Document of The World Bank FOR OFFICIAL USE ONLY Report No: 54543-MR PROJECT PAPER ON A PROPOSED ADDITIONAL FINANCING IN THE AMOUNT OF SDR 16.9 MILLION (US$25.5 MILLION EQUIVALENT) INCLUDING SDR 10.3 MILLION (US$15.5 MILLION EQUIVALENT) IN PILOT CRISIS RESPONSE WINDOW RESOURCES TO THE ISLAMIC REPUBLIC OF MAURITANIA FOR AN URBAN DEVELOPMENT PROJECT June 9, 2010 Water and Urban Country Department AFCF2 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 2010) Currency Unit = Mauritanian Ouguiya US$1.0 = UM 270 SDR 1.0 = US$1.5111 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AFD Agence Française de Développement (French Development Agency) AFESD Arab Fund for Economic and Social Development AMEXTIPE Agence Mauritanienne d'Exécution de Travaux d'Intérêt Public pour l'Emploi (Public Works Agency) APL Adaptable Program Loan CAC Cellule d'Appui aux Communes (Municipal Support Unit) CAS Country Assistance Strategy CDHLCPI Commissariat aux Droits de l'Homme, à la Lutte contre la Pauvreté et à l'Insertion (Human Rights, Poverty Alleviation and Insertion Agency) CRW Crisis Response Window ERR Economic Rate of Return FRD Fonds Régional de Développement (Regional Development Fund) GDP Gross Domestic Product GNI Gross National Income IDA International Development Association IP Implementation Progress MEAD Ministry of Economic Affairs and Development M&E Monitoring and Evaluation MDOD Convention de maîtrise d'ouvrage déléguée (Delegated Contract Management Agreement) PCU Project Coordinating Unit PDO Project Development Objective PPF Project Preparation Fund PRSP Poverty Reduction Strategy Paper RAP Resettlement Action Plan SFD Saudi Fund for Development SNDE Société Nationale de l'Eau (Water Public Company) SOMELEC Société Mauritanienne d'Electricité (Electricity Public Company) UDP Urban Development Project Vice President: Obiageli K. Ezekwesili Country Director: Madani M. Tall Sector Director: Inger Andersen Sector Manager: Junaid K. Ahmad Task Team Leader: Brahim Ould Abdelwedoud ii ISLAMIC REPUBLIC OF MAURITANIA URBAN DEVELOPMENT PROJECT ADDITIONAL FINANCING CONTENTS Page I. Introduction ..........................................................................................................................1 II. Background and rationale for additional financing .............................................................1 III. Proposed changes .................................................................................................................5 IV. Appraisal summary ..............................................................................................................6 V. Terms and Conditions for Project Financing .......................................................................8 VI. Project readiness ..................................................................................................................9 Annex 1: Results Framework and Monitoring...............................................................................10 Annex 2: Risk Identification Worksheet........................................................................................18 Annex 3: Detailed Description of Modified or New Project Activities.........................................21 Annex 4: Revised Estimate of Project Costs .................................................................................22 Map IBRD 31361 ...........................................................................................................................23 iii PROJECT PAPER DATA SHEET Date: June 9, 2010 Team Leader: Brahim Ould Abdelwedoud Country: Islamic Republic of Mauritania Sector Director: Inger Andersen Project Name: Urban Development Project ­ Sector Manager: Junaid K. Ahmad Additional Financing Country Director: Madani M. Tall Original Project ID: P069095 Environmental Category: B Project ID: P119900 Borrower: Islamic Republic of Mauritania Responsible Agency: Ministry of Economic Affairs and Development (MEAD) Address: B.P. 238, Nouakchott, Mauritania Contact Person: Director of Planning (MEAD) Tel: (222) 254617/(222) 250349 Fax: (222) 254617/(222) 250349 Other Implementing Agencies: Project Coordinating Unit (PCU) Tel: (222) 5290693/(222) 6330010 Fax: (222) 5290601 Email: ccp: pdu.mr Public Works Agency - AMEXTIPE (Agence Mauritanienne d'Exécution de Travaux d'Intérêt Public pour l'Emploi) Revised estimated disbursements (Bank FY/US$m) (Original project + AF) FY 2001-2010 2011 2012 Annual 18.0 7.5 Cumulative 70.0 88.0 95.5 Current closing date: June 30, 2011 Revised closing date: June 30, 2012 Does the project require any exceptions from Bank policies? Yes X No Have these been approved by Bank management? Yes No Is approval for any policy exception sought from the Board? Yes X No Revised project development objectives/outcomes: To support Mauritania's central and local governments to: (i) improve access to basic services and infrastructure in targeted urban areas; and (ii) increase access to micro-finance and income-generating activities for slum population. Does the scaled-up or restructured project trigger any new safeguard policies? No. For Additional Financing [ ] Loan [X] Credit [ ] Grant For Loans/Credits/Grants: Total Bank financing: US$25.5 million equivalent (including US$15.5 million from Crisis Response Window) Proposed terms: 40 years maturity including a grace period of 10 years. Financing Plan (US$m.) (AF) Source Total IDA 25.50 Government 2.40 Total 27.90 Financing Plan (US$m.) (Original Project + AF) Source Total IDA 95.50 Government 22.46 Others 9.00 Total 126.96 iv ISLAMIC REPUBLIC OF MAURITANIA URBAN DEVELOPMENT PROJECT ­ ADDITIONAL FINANCING I. Introduction 1. This Project Paper seeks the approval of the Executive Directors to provide Additional Financing of US$25.5 million to the Islamic Republic of Mauritania for the Urban Development Project (UDP), as well as an extension of the closing date of the original Credit (Cr.3574 MAU) from June 30, 2011 to June 30, 2012. The UDP is the first phase of a two phase Adaptable Program Loan (APL). The request for Additional Financing builds on two specific requests from the Government (letters dated January 14, 2010 and March 4, 2010) to use available IDA resources (US$10 million from the country's IDA 15 allocation) and funds available under the Crisis Response Window (CRW) (US$5.5 million from CRW 1 and US$10 million from CRW 2). 2. In accordance with OP/BP 13.20, Additional Financing, the proposed Additional Financing would finance costs associated with scaling up the development effectiveness and impact of component 1 (d) (Provision of basic urban infrastructure in the main cities) of the Urban Development Project, described in the Project Appraisal Document presented to the Board on October 25, 2001. The scaling up is comprised of construction of: (i) paved road (25.7 km), (ii) unpaved roads (26 km), (iii) water supply (8.3 km of network), and (iv) transmission and distribution lines (18.5 km of network and 210 street lamps). 3. The Bank-financed activities will be coordinated closely with activities under implementation financed by the Government of Mauritania and other donors --(French Development Agency (AFD), Arab Fund for Economic and Social Development (AFESD), the Kuwait Fund for Arabic Economic Development and the Saudi Fund for Development (SFD)-- in the urban sector. II. Background and rationale for additional financing 4. Country context. Mauritania has a population of 3.2 million and a gross national income (GNI) per capita of US$840 (2008). The country has undergone a period of political instability with the overthrow of elected governments in 2005 and 2008. Constitutional rule was re-established in August 2009. Overall growth in gross domestic product (GDP) decelerated from 11.4 percent in 2006 to 0.6 percent in 2008. After declining to 7.4 percent at the end of 2007, inflation reached 8.6 percent in 2008 due to the food price crisis. The Government's reform process was disrupted by the coup and the fiscal situation has deteriorated. Gross international reserves (excluding oil) had declined to US$208 million at end 2007, equivalent to 1.9 months of imports of goods and services. Government revenues, based largely on natural resources, have declined as (i) oil production fell under 10,000 barrels a day, (ii) the price of iron ore, which is the main source of foreign currency, fell by more than 30 percent in 2009, and (iii) the fishing industry is not doing well. The current account deficit widened to 13 percent of GDP in 2009. The situation is critical, particularly in the urban areas, where unemployment has reached record levels. 1 5. Urban context. The urbanization rate stands at 62 percent, up from 4 percent in 1962. About 35 percent of the urban population lives in slums. The absence of economic infrastructure limits the competitiveness of Mauritanian cities and their ability to reap the benefits of the economies of scale normally linked to increased urbanization. In addition, living conditions in many neighborhoods are affected by the lack of adequate urban services and the urban poor are particularly vulnerable to the financial crisis, which has contributed to further degrading their quality of life. 6. The original Credit. The original Development Credit Agreement for an amount of SDR 55.8 million (US$70.0 million equivalent) was signed on October 31, 2001. The Urban Development Project (UDP) is the first phase of a two phase Adaptable Program Loan (APL), described in the Project Appraisal Document (PAD) approved by the Board on October 25, 2001. Project implementation was coordinated with parallel financing by other donors in the amount of US$9 million. The Credit became effective on April 30, 2002. The project was originally scheduled to close on December 31, 2006, but it has been extended twice due to changes at the country level which have led to holds put on contacts between the Government and the Bank. The current closing date is June 30, 2011. An extension of the closing date of the original project will be required to align it with the proposed closing date of the Additional Financing which is expected for June 30, 2012. As of June 3, 2010, 94 percent of the Credit has been disbursed. Disbursement projections indicate that the total credit amount will be disbursed before the current closing date of June 30, 2011. 7. Original project objectives. The Project Development Objectives (PDO) and APL objectives, as stipulated in the Project Appraisal Document is to support Mauritania's central and local governments to: (i) improve living conditions and promote employment opportunities in the main towns of Mauritania, especially in slums; and (ii) strengthen the institutional framework and capacity for urban and land management. 8. Components of the original project: The project has four components: a) Provision of basic urban infrastructure (US$75.85 million; IDA: US$54.30 million). Support to the first phase of a ten-year program of comprehensive slum upgrading in Nouakchott and to the extension of basic infrastructure and community facilities in 12 regional capitals. Direct employment generation is expected through labor-intensive construction methods and, in the longer term, through infrastructure in support of labor- intensive economic activities. b) Micro-credit (US$6.90 million, entirely funded by the Government). Credit for land tenure regularization or land acquisition, home construction or improvement, enterprise development, and employment promotion. c) Institutional and capacity building (US$8.05 million; IDA: US$8.05 million). Technical assistance, training, and capacity building for: (a) local organizations, micro- enterprises, and the Human Rights, Poverty Alleviation, and Insertion Agency (CDHLCPI); (b) municipalities; and (c) government administration. d) Auditing, monitoring, and operating costs of implementing agencies (US$6.56 million; IDA: US$5.92 million). 2 9. Project performance. During its eight years of implementation, the project has consistently been rated Satisfactory in terms of its PDO and Implementation Progress (IP) ratings, despite the challenges posed by the suspension of disbursements. The project has already achieved the targets for its ten PDO indicators and eight out of the ten intermediate outcome indicators (the ninth related to municipal revenue is currently being evaluated). Some of the main achievements are: (i) generation of almost twice as much employment as expected (107,000 employment-months versus an initial target of 40,000), (ii) increase in water consumption from 15 to 41 liters per person per day (target: 25 liters) and reduction in water prices by 50 percent (as expected), (iii) regularization of 27,970 land titles (target: 3,000) and 15,238 land titles registered (target: 3,000), and (iv) transfer of funds to municipalities increased tenfold, providing substance to the decentralization process. The project has been affected by the holds on IDA funds, and especially complex reforms related to land taxation and municipal taxes have taken time to materialize. However, the Government, in office since August 2009, is fully committed to make progress in these important areas, which are being supported by activities already planned under the original project. As a result, the Government sent to the Bank two requests for Additional Financing, dated January 14, 2010 and March 4, 2010. 10. Legal covenants. All dated legal covenants beyond the conditions for effectiveness are met. 11. Procurement compliance is satisfactory. During the Bank's supervision mission in September 2009, a post-procurement review was conducted and was assessed as satisfactory. The review concluded that the project is complying with the Bank's procedures. 12. Financial management performance is satisfactory. During the Bank's supervision mission in September 2009, a financial management review was carried out by the Bank and was assessed satisfactory. Financial audits were delivered on time and are unqualified. The Financial Management Reports (FMRs) have also been submitted on time to IDA. A technical audit of works implemented under the different components has been carried out regularly (every two years) by independent consultants. The audits have found the technical quality of works to be satisfactory. This assessment was confirmed by regular Bank supervision missions. 13. Compliance with safeguards. The project is rated satisfactory in terms of overall safeguard compliance: environmental safeguards are rated satisfactory and social safeguards (OP/BP 4.12 Involuntary Resettlement) are rated highly satisfactory, due to the highly satisfactory handling of the complex resettlement which was necessary for the El Mina slum upgrading, as evidenced in a study conducted in 2004. The performance of the implementing agencies is satisfactory. In preparation of Phase II, the Government and the Bank agreed to carry out a social audit of the resettlements to be carried out by the Government in the slums proposed under Phase II. Those resettlements had been carried out in Nouakchott (which is not covered under the Additional Financing) mostly during a period when the Bank's activities in Mauritania had been put on hold due to the emergence of a de facto Government. 14. Rationale and reasons for requesting the Additional Financing. Based on the satisfactory performance of the project and the scope of the needs, the Government requested Additional Financing for the project to expand the scope of works under Component 1(d), provision of basic urban infrastructure in the 12 regional capitals, in view of the high impact of these works on the improvement of the quality of life of affected populations and the potential to mitigate the impact of 3 the financial crisis. As presented in paragraph 9, the activities related to Component 1 are performing well, exceeding, in some cases, the end-of-project targets. Access to services and infrastructure was significantly improved. However, the global economic downturn and the domestic political crisis following the coup in August 2008 led to a deterioration of macroeconomic conditions in Mauritania, with a significant increase of unemployment in urban surrounding areas. The population is increasingly unable to pay for services delivered by the project (water, health, transport, housing loans, etc.). This would seriously affect the achievement of the PDO, in particular the improvement of living conditions and could compromise the second phase of the APL. If the additional activities are implemented now, the created jobs and generated revenues will allow the population to effectively benefit from the services and infrastructure built by the project. 15. Providing the Additional Financing for the first phase of the APL will allow the Bank to assist the Government of Mauritania in the short-term mitigation of the financial crisis by financing activities that are fully aligned with longer-term development objectives. Appraisal of the Additional Financing provided an opportunity to review triggers for the second phase of the APL and to sustain momentum generated by the project until funds for urban development can be made available by the Government or potentially under IDA 16. The proposed closing date until June 30, 2012 will allow all activities to be fully implemented and ensure that the second phase of the APL can be fully prepared under Phase 1. 16. Justification of Crisis Response Window (CRW) resources. Overall GDP growth decelerated from 11.4 percent in 2006 to 0.6 percent in 2008. After declining to 7.4 percent at the end of 2007, inflation reached 8.6 percent in 2008 due to the food price crisis. The Government's reform process was disrupted by the coup and the fiscal situation has deteriorated. Gross international reserves (excluding oil) had declined to US$208 million at end 2007, equivalent to 1.9 months of imports of goods and services. Government revenues, based largely on natural resources, have declined as (i) oil production fell under 10,000 barrels a day, (ii) the price of iron ore, which is the main source of foreign currency, fell by more than 30 percent in 2009, and (iii) the fishing industry is not doing well. The current account deficit widened to 13 percent of GDP in 2009. The situation is critical, particularly in the urban areas, where unemployment has reached a record level. 17. The funds available under the Additional Financing will be used to scale up Component 1(d) of the project1. This includes implementing works to reinforce the impact of the project in the slums of the major cities of Mauritania and generating employment for unskilled labor, directly benefiting the poorest part of the population. For the Additional Financing, the generation of temporary employment through the use of labor-intensive construction techniques will be monitored as it has regularly been done under the original project. While the indicator is not included as a formal project indicator, it will be used to better monitor the project's immediate social impact. Based on initial estimates by the Borrower, implementation of the proposed additional activities, using labor- intensive construction techniques is expected to generate about 36,000 person-months of employment, essentially distributing revenue to unskilled workers and the poorest part of the population. This will contribute to reducing the social tension and allow the Government to avoid a significant social crisis, in line with the objectives of the Crisis Response Window (CRW) resources to manage the poverty, social, and economic impact of the crisis. The proposed Additional 1 This corresponds to Part B of the original project in the Development Credit Agreement. 4 Financing will have a direct impact on poverty alleviation. The operation will also protect the poor by ensuring that essential services, such as water, transport and electricity, are preserved. 18. Consistency with the Country Assistance Strategy. The 2006 Poverty Reduction Strategy Paper (PRSP) is Mauritania's second generation of poverty reduction strategy. The FY08-FY11 Country Assistance Strategy (CAS) is aligned to the five themes of the strategy: (1) acceleration of growth and stabilization of the macroeconomic framework; (2) centering growth in economic areas benefiting the poor; (3) development of human resources and expansion of basic services; (4) improved governance and capacity building; and (5) enhanced steering, monitoring, evaluation, and coordination of efforts. The Bank is committed to supporting the second and third themes by contributing to urban development and urban poverty reduction as well as to improving the quality of, and universal access to, basic services, such as water supply. 19. Coordination with other donors. The design of the Additional Financing fully takes into account the activities funded by the Government and other development partners in the urban sector. Given the importance of this sector for the economy and in the fight against poverty, more than US$470 million is currently being spent in Mauritania's cities. Major donors include the French Development Agency (AFD), the Arab Fund for Economic and Social Development (AFESD), the Kuwait Fund for Arabic Economic Development and the Saudi Fund for Development (SFD). As about 90 percent of those funds have focused on Nouakchott, the capital city, it was agreed with the Government to use the resources of the proposed Additional Financing on the other regional capital cities already included in the scope of the original project. 20. Risks. The overall risk associated with the original project was rated Moderate. Risks identified during the preparation of the original project have not materialized. It is particularly important to note that the Government has consistently provided timely counterpart funds under the first phase of the project. However, some additional risks were identified during the project implementation. In particular, these include risks related to the macro-economic framework, which further justifies the use of CRW funds, as well as interruption of the dialogue between the Government and the Bank for a period of about 15 months, which has impacted project progress in the past. A full review of risks at the country, sectoral, and project levels was carried out during the Bank's supervision mission in May 2010. The risks, as well their corresponding mitigating measures, are fully developed in Annex 2. As a result, the overall residual risk of the Additional Financing is Moderate. III. Proposed changes 21. The original PDO has been revised to be more focused and better aligned with the proposed activities. The revised objective reads as follows: To support Mauritania's central and local governments to: (i) improve access to basic services and infrastructure in targeted urban areas; and (ii) increase access to micro-finance and income-generating activities for populations living in slums. The activities financed under the Additional Financing will scale up Component 1(d), Provision of basic urban infrastructure in the 12 regional capitals, and will include the construction of (i) paved road (25.7 km), (ii) unpaved roads (26 km), (iii) water supply (8.3 km of network), and (iv) transmission and distribution lines (18.5 km of network and 210 street lamps), thereby improving access to water, road, and electricity. The Additional Financing will enable these services for an additional 120,000 persons, and will also create 36,000 employment-months, in line with the 5 objective of the CRW funds. While IDA funds will be dedicated to the works activities, the Government will finance the costs related to the management fees of the national Public Works Agency (AMEXTIPE) and operating costs of the Project Coordinating Unit (PCU), estimated at US$2.4 million. The technical and financial audits of the works proposed under the Additional Financing will be funded by the remaining funds under the original project. IV. Appraisal summary 22. Appraisal of scaled-up activities. A thorough review of implementation progress has been carried out during appraisal, including an updated cost analysis to ensure that the original project and the proposed Additional Financing would complement other donors' operations within the context of the urban development program. 23. The detailed scope of works is presented in Annex 3 and was finalized and agreed at appraisal. The determination of the activities considered for the Additional Financing takes into account the following criteria: (i) priorities of the municipalities; (ii) degree of readiness of the various infrastructure projects submitted for consideration; and (iii) other financing sources (Government, development partners) already available in each of the municipalities. Engineering studies as well as four bidding documents for works located in four (out of 9) cities are already available. The bidding documents of all works identified for the entire program of the proposed Additional Financing (US$25.5 million) will be finalized in June 2010, thus allowing a disbursement of about US$18 million in 2011 and US$7.5 million in 2012. 24. A socio-economic analysis was carried out as part of project preparation confirming the economic justification of key activities. The proposed works were subject to an economic analysis verifying that the Economic Rate of Return (ERR) is above the minimum required 12 percent. The recurrent maintenance cost incurred by the proposed program for water and electricity infrastructure will be covered by the relevant public utilities (the national water company, SNDE, and the national electricity company, SOMELEC). The recurrent maintenance cost incurred by the proposed road program will be paid for by municipalities which are committed, through the municipal contract, to mobilize the required resources. 25. Safeguard aspects. The project was rated Category A due to the resettlement of a community that was located in an urban slum area. A Resettlement Action Plan (RAP) was prepared in 2001 and successfully implemented and completed in March 2004. An Environmental Impact Assessment (EIA) was also elaborated in 2001 and has concluded that there was no major environmental impact. 26. The Additional Funding activities will mainly focus on roadway, adduction systems, and electrification. An Environmental and Social Management Framework (ESMF) and Resettlement Policy Framework (RPF) have been elaborated, indicating that the activities proposed under the Additional Financing will involve minor or moderate negative environmental and social impacts (arable lands (destruction of crop fields) and on the domestic infrastructure (fences, septic tanks, etc)). The elaboration of those framework documents involved main stakeholders (including mayors, consultants, and representatives from government and civil society) and a consultation workshop was held on May 4, 2010 to present and discuss all the ESMF and RPF findings. It was concluded that the Additional Financing be given a safeguards rating of Category B. These safeguard 6 instruments have been disclosed in the country on May 4, 2010 and at the Bank's Infoshop on May 19, 2010. 27. Implementation arrangements. The Additional Financing scales up Component 1(d) of the original project. The same implementation arrangements as those used for this component under the original project will be used for the Additional Financing. Two entities will be involved: (i) the Project Coordinating Unit (PCU) which will continue handling the overall project monitoring, reporting to the Bank, and auditing. The PCU reports to the Ministry of Economic Affairs and Development and the Coordinating Committee; and (ii) the executing agency, the national agency for public works, AMEXTIPE, in charge of implementing all the activities proposed under the Additional Financing on behalf of the communes, on a contract management basis. 28. Concerned municipalities have already selected their subprojects, programming, and operation and maintenance. The Government and the concerned municipalities will sign new agreements with AMEXTIPE on project implementation arrangements. New Delegated Contract Management Agreements (Conventions de maîtrise d'ouvrage déléguée, MDOD) in form and substance satisfactory to IDA will be signed between AMEXTIPE and each of the concerned cities. The agreements (Municipal contracts) will be signed between the Government and each of the nine participating municipalities specifying the roles and responsibilities of the cities, line ministries, and central government, and the policy reforms to be undertaken by each party (i.e. under these Agreements, the beneficiary cities will commit to set aside some of their budget funds for maintenance of the investments financed under the project). Those draft documents were prepared during project preparation and are expected to be signed in the week following Board approval. 29. Closing date. The current closing date of the original project is June 30, 2011. An extension of the closing date will be required to align it with the proposed closing date of the Additional Financing which is expected for June 30, 2012. As of May 17, 2010, 94 percent of the Credit has been disbursed. Disbursement projections indicate that the total credit amount will be disbursed before the current closing date. 30. Procurement arrangements. The procurement management function of the project has continued to be satisfactory. The implementation of contracts already awarded is proceeding in accordance with the procurement plan. In order to mitigate the procurement risk and facilitate the implementation of the activities of the additional financing, the procurement of goods, works, and services will be carried out by AMEXTIPE. As the executing agency, AMEXTIPE will be responsible for preparing bidding documents, coordinating and monitoring bidding processes, and liaising with IDA. The PCU will have to handle a limited number of activities, including monitoring and evaluation (M&E) activities as well as technical and financial audits. The PCU includes qualified and experienced procurement specialists who have access to appropriate tools and knowledge, to enable them to carry out their functions effectively. 31. The procurement activities funded under the Additional Financing will be carried out in accordance with the World Bank "Guidelines: Procurement under IBRD Loans and IDA Credits" (dated May 2004, revised October 2006 and May 1, 2010)" and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers (dated May 2006, revised October 2006 and May 1, 2010). For each contract to be financed under the Additional Financing, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated 7 costs, prior review requirements, and time frame have all been agreed between the Borrower and IDA in the Procurement Plan. The Procurement Plan will be updated as required ­ at least annually ­ to reflect the actual project implementation needs and improvements in institutional capacity. 32. Procurement capacity assessment, action plan, risk rating, and thresholds. A participatory procurement capacity assessment of the existing implementing agency, AMEXTIPE, was conducted during program preparation of the Urban Development Project (Credit 3574-MAU) in March 2001 and reassessed annually as part of the procurement supervision missions and procurement post reviews of the original project. The following points emerged from the assessment and reassessments: (i) AMEXTIPE is staffed with several procurement specialists and task programs managers with extensive experience in IDA and with other donors' procurement procedures; (ii) the agency is well organized and has clearly defined procurement responsibilities; and (iii) the agency has the capacity to manage procurement cycles well and has a good procurement record-keeping system. 33. Financial management: disbursement arrangements, reporting, and auditing. A financial management assessment was carried in May 2010 in the context of the supervision mission of the original project. The objective of the mission was to determine whether the PCU in charge of project implementation continues to maintain an acceptable financial management system in place. The conclusion of the assessment is that the financial management system in place, subject to the reinforcement measures, satisfies the Bank's minimum requirements under OP/BP 10.02, Financial Management, and is therefore adequate to provide, with reasonable assurance, accurate and timely financial management information on the status of the project required by Bank. 34. All the fiduciary aspects of the current operation will be handled by the qualified fiduciary team of the PCU who has strong knowledge and experience in the Bank's fiduciary procedures; while the technical aspect will be handling by AMEXTIPE under a Delegated Management Contract Agreement. V. TERMS AND CONDITIONS FOR PROJECT FINANCING 35. The proposed Additional Financing would consist of an IDA Credit of US$25.5 million equivalent, including US$15.5 million equivalent from the Crisis Response Window. Project specific Condition of Effectiveness: None. Main Dated covenants: (i) The Recipient shall not request a withdrawal from the Financing Account for the financing of basic urban infrastructure in a Main City unless: (i) a framework agreement has been signed between the Recipient and AMEXTIPE and a Municipal Contract has been signed between the Recipient and such Main City in accordance with Section I.A.2 of Schedule 2 to the Financing Agreement; (ii) a MDOD Agreement has been signed between such Main City and AMEXTIPE in accordance with Section I.A.3 of Schedule 2 to the Financing Agreement; and (iii) the Association has received satisfactory evidence of compliance with the applicable provisions of the Environmental and Social Management Framework and the Resettlement Policy Framework. 8 (ii) Payment of 50 percent of counterpart funds four months after the effective date, and (ii) the remaining 50 percent ten months after the effective date. (iii) Amendment of the Project Implementation Manual three months after the Effective Date. (iv) Recruitment of an external independent auditor three months after Effective Date. Exceptions to Bank Policies: None The proposed Additional Financing does not involve any exceptions to Bank policies. VI. PROJECT READINESS 36. Draft Delegated Contract Management Agreements and draft Municipal Contracts have been prepared during project preparation and are expected to be signed in the week following Board approval. Engineering studies as well as four bidding documents for works located in four of nine cities are already available. The bidding documents for all works identified for the entire program of the proposed Additional Financing will be finalized in June 2010, thus allowing a disbursement of about US$18 million in 2011 and US$7.5 million in 2012. 9 ANNEX 1: RESULTS FRAMEWORK AND MONITORING PDO 2 Rationale for Outcome Indicators change Current as per PAD Proposed Current as per PAD Impact on 541,590 People in slums in APL dwellers by 2010 (of Nouakchott with access The purpose of the Adaptable whom 281,590 are slum to improved urban Program Loan (APL) is to dwellers); services support Mauritania's central and local governments to: (i) improve Direct project Mandatory Core living conditions and promote beneficiaries (number), indicator. employment opportunities in the % of whom are female Definition of main towns of Mauritania, (percentage) direct beneficiary especially in slums; and (ii) would be people strengthen the institutional benefiting from framework and capacity for urban any of the and land management improved infrastructure PDO built/rehabilitated Improved living conditions, under the project mainly in four slums of or benefitting Nouakchott (El Mina, Ryad, Dar from job creation Naim, and Teyaret Nord) or micro-credit Proposed: Location of water pipes Number of people in Core Indicator (i) Improve access to basic from household urban areas provided services and infrastructure in with access to targeted urban areas; and (ii) "Improved Water increase access to micro-finance Sources" under the and income-generating activities project for slum populations Improved sanitation with Number of people in Core Indicator one latrine per nine slum urban areas provided dwellers by 2010 with access to "Improved Sanitation" under the project Number of people in Core Indicator urban areas provided with access to all-season roads within a 500 meter range under the project Reduction in water Unchanged, but moved prices by 50 percent in to intermediate level the slums Increased daily potable Unchanged, but moved water consumption to intermediate level 2 Original program indicators are also covered under this framework 10 First Phase: Unchanged, but moved 1,100 plots developed, to the intermediate level 1,100 plots sold. Number of land titles Unchanged, but moved regularized and to the intermediate level registered Number of jobs created Jobs created (number) or employment conditions improved for 40,000 workers; 25,000 micro-finance loans (80 Number of lines of percent for housing, 20 micro-credit provided to percent for economic slum dwellers activities related to 20,000 additional jobs) by 2010. People in urban areas provided with access to electricity under the project by household connections (number) People provided with improved drainage under the project Intermediate Results: Results Indicators for each Component Rationale for One per component change Improved community Core Indicator I - . PROVISION OF BASIC water points constructed URBAN INFRASTRUCTURE or rehabilitated under the project Improved infrastructure and Pipe household water Core Indicator priority basic services in the connections affected by targeted areas rehabilitation works undertaken under the project Primary, secondary, and tertiary water distribution networks built under the project Latrines improved Number of improved Core Indicator latrines constructed under the project 11 paved roads; unpaved Roads constructed, non- Core Indicator roads rural Roads rehabilitated, non- rural/ rural Earth roads built under the project (km) Health centers built Health facilities Core Indicator constructed, renovated, and/or equipped Electricity Transmission and distribution lines constructed or rehabilitated under the project Lighting posts built Primary classrooms Number of additional Core Indicator built or rehabilitated classrooms built or rehabilitated II - MICRO-CREDIT Line of Credit ­ Micro- Core Indicators finance (volume) Improved Access to Micro-Credit People buying or improving their house with the provided loan (number) III - INSTITUTIONAL AND Increase in transfer of Unchanged CAPACITY BUILDING funds to municipalities (%) Municipality incomes Unchanged increased (%) Persons trained Unchanged (number) 12 Arrangements for results monitoring Responsibility Comments Baseline Data Source/ Target Values Frequency for Data (e.g. rationale Unit of Original Progress Methodology PDO Level Results Collection for change) Measure- Project To Date Indicators* 2011 2012 Core ment Start (2010) (2002) People in slums in Nouakchott with access to 3 Number Improved Urban Services (persons) 0 163,000 163,000 163,000 Annual CCP reports ADU People in regional capital cities provided with access to all-season roads within a Number X 0 29,060 49,000 82,360 Annual CCP reports AMEXTIPE 500 meter range under the (persons) project People in regional capital cities provided with access Number X 0 6,600 6,800 7,030 Annual CCP reports AMEXTIPE to Improved Water Sources (persons) People in regional capital cities provided with electricity by household Number X 0 11,000 11,500 12,650 Annual CCP reports AMEXTIPE connections under the (persons) project Number of lines of micro- Target of credit provided to slum X number 0 89,4464 89 446 89,446 Quarterly CCP Reports ADU / GRET 23,500 was dwellers overachieved People in regional capital cities provided with Number improved drainage under 0 17,000 18,500 20,775 Annual CCP reports AMEXTIPE (persons) the project 3 Includes access to at least one of the following services: improved sanitation, improved access roads, improved water sources, improved power connection. 4 94,246 AGR lines (support to income generating activities) and 5,200 habitat lines 13 Number of people in urban areas provided with access to "Improved Sanitation" X number 0 26,514 26,514 26,514 Annual CCP reports AMEXTIPE under the project Beneficiaries The direct Number project (million beneficiaries persons) are as follows: (52%)5 access to at least one of the following Direct Project Beneficiaries, services: 250,000 300,000 370,000 improved X 0 Annually CCP Reports CCP (% of whom are female) (52%) (52%) (52%) sanitation, improved access roads, improved water sources, improved power connection Employ- ADU / Job created ment- 0 107,165 120,000 143,000 Quarterly CCP Reports MEXTIPE months 5 Estimate. 14 Baseline Target Values Unit of Original Progress Responsibility Comments Intermediate Results 2011 2012 Data Source/ Measure- Project To Date Frequency for Data (e.g. rationale Core Indicators Methodology ment Start (2010) Collection for change) (2002) Roads constructed, non- Target of 10.8 rural X km 0 26.4 km 26.4 km 26.4 km Quarterly CCP Reports ADU km was overachieved Earth roads built under the Target of 31.5 project Km 0 33 km 33 km 33 km Quarterly CCP Reports ADU km was overachieved Primary, secondary, and tertiary water distribution networks built under the project km 0 134,8 km 134,8 km 183 km Quarterly CCP Reports ADU Total Nouakchott 0 111 km 111 km6 111 km Regional Capitals 0 23,8 km 23,8 km 72 km 1,100 plots developed, 1,100 plots sold. number 0 1,375 1,375 1,375 Quarterly CCP Reports ADU Number of additional classrooms built or X number 0 271 2717 271 Quarterly CCP Reports ADU rehabilitated Number of improved Target of 2,000 latrines built under the X number 0 2.946 2,9468 2,946 Quarterly CCP Reports ADU was project overachieved 6 Initial target not provided 7 Initial target of 356 was revised at the Mid-Term Review to take into consideration 223 class rooms financed under the education project 8 Initial target of 3,600 was revised at the Mid-Term Review to take into consideration the lack of demand 15 Baseline Target Values Unit of Original Progress Responsibility Comments Intermediate Results 2011 2012 Data Source/ Measure- Project To Date Frequency for Data (e.g. rationale Core Indicators Methodology ment Start (2010) Collection for change) (2002) Improved community water points built / rehabilitated under the X number 0 72 729 72 Quarterly CCP Reports ADU project Increased daily potable liters/person/ Original target water consumption 15 41 41 41 Quarterly CCP Reports ADU day was 25 Health facilities constructed, renovated, X number 0 3 3 3 Quarterly CCP Reports ADU and/or equipped Reduction in water prices % 50% 50% 50% by 50 percent in the slums 2 Every two years Survey (CCP) CCP $/m3 1 1 1 Piped household water connections affected by Number rehabilitation works X 0 24,750 50,000 86,900 Annual CCP reports AMEXTIPE (persons) undertaken under the project Number of land titles Target of 3,000 regularized and registered number 0 27,970 27,970 27,970 Quarterly CCP Report ADU / GRET was overachieved Transmission and X km Quarterly CCP Reports ADU distribution lines constructed or rehabilitated under the project 0 261 261 281 Total Nouakchott 0 209 km 209 km10 209 km Regional Capitals 0 52km 52km 72km 9 Initial target not provided 10 Initial target not provided 16 Baseline Target Values Unit of Original Progress Responsibility Comments Intermediate Results 2011 2012 Data Source/ Measure- Project To Date Frequency for Data (e.g. rationale Core Indicators Methodology ment Start (2010) Collection for change) (2002) Line of Credit ­ Micro- Every three finance (volume) X US$ million 0 13.5 13.5 13.5 CCP reports CCP months Number of people buying or improving their house number 0 5,200 7,500 7,500 Quarterly CCP Reports ADU / GRET with the provided loan Alignment Roads rehabilitated, non- Works 11 with Core rural X km 0 km 16.3 km 16.3 km 41.3 km Quarterly supervision OVD, UCOP Indicator reports wording Works Roads rehabilitated, rural X km 0 km 12.5 12.5 38.5 km Quarterly supervision ADU reports Works Lighting posts built AMEXTIPE/ Number 0 158 15812 370 Quarterly supervision ADU reports Increase of transfer of CCP Original target funds to municipalities MRO +1,320% +1,320% +2,000% 265 Yearly Budget reports was +600% (FRD) million 3,500 3,500 5,300 (1,855) Municipality income CCP increase % 0 +33% + 50% +50% Yearly Budget reports CCP Persons trained number 0 629 300 629 Yearly CCP Reports 11 Initial target not provided 12 Initial target not provided 17 ANNEX 2: RISK IDENTIFICATION WORKSHEET Risk factors Description of risk Rating of Mitigation measures Rating of risk residual risk I. Country and/or Sub-National Level Risks Macroeconomic The macroeconomic framework has been Substantial The Government signed a new program with Substantial Framework negatively impacted due to political instability the IMF; some important support, in recent years; Government's reform process particularly from Arab Donors, is expected. was disrupted by the coup and the fiscal situation has deteriorated threatening the global economic crisis Country Mauritania has continuously honored its Low Renewed dialogue between Government and Low Engagement with commitments vis-à-vis the World Bank, even the Bank and implementation of existing World Bank during the last suspension period portfolio of project. Country The lack of the dialogue between the High The new high-intensity labor works will Substantial Governance Government and the opposition, high reduce unemployment; Continued donor unemployment rate, and the rise of food prices support to government reform efforts through may trigger some social conflicts and political budget support and specific investments crisis, threatening the stability of the country Systemic High systemic corruption; Mauritania is Substantial Continued donor support to government Moderate Corruption ranked 123 (out of 180) in 2008 Transparency reform efforts through budget support. International Corruption Perception Index. Government has new anti-corruption strategy Need to strengthen coordination of anti- which deserves strong donor support. The corruption reforms across sectors. Procurement rating of the original project has consistently been Satisfactory. Procurement reviews as well as independent technical and financial audits will be carried out regularly under the Additional Financing. 18 Risk factors Description of risk Rating of Mitigation measures Rating of risk residual risk II. Sector Governance, Policies and Institutions Sector Specific Lack of central government willingness to Substantial The Government has recently approved a Substantial Risks accompany and support local governments policy letter confirming its commitment to the decentralization. Donors are coordinating to support and follow-up the implementation of this policy letter Technical support and capacity building is provided by the original project to both central and local levels Capacity of the central government to Substantial Technical assistance will be provided through Substantial implement the decentralization policy (DGCT) the CAC. Other donors are also providing technical assistance Policy risk The lack of financial commitment of the Substantial The level of financial transfer from central to Moderate current government to support decentralization local governments (FRD) is closely monitored and increased by 1,300% since 2001. Institutional Capacity of the municipalities to follow-up on High Activities will be implemented by Moderate capacity implementation of the activities AMEXTIPE and technical support is provided through the PCU to the mayors to negotiate better with AMEXTIPE III. Operation-specific Risks Financing The time availability of government financing Substantial Under the original project, all counterpart Low for the complementary activities to the project. funds have been provided in a timely manner. The Government has already allocated the expected contribution for the first year (US$ 14 million) in its annual budget approved in December 2009. Sustainability Inadequate institutional and financial capacity Moderate Technical assistance provided by the original Low in relevant local governments for operations project, funds transferred by the Government and maintenance of infrastructure financed by through the FRD and the signed commitment the project. between mayors and the central government will mitigate this risk. 19 Risk factors Description of risk Rating of Mitigation measures Rating of risk residual risk Implementation Lack of performance of AMEXTIPE in the High Experience, specific technical assistance. Moderate implementation of the selected program Currently, AMEXTIPE has no other priority activities and could focus on the program OVERALL RISK Substantial Moderate RATING The overall risk rating for the project, taking into account the mitigation measures is deemed Moderate. Definition of Risk Ratings: H: High; S: Substantial; M: Moderate; N: Negligible 20 ANNEX 3: DETAILED DESCRIPTION OF MODIFIED OR NEW PROJECT ACTIVITIES 1. The detailed scope of works were finalized and agreed at appraisal. The table below summarizes, for each municipality, the proposed activities to be funded under the Additional Financing in the water, road, and electricity sectors. 2. The determination of the activities considered for the Additional Financing takes into account the following criteria: (i) the priorities of the municipalities; (ii) the degree of readiness of the various infrastructure projects submitted for consideration; and (iii) the other financing sources (government, development partners) already available in each of the municipality. Estimated cost City Sub-project (IDA) (MRO) Sub-sector Nature of works Akjoujt Extension of electricity network 164,000,000 Electricity MT network (ml) 1,500 BT network (ml) 3,500 Social connections (nb) 300 Public lighting Length of network (ml) 6,000 Lamps (nb) 70 5 transformers pm Aleg Road rehabilitation 600,000,000 Urban roads Length (ml) 1,500 Rural dirt roads Length (ml) 3,000 Development of potable water Atar distribution 200,000,000 Urban water Distribution network (ml) 2,500 Social connections (nb) - 3 reservoirs and pumping pm Urban roads and Road rehabilitation and street lighting 940,000,000 pavements Longueur (ml) 2,500 Public space Surface (m2) 8,000 Public lighting Length of network (ml) 1,500 Lamps (nb) 70 Kaédi Road rehabilitation 540,000,000 Urban roads Length (ml) 5,500 Kiffa Road rehabilitation 991,000,000 Urban roads Length (ml) 9,000 Nouadhibou Road rehabilitation 753,000,000 Urban roads Length (ml) 8,000 Public lighting Length of network (ml) 8,000 Lamps (nb) 70 Development of potable water Rosso distribution 500,000,000 Urban water Distribution network (ml) 3,600 Social connections (nb) - Water fountains (nb) 2 Treatment unit, drilling pm Drainage - central Rainwater drainage 75,000,000 market Length (ml) 500 Reinforcement of discharge system Dam - discharge pm Road rehabilitation 982,000,000 Rural dirt roads Length (ml) 15,000 Development of potable water Sélibaby distribution 125,000,000 Urban water Distribution network (ml) 3,000 Social connections (nb) 200 Water fountains (nb) 15 Maintenance of water tanks pm Drainage - city 355,000,000 center Length (ml) 3,500 Tidjikja Road rehabilitation 520,000,000 Rural dirt roads Length (ml) 8,000 Extension of electricity network 140,000,000 Electricity MT network (ml) 5,000 BT network (ml) 8,500 TOTAL 6,885,000,000 MT: Moyenne tension (medium voltage); BT: Basse tension (low voltage) 21 ANNEX 4: REVISED ESTIMATE OF PROJECT COSTS Table 1: Original project - component cost by financier (amount in US$ million) IDA Gov. Others Total 1. Provision of basic urban infrastructure 54.30 12.55 9.00 75.85 2. Micro-credit 0.00 6.90 0.00 6.90 3. Institutional and capacity building 8.05 0.00 0.00 8.05 4. Audits, monitoring, and operating costs 5.95 0.61 0.00 6.56 PPF refinancing 1.70 0.00 0.00 1.70 Total costs 70.00 20.06 9.00 99.06 Table 2: Additional Financing, Component 1 - estimated costs by category and financier (amount in US$ million) IDA Gov. Total Works (including physical and finance contingencies) 24.5 0.0 24.5 Consultant services 1.0 0.0 1.0 Operating costs (Implementing agency) 0.0 2.4 2.4 Total costs 25.5 2.4 27.9 22 IBRD 31361 18° 16° 14° 12° 10° Former Atlantic Spanish ALGERIA MAURITANIA Ocean Sahara URBAN DEVELOPMENT PROGRAM MAURITANIA 30° 30° Nouakchott M A L I Nema 0 100 200 300 Tombouctou PROJECT CITIES Dakar KILOMETERS SENEGAL NIGER THE BURKINA GAMBIA Bamako Niamey FASO PRIMARY ROADS Bissau NIGERIA GUINEA- Ouagadougou BISSAU GUINEA BENIN SECONDARY ROADS GHANA M O R O C C O28° TO Conakr y CÔTE D'IVOIRE GO 28° TRACKS RAILROADS 8° This map was produced by the REGION CAPITALS To Tindouf Map Design Unit of The World Bank. AIRPORTS The boundaries, colors, denominations and any other information shown on PORTS this map do not imply, on the part of REGION BOUNDARIES The World Bank Group, any judgment INTERNATIONAL on the legal status of any territory, or BOUNDARIES any endorsement or acceptance of 26° such boundaries. 26° Aïn Ben Tili ALGERIA Chegga To La'Youn ATLANTIC Bîr Mogreïn FORMER OCEAN TIRIS 24° S PA N I S H ZEMMOUR 24° SAHARA Zouérat Fdérik Tourîne Touâjîl 22° 22° Boû Lanouâr Choûm Nouâdhibou Tmeïmîchât Ouadâne la Gouèra DAKHLET Atâr A D R A R NOUADHIBOU Chinguetti 20° INCHIRI 20° Akjoujt Oujeft Nouâmghâr HODH ECH Tamassoumît TA G A N T CHARGUI Aguilâl Faï Tidjikja Tîchît NOUAKCHOTT 18° TRARZA 18° Moudjéria Cangarâfa Boutilimit Magta Lahjar Oualâta BRAKNA B A Tâmchekket Rkîz Aleg Mederdra HODH A Guérou S Rosso A S Kiffa Ayoûn el Atroûs Bogué Mônguel Barkéwol el Abiod EL Timbedgha Néma To St-Louis 16° Kaédi Mbout Koûroudjél GHARBI Amourj Bassikounou 16° GORGOL Kankossa Kobenni Sivé Maghama Touil Djiguéni Se AK A ne IM ga GUID l R. Sélibabi Gouraye SENEGAL M A L I 14° 18° 16° 14° 12° 10° 8° 6° 14° APRIL 2001