Uganda - Posts and Telecommunications Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 10148 PROJECT COMPLETION REPORT UGANDA POSTS AND TELECOMMUNICATIONS REHABILITATION PROJECT (CREDIT 1367-UG) NOVEMBER 22, 1991 Industrv and Energy Operations Division Eastern Africa Department Africa Regional Office 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.  ABBREVIATIONS AND ACRONYMS USED EAPTC East African Posts and Telecommunications Corporation H.F. High Frequency radio DEL Direct Exchange Line (Connected Telephone) ITU International Telecommunications Union Telex Switched Teleprinter Service VHF Very High Frequency Radio UHF Ultra High Frequency Radio UPTC Uganda Posts and Telecommunications Corporation UPU Universal Postal Union  THE WOtLD BANK FOR OFFICIAL USE ONLY Wa0hngton. .C. 20413 USA Offtic of Disetortaweral Operattees latuasio November 27, 1991 MEMORANDUTM M' THE_EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Uganda Posts and Telecommunications Rehabilitation Prolect (Credit 1 76-UG) Attached, for information, is a copy of a report entitled "Project Completion Report on Uganda - Posts and Telecommunications Rehabilitation Project (Credit 1367-UG)" ptepared by the Africa Regional Office with Part II of the report contributed by the Borrower. No audit of this project .Aas been made by the Operations Evaluation Department at this time. Attachment 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.  FOR OFFICIAL USE ONLY UGANDA POSTS AND TELECOMUICATIONS REHABILITATION PROJECT- CREDIT 1367-UG PROJECT COMPLETION REPORT Table of Content Page No. PREFACE....................... i EVALUATION SUMMARY .........................**** i Part I 1. * PROJECT IDENTITY ..............~ ***~* 9* 9999.9 2J BACKGROUND ............................N.. .. - Ravages of Civil War ........................... ... 1 3. PROJECT OBJECTIVES AND DESCRIPTION.................. 1 . Project Objectives......... ........... a m Project Description .............................. 2 4. PROJECT DESIGN AND ORGANIZATION.................... 3 S. PROJECT IILEMENTATIONP ................ 9. ........... 3 - Credit Effectiveness and Project Start Up......... 3 - Implementation Scheduleh.......................... 3 - Project Coats ...... . . ................. 4 - Disbursementsu..................................... 4 - Credit Allocation............................ ..... 4 6. PROJECT RESULTS.................. 4 Telecommunications and Posts Rehabilitation...... 4 - Technical Assistance. ..... . . .. 5 - Financial Performance ............................. 5 - Financial and Economic Rate of Return ............ 6 - Institutional Impact .....*999**9*6*...... * 6 H uman Resource Development 6 7. PROJECT SUSTAINABILITY ......................... 6 89 BANK PERFORMANCE .................. ....... 7 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.  Table of Contents (Cont.) * Page No. 9. BORROWER PERFORMANCE ......... ................... 7 10. PROJECT RELAtIONSHIP ..........................***** .. 8 11. CONSULTING SERVICES..*................*.*...**..... 8 12. PROJECT DOCUMENTATION AND DATA ..................... 8 13. CONCLUSIONS, AND RECOMMENDATIONS.................... Part II Borrowers perspective of the design, implementation and development impact of the project .................. .. . g Part III 1 Related Bank Loans or Credits .. ............ 2 Project Timetable ................................... 21 3 Credit Allocation and Disbursements A. Credit Disbursements ........... ... ..... . 22 B. Allocation of Credit Proceeds ................. 23 4 Project Implementation 24 A. Rehabilitation and Additions, (Main Components). 24 B. Completion Dates................................ 25 5 Project Costs and Financing A. Project Costs......................*............. 26 B. Project Financing ............................... 27 6 Project Results 28 A. Direct Benefits ................ . 28 B. S tudies Cvnt........................... ..... . 29 7 Status of Covenants ................ .. ,.* .... 30 a Missions ............................. 31  Table of Contents (Cont.) Pmte No. Annexes Annex 1 Income Statement . ..................... * . ^ 33 An=ex 2 Financial Performance Indicators ................... 34 Annex 3 Internal and Economic Rate of Return............... 35  POSTS AND TELECOMMUNICATIONS REHABILITATION PROJECT CREDIT 1367-UG PROJECT COMPLETION REPORT PREFACE 1. This report covers the Posts and Telecoumunications Rehabilitation Project in Uganda supported by Credit 1367-UG. The credit for SDR 20.4 million to the Republic of Uganda was signed on July 8, 1983, became effective on October 11, 1983 and was closed on June 30, 1987, the original closing date. 2. Parts I and III were prepared by Bank staff, based on information available in the project files and information supplied by the Uganda Posts and Telecomunications Corporation. 3. Part II was prepared by the Borrower giving iLs perspective of the design, implementation and development impact of the project.  -. ii. - POSTS AND) TELECOMMUNICATIONS REHABILITATION PROJECT CREDIT 1367-UG PROJECT COMPLETION REPORT EVALUATION SUMMARY Obi ectives Credit 1367-UG was made to support the Government's Rehabilitation Program for the 1982-84 period and overcome the ravages of the civil war in the Posts and Telecommunications Sector, and in particular (a) to restore service in major population and business centers to a reasonable level and (b) to improve UPTC's operating efficiency and financial position. mplementationExperience Initial action in implementation of the project particularly in procurement was quite good during the 1983-84 period. Due to the detericration in the macroeconomic situation in Uganda and the civil conflict during 1985-86 project, implementation was seriously affected. Some of the procured items such as cables, telephones and vehicles were looted or destroyed. Apart from the above, there was a lack of stable management at senior levels which was aggravated by the sudden death of the Managing Director compounded by the low morale and indiscipline among the staff in general. The severe cash flow problems and rampant inflation in the country also seriously affected the progress of the project. The overall situation improved by late 1986 and the project which was due for completion by June 30, 1986 was completed by December 30, 1987 about a year and half behind schedule. Results Although considerably delayed, the project's physical targets were substantially achieved, especially in the rehabilitation of the postal and telecommunications equipment and services. With the technical 6ssistance provided, the planning and implementation capability was modestly enhanced. With the assistance of financial consultants, steps were taken for establishment of a commercial accounting system and finaucial management but these could not be properly implemented due to the civil conflict of 1985-86 which ah]o adversely affected staff morale and productivity. The tariffs of UPTC were not revised till October 1986, despite strong pressure by the Bank, and with the rampant inflation, UPTC's financial position was desperate between 1984 and 1986. UPTC also suffered from very poor collection of receivables which compounded the problem. UPTC was unable to meet the financial performance targets under the Credit and also the audit covenants, The overall financial situation improved by the end of 1986 with the revision of tariffs and more stable financial control and management.  iii - Lessons Learned The poor performance of UPTC especially in the financial area would point normally towards a failure in the project's objectives and financial covenants designed to achieve them. At the time of appraisal some risks relat::ng to the general financial conditions of the country and security were indicated as possible. The resurgence of the civil war in 1985-86 and its effect on project implrmentation, and UPTC's staff operations and f..nances could not be foreseen. In the background of this, the Bank continued its efforts to assist UPTC to address the basic problem of rehabilitation of the services and improve, to the extent possible, its billing and collection and pressin, for the revision of tariffs. It is to the credit of UP.C that total breakdot.m of the postal and telecommunications service did not occur before the turn around for the better which took place at the end of 1986. It is at this time that improvements in its finances due to revision in tariffs and installation of an effective manEgement took place. The new management facilitated the processing of the Bank's Second Telecommunications Project in 1988. The second project is designed to assist in the resolution of the outstanding institutional and financial issues as well as continuing with the rehabilitation of the service to improve quality and expansion to meet part of the demand. The experience gained by UPTC in the first project should enable it to improve its performance in the implementation of the second project.  POSTS AND TELECOMMUNICATIONS REHABILITATION PROJECT CREDIT 1367-UG PROJECT COMPLETION REPORT PART I 1. Project Identit. Title Posts and Telecommunications Rehabilitation Project Credit No.: 1367-UG RVP Unit . Africa Region Country ; Uganda Sector : AF2IE - Industry and Energy Subsector : Telecommunications 2. Background 2.01 After the breakup of the East African Community (EAC) of which the East African Telecommunications Corporation (EAPTC) was a part, the Government of Uganda established the Uganda Posts and Telecomunlcations Corporation (UPTC) in 1977 to be responsible for all the Postal and Telecommunications services in Uganda. UPTC provides all domestic and international telecommunications services comprising telephone, telex and telegraphs. UPTC is also responsible for the postal services. 2.02 Before the demise of the EAC th!e Bank Group had supported telecommunications deoelopment in the EAC through financing three projects since 1967 as indicated in Table 1, Part III. At the request of the Government. IDA got involved again in Uganda through a telecommunications sector mission in July 1982, followed by a pre-appraisal mission in November 1982 that led to the appraisal of tne Posts and Telecommunications Rehabilitation Project for UPTC supported by IDA Credit 1367-UG. Ravages of Civil War 2.03 By the time the 1978-79 civil war ended, the Posts and Telecommunications buildings, equipment and services had suffered extensive damage. About 202 of all telephone exchange systems along with the main radio links connecting the principal cities were destroyed. Substantial amount of equipmeuu. hisd material were looted from the rural call radio stations and posts and telegraph offices causing almost total disruption of the postal and telecommunications services. 3. Project Objectives and Description Project Objectives 3.01 To overcome the ravages of the civil war, the Government prepared the Rehabilitation Program for the 1982-87 period for the Posts and  -2- Telecommuniications vector with thie basic objective to restore service in major population and business centers and to improve UPTC's operating efficiency and financial position. Under this broad objective (supported by the project), priorities for the postal and telecommunications services were given to: (a) recurrent and occasional imports of goods and services required to maintain and operate existing services and carry out minor works; (b) basic technical assistance needed to overcome selected major problems in UPTC's operations; and (c) investments needed to recover basic telecommunications services capability and attain acceptable standards of postal service. Project Description The Project provided for; I - REHABILITATION 3.02 Part A - The supply and installation of two 1,000 line containerized automatic telephone exchanges at Masaka and Mbarara; extension of existing exchanges in Jinja, Entebbe, Mengo, Fort Portal, Kakira and Lugazi; repair of the existing Pentaconta telex exchange and extension of existing Nedix telex exchange by 120 lines; supply of cables, telephone instruments, teleprinters and other equipment and materials for repairing and supplementing line, cable and subscriber plants; and equipment and material to extend basic service to about 200 rural communities. Part B - Postal Services. Postal equipment including mail bags, safes, scales, office machines post office boxes and mail boxes. Part C - Common Services. Vehicles for telecommunications works Pnd operations and postal operations; machinery and tools for maintenance and repair of these and existing vehicles; and miscellaneous equipment for the print shop, drawing office and buildings branch. Part D - Training. Imported materials to complete the new training center building; training equipment, instruments and materials and 110 man- months experts in training management and instruction. II - TECHNICAL ASSISTANCE Part E - A total of 234 man-months of consultancy serwices comprisings 90 man-months for financial management, 96 man-months for project implementation and operations and 48 man-months for planning.  -3- XI - RECURRENT PURCHIASES Part F - Two years consumption of spare parts and materials for postal and telecommunications operations maintenance and vehicles. 4. Pract Design and Organization The project was designed within the framework of UPTC's program for the 1982-87 period. It comprised essential items of works and services to be undertaken during the 1982-84 period as priority items for urgently rehabilitating or replacing the telecommunications plant which was run down for lack of spare parts or damaged in the 1978/79 civil war. It also aimed at improving the standard of postal service a8d addressing selected areas of badly needed institutional development