Document of the World Bank i As of December Currency unit = Mauritanian Ouguiyas (UM) 1 USD = 329 UM Fiscal Year January 1 – December 31 CCM Central Procurement Commission CDD Community-Driven Development CFAA Country Financial Accountability Assessment CPAR Country Procurement Assessment Report CPCCA Code of Civil, Commercial and Administrative Procedure CPI Corruption Perceptions Index CPIA Country Policy and Institutional Assessment CSO Civil Society Organization DB Doing Business report EC European Commission EITI Extractive Industries Initiative FDI Foreign Direct Investment GDP Gross Domestic Product ICS Investment Climate Survey IDF Institutional Development Fund IGE Inspectorate General of State IGF Inspectorate General of Finance IP Integrity Pact IT Information Technology KKM Kaufmann Kraay Mastruzzi NGO Non-Governmental Organization OECD-DAC Organization for Economic Cooperation and Development – Development Assistance Committee OLS Ordinary Least Squares PEFA Public Expenditure and Financial Accountability PPP Purchasing Power Parity PRECASP Public Sector Capacity Building Project SOCOGIM Society of Construction and Real Estate Management of Mauritania UN United Nations UNDP United Nations Development Program Vice President: Obiageli K.Ezekwisili Country Director: Madani Tall Sector Director: Sudhir Shetty Sector Manager: Antonella Bassani Task Team Leaders: Jasmin Chakeri and Nicola Pontara ii Acknowledgements ........................................................................................................................ iv Executive Summary ........................................................................................................................ v Matrix of Main Recommendations ................................................................................................ xii 1 Introduction............................................................................................................................. 1 2 Why the analysis of corruption matters in Mauritania? .......................................................... 3 2.1 Governance and corruption: conceptual framework ...................................................... 3 2.2 Defining corruption ........................................................................................................ 4 2.3 The Mauritanian context: a snapshot of the political economy ..................................... 8 2.3.1 The era of democracy by decree (1984-2005) ............................................................... 8 2.3.2 The return to democracy: A new beginning? Limitations of the current governance and anti-corruption framework ........................................................................................................ 10 2.4 Recommendations ........................................................................................................ 18 3 Fighting corruption in public procurement ........................................................................... 19 3.1 Literature Review......................................................................................................... 19 3.2 Diagnostic .................................................................................................................... 21 3.3 International experience ............................................................................................... 26 3.4 Recommendations ........................................................................................................ 28 4 Fighting corruption in Mauritania’s courts ........................................................................... 30 4.1 Literature review .......................................................................................................... 30 4.2 Diagnostic .................................................................................................................... 32 4.2.1 Access to justice ........................................................................................................... 35 4.2.2 Corruption in the court room ....................................................................................... 36 4.2.3 Other forms of corruption in the judiciary ................................................................... 37 4.3 International experience ............................................................................................... 38 4.4 Recommendations ........................................................................................................ 39 5 Corruption and the extractive industries ............................................................................... 41 5.1 Literature review .......................................................................................................... 41 5.1.1 Corruption in the oil sector and relevant actors ........................................................... 41 5.1.2 Vulnerability to corruption in the oil value chain ........................................................ 43 5.2 Diagnostic .................................................................................................................... 45 5.3 International Experience .............................................................................................. 48 5.4 Recommendations ........................................................................................................ 50 6 Corruption as an obstacle to private sector development ..................................................... 51 6.1 Constraints on private sector development in Mauritania ............................................ 51 6.2 Descriptive analysis ..................................................................................................... 52 6.2.1 Firms’ perception of corruption in Mauritania............................................................. 52 6.2.2 Petty Corruption ........................................................................................................... 53 6.2.3 The financial cost of corruption ................................................................................... 55 6.3 Results .......................................................................................................................... 56 6.3.1 Bribe Propensity........................................................................................................... 56 6.3.2 Bribe Intensity .............................................................................................................. 57 6.4 Recommendations ........................................................................................................ 58 References ..................................................................................................................................... 69 iii List of Annexes Annex 1: Macro-economic Context and Outlook ................................................................................. 60 Annex 2: Effects of Corruption on Development and Measurement Issues ......................................... 62 Annex 3: The Oil Circuit in Mauritania ................................................................................................ 64 Annex 3: Probit estimations on the incidence of corruption in Mauritanian firms – the probability of a firm paying bribes ................................................................................................................................. 65 Annex 5: OLS corruption regressions, bribes as a share of total sales is the dependent variable in percentage ............................................................................................................................................. 66 Annex 6: The theoretical framework and specification of the model ................................................... 67 List of Boxes Box 3.1 A snapshot of procurement reforms in Mauritania .................................................................. 21 Box 3.2: Transparency International’s minimum standards for public contracting .............................. 27 Box 4.1: Mauritania's legal framework against corruption ................................................................... 33 Box 5.1: A Variety of Oil Funds ........................................................................................................... 47 List of Figures Figure 1.1: MRT GAC Framework: Synergy and coordination of World Bank GAC Interventions ..... 2 Figure 2.1: Components of a balanced national governance system ...................................................... 4 Figure 2.2 Kaufmann-Kraay-Mastruzzi Index ...................................................................................... 12 Figure 3.1: Frequency of bribery in procurement ................................................................................. 20 Figure 4.1: Sectors and institutions most affected by corruption .......................................................... 31 Figure 4.2: Africa, average cost of the last bribe paid (€) ..................................................................... 32 Figure 4.3: KKM Indicators for the rule of law (2006) ........................................................................ 33 Figure 6.1: Major or severe obstacles to growth, whole sample (% of firms) ...................................... 52 Figure 6.2: Corruption as major/severe obstacle to growth (% of firms, right axis) and overall rank as an obstacle to growth (left axis), formal sector, selected countries ...................................................... 53 Figure 6.3: Informal payments requested (% firms), selected countries ............................................... 54 Figure 6.4: Average bribes to “get things done� (% of sales) and to secure public contracts (% of contract) ................................................................................................................................................ 55 Figure 6.5: Bribes to “get things done� (% of sales) and to secure public contracts (% of contract ) in selected countries .................................................................................................................................. 55 Figure 6.6 Corruption perception and GDP (in PPP US$) .................................................................... 62 List of Tables Table 2.1 Mauritania: main governance indicators (latest available figures) ....................................... 12 Table 3.1: Thresholds under the 2002 procurement code ..................................................................... 23 Table 5.1: Current and projected oil production (2006-2015) .............................................................. 45 Table 5.2: Petroleum sector corruption typology, warning signs and responses .................................. 49 iv ACKNOWLEDGEMENTS This report was prepared by a team led by Jasmin Chakeri (Country Economist, LCSPE) and Nicola Pontara (Senior Economist, AFTP4). The core team was composed of Manuela Francisco (Country Economist, AFTP4), Hawa Cissé Wagué (Economist, AFTP4), Asli Gurkan (Consultant, AFTP4), Cristina Otano (Consultant, EXTEU) and Ould Mohamed El Hacen Mohamed El Moctar (currently Minister of Petroleum and Energy). The report is based on a shorter policy note prepared in 2007 by the World Bank team in cooperation with the United Nations Development Program (UNDP), the European Commission (EC) and the Public Sector Capacity Building (PRECASP) project. The core team for the policy note consisted of Olga Ivanes (EC), Geza Strammer (EC), Amel Daddah (World Bank); and Abderrahmane El Yessa, Cecile Molinier (UNDP). The report draws extensively on background papers commissioned for the policy note and prepared by the following consultants: Olivier Vallee and Haroune Ould Siddat (public administration, PRECASP); Giorgio Blundo (socio- cultural aspects of corruption in Mauritania, EC); Claude Cornuau, Jemila Mint Ichidou and Mohamed Ould el Mounir (judicial sector, UNDP). The Mauritania counterpart team was led by Hassen Ould Zein (Economic Advisor to the Prime Minister), Ministry of Economy and Finance, (MEF), and Mohyedine Ould Sidi Baba, General Director of Development and Economic Cooperation. The report has benefited from the overall guidance of Antonella Bassani (Sector Manager, AFTP4) and comments made by the peer reviewers, Ed Campos (Lead Public Sector Specialist, SASPR), Nicola Smithers (Senior Public Sector Specialist, AFTPR) and Colum Garrity (Public Sector Specialist, PRMPS). Valuable comments were also received from Moustapha Ould El Bechir (Procurement Specialist, AFTPC), Sidi Mohamed Boubacar (Lead Council, LEGAF), Helène Bertaud (Senior Counsel, LEGAF), Francesca Recanatini (Senior Public Sector Specialist, PRMPS), Sid’Ahmed Ould Cheikhna (Economist, AFTP4), Camille Bryan (Junior Professional Associate, WBIGP) and Vinay Bhargava (Director, EXTIA). The team is also grateful to François Rantrua (World Bank, Country Manager, AFMMR) for comments and support. Logistical support was provided by Pierre Lenaud (World Bank, AFTP4). v Executive Summary 1. Motivation of the report and choice of topics. This report is based on a number of background papers prepared jointly by a group of donors (EU, UNDP and the World Bank) and government counterparts. These papers were discussed in country and condensed in a Policy Note on fighting corruption, which was delivered to the authorities in April 2007. The Policy Note has been in turn used by the authorities to prepare a draft National Anti-corruption Strategy (NACS), which is being finalized. This report also benefits from research conducted at the World Bank on the economics of rent seeking in Mauritania and the impact of corruption on the development of private local and foreign firms. The study therefore builds on the Policy Note by analyzing more in depth corruption issues and practices in the country in selected areas. 2. The topics covered in this report were chosen given their criticality for the anti- corruption and governance agenda and in order to align the analysis and recommendations to the draft anti-corruption strategy, which focuses on: (i) the socio- cultural aspect of corruption; (ii) corruption in the public administration sphere (including procurement); (iii) corruption in the extractive industries; and (iv) the re- establishment of the rule of law. The inclusion of additional work on corruption as an obstacle to private sector development was motivated by the availability of the recently completed Investment Climate Assessment (ICA). Clearly, corruption in Mauritania is not confined to the topics covered here, which therefore do not represent an exclusive list of problematic areas. Follow up work on other issues of corruption and governance is currently being undertaken with support from the World Bank, including a governance diagnostic and a stakeholder analysis. 3. Aims and structure of the report. The overarching aim of the report is to provide analytic support to the NACS formulation, offer lessons from international experience on governance and anti-corruption (GAC) policy and generally support the Government and its development partners to better understand the phenomenon of corruption in Mauritania. The report is structured as follows: Chapter 2 focuses on the definition and measurement of corruption and the Mauritanian political economy. Chapter 3 focuses on corruption in public procurement. Chapter 4 concentrates on corruption in the courts of law. Chapter 5 deals with the extractive industries. Chapter 6 focuses on corruption from the perspective of the private sector, based on the results of the recent Investment Climate Assessment (ICA). 4. Main message of the report. On the basis of the analysis conducted in this report, the single most important message concerns the need for maintaining momentum and pressing ahead with the finalization of ongoing anti-corruption strategic thinking and legislation, and the implementation of already approved GAC laws and measures. Looking forward, the emphasis should shift from passing laws and rules to concrete implementation of procedures on a broader agenda of greater political accountability. Priority areas include: (1) independence of the media, (2) monitoring procedures (such as a governance diagnostic survey) and (3) the establishment of an effective mechanism through which the voice of citizens and users of public services can be heard. vi 5. Chapter 2: why the analysis of corruption matters in Mauritania? Corruption can be defined as “the use of public office for private gain�. Although this simple definition refers directly to the abuse of the public trust by government agents, corruption manifests itself most commonly as a systemic problem involving individual citizens, private businesses, and often with links to cross border actors. It essentially represents the failed outcome of weak monitoring and accountability systems. Such failures can be seen at all levels of government activity. Corrupt activities are broadly classified as either “grand corruption� – at the legal and policy levels - or “administrative corruption� – which includes abuses of personnel, budget and contracting procedures as well as the every day bribes commonly known as “petty corruption�. These two broad categories can also be understood as “upstream� (grand) vs. “downstream� (administrative) corruption. 6. Corrupt practices have deep social roots in Mauritania and reflect decades of rent- driven development. Under the old regime of Maaouiya Ould Sid'Ahmed Taya (1984- 2005) relationships of loyalty and dependence permeated a formal political and administrative system through a predominant party system. Wealth was redistributed towards a clientele chosen because of “ethnicity�, “tribalism� or “status� within the system of Mauritanian society. Tribal leaders were rewarded for their loyalty with positions in government and key sectors of the economy that conferred access to public resources to reward their constituencies. Office holders were rotated to spread access to state largesse and to limit incentives to defect to the opposition. These societal developments have left their mark on the country’s political and administrative institutions, and accountability mechanisms remain weak. 7. Despite the existing challenges, Mauritania has now the chance to make a fresh start. A coup in August 2005 deposed the long serving president Taya. The transition authorities (2005-2007) laid out a path for the establishment of democratic rule and took important steps on the governance front, such as, inter alia, the adhesion to the Extractive Industries Transparency Initiative (EITI), adoption of an Ethics Code for civil servants and a declaration of assets bill for high-raked personnel in the administration. The new Government, appointed in 2007, has continued along this path and adopted a law penalizing slavery, and made the public announcement of the willingness to acknowledge the human rights violations against black African Mauritanians during the 1989-91 period, including the repatriation of refugees. In light of this promising environment, the report notes that this is an opportune time for World Bank and other donors to support the government to finalize the anti-corruption strategy and to assist in the implementation of recently enacted governance and anti-corruption measures through monitoring, knowledge-dissemination and capacity-building initiatives. 8. Chapter 3: corruption in public procurement. Procurement is considered one of the areas of government activity most prone to corruption as it involves a large share of public resources. Corrupt procurement affects government spending in all sectors, and its consequences can be far-reaching. One of the difficulties of detecting corruption in procurement lies in the many forms in which corrupt activities can occur. Corruption in procurement can occur at various points in the process, including: project identification and design; advertising, pre-qualification, bid document preparation and submission of bids; bid evaluation and award of contract; and contract performance, administration and supervision. Corruption thrives in environments where transparency is weak – as in vii many procurement systems – where information is restricted to a small circle of people due to the “confidential� nature of the data. 9. In general, the costs of corruption in procurement are high in Mauritania. A recent OECD report puts Mauritania 118th out of 135 countries regarding the extent of irregular payments for public contracts. Controls are weak. Even though the Central Procurement Commission (CCM) is supposed to review every contract, it is neither able nor willing to do so in a competent way. While ex post audit has improved somewhat with the strengthening of the Audit Office (Cour des Comptes) and the General State Inspectorate (IGE), controls during the procurement process are still insufficient. Capacity of procurement personnel is insufficient. Staff is not familiar with the rules and procedures established by the procurement code. Finally, effective complaint mechanisms are virtually non-existent. Bidders who feel that they have been treated unfairly have currently little chance of having their grievances addressed. 10. Mauritania’s current procurement code is relatively comprehensive in coverage, but is not considered an international best-practice. More importantly, significant challenges exist on the implementation side. Currently, the responsibility for public procurement for contracts under a certain threshold is decentralized to procurement commissions at the department level. Larger contracts fall under the jurisdiction of the CCM, which is made up of senior representatives from across the central government. In addition, the CCM retains the responsibility of regulation, control, recourse (complaint), evaluation and award of contract with regards to the procurement conducted by the departmental commissions. This high level of centralization reduces the transparency of the decision making process, thus providing ample opportunities for corruption. The report recommends that the procurement code be revised and improved taking these shortcomings into account. The effective implementation of the legislation ought to be assured by ensuring proper training of staff involved in procurement, as well as strengthening audit and reporting mechanisms, and enforcing punitive measures against those who engage in corrupt practices. 11. In recent years, there have been several important innovations in the area of public procurement around the world which have shown good results in the fight against corruption. The so-called Integrity Pacts (IPs), championed by Transparency International as a key instrument to prevent corruption in procurement, are agreements between the government and bidders that commit all sides to refrain from giving or receiving bribes or from engaging in other unethical behavior. By providing such an assurance, the incentives for corruption are removed, paving the way for a fair and cost- effective procurement process. E-Procurement solutions, i.e. the use of information technology in the procurement process, have become popular around the world. Their main advantages include greater transparency, reduced opportunities and incentives for corruption, and improvements in the efficiency of procurement. E-Procurement systems differ between countries in terms of content (providing only information or also a transaction interface) and coverage (central, regional and/or local governments) and can be tailored to the specificity of the Mauritanian context. 12. Chapter 4: corruption in the judicial sector. The central role played by the judiciary in the fight against corruption is increasingly being recognized by governments, viii donors and researchers. An independent, well-functioning judicial system plays a key role in a country’s governance system. It provides legal recourse to all citizens without consideration of social status or financial means; in democratic systems it also acts as a check on the executive and legislative branches of government. Corrupt judicial systems, on the other hand, fundamentally undermine good governance. When power and wealth determine the outcome of the judicial process, a large part of the population is deprived of its rightful access to justice. Such impunity sends a strong signal that corruption is tolerated and even encouraged, which helps it spread throughout the government, the economy and society in general. 13. Corruption is rampant in the judicial system in Mauritania. Four areas stand out. Selective access to justice. In practice, access to justice depends to a large extent on personal connections. Those without the necessary links have to pay to have their cases heard. Manipulation of facts. Evidence and statements recorded by the judicial policy are frequently falsified. Varying speeds of processing. Some cases remain unprocessed for long periods, while others are swiftly tried and executed, without any plausible explanation. Hidden charges. Official charges (e.g. stamp duties) are levied on the basis of an official decree. However, seven years after the promulgation of the applicable law, the decree has not been adopted. Hence, arbitrary amounts are collected by those that control access to judicial services. Once a case has reached the court room, corrupt practices continue, including violation of the rights of the defense (e.g. use of coercion, arbitrary arrests) and excessive recourse to non-standard procedures (e.g. summary judgments). 14. Other factors contribute to the practice of corruption in the judicial sector in Mauritania. Pressure is exerted through the executive’s control over the promotion, sanction and transfer of judges. Many judges are active members of political parties representing tribal and/or regional interests, affecting their impartiality. Moreover, there is uncertainty on what is the applicable law: Mauritania’s dual tradition (the “modern� French law and the “traditional�, religious or customary, law) create tension at times. While modern law is the official law, it is often not effectively used; traditional law, on the other hand, is better known and understood by the citizens, but not reflected in the formal legal system. Illiteracy, lack of a systematic codification of legal texts, lack of reliable sources of legal documentation and information, and difficult public access to legal information are all factors that create an environment in which the law remains opaque. To help alleviate these weaknesses in the judiciary, the report recommends a number of steps including harmonizing traditional and modern law systems; rendering the law and the court decisions publicly accessible in French and Arabic through the Mauritanian Global Legal International Network (GLIN); enforcing a strict merit-based appointment and promotion process for judges; and improving the general working conditions for judges and court clerks. 15. International experience shows that a number of reforms have helped reduce the opportunities of corruption in the judiciary. These include the following. Codes of Conduct. The Bangalore Principles of Judicial Conduct (i.e. independence, impartiality, integrity, equality, propriety, and competence and diligence) represent one of the few international attempts at designing internationally recognized accountability mechanisms for the judiciary. Salaries. There is a general consensus that judges and other court ix personnel need to be remunerated in accordance with the important role they play. This will not automatically lead to less corruption but it will reduce judges’ financial dependence on bribes, thus reducing one of the incentives for corrupt behavior. Merit- based Appointments. In several countries, especially in Latin America, judicial councils have been created to appoint judges at various levels. The main objective of these councils is to ensure that appointments are made on a merit basis and not on political considerations, thereby strengthening judicial independence. These councils have shown mixed results, emphasizing the need for broader governance reforms and oversight of judicial performance. 16. Chapter 5: corruption in the extractive industries. Corruption in the oil sector takes place through different channels. Grand corruption at the legislative and political level can influence the design of sector policies, as well as the enactment of particular sector laws and taxes. It may also involve the direct theft of important sums of money through diversion of production, products, or revenues. Administrative corruption leads to illegal benefits in exchange for approvals covering a wide range of commercial and operational activities. This also includes the broad area of procurement abuse, including tender rigging, kickbacks, and cost inflation. Oil sector corruption can involve a wide range of institutions and individuals engaged in the sector, including governments, oil companies, “big men� and banks. Vulnerability to corruption is present in each segment of the oil sector value chain from the award of exploration rights, development phase, production phase, trading, transport, and refining and marketing. 17. Oil production in Mauritania begun in February 2006. The actions taken to date by the authorities to set up an institutional framework for the transparent and effective management of oil revenue have been encouraging. Oil revenues have been treated transparently in the 2006 and 2007 budgets. The authorities have engaged in prudent fiscal and monetary policies and set up the National Hydrocarbon Revenue Fund (FNRH). The government has created a National Oil Company (SMH), adhered to the Extractive Industry Transparency Initiative (EITI) and agreed to implement all its steps. The FNRH is a financing fund. The fund covers the financing needs identified in the annual government budget, reflecting the level of non-oil deficit net of available financing from sources other than from the domestic banking system (such as net external financing and privatization) and domestic debt management needs in support, among others, of foreign reserves of the central bank. Withdrawals from the Fund in any given year are limited to the ceiling authorized by the budget law, and must be deposited in the Treasury account at the central bank. The fund is audited by Cour des Comptes and by an independent international auditing company selected through competitive bids. 18. The SMH has the responsibility for managing the state participation in the oil sector and facilitate the development of national capacity in this sector. The SMH risks turning into an annex of the Ministry of Economy and Finance without appropriate safeguards, which could lead to: (i) the leakage of funds from the commercial enterprise and into the political patronage system; and (ii) the diminished capacity of SMH to execute its commercial responsibilities in the long-term national interest. On the EITI front, Mauritania released its first EITI report in March 2007 covering the mining and oil sectors and is currently preparing the second report. x 19. Despite these positive steps, a number of shortcomings still exist. The current legal and fiscal regime applicable to the oil sector was adopted in 1988 and the PSA model in 1994. Both need to be revised and updated. Both the Ministry of Petroleum (MEP) and the SMH have a serious deficit of qualified staff. The report recommends strengthening capacity in the oil sector by hiring a specialized and adequately trained consultant team for both above-mentioned institutions; strengthening the framework for the management of oil revenues; and fostering transparency in the management of the oil sector. 20. Looking at the international experiences, corruption in the oil sector can be exceptionally strong and difficult to eradicate in that vested interests opposed to reform are usually transnational, very powerful and well financed. Therefore, only high level and sustained commitment can make a dent in corruption. Only anti-corruption campaigns that are part of broader country program promoting good governance and aiming at attacking corruption across the board are likely to succeed. The more concerted the effort of stakeholders – government, industry, civil society, the financial community, and development agencies – the greater the chances of success. The role and responsibilities of developed countries in particular are frequently overlooked in this context, even though some companies and institutions of the developed world, and the governments that host them, are frequently complicit, passively and actively, in developing world corruption cases. Fighting corruption in the petroleum sector requires human and financial resources. Resources requirements can be moderate (e.g. informational campaigns), substantial (e.g. technical assistance, capacity building in government agencies and civil society) or significant (e.g. complicated investigations and surveillance). 21. Chapter 6: corruption as an impediment to SME development. The development of the private sector in Mauritania has been mainly constrained by lack of competition due, inter alia, to the presence of powerful and well-connected business groups. A key feature of the modern sector is the high concentration of ownership by a few families of large businesses in trade and commerce. Large private trading monopolies skim rent from the urban economy at the expense of domestic (more competitive) private producers whose margins are shrunk by high factor costs. Monopolies also dominate bank credit and insurance services at the expense of small and medium-size businesses, potentially the most dynamic economic agents, who do not have preferential access to long-term credit and lack political connections. These factors, combined, have restrained the emergence of private sector activity and, notably, the expansion of small and medium enterprises, putting a lid on the growth potential in Mauritania beyond the exploitation of natural resources. 22. How does corruption affect the development of private sector enterprises in Mauritania? Data on the perception of corruption at the firm level show that: (i) corruption is not considered to be one the most taxing factor impeding firms’ growth in Mauritania, and (ii) the perception of corruption as an obstacle to growth is significantly lower that in neighboring countries. However, the cost of corruption to firms is significant – both when expressed as a percentage of firms’ annual sales or contract value – and higher than in the comparator group’s countries. By broadening the analysis xi beyond perception, it is apparent that corruption is internalized by firms and considered common, accepted practice in Mauritania. Alternatively, firms refrain from reporting corruption for fear of retaliation. 23. Econometric evidence on bribe propensity and intensity suggests that medium- size firms are the ones that suffer most from corruption in Mauritania. Larger firms are more established and connected, do not fear exiting the market and are less likely to be harassed. Smaller firms are less visible and may be able to escape the control of public officials, by operating largely in the informal sector. The results add value to the hypothesis that these firms are disadvantaged in two fundamental ways in Mauritania: first of all, they are squeezed by the presence of powerful business groups/large firms which have de facto monopolies in important sectors of the economy. Secondly, they are the most likely firms to pay bribes and pay the highest amounts in percentage of their total annual sales, which places an additional burden on their ability to grow. The report makes several recommendations to reduce barriers to entry in the private sector, such as improving access to long-term credit for SMEs and adopting microeconomic measures to reduce the scope for corruption. Specific actions may include conducting regular surveys on the perception of corruption in the private sector; and swiftly implementing the recently-approved banking law and ethics code for civil servants who deal with private enterprises. xii Matrix of Main Recommendations Issues Recommendations on specific sectors Specific actions proposed General (Chapter 2)  Finalize the Anti-Corruption Strategy  Conduct extensive consultations of civil society and other non- governmental actors, including to identify the role of civil society organizations in the monitoring system adopted for the Strategy - Corrupt practices have  Finalize and disseminate the strategy deep social and  Begin implementation of recently enacted anti-corruption  Prepare implementing regulations for Ethics Code, including historical roots measures pilot mechanisms of exchange and control/feedback at end-user level - The recently elected  Prepare specific Codes of Conduct for individual functions of government has the public administration (procurement, customs etc.) declared its commitment  Actively monitor progress in the fight against corruption  Conduct regular surveys (such as those conducted by Global to reform Integrity or Transparency International)  Conduct sector-specific diagnostics and institutional assessments (such as PEFA)  Launch a far-reaching communications campaign  Extend the range of interactive electronic media as privileged instrument for successful information campaigns  Inform citizens through TV, radio and/or newspaper advertisements and public events Procurement (Chapter 3)  Carry out a detailed diagnostic of the governance problems  Use OECD-DAC model of a two-step evaluation - The costs of corruption in procurement  Commit to Integrity Pacts (IPs) in a small number of high- in procurement are high. profile procurement cases. - Controls on contracts  Improve the revised draft procurement code  Separate the current functions of the CCM are week  Stipulate competitive bidding as the default procurement method - The new draft code on  Clarify advertising requirements procurement still  Establish a limit on change orders after contract award contain some  Improve transparency by making more procurement  Improve information available on the CCM website and in shortcomings information available publicly public journals and newspapers xiii Issues Recommendations on specific sectors Specific actions proposed - The new draft code on  Ensure that staff involved in procurement are properly  Train staff in technical and ethical aspects of procurement procurement still trained contain some  Strengthen audit and reporting mechanisms  Better monitor the award of contracts as a result of the split of shortcomings the CCM functions  Enforce strict and credible sanctions for those who engage  Enforce disciplinary measures against corrupt government in corrupt activities officials  Blacklist / debar firms that have engaged in corrupt practices Judiciary (Chapter 4)  Harmonize traditional and modern law systems  Launch a process of consultation among academics, clerical chiefs and other relevant stakeholders to compile a common and commonly acceptable law  Make the law and the courts decisions publicly accessible in  Ensure that GLIN is regularly updated French and Arabic through the Mauritanian Global Legal - Corruption is rampant International Network (GLIN) throughout the judicial system in the form of  Issue a code of conduct for the judiciary, based on the  Draft a Code of Conduct that provides concrete, situation- selective access to Bangalore Principles specific guidance to members of the judiciary justice, manipulation of  Establish pilot mechanisms of exchange and control/feedback facts, varying speeds to at end-user level (access and quality of services) processing and hidden  Enforce a strict merit-based appointment and promotion  Implement recent ordinance on minimum qualifications for charges. process for judges members of the judiciary  Establish continuing education program for judges once they are appointed  Improve the general working conditions for judges and court  Make funds available for adequate equipment and maintenance clerks of court facilities  Ensure that courts have sufficient staff to run effectively Extractive Industries (Chapter 5) - Authorities have  Strengthen the framework for the management of oil  Elaborate, adopt and enact general Hydrocarbon Revenue adopted measures for revenues Management Law transparency of oil  Elaborate, adopt and enact an Oil Sector Policy Letter and revenues. Their translate it into modern sector law and contracts implementation needs to be monitored. xiv Issues Recommendations on specific sectors Specific actions proposed - Authorities have  Foster transparency in the management of the oil sector  Finalize and adopt the long-term strategy of the SMH, which adopted measures for should clarify its role and mandate transparency of oil  Ensure Parliament’s approval of the SMH budget every year, in revenues. Their conjunction with the State budget implementation needs to  Publish routinely the audited accounts of the SMH be monitored.  Produce and disseminate first EITI report for 2007 and following years (yearly basis)  Strengthen capacity in the oil sector  Recruit a consultant team for both SMH and MEP that follows a learning program based upon an “on-the-job-training� approach.  Train civil society representatives on basic oil industry and macroeconomic concepts  Launch the communication campaign to manage the expectations of the general public  Publish the production sharing contracts with the main oil operators Corruption and Private Sector Development (Chapter 6)  Analytical work on corruption  Conduct regular surveys on the perception of corruption in private sector and on ways of reducing rent seeking activities (e.g. political stakeholder analysis, sectoral corruption studies, - Private sector activities, etc.).Train civil society representatives on basic oil industry including bank credit and macroeconomic concepts and insurance services,  Improve access to long-term credit for SMEs  Implement swiftly and effectively the recently-approved are dominated by banking sector law monopolies  Microeconomic measures to reduce scope for corruption  Implement an ethic code for civil servants who deal with - Corruption is private enterprises internalized by firms  Ensure that sanctions are delivered and applied  Review of the salary scale of civil servants with a view to provide better remuneration for specific categories of employees 1 1. Introduction 1. Origin of the report. This report is based on a number of background papers prepared jointly by a group of donors (EU, UNDP and the World Bank) and government counterparts. These papers were discussed in country and condensed in a Policy Note on fighting corruption, which was delivered to the authorities in April 2007. The Policy Note has been in turn used by the authorities to prepare a draft National Anti-corruption Strategy (NACS), which is currently being finalized. This report also benefits from research conducted at the World Bank on the economics on rent seeking in Mauritania and the impact of corruption on the development of private local and foreign firms. The study therefore builds on the Policy Note by analyzing more in depth corruption practices in the country in selected areas. 2. Aims and structure of the report. The overarching aim of the report is to provide analytic support to the finalization of the NACS, offer lessons from international experience in the areas of governance and anti-corruption (GAC) and generally support the Government and its development partners to better understand the phenomenon of corruption in Mauritania. The report is structured as follows: Chapter 2 focuses on the definition and measurement of corruption and the Mauritanian political economy. Chapter 3 focuses on corruption in public procurement. Chapter 4 concentrates on corruption in the courts of law. Chapter 5 deals with the extractive industries. Chapter 6 focuses on corruption as perceived by the private sector, based on the data of the recent Investment Climate Assessment (ICA). 3. Link with Government and World Bank agendas. Since it took office in April 2007, the Government has taken important steps to improve governance.1 The Parliament has recently approved an ethics code for civil servants and a declaration of assets bill for members of the government. The findings of this study can help the authorities to shape their anti-corruption interventions and improve synergy. On the Bank’s side, the new CAS (2007-2010) supports, inter alia, the establishment of more transparent economic governance. This study will help to identify entry points for the delivery of programs and projects in the domain of governance, and strengthen the potential synergies among on-going projects that touch upon governance issues (e.g. PRECASP, PSD) and GAC interventions. 4. The GAC framework in Mauritania. As mentioned, the present study is designed to provide analytic value and guidance on GAC interventions to the Mauritanian government. The World Bank is providing follow up support to the Mauritanian GAC through activities financed by trust funds, which include a political stakeholder analysis and a quantitative diagnostics on corruption. The former focuses on the mapping of stakeholders (i.e. identifying winners and losers from reforms in selected sectors) and provides technical assistance for coalition-building. The latter focuses on quantifying corruption risks and identifying mitigation measures in public procurement, transport and construction sectors (see Figure 1.1). 1 Mauritania held a series of elections that began in November 2006 with a parliamentary vote and culminated March 25, 2007 with the second round of the presidential election. Sidi Ould Cheikh Abdellahi was elected President. 2 Figure 1.1: MRT GAC Framework: Synergy and coordination of World Bank GAC Interventions BROADER POLICY DRIVEN MRT GAC PILLARS/PRIORITIES Core twin pillars of GAC in MRT derives from NACS (evolving, details to be determined), WB CAS, PRSPII, ICA efforts Private Sector Public Sector Non-oil private sector led growth Efficient and Transparent Public Understand mechanism fuelling Administration rent seeking and reduce it; Improve two core areas: Diversify non-oil sources of (1) Public administrative norms that growth by improving overall cuts across sectors – public expenditure business environment; enhance management, public procurement, investment climate and investor government personnel management, confidence. etc. and (2) Reduce corruption in high value and GAC vulnerable public sectors like transport MRT (Norwegian TF) Sector Governance Diagnostics MRT (BNPP) Stakeholder Analysis and Quantitative and qualitative data interventions to Coalition Building for Good Governance provide analytical evidence to national and Identifies winners and losers from reforms international (partners) development practitioners and in selected sectors (Focus on Private Sector, policy makers on corruption risks and mitigation in: Public Administration and Selected Topics,  Public procurement across economic and social i.e. health end users, integrity poles, etc.) sectors Provides technical assistance for coalition-  Transport sector building and capacity development outreach  Construction industry firms in the private sector to stakeholders to facilitate participation in Designed to provide operational value to policy support of GAC process. makers and project managers to improve governance Designed to map stakeholders and build in key infrastructure (and comparator social) sectors capacity and support national GAC and corresponding private industries serving those stakeholder groups and alliances. sectors. WBG SUPPORT TO MRT GAC MRT (WB-UNDP-EU) Anti-corruption Study Study to provide analytic support to the NACS formulation, offer lessons from international experience on GAC, and generally support the MRT government and its development partners to better understand the phenomenon of corruption at all levels in MRT. Designed to provide analytic value and guidance on anti-corruption interventions to the Mauritanian government. 3 2. Why the Analysis of Corruption Matters in Mauritania? 1. Mauritania is at a cross-road. With relatively good natural resource prospects (oil, iron ore, fisheries, copper and gold), the economy is poised to grow rapidly in the future potentially triggering a transition from low to middle-income country2 (see annex 1). The key challenge confronting policy makers today is to diversify the sources of growth besides natural resources, and attract investment by creating an enabling environment for private sector development. However, the country displays already a distorted economy and dependent policy that tends to prioritize rent redistribution over wealth creation (Auty and Pontara 2008). Weak governance and corruption have become a central concern in Mauritania in recent times, as evidence emerged on the existence of significant extra-budgetary spending and embezzlement of public resources between the end of the 1980s and 2004. 2. Governance has become an increasingly important issue for policy makers focusing attention on the structure created by the complex relationships between a country’s institutions and traditions. The problem of corruption, and ways of measuring it, has also received much attention. This chapter will begin with a brief review of the notions of governance and corruption conceptual framework (Section 2.1). Section 2.2 looks at the definitions of corruption. Section 2.3 discuss of the political economy of Mauritania in recent years and the state of governance and corruption, based on the available evidence. Section 2.4 presents a number of recommendations aimed at strengthening governance and anti-corruption efforts in the country. GOVERNANCE AND CORRUPTION: CONCEPTUAL FRAMEWORK 3. A national governance system includes all the different components and procedures that together determine how the state acquires and exercises its authority to provide public goods and services. As such, a national governance system includes: (i) effective and transparent management of the public sector; (ii) the strength of political accountability, including political competition and transparency; (iii) the role played by non-governmental actors, including the extent to which civil society can hold government accountable; (iv) the level of media freedom and the way the private sector interacts with government; (v) the role of local participation and community empowerment; and (vi) the strength and capacity of formal oversight institutions (including parliament, independent oversight agencies, etc.) (Figure 2.1). 4. Corruption thrives where governance is weak, hence strengthening the governance system as a whole is a way to fight corruption. Weak governance implies a breakdown in one or more parts of this structure and a symptom of such a breakdown is widespread corruption. Promoting good governance is therefore key in the fight against corruption. Evidence shows that countries that succeeded in establishing a good 2 Mauritania has a population of 2.9 million people and a per capita GDP of US$ 933 (World Bank, 2007). The non-oil (oil) GDP growth rate in 2006 was 4.1 percent (11.4 percent with oil). 4 governance framework and sound investment climate have attracted foreign direct investment (FDI) and benefited from sustained economic growth. Per capita income and the quality of governance are strongly and positively correlated across countries (Kaufmann and Kraay, 2003). Figure 2.1: Components of a balanced national governance system Source: World Bank (2006c) DEFINING CORRUPTION 5. As the issue of governance has gained prominence in the development community, several definitions trying to capture the full spectrum of corrupt activity have emerged. One of the most common, and the one we will be using throughout this report, is that corruption is “the use of public office for private gain� and is explicitly the result of a breakdown in good governance practice. This general definition implies the role of both public agents and private citizens in the abuse of public sector mechanisms to extract personal gain, as most forms of corruption involve at least two parties, and can be initiated from either side. Personal gain, in turn, can be defined as financial (bribes, kickbacks etc.) or other benefits (gifts, privileges etc.). 6. Broadly speaking, corruption falls into two main categories: The first is “grand� or “upstream� corruption – involving the manipulation of legal and policy decisions for private gain. As stewards of the public trust, political leaders should allocate resources according to the best interests of the general public. Grand corruption occurs when leaders deviate from this guiding principle and instead make policy decisions that sacrifice returns to the public for private benefit (see Barro, 1973, Becker, 1983, Grossman and Helpman, 1994, and Rose-Ackerman, 1999). Grand corruption can be further broken down into the following sub-types: 5  State capture, referring to use of undue influence at the regulatory and policy making levels to ensure unfair benefits for certain actors. This can be measured, in part, by the extent to which bribes are paid to change the content of decrees or regulations, and economic or financial policies. Such influence is typically directed toward the executive branch at the ministerial level.  Legislative corruption is a type of state capture distinguished by its focus on representatives in the legislative branch and typically involves the way in which the voting behavior of legislators is influenced. For example, legislators can receive bribes from interest groups to enact legislation that can change the economic rents associated with their assets. 7. The second category is “administrative� or “downstream� corruption, in which actors at the administrative level (rather than the policy making level) extract gains by manipulating personnel, budget and contract procedures as well as through the “traditional� bribe-for-services mechanism broadly referred to as “petty corruption�. The following provides an abbreviated typology of corruption under this definition:  Corruption in personnel involves decisions in the hiring, promotion, discipline and dismissal of state agents that are influenced by illegal payments and nepotism. Corruption in personnel is facilitated by poor governance and a lack of transparency in hiring and promotion decisions where the practice of meritocracy is subjugated to personal or social ties.  Corruption in budgets and contracts: Where the allocation of funds at the operational level (as opposed to the national allocation which occurs at the parliamentary level) is diverted to benefit particular interests. Abuse of extra- budgetary or “emergency funds� is a common manifestation along with budget allocations for phantom services. This sub-type also includes budgetary funds misused in contracts where interference with the bidding, award, or verification processes is used to favor certain firms at the expense of creating the best return for investment to the public. “Petty corruption� also falls under administrative corruption, and indeed is sometimes discussed interchangeably. The term “bureaucratic corruption� is also used. Here, petty corruption serves as a catch all for the unofficial-payments-for-services which characterize the most common type of corruption and which most directly affects the poorest citizens. Three variants of bribes that constitute bureaucratic corruption can be identified: (a) those that equate supply and demand; (b) those that work as incentive payments for bureaucrats; and (c) those that lower costs and expedite processes for “consumers� (Rose-Ackerman, 1998). (Annex 1: Macro-economic Context and Outlook Since the early-1970s, the economy has grown slowly, and Mauritania remains a low-income country, with a poverty incidence of 46.7 percent (2004 data) and nearly half of its 2.9 million people living in poverty. The country is on track to achieve the Millennium Development Goals (MDGs) in gender parity in education, but off-track on child and maternal health and nutrition. The country’s economy is characterized by a narrow production base, low level s of industrialization, and a GDP composed of 40 percent services; 30 percent agriculture and livestock; 12 percent mining; 12 percent oil; and 6 percent fisheries. 6 Government continued stabilization efforts in 2005–06, and first results began to show. In 2006 growth reached 11.7 percent mostly due to the start of oil production. Strict observance of the fiscal and monetary policy stances was instrumental in bringing 12-month inflation down to an average of 6.2 percent in 2006. Fiscal performance has been strong, reflecting the government’s revenue collection efforts and sustained spending discipline. As a result, by end-2006, the basic non-oil fiscal deficit was limited to 4.4 percent of non-oil gross domestic product (GDP). The external position has begun to strengthen: gross official reserves increased from US$70 million in 2005 (0.7 months of imports) to US$194 million in 2006 (2.6 months of imports, year-end). Moreover, by the end of 2006, the parallel foreign exchange market premium was brought down to insignificant levels. The medium-term outlook for the economy is relatively favorable. The recent stabilization of the macro-framework combined with the discovery of oil and the relatively good natural resource prospects yields a positive medium-term outlook. However, oil production has improved economic prospects to a lesser extent than first predicted. Indeed, overall GDP growth decelerated from 11.4 in 2006 to 0.9 in 2007, due to the reduction in oil production. Lower than expected production figures from the Chinguetti field have furthermore dampened expectations. Oil production will not push GDP growth above 9 percent until 2012, when production is expected to begin in the two additional oil fields (Tiof and Tevet). In contrast, non-oil GDP growth increased from 4.1 percent in 2006 to 5.7 percent in 2007, and is expected to register an average annual growth of 4.6 percent between 2007 and 2012 (see Macroeconomic indicators below). Per capita gross national product (GNP) is projected to reach the US$1,000 mark in 2011. The consumer price index (CPI) inflation is expected to be brought below 5 percent within the next 2 years, and official cash reserves are expected to reach 3 months of import cover starting in 2008. On the fiscal side, the adjustment achieved in 2005–06 will facilitate a substantial reduction of domestic arrears under conservative revenue and realistic spending assumptions. The overall fiscal position will begin to improve slightly in 2009, and will turn positive as oil production pick up in Tiof and Tevet in 2012. The basic non-oil fiscal balance – excluding oil revenue, foreign- financed spending, and interest due on external debt – registered an unexpected surplus of 0.5 percent of non-oil GDP at end-June 2007, owing mainly to high fiscal revenues and delays in implementing investment projects related to the change of government. Oil revenue is unlikely to pick up significantly in 2008-09: as a consequence, the budget is expected to move into deficit, equivalent to 3.2% of GDP, in 2008. The revised oil production figures will affect Mauritania’s external position for the next three years. The current account balance will decline through 2010 then significantly improve from 2011 onwards. The current account will benefit in the short term from the continued strength of Mauritania’s iron ore exports along with the beginning of operations at Akjoujt (copper and gold) and Tasiast (gold). From 2008, however, the projected decline in the world prices of these commodities will reduce their positive contribution to the balance of payments. The recent debt sustainability analysis (DSA) points to a moderate risk of debt distress. As all critical external and fiscal ratios remain below the applicable thresholds over the entire DSA horizon, the DSA suggests a relatively positive outlook for sustainability. However, negotiations for debt relief have stalled with a number of bilateral creditors (Algeria, Iraq, Kuwait, Libya, and the United Arab Emirates), causing Mauritania to build up substantial arrears. Key Macroeconomic Indicators, 2006–11 2006* 2007* 2008 2009 2010 2011 2012 Real GDP growth (%) 11.4 0.9 4.5 4.1 3.5 4.8 9.9 Non-oil real GDP growth (%) 4.1 5.7 5.0 4.8 4.1 3.9 4.2 7 CPI (period average, %) 6.2 7.6 5.3 5.5 5.0 5.0 5.0 Current account balance (% of GDP) -1.3 -6.7 -6.7 -9.2 -16.2 -24.7 -2.3 Overall non-oil balance incl. grants (% of GDP) -4.7 -6.3 -6.2 -4.9 -4.1 -4.6 -5.1 Overall non-oil balance excl. grants (% of GDP) 45.7** -8.2 -9.2 -7.0 -5.4 -5.5 -5.7 Overall balance (% of GDP) 2.6 -3.0 -3.0 -2.4 -1.6 -1.4 2.7 Gross official reserves (in months of imports) 2.7 2.3 3.2 3.4 3.4 3.7 4.2 GDP per capita (US$) 938 933 983 972 952 1,003 1,237 Nominal GDP (US$ billion) 4.1 2.8 3.0 3.0 3.0 3.2 4.1 Source: International Monetary Fund (2007). Notes: * Preliminary; ** This is due to MDRI relief, oil signature bonuses and the sale of a third telecom license. 8  Annex 2 looks at the effects of corruption on development and measurement issues). THE MAURITANIAN CONTEXT: A SNAPSHOT OF THE POLITICAL ECONOMY 8. On April 19, 2007, Mauritania entered arguably the most promising phase of its post-colonial evolution. On that day, its transition from a 19-month military regime to its “Third Republic� was completed, and Sidi Mohammed Ould Cheikh Abdallahi was nominated President following elections considered the fairest presidential poll in the country’s history. Prior to this, on November 19 and December 3, 2006, a new National Assembly – the most politically plural ever – was also elected3, and started its five year- mandate in May 2007. Overall, since the demise of Ould Taya in August 2005, important steps have been taken to improve the governance and anti-corruption (GAC) framework in Mauritania. Despite progress, significant improvements are still needed. The remaining part of this section attempt to provide a snapshot of the political economy of Mauritania in recent years, and evaluate – despite evident data limitation – the extent to which poor governance and corruption are perceived as significant phenomena in today’s Mauritania. The era of democracy by decree (1984-2005) 9. Corrupt practices have deep social roots in Mauritania and reflect decades of rent- driven development during the era of Maaouiya Ould Sidi Ahmed Taya, who came to power on the 12th of December 1984 by military coup. “Guided democracy�, “managed democratization�, “paper democracy�, “authoritarian restoration� – accompanied by “shuffle-mania� in the rotation of office holders have been used to describe the Taya’s years (Marianne 2001, Jourde 2001, Marchesin 1994, Ould Cheick 1994, Ould Ahmed Salem 1999).4 Taya’s regime has profoundly marked the history of Mauritania. Under his rule, the Parti Républicain Democratique et Social (PRDS) was created to “civilianize� the military regime. A new Constitution – building a powerful presidential system – was submitted to a national referendum and approved in 1991, marking the beginning of the second Republic. Taya successfully controlled the coup-prone army, secured the support of the business community while embracing the democratization process and the economic reform bandwagon of the 1990s (Ould Ahmed Salem, 1999, N’Diaye, 2006).5 10. Taya forged a “grand compromise�, an arrangement that brought together powerful Arab-Berbers groups as well as some of the ruling black African elites, which together formed the backbone of the PDRS.6 His regime was characterized by a military 3 Municipal and legislative elections took place on November 19, 2006 and senatorial elections on January 21, 2007. The return to constitutional culminated with presidential elections on March 11, 2007. 4 According to Ould Ahmed Salem (1999) the frequent rotation of office holders in key position gave value to the popular saying that “all Mauritanians need to have their part of the cake�. The speed of office holders’ rotation picked up significantly in the last years of the regime. 5 Marianne (2001) and Jourde (2001) maintain that the “conversion� to democracy was made necessary by the need to reconcile with the country financial sponsors, after Taya supported Saddam Hussein during the first Gulf war and after the 1989-90 Senegalese-Mauritanian conflict. 6 Ethnically and culturally, Mauritania is made up of Arabic-speaking tribes (or Bidhân), from which political, economic and military elites have asserted their control o ver the country’s political system, and 9 oligarchy based on neo-patrimonialism – i.e. a system where relationship of loyalty and dependence pervade a formal political and administrative system – though a predominant party system using the same way of governing (Marianne 2001). Regionalism and tribal solidarities and conflicts played an important part, while tribal identity enjoyed a revival alongside the establishment of political pluralism. Legislative and Presidential elections were held in 1992 and 1997 and 2003. Although Mauritania has had party pluralism and not a hegemonic party system as elections were contested, the widespread control of state resources by the PDRS prevented the rise of any challenge from the splintered and fractioned opposition. 11. Under Taya, the increasing income disparity between the elite and the rest of the population fostered a process of wealth redistribution towards a clientele chosen because of “ethnicity�, “tribalism� or “status� within the cast system of the Mauritanian society. Fractiousness within the dominant groups encouraged the leadership to maintain power by using state control of productive activity in order to generate resources to sustain a clientelistic patronage system. Large private trading monopolies and inefficient state- owned water and electricity companies were allowed to skim rent from the urban economy at the expense of domestic private producers whose margins were shrunk by high-cost water and intermittent power. The monopolies also dominated bank credit at the expense of small and medium-size businesses (potentially the most dynamic economic agents), whose perceived ‘high risk’ elicited high interest rates. Large firms with political connections dominated state procurement contracts and reserved domestic markets for imports, even when local producers were cheaper. 12. The government’s recourse to negotiating access to patronage in order to retain political power had strong appeal for the Mauritanian elite. As members of a society with deep roots in trade, some enterprising members of Mauritania’s elite sought high returns through the short-term. Foregoing long-term investment in production such as cropping and fabrication, manufacturing the business class tended to look to the Gulf States as a model for rent deployment: the expectations being that Mauritania should function as a trading nation, building an entrepôt service economy, supported by a rapid transformation of the mineral rent into human capital. Yet Mauritania’s likely ratio of oil reserves to population and number of years of expected production are almost certainly far too small/few to sustain that ambition. Meanwhile, the preference for trading based on political links encouraged monopolies and diminished domestic competition. The phenomena described above have also had an impact on undermining the governance framework (see below).7 non-Arab speaking Mauritanians (Haalpulaar, Soninke, Wolof, and Bambara) who were persecuted and marginalized during most of Ould Taya’s reign, though the latter has co -opted a number of non-Arab speaking politicians and notables within its ranks. A third socio-cultural group, the Haratins, is made up of descendents of enslaved Africans and constitutes arguably the largest group. 7 Ould Ahmed Salem describes the practice of “Tcheb -Tchib�, which has become a legitimate way of doing business though personal connection, given that a good part of the Mauritanian elite is made up of “Tcheb - Tchaba�, i.e. those who practice Tcheb-Tchib (Ould Ahmed Salem 2001). 10 The return to democracy: A new beginning? Limitations of the current governance and anti-corruption framework 13. Mauritania’s second republic terminated on August 3, 2005, when Taya was ousted in a bloodless coup. The coup leaders established a Military Council for Justice and Democracy (CMJD) headed by Colonel Ely Ould Mohamed Vall (Taya’s Chief of Security), dissolved parliament, and formed a new transitional government. 8 The transition authorities is in the process of finalizing a National Anti-Corruption Strategy (NACS), ratified UN and African Union’s anti-corruption conventions, joined the Extractive Industries Transparency Initiative (EITI), issued a public sector ethics code, and created a State Inspection Agency. In June 2006, the country held a successful referendum on constitutional amendments, including: the limitation of future president to two consecutive terms of five years; the introduction of a maximum age limit of 75 for future presidents; the reduction of the executive’s power to rule by decree; and the introduction of mechanisms that would make it impossible for the parliament to reverse changes. 14. The current government, appointed in April 2007, continued the work done by the transition authorities: it established an Anti-Corruption commission in December 2007, adopted a decree for declaration of assets for high-level civil servants, announced a national day for fight against corruption, and is working closely with donors to finalize NACS. But what is the current status of governance in Mauritania? How much is corruption a problem? What follows is an attempt to answer these questions, by using the available data and information. First of all, by looking at Table 2.1, the following aspects can be highlighted:  Transparency International Corruption Perception Index ranks Mauritania in the bottom quarter of the countries considered (123rd out of 180)  The World Bank’s Country Policy and Institutional Assessment classifies Mauritania amongst those countries characterized by fragile policies and institutions. The specific ranking on transparency, accountability and corruption is still low, at 2.5 out of a possible 6.  The Doing Business report places Mauritania in the bottom quintile (148 out of 175 countries) and note that the country performs particularly poorly under the “starting a business� heading.  The recently-completed Investment Climate Assessment (ICA) shows that perceptions of corruption can be potentially misleading. Corruption is not considered to be one the most taxing factor impeding firms’ growth in Mauritania. Yet its cost to firms is significant and higher than in the comparator group’s countries. This means that corruption is internalized by firms and considered common, accepted practice. 8 A Road Map was agreed with representatives of political parties, which have regained freedom of speech and association and civil society, focusing on the following key issues: (a) the return to democracy within 24 months, establishing key milestones; (b) the improvement of the judicial system, and (c) the deepening of reforms in the public finance sphere, including the transparent management of oil rents. 11  In addition, looking at the KKK indicators (voice and accountability; political stability and absence of violence; government effectiveness; regulatory quality; rule of law and control of corruption, see Figure 2.2), most indicators show a deterioration since 2000 (N.B. The performance of KKM indicators for 2002 and 2004 is likely to be inflated, as misreporting on key economic data was confirmed in 2005). 12 Table 2.1 Mauritania: main governance indicators (latest available figures) Latest Year Indicators Definition/Explanation Mauritania’s Performance Available Composite index that relates to perceptions of the Aggregate Governance Indicators T-I Corruption degree of corruption as seen by business people and Perception Index country analysts, and ranges between 10 (highly clean) 2007 123rd out of 180 countries (CPI) and 0 (highly corrupt). On a scale from 1 (worst) to 6 (best), Mauritania scored: Evaluates country’s policies and institutions by 3.0 for property rights and rules- analyzing 16 dimensions. Governance-related based governance; Country Policy and dimensions are: Property rights and rules-based 2.0 for quality of budgetary Institutional governance; Quality of budgetary management; Quality 2006 management; Assessment of public administration; Transparency, accountability & 3.0 for quality of public (CPIA) corruption in the public sector administration; (Also serves as one of the sources for the KK and CPI) 2.5 for transparency, accountability & corruption Evaluates ease of doing business by monitoring ten Overall rank: 148 out of 175 Business Environment categories: In top half for Registering Doing Business 1. Starting a business; 2. Dealing with licenses; 3. property and Enforcing (DB) Employing workers; 4. Registering property 5. Getting 2007 contracts; Among lowest Indicators credit; 6. Protecting investors; 7.Paying taxes; 8. performers in Starting a Trading across borders; 9. Enforcing contracts; 10. business and Paying taxes Closing a business. 29.1% of firms say corruption is Investment Climate Survey of private sector firms and employees to major or severe constraint 2006 Survey (ICS) evaluate the overall business environment. 6.6% of yearly turnover spent on informal payments Records annual information on political regime and authority characteristics. Includes indicator on On a scale from 1 (worst) to 7 Political and press Polity IV Country executive constraints, defined as the extent of 2004 (best): Report institutionalized constraints on the decision-making Executive constraints: 3.0 freedom powers of chief executives. Freedom House Status of civil liberties 2006 “Partly free� Reporters without Press freedom index 2007 55th out of 169 countries Borders Figure 2.2 Kaufmann-Kraay-Mastruzzi Index 13 15. There is secondary evidence on the extent of poor governance and corruption in Mauritania. A report prepared by an Inter-Ministerial Committee on Governance during the transition (GIRM 2006) concluded that the phenomenon of corruption has evolved significantly over the last decade, encouraged by a feeling of general impunity. Against the yardstick of what can be called a “National Governance System� (see again Figure 2.1), in which each of the actors (citizens, businesses, media, NGOs, politicians, legislators and bureaucrats) has an active role to play, Mauritania’s weaknesses can be summarized as follows:  Public Sector Management remains a key constraint: civil service management is overly centralized; recruitment and promotion practices are not based on merit; and overlapping functions of ministries reduce government effectiveness. Off- budget spending was rampant in the recent past, but decisive steps have been taken to bring all expenditures on-budget and improve expenditure tracking. Public procurement is characterized by a complete lack of transparency and oversight. An Ethics Code and a decree mandating the declaration of assets of public officials have recently been adopted. The extractive industries sector, on the other hand, has been subject to several transparency initiatives, including the government’s adherence to EITI, the creation of an oil revenue fund, and the transparent handling of oil revenues in the budget).  Political Accountability has recently been strengthened. The recent elections have resulted in the most politically diverse parliament in Mauritania’s history, though still revealing the continuation of political patterns that have deep historical roots. First, the coalition of opposition parties (“opposition� refers to their status under the previous regime) failed to gain a majority in the Assembly (41 of the 95 seats). Second, political parties that were officially affiliated to the “presidential coalition� in the previous Ould Taya regime (including some splinters of these parties) won a total of 16 seats. Third, “independent candidates,� that is, people with no affiliation to political parties, won a total of 39 seats. Despite the greater pluralism, some observers note that the bloc of deputies linked to the “old guard� is still significant, controlling 57% of the seats in the new Assembly (that is 54 seats in total) (N’Diaye and Jourde 2007).  The role of Civil Society, Media and the Private Sector is also beginning to change. Significant improvements have been made with regards to media freedom – Mauritania is now considered “partly free� according to Freedom House (www.freedomhouse.org). Civil society organizations (CSOs) suffer from limited capacity, lack of independence and lack of permanent financing. Access to policy making remains limited, even though access to information has improved somewhat. Some recent citizen initiatives (such as the Citizen Initiative for Change), however, show that landscape is quickly changing. On the private sector side, the recent ICA shows that the cost on corruption on the economy appears to be high.  Programs aimed at Local Participation and Community Empowerment are limited. Decentralization of resources and decision making authority remains limited. Donor-funded community-driven development (CDD) projects are under 14 way in several regions, but there is no national-level framework for community involvement in development.  Formal Oversight Institutions are currently not effective. Parliament has limited human resources and capacity to perform effective oversight function. Mauritania’s courts are considered to be among the most corrupt institutions in the country. Corruption in the judicial system is rife according to an inter- ministerial report published in 2005. The feeling of general impunity has been also promoted by the precariousness of the justices’ and court personnel’s living conditions. Therefore, rather than being a symbol of law and order, courts are seen as part of the problem – as they do not enforce laws (thereby protecting citizens from the corrupt behavior of others) and can be prone to bribery to influence the outcome of a case. Despite its clearly defined roles and responsibilities, the Audit Court (Cour des Comptes) remains largely ineffective. The General State Inspectorate (IGE), which reports directly to the Prime Minister, was established in 2005 and has a broad mandate of control and oversight of public administration. 16. As mentioned in the introduction, the topics covered in this report were chosen given their criticality for the anti-corruption and governance agenda and in order to align the analysis and recommendations to the draft anti-corruption strategy, which focuses on: (i) the socio-cultural aspect of corruption (Chapter 2); (ii) corruption in the public administration sphere (notably procurement, Chapter 3); (iii) corruption in the extractive industries (Chapter 5); and (iv) the re- establishment of the rule of law (Chapter 4). The inclusion of additional work on corruption as an obstacle to private sector development (Chapter 6) was motivated by the availability of the recently completed ICA. Clearly, corruption in Mauritania is not confined to the topics covered here, which therefore do not represent an exclusive list of problematic areas. Follow up work on other issues of corruption and governance is currently being undertaken with support from the World Bank, including a governance diagnostics in transport, procurement, and public works, and a stakeholder analysis and civil society coalition-building activities for good governance. Moreover, this report is based on surveys of relevant stakeholders and analysis of institutional features (see Annex 1: Macro-economic Context and Outlook Since the early-1970s, the economy has grown slowly, and Mauritania remains a low-income country, with a poverty incidence of 46.7 percent (2004 data) and nearly half of its 2.9 million people living in poverty. The country is on track to achieve the Millennium Development Goals (MDGs) in gender parity in education, but off-track on child and maternal health and nutrition. The country’s economy is characterized by a narrow production base, low level s of industrialization, and a GDP composed of 40 percent services; 30 percent agriculture and livestock; 12 percent mining; 12 percent oil; and 6 percent fisheries. Government continued stabilization efforts in 2005–06, and first results began to show. In 2006 growth reached 11.7 percent mostly due to the start of oil production. Strict observance of the fiscal and monetary policy stances was instrumental in bringing 12-month inflation down to an average of 6.2 percent in 2006. Fiscal performance has been strong, reflecting the government’s revenue collection efforts and sustained spending discipline. As a result, by end-2006, the basic non-oil fiscal deficit was limited to 4.4 percent of non-oil gross domestic product (GDP). The 15 external position has begun to strengthen: gross official reserves increased from US$70 million in 2005 (0.7 months of imports) to US$194 million in 2006 (2.6 months of imports, year-end). Moreover, by the end of 2006, the parallel foreign exchange market premium was brought down to insignificant levels. The medium-term outlook for the economy is relatively favorable. The recent stabilization of the macro-framework combined with the discovery of oil and the relatively good natural resource prospects yields a positive medium-term outlook. However, oil production has improved economic prospects to a lesser extent than first predicted. Indeed, overall GDP growth decelerated from 11.4 in 2006 to 0.9 in 2007, due to the reduction in oil production. Lower than expected production figures from the Chinguetti field have furthermore dampened expectations. Oil production will not push GDP growth above 9 percent until 2012, when production is expected to begin in the two additional oil fields (Tiof and Tevet). In contrast, non-oil GDP growth increased from 4.1 percent in 2006 to 5.7 percent in 2007, and is expected to register an average annual growth of 4.6 percent between 2007 and 2012 (see Macroeconomic indicators below). Per capita gross national product (GNP) is projected to reach the US$1,000 mark in 2011. The consumer price index (CPI) inflation is expected to be brought below 5 percent within the next 2 years, and official cash reserves are expected to reach 3 months of import cover starting in 2008. On the fiscal side, the adjustment achieved in 2005–06 will facilitate a substantial reduction of domestic arrears under conservative revenue and realistic spending assumptions. The overall fiscal position will begin to improve slightly in 2009, and will turn positive as oil production pick up in Tiof and Tevet in 2012. The basic non-oil fiscal balance – excluding oil revenue, foreign- financed spending, and interest due on external debt – registered an unexpected surplus of 0.5 percent of non-oil GDP at end-June 2007, owing mainly to high fiscal revenues and delays in implementing investment projects related to the change of government. Oil revenue is unlikely to pick up significantly in 2008-09: as a consequence, the budget is expected to move into deficit, equivalent to 3.2% of GDP, in 2008. The revised oil production figures will affect Mauritania’s external position for the next three years. The current account balance will decline through 2010 then significantly improve from 2011 onwards. The current account will benefit in the short term from the continued strength of Mauritania’s iron ore exports along with the beginning of operations at Akjoujt (copper and gold) and Tasiast (gold). From 2008, however, the projected decline in the world prices of these commodities will reduce their positive contribution to the balance of payments. The recent debt sustainability analysis (DSA) points to a moderate risk of debt distress. As all critical external and fiscal ratios remain below the applicable thresholds over the entire DSA horizon, the DSA suggests a relatively positive outlook for sustainability. However, negotiations for debt relief have stalled with a number of bilateral creditors (Algeria, Iraq, Kuwait, Libya, and the United Arab Emirates), causing Mauritania to build up substantial arrears. Key Macroeconomic Indicators, 2006–11 2006* 2007* 2008 2009 2010 2011 2012 Real GDP growth (%) 11.4 0.9 4.5 4.1 3.5 4.8 9.9 Non-oil real GDP growth (%) 4.1 5.7 5.0 4.8 4.1 3.9 4.2 CPI (period average, %) 6.2 7.6 5.3 5.5 5.0 5.0 5.0 Current account balance (% of GDP) -1.3 -6.7 -6.7 -9.2 -16.2 -24.7 -2.3 Overall non-oil balance incl. grants (% of GDP) -4.7 -6.3 -6.2 -4.9 -4.1 -4.6 -5.1 Overall non-oil balance excl. grants (% of GDP) 45.7** -8.2 -9.2 -7.0 -5.4 -5.5 -5.7 Overall balance (% of GDP) 2.6 -3.0 -3.0 -2.4 -1.6 -1.4 2.7 16 Gross official reserves (in months of imports) 2.7 2.3 3.2 3.4 3.4 3.7 4.2 GDP per capita (US$) 938 933 983 972 952 1,003 1,237 Nominal GDP (US$ billion) 4.1 2.8 3.0 3.0 3.0 3.2 4.1 Source: International Monetary Fund (2007). Notes: * Preliminary; ** This is due to MDRI relief, oil signature bonuses and the sale of a third telecom license. 17 17. Annex 2) and a mix of qualitative (e.g. focus group discussion, open questionnaires) and quantitative (e.g. closed questionnaires, econometrics) methodology. Chapters 2-5 draw on the existing institutional analyses in the sectors covered as well as fresh information collected during February-April 2007 by research from the relevant stakeholders. Chapter 6, by contrast, presents econometric evidence on the impact of corruption at the firm level using the ICA dataset. 18 RECOMMENDATIONS 18. On the basis of the analysis conducted in this chapter, it is recommended that the authorities:  Finalize the Anti-Corruption Strategy. The strategy, a draft of which is currently being discussed in Mauritania, will provide a framework for ongoing and future measures aimed at fighting corruption. It should be finalized in an open and transparent way, involving civil society, donors and other non-governmental actors, and its implementation should be constantly monitored and periodically updated.  Begin implementation of recently enacted anti-corruption measures. The recently- adopted public sector Ethics Code and a Declaration of Assets of public officials can be crucial tools for the prevention of corruption and should be a central component of the Anti-Corruption Strategy. It is important to ensure that they can be effectively implemented, and for that purpose it is recommended that the implementing regulations be drafted with care, taking into account international experience. The Ethics Code should be complemented by specific Codes of Conduct for individual functions of the public administration (justice, procurement, customs, health, education, etc.), which can provide concrete guidance for behavior in specific situations. In addition, implementing regulations for Ethics Code should include pilot mechanisms of exchange and control/feedback at end-user level in selected sectors.  Actively monitor progress in the fight against corruption. Overseeing the implementation of the strategy will require adequate monitoring and evaluation mechanisms, such as surveys (such as those conducted by Global Integrity and Transparency International), sector-specific diagnostics (as currently prepared by the World Bank Institute) and in-depth institutional assessments such as the Public Expenditure and Financial Accountability (PEFA) assessment. It will also require active implication of civil society organizations, which should be encouraged and supported to play their role as promoters/defenders of good governance.  Launch a far-reaching communications campaign. Convincing the public that the government is committed to fighting corruption and promoting public support for anti-corruption efforts will be a key prerequisite. Television or newspaper advertisements and public events can be used to inform citizens of their rights and responsibilities and encourage them to stand up against corrupt behavior. More efforts need to be put into liberalizing the facto the media. Recent attempts (pilot experience) made to increase the participation of listeners to debate on the public radio (e.g. through the experience of Citizen Radio, led by Citizens for Change Initiative) should be expanded and consolidated. 19 3. Fighting Corruption in Public Procurement 1. Corruption in the public sector is particularly harmful as it can have significant economic and social costs. This chapter looks at a key function performed by every part of the public sector: procurement. As the main interface between the public and private sectors, procurement tends to present a particularly complex pattern of governance challenges. This is also true for Mauritania, which has experimented with procurement reforms since the late 1990s but still suffers from widespread corruption in this area. The following analysis is aimed at contributing to the ongoing procurement reforms, including the revision of the procurement code. 2. The problem of corruption in procurement has received much attention in recent years by organizations such as the OECD, Transparency International and the World Bank. Thanks to recent analytical work, there is a better understanding of the extent and mechanisms of this problem, as well as of different remedies implemented around the world. This chapter will present a short overview of the main literature on the topic (Section 3.1), to be followed by a diagnostic of the problem in Mauritania (Section 3.2), as well as a section on international experience (Section 3.3). Section 3.4 presents a number of recommendations aimed at strengthening governance in public procurement. LITERATURE REVIEW 3. In many countries, procurement is considered one of the most corrupt areas of government activity, not least because it involves a large share of public resources, representing between 10 and 20 percent of a country’s GDP (Campos et al., 2007). Private sector survey data shows that in every region of the world, except for the former Soviet Union, procurement is considered to be the public function in which bribery is most rampant (Figure 2.1). Even in OECD countries, where bribery is perceived to be less widespread, the frequency of bribes paid for procurement is more than double that for utilities, taxation, and the judiciary. 4. Corrupt procurement can affect government spending in all sectors, which means that its consequences can be far-reaching. When private interests take precedence over the public interest, competition revolves around bribes rather than quality or cost, which can have significant negative consequences for public service delivery. There are also costs for the private sector: corruption in procurement can “provide an unfair, u nstable and risky competitive advantage and will create a sort of market-entry cost or non-tariff barrier, at least for those companies who do not wish, or cannot afford to, bribe their way in� (Transparency International, 2006a). 5. One of the difficulties of detecting corruption in public procurement lies in the many forms in which corrupt activities can occur. Probably the most easily detectable forms are straightforward bribes and kickbacks to officials, either financial or in kind. But corrupt procurement schemes often display considerable creativity and innovation on the part of bidders and/or procurement officials, ranging from collusion and bid rigging, 20 to the creation of shell companies to obscure ownership, and the provision of fraudulent information in bidders’ offers (see Campos et al., 2007). Figure 3.1: Frequency of bribery in procurement 6. Just as corruption in procurement can take many different forms, it can also occur at various points in the process. Campos et al. (2007) identify a range of potential opportunities for corruption grouped by the four main stages:  Project identification and design. This early stage sets the tone for the rest of the procurement process. If political influence, rather than objective needs assessments, determines which projects get approved and funded, there is a danger that subsequent stages may also be unduly influenced by considerations other than cost effectiveness and quality.  Advertising, pre-qualification, bid document preparation and submission of bids. Invitations to bid should be widely advertised, and adequate time needs to be allowed in order for potential bidders to meet deadlines. The pre-qualification stage, which is designed to filter out unqualified candidates, may be used to favor certain bidders and disqualify others that are equally or more qualified. Bidding documents can be written in a way that precludes a large number of bidders from meeting the necessary requirements (by over-specifying the technical specifications, excessive fees to obtain the bid documents etc.). Finally, at the submission stage, collusion among bidders, or the sale of privileged information to selected bidders, can lead to distortions in the content and number of bids submitted.  Bid evaluation and award of contract. This is a crucial stage in the procurement process as it is here that the main decisions are made. Price is generally the main 21 criterion used in the evaluation, while quality and other variables also play a role. In some systems, subjective, non-price criteria are given excessive weight, making those evaluations particularly prone to corruption.  Contract performance, administration and supervision. Once the contract has been awarded, mechanisms need to be in place to ensure that the funds are spent according to the contract. This requires the preparation of regular and accurate records, as well as periodic forensic spot checks to verify the information provided in the records. 7. In short, corruption thrives in environments where transparency is weak – which is the case with many procurement systems, which restrict information to a small circle of people due to the “confidential� nature of the data. DIAGNOSTIC 8. Like in other countries in the region, procurement in Mauritania is considered to be one of the most corrupt areas of government. The current procurement code, which was approved in 2002, is not considered up to international standards, despite being relatively comprehensive in coverage, applicable to all levels of government and state- owned enterprises, and based on the concept of open competition and the efficient use of public resources. In addition, serious challenges exist on the implementation side, at all stages of the procurement process. Since 2002, there has been a dialogue with the World Bank on the need to improve the existing procurement code, and ensure implementation (see Box 3.1). Recently, the authorities have proposed a new procurement code, and the bank has responded with a series of comments and recommendations (see Paragraph 22 below). It is hoped that a final procurement code is approved in the next Parliamentary session. Box 3.1 A snapshot of procurement reforms in Mauritania The reform of the public procurement system in Mauritania was initiated in 1998 following a Country Portfolio Performance Review (CPPR) in 1997. This CPPR identified a number of serious deficiencies, including the lack of a sound procurement policy, long delays in the preparation of bidding documents, lack of confidentiality in the bid evaluation process, and inefficient contract management, leading to many complaints and further delays. An IDF Grant to strengthen the system was approved in 1998, to: (i) improve the legal and institutional procurement framework, including the preparation of a new procurement code and the restructuring of the Central Tender Board (CTB); (ii) start a first phase of creating the necessary tools for improving the preparation, planning, execution and follow-up of the procurement process; and (iii) train staff in procurement and disbursements. A CPAR was finally carried out in 1999 In 1999, a Country Procurement Assessment Report (CPAR) was carried out to accompany the execution of the IDF. However, the execution of the IDF was slow and was closed in October 2002. Under the IDF, a new procurement code was prepared and approved by Decree in February 2002, but was not deemed up to best-practice standards. In addition, other essential aspects such as the proposed reorganization of the Central Tender Board (CTB, Commission Centrale des Marchés, CCM), installation of procurement planning and a monitoring and evaluation system, the effective application of proposed thresholds for procurement approvals, and especially the development and execution of a procurement training program, did not fully materialize. The preparation of standard bidding documents 22 and general conditions of contract was also not fully completed. A desk study/CPAR update was prepared in June 2002 and sent to the Government. The CPAR Update provided, inter alia, detailed comments for improvement of the procurement code. Since then there have been exchanges between the Bank and the authorities on the procurement code and partially-implemented reforms. The Bank has provided examples of procurement codes for francophone countries based on civil law. An action plan was laid out to revise the procurement code, reorganize the procurement function and launch a broad capacity building effort. A second IDF was approved in 2004 to support the following key actions: (i) the review and upgrade of the procurement code (in particular the separation of the public procurement functions such as ex-ante control, regulation and complaints; the preparation and adoption of regulatory and implementation texts, etc.); and (ii) the strengthening of institutional capacity (in particular the setting up of a Permanent Procurement Unit for training and monitoring purposes, the reorganization of CTB, the consolidation of Ministerial Procurement Units, the publication of all information on public procurement in newspapers and the internet). Despite some progress achieved under the 2nd IDF procurement – including the establishment of a Steering Committee for procurement reforms, the elaboration of a new (draft) code and the recruitment of a specialized center for the establishment of permanent capacity on procurement issues in Mauritania – there are still significant steps that needs to be taken (see Section 3.4). 9. Under the current code, the responsibility for public procurement for contracts under a certain threshold (see Table 3.1) is decentralized to procurement commissions at the department level. Larger contracts fall under the jurisdiction of the Central Procurement Commission (CCM), which is made up of senior representatives from across the central government. In addition, the CCM also retains the responsibility of regulation, control, recourse (complaint), evaluation and award of contract with regards to the procurement conducted by the departmental commissions. In fact, the CCM is required to be involved a priori in every contract award, as it has to review all decisions made by the departmental commissions. This high level of centralization reduces the transparency of the decision making process, thus providing ample opportunities for corruption. 10. According to the CCM website, of the 69 contracts awarded until mid-2007, 87 percent were awarded through competitive bidding, 6 percent through direct contracting (gré à gré) and 7 percent through shopping (consultation simplifiée). The website also provides information on contract value, contracting agency and financing source for the 10 most recent contracts of the current year, as well as the minutes of recent CCM meetings. However, more comprehensive data on procurement, including annual procurement plans, are currently not available on the internet. 11. In general, information on the extent of corruption in public procurement is scarce. According to the first annual report of the Supreme Audit Court (Cour des Comptes) for the year 2005 (published in 2007), and the audits conducted by the newly established General State Inspectorate (Inspection Générale de l’Etat –IGE), corruption in public contracting is rife (Cour de Comptes, 2007, IGE, 2007). 23 Table 3.1: Thresholds under the 2002 procurement code Procurement method (responsibility) Central administration Public commercial and Urban local governments Other local governments industrial enterprises Nouakchott & Nouadhibou Shopping