Report No: ICR00004931 IMPLEMENTATION COMPLETION AND RESULTS REPORT IDA-D1530, AND IDA-D2640 ON A GRANT IN THE AMOUNT OF SDR19.0 MILLION AND SDR18.6 MILLION (US$ 26.0 MILLION AND US$ 26.0 MILLION EQUIVALENT) TO THE ISLAMIC REPUBLIC OF MAURITANIA FOR THE FIRST AND SECOND FISCAL CONSOLIDATION AND PRIVATE SECTOR SUPPORT DEVELOPMENT POLICY OPERATIONS December 16, 2019 Macroeconomics, Trade and Investment and Fiscal Management Global Practice EA2M1 unit, Africa Region The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) CURRENCY EQUIVALENTS (Exchange Rate Effective December 16, 2019) Currency Unit = Mauritanian Ouguiya (MRU) MRU 37.30 = US$1 US$ 1.38 = SDR 1 FISCAL YEAR January 1 – December 31 Regional Vice President: Hafez Ghanem Country Director: Nathan Belete Country Manager: Laurent Msellati Global Practice Director: Marcello Estevao Regional Director: Elisabeth Huybens Practice Manager: Lars Christian Moller Task Team Leader(s): Samer Matta ICR Primary Author: Richard J. Carroll ICR Main Contributor: Richard J. Carroll 1 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) ABBREVIATIONS AND ACRONYMS AfDB African Development Bank LDP Letter of Development Policy MDGs BCM Central Bank of Mauritania MDGs Millennium Development Goals BoP Balance of Payments MEF Ministry of Economy and Finance CA Contracting Authorities MOE Ministry of Education CAD External Current Account Deficit MOF Ministry of Finance Public Investment Analysis and Programming CAPIP MOH Ministry of Health Committee CAS Country Assistance Strategy MRU Mauritanian Ouguiya Code of Real Property Rights (Code des Droits CDR MTEF Medium-Term Expenditure Framework Reels) CFAA Country Financial Accountability Assessment NPL Non-performing Loan CPF Country Partnership Framework OIE World Organization of Animal Health Directorate of Studies, Reforms, and Monitoring and Evaluation (Direction Générale DGERSE PEFA Public Expenditure and Financial Accountability des Etudes, des Réformes, du Suivi et d'Evaluation) DPO Development Policy Financing PER Public Expenditure Review DSA Debt Sustainability Analysis PFM Public Financial Management Japan Policy and Human Resources Development DTF General Directorate of Financial Oversight PHRD Trust Fund ECF Extended Credit Facility PIM Public Investment Management Administrative Public Agencies (Etablissements EPA PIP Public Investment Program Publics à Caractère Administratif) EU European Union PPP Public-Private Partnerships FDI Foreign Direct Investment RACHAD Automated expenditure-chain system FY Fiscal Year ROSC Report on the Observance of Standards and Codes National Strategy for Accelerated Growth and GDP Gross Domestic Product SCAPP Shared Prosperity Electronic Public Financial Management GFMIS SDR Special Drawing Rights Information System National Mining Company (Société Nationale des GNP Gross National Product SNIM Industries Minière) GoM Government of Mauritania SOE State Owned Enterprise GRS Grievance Redress Service TA Technical Assistance HIPC Heavily Indebted Poor Countries TBs Treasury Bills International Bank for Reconstruction and IBRD ToT Terms of Trade Development IDA International Development Association UNDP United Nations Development Program IFC International Finance Corporation US$ United States Dollars IMF International Monetary Fund VAT Value-added Tax JSAN Joint Staff Advisory Note 2 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) TABLE OF CONTENTS DATA SHEET .......................................................................................................................................5 I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES ................................................................8 A. Context at Appraisal ............................................................................................................................. 8 Overall context ................................................................................................................................. 8 Structural/sectoral background ..................................................................................................... 11 Bank Rationale for Involvement .................................................................................................... 12 Original Program Development Objective(s) (PDO) (as approved) ............................................... 12 Original Policy Areas/Pillars Supported by the Program (as approved) ........................................ 12 B. Significant Changes During Implementation ...................................................................................... 13 Revised Program Development Objectives (PDOs) ....................................................................... 13 Revised Policy Areas/Pillars supported by the Program ................................................................ 13 Other Changes ............................................................................................................................... 13 II. ASSESSMENT OF KEY PROGRAM DESIGN AND OUTCOMES......................................................... 14 A. Relevance of Prior Actions .................................................................................................................. 14 B. Achievement of Objectives (Efficacy) ................................................................................................. 21 Relevance and Measurability of RIs and Appropriateness of Targets ........................................... 21 Efficacy of prior actions.................................................................................................................. 24 Rating: Satisfactory ........................................................................................................................ 27 C. Overall Outcome Rating and Justification .......................................................................................... 27 III. OTHER OUTCOMES AND IMPACTS............................................................................................. 28 A. Poverty, Gender and Social Impacts ................................................................................................... 28 B. Environmental, Forests and Natural Resource Effects ....................................................................... 28 C. Institutional Change/Strengthening ................................................................................................... 28 D. Other Unintended Outcomes and Impacts......................................................................................... 29 IV. BANK PERFORMANCE ............................................................................................................... 29 V. RISK TO SUSTAINABILITY OF DEVELOPMENT OUTCOMES ........................................................... 32 VI. LESSONS AND NEXT PHASE ....................................................................................................... 32 A. Lessons Learned .................................................................................................................................. 32 B. Next Phase .......................................................................................................................................... 34 ANNEX 1. RESULTS FRAMEWORK ..................................................................................................... 35 3 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES .................... 38 ANNEX 3. BORROWER, CO-FINANCIERS, AND OTHER DEVELOPMENT PARTNERS’/STAKEHOLDERS’ COMMENTS ..................................................................................................................................... 40 ANNEX 4. SECTORS AND THEMES ..................................................................................................... 41 ANNEX 5. SUPPORTING DOCUMENTS ............................................................................................... 43 4 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) DATA SHEET BASIC INFORMATION Program Series Project ID Short Name Full Name Mauritania Fiscal and Private Sector Participation P160592 Mauritania DPO Reforms DPO Mauritania Second Fiscal Consolidation and Private P163057 Mauritania DPO 2 Sector Support DPO Series Details (USD) Project ID Approved Amount Disbursed Amount P160592 26,000,000.00 25,413,450.00 P163057 26,000,000.00 26,332,392.14 Total 52,000,000.00 51,745,842.14 KEY_D PF_OPTI ONS_ TBL P160592 P163057 Policy-Based Guarantees No No Ln/Cr/TF IDA-D1530 IDA-D2640 Concept Review 10-Aug-2016 12-Apr-2017 Decision Review 02-Nov-2016 06-Nov-2017 Approval 15-Dec-2016 20-Dec-2017 Effectiveness 19-Dec-2016 21-Dec-2017 Original Closing 31-Dec-2017 31-Dec-2018 Actual Closing 31-Dec-2017 31-Dec-2018 Crisis or Post-Conflict No No Regular Deferred Drawdown Option No No Catastrophe Deferred Drawdown Option No No 5 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Sub-National Lending No No Special Development Policy Lending No No Organizations Series Project Borrower Implementing Agency P160592 Ministère de l’Economie et des Ministère de l’Economie et des Finances Finances P163057 Program Development Objective (PDO) Program Development Objective (PDO) (From last operation in the series) Project Development Objective (Note: will be disclosed in the MOS) Support fiscal consolidation and private sector participation in non-extractives sectors Board Schedule Comments PROGRAM FINANCING DATA (USD) World Bank Administered Financing Approved Amount Actual Disbursed P160592 26,000,000 25,413,450 IDA-D1530 P163057 26,000,000 26,332,392 IDA-D2640 Total 52,000,000 51,745,842 RATINGS SUMMARY Program Performance Overall Outcome Relevance of Prior Actions Achievement of Objectives (Efficacy) Satisfactory Satisfactory Satisfactory 6 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Bank Performance Satisfactory ACCOUNTABILITY AND DECISION MAKING At ICR: Regional Vice President Country Director Director Hafez M. H. Ghanem Nathan M. Belete Marcello De Moura Estevao Filho Practice Manager Task Team Leader(s) Lars Christian Moller Samer Naji Matta At Approval: P160592 Regional Vice President Country Director Director Makhtar Diop Louise J. Cord Carlos Felipe Jaramillo Practice Manager Task Team Leader(s) Lars Christian Moller Wael Mansour P163057 Regional Vice President Country Director Director Makhtar Diop Louise J. Cord Carlos Felipe Jaramillo Practice Manager Task Team Leader(s) Lars Christian Moller Wael Mansour, El Hadramy Oubeid 7 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES 1. Mauritania is a sparsely populated country that is one of the least developed in the world. Geographically, Mauritania links the Arab Maghreb and western Sub-Saharan Africa (SSA). It is characterized by a very low population density of 4.3 people per square kilometers, which is significantly lower than the 44.9 average in SSA. While the poverty rate declined from 44.5 percent in 2008 to 33 percent in 2014, Mauritania remains one of the least developed countries in the world, ranking 159th out 189 countries on the Human Development Index (HDI) index in 2017. 2. This Implementation and Completion and Results (ICR) report assesses the achievement of the First and Second Fiscal Consolidation and Private Sector Reform Development Policy Operation (DPO) operations (P160592 and P-163057) to Mauritania.1 These operations were the first Bank-funded DPOs in Mauritania. The series consisted of two operations aimed at supporting the Government of Mauritania (GoM) to implement structural fiscal reforms and private sector participation in non-extractive sectors. The first operation (DPO1), a grant financing of US$26 million (SDR19 million), was approved by the Board on December 15, 2016. The second operation (DPO2), a grant financing US$26 million (SDR 18.6 million), was approved by the Board on December 20, 2017. A. Context at Appraisal Overall context 3. Historically, Mauritania’s development model suffered from a mis-management of natural resources. During 2000-2014, extractive industries represented an average of 25 percent of GDP, 82 percent of exports and 23 percent of fiscal revenues. During the 2009-2014 commodity boom, mining exports doubled, pushing Mauritania’s average annual real GDP growth rate to 4.2 percent, close to the SSA average at that time. High commodity prices prompted a surge in foreign direct investment (FDI) and revenue inflows, which increased demand for non-tradeable services and drove the real exchange rate to appreciate. Substantial resource revenues and foreign aid were not used to invest in productive sectors. Rather, they contributed to a state-driven development model, which did not encourage economic diversification. 4. At the time of inception of this DPO series, Mauritania was struggling to cope with the terms of trade (ToT) shock from the steep drop in the price of Mauritania’s commodity exports. The end of the commodity super-cycle in 2014 weighed heavily on the Mauritanian economy. Growth plummeted from 6.1 percent in 2013 to 0.4 percent in 2015 (Table 1). The fiscal surplus of 4.3 percent of GDP in 2013 turned to a deficit of 3.4 percent in 2015 as mining revenues declined and the wage bill and capital expenditures soared. Meanwhile, the inflexible exchange rate policy (the ouguiya was pegged to the U.S. dollar in a crawl-like arrangement) and a lack of monetary policy tools limited the central bank’s (BCM) ability to respond to the ToT shock. This led to growing pressure on foreign-exchange reserves which dropped to only 2.1 months of imports by end-2014. These pressures prompted BCM to adopt a more flexible exchange rate policy and 1 This Implementation Completion Report (ICR) is part of an Operations Policy and Country Services (OPCS) pilot that is testing a revised template for development policy operations. Pilot template guidelines are available upon request to help readers understand the new format. 8 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) contract a US$300 million non-concessional loan from Saudi Arabia in mid-2015. These policies helped alleviate pressure on reserves, but significantly increased the debt-to-GDP ratio, which rose from 70.6 percent of GDP in 2013 to 96.7 percent in 2015. Against this deteriorating economic situation, Mauritania asked the Bank for budget support. 5. By appraisal, the macroeconomic policy framework was deemed adequate to launch DPO1 given an expected growth recovery, a fiscal consolidation path, and a more favorable external environment. In particular, this assessment was affirmed by: (i) favorable medium-term growth prospects underpinned by continued strength in fishing and agricultural production; (ii) lower external pressures driven by improved ToT and BCM’s policy to adopt a more flexible exchange rate policy; and (iii) the Government’s strong commitment to fiscal consolidation. Risks, while manageable, remained substantial, particularly in terms of the macroeconomic environment, notably in the absence of an IMF-supported program. The Bank and IMF teams shared similar views about the overall macro-framework and coordination was very effective, but the IMF only reached an agreement with GoM regarding a three-year ECF program in December 2017,2 because it stressed the need to adhere to a zero level non-concessional borrowing policy.3 In the Letter of Development Policy of both DPO1 and DPO2 and in a separate letter that GoM sent to the president of the World Bank as part of DPO1, the authorities committed to implement several reforms to strengthen the monetary policy framework in line with the Bank and IMF recommendations. Some of these reforms such as strengthening banking supervision, fighting money laundering, and adopting a more flexible exchange rate, were included and implemented later as part of the IMF program. Table 1: Key Macroeconomic Indicators 2 The Fund’s program has four pillars: (i) more flexible monetary and exchange rate policy; (ii) fiscal consolidation through tax administration and PIM to keep the debt going downward; (iii) strengthen bank supervision and boost private sector credit; (iv) and advance structural reforms to improve the business environment and accelerate diversification. Pillars (ii) to (iv) overlap with the DPO series reform areas. 3 Two key priority infrastructure projects (the Boulenoir wind farm project and the Nouakchott fishing port project) were excluded from that rule because they were identified in the SCAPP and did not have concessional financing. 9 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) 2013 2014 2015 2016 2017 E2018 P2019 P2020 Real Economy annual change unless otherwise indicated Real GDP growth 6.1 5.6 0.4 1.8 3.1 3.6 6.4 5.7 Per Capita GDP (current US$) 1,566.7 1,435.3 1,249.4 1,175.9 1,196.7 1,240.0 1,312.0 1,322.5 Extractives GDP growth 15.1 4.2 -5.6 0.7 -7.1 -18.7 16.3 5.3 Non-extractives GDP growth 4.8 5.8 1.4 2.0 4.5 6.4 5.5 5.7 Prices annual change unless otherwise indicated GDP deflator 3.0 -9.2 -4.2 3.4 3.4 2.7 7.2 3.4 CPI Inflation 4.1 3.6 3.3 1.5 2.3 3.0 2.2 2.8 Iron Price ($/dmt) 135.4 97.0 55.9 58.4 71.8 69.8 96.3 90.4 Copper Prices ($/mt) 7,332.1 6,863.0 5,510.0 4,868.0 6,170.0 6,530.0 6,137.0 6,316.6 Gold Prices ($/ troy oz) 1,411.5 1,266.0 1,161.0 1,249.0 1,258.0 1,269.2 1,322.0 1,372.5 Oil Price (US$/bbl) 104.1 96.2 50.8 42.8 52.8 68.3 62.6 63.6 Fiscal Accounts Percent of GDP, unless otherwise indicated Expenditures 25.8 29.5 32.8 28.5 28.3 27.2 26.7 27.1 Current Expenditure 15.8 17.7 18.8 16.8 17.5 18.2 17.5 17.5 Capital Expenditure 10.0 11.8 14.1 11.8 10.8 9.1 9.2 9.6 Revenues 30.1 26.1 29.4 28.0 28.0 30.2 27.1 27.5 Tax Revenues (excl. extractives) 14.6 16.1 16.8 16.7 17.6 18.9 18.6 18.8 Non-tax revenues 9.7 4.4 9.1 7.8 7.1 6.6 5.3 5.4 Extractive Revenues 5.2 5.4 1.7 1.6 2.3 4.0 2.5 2.5 Grants 0.7 0.1 1.8 1.9 1.0 0.7 0.7 0.8 Primary Budget Balance 5.2 -2.4 -2.3 0.5 1.2 4.6 1.8 1.7 Budget Balance 4.3 -3.4 -3.4 -0.5 -0.3 2.9 0.3 0.4 Public Debt (including Kuwait debt) 70.6 78.6 96.7 98.9 95.9 102.2 95.7 96.0 Public Debt (excluding Kuwait Debt)* 53.0 59.4 75.0 77.3 75.8 82.7 77.8 78.8 Balance of Payment Percent of GDP, unless otherwise indicated Current Account Balance -22.3 -27.3 -21.6 -15.1 -13.9 -18.7 -15.0 -19.4 Foreign Direct Investment 19.9 9.3 10.4 5.8 12.0 12.4 11.6 17.5 Gross Reserves (million US$, eop) 981.8 620.1 821.3 824.5 849.0 919.1 1,010.7 1,199.3 in months of goods imports 3.9 2.8 5.1 5.2 4.9 4.2 4.5 5.0 in months of imports (goods & services) 2.9 2.1 3.8 3.9 3.6 3.6 3.8 4.0 Exchange Rate (MRU/US$, avg) 30.0 30.2 32.4 35.2 35.8 35.7 .. .. GDP (nominal, million US$) 5,724.2 5,391.6 4,828.9 4,679.3 4,905.9 5,234.9 5,704.6 5,922.3 Source: Ministry of Economy and Finance (MEF), National Statistics Office, Central Bank of Mauritania (BCM), IMF, United Nations (UN) Population, World Bank Staff Calculation as of August 30, 2019. * The Kuwait debt is a loan that was contracted in the 1970s from the Kuwait Investment Authority and was not cancelled as part of the HIPIC initiative. The loan is dormant as no interest or principal has ever been paid. The Mauritanian authorities are in discussions with Kuwait to cancel this debt, but no agreement has been reached yet. 6. In addition to the strong coordination with the IMF, the World Bank worked closely with other development partners to define the scope of government reforms supported by this series. In particular, a budget-support operation from the African Development Bank (AfDB) was being developed in parallel to the Bank’s DPO. Given the very close collaboration between the two institutions, the AfDB anchored its two- year operation to the private-sector-participation pillar of the Bank’s DPO series. The first operation was approved by the AfDB Board in November 2016 with a grant of US$ 4.6 million and a credit of US$ 4.8 million, while the second operation was approved in November 2017 as a grant of US$ 5.7 million.4 Similar to the Bank, these operations were the first AfDB DPOs in Mauritania. 4 https://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/MAURITANIA_- _Economic_Reforms_and_Diversification_PAREDE_II_EN.pdf 10 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Structural/sectoral background 7. Mauritania’s tax system suffered from flaws that came to light following the ToT shock. Despite a series of major tax reforms launched in 2011, Mauritania’s tax system suffered from inefficient tax incentives that were inaccurately targeted and commonly used by companies that did not comply with associated obligations. A 2014 World Bank survey of investors in Mauritania found that almost 80 percent of respondents would have invested the same amount in the absence of tax incentives. Mauritania’s income tax was also affected by Base Erosion and Profit-Shifting (BEPS) activities due to an inadequate regulatory framework and procedures to address the different sources (domestic and international) of BEPS. This included transfer mis-pricing by affiliates of multinational enterprises. 8. Public Investment Management (PIM) also suffered from structural weaknesses that limited the contribution of the Public Investment Plan (PIP) to growth. The critical deficiencies in Mauritania’s PIM framework included (i) the lack of technical and financial criteria applied for project-selection, (ii) the fragmented project-management system that did not include domestic and foreign-financed projects, and (iii) inefficiencies in project execution and procurement systems that reduced transparency. 9. The parastatal sector was large and was a growing problem because of the high cost and poor quality of services, as well as their fiscal cost through subsidies. The parastatal sector comprised 50 State- owned enterprises (SOEs) and more than 100 enterprises with administrative character (EPAs). There was also weak oversight and limited financial information. At appraisal, the fiscal burden of subsidies paid to the parastatal sector amounted to 3.5 percent of GDP and accounted for 19 percent of recurrent expenditures. In addition, their expenditures were off-budget, thus masking the fiscal risk they posed. 10. Mauritania’s weak infrastructure and low level of technological development could be traced, in large part, to an underdeveloped private sector. With uncertainties about commodity prices, fiscal revenues alone were also unlikely to be sufficient to drive economic growth. To remedy these constraints to development, there was a growing interest in public-private partnerships (PPPs). This vehicle held out promise for enhanced foreign direct investment (FDI) and, with it, improved technology transfer and development of infrastructure beyond just the extractive industries. However, the legal and regulatory framework for PPPs needed to be established. 11. The legal framework for land rights was a significant obstacle to economic and social development resulting in insecurity of property rights. This obstacle discouraged investment in land improvements and issuing credit that required collateral. This credit constraint affected both households and businesses. In response, the Government launched a program to strengthen the framework for property rights and land tenure. Part of this program was to pilot innovative land-rights management systems in different contexts in the country (both rural and urban). 12. Livestock played a major role in the economic and social fabric of Mauritania, but animal diseases, combined with severe climatic shocks prevented the sector from reaching its full production and export potential. Livestock accounted for an average of 19 percent of GDP in 2000-2015. In addition to being one of the few non-extractive sectors in which Mauritania has a comparative advantage, livestock provides revenues to about one million people (25 percent of the population) and plays a key role in food security. 13. Against this backdrop, the Government approved its National Strategy for Accelerated Growth and 11 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Shared Prosperity (SCAPP) for the period 2016-2030. The long-term goal of the SCAPP is for Mauritania to reach the status of a middle-income country by 2030. The three strategic axes of the strategy are: (i) promoting robust, sustainable and inclusive growth, though strengthening the private sector and unlocking the potential of high-growth industries such as agribusiness, fisheries and livestock; (ii) developing human capital and access to basic social services; and (iii) strengthening economic governance, with a particular focus on improving fiscal management. The DPO series was closely aligned with the SCAPP’s objectives to support the emergence of new employment-generating sectors and private-sector, and improve fiscal management. Bank Rationale for Involvement 14. There was a strong rationale for World Bank involvement in the context of this DPO series. In Mauritania, the Bank had substantial experience in the priority areas that would best help the country address the severe economic challenges it faced in 2015. The Bank had already conducted a substantial amount of relevant analytical work that could lead to a successful policy operation (see Section IV. and Table 6 for details). The analytical work included a 2013 analysis of governance in State-Owned Enterprises (SOEs) and a 2014 Public Expenditure and Financial Accountability (PEFA) report. As a result, the Bank had comparative advantages in tax administration, PIM, improving budgeting and transparency of SOEs, all of which could lead to increased fiscal savings. This was key not only to managing the crisis, but to use resources more efficiently to preserve past gains in poverty reduction. Thus, this DPO series was fully aligned with the World Bank’s twin goals of ending extreme poverty and boosting shared prosperity. The Bank was also able to use the DPO to help leverage further lending from development partners, particularly the IMF and the AfDB. Original Program Development Objective(s) (PDO) (as approved) 15. The program development objective (PDO) was “to support fiscal consolidation and private sector participation in non-extractives sectors.” Original Policy Areas/Pillars Supported by the Program (as approved) 16. To support this PDO, the program was designed around two pillars: Pillar A: Support fiscal consolidation by increasing domestic revenues, enhancing fiscal transparency and increasing the efficiency of public spending.  A.1 Reducing tax expenditures and mitigating profit shifting and base erosion risks  A.2 Public Investment Management  A.3 The Parastatal Sector This pillar supported the Government’s fiscal consolidation by increasing domestic revenues, controlling and increasing transparency of expenditures related to parastatals, and improving the efficiency of public spending. The designed measures aimed to increase the flexibility and responsiveness of fiscal policy, as well to mitigate systemic fiscal risks. Specifically, pillar A included actions toward: (i) increasing non-extractives revenues by rationalizing tax expenditures and expanding the tax base; (ii) streamlining the PIP and reducing its impact on public debt; and (iii) addressing fiscal risks related to parastatals. These measures assist 12 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Mauritania in its fiscal consolidation efforts and help adapt its fiscal policy to a new external environment of low commodity prices. Pillar B: Support private sector participation in the non-extractives sectors.  B.1 Public-Private Partnerships  B.2 Property Rights  B.3 The Livestock Sector This pillar supported the diversification of economic activity in non-extractives through PPPs, establishing land rights and measures to formalize the livestock sector. Specifically, pillar B contained actions: (i) introducing PPP arrangements to attract greater private sector participation and FDIs; (ii) reforming land tenure and property rights law to alleviate access to credit constraints, and (iii) strengthening the regulatory environment to promote increased productivity and exports in the livestock sector. These measures supported private sector participation in the non-extractives sectors. By strengthening the regulatory framework for PPPs, better defining property rights to improve the business climate and facilitate access to credit, and bolstering livestock sector formalization and productivity, the program could fulfill the program development objective of supporting private sector participation in the non-extractives sector. B. Significant Changes During Implementation Revised Program Development Objectives (PDOs) 17. The PDO was not revised. Changes to indicators are explained in Table 4 in Section II. Revised Policy Areas/Pillars supported by the Program 18. The wording of pillars A and B was slightly revised from DPO1 to DPO2:  Changes in Pillar A: There was a revision with “enhancing fiscal transparency” in DPO1 replaced by “controlling public enterprises” in DPO2. The change in wording was intended to emphasize that the fiscal consolidation under DPO2 had a stronger focus on the operations of public enterprises (particularly through procurement reform and the RACHAD automated financial database).  Changes in Pillar B: There was a small revision with “private sector participation” in DPO1 replaced by “private sector-led diversification” in DPO2. The change in wording was intended to better capture the emphasis on diversification (through PPPs, property rights, and livestock sector reforms) and to reflect this aspect as it was described in the SCAPP. Other Changes 19. Because GoM responded well to the ToT shock and benefited from DPO1, reduced its deficit, and achieved a primary surplus which helped support an IMF program, the DPO2 was launched in a more favorable macroeconomic context. In fact, GoM achieved a primary surplus for three straight years. DPO1 set the stage for DPO2 by helping to achieve fiscal savings and increased revenues. DPO1 also achieved leverage as evidenced by the new IMF program and assistance from AfDB and the EU. The participation of 13 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) these development partners meant additional financial and technical resources to strengthen the reform program. II. ASSESSMENT OF KEY PROGRAM DESIGN AND OUTCOMES A. Relevance of Prior Actions 20. The design of the PDO was consistent with the Country Partnership Framework (FY18-FY22) and fully relevant to the development priorities of the Mauritania as outlined in the SCAPP (see section A). Thus, the assessment of the prior actions’ relevance to the PDO is also relevant to country priorities. Table 2 below lists all the prior actions and triggers for DPOs 1 and 2. Pillar A ― Support Fiscal Consolidation: A.1: Reducing tax expenditures and mitigating profit shifting and base erosion risks 21. The elimination of inefficient tax expenditures was relevant to achieving fiscal consolidation through increasing budget revenues. Fiscal consolidation was promoted by measures to reduce poorly targeted tax exemptions. It was estimated that inefficient tax policies cost the GoM 4.9 percent of GDP in 2013 or 30 percent of non-extractives tax revenues.5 The authorities estimated that tax expenditures linked to companies benefiting from the investment code accounted for around US$550 million for the relevant audit period from 2014-2016. It was reported that many companies that received preferential status in 2014 and 2015 were not in compliance with the investment and employee targets determining eligibility for their tax breaks. The audit that revealed this state of affairs was a critical measure under the program. 22. The focus on tax exemptions follows a series of tax reforms implemented in 2011-2014 to broaden the tax base. In 2012, GoM eliminated the global income tax and switched to a dual tax system, with a proportional tax on capital income and progressive taxation of wages. The authorities also removed the Corporate Income Tax (CIT) exemption of the main gold company, contributing to a 1.3 percentage points of GDP increase in CIT (IMF, 2019). The VAT was also extended to cover the mining sector, and mining companies receive reimbursement only if they can prove that their purchases have been acquired from formal domestic suppliers. This provided an incentive for local supplier to register and become formal, resulting in an increase in the tax identification numbers from 1,789 in 2011 to 5,860 in 2013. 23. Transfer pricing regimes, with effective documentation rules, were relevant to reduce profit shifting and collect additional revenue. Country experiences6 indicated that the introduction of such reforms help governments capture significant additional tax revenues. The DPO series supported audits targeting the largest companies operating in Mauritania, notably those in the extractive industries, where collections from mining royalties based on sales had been too low due to transfer mis-pricing. In 2013, the 10 most profitable companies accounted for 55 percent of income tax, with mining companies accounting for around 28 percent of total income tax collected and telecommunication firms for 23 percent (IMF 2014). Thus, if that could be corrected, there should be significant fiscal savings. Experiences of other countries with 5 World Bank (2016). Due to data limitations, this assessment does not include all preferential tax regimes. 6 See World Bank (2016) and Beer and Loeprick (2015). These studies find that on average estimated profit shifting among MNE subsidiaries in a sample of more than 15,000 MNE affiliates is reduced by 52 percent 2 years after the introduction of mandatory documentation requirements. 14 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) recently established transfer pricing regimes also provided insight into the potentially important revenues at stake.7 The audit supported under DPO-1 was an essential tool for the success of tax measures as well as the requirement for companies to provide documentation of their operations. A.2: Public Investment Management 24. To remedy the structural weaknesses in PIM, there was a need to have a new institutional framework that would base project selection on strategic and efficiency criteria. The absence of a systemic process for selection of investment projects, combined with fragmented procedures, allowed for off-budget capital spending by public entities that led to rapid accumulation of debt in 2009-2014. DPO-1 addressed this issue by supporting the GoM’s elaboration of a legal framework for PIM, which aimed to reinforce budgetary discipline and establish more rigorous project selection. Included in the new framework were procedures for project selection based on their social, economic, and environmental impact, and their relevance to the SCAPP. This reform is closely linked to fiscal consolidation as it increases the value for money of investment spending. Also critical were reforms to the budget classification, which resulted in preparing, for the first time, a unified investment budget that encompassed both domestic and foreign-financed projects in the 2017 budget law. 25. Procurement reforms were also important to the fiscal consolidation objective. Recent procurement reforms had included contradictions between implementation decrees and the objectives of the Public Procurement law. For example, the sectoral tender commissions exercised total control over the procurement process, without any involvement by ministerial contracting authorities, a direct violation of of the procurement law.8 Capacity limitations and a lack of transparency caused delays and cost overruns. DPO- 2 focused on reinforcing the supervisory role of the Public Procurement Regulatory Authority (Autorité de Régulation des Marchés Publics, ARMP) and tightening administrative controls. A3: The Parastatal Sector 26. Bringing all Administrative Public Agencies (EPAs) on-budget was important to fiscal consolidation. The rapid expansion of off-budget parastatal operations prior to the DPO series, increased fiscal risks due to accumulated losses and debt, weak governance, and reliability on government transfers. This series addressed some of these risks by integrating all EPA budgets in the Automated Expenditure-Chain System RACHAD, thus prohibiting extra-budgetary expenditures by EPAs. The expected benefits of these actions were to strengthen administrative controls and enhance transparency in the parastatal sector which was critical to the effective management of fiscal risks, especially in a context of fiscal constraints. Pillar B ― Private Sector Participation and Diversification B.1 Public-Private Partnerships 27. The actions were relevant to the objective of private sector participation and diversification because they updated the PPP framework and created a unit to assess PPPs. The actions addressed key governance constraints to the development of PPPs: (i) no clear national strategy regarding PPPs; (ii) lack of legal and institutional framework to reassure private investors and give clear business environment signals; (iii) capacity constraints and misconceptions about potential PPP operation and financial modeling; (iv) a 7 The Kenyan Revenue Authority, for instance, collected US$85m in additional tax revenues in 2013 from transfer pricing. (see World Bank 2016, p.9-12). 8 Law # 2010‐044 “Code des Marches Publiques.” 15 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) failed PPP attempt in the past that may influence the credibility of further PPP operations.9 In addition to their positive fiscal impact, the expected benefits of the PPP-related actions were to accelerate technology transfer, develop the local private sector, and attract FDI to sectors beyond extractive industries. This was important to increase private sector participation and enhance diversification. B.2 Property Rights 28. Reforms in land titling aimed to address the weak regulatory framework for land that inhibited private sector development through several channels. First, it discouraged investment in fixed assets. Second, it limited access to finance as property that lacks an official title cannot be leveraged as collateral by banks. The actions were designed to alleviate some of these issues by promoting investment in land, facilitating borrowing against equity, and shielding the poor from illegal infringement or expropriation. B.3 The Livestock Sector 29. Reforms requiring certification of livestock trade and for butchering were critical to remedy the lack of sanitary standards and the high degree of informality in the sector. These constituted major constraints to the development of the livestock sector, which is one of the key sectors offering opportunities for economic diversification and export potential. 9The experience with contracting a private company for Waste Management in Nouakchott has not been successful. Conflict between the private operator and the government arose leading to bad services delivery and ending with breaking the contract in 2014. 16 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Table 2: Policy Actions and Triggers for DPO 1 and 2 Prior Actions under DPO1 DPO2 Triggers Prior Actions under DPO2 Pillar A: Support fiscal consolidation by increasing domestic revenues, controlling public enterprises expenditures, and increasing the efficiency of public spending A.1 Reducing tax expenditures and mitigating profit shifting and base erosion risks Prior Action 1: The Minister of Finance has issued an (Indicative) Trigger # 1: Publish the tax Prior Action 1: The Ministry of Economy and Finance, order introducing the benchmark tax model for tax expenditures estimations in an appendix of the based on a policy communique to the Council of exemptions, and has published it in the official Budget Law 2018. (Revised as p.a. 1) Ministers, has notified the companies in full breach of gazette, and has compiled a tax exemption registry for their investment agreements that their tax and firms benefiting from tax exemptions under the 1982 customs incentives, awarded under the 2012 Investment Code and the 1966 Free Zone Area law. Investment Code, will be revoked, effective January 1, 2018. (Indicative) Trigger # 2: The Ministry of Prior Action 2: The Ministry of Economy and Economy and Finance introduces the legal Finance has adopted the legal provisions for a provisions for a comprehensive transfer pricing comprehensive transfer pricing documentation documentation and disclosure requirements as and disclosure requirements as well as an effective well as an effective anti-abuse, which limits an anti-abuse provisions, which limit an entity’s net entity’s net interest deductions to a fixed interest deductions to a fixed percentage of its percentage of its profit, measured using profit, measured using earnings before interest, earnings before interest, taxes, depreciation taxes, depreciation and amortization (EBITDA). and amortization (EBITDA). (Revised as p.a. 2) A.2 Public Investment Management Prior Action 2: The Council of Ministers has issued a (Indicative) Trigger # 3: The Council of Prior Action 3: The Council of Ministers has decree creating an institutional framework for the Ministers has adopted a new agreement model adopted a decree correcting deficiencies in the evaluation, selection and execution of public and revised bidding documents that limits implementation of the Public Procurement Law, investment projects, and has published it in the project award outside the Regulatory Authority including clarifying regulations governing the official gazette. for Procurement (ARMP) cycle, and that composition, organization, and operations of the enhances the involvement of ministerial procurement commissions and designating contracting authorities. (Revised as p.a. 4) specific officials responsible for procurement in each Contracting Authority, and has published it in the official gazette. 17 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Prior Action 3: The Council of Ministers has approved (Indicative) Trigger # 4: The executive decrees Prior Action 4: The Council of Ministers has the budget law proposal for 2017 that includes an underpinning the Procurement Law are adopted the implementation decrees for Law 2005- integrated public investment budget with combined reviewed and those that conflict with the law’s 020 reorganizing the project award and project domestic and foreign financed projects. objectives, including decrees related to the management processes, and regulating the sectoral procurement committees and the contracting arrangement between Government and evaluations sub-committees are modified. SOEs, and published it in the official gazette. (Revised as p.a. 3) A.3 The Parastatal sector Prior Action 4: The Minister of Economy and Finance (Indicative) Trigger # 5: The Minister of Prior Action 5: The Minister of Economy and has issued an executive circular requiring the Economy and Finance issues a decree Finance has issued a policy communique instructing expansion of the automated expenditure-chain system mandating the expansion of the RACHAD the expansion of the treasury management system (RACHAD) to include all eligible EPAs in Nouakchott system to encompass public agencies starting (RACHAD) to encompass the revenues and beginning January 1, 2017. on January 1st, 2018. (Unchanged) expenditures of all eligible public agencies starting January 1, 2018, as a means to reduce fiscal risks and enable budgetary savings. (Indicative) Trigger # 6: The Council of Prior Action 5: The Recipient has published the latest Ministers approves a new institutional audited financial statements for the five largest framework for SOE oversight and reporting, commercial enterprises in which its ownership stake subsidy provision and contingent liability exceeds 50 percent, on the website of its Treasury. management, and a schedule for SOE restructuring. (Dropped) Pillar B: Support private sector participation in the non-extractives sectors B.1 Public-Private Partnerships 18 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Prior Action 6: The Council of Ministers has presented (Indicative) Trigger # 7: The Inter-ministerial Prior Action 6: The PPP law is made operational to Parliament the draft law on public-private committee validates the updated PPP portfolio through i) the adoption and publication in the partnerships (PPPs), and has approved two orders and officially decides to engage in PPP official gazette of the PPP executive decree by the relating to the composition and operation of the inter- operations under the new framework. Council of Ministers that defines the institutional, ministerial and the technical committees for PPP (Revised as p.a. 6) procedural, and governance set-ups for PPP respectively, and has published these in the official projects and ii) the adoption and publication in the gazette. official gazette of the order by the Minister of Economy and Finance setting thresholds for operation requiring inter-Ministerial approval. (Indicative) Trigger # 8: A new PPP Unit has been created and is operational with staff recruited and an operational budget allocated in the budget law proposal 2018. (Dropped, included in the PPP law) B.2 Property Rights Prior Action 7: The Minister of Economy and Finance (Indicative) Trigger # 9: The Council of Prior Action 7: The Recipient has enacted a new Law has established the institutional framework for land Ministers has adopted a new Law for Property for Property Rights (Code des Droits Réels) that reform by adopting an order creating a technical Rights “Code des Droits Reels” that modernizes, reconciles, and consolidates the current committee for land reform, appointing its members modernizes, reconciles and consolidates the property rights regimes, and published it in the and validating its terms of reference. current regimes in application. (no change) official gazette. (Indicative) Trigger # 10: The Council of Prior Action 8: The Minister of Interior and Ministers adopts a new institutional Land Decentralization, the Minister of Housing, Urban Policy Reform framework that fosters a more Development, and Land-Use Management, the inclusive land-tenure system with a set agenda Minister of Budget, and the Minister of Economy of execution. (Replaced by p.a. 8) and Finance have issued and published it in the official gazette a joint order laying down the new simplified modalities for processing demands for the final concession on property in urban areas, with the objective of expediting the property title granting process. B.3 The Livestock Sector 19 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Prior Action 8: The Council of Ministers has made the (Indicative) Trigger #11: The Livestock Law is Prior Action 9: (i) The Council of Ministers has Livestock Law operational through the adoption of two further operationalized as the Council of adopted decrees codifying professional standards new executive decrees on livestock exports and Ministers and Minister of Livestock adopts the and qualifications for veterinarians and defining the imports and on animal-feed quality, and through the remaining 5 executive decrees governing the applicable requirements and institutional Minister of Livestock three new orders on poultry regional management of grazing lands and framework for the livestock sector, including for production and veterinary inspections, all in transhumance corridors, the development of establishing livestock farms, vaccination parks, accordance with OIE standards, and all published in the pastoral infrastructure and the livestock markets, and slaughterhouses; and these official gazette. professionalization of livestock production; all decrees are consistent with the World Organization in accordance with the World Organization of of Animal Health (OIE) standards; (ii) the Minister of Animal Health (OIE) standards and published in Livestock has issued three new orders defining the official gazette. (Unchanged, only wording conditions for meat utilization and transformation added to reflect content of decrees) and describing the organization of the livestock profession and sectoral information systems; and (iii) these decrees and orders have been published in the official gazette. 20 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Rating: Satisfactory 30. All prior actions of the program were relevant to the PDO, which, in turn was relevant to country priorities. The rating is satisfactory also because the actions were appropriate to stabilizing the fiscal situation in the short-run. The relevance of actions in the longer term is satisfactory given that the designed actions aimed at increasing private sector participation and economic diversification. Table 3: DPO 1 and 2 Disbursements and Release Dates Tranche # Amount-US$ Expected Release Date Actual Release Date Release DPO1 (P160592) 25,413,450 Not applicable December 28, 2016 Regular DPO2 (P163057) 26,332,392 Not applicable December 22, 2017 Regular B. Achievement of Objectives (Efficacy) Relevance and Measurability of RIs and Appropriateness of Targets 31. The results framework was generally relevant, but suffered a number of shortcomings in some areas that affected either the link between the prior action and the indicator and/or the link between the PDO and the indicator. With respect to fiscal consolidation, the indicator of higher tax revenues as a percentage of GDP did relate to more efficient tax administration, but was too broad as there are many other factors that could affect tax revenues. For example, a ToT shock could have adversely affected economic activity and tax revenues, even though the measures related to removing inefficient tax expenditures and improved transfer pricing were successful, thus, possibly leading to an erroneous conclusion. In other words, tax administration reforms may not fully account for the increase in tax revenues as a percentage of GDP. The ICR remedies this shortcoming with additional evidence more directly related to the tax reforms, in particular the Ministry of Finance’s report (2019) on the decline in fiscal exemptions as a percentage of GDP from 2017 to 2018. This indicator more accurately measures the benefit of reducing unqualified tax exemptions. It might also have been advisable to continue to measure certain DPO1 indicators as they continued to be relevant. For example, the number of EPAs in the RACHAD expenditure system and the share of budget transfers through RACHAD continued to be relevant in measuring intermediate progress in enhancing fiscal savings. 32. One other improvement would have been to measure not only the percentages, but also the actual numerator and denominator. This would have increased the confidence in the indicator and the number of reported relevant cases. For instance, in the case of the livestock indicators, although the percentages were reported, the actual number of total verified products to slaughterhouses was not, nor was the number of formal livestock transactions, nor the total number of transactions. 33. The results indicators (RI) underwent a number of revisions between DPO1 and DPO2 to improve their relevance (Table 4). In DPO2 the indicators relative to fiscal consolidation were changed and, in some cases, better linked to the prior actions. For example, the PPP indicator was changed from the number of approved PPPs, over which the Bank and the series had no control, to a more relevant indicator that measured the importance of the executive PPP unit. This unit would conduct actual reviews of planned PPPs. Another example was the indicator for parastatals, which, under DPO1, measured the 21 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) number of EPAs included in the RACHAD expenditure system, changed in DPO2 to an indicator that measured actual reduction in extra-budgetary savings. The latter was closer to the PDO of improved fiscal savings. Table 4. Original and Revised Results Indicators and Actual Achievements Original Indicator from DPO 1 Change for DPO 2 Explanation Actual Achieved Pillar A: Support fiscal consolidation by increasing domestic revenues, enhancing fiscal transparency and increasing the efficiency of public spending Number of Tax Exemptions Tax revenues increase by 1.2 Replaced with a more Achieved: categories eliminated under the percent of GDP. Baseline outcome-oriented Increase by 1.8 new benchmark model. Baseline (2015): 17 percent of GDP; indicator, to be sufficiently percent of GDP (2016): 0; Target (2018):2 Target: (2019): 18.2 percent attributable. between 2015 of GDP and 2019 vs. 1.2 percent of GDP Share of public investment Share of public investment Slight change to make Exceeded: 100% projects prepared and executed projects selected and more accurate, “prepared” vs. >75% selected based on new framework. executed based on new changed to “selected” and executed Baseline (2016):0; Target (2018) framework. Baseline (2016): under new >75%. 0; Target (2018): >75%. framework Percentage of the total value Added at DPO 2 stage Mostly achieved: of contracts awarded 28% vs. 23.5% of without competition has contracts been cut in half. Baseline awarded without (2016): 47 percent of total competition procurement bids. Target (2018): 23.5 percent of total procurement bids. The number of eligible Decline in public enterprises A new RI 2 indicator was Exceeded: 133 vs. administrative public agencies and agencies extra- added to the original 81 (DPO 1) (EPAs) and agencies included in budgetary spending and indicator to better the automated expenditure-chain carry-forwards (in measure the impact of the Achieved: 0.01% system (RACHAD) increases. percentage of GDP). Baseline reform. However, both vs. 0.2% of GDP Baseline (2016): 0; Target (2018): (2016): 1.2 percent of GDP. were measured and are for extra- 81. Target (2018): 0.2 percent of relevant to the PA and budgetary GDP. PDO. spending (DPO 2) The share of budget transfers to Indicator was not carried Exceeded: 100% parastatals administered through over into DPO 2, but was vs. 79% RACHAD. Baseline (2015): 0%; measured and is relevant Target (2018): 79% to the PDO and p.a. Pillar B: Support private sector participation in the non-extractives sectors The number of public-private The executive PPP Unit has Original indicator was Exceeded: 100% partnership (PPP) projects under reviewed and assessed PPP dropped in favor of a more vs. 50% of PPP implementation using the new projects according to the relevant indicator because proposed projects framework increases. Baseline new regulatory framework. the series could not target are reviewed by (2016): 0; Target (2018): 2 Baseline (2016): 0, Target a specific no. of PPPs as it the PPP Unit (2018): half of the PPP did not have any control portfolio. over that number. 22 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Increase in formal properties Increase in the number of Indicator target increased Partially titled. Baseline (2015): 27168; formal properties titles. because the original target Achieved: 29,742 Target (2018) : >28000 Baseline (2015): 27168; would likely have been vs. >31,000 Target (2018): >31000 met even without the reform given the current rate of increase (about 500 annually). The traceability of livestock- Improvements in the Wording change to make it Exceeded: 88% product exports improves. formalization of the livestock more accurate vs. 8% of animals Increase in the percentage of sector as highlighted by: slaughtered are verified products in The increase in the verified slaughterhouses’ total products. percentage of verified Baseline (2016): 0%; Target products in total products of (2018): 8% slaughterhouses. Baseline (2016): 0%; Target (2018): 8%. Increase in the percentage of The Increase in the No change formal livestock transactions (as percentage of formal Exceeded: 100% per the new law) at the borders. livestock transactions (as per vs. 10% reported Baseline (2016): 0%; Target the new law) at the borders. by the Ministry of (2018): 10%. Baseline (2016): 0%; Target Rural (2018): 10% Development 34. Measurability of RIs: The indicators were feasible and measurable. The definition, calculation and data sources were reasonably clear for the RIs in most cases. One exception were the livestock indicators, as described above, even though these indicators were also used in the Regional Sahel Pastoralism Support Project (PRAPS-P147674). The percentage improvement would have been better understood by the counterpart if there had been clarity of both the denominator and the numerator of the percentage of livestock transactions. During the ICR mission, there were counterpart and Bank differences in understanding of how the total (denominator-total number of livestock transactions) was supposed to be measured. 35. Despite their measurability in most cases, the RIs were available only after concentrated efforts by the ICR team to ensure government provision of the data. Even though this was a relatively short series (two vs. three years, or more), the RIs should have been more regularly tracked so that they could have served more as a management tool for implementation of the program. There did not appear to be any specific actions to establish or improve monitoring mechanisms during the series, in which case the data would have been readily available to the ICR team. This finding reflects the low capacity in Mauritania and speaks to the need to redouble efforts to instill a Monitoring and Evaluation (M&E) culture in the relevant ministries. 36. Appropriateness of targets: Targets were generally set at reasonable levels, though there were several cases of targets that were overly cautious. One example is the case of the number of property titles, whose pre-reform trendline would have come close to achieving the target even without reforms. Formalization of livestock sector indicators were also set unusually low. This is because the Government preferred to be conservative in terms of targets as the livestock sector was highly informal and the authorities were skeptical about the speed with which people would comply with the new rules. Most of the targets were, however, appropriate, particularly in light of the fact that it often takes several years to 23 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) see full implementation. Notably, the targets related to reviewing PPPs and projects for public financing (PIM) and bringing EPAs under RACHAD were set at well below (50-75 percent) full implementation levels, which were reasonable targets. All of these targets were exceeded, reaching 80-100 percent. Baselines were reported to allow for a proper comparison. Efficacy of prior actions 37. Particularly as this was the first DPO series for Mauritania, it was a reasonable expectation that much of the reform effort was to set up institutions and processes with the main outcomes realized over a number of years. Therefore, mostly intermediate indicators were measured with the idea that these intermediate results indicated a program on track to produce the full, expected benefits in the future. Objective 1: Support Fiscal Consolidation—Satisfactory Achievement of Objective 38. The program deserves credit for contributing to the major improvement in the overall fiscal stance, which is important evidence of PDO achievement, and may strengthen resilience to future ToT shocks. As explained below, GoM implemented major reforms to improve the fiscal position. The commitment to DPO1 measures also laid the groundwork to secure a new IMF-ECF program which further contributed to fiscal improvement as reflected by the improvement of the fiscal balance from -3.4 percent of GDP in 2015 to +1.5 percent of GDP in 2018. RI1: Tax administration - Exemptions and Transfer Pricing 39. The programs’ measures to eliminate tax exemptions that were not legitimate and to deal with foreign firms’ tax avoidance were implemented, leading to large fiscal savings. In the case of tax exemptions, a key step in the process of identifying firms that were compliant with their investment agreement was an audit of companies. If firms were found not to be compliant, they were notified as of January 1, 2018, and their exemptions revoked. The results of the audit were published and preliminary results suggest that total fiscal exemptions dropped from 6.4 percent of GDP in 2017 to 5.9 percent of GDP in 2018. For foreign firms transfer pricing, the Bank and the IMF worked together. There was a tax reform TA (part of the Mauritania Public Sector Governance Project-P146804) that built capacity for enforcing these measures. The combined result of these tax administration measures was to be reflected in terms of a 1.2 percent of GDP increase in tax revenues between 2015 and 2019. This target was exceeded as tax revenues actually rose by 1.8 percent of GDP over this period. RI2: Public Investment Management - Project Selection 40. The series supported GoM’s efforts to develop a new legal framework for PIM that reinforced budgetary discipline and established a more rigorous project selection process. As per the DPO reforms, public investment projects are now reviewed according to specified criteria set by the Comité d’analyse et de programmation de l’investissement public (CAPIP). The target of more than 75 percent of projects reviewed by CAPIP was achieved with a reported 100 percent actual achievement. The latest information is that CAPIP continues to review 100 percent of projects which covers a total of 332 projects in the pipeline for 2020. Thus, the reviews are a significant undertaking. Another important output was the manual for the project selection process. This manual details the PIP’s implementation, monitoring, and evaluation mechanisms, including timeframes for undertaking key activities and the role of different 24 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) stakeholders in the process. The new process has resulted in cancellation of some low-return projects ‒ including the rejection of a large sugar factory which would have been an unviable investment ‒ and a re- prioritization of some sectors. Thus, the improved selection process contributes to fiscal consolidation by ensuring higher return projects receive funding. The Government has also reformed its system of budget classifications, and submitted a consolidated 2017 budget law to Parliament that, for the first time, included a comprehensive investment budget encompassing both domestic and foreign-financed projects. This practice now appears to be institutionalized as it has been rolled over in the 2018 and 2019 budget laws. RI3: Procurement - Competitive procurement for SOEs 41. The procurement measures were designed to correct implementation decrees that would lead to more effective public procurement, competitive bidding and fiscal savings. The target was to reduce the percentage of total value of contracts that were not awarded through competition by half. This target was mostly achieved as the percentage of total value of non-competitively awarded contracts fell from 47 percent in 2016 to 28 percent in 2018 (Autorité de Regulation des Marchés Publics, 2019). Despite this achievement, fiscal savings are unknown and some structural shortcomings persist. One shortcoming was that the underlying law itself needed some revision, not just the implementing decrees, but this would have taken a longer time, beyond the time frame of the series. GoM also decided to wait and see how the procurement function performs before revising the law. The other concern was that the recruitment of staff for the procurement commission was not conducted on a merit basis. While there was a competitive process, the best candidates that scored the highest scores were not chosen. This means that those who were chosen had inadequate backgrounds in procurement that could not be fully remedied training in the short-term. Fortunately, this shortcoming had limited effects because the target of reducing the value of non-competitively awarded contracts was mostly achieved. RI4,5: Parastatal Sector - RACHAD for EPAs 42. Coverage by the RACHAD Expenditure Management System and Extra-Budgetary Expenditures was a major success of the reform program. All Administrative Public Agencies (EPAs) were integrated into the budget. Now, EPAs have to develop their own budgets and strictly adhere to them. That is, they cannot over-spend and cannot save underused budget from one year to the next.10 By bringing all EPAs under a unified, automated system of expenditures, GoM was able to eliminate extrabudgetary expenditures by EPAs from 1.2 percent of GDP in 2016 to near 0 percent in 2018, representing large fiscal savings. Objective 2: Private Sector Participation—Moderately Satisfactory Achievement of Objective RI6: PPPs - Improved Framework 43. The reform program supported drafting the PPP law for the Council of Ministers to present to parliament (DPO1) and then making the new PPP law operational (DPO2). A major output of the series was setting up the PPP Executive Unit. This unit, after a protracted period for recruitment that delayed its establishment by one year, is now staffed with all necessary competencies, except legal.11 There is also an inter-ministerial Committee to oversee and approve PPPs. Under the related TA, the Nouadibou Eco- 10 Prior to that reform, the treasury had to pay losses. 11 Additional information on the current work of the established PPP unit is available at www.ppp.gov.mr. 25 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Seafood Cluster project, US$ 2.5 million were allocated in May 2019 to the PPP unit, out of which US$ 0.5 million were to pay two-year salaries for the staff of the PPP unit and the rest for assistance to operationalize the PPP agenda (studies, experts, training, etc.). 44. Several PPPs are in the pipeline including: a cold storage facility at the Nouadhibou port, a parking lot near the Capital Market in Nouakchott with multiple uses, a water generation and transport project in the North, a highway (Boutimilit) in the East (studies completed, but funding not yet secured) and a new solid waste management PPP. Documents for all of these PPPs are ready. The related results indicator for DPO1 (number of PPPs reviewed) had to be changed in DPO2 to “half the PPP portfolio to be reviewed by the PPP Executive Unit.” This target was exceeded with 100 percent (i.e. 10 out of 10) of priority PPPs in the pipeline reviewed. To date, only one PPP, which relates to the infrastructure project in port of Nouakchott, has been formally approved (October 2018). However, the process for this PPP was not fully transparent because there was not a competitive bidding process and the PPP executive unit became fully operational only afterward in February 2019.12 RI7: Property Rights 45. The DPO series supported the new Code des Droits Reels, which was probably the most important accomplishment in the area of property rights. Streamlining property titling is expected to promote the private sector through access to credit and to lead to asset markets. As access to credit is largely linked to the overall monetary policy which was beyond the control of the program, the results indicator measured the increase in land titles. The number of finalized land titles was 29,742 in 2018, an increase of 2,574 from a 2015 baseline of 27,168. This is actually below the target of 31,000 that was increased from 28,000 during DPO2. The trendline for land titles was about 500 new titles per year, so the achievement is somewhat above that rate. A possibly better intermediate indicator might have been the time required to grant a land title, but that indictor has not been measured. This component was supported by broad participation from development partners. For example, the AFD and AfDB,13 among others, were very active in land reform and used the same policy matrix as the DPO series. The Bank concentrated on urban land titling, which was particularly relevant to access to credit and private sector development. RI8,9: Livestock Sector 46. The series achieved progress in formalizing the livestock sector with the help of TA to reach the standards set by the International Organization for Livestock. This progress contributes to private sector participation in one of the most important sectors of the economy and helps ensure improved quality (health) of livestock that could enhance exports. The series supported the development of new implementation regulations (texte d’application). All 10 regulations were defined to govern the livestock sector. This represented a major improvement in the sector so that livestock now has to be certified in good health before entering the market. The inputs included training of 20 veterinarian specialists over 2- 3 years in Dakar. These specialists were needed to implement the texts to ensure health of the livestock and to administer vaccinations. The results indicator target for increased percentage of verified products 12 This US$ 310 million PPP project aims at building and operating a new container terminal to improve the capacity and operations of the port of Nouakchott, under a 30-year concession agreement. According to this partnership, the private operator will design, build, finance and operate a new container terminal (initial capacity of 250,000 TEUs, with a possibility to expand to 600,000 TEUs at a later stage) able to accommodate 2 panama size vessels up to 50,000 DWT capacity. 13 The AfDB supported the production of the Real Property Code which was adopted by the National Assembly in May 2017. 26 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) at the slaughter houses achieved a level of 88 percent compared to a target of only 8 percent. The second indicator, an increase in the percentage of formal livestock transactions (as per the new law) at the borders, achieved 100 percent against a target of 10 percent. These achievements indicate that the practices have achieved near universal application well ahead of the expected timeframe. Rating: Satisfactory 47. The program mostly met or exceeded seven of eight targets. Eliminating tax abuses by companies which were not complying with their investment agreements as well as the cases of transfer mispricing were important achievements, with large fiscal benefits expected over time. Systematic measurement of these benefits is necessary to validate effective implementation (actual savings) of these measures. Bringing EPA budgets under RACHAD was an important success of the program and was confirmed by results indicators. Progress was made in PPP and procurement. Evidence that the reviews of PPPs and procurements will have concrete benefits will only be realized once the new PPPs are in operation over the coming years. The evidence for PIM benefits appears stronger with capacity built in line ministries and alignment of projects with sectoral and national strategies. The application of the financial viability filter has shown some early results with the rejection of an unviable expensive project and reprioritization of projects. In the case of property rights, there was also some progress in laying the ground work for the private sector, particularly in urban areas. Going forward the GoM will need to more systematically measure the benefits of the more streamlined process of land titling. The livestock indicators exceeded targets, although it will take time to measure potential increases in exports. Table 5 summarizes the achievement of program targets. Table 5. Summary of Results Target Achievement Reform Area Exceeded Achieved Mostly Partially Not Total Achieved Achieved Achieved Pillar A: Fiscal Consolidation, Fiscal Transparency and Efficiency of Public Spending Reducing tax expend., mitigate 1 1 profit sharing and base erosion PIM (incl. procurement) 1 1 2 Parastatal sector 1 1 Pillar B: Support Private Sector Participation in the non-Extractives Sector PPPs 1 1 Property rights 1 1 Livestock 2 2 Total 4 2 1 1 0 8 C. Overall Outcome Rating and Justification Rating: Satisfactory 48. With the prior actions relevant at a satisfactory level, and efficacy also rated satisfactory, the overall outcome rating is satisfactory, although progress in some reform areas will require additional time for outcomes to be measurable. The program launched a number of initiatives which could have a profound impact over time if the reforms continue to be implemented and expanded on the ground. The relevance of the actions was satisfactory. The actions and policy dialog contributed to restore fiscal stability, which was a strong accomplishment. The reforms also constituted initial steps toward a more 27 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) diversified economy. There is optimism about the potential benefits/outcomes of the actions, but there needs to be improvements by GoM in monitoring indicators and measuring efficacy. Some of the shortcomings in the results framework were compensated by additional evidence for PDO achievement. III. OTHER OUTCOMES AND IMPACTS A. Poverty, Gender and Social Impacts 49. The program is likely to have a positive impact on poverty reduction, but actual impacts are not yet measured as the latest household survey was done in 2014. The key areas to positively impact poverty include improved efficiency of public investment and fiscal space to ensure more allocation towards social and poverty programs in the future. The focus on private sector participation should aid in job creation in urban areas where most of the poor live. Reforms that increase productivity in livestock, a major economic sector in Mauritania should also help reduce poverty in a sector that provides a livelihood for many of the country’s poor. The property-rights agenda targeted the business environment and covers essentially those with existing titles or concessions. It did not address property ownership and usage in rural areas. 50. The program could also have some indirect effects from a gender perspective. In particular, the concept of co-ownership defined in the new CDR law (prior action 8) could allow women to potentially access assets (buildings, houses, apartments, shops, etc.) more frequently and more easily in legally defined partnerships. B. Environmental, Forests and Natural Resource Effects 51. The program did not have any negative environmental impacts. Two areas where it is expected to have positive environmental impacts is in the areas of PPPs and procurement. In the first area, PPPs are being reviewed with consideration for environmental safeguards. The program was supported by TA that helped build capacity to apply these safeguards. In the case of the procurement, there is now a legal framework for stronger compliance with existing environmental regulations for public procurement. C. Institutional Change/Strengthening 52. The reform program focused on challenging reforms that contributed to institutional change. The components of the program, the first of its kind in the country, initiated a new way of thinking about government operations and the approach to economic development in Mauritania. For example, GoM used its authority to examine the tax system and then correct abuses such as unwarranted tax exemptions and transfer mis-pricing by companies, thus overcoming monied interests. Another area, where fiscal consolidation was promoted, were the reforms aimed at more competitive and transparent procurement. The idea of following procurement procedures, though it does not guarantee the elimination of corruption, is a realization of the importance of following a process as laid out by the law. Improvements in PIM have introduced the idea of projects selected on merit and better links to the overall development strategy (SCAPP). Similarly, PPP reforms show a change in attitude toward harnessing the private sector to accomplish national goals. The expansion of RACHAD demonstrates how GoM is increasingly recognizing digitalization can help solve governance and fiscal issues. Land reform, including the Code des Droits Reels, could pave the way for increased private sector participation. 28 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) 53. A key factor in ensuring relevance and a completed value chain was the critical assistance from the Bank-financed Governance project and other TAs (see Table 6 below). This support was essential in ensuring that prior actions translated to actual implementation. D. Other Unintended Outcomes and Impacts None IV. BANK PERFORMANCE Analytical Underpinnings 54. Analytical underpinning was a strong feature of Bank performance. Each policy area was addressed with relevant analytical work and technical assistance as Table 6 shows. During the ICR mission, government stakeholders underscored the importance of both the analytical work and TA in the program. Analytical work was particularly important given that Mauritania was new to policy-based operations. The reforms needed to be carefully designed to instill new ways of thinking by the Government, for example, in how it can employ the potential of the private sector in meeting national goals. Table 6. Selected Analytical Work Underpinning the Program Program Area Analytical Work Related WBG Projects A. Support fiscal consolidation by increasing domestic revenues, enhancing fiscal transparency and increasing the efficiency of public spending A.1 Tax World Bank, 2016. “Tax Expenditure in Mauritania Public Sector Governance Project Expenditures Mauritania. Definitions and Estimates for (P146804). capacity building for the tax 2013 and 2014.” Washington, D.C.: The authorities to implement the new transfer World Bank Group pricing rules and undertake assistance linked World Bank, 2016, Transfer Pricing in to taxation of the extractives sector. Developing Economies: A Handbook for Policy Makers and Practitioners. A.2 Public World Bank, 2016. “Islamic Republic of Mauritania Public Sector Governance Project Investment Mauritania: Public Expenditure Review.” (P146804). Capacity building to various MEF Management, incl. World Bank, 2014. “Mauritania: Public directorates for the implementation of PIM procurement Expenditure and Financial Accountability reforms and procurement reforms. Assessment.” World Bank, 2016. “The Independent Evaluation of the Comparative Living Standards Project, 2001-2015.” A.3 Parastatal World Bank, 2013. “Governance of State- Mauritania Public Sector Governance Project Sector Owned Enterprises and Public Agencies in (P146804). TA and investment in building a the Islamic Republic of Mauritania.” single treasury account. The integration in World Bank, 2016. “Islamic Republic of RACHAD is one of the steps of this global Mauritania: Public Expenditure Review.” reform. B. Support Private Sector in the Non-Extractives Sector B.1 Public Private World Bank, 2015. “Legal and Institutional Nouadhibou Eco-Seafood Cluster Project Partnerships Analysis of PPPs in Mauritania.” World (P151058). TA on the formulation of the legal 29 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Bank, 2015. “Nouadhibou’s Eco-Competitive infrastructure for PPP; capacity building for Seafood Cluster.” the new executive PPP unit within the MEF; World Bank, 2016. “Islamic Republic of and financing international expertise to assist Mauritania Diagnostic Trade Integration during PPP deals. Study Update.” B.2 Land Tenure World Bank, 2014. « Cadre d’Analyse de la Support to Mauritania Land Reform Policy and Property Gouvernance Foncière en Mauritanie. ». • (P161010). Support a nationwide policy dialog Rights World Bank/IFC, 2015. “Enterprise Surveys: on land; stock taking of the land sector; and Mauritania Country Profile” (iii) design pilot operations. World Bank, 2015. “Mauritania: Diagnostic The Mauritania Public Sector Governance Trade Integration Study Update.” Project (P146804) will be financing pilot tests Heritage Foundation, 2016. “Index of for land reforms in both rural and urban areas Economic Freedom: Property Rights Index.” along with regional conferences on land across Mauritania. B.3 Livestock Annual Meetings Decisions of the OIE. Regional Sahel Pastoralism Support Project Sector (P147674) (PRAPS). TA to the ministry of World Bank 2015. « Projet Régional d’Appui livestock to formulate the legal infrastructure Au Pastoralisme Au Sahel (PRAPS), Cadre De needed to operationalize the livestock law, Gestion Environnemental Et Sociale. » and capacity building and TA to prevent and combat livestock related diseases and to GoM 2015. « Stratégie Nationale de Security implement sanitary standards. Alimentaire pour la Mauritanie aux horizons 2015 et visions 2030. » Regional Disease Surveillance Systems Enhancement Phase III (P161163) (REDISSE 3). Regional investment project to enhance the capacity for animal disease surveillance in Mauritania. Risk Assessment and Mitigation 55. The Bank appropriately assessed the overall risk for DPO1 as high, although improvements between DPO 1 and 2 might have warranted a substantial (rather than high) rating for DPO2. There were substantial or greater risks in a number of risk categories, which supported high overall risk ratings (Table 7). Many of the risks were effectively mitigated. The key risk mitigation was the support from related TA projects which were to, and did, carry implementation forward. The PD also cites the selection of reforms where the Government had already initiated action and therefore was committed to seeing the reforms through. Macroeconomic risks in DPO2 were assessed again as high, which may have been overstated, particularly because DPO1 had been successful in improving macroeconomic stability and because the Government had agreed to a new program with the IMF. The IMF program aimed to mitigate risks through improved exchange rate and monetary policies, as well as avoidance of non-concessionary borrowing. Risks to DPO2 were also mitigated through the finalization of the SCAPP in the last quarter of 2017, and the MEF’s building of a multi-stakeholder coalition to support the reform agenda. Table 7: Risk Ratings Summary from the Program Documents Risk Category DPO1 DPO2 1 Political and governance Substantial Substantial 30 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) 2 Macroeconomic High High 3 Sector strategies and policies Moderate Moderate 4 Technical design of project or program Moderate Moderate 5 Institutional capacity for implementation and sustainability High Substantial 6 Fiduciary Substantial Substantial 7 Environment and social Substantial Moderate 8 Stakeholder Moderate Moderate Overall High High 56. The institutional capacity risk was only partly mitigated, but was appropriately decreased to the substantial level. The areas of PIM, procurement, and PPP reform required strong collaboration across line ministries and build-up of technical expertise. The TA and capacity-building support provided through ongoing World Bank projects in the areas of PFM, institutional development, PPP arrangements, land reform, and the growth of the livestock sector did help mitigate risks, which otherwise would have been appropriately rated as high. 57. Fiduciary risks were substantial, but were partially mitigated by the reform program itself, especially by expanding RACHAD to EPAs. The Government made progress in several key areas, including (i) payment execution through the RACHAD system; (ii) the expansion of an electronic PFM information system (GFMIS) to all ministries; and (iii) the completed review of past financial statements and their submission to the Court of Accounts, as pointed out in the PD. The public sector governance project (P146804) launched in June 2016 helped mitigate fiduciary risks issues, including SOE oversight, GFMIS implementation, public procurement reform, and accounting, auditing, and financial controls. 58. By Bank rules, ISRs were not required for the series. The Mauritania Fiscal Consolidation and Private Support DPO1 and DPO2 had Board dates exactly 12 months apart, and the second operation closed 12 months after the approval. Thus, there was no requirement for ISRs for these two operations. 59. The Bank made necessary adjustments to the program to maintain relevance and to adjust to different rates of progress in different reform areas. The adjustments, as reported in Table 2, show triggers modified to improve specificity and likelihood of implementation given the low institutional capacity and within the timeframe of the series. These adjustments helped maintain program relevance without sacrificing significant reform value. 60. The Bank conducted regular supervisions and sustained day-to-day support from the field office. Expertise for each area of the program resided in the field and was also supported by a substantial TA, which was a key success factor for the program. As part of regular supervision, the Bank also coordinated well with development partners, especially the IMF and the AfDB. 61. One shortcoming in supervision is that the actual measurement of results in the end was weak. M&E was sporadic during the series and the results indicators should have been more regularly reported 31 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) to be more useful to program management. The indicators themselves could have been stronger, but were improved during DPO2. M&E also faced the challenge of weak Government capacity. Rating: Satisfactory V. RISK TO SUSTAINABILITY OF DEVELOPMENT OUTCOMES 62. The program outcomes are likely to be sustained, but there are some risks. Mauritania has demonstrated its commitment to fiscal consolidation, and is on a better path towards fiscal sustainability as GoM tries to improve tax administration and project selection and increase the role of the private sector in non-extractives. It has even achieved budget surpluses (2016-18) despite a large decrease in extractive revenues, which fell from an average of 5.9 percent of GDP in 2011-2014 to 2.4 percent in 2015- 2018. Maintaining this path of lower dependency on resource revenues will render the country less vulnerable to ToT fluctuations. The program is also supported by a continuing IMF program (see Next Phase section below). 63. Specific sustainability concerns exist in the areas of PPPs, procurement, and land reform. For PPPs, the experience of the most recent PPP regarding the expansion of the Nouakchott port was not in line with a transparent process. Thus, it will be critical that next PPPs in the pipeline fully comply with the new regulatory and legal framework and to ensure the PPP Unit is independent and the Government ensures transparent PPP processes (avoiding undue political influence on PPP process and the PPP Unit). Other risks to PPP include the still weak capacity and understanding of the PPP concept by the public and local private sector. In procurement, while the law is an important step forward, the recruitment of the review committee raised concerns about GoM’s commitment to a transparent procurement process. In land reform, there are concerns also about the pace of reform. Currently, there is a substantial delay in the operation of the technical committee. Though it has an office, a car, and necessary equipment, it does not have staff and is not properly functioning yet. To get land reform moving, the Bank has supported several pilots in different areas of the country (following the Madagascar experience), rather than try to implement land reform in one big launch. This will help to reduce risk by building success gradually in an area (both rural and urban pilots) where there is significant political resistance. Ongoing investment/TA projects also help limit risks in the areas of PPP, procurement and land reform. VI. LESSONS AND NEXT PHASE A. Lessons Learned 64. The following key lessons emerged from this DPO series: Lesson 1: A DPO can be used to help a country develop an adequate macroeconomic framework even in the absence of an IMF program. In the Mauritanian context, the challenge was to manage skepticism and expectations within the Bank and the Government. To meet this challenge, the first requirement was to have a solid macroeconomic assessment based on detailed quantitative fiscal, external and monetary data. This assessment, in turn, required enlisting macroeconomists that understand fiscal, debt, and external sector dynamics. A second requirement was to build trust with government counterparts in the ministry of finance and the central bank to have a clear view on the sustainability of the macro framework. Third, on the Bank side, early consultation with the GPs, CMU, OPCS and the credit risk department all 32 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) helped to ensure buy-in and strengthen discussions with authorities. Fourth, it was important to regularly consult and share information with the IMF. Fifth, to demonstrate an appropriate fiscal framework there was a need to agree on fiscal targets with the Government. By DPF2, the Bank advised the Government that an IMF program was necessary to go ahead, which the authorities eventually accepted. Lesson 2: The use of the DPO instrument was critical in moving reforms forward that otherwise might have stalled. The DPO series with its accompanying country dialog, coordination with the IMF and other development partners was critical in moving the reforms forward. ICR interviews confirmed that all Government stakeholders felt a time pressure to complete the prior actions and to advance their subsequent implementation. One example was in the livestock sector where stakeholders reported that the budget support was key not only to the underlying legal reform to formalize the sector, but also the specific “textes,” or implementing regulations, for livestock operators to follow. Lesson 3: A TA operation is an essential complement to a DPO to ensure follow through and, therefore, ensure implementation of reforms on the ground level, especially in a low capacity country like Mauritania. It might even be reasonable to state that it would be pointless to attempt a reform program without specific training and expertise guaranteed to operationalize the reforms. This was a universal view of Government stakeholders. TA projects also are of longer duration and can provide adequate follow up in reform areas even if subsequent DPOs do not. Examples include the Governance project, REDISSE 1, 2 and 3. Lesson 4: To achieve greater and faster impact of reforms, it is advantageous to have an actual activity/investment ready to go to put the reform into action. In the case of PPP reforms, impact would likely have been realized sooner, and the trigger would not have been downscaled if the Bank had been able to commit sooner to support an actual PPP operation. The PPP trigger had to be revised from actual engagement in PPP operations under the new framework, to the more intermediate action of publishing the procedures, setting-up the governance for PPP projects, and establishing thresholds for operation requiring inter-Ministerial approval. It was difficult to drive the PPP reform by emphasizing the need to set-up a PPP unit without having a clear schedule to launch an actual PPP. While there are a number of PPPs in the pipeline, none were ready to be evaluated under the new framework. Another issue is that the team did not have funds to provide TA support after the legal and regulatory framework was set in place (February 2017). There were two Public-Private Infrastructure Advisory Facility (PPIAF) funds in place, but these closed immediately afterward, which prevented the team from providing follow-up TA in the interim. Lesson 5: Economic and financial constraints during or after a ToT shock add pressure on Governments to rapidly conduct reforms that otherwise would have taken longer to implement. The context for this series created an opportunity for GoM to rally around solutions to its mounting debt and undiversified economy. The design of the DPO series capitalized on that urgency and resulted in a reasonably successful program. Lesson 6: Having strong ownership from the Government and a champion within GoM offered an excellent opportunity to achieve structural reforms and shifts in attitude, particularly during a time of high fiscal pressure. Having a reform champion within the Government, combined with economy urgency, provided a strong opportunity for reforms that was seized with a meaningful program of reforms. It should be noted, however, that having a reform champion from the Government’s side is not something that the 33 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) Bank can have control over as it cannot choose its counterpart. Lesson 7: Support to M&E is a long-term effort, particularly in a low capacity country. The Bank needs to make substantial efforts to help ingrain the practice of M&E, if the real benefits of M&E are to be realized during a programmatic series. The results framework for the program needed to be better integrated into program management. Counterparts tended to view the monitoring of results indicators as an afterthought to meet a bureaucratic requirement rather than as a tool for program management or performance measurement. With a more concerted effort to incorporate results management into the policy dialog, both the Bank and GoM can have a better understanding of what they are trying to accomplish and their progress toward the objectives. B. Next Phase 65. After helping to restore macroeconomic stability, the DPO series laid the foundation for further structural reforms and interventions in support of a private-sector led growth in Mauritania. Building on this foundation, the Bank is supporting a new DPO series of three operations (2019-2021) in March 2018. This new series aims at supporting GoM’s efforts to improve the regulatory environment and skills for boosting competition and inclusiveness of the Mauritanian private sector. It is built on three pillars. The first pillar supports reforms to improve the business environment of Small and Medium Enterprises. The second pillar supports reforms of broadband digital infrastructure that remove barriers to investment and competition in the internet broadband market. Finally, the third pillar supports reforms in basic education and vocational training to improve the quality of skills provided by the general education and training systems. The first operation, a grant financing of US$50 million (SDR 36.1 million) was approved by the board on July 24, 2019. Discussions for the second operation started in September 2019.14 The IMF continues to support Mauritania under the ECF which runs through 2021. The IMF program supports key areas of the DPO series including sustaining the fiscal consolidation process by enhancing tax administration and improving PIM and to improve the business environment and accelerate economic diversification. 14 First Competition and Skills Development Policy Financing. 34 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) ANNEX 1. RESULTS FRAMEWORK RESULTS INDICATORS Objective/Outcome: Support fiscal consolidation by increasing domestic revenues, enhancing fiscal transparency and increasing the efficiency of public spending Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Tax revenues increase by 1.2 % of GDP 17% 18.2% 18.6% percent of GDP Date Achieved 2015 2019 2019 Comment Target achieved. Though the improvement is only partially attributable, other evidence is presented to show PDO achievement. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Share of public investment % of PIPs 0% >75% 100% projects selected and executed based on new framework. Date Achieved 2015 2018 2018 Comment Target exceeded (by 33%, 100% compared to 75%). All public investment projects are selected under the new framework. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Percentage of the total value % of total procurement 47.0% 23.5% 28% of contracts awarded without bids competition has been cut in 35 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) half. Date Achieved 2016 2018 2018 Comment Target mostly achieved (81%-improvement was 19% vs. 23.5% targeted). Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Decline in public enterprises % of GDP 1.2% 0.2% 0.01% and agencies extra-budgetary spending and carry-forwards (in percentage of GDP). Date Achieved 2016 2018 2018 Comments Target achieved. Public enterprises are no longer allowed to make extra budgetary expenditures. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion The executive PPP Unit has % of PPP portfolio 0% 50% 100% reviewed and assessed PPP projects according to the new regulatory framework. 2016 2018 2019 Comments Target exceeded (by 50%). All PPP projects are reviewed by the PPP executive unit. Objective/Outcome: Support private sector participation in the non-extractives sectors Indicator Name Unit of Measure Baseline Revised Target Actual Achieved at Completion Increase in Increase in the Number 27,168 > 31,100 29,872 number of formal properties titles. 36 The World Bank First and Second Fiscal Consolidation and Private Sector Reform DPO (P160592 and P163057) 2015 2018 2018 Comments Target partially met (69% of expected increase). Note that original target was increased from 28,000 to 31,000 during DPO 2. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion The increase in the % of total 0% 8% 88% percentage of verified products in total products of slaughterhouses. 2016 2018 2018 Comments Target exceeded (by 80 percentage points). Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion The Increase in the % of total 0% 10% 100% percentage of formal livestock transactions (as per the new law) at the borders. Baseline (2016): 0%; Target (2018): 10% 2016 2018 2018 Comments Target exceeded (by 90 percentage points). By law, all livestock transactions at the borders must be formalized. 37 The World Bank ICR Template (P159389) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES A. TASK TEAM MEMBERS P-160592 The program document for this proposed DPO was prepared by Wael Mansour (Economist TTL, GMF08), El Hadrami Oubeid (Public Sector Specialist, GGO27), Christine Richaud (Lead Economist, GMF09), Alain D’Hoore (Consultant), Pierre Mandon (Research Analyst, GMF01), Gregoire Rota Graziosi (consultant), Cedric Mousset (Lead Financial Specialist, GFM01), Kjetil Hansen (Senior Public Sector Specialist, GG027) Yemdaogo Tougma (Research Analyst, GMF07) Julien Emmanuel Galant (Consultant), Laurent Corthay (Senior Private Sector Specialist, GTC07) Andre Teyssier (Senior Land Administration Specialist, GSULN), Brahim Sall (Senior Rural Development Specialist, GFA 01), Ghada Elabed (Young Professional, GFA07), Fatou Fall Samba (Senior Financial Management Specialist, GG025), Moustapha Ould El Bechir (Senior Procurement Specialist, GGO07) , Paolo Verme (Senior Poverty Economist, GPV07), AbdelKrim Araar (Consultant), Siobhan Mclnerney-Lankford (Senior Counsel, LEGAM), Silvia Gulino (Operation Analyst, GMF01), Maude Valembrum (Language Program Assistant, GMF08), and Fatima Cherif (Program Assistant, AFMMR). P-163057 The program document for this proposed DPO was prepared by Wael Mansour (Economist and TTL, GMF08), El Hadramy Oubeid (Public Sector Specialist and co-TTL, GGO27), Jan Loeprick (Senior Economist, GGO28), Julien Emmanuel Galant (Consultant, GTC13), Laurent Corthay (Senior Private Sector Specialist, GTC07), Brahim Hamed (Senior Procurement Specialist, GGO05), Moustapha Ould El Bechir (Senior Procurement Specialist, GGO05), Brahim Sall (Senior Rural Development Specialist, GFA01), Hugues Agossou (Senior Financial Management Specialist, GG025), Cedric Mousset (Lead Financial Sector Specialist, GFM1A), Andre Teyssier (Senior Land Administration Specialist, GSULN), Federica Marzo (Senior Poverty Economist, GPV07), AbdelKrim Araar (Consultant, GPV07), Sachiko Morita (Senior Counsel, LEGAM), Faly Diallo (Finance Officer, WFALA), Richard J. Carroll (Evaluation Specialist), Micky Ananth (Operation Analyst, GMF08), Theresa Adobea Bampoe (Program Assistant, GMF08) and Aminetou Diallo (Program Assistant, AFMMR). 38 The World Bank ICR Template (P159389) B. STAFF TIME AND COST P160592 Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY17 28.5 234,557 Total 28.5 234,557 Supervision/ICR N.A N.A N.A Total 28.5 234,557 P163057 Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY18 56.9 304,103 Total 56.9 304,103 Supervision/ICR FY20 2 42,000 Total 58.9 346,103 39 The World Bank ICR Template (P159389) ANNEX 3. BORROWER, CO-FINANCIERS, AND OTHER DEVELOPMENT PARTNERS’/STAKEHOLDERS’ COMMENTS Comments of Government of Mauritania: We have reviewed the draft evaluation report of the DPO series (2016-2017) that was sent to us on October 14, 2019 and have the following comments: - In paragraph 36, we propose to add a reference to the 2018 ARMP report which shows the decrease in the percentage of the total value of public contracts awarded without competition. - It would also be desirable that World Bank implements the report's recommendations, particularly with regard to strengthening monitoring and evaluation (M&E). (Note: The ICR concurs with the GoM comments) Commentaires du Gouvernement mauritanien (French translation): Nous avons examiné le projet de rapport d’évaluation de la série de DPO (2016-2017) qui nous a été envoyé le 14 octobre 2019 et nous avons les commentaires suivants : - Dans le paragraphe 36, nous proposons d'ajouter une référence au rapport de l'ARMP de 2018 qui montre la baisse du pourcentage de la valeur totale des marchés publics attribués hors concours. - Il serait également souhaitable que la Banque Mondiale applique les recommandations du rapport, notamment en ce qui concerne le renforcement du suivi et de l'évaluation (S&E). 40 The World Bank ICR Template (P159389) ANNEX 4. SECTORS AND THEMES SECTORS AND THEMES P160592 Sectors Mitigation Co- Adaptation Co- Major Sector/Sector (%) benefits (%) benefits (%) SECTOR_TBL Agriculture, Fishing and Forestry 12 0.00 0.00 Livestock 12 0 0 SECTOR_TBL Public Administration 50 0.00 0.00 Central Government (Central Agencies) 50 0 0 SECTOR_TBL Financial Sector 25 0.00 0.00 Other Non-bank Financial Institutions 25 0 0 SECTOR_TBL Industry, Trade and Services 13 0.00 0.00 Other Industry, Trade and Services 13 0 0 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Economic Policy 13 Fiscal Policy 13 Tax policy 13 Private Sector Development 13 Public Private Partnerships 13 Public Sector Management 38 Public Finance Management 38 Public Expenditure Management 38 Domestic Revenue Administration 13 Public Administration 25 Public Assets and Investment Management 25 Urban and Rural Development 25 Rural Development 25 Rural Markets 13 Land Policy and Tenure 13 P163057 41 The World Bank ICR Template (P159389) Sectors Mitigation Co- Adaptation Co- Major Sector/Sector (%) benefits (%) benefits (%) SECTOR_TBL Agriculture, Fishing and Forestry 10 0.00 0.00 Livestock 10 0 0 SECTOR_TBL Public Administration 70 0.00 0.00 Central Government (Central Agencies) 60 0 0 Other Public Administration 10 0 0 SECTOR_TBL Industry, Trade and Services 20 0.00 0.00 Public Administration - Industry, Trade and Services 20 0 0 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Private Sector Development 20 Public Private Partnerships 20 Public Sector Management 30 Public Finance Management 20 Domestic Revenue Administration 20 Public Administration 30 Public Assets and Investment Management 20 State-owned Enterprise Reform and Privatization 10 Urban and Rural Development 30 Rural Development 30 Rural Markets 10 Land Policy and Tenure 20 42 The World Bank ICR Template (P159389) ANNEX 5. SUPPORTING DOCUMENTS African Development Bank (2017), Mauritania Economic Reforms and Diversification Support Programme – Phase II (PAREDE II) Autorité de Régulation des Marchés Public, (2019), Audit Technique et Financier de la Passation et de l’Execution des Marches Publics Au Titre de La Gestion Budgetaire 2018, Nouakchott IMF, (2017), Islamic Republic of Mauritania: Request for a Three-Year Arrangement Under the Extended Credit Facility, Washington D.C. IMF, (2019), Case Studies in Tax Revenue Mobilization in Low-Income Countries, WP/19/104. Washington D.C. Ministère de l’Economie et des Finances, (2017), Stratégie Nationale de Croissance Accélérée et de Prospérité Partagée SCAPP 2016-2030, Nouakchott. Ministère de l’Economie et des Finances, (2017), Manuel d’application du décret N°2016-179 relatif à la formulation, la sélection et la programmation de l’investissement public, Nouakchott. Ministère de l’Economie et d’Industrie, (2019), Indicateurs de résultats clés pour les DPO 2016 et 2017, Nouakchott. Ministère des Finances, (2019), Rapport sur les Dépenses Fiscales en Mauritanie pour l’Exercice 2018, Nouakchott. Website of PPP unit: http://www.ppp.gov.mr/ World Bank, 2013. “Governance of State-Owned Enterprises and Public Agencies in the Islamic Republic of Mauritania”, Washington D.C. World Bank, 2014. “Mauritania: Public Expenditure and Financial Accountability Assessment”, Washington D.C. World Bank, (2015), Regional Sahel Pastoralism Support Project, Washington D.C. World Bank, (2016a), Support Mauritania Land Reform Policy, Washington D.C. World Bank, (2016b), Public Sector Governance Project, Washington D.C. World Bank, (2016c), Nouadhibou Eco-Seafood Cluster Project, Washington D.C. World Bank, (2016d), Islamic Republic of Mauritania: First Fiscal Consolidation and Private Sector Support Development Policy Operation, Washington D.C. World Bank, (2017), Islamic Republic of Mauritania: Second Fiscal Consolidation and Private Sector Support Development Policy Financing, Washington D.C. World Bank (2018a), Islamic Republic of Mauritania: Country Partnership Framework for the Period of FY18-FY23, Washington D.C. World Bank (2018b), 1er Rapport sur la Situation Economique en Mauritanie: Vers une consolidation budgétaire qui améliore la gestion des investissements publics et fortifie les filets sociaux, Washington D.C. 43 The World Bank ICR Template (P159389) World Bank (2019), 2nd Rapport sur la Situation Economique en Mauritanie: Améliorer le climat des affaires pour favoriser le développement du secteur privé, Washington D.C. 44