Conditions for Doing Business in Mauritania
Mauritania: flow of FDI in 2018 - 70,8 mln US Dollars (at current prices, UNCTAD)
FDI - Foreign Direct Invetsment
Africa Capacity Index (ACI) 2019
Since 2011, the African Capacity Building Foundation (ACBF – specialized agency of the AU, located in Harara, Zimbabwe https://www.acbf-pact.org/) publishes an annual Africa Capacity Report (ACR).
The ACR measures and examines the capacity of African countries to pursue their development agenda, focusing on key determinants and components of capacity for development. ACBF defines capacity as the “ability of people, organizations, and society as a whole to manage their affairs successfully” and capacity development as the process by which “people, organizations, and society as a whole unleash, strengthen, create, adapt, and maintain capacity over time.
Capacity of African countries, examined in ACR, is reflected by Africa Capacity Index (ACI). The ACI - is a composite index computed from a quantitative and qualitative assessment of four sub-indices or indicator “clusters” on a specially designed questionnaire. “The policy environment cluster” considers the conditions that must be in place to make transformational change and development possible. “The processes for implementation cluster” assesses the extent to which countries are prepared to deliver results and outcomes. “The development results at country level cluster” refers to tangible outputs that encourage development. And “the capacity development outcomes cluster” measures change in the human condition.
Mauritania ACI 2019 Rank 25 Score 51.7
Cluster 1 Policy environment for capacity development 89.5
Cluster 2 Processes for implementation 41.9
Cluster 3 Development results at country level 50.0
Cluster 4 Capacity development outcomes 44.8
Incentives and Guarantees for foreign investors
The current government, elected in July 2009, has placed a priority on recruiting foreign investors to Mauritania. The Investment Authority of the Ministry of Economy and Development has been asked to give quarterly updates to the office of the Prime Minister concerning foreign investment projects. The government’s investment and development strategy emphasized private sector development, which was seen as the main engine of economic growth.
Privatization, liberalization, and investment incentives figured prominently in Mauritania’s previous World Bank and IMF structural reform programs. Foreign investment is welcome in most sectors. The 2002 Investment Code uses privatization and liberalization to encourage foreign investors and guarantees companies the freedom to transfer most capital and wages abroad. Foreign investment is prescreened by the government. Certain financial investments, particularly in the fields of mining, hydrocarbons, telecommunications, and utilities are subject to additional restrictions. Reforms have been implemented to ease foreign investment, but complicated and burdensome bureaucratic procedures, corruption, and non-transparent legal, regulatory, and accounting systems inhibit investment. Residents and non-residents may hold foreign exchange accounts, but non-resident accounts are subject to some restrictions. Payments and transfers are subject to quantitative limits, bona fide tests, and prior approval in some cases.
In collaboration with the World Bank, the Investment Authority in the Ministry of Economy and Development is writing a new Code of Investment, which has not yet been completed, but is expected to be announced in 2011. The new code aims to reduce the administrative bureaucracy associated with approving foreign direct investments in Mauritania. The Investment Code is the principal source for laws and information related to Mauritania’s investment climate. It is designed to encourage direct investment, facilitate administrative procedures, and enhance investment security. The following are legal guarantees in the current Investment Code for any entity, Mauritanian or foreign, wishing to invest in Mauritania:
-- Freedom of establishment and capital investment, in accordance with the laws and regulations in place
-- Freedom to transfer foreign capital
-- The ability to transfer professional income of foreign employees
-- The equal treatment of Mauritanian and foreign individuals and legal entities.
The Investment Code applies to all sectors of the economy, with the exception of the following sub-sectors, which are governed by laws and regulations specific to those sectors:
-- Purchasing goods for resale on the local market without further processing
-- Activities governed by the country’s banking laws, except for leasing activities
-- Activities governed by insurance regulations
-- Activities in the mining and petroleum sectors
-- Communications and telecommunications
-- Water and electricity production
Contracts are protected by the Civil and Commercial Codes, although court enforcement and dispute settlement can be difficult to obtain. The judicial system remains weak and is unpredictable and inefficient in its application of the law. Judges lack training and experience in commercial and financial law and are sometimes corrupt.
With the exception of sectors where public companies hold monopolies such as water and electricity distribution, Mauritania has no discriminatory policies against foreign investment, imports, or exports. The mining, fishing, agricultural, banking, petroleum, technology and tourism sectors are actively seeking foreign direct investment.
Foreign investors generally receive the same treatment as Mauritanian investors, subject to the provisions of treaties and agreements concluded between the Government of Mauritania and other countries. Foreign investors have the same access as Mauritanians to courts of law. Nonetheless, the success of foreign investors often depends in large part on collaboration with local partners who understand the local market and government. Unfortunately, the unstable political and economic climates have meant that certain investors have suddenly found obstacles to their success because of the changing political affiliations and interests of their Mauritanian partners.
The largest foreign investments have been in the petroleum and mining sectors, attracting approximately 80% of all foreign investment in Mauritania. The fishing industry accounts for almost all other foreign investment in Mauritania.
Conversion and transfer policies
There are no legal or policy restrictions on converting or transferring funds associated with investments. Investors are guaranteed the free transfer of convertible currencies at the legal market rate, subject to the availability of such currencies. Similarly, foreigners working in Mauritania are guaranteed the prompt transfer of their professional salaries. To transfer funds, investors are required to open a foreign exchange bank account in Mauritania. Transfers from abroad are limited to 100,000 Euros per transaction, but investors may conclude an unlimited number of transfers each day. There are no legal transaction limits for investors transferring money out of Mauritania, although regulations to undertake such transactions may be complicated.
The local currency, the ouguiya, is freely convertible within Mauritania, but its exportation is not legally authorized. Hard currencies can be easily found either in commercial banks. The Central Bank has liberalized the foreign exchange system and now holds regular foreign exchange auctions, allowing market forces to fix the value of the ouguiya. Individuals and companies may obtain hard currencies through commercial banks for the payment of purchases or the repatriation of dividends. If the bank has hard currency available, there is no delay in effect for remitting investment returns. However, foreign currency is in high demand and banks may not have sufficient currency. In that case, the commercial bank must obtain it from the Central Bank in order to conduct the transfer. The Central Bank is required to prioritize government transfers, which could present further delays. Delays, although relatively uncommon, have been reported from one to three weeks.
There are no legal parallel markets in Mauritania which would allow investors to remit investments through other means. There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported inputs.
Performance requirements and incentives
Mauritania is in a transitional stage with respect to application of its WTO commitments. The government offers tax benefits, including exemptions in some instances, to enterprises in priority sectors listed in its Investment Code. In the case of imported “dumped” goods deemed to be competing unfairly with a priority enterprise, the government will respond to industry requests for tariff surcharges, thus providing some potential protection from competition. Additional clarity to these procedures and exemptions should come with the publication of the new Investment Code in 2011.
There are no performance requirements beyond those that might be indicated in individual investment agreements and no requirements for local financing. There are some rules governing the percentage of host country nationals employed, but the government is flexible on this point. Industrial fishing crews are encouraged to have five Mauritanian crewmembers per vessel, but it is not a requirement.
Foreign firms are encouraged to participate in government-financed research and development programs. Investment incentives such as free land, deferred and reduced taxes and tax-free importation of materials and equipment are available to encourage foreign investors. The Investment Code outlines certain investment incentives, but foreign investors may negotiate others directly with the government. Performance requirements are not normally imposed as a condition for establishing, maintaining or expanding an investment, or for access to tax and investment incentives unless indicated in an individual investment agreement. Under the Investment Code, investors are required to purchase from local sources if the good or service is available locally and is of the same quality as could be purchased abroad. There is no requirement for investors to export a certain percentage of output or only have access to foreign exchange in relation to their exports.
There is no requirement that nationals own shares in foreign investments. Additionally, there are no discriminatory or excessively onerous visa, residence, or work permit requirements inhibiting foreign investors’ mobility.
Right to private ownership and establishment
The Government of Mauritania guarantees any individual or legal entity wishing to undertake business activities in the country the freedom of establishment in accordance with the laws and regulations in force. Privatization and liberalization programs have also helped put private enterprises on an equal footing with respect to access to markets and credit.
Financial freedom
Mauritania's underdeveloped financial sector remains concentrated in urban areas. Limited access to credit and the high costs of financing keep more dynamic entrepreneurial activity from taking place. Lending to the private sector has been limited. The banking sector dominates the financial system, accounting for more than 80 percent of total assets. There are 11 commercial banks, one of which is 50 percent government-owned. Foreign banks are new to the system; two French bank subsidiaries opened in 2006 and 2007 and one Qatari bank subsidiary (Qatar National Bank) opened in 2010. In 2007, a new banking law was enacted to enhance competition, improve access to credit, and ensure bank liquidity. The law mandates separation of bank management and ownership and limits the percentage of loans that a bank can make to related parties.
Capital markets are virtually nonexistent; there is no stock market and less than 7% of Mauritanian citizens possess formal bank accounts. Although the entry of foreign banks has reduced the cost of borrowing, it is still prohibitively expensive and nearly impossible to find business loans at a rate competitive with those available in neighboring countries.
Transparency of the regulatory system
In practice, ownership in many sectors of the economy is concentrated among a few families. They have significant monopolistic power which is reinforced by formal and informal regulatory barriers. Tax rates on businesses in the formal sector are extremely high, which could distort or impede investment. The procedures required to pay taxes are complicated and time consuming. Recent efforts to combat corruption have resulted in business faced with extraordinary tax bills that they previously could avoid through bribes paid to tax inspectors and assessors.
Labor laws and conditions of employment are complex. There are many limitations on hiring conditions, duration of work, and dismissals, which could also distort or impede investment. Environmental and health and safety laws and policies, mostly because they do not exist, do not distort or impede investment.
The government established the Consolidated Office for Investments (Guichet Unique) in 1997 in order to streamline bureaucratic procedures for investment. As a result, transparency has increased and bureaucratic procedures have been reduced. Nevertheless, complicated bureaucratic procedures and unnecessary red tape that require time and money remain a problem. There is also a complex and often overlapping system of permits and licenses required to do business. In addition, there continues to be a lack of transparency in the legal, regulatory, and accounting systems, which do not meet international norms. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations. Proposed laws and regulations are supposed to be published in draft form for public comment before being sent to Parliament, but this does not always occur. As a result many businesses in Mauritania maintain dual accounting standards to allow them to at best avoid bureaucratic inefficiencies and at worst evade the particularly high rates of taxation.
Mauritania expressed interested in joining the Extractive Industries Transparency Initiative (EITI) in 2005 and released an annual report in 2007. However, it has taken only basic steps to complete the validation process. Since the August 2008 coup and the July 2009 elections, the new government has indicated interest in restarting the validation process. However, Mauritania missed the March 2010 deadline, as well as the September 2010 extended validation process deadline. The IMF’s 2002 fiscal Report on Standards and Codes (ROSC) and the 2008 Article IV report emphasize the need to significantly improve public expenditure management, accountability and transparency. The ROSC pointed to the need to improve dissemination of information to parliament and the public. These points are being re-addressed in the newest IMF program, which was initiated in late 2009.
Bilateral investment agreements
Mauritania has bilateral investment agreements and investment protection with member countries of the Arab Maghreb Union (Algeria, Libya, Morocco, and Tunisia) as well as with Saudi Arabia, France, Belgium, and Romania. Other agreements exist with Burkina Faso, Cameroon, Gambia, Ghana, Mauritius, Italy, Lebanon, Qatar, Yemen, Korea, Egypt and the Arab League. Mauritania has no bilateral investment or taxation treaties with the United States.
Mauritania is a signatory to the Cotonou Agreement between the European Union (EU) and the group of African, Caribbean and Pacific (ACP) countries, and thus enjoys free access to the EU market. As a “least-developed country”, Mauritania also benefits from duty-free access to the European market under the Everything-But-Arms initiative. Since 1987, the Government has signed four fisheries agreements with the European Union, the most recent covering the period August 2008 - July 2012. As of January 1, 2010, Mauritania was restored as a beneficiary member of the trade preferences outlined in the African Growth and Opportunity Act (AGOA), which provides for the privileged access of Mauritanian export products into the U.S. market.
Opic and other investment insurance programs
Mauritania currently qualifies for Overseas Private Investment Corporation (OPIC) coverage, but its program is limited. Potential investors should contact OPIC directly for guidance. A British-Mauritanian insurance company, Atlantic Londongate, offers broad commercial coverage. Mauritania is a member of the Multilateral Investment Guarantee Agency (MIGA), which protects foreign direct investment against political risk. The Embassy purchases local currency at an official rate of 290 ouguiya per dollar. The ouguiya has been fairly stable over the last few years, but could devalue if there is further political or economic instability.
Labor
While labor is abundant, there is a shortage of skilled workers and well-trained technical and managerial personnel in most sectors of the economy. As a result, there are few sectors of the economy that use advanced technologies because the skilled labor required to operate them is not readily available. While labor is relatively inexpensive, labor productivity is very low, even compared to neighboring countries. The mining sector is an exception, where the national mining company SNIM provides advanced training for its employees.
Labor-management relations are generally good in Mauritania and there are few strikes by workers. Mauritania is a signatory to the ILO conventions protecting worker rights. In October 2004, the government updated the Labor Code to conform to ILO Conventions 138 and 182. It organized a forum on labor laws and worked with UNICEF on a survey of child labor in two major cities, Nouakchott and Kiffa.
Mauritania's restrictive labor regulations hinder employment and productivity growth. The non-salary cost of employing a worker is moderate, but the difficulty of laying off a worker creates a disincentive for new hiring.
Foreign trade zones/free ports
There are no duty-free import zones in Mauritania. However, the Investment Code introduced a Duty-Free Points Regime to encourage exports. The following are eligible for the Duty-Free Points Regime:
-Production activities and provision of services intended exclusively for exportation.
- Activities intended indirectly for exportation through the complete and exclusive sale of goods or services to enterprises, which export directly.
The Duty-Free Points consist of facilities where such activities are carried out. They are placed under the control of the Customs Administration. Companies whose activities fall under the Duty-Free Points Regime are exempt from export duties and taxes. Customs and import regulations are notoriously opaque and investors should actively research the regulations pertaining to any potential investment sectors.
http://www.state.gov/e/eb/rls/othr/ics/2011/157322.htm
Prospects for economic cooperation with Mauritania:
- agroindustry;
- processing of foodstuff;
- mining;
- machine building;
- fishing;
- manufacturing;
- construction;
- energy;
- transportation;
- scientific cooperation on oceanography and agroindustry;
- tourism.
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