Sri Lanka - Second Telecommunications

 ICRR 10250 Report Number : ICRR10250 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: C2249 Project ID : P010373 Project Name : Second Telecommunications Country : Sri Lanka Sector : Telecommunications & Informatics L/C Number : Credit 2249-CE Partners involved : UNDP, ADB, OECF Japan Prepared by : Marcel Scoffier (Consultant), OEDST Reviewed by : Alain A. Barbu Group Manager : Gregory K. Ingram Date Posted : 06/30/1999 2. Project Objectives, Financing, Costs and Components : The project, supported by an IDA credit of SDR 39.7 million (US$57 million equivalent), was approved in FY91 and closed in FY98, two years behind schedule . A total of SDR5.2 million (US$7.3 million equivalent) was cancelled. Actual project cost was US$202.5 million in line with appraisal estimates. Co-financing was provided by ADB, OECF Japan (US$ 24.5 million), and UNDP/ITU (US$0.7 million). Project objectives were to: (a) strengthen the institutional capabilities of the newly established Sri Lanka Telecommunications (SLT) to operate the country’s public telecommunications; (b) facilitate private sector involvement in the sector; (c) connect 50,000 new subscribers, reducing the large unsatisfied demand and network congestion; and (d) improve service quality. Project components were part of SLT’s 1990-95 investment program and included : (a) expansion of telecommunications facilities to enable connection of 50,000 new subscriber lines, together with additional domestic and international trunk switching and transmission systems; and (b) technical assistance for network planning, technical operation of the expanded facilities, management development, information systems, training, sector institutional strengthening and restructuring. 3. Achievement of Relevant Objectives : Project objectives were achieved and substantially exceeded under all aspects, though behind schedule by more than two years for its physical component . Network objectives : the project’s physical objectives were exceeded . By June 1998, about 115,000 lines (including exchange rehabilitation ) had been provided under the project and about 80,000 new subscribers connected (compared to appraisal estimates of 57,000 and 50,000 respectively). Works underway under SLT’s enlarged program at project closing should enable almost tripling appraisal targets in early 1999. SLT’s service quality and operational efficiency also improved . Project’s ERR was re-estimated at 64%, SLT ’s institutional development : these objectives for improvement of SLT ’s managerial versus 37% at appraisal. SLT’ and operational capabilities were fully met, in particular in the areas of network engineering and planning, development of new facilities, operations and maintenance, service quality improvement, staffing ratio and financial performance. Sector policy objectives : the project’s objectives of sector policy, reforms and restructuring, regulation and promotion private investments and operations in Sri Lanka ’s telecommunications sector were exceeded thanks to strong government commitment. At the end of the project, SLT had been converted into a company (SLTL) under private management, various private service providers licensed, and a functioning sector regulation established . 4. Significant Achievements : All physical, institutional and sector policy objectives were significantly exceeded (see above). The project achievements in sector reform and institutional improvements appear irreversible especially after a 1996 amendment of the Telecommunications Act, the conversion of the regulator into a more independent commission, SLT ’s privatization, and various other private operators well established . 5. Significant Shortcomings : As a moderate shortcoming, the computerized accounting, billing and collection systems to be funded by ADB under the project were not implemented. This made it difficult for SLT to fully comply with the financial covenants agreed with IDA on timely financial performance reporting and accounts receivable . This could have been pursued more actively at project mid-term review in 1993. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Satisfactory Highly Satisfactory Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : In Telecommunications (TC), networks expansion, improvement of operations and sector reform towards liberalized and regulated statutory set -up is a complex process that takes time and involves major actors in government, society and economy, best supported by a sustained Bank involvement via multiple channels and instruments (incl. PSM loans and SALs if needed). Surplus credit funds due to cost savings and elimination of project items should be identified and canceled, or reallocated, early, e .g., at project mid-term review, to reduce commitment charges for the Borrower, or ensure that needed items, which would suffer delays, be also implemented . 8. Audit Recommended? Yes No Why? Cluster audit of this project and the preceding TC project (Cr.1020-CE), together with a survey of the other concurrent IDA operations with TC components (see 7 (i) above) to assist in public sector management reforms, to review the role of the Bank /IDA in the sector development and reform, and link to the overall macroeconomic structural adjustment and privatization program . 9. Comments on Quality of ICR : ICR is satisfactory: In particular, it includes the Borrower /Beneficiary’s evaluation of the project implementation, and a summary outline of the relevant activities under the ongoing TA project for TC regulation and Public Enterprise Reform (Cr 2837-CE) for the establishment of an effective regulatory set -up for TC by end 1999. The report, however, would have gained from incorporating more detailed comments from co -financiers particularly regarding the extent of donors’ coordination during project implementation .