Rwanda - Second Communications Project

Documnot of The World Bank FOR OMCIAL USE ONLY Iqwt No. 9042-RW STAFF APPRAISAL REPORT REPUBLIC OF RWANDA SECOND COMMUNICATIONS PROJECT NOVEMBER 19, 1990 Africa Technical Department South Central and Indian Ocean Department This docuemt has a retrce distribution and may be wed by recipiets oily le the Wfonrman of their official duties. Its contents may not otherwise be disclosed without World Bank authoriation.  CURRENCY AND EQ'JIVALENTS Currency Unit - Rwandese Franc (RF) $1.0 - RF 74 up to November 1990, and $1.0 - RF 123.3 from November 10, 1990 onwards FISCAL YEAR Government - January 1 - December 1 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS AfDB African Development Bank CCCE Caisse Centrale de Cooperation Economique (Lending Agency of the French Government) CCP Comptes Ch&ques Postaux (Postal Checking Accounts) DEL Direct Exchange Line or line connected to the exchange DGP Direction Generale des Postes (Posts General Directorate) DGT Direction Generale des Telecommunications (Telecommunications General Directorate) EIB European Investment Bank FAC Fonds d'Aide et de Cooperation (Aid Agency of the French Government) GOR Government of Rwanda INTELSAT International Consortium for Telecommunications Satellites ISD International Subscriber Dialling ITU International Telecommunications Union KBO Kagera Basin Organization MINITRANSCO Ministry of Transport and Communications ONATRACOM Office National des Transports en Commun (Parastatal of the Rwandese Government for public transportation) PE Sector Public Enterprises Sector PO Post Office POTS Plain Old Telephone Service, or basic telephone service RP Regie des Postes (autonomous public postal entity) SEMT Societe d'Economie Mixte des Tklecommunications (Mixed enterprise telecommunications company) STD Subscriber Trunk Dialing UNDP United Nations Development Program UPU Universal Postal Union VHF Very High Frequency: radio systems working in the range of 30-300 MHz  FOR OFFICIAL USE ONLY REPUBLIC OF RWANDA SECOND COMMUNICATIONS PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. CREDIT AND PROJECT SUMMARY .i.. . . . . . . . . . . ... . -iii I. INTRODUCTION .... . . . . . . . . . . . . . . .....1 Economic Context .... . . . . . . . . . . . ....1 II. THE COMMUNICATIONS SECTORS . . . . . . . . . . . . . . 2 Access to Telecommunications . . . . . . . . . . . . . 3 Use and Quality of Telecommurications Services . . . . 3 Existing Telecommunications Facilities . . . . . . . . 4 Demand for Telecommunications Services . . . . . . . . 4 Access to Postal Services . . . . . . . . . . . . . . . 4 Use and Quality of Postal Services . . . . . . . . . . 5 Existing Postal Facilities . . . . . . . . . . . . . . 5 Demand for Postal Services . . . . . . . . . . . . . . 6 Sector Strategy and Goals . . . . . . . . . . . . . . . 6 Sector Constraints.... 7 IDA Strategy.... 8 Project Focu3 ....8 III. THE IMPLEMENTATION AGENCIES. 8 Sector Commercialization. 8 Organization and Management . . . . . . . . . . . . . . 10 Planning and Operations Management . . . . . . . . . . 11 Staff and Training .11 Training Facilities .12 Accounting and Financial Management . . . . . . . . . . 12 Auditing .13 This report is based on the first findings of an appraisal mission composed of Messrs. O6rald Buttex, Principal Tolecommunications Engineor (Task Manager), Jean Boutan, Sr. Financial Analyst, Yves de Talhouot and Bernard Hauri-, Consultants, which visited Rwanda in February 1899, and on a post-appraisal w;ssion composed of Messrs. 06rald Buttax, Jean 9oe:lan and Victor Abadie, Consultant, which visited Rwanda in August 1990, following decisions made by Government and IDA regarding the Communications Sector Reform. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Page No. IV. THE INVESTMENT PROGRAMS AND THE PROJECT . . . . . . . . 13 A. Description .... . . . . . . . . . . . . . . . . 13 Telecommunications Investment Program . . . . . . . 13 Postal Investment Program . . . . . . . . . . . . . 14 Project Description ... . . . . . . . . . . . . . 14 Institutional Reform Program . . . . . . . . . . 14 Telecommunications Component . . . . . . . . . . 15 Postal Component . . . . . . . . . . . . . . . . 15 B. Costs and Financing . . . .s. . . . . . . . . . . . 15 Program Costs . . . . . . . . . . . . . . . . . . . 15 Project Costs .... . . . . . . . . . . . . . . . 16 Contingencies . . . . . . . . . . . . . . . . . . . 17 Financing of Telecommunications and Postal Investment Programs . . . . . . . . . . . 17 Project Financing . . . . . . . . . . . . . . . . . 18 C. Procurewant and Implementation . . . . . . . . . . 19 Procurement .... . . . . . . . . . . . . . . . 19 Disbursement .... . . . . . . . . . . . . . . . . 20 Project Implementation . . . . . . . . . . . . . . . 21 Performance Monitoring . . . . . . . . . . . . . . . 22 V. FINANCIAL ANALYSIS .22 Past Performance .22 Present Position .23 Projected Financial Performance . . . . . . . . . . . . 24 DGT/SEMT . . . . . . . . . . . . . . . . . . . . . . 24 DGP/RP . . . . . . . . . . . . . . . . . . . . . . . 26 Projected Financing Plan . . . . . . . . . . . . . . . 28 DGT/SEMT . . . . . . . . . . . . . . . . . . . . . . 28 DGP/RP . . . . . . . . . . . . . . . . . . . . . . . 29 Tariffs . . . . . . . . . . . . . . . . . . . . . . . . 29 DGP/RP .... . . . . . . . . . . . . . . . . . . . 29 DGT/SEMT . . . . . . . . . . . . . . . . . . . . . . 30 VI. ECONOMIC ANALYSIS .30 Return on Investment . . . . . . . . . . . . . . . . . 30 Benefits .... . . . . . . . . . . . . . . . . . . . 31 Fiscal Impact .... . . . . . . . . . . . . . . . . . 31 Least Cost Solution .... . . . . . . . . . . . . . . 32 Risks .... . . . i . . . . 32 Environmental and Health Effects . . . . . . . . . . . 32 VII. AGREEMENTS REACHED AND RECOMMENDATION . . . . . . . . . 33 Condition of Negotiations . . . . . . . . . . . . . . . 33 Agreements Reached During Negotiations . . . . . . . . 33 Conditions of Credit Effectiveness . . . . . . . . . . 34 Conditions of Disbursement . . . . . . . . . . . . . . . 34 Recommendation .................... 34  Page No. TEXT TABLES: 4.1 Project Cost Summary . . . . . . . . . . . . . . . . . . 16 4.2 Telecommunications Financing Plan . . . . . . . . . . . 17 4.3 Financing Plan - Postal Services . . . . . . . . . . . . 17 4.4 Project Financing Plan ... . . . . . . ...... . . 18 4.5 Procurement Arrangements . . . . . . . . . . . . . . . . 19 4.6 Disbursement of IDA Credit . . . . . . . . . . . . . . . 21 5.1 Key Indicators of DGT Past Financial Performance . . . . 22 5.2 DGT Balance Sheet . . . . . . . . . . . . . . . . . . . 23 5.3 DGP Balance Sheet . . . . . . . . . . . . . . . . . . . . 24 5.4 Key Indicators of DGT/SEMT Projected Financial Performance . . . . . . . . . . . 25 5.5 Key Indicators of DGP Projected Financial Performance 26 5.6 Percentage Contribution to Revenues by Category for Postal Services . . . . . . . . . . . 27 5.7 Weight by Category of Percentage Increases by Charges 27 5.8 Projected DGT/SEMT Financing Plan 1990-94 . . . . . . . 28 5.9 Projected DGP Financing Plan 1990-94 . . . . . . . . . . 29 ANNEXES: 1 Communications Sector Policy . . . . . . . . . . . . . . 35 2 Telecommunications Services: Basic Data . . . . . . . . 42 3 Postal Services: Comparative Indicators of Postal Services in African Countries . . . . . . . 43 4 Postal Services: Basic Data . . . . . . . . . . . . . . 44 5 Terms of Reference ..45 6 Organization Chart of MINITRANSCO . . . . . . . . . . . 60 7 Implementation Schedule ..61 8 Telecommunications Services: Description of the Telecommunications Component of the Project . . . . . 62 9 Postal Service: Description of the Physical Components of the Postal Project . . . . . . . . . . . 63 10 Telecommunications Investment Program . . . . . . . . . 66 11 Postal Investment Program . . . . . . . . . . . . . . . 67 12 Schedule of Disbursements . . . . . . . . . . . . . . . 68 13 Performance Indicators ..69 14 Supervision Plan ..70 15 Assumptions Used in the Financial Projections for Telecommunications ..71 16 Assumptions Used in the Financial Projections for Postal Services ..76 17 Summary of Telecommunications Tariffs . . . . . . . . . 81 18 Return on Investment ................ .. . 83  - i - REPUBLIC OF RWANDA SECOND COMMUNICATIONS PROJECT Credit and Project Summary =rrower: Republic of Rwanda. !neficiaries: Ministry of Transport and Communications (MIWITRANSCO), and following their creation: Societe d'Economie Mixte des T4lecommunications (SEMT) and Regie des Postes (RP). )A Credit: SDR 8.9 million ($12.8 million equivalent). ?rms: Standard IDA. ilending Terms: The Government of Rwanda (GOR) will onlend the Credit proceeds to SEMT and RP, at a 7.72Z interest rate for a period of 15 years (including a 5-year grace period) for SEMT, and at a 4Z interest rate for a period of 20 years (including a 5-year grace period) for Pl. -o1ect 3jectives: The objectives of the project are to promote efficient communications in support of economic growth through a series of actions designed to: (a) assist GOR in institu- tional reform aimed at creating autonomous commercially oriented operating entities for both the telecommunications and postal sectors, paving the way for private sector participation; (b) support the implementation of a sensible investment program in these sectors; (c) maintain quality and improve efficiency of telecommunications services; and (d) ensure adequate coverage and service improvement of the postal sector. The project will also further public enterprise sector reform by providing a concrete example of how to ensure the appropriate operating autonomy of two of the largest public entities. ro1ect ascription: The project has two major components: institutional reform and training, leading to autonomy in the postal sector and eventual privatization of telecommunications operations; and an investment program to improve the Posts and Telecom- munications services. The IDA Credit proceeds would support: (a) technical assistance to implement the institutional reform by, inter alia, setting up an appropriate legal framework and putting in place commercial management capabilities for the sectors ($2.3 million); (b) training for posts and telecommunications staff, rehabilitation of the training center and scholarships ($2.5 million); (c) complementary items of the telecom- munications investment program, to secure the lonig distance network, create public telephones and improve maintenance ($4.8 million); and (d) the postal sector investment prog consisting of construction of a mail sorting  - ii - center, and extension of retail and of rural delivery services ($3.2 million). GOR will onlend the IDA Credit to the executing agencies which will bear the foreign exchange risk. Project Benefits and Risks: Both investment programs supported by the project are expected to yield substantial benefits and high economic rates of return. IDA involvement in assisting both sectors to establish their long term investment program should help ensure efficient sector development and sector profitability. Improved sector management will result from the creation of autonomous communications entities. The overall business environment will be enhanced, specifically boosting sectors dependent on information exchange such as banks, export oriented companies and services. The risk of delays in putting in place the independent entities is mitigated by strong Government commitment expressed through a Statement of Sector Policy and by timely preparation for their creation. Estimated Costs: a/ Local Foreign Total Local Forsisn Total X of Total 1. TELECOLJUNICATIONS Institutional Reform 13 194 207 0.1 1.5 1.8 10 Maintenance equipmnt - 110 110 - 0.9 0.9 6 Public call stations 6 173 179 0.1 1.4 1.5 9 Microwave links 18 162 200 0.2 1.6 1.6 9 Vehicles - 42 42 - 0.3 0.8 2 Training 206 205 - i'8 1.8 11 Sub-total W7 9 i -ii T 8 74 7 Physical contingencieo 2 40 42 0.0 0.3 0.8 2 Price contingencies 22 109 181 0.8 0.8 1.1 7 Sub-total 4 -149 173 O-B 1 1. 4 9 TOTAL TELECOMMUNICATIONS 61 1055 l116 0.6 8.6 9.1 56 II. POSTAL SERVICES Institutional Reform 95 96 - 0.8 0.8 5 Postal sorting center 80 205 286 0.6 1.7 2.8 14 Construction rehabilitation of post offices 88 79 115 0.8 0.8 1.1 6 Equipmnt - 126 125 - 1.0 1.0 6 Vehicles - 22 22 - 0.2 0.2 1 Training 18 50 68 0.1 0.4 0.5 6 Ing6nioure conseil - 20 20 - 0.2 0.2 1 Sub-total 5,B2 696 728 1. 0 5.1 6.1 -i Physical contingencies 18 44 57 0.8 0.8 0.6 4 Prieo contingencles 68 a6 l18 0.6 0.4 0.9 5 Sub-total -W 10 -88 0 8 67 -iC --