interested bidders; (b) maintaining a detailed list o f technical specifications of goods and services to be financed by the project; (c) preparation o f the procurement plan and calendar; (d) preparation and/or finalization o f pre-qualification bidding documents and requests for proposals; (e) bid evaluation and preparation o f evaluation reports; (f) - 45 - contract approval process through CCM/CDM (see below) and IDA, respectively; (g) receipt o f goods and services and dispatching; and (h) processing international and local price quotations. 15. In addition to IDA procedures, UCPM will process procurement according to the Mauritanian legislation through the Departmental Tender Board - Commission Departementale des Marches (CDM) - responding to the MMI, for the procurement o f contracts between U M 2 million and UM25 million (about US$7,500 and US$lOO,OOO equivalent, respectively) for consultant services, between U M 2 million and U M 3 0 million (about US$7,500 and US$120,000 respectively), for goods and finaly between U M 3 million and UM75 million (about US$ll,OOO and US$280,000 respectively), for works. The National Tender Board - Commission Nationale des Marches (CCM) - will be responsible for processing procurement above those thresholds. The U C P M would prepare bidding documents but would not award contracts, which i s the responsibility o f the C D M and the CCM, respectively. The involvement o f C D M may be further increased, as it i s foreseen that the thresholds would be raised in a forthcoming revised Prime Minister Decree. Procurement Capacity Assessment 16. A procurement capacity assessment o f the existing implementing agency (UCPM) has been conducted during project preparation. The following points emerged from this assessment: 0 The U C P M has gained extensive experience and managed satisfactorily IDA and IDB procurement procedures under a previous project as well as the on-going Mining Sector Capacity Building Project (Cr. 3206-MAU). The unit i s well organized, has clearly defined procurement responsibilities and skilled staff. It has the capacity to manage the Procurement Cycle well and has a good record keeping system. Even though the proposed project involve a more diverse stakeholders basis, U C P M staff will be able to monitor and coordinate all contracts. 0 As mentioned under paragraph 14 of this Section, entities other than UCPM and IDA are involved inthe procurement process: (i)The National Tender Board (CCM) is involved inthe procurement process of all IDA projects in Mauritania. It has a demonstrated a good procurement management capacity and i s well experienced with respect to the implementation o f Bank procedures and guidelines. (ii)However the Departmental Tender Board - Commission D6partementale des Marchis (CDM) - responding to the MMI-has at present a weak procurement capacity and experience, due to its so far limited involvement inprocurement management because o f the very low upper threshold - about US$4,000 - above which the procedures were transferred to CCM. Consequently, the C D M has no permanent trained staff nor equipment. After the recent procurement reform, C D M will now be responsible to process a larger volume o f contracts due to the raised thresholds o f contracts value controlling its involvement: up to about US$280,000 for works, US$120,000 for goods and USSlOO 000 equivalent for consultant services. Even though the U C P M staff will be responsible to prepare the procurement documents and to provide technical assistance to the CDM, it will be necessary to strengthen this unit's procurement management capacity. 0 On the basis o f the present procurement capacity assessment, the MMI'sC M D should establish a unit with one permanent experienced staff, and office facilities and supplies in order to provide timely and adequate procurement services. The Credit would provide support to the strengthening o f the MMI's C D M by financing, technical assistance, office supplies and equipment to the CDM, as well as training to C D M staff. The G o M agreed to execute the procurement capacity buildingplan below for the CDM. - 46 - Capacity BuildingPlan LRequiredaction I Schedule I Responsible Make available for the Departemental Tender Board ( Before the end o f MMI Commission Dkpartementale des Marchb CDM) a September 2003 sufficient space for meeting, preparation o f bidding documents and conservation o f files. Designation o f administrative agent as permanent staff for Before the end o f MMI CDM. September 2003 Recruitment o f procurement specialist to provide technical Before the end o f U C P M assistance for the first six months for supporting C D M and September 2003 coaching administrative agent who will be fully responsive after this periode. Supply necessarily equipments for preparation, copying Before the end o f U C P M and conservation o f procurement documents. September 2003 Training o f C D M permanent staff and C D M members. Duringfirst 6 months U C P M after effectiveness Procurement Plan(PP) 17. The draft Procurement Plan for works, goods and services to be procured by U C P M during the five years o f project implementation has been prepared and agreed upon between the Borrower and IDA duringnegotiations. At latest by January 31o f each subsequent year, the procurement plan relatedto the agreed Annual Work Program will be updated and submitted to the Bank for review and approval. The PP shows the step-by-step procedures for procurement, contract packages for goods, works and consultants services and training, estimated cost and the procurement/selection method, the activities which follow procurement, such as manufacture, shipment, delivery and installation o f goods; mobilization, construction and completion o f works. It i s mandatory that all procurement be carried out inaccordance with the formally agreedprocurementplan (original and formally up-dated). Therefore, for the purpose o f this project, agreed Procurement Plans will determine procurement methods and it i s not necessary to set up the corresponding aggregate total amounts. The PP will be an integral part o f the Project Implementation Plan (PIP) which will be acceptable to the Bank and formally approved by the Borrower as a conditionality for project effectiveness. - 47 - Procurement methods (Table A) Table A: Project Costs by Procurement Arrangements (US$ million equivalent) (4.11) (0.23) (0.21) (0.00) (4.55) 2. Goods 0.00 1.55 0.14 0.00 1.69 (0.00) (1.33) (0.12) (0.00) (1.45) 3. Services 0.00 0.00 10.25 4.30 14.55 (0.00) (0.00) (9.84) (0.00) (9.84) 4. Training 0.00 0.00 0.74 0.00 0.74 (0.00) (0.00) (0.74) (0.00) (0.74) Small Grants 0.00 0.00 0.84 0.00 0.84 (0.00) (0.00) (0.84) (0.00) (0.84) Incremental costs 0.00 0.00 0.76 0.30 1.06 (0.00) (0.00) (0.58) (0.00) (0.58) Total 4.40 1.82 12.98 7.00 26.20 (4.11) (1.56) (12.33) (0.00) (18.00) I'Figures inparentheses are the amounts to be financed by the IDA Credit. All costs include contingencies, 2'Includes civil works and goods to be procured through national shopping, consulting services, services o f contracted staff o f the project management office, training, technical assistance services, and incremental operating costs related to (i)managing the project, and (ii) re-lending project funds to local government units. - 48 - Table AI : Consultant Selection Arrangements (optional) (US$ million equivalent) A. Firms 6.86 0.00 0.00 0.00 2.04 0.00 4.30 13.20 (6.67) (0.00) (0.00) (0.00) (1.95) (0.00) (0.00) (8.62) B. Individuals 0.00 0.00 0.00 0.00 1.35 0.00 0.00 1.35 (0.00) (0.00) (0.00) (0.00) (1.22) (0.00) (0.00) (1.22) Total I 6.86 0.00 0.00 0.00 3.39 0.00 4.30 14.55 (6.67) I (0.00) I (0.00) I(0.00) I (3.17) I (0.00) I (0.00) I (9.84) I I\Including contingencies Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed Figures in parentheses are the amounts to be financed by the Bank Credit. - 49 - Prior review thresholds (Table B) Table B: Thresholds for Procurement Methods and Prior Review' 50-200 N C B None 200 QCBS A1118.5 <200 QCBS, CQ None Individuals >50 CQ Alli1.1 G O CQ None 4. Training Annual training plans and all out-of-country training 5. Small Grants PIP Small Grants Procedures 6. Miscellaneous Total value of contracts subject to prior review: USD12.3 million (about 76% oftotal, excl. N.B.Fcontracts) Overall Procurement Risk Assessment: Average Frequencyof procurement supervisionmissions proposed: One every 12months (includes special procurement supervision for post-review/audits) "Thresholds generally differ by country andproject. Consult "Assessment o fAgency'sCapacity to Implement Procurement"and contactthe RegionalProcurement Adviser for guidance. - 50 - Annex 6(B): Financial Management and Disbursement Arrangements MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT FinancialManagement 1. Summary of the FinancialManagement Assessment 1.1 U C P M financial management assessment was conducted to: (a) determine if it has acceptable procedures o f financial management interm o f internal and external controls and o f management o f financial information; and (ii) make recommendations on how to minimize the fiduciary risk components identified. 1.2 The computerized financial management system set up under the first TA project will be updated. The U C P M will maintain accounts and payments o f the proposed project, clearly separated from the first TA project. 1.3 An Accountant Assistant would be recruited to reinforce the FMunit. 1.4 Financial Reuorting : Separate financial statements will be prepared for the project. They will comprise: (i) statement o f source and application o f Funds for the project during the current financial a year and cumulative since the start o f the project; and (ii) a balance sheet. These two financial statements will be prepared annually. Inaddition, the project management unit will submit quarterly reports using the FMR models including financial reports, physical progress reports and procurement/contracts reports, within 45 days o f the end o fthe reportingperiod. 2. Audit Arrangements Financial Audit. The consolidated financial statements o f the project will be audited for each fiscal year by an independent auditor acceptable to IDA inaccordance with standards on auditing also acceptable to IDA. Audit reports o f reasonable scope and detail will be submittedto IDA within six months o f the end o f the audited period. The auditor will provide an opinion on: (i)the project financial statements (statement o f Source and Application o f Funds and Balance Sheet); (ii) the statement o f expenditures (SOE); (iii) special account (SA); and (iv) the project account. The auditor will also issue a separate the management report on internal and operational procedures outlining any recommendations for improving internal accounting controls and operational procedures identified as a result o f the financial statement audit at the levels of UCPM, MMIimplementing agencies and Community-based organizations. 3. DisbursementArrangements Method qf Disbursement. The borrower will use transaction-based disbursements (traditional mode) in accordance with procedures outlined in the Bank's Disbursement Handbook. Minimum of Application Size. The minimum application size for direct payments, to be withdrawn directly from the Credit Account, and special commitments is: (i) USD200,OOO equivalent for goods and USD500,OOO equivalent for works; (ii) USD200,OOO equivalent for consulting and auditing services, in the case o f consulting firms, and USD50,OOO equivalent, inthe case o f individual consultants. Allocation of credit proceeds (Table C) The Credit would be disbursed over a period o f 60 months (the Project completion date would be September 15, 2008 and the Credit closing date i s March 15, 2009), as follows: (i) 100 percent o f foreign and 85 percent o f local expenditures for contract works; (ii)100 percent o f foreign and 85 percent o f local expenditures for goods; (iii)100 percent o f foreign, 85% (firms) and 90% (individuals) o f local expenditures for consultancies (including audits); (iv) 100 percent for training and seminars; (v) 100 -51 - percent o f expenditures for small grants, and (vi) 85 percent for incremental operating costs. Disbursement o f Credit proceeds would be made against six categories (base costs): (i) contract works (USD4.32 million); (ii)goods (USD1.38 million); (iii) consulting contracts (USD9.35 million); (iv) training and workshops (USD0.70 million); (v) small grants (USD0.80 million), and (vi) incremental operating costs, including audits (USD0.55 million). Unallocated funds amount to USD0.90 million. Table C: Allocation of Credit Proceeds Goods 1.38 100 percent o f foreign and 85 percent o f local expenditures Consultants services 9.35 100 percent o f foreign, and 85 percent (firms) and 90% (individuals) o f local exPenditures Training 0.70 100% Small Grants 0.80 100% Incremental recurrent costs 0.55 85% Unallocated 0.90 Total Project Costs with Bank Financing 18.00 ITotal I 18.00 I I Use of statements of expenditures (SOEs): Disbursements will be made against Statement o f Expenses (SOEs) for contracts and goods not requiring the Bank's prior review. Therefore disbursements for all contracts for: goods o f less than US$ 200,000, for works o f less than USD500,000, for consulting services, training and publications by f i r m s and individuals o f less than US$ 200,000 and US$50,000 respectively; and all incremental operating expenses and small grants would be made on the basis o f SOEs and certified by the UCPM. SOE statements will be audited annually by independent auditors acceptable to the Bank. All SOEs supporting documentation will be kept therefore by the U C P M and made available for review by bank supervision missions and external auditors. Special account: Payments from the Credit proceeds would be administered by the U C P M from a Special Account. The Special Account would be maintained in U S dollars in a commercial bank selected by the Borrower and acceptable to the World Bank. The authorized allocation, sufficient for about four months o f eligible expenditures, would be U S D1,000,000; however, the initial allocation would be limited to USD500,OOO until the aggregate amount of withdrawals from the Credit Account plus the total amount of all outstanding special commitments entered into the Bank shall be equal to or exceed SDR 1,500,000. The Special Account would be managed by the U C P M which would be responsible for preparing disbursement requests. These requests would be submitted on a monthly basis. Replenishment o f the Special Account would follow Bank procedures. Disbursements will be made under the authorized signature from a designated representative o f the Borrower. The Special Account would be audited annually by independent auditors acceptable to the Bank. - 52 - Annex 7: Project Processing Schedule MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT ITime taken to prepare the project (months) 5 9 (FirstBank mission (identification) II 07/28/2002 II 07/28/2002 II Appraisal mission departure 11/04/2002 04/29/2003 Negotiations 12/09/2002 05/07/2003 IPlanned Date of Effectiveness I 0511912003 I 0911512003 I Prepared by: The World Bank Oil, Gas, Miningand Chemicals Department jointly with the Ministryo f Mines and Industrythe MiningSector Capacity BuildingProject Coordination Unit. Preparationassistance: PHRD Grant for project preparation, Environmental and Social Department o f the Africa region Bank staff who worked on the project ncluded: Name Speciality Paul0 de Sa Task Team leader Gotthard Walser Senior MiningSpecialist Peter van der Veen Sector Manager, Peer Reviewer Ahmedou ould Hamed Senior Procurement Specialist Brahim ould Abdelwedoud Municipal Officer Alexandra Pugachevsky Operations Analyst Sandra Cesilini Senior Social Specialist, Peer Reviewer Salamata Bal Social Specialist Yahya Ould Aly Jean Disbursement Assistant Christopher Sheldon Senior MiningSpecialist Hans Wabnitz Senior Counsel Wolfgang M.T. Chadab Finance Officer Amelia Williams Team Assistant Yves Duvivier Country Office Manager, Mauritania Eavan O'Halloran Operations Officer Claude Ginet Consultant, Geologist Cherif Diallo Senior Implementation Officer, Peer Reviewer Desire Coquillat Consultant, Financial Management Assessment 4nna Martella Consultant, Anthropologist - 53 - Annex 8: Documents in the Project File* MAURITANIA. SECOND MINING SECTOR CAPACITY BUILDING PROJECT A. Project Implementation Plan Draft Project ImplementationPlan (March 2003) Procurement Plan (April 2003) B. Bank Staff Assessments PRISM 1 Mid-termreview aide memoire (April 2002) Identificationmission aide memoire and BTO (August 2002) Preparation mission aide memoire and BTO (November 2002) Pre-appraisal mission aide memoire and BTO (March 2003) Financial Management Assessment Report (April 2003) C. Other Sectoral Environmental Assessment, Tecsult (April 2003) Resettlement Policy Framework (April 2003) Draft Small Grants Manual (April 2003) *Including electronic files - 54 - Annex 9: Statement of Loans and Credits MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT 21-Mav-2003 Difference between expected and actual Oriainal Amount in US$ Millions disbursements' Project ID FY Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd PO69095 2002 Urban Development Program 0.00 70.00 0.00 74.66 15.94 0.00 PO71308 2002 EDUCATION SECTOR DEVELOPMENT PROGRAM 0.00 49.20 0.00 48.39 -4.71 0.00 PO71881 2002 MR Global Distance Learning Center 0.00 3.30 0.00 2.78 1.28 0.00 PO64570 2000 CULTURAL HERITAGE 0.00 5.00 0.00 2.82 1.94 0.00 PO44711 2000 Maur:INTEG DEV PROG FOR IRRIGATED AGR 0.00 38.10 0.00 15.93 4.43 0.00 PO66345 2000 MR EGYIWATERISANITATION SECTOR REFORM 0.00 9.90 0.00 5.46 8.03 0.00 PO57875 1999 MINING SECT CAPACITY 0.00 15.00 0.00 5.72 4.00 0.00 PO63791 1999 MR - TELECOM & POSTAL REFORM 0.00 10.80 0.00 2.68 2.79 0.00 PO55003 1999 NUTRITION (LIL) 0.00 4.90 0.00 2.28 2.11 2.36 PO35689 1998 HEALTH SECTOR INVEST 0.00 24.00 0.00 8.52 8.62 7.84 PO46650 1997 MR REGIONAL POWER 0.00 11.10 0.00 1.30 1.49 -0.20 Total: 0.00 241.30 0.00 170.55 45.92 10.00 MAURITANIA STATEMENT OF IFC's HeldandDisbursedPortfolio Jun 30 - 2002 InMillions US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1997 BMCI 3.50 0.00 0.00 0.00 3.50 0.00 0.00 0.00 1996100 GBM 7.00 0.00 0.00 0.00 7.00 0.00 0.00 0.00 1999 PAL-Tiviski 0.50 0.00 0.00 0.00 0.44 0.00 0.00 0.00 1999 SEFLemhar 0.44 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Portfolio: 11.44 0.00 0.00 0.00 10.94 0.00 0.00 0.00 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic Total Pending Commitment: 0.00 0.00 0.00 0.00 - 55 - Annex I O : Country at a Glance MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT Sub- POVERTY and SOCIAL Saharan Low- Mauritania Africa income Developmentdlamond' 2001 Population, mid-year (millions) 2.8 674 2311 Life expectancy GNI per capita (Atlas method, US$) 350 470 430 GNI (Atlas method, US$ billions) 0.96 317 1,069 Average annual growth, 1995-01 Population (%) 3.2 2.5 1.9 Labor force (%) 3.3 2.6 2.3 GNI Gross per primary Most recent estimate (latest year available, 1995-01) capita nrollment Poverty (% of population below nationalpovertyline) 46 Urban population (% of total population) 59 32 31 Life expectancyat birth (years) 52 47 59 - Infant mortality (per 1,000live births) 74 91 76 Chiid malnutrition (% of children under 5) 32 Access to improved water source Access to an improved water source (% of population) 37 55 76 Illiteracy (% ofpopulation age 15+) 59 37 37 - Gross primary enrollment (% of school-age population) 88 78 96 Mauritania Male 89 85 103 Low-income group Female 82 72 88 KEY ECONOMIC RATIOS and LONG-TERMTRENDS 1981 1991 2000 2001 1 Economic ratios' GDP (US$ billions) 0.86 1.I 0.98 1.o Gross domestic investmentiGDP 26.5 17.9 30.3 26.7 Exports of goods and services/GDP 39.3 44.1 40.1 38.2 Trade Gross domestic savings/GDP 0.5 9.7 18.4 14.0 T Gross national savings/GDP 9.6 9.7 29.8 19.9 Current account balancelGDP -17.1 -8.2 1.I -5.1 Interestpayments/GDP 2.1 2.2 Total debtiGDP 112.7 193.6 189.5 181.9 Total debt service/exports 22.4 17.3 Present value of debtiGDP 61.7 60.0 I 1 Present value of debtiexports 128.4 136.8 Indebtedness 1981-91 1991-01 2000 2001 2001-05 (average annual growth) GDP 0.2 4.3 5.1 4.6 5.8 _I__ Mauntania GDP Der caDita -2.3 I.3 1.6 1.4 3.1 Low-income orouD Expo& of goods and services 0.2 3.1 11.9 8.0 8.6 STRUCTURE of the ECONOMY 1981 I991 2000 2001 Growth of investment and GDP (%) (% of GDP) Agriculture 31.9 28.7 21.3 20.9 1 7 5 ~ Industry 26.2 30.0 29.1 28.6 Manufacturing .. 10.8 8.6 8.0 Services 41.9 41.3 49.6 50.5 Private consumption 65.4 72.1 64.7 70.4 General government consumption 34.2 18.2 17.3 15.6 Imports of goods and services 65.3 52.3 52.2 50.7 -GDI *GDP 1981-91 1991-01 2000 2001 (average annualgrowth) Growth of exports and Imports (Oh) Agriculture 1.4 4.6 2.8 -0.2 industry 4.7 2.1 6.7 1.4 40 Q Manufacturing -1.6 -0.5 3.3 5.9 Services 1.1 5.6 5.9 8.5 Private consumption -0.9 2.2 -16.4 14.8 General government consumption -3.5 2.5 23.2 -5.6 -40 1 Gross domestic investment 3.4 10.6 57.5 -5.4 - Exports *Imports ImDortsof goods and services -1.7 2.9 14.8 4.8 Note: 2001 data are preliminary estimates. 'The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete - 56 - Mauritania PRICES and GOVERNMENT FINANCE 1981 1991 2000 2001 Domestic prices Inflation ("h) I (% change) Consumer prices 5.6 3.3 4.7 '5 T Implicit GDP deflator 7.3 9.8 10.7 5.4 Government finance (% of GDP, includes current grants) Current revenue 22.6 25.8 28.1 Current budget balance 1.4 9.0 11.4 Overall surplusldeficit -5.7 -3.1 2.4 TRADE 1981 1991 2000 2001 (US$ millions) Export and Import levels (US$ mill.) I Total exports (fob) 434 359 345 Iron ore 212 202 188 Fish 222 157 155 Manufactures Total imports (cif) 416 343 357 Food 121 120 113 Fuel and energy 39 100 92 Capital goods 78 78 61 Export price index (1995=100) 110 82 87 95 96 97 98 99 00 Import price index (1995=100) 108 98 95 I Exports Imports Terms of trade (1995=100j 101 83 91 BALANCEof PAYMENTS 1981 1991 2000 2001 (US$ millions) Current account balance to GDP (%) Exports of goods and services 319 498 392 385 5 - imports of goods and services 514 591 493 496 Resource balance -196 -93 -101 -111 Net income -51 -61 -20 -58 Net current transfers 99 62 132 117 Current account balance -147 -93 11 -51 Financing items (net) 171 121 -35 18 Changes in net reserves -24 -28 24 33 -15 1 Memo: Reserves including gold (US$ millions) 166 67 255 286 Conversion rate (DEC, /ocal/US$j 48.3 81.9 238.9 255.2 EXTERNAL DEBT and RESOURCE FLOWS 1981 1991 2000 2001 (US$ millions) 1 Composition of 2001 debt (US$ mlll.) Total debt outstanding and disbursed 967 2,188 1,852 1,836 IBRD 11 43 0 0 iDA 44 224 449 475 I?' 794 Total debt service 77 88 IBRD 1 15 2 0 IDA 0 2 7 9 Composition of net resourceflows Official grants Official creditors 145 25 Private creditors -15 -2 Foreign direct investment 12 2 42 14 Portfolio equity 0 World Bank program Commitments 3 0 63 123 A - IBRD E. Bilateral Disbursements 17 14 57 47 B. IDA D . Other multilateral F Private - Principal repayments 0 12 6 5 C-IMF G Short.term . Netflows 17 1 51 42 interest payments 1 5 3 3 Nettransfers 16 -4 48 38 - 57 - Additional Annex 11: SECTORAL ENVIRONMENTAL ASSESSMENT SUMMARY MAURITANIA: SECOND MINING SECTOR CAPACITY BUILDING PROJECT Context The first Mining Sector Capacity Building Project (PRISM 1) funded activities supporting the reform o f the Mauritanian mining sector, in order to build up the Government management capacity and to attract investments, The legal framework was modernized, an institutional strengthening program was initiated and a series o f activities implemented to develop the national technological capacity and to provide the geo-information needed to administer the sector (Le. environmental studies, geological mapping, geophysical surveys). The second part o f this project, PRISM-2, i s currently in preparation and will continue to assist the Government to improve sector development management. On the basis o f its objectives and planned activities, PRISM 2 has been categorized by the World Bank as environmental category B. A Sector Environmental Assessment (SEA) has been carried out by an independent consultant firm, contracted by the Borrower, as part o f project preparation. The objectives o f the SEA were to identify the social and economic impacts potentially triggered by PRISM-2 implementation, to propose realistic measures which would avoid or reduce these potential impacts, and to integrate these measures into project design, in particular in its environmental component. This document summarizes the main findings and recommendations o f the SEA. Objectives of theproposed project The development objectives o f the proposed project would be to build-up and consolidate the Government's long term institutional and technical capacity to manage the country's mineral resources, including social and environmental management; to encourage private investments in the minerals sector; and to increase fiscal revenues from the mining sector and improve the sector contribution to national and regional socioeconomic development. Project components The proposed project will continue the activities successfully implemented under PRISM-1 - including geo-information infrastructure development and institutional strengthening. In addition, it will incorporate hydrogeological research, local economic development inmining sector communities, closely focusing on miningsector contribution to the fight against poverty. There are four project components: Local economic development in mining areas, focusing mostly on the Zouerate-Nouadhibou corridor, which will include building social and environmental management capacity for local governments; 0 Geo-information and development; 0 Institutional reinforcement (including environmental management); and 0 Project management. - 58 - Potential mining development scenario Once the PRISM i s completed, Mauritania will benefit at the national scale, from promotion tools for the miningsector, geological maps at various scales and geophysical surveys on almost all o f its territory. In the Zouerate-Nouadhibou corridor area, there will be reinforcement o f local authorities capacity to take responsibility independently o f the SNIM activities, increase iron production, whether by the SNIM or by other operators, environmental management capacity building o f the SNIM, as well as improvement o f the efficiency and use of existing infrastructures and potential construction o f new infrastructures. South o f the Mauritanides, a detailed hydrogeological study will be conducted. Regarding institutional capacity building, a mining promotion unit will be created, mining cadastral survey office reinforced, a coordination mechanism between the SAE and DEAR established, a baseline environmental study in the Mauritanides southern area achieved, environmental audits o f Akjoujt copper mine and SNIM operations finished, and inter-departmental analysis o f the environmental impact study o f the Bofal-Loubboi'ra phosphates deposit exploitation completed. With the exception o f miningactivities o f the SNIM (iron) in the north o f the country, SAMIA (gypsum) inNouakchott area and sand quarries (which those on the littoral are the subject o f a moratorium), there are currently no other miningactivities in Mauritania. Projects which could soon begin operating include the iron production increase project o f the SNIM, the Akjoujt copper deposit re-exploitation (GEMAK), the Tasiast goldfield and Bofal phosphate exploitation (SOPHOSMA). Legal and institutional framework. Mauritania i s party to numerous international environmental conventions, including those on climate change and biodiversity. Inaccordance with MauritaniaMining Policy Declaration, dated March 6th 1997,the private sector is in charge o f developing the Mauritanian mining industry, while assuming all risks and the financial, material and human responsibility required for the sector development. The State o f Mauritania, however, shall ensure favourable conditions for investment, promotion of the sector and setting up o f an appropriate legal and institutional framework. Through its Water and Energy Sectors Development Policy Declaration, dated September 23rd 1998, Mauritaniarecognizes the need to ensure the sustainable development o f the water sector and to improve longtennmanagement o f water resources. The Environment Parent Act (Parent Act) has been promulgated in July 2000 and application decrees are currently under preparation. Numerous legal texts cover the fields o f environment quality, protected areas, protection o f endangered species, control o f land and resources use, health and occupational safety, as well as impact assessment and analysis processes and public consultation and community participation. Few application decrees are enforced, however. In reference to local legislation, a process of decentralisation and devolution is under preparation. According to existing legislation, municipal authorities have the responsibility to assume the management o f district interests; they ensure public services needed by local populations which do not fall under the state's responsibility. The mayor ensures, under the control o f the local administrative authority, the application o f laws and regulations. Municipalities can fulfil their responsibilities on miningactivities carried out on their territory and could evenpromulgate regulations for the protection o f the environment on district territory. - 59 - Institutional framework The public institutions considered or taken into account inthis SEA are the following: Ministry o f Mines and Industry (MMI), especially the SAE; Ministry o f Rural Development (MDRE), particularly the DEAR; Ministryo f Interior, Postal and Telecommunications Services (MIPT), notably the DATAR and DCL; Ministry o f Hydraulics and Energy, especially the DHA, CNRE, ANEPA and ARM; analysis laboratories, including the National Centre o f Hygiene (CNH), two university laboratories, the laboratory o f the SNDE and the future laboratory o f OMVS. The institutional deficiencies limiting the accomplishment o f tasks or making it impossible have been examined along three angles. On the policy and legal point o f view, the environmental issue does not appear yet as a priority for the government, there have been recent initiatives in the environmental sector but application decrees and standards are just about non-existent, the MDRE i s politically fragile, there i s an insufficient consensus on the role and functions o f the MDRE as far as environment i s concerned and finally, there i s no clear definition o f local communities responsibilities in environment. On the inter-institutional point o f view, there i s no supra-departmental authority responsible for the environment, there i s a resistance to give up some powers and an overlap in the responsibilities, and there i s no participative and dialogue mechanisms, and this, at all levels. Moreover, it appears that for ensuring the follow-up o f legislation, the ministries have difficulty to work together, there i s a confused distribution o f the mandate and attributions o f institutions responsible for environmental management as well as an absence o f operational coordination between the organisms. Finally, on the point o f view o f organisational and individual attributions, there i s an overlap in the responsibilities o f various ministries (MMI,MDRE, MIPT), an insufficiency of human (national managers) and financial means as well as a relative lack o f national highlevel expertise and technical expertise in environmental management. Private Mining sector Two mining societies have been analysed, namely SNIM and SAMIA, as well as organisations which have development projects in study and feasibility phase, being SOPHOSMA and GEMAK. All o f them have need assistance in environmental management. Non-Governmental Organizations The last dozen years have brought a notable increase in the number o f NGOs in Mauritania. Nevertheless, the EES has determined that NGOs still play a limited role inthe environmental sphere. Municipalities and wilayas A t the local level, the team met with representatives from the Tins-Zemmour Willaya, in the Nouakchott municipality, and from the Bababe and El Vera communities, which are located in the area o f future SOPHOSMA development. These organizations lack the ability to fully participate in local economic development in their region and are short o f financial and human resources to take control of their economic development, especially inthe miningsector. The Surrounding Environment - 60 - Natural environment Mauritania i s characterised by a Saharan climate in its northern two thirds and by a sahelian climate in its southern and extreme southeastern parts, the 150 mmisohyet, which i s moving to the south as years go by, beingthe approximate limit inbetween the two types o f climate. The whole country is in pluviometric deficit. Only the southwest region corresponding to the Senegal river valley has permanent surface water. Wetlands, associated with dayas, garas or gueltas, are freshwater ponds whose longevity depends on their location inthe country and on rainfalls intensity, quantity and frequency. Most Mauritania's aquifers have fossil groundwater and their last significant recharge occurred 5000 years ago. The hydric situation o f the various aquifers i s unknown. Nevertheless, Mauritania has significant groundwater resources which are, however, unequally distributed over the territory and whose quality considerably varies from one region to another. Except near some mining complexes (Akjoujt among others) and apart from salinity which makes water non potable (mainly inthe north o f the country and along the littoral), the groundwater i s in general o f good quality. The way water i s drawn can cause pinpoint contamination (nitrates, coliforms, etc.) o f groundwater, especially at the site o f dug and traditional wells. The country i s generally characterised by low density vegetation, due to climate degradation which has affected duringthe latest decades all the saharo-sahelian region, particularly its northern edge, and which has contributed to the destruction o f Mauritanian vegetal cover, and even to the disappearance o f biotopes and wildlife species. The most important forest potential i s located in Senegal river valley and along its tributaries (woodlands, Acacia steppes and brushes) covering a little less than 3 % o f the country. The exploitation o f wood resources for fulfilling the populations' needs in firewood and charcoal i s well over the resources growth rate (10 times more). Mauritania has 14 vegetal species considered as endangered, 9 as endemic and 22 protected within conservation areas. Native fauna in Mauritania is, consequently, largely affected by drought, especially its prevalence in the last 30 years. The neighboring areas along the Senegal river are rich in fauna. There are nearly 20 fully protected fauna species in Mauritania, and 22 partially protected species. In the protected areas, Mauritania has created two national parks, both situated along the Atlantic coast - the National Park o f Banc d'Arguin in the North, and the National Parc o f Diawling in the South, as well as two natural reserves - El Aguer in the wilaya o f Hodh El Gharbi, and the Chott Boul, inthe wilaya o f Trarza. There are also three reserves - Tilemsi, Guelb er Richat, and El Atf, in the Hodh Ech Charghi, Adrar, and Gorgol wilayas, respectively. Finally, there are nearly 30 protected forests, that cover a total o f 48,000 hectares, a majority o f which are located along the Senegal river valley. Human resources Mauritania i s a transition country between West and North Africa, and i s part o f the Arabic Maghreb Union. The National Land Use Plan, prepared in 1993, describes the major land use alternatives, and establishes the orientations allowing the Government to determine by legislation the arbitration regulations for land use (decrees not yet prepared). As o f 2000, there were more than 2.5 million inhabitants in Mauritania. The density o f the population i s very weak, at 2.6 inhabitants per km squared, 10 times less than the African average o f 26 inhabitants per kmsquared. The average poverty index in 1995 was 46.0, which puts Mauritania at a disadvantage relative to the rest -61 - o f the African continent, North and West Africa included. Between 1996 and 1999, there was an increase in the incidence o f poverty in the country. About 50% o f the population, as o f 1995, lived below the poverty line. In 1987, a poor or an extremely poor person received an income o f less than USS370 or USS275, respectively. The high number o f persons 15-years-old and under, (48.9% in rural areas, and 41.4% in urban areas) poses additional requirements in education, health and professional development. This situation will most likely be gradually alleviated, as the birthrate has fallen (from 6.2 children per woman in 1980 to 4.7 in 2001). The river valley has the majority o f the population (36.4%), but Nouakchott has seen the highest increase in demographics between 1988 and 2000, with the annual growth rate o f 3.75%. The 2000 census has established that only 4.8% o f the Mauritanian population i s nomad, compared to 12.8% in 1988. The 1970s drought brought an end for the nomad lifestyle for many, and has generated a general increase in urbanization. In 2000, Mauritania was relatively less rural than other African countries (42.5% vs. 61.5%). The Northern region i s highly urbanized (69.8% o f the population), while a majority o f the people living around the river delta (74.3%) and the central part o f the country (68.9%) are rural. Average household size in Mauritania i s 6.5 persons. Women are heads o f 30% o f households, and in rural areas - 32% o f households. Sanitary conditions in Mauritania are disturbing. Infant mortality rate i s at 101 deaths before the end o f first year per 1000 births - which i s very high in comparison to the average childhood mortality rate in Africa, which i s 80 deaths per 1000 births. Maternal mortality rate i s estimated at 747 deaths per 100,000 live births for the 1994-2001 period. In 1998, the illiteracy rate was at 59.98%, with the 16% difference between male (67.95%) and female (52.08%) illiteracy. The river delta and central regions are less favored in comparison to the national average, with 65.55% and 68.9%, respectively, while the Nouakchott and the Northern regions are better o f f with 41.8% and 48.64%, respectively. Since 1988, the average illiteracy rate has not decreased, and remains very high; in 2000 it rests at 58% (vs. the African average o f 38%). From 1990 to 1999, Gross National Product has increased at the rate o f 3.9%, compared to 2.5% for the rest o f the African continent. In 2000, GNP per capita was nevertheless one o f the lowest in Africa, at US$495 per year, compared to US$749 for the rest o f Africa. The services sector represented 38% o f GNP, and i s the largest part o f Mauritanian economy, followed by the industrial sector at 33%, and the rural sector at 28%. The main activities o f the industrial sector are iron ore production and industrial fishing, which together represent more than 95% o f the country's exports. Such dependency on two products exposes Mauritania to price fluctuations for the two products. Three out o f every four people are involved in agriculture, especially in the river delta and in the Assaba wilaya. Foodproduction in Mauritania i s composed o f rice, rice, dates, beef and poultry, milk and fish. Finally, there i s a certain level o f infrastructure - three national roads, from Nouakchott to Atar in the North (R.N.l), towards Rosso in the South (R.N.2), and towards Nema in the East (R.N.3), a network o f secondary roads in more or less good condition. The only railroad links Zouerate and Nouadhibou. There are two international airports, in Nouakchott and Atar, and a number o f national airports in the main wilayas. Industrial ports are located in Nouadhibou (central port), and Nouakchott. Artisanal - 62 - fishing ports are located in Nouadhibou and Nouakchott, and also in the Banc d'Arguin zone (Nouamghar), and inthe areas along the Senegal river (Rosso, Boghe, Kaedi). Power production has been limited until recently to thermal stations in important towns (Nouakchott, Nouadhibou, Zouerate, Selibaby, Nema, Timbedra, Aioun, Kiffa, Guerou), but can now count on OMVS hydroelectric development for the south o f the country, from Selibaby Region up to Nouakchott. The city o f Nouakchott has an aqueduct network drawing groundwater but there i s no sanitation system. The future Aftout project, aiming at supplyingwater to Nouakchott from Senegal river comprises a sanitation component. Environmental and Social Assessment Legalframework The present study has determined the following legal problems - difficulty with access to legal information, absence o f implementation manuals, a high level o f Government discretion in law application, overlapping o f texts on the same subject, and a high number o f relatively important counterparts involved in environmental management. In regard to legislative and regulatory issues, PRISM does not include a legal component -- the first project has only one text directly linked to the mining sector legal regulations. The second mining project plans to evaluate the existing regulations linked to the cadastre, along with revising environmental legal texts. According to EES, the applicable themes are: quality o f the environment : non-existence o f application decrees for standards on acceptable thresholds for air, water, soil noise and vibrations; groundwater exploitation and wells protection: non-harmonised and numerous legal texts; effluents treatment: incomplete tools; solid waste management : classified industrial enterprises are subjected to specifications; there i s a lack o f application decrees (landfills); dissuasive mechanisms are extreme; protected areas : they are well identified and a mininginvestor could avoid these areas or know the boundaries o f a miningproject in such area; endangered species protection : habitats to protect are not identified, but protected areas such as national parks, classified forests and wildlife reserves are identified; control o f land and resources use : several legal tools aiming at regulating land property and their use exist; land use conflicts are possible if a miningexploitation i s authorised; regarding site restoration, the State discretionary powers should be restricted; health and occupational safety : many measures exist inthis matter but they require to be updated on the basis o f international practices (toxic products storing standards, hazardous materials information and utilisation system, etc.). impact assessment and analysis processes, public consultation and community participation :the application decrees need to be adopted; there i s ajurisdiction problem regarding the decree on mining environment; responsibilities o f managers : there i s no distinction between a legal entity and a natural person. Institutionalframework Problems exist on different levels. On the governmental level, there i s a problem with the organization o f environmental management, which requires harmonization o f PRISM activities with certain - 63 - governmental entities. On the ministerial level, the problems concern communication and coordination o f activities between the Ministryof Miningand Industrywith the other ministries, affected by miningactivities. Reinforcement o f this coordinating effort i s envisioned for PRISM-2 (SAE, DEAR, CNRE). Training for the employees inthe mainministries (SAE, DEAR,CNRE) is another issue, and is planned for PRISM-2. On the regional and local levels, there exists a problem o f weak control and competencies o f the regional authorities responsible for the miningsector. PRISM-2 includes capacity buildingefforts in the Zouerate region to correct this particular problem. Water The only direct impact o f the second project i s linked to hydrogeological exploration. The project will involve improved understanding o f underground waters, which i s a step in the right direction. Nonetheless, mining sector development led by PRISM will negatively impact the country's water resources, with the mining sector consuming large quantities o f water and producing hazardous waste and byproducts. From the legal and institutional perspectives linked to water resources, there i s no independent laboratory, which would permit verification o f data presented by the mining industry (analysis o f effluent, surface water, groundwater, soil and air) for environmental audits, impact studies and follow-up. Water overexploitation could risk to exacerbate the desertification process and thus to contravene the Paris Convention to Combat Desertification. Water use conflicts could also occur (population, livestock, wildlife, vegetation). A socio-political debate should be initiated on national and regional priorities regarding use o f water, which i s a little and even not renewable resource almost everywhere on the Mauritanian territory. But this debate should be based on the knowledge o f the resource which i s not comprehensive yet. Indeed, the hydric situations o f Mauritanian aquifers are not precisely known and the CNRE does not have the internal resources (human and financial) to undertake this task. The PRISM will allow to acquire some elements o f knowledge, but this will be insufficient to allow the development o f necessary tools for adequate water management. It is necessary to determine, by region, the water needs, the existing conditions (available quantity, renewal, etc), as well as water usage priorities. The CNRE database, which will become more user-friendly under the second project, allows evaluation o f the needs, while the availability o f resources i s still not known. On the other hand, increased knowledge o f water resources would provide mining companies with the required information on the needed water levels, but would not guarantee the environmental protection agencies that water resources will not be over-exploited. Water usage in humid climates for adequate water provisioning i s another problem. This requirement would meet the demands o f the Ramsar Convention (1971), and has not yet been met in Mauritania. On the other hand, spillage o f effluents and contaminated products into the surrounding areas, especially in the humid zones, would eventually affect the quality o f surface and underground waters. A lack o f precise guidelines covering the levels o f contaminating agents permits the mining sector to take advantage o f rules and regulations, which may not be necessarily directly suited for Mauritanian conditions. The exploitation of surface waters or shallow underground waters leads to the reduction o f deep water tables recharge; the rabatment o f shallow water tables piezometric levels leads to vegetal cover - 64 - degradation and would exacerbate soil salinisation under Saharan climate, thus desertification. From an economic point o f view, the royalties for groundwater exploitation through one or several drilled wells are fixed at 3 UM/m3 by the Water Code, and this, for the supply o f drinking water to the population, considered as a basic public service. Groundwater exploitation for industrial needs does not take place inthe same context. Therefore, the amount o f royalties for these activities should be reviewed by taking into account that water resources inMauritaniaare mostlynot renewable. Moreover, the littoral protection could be threatened by mining development if the decree on construction ban i s not adopted intime in order to control land use inthis area. In addition, water pumped in Senegal river for supplying drinking water is only disinfected and no treatment can mitigate an eventual contamination by petroleum or chemical products discharged in the river or its tributaries. Treatment procedures are very sensitive to water quality at the intake, including nitrates and total particles, and a quick change in quality can offset the effect o f disinfection, and therefore cause the eventual transmission o f diseases. Biological environment There are very little reliable data on the state o f wildlife populations at the country's scale (size, habitats, migrations, etc), and the legislation does not appear efficient in matter o f wildlife and habitats protection. Indeed, regulations are very little developed and application tools for protecting particular vegetation areas such as classified forests are non-existent. In fact, environment protection i s mostly limited to agriculture and animal production related aspects. There are also gaps inthe transversal vision o f the environment inthe governmental system and a lack o f cohesion in actions and measures set up for the protection o f the environment. Large land clearing, access to the territory induced by new infrastructures, increased human pressure, introduction o f exotic species, leaching basins and tailings pounds (risks o f incidental spill, attraction for birds), are some o f the impact sources that could affect the biological environment. The potential impacts include the destruction o f vegetation and wildlife terrestrial and aquatic habitats, change and disturbance o f these habitats, and reduction o f animal populations reproduction rate. In Senegal river area, these effects could be transboundary, affecting also Senegal and Mali. Social environment In the Mauritanian context, several elements o f the human environment are sensitive to mining development. There will be migration and movements o f population and labour, and increase inrevenues for one part o f this population, but also consequently an increase in revenues inequities. Land use will be directly affected by the presence o f infrastructures and the exploited area as well as by mining or associated activities (like transport), but also indirectly by the results o f these activities; for example, by the population resettlement following expropriation, potential conflicts in areas used for animal production, like pastures and transhumance routes, for tourism or heritage development. Health and safety standards linked to mining (of workers or o f the surrounding population), present another problem- possible work accidents, respiratory illness, air, water pollution, and a rise in sexually transmitted diseases or malaria. Miningdevelopments would improve the quality of life by providing public services, such as potable - 65 - water and electricity, health and education. Economic effects could also include a disruption o f schooling, changes in the cost o f services (water, electricity), economic discrepancies between men and women, especially in the division o f labor, and other external effects on related activities (agriculture, animal husbandry, tourism). The lack o f awareness, sensitisation and involvement o f the population concerning mining development environmental problems is another concern. As a macro-economic impact, the mining sector reinforcement would allow the perception o f foreign currencies through exportations and also to diversify these exportations. The growth o f mining activities would contribute to the development o f local expertise and to the reduction o f importation. Such economic input would be particularly beneficial for the most disadvantaged wilayas: Adrar, Assaba, Brakna, Guidimaka and Gorgol. On the regional level, there would be positive impacts. Required infrastructure (roads, electricity), would serve the entire region. Direct impact on the population consists o f a positive effect on the quality o f life -electricity,potablewater, healthcare, education, auto services, development ofwomen's organizations involved in stone cutting and polishing. Negative effects are income disparity in the case o f women, and interrupted schooling of the young, who would seek employment because o f the availability of non-skilled labor opportunities. Development without PRISM-2 Ifthe PRISM-2 is not implemented, the benefits generated by the PRISM-1 riskbeing lost. There would not be such good potential coordination for development, nor adoption and promotion o f a sustainable economic development and social policy. N o monitoring would take place on regulation in matter o f environment. The consistency o f measures supporting development in Zouerate area would be affected. Development would be more disordered due to the non-existence o f investments orientation and poor control o f development actions. It would be more difficult to ensure the protection and improvement o f quality o f life, fight all kinds o f pollution, due to the poor capacity o f existing institutions. Finally, the knowledge o f water resources and their adequate management methods could risk to stagnate, and the effects o f miningdevelopment on this resource could be significant. Recommendationsfor the content of PRISM-2 T o offset the gaps in the legal framework, i t i s recommended to integrate a legal component into the PRISM-2. The study o f the legal framework would focus on legislation directly or indirectly related to the mining sector and would have three objectives: to propose and implement means allowing access to all legislation and regulations applicable in Mauritania; to review the whole environmental legislation and amend overlapping situations; to prepare application decrees which laws refer to, while favouring the dialogue between concerned ministries; to limit the grant o f discretionary powers and avoid to implement discretionary power following the deliverance o f an exploitation permit; and finally, to establish the list o f all required environmental permits for an investor wishing to launch a mining project in Mauritania and to make available this list and legal texts to investors and other stakeholders involved in the mining sector. I t i s essential that the legal framework be transparent and adequate in order to attract potential investors and miningsponsors. On the institutional plan, it i s recommended to launch the PRISM-2 according to schedule in order to ensure the sustainability o f the benefits1 achieved under the PRISM-1. The beneficial impacts o f the - 66 - PRISM-2 will reach a larger part o f the population and not only the institutions and private entities involved in the PRISM-1. The PRISM-2 comprises a component consisting o f carrying out studies and the monitoring o f capital as well as the collection o f mining-related international information. Beyond compilation and transmission o f the information, i t would be opportunate that the mining promotion unit acquire an analysis tool to ensure the economic monitoring o f the various mining sub-sectors (gold, copper, diamonds, etc.). The economic monitoring should also identify the recent and long term trends o f the intemational ore market: ore price, international ore demand and production. From the environmental point o f view, the PRISM-2 should support inpriority the Ministryo f Mines and Energy, through its Service o f Environmental Affairs (SAE), promote the mining sector and prepare receiving and supervising potential investors. For this, the PRISM-2 should continue PRISM-1 actions related to SAE capacity building, combined this time with the reinforcement o f the DEAR (MDRE) and CNRE (MHE). InMauritania, water is a fragile and vital resource and without it, there wouldbe no mining development nor agro-pastoral activity. Current legislation considers water as patrimonial and it i s necessary that this notion be taken into account in each decision which could have an impact on this resource. The acquisition o f knowledge and transmission o f information are essential in this context. Therefore, it i s recommended to encourage water management by aquifer, since surface water (wadis, ponds, etc.) are closely linked with surface aquifers. The partial knowledge o f water resources prevailing in Mauritania could cause adverse impacts on this precious resource. This knowledge needs to be more comprehensive. The DEAR, SAE and CNRE should have the necessary tools to ensure the adequate monitoring o f the hydnc resource quantity and quality, and to analyse impact studies that they receive. Furthermore, the DEAR project consisting o f making the inventory and characterising wetlands should be re-launched and implemented as soon as possible. Thus, the DEAR and SAE will be capable with this tool to better assess the impact studies that they receive. Any exploitation project inwetlands for mining or other development should be the subject o f an impact study covering not only water quantity and quality but also the whole ecosystem. In addition to the hydrogeological map covering the area south o f the Mauritanides and the updating o f the CNRE database planned under the PRISM-2, it would be necessary to include a component on information analysis in order to bring out the baseline characteristics o f Mauritanian aquifers, a summary assessment o f their hydric situations and an analysis o f their individual vulnerability to contamination and overexploitation. It would also be necessary, through additional funds, to initiate a research program on Mauritanianaquifers recharge mechanisms and plan for a component consisting inmodelling the large aquifers o f the "Continental terminal" (Trarza, Benichalb and BOOLanoulr). From the legal point o f view, a mechanism should be set up so that any new water exploration drilled well, whatever positive or negative and its source o f funding, should be reported to the CNRE. In the framework o f the environmental impact assessment o f the hydrogeological study planned in the south o f the Mauritanides by the PRISM-2, the SAE should ensure that the selected drilling company uses material in good mechanical conditions as well as a method and drilling materials allowing to avoid any effect on groundwater quality. - 67 - The available information on vegetation, wildlife (distribution areas, densities, reproduction sites, population evolution), endangered species and their habitats, protected areas and their wildlife, i s quite scarce. It would be usefulto produce some maps identifying and demarcating the most sensitive areas to miningdevelopment, includingaquifers vulnerable to overexploitation, areas used for animal production or agriculture, areas with vegetation o f interest or habitats o f vulnerable or threatened species, agglomerations, known archaeological sites, etc. in order to allow managers to quickly judge the potential impacts o f projects they have to analyse. These maps illustrating the areas sensitive to mining exploitation could be made available to interested sponsors and would be very useful for the preparation of future miningprojects impact studies. The PRISM-2 could facilitate the preparation o f maps o f areas sensitive to mining exploitation in regions likely to offer a quick development o f this type o f activity duringthe next years, like Inchiri Region. Another tool which could be very useful for managers o f the DEAR and SAE would be a good practices guide in matter o f mining exploitation. This tool would include a detailed list o f prevention measures aiming at preserving the environment and the populations health at each step o f the miningexploitation cycle and adapted to the Mauritanian context. This guide could also be made available to private investors wishing to increase their project environmental performance and to improve the quality o f the impact study that they will have to submit for approbation. It would be relevant to broaden the objectives o f the SNIM environmental management capacity building by supporting the achievement o f an environmental impact study on the SNIM operations and a study on surrounding populations and workers health. Besides, the PRISM-2 will finance a strategic study o f the S N I M long term development in Zouerate area. T o this end, it would be important to carry out a social and environmental impact assessment. In the framework of the Bofal-Loubboi'ra phosphates exploitation environmental impact study analysis planned by the PRISM-2, it would be important to take into account all aspects o f the project, including the solutions proposed for ore transportation and processing, notably infrastructures like the loading dock and the chemical complex. The PRISM-2 proposes a study on the baseline environmental conditions o f the area south o f the Mauritanides, by focusing on the use and management o f water resources. It would be essential to include in this study a socio-economic component and the mapping o f the elements sensitive to mining development. In the framework o f the support to Zouerate region local communities planned by the PRISM-2, it is necessary to plan for the reinforcement on the organisational and financial management capacity levels, without replacing the Government in its budgetary responsibility. The PRISM-2 should rather facilitate, in consultation with local authorities, the research o f new taxation powers that could allow the development o f their community in harmony with the prevailing economic sector. In general, the objective of the PRISM-2 is to involve populations in the mining sector development process, but no concrete activity, other than those planned in Zouerate region, i s programmed. An assistance should be planned to reinforce the capacities o f some NGOs involved in the environment sector related to mining development, including financial support mechanisms that would allow them to carry out concrete and efficient actions in the field o f environment. In addition, it i s recommended that a communication component, mostly directed to regional stakeholders (NGO, walis and hakems) and representatives o f the various ministries, be planned in the framework o f the mining sector promotion. - 68 - The communication activities should include workshops in the administrative centres o f wilayas and not only inNouakchott. Recommendations on MiningConcessions Miningexploitation impacts can be significantly reduced through adequate environmental management not necessarily involving considerable costs, if these environmental management measures are integrated in the ore exploitation and transformation processes; however, the costs related to abandoned exploitation sites post-restoration can be quite considerable. For Mauritania, the measures are related to the hydric resource are a priority. - 69 - - 70 - MAP SECTION