Mozambique - Communication Sector Reform Project

Report No. PID9839 Project Name Mozambique-Communication Sector Reform (@) Project Region Africa Regional Office Sector Telecommunications & Informatics; Other Transportation Project ID MZPE73479 Borrower(s) REPUBLIC OF MOZAMBIQUE Implementing Agency Address MINISTRY OF TRANSPORT AND COMMUNICATIONS Address: P.O. Box 275 - 336, Martires de Inhaminga Av. Contact Person: Mr. Joao Jorge Tel: (+ 258) 420 233 Fax: (+258) 431 028 Environment Category B Date PID Prepared June 25, 2001 Projected Appraisal Date June 28, 2001 Projected Board Date September 27, 2001 1. Country and Sector Background Key Sector Issuesa. Inadequate service provision Mozambique is a large country with an area of approximately 800,000 km2 and a population of 17.3 million. More than two thirds of the population live in absolute poverty, and most of the poor live in the country's vast and isolated rural areas, where infrastructure and communications are scarce. Only 3.2 percent of rural population have a public telephone in their own village, while the post office is available only to 2.7 percent of rural population. Even though, air transport remains the essential vital link to various parts of the country stretching over more than 2000 km of coast, which are prone to natural disasters, air transport services are characterized by very limited frequency, delays and high cost. Air transport services are thus unable to facilitate market integration and help extremely isolated Mozambican farmers to bring their products closer to the commercial markets in the South.Telecommunications: Telephone service provision in Mozambique is inadequate and uneven. Mozambique's teledensity of 0.5 main fixed lines per 100 inhabitants (2000) is not only well below to that of developed countries, but it is also low when compared to other African countries with comparable geographic and economic condition. This illustrates the difficulty of the public incumbent in keeping up with market demand and population growth. In the end of 2000, the fixed network had a switching capacity of about 128,000 lines from which 86,000 were in service. There are only about 2,000 public phones. In terms of quality of service, the network is basically fully digitalized. However, Mozambique ranks low in Africa with 80 faults per 100 main lines (2000). The urban areas have 99 percent of the telephone lines, while only 1,340 lines are available in rural areas, which have a population of about 11 million. Large areas are without any communications service, the nearest telephone  and post office is hundreds of kilometers away and 26 of country's 128 districts are without a single telephone. Mean distance to nearest telephone and post office in rural areas is about 50 kilometers. Real demand is estimated to be well above the official waiting list of 21,000 lines reported by TDM.Just as in other countries, since its introduction of cellular services in 1997, subscribers have grown exponentially to reach 62,000 in 2001. As a result of the introduction of pre-paid services, the subscriber base grew by more than 350 percent just within the year 2000. However, the GSM network coverage is limited to Maputo and Beira, the main roads towards South Africa and Swaziland ("the corridor"), Xai-Xai and Zimbabwe. This leaves about 15.7 million inhabitants uncovered. The unsatisfied demand is estimated at least 600,000 for mobile services by the existing cellular operator.Despite the fact that Mozambique was the 4th country in Africa to connect to the Internet in 1994, internet subscribers are still below 10,000. There are only few public Internet access points - three cybercenters in Maputo, a telecenter in Manhica and another one in Namaacha. The main bottlenecks to internet development in Mozambique remain lack of long-distance transmission facilities, high prices of leased lines, low PC penetration, limited computer literacy and illiteracy; high prices faced by low income users and lack of local language content. Post: During the war many post offices were closed and although some have been recovered during 1990's, the number of post offices have not yet reached the pre-war level. There are only 10 full-service post offices located in the provincial capitals, and 450 postal stations, which sell stamps and process mail throughout the country. The number of mail items delivered per capita per year has been stagnating around 0.4 during the period of 1997-1999, which is low compared to international standards (7 in Morocco and 650 in the USA). The official figure on average national mail delivery is three days, but increases to seven days during the rainy season due to poor road network worsened by floods. In rural areas the delivery times might be much longer. Air Transport: To date, Mozambique cannot rely on its air transport system to meet the country's specific needs in terms of (i) helping effectively capture significant tourism flows estimated to reach US$52 billion by 2010 region-wide, a sector which already represent 40 percent of the country's GDP; (ii) facilitating national market integration, in particular foster trade in agriculture, a sector targeted for its poverty reducing potential; and (iii) linking remote rural areas of the country. The inability of current air transport provision to meet demand from above-mentioned sectors is reflected in long passenger waitlist and the very low level of air traffic being handled by the 19 airports managed by ADM, 700,000 passengers and 6,500 tons of freight in 1999. Traffic growth is expected to be 7 percent whereas with Mozambique GDP growth levels, air traffic growth should be at least twice or three times these levels.Air services provision is characterized as uneven, of questionable quality and extremely expensive. Three international airports Maputo, Beira, and Nampula handle the majority (80%) of traffic, whereas the rest is split among the various sixteen principal airports. Maputo alone accounted in 1999 for approximately 400,000 passengers. These traffic levels are much lower than the minimum volumes for efficient air transport infrastructure and operations. Although, Maputo is the biggest airport of the country, there is room to reach generally accepted economic threshold volume of 1 million passengers for an airport. Mozambican airports are primarily single-carrier airports as they are served by one carrier LAM, operating under exclusivity rights in a network primarily -2 -  domestic and regional. Most national airports are affected by the limited frequency and high cost of service of the national carrier, resulting from operations of an expensive fleet and the lack of strategic alliance to spread fixed costs, marketing and information systems, and upgrade operations. Traffic volume is also affected by the fact that aeronautical fees charged at Maputo International Airport (MIA) are substantially higher (US$ 72 per passenger) than competing airports: Johannesburg (US$ 29.95), Harare (US$ 49.57) or Lilongwe (US$ 54). In comparison with other airports, ADM relies heavily on aeronautical charges (landing, runways, aircraft parking and passengers fees) for its revenues (94 percent). The current trend for airports worldwide is to increase the landside charges (commercial revenues from boutiques, malls, office leasing, car parking etc.) which are less price sensitive and decrease aeronautical revenues to increase airport competitiveness in attracting airlines. As a result of this poor quality of service, there is a risk of international and regional traffic being further diverted to other destinations and the region hub-and-spoke airport Johannesburg (where 11 million passengers can make up to 30 connections a day) instead of feeding the domestic market with increased traffic flows which will ultimately result in spreading fixed costs and improved affordability of services. b. Weak legal framework and regulatory capacityLegal and regulatory arrangements have not been conducive for effective development of the telecommunications, postal and air transport sectors. Liberalization and market entry has been slow and limited to few market segments such as internet, express mail or non scheduled flights on selected domestic routes. In addition, the newly established regulators, Instituto Nacional das Comunica6yAes de Mo6ambique (INCM) for telecommunications and post; and the Civil Aviation Authority (INAC) for air transport are inexperienced in effectively regulating sectors in which private participation is sought. In particular, they lack a degree of independence, as well as financial and human capacity to effectively oversee multi-operator sectors.Telecommunications: In November 1999, the Assembly passed Law 14/99 on telecommunications to accelerate the modernization and liberalization of the sector. The law abolishes restrictions on foreign participation and opens the way for the privatization of Telecomunicacoes de Mocambique (TDM). The law also establishes Instituto Nacional das Comunica6yAes de Mo6ambique (INCM) as a separate agency from MTC (created earlier by Law 22/92 as a department of MTC) and grants it financial and administrative autonomy. However, the law fails to provide sufficient clarity about INCM's independence, statute and organization in order to assure that policy and regulatory functions are truly separated. In addition, while the law opens the mobile segment to competition, it provides for a "transitional" monopoly on fixed and international services to TDM until its privatization and for a minimum of 5-year period after that. Furthermore, its treatment of some vital issues including price regulation, licensing and convergence of technologies and markets is not satisfactory.Key secondary legislation, which is critical to establish a comprehensive legal and regulatory framework still needs to be prepared. The Government has already drafted, although not yet finalized decrees relating to: (i) organization and functioning of INCM, (ii) interconnection and (iii) access. Other secondary legislation relating to (iv) licensing, (v) tariffs, (vi) dispute resolution, (vii) universal service, (viii) frequency spectrum management and frequency fees, and (ix) numbering still needs to be prepared.Following its establishment, INCM undertook an evaluation of spectrum use and prepared a detailed frequency spectrum allocation plan. However, the current -3 -  frequency allocation is inappropriate for a competitive market environment as the mobile operator, TDM uses 50 percent of the allocated frequencies in the 900 and 1800 MgHZ band. A new frequency management system is necessary to free spectrum for the new mobile operators and equipment is needed to monitor its use.INCM lacks financial, human and technical resources to effectively carry out its mission. The regulator estimates its annual budget needs to be around US$ 2 million per year, but currently INCM's only source of revenue is a yearly contribution from TDM in the amount of approximately US$ 0.6 million. INCM's budget needs to be reviewed and sources of funding secured if the regulator is to become financially independent. While INCM has inherited excessive staffing from the Ministry, it lacks staff with telecommunications and postal regulation expertise. Training and assistance is much needed.Post: In 1982, postal services were separated from telecommunications and in 1992, Decree 24/92 transformed the Post to a state owned company, "Correios de MoCambique" (CM). However, no Law governing the postal sector has been prepared. INMC was established at the same time to regulate both postal and telecommunications sectors, but it has no postal expertise among its staff. A proper postal legal framework and regulatory capacity need to be developed if the sector is to open up to competition and attract private capital into service provision.Air transport: In 1996, GOM adopted a Transport Policy aimed at introducing competition in the Air Transport sector. The legislation was later completed with a set of regulations in August 1998 organizing the sector as follows: Airport management was entrusted to ADM which was incorporated as a limited liability company. LAM was restructured as a limited liability company and granted a 5-year monopoly as a transition to privatization. This transformation was a reflection of the withdrawal of the State from commercial functions and part of the Government's overall program of restructuring and privatization of the air transport sector. Regulations pertaining to safety and aircraft/carriers licensing were only partially developed. On technical regulation, legislation was enacted to set up a new civil aviation authority in charge of overseeing compliance to technical standards. Safety procedures were updated with new procedures in line with international technical and safety standards. However, actual operationalization of the civil aviation authority and technical procedures has not taken place yet. The key barriers to entry remain on the economic regulation side where series of government authorization and approvals are required for route allocation, licensing procedures, fare setting and revisions. The bureaucratic approval process significantly impedes entry into the sector. Despite initial efforts towards commercialization of airport and airline operations and setting up of safety regulations, the impact of initial efforts towards liberalization has not been felt primarily because of the web of economic regulations and tedious approval process and LAM's dominant position. These barriers to entry have neither been conducive to traffic development, as illustrated by current declining trends in the sector and financial difficulty of the main carrier, nor are they in line with GOM's stated objective of rapid expansion of efficient services. To effectively promote these objectives, legislation and regulation need to be enacted to (i) remove all obstacles to licensing charters, carriers and aircrafts; (ii) clarify responsibility of each player in the sector and strengthen their oversight ability; (iii) clearly define financing mechanisms for a sustainable development of air navigation services, air services and critical airport network and social routes. The trend worldwide is towards the adoption of open sky agreements - 4 -  whereby one country (unilateral Open Sky as the united Arab Emirates, Singapore), two countries or a set of countries (EU, Mercosur, NAFTA) agree to lift all restrictions on the number of carriers, number of frequencies and type of aircraft. The Africa Region has also joined the worldwide trend by adopting last year, under the Yamoussokro Declaration, a region-wide Open Sky initiative calling for lifting of flight restrictions (number of carriers, frequencies) within the African continent according to a phased implementation schedule. Mozambique air transport legislation need to be amended to reflect this far reaching continent reform, and to allow the set up of an environment which will allow Mozambican air transport to take advantages of the opportunities of this bigger market.c. Lack of competition, private investment and know-howRestrictive legislation and weak regulatory capacity inhibit competitive entry into most of Mozambique's communications, postal and air transport market. At the same time, the incumbent operators have failed to provide satisfactory service and are increasingly facing highly competitive environment abroad (e.g. TDM's highly priced international telephony service from countries with lower tariffs, Maputo International Airport from the Johannesburg hub) and substitution at home (e.g. internet telephony, private courier services or the new Maputo-Johannesburg road) due to lack of commercial management and sufficient capital.Telecommunications: The dominance of the incumbent on practically all segments of the sector constitute a significant barrier to entry for other operators. TelecomunicaO3Aes de Mo6ambique (TDM), the 100 percent state owned operator, is the sole provider of local, long distance and international fixed telephony services in Mozambique. TDM is also the only provider of mobile services in Mozambique through an informal ten year management arrangement (not license) with a joint venture TelecomminicaO3Aes M6veis de Mo6ambique (TMM) operated by Detecon (assets are 100 percent TDM owned). In addition, TDM has joint ventures in line installation and maintenance (Televisa is 50 percent owned by Visabeira, a Portugese holding company), in cable TV (TVCabo is 50 percent owned by Visabeira), as well as in data, internet, paging and VSAT services (Teledata, the largest commercial Internet service provider, is 50 percent owned Portugal Telecom International).Post: The Post is still a monopoly except for courier services which have been liberalized. The Post faces increasing difficulty in retaining its already reduced market share (20 percent) in this profitable market segment; and despite the Post's exclusive right to deliver basic service, some competitors have started providing regular mail services. At the same time, the 100 percent state owned postal operator lacks resources to finance crucial technological improvements or the introduction of new services. Currently, only few of the post offices provide new products such as public telephone, fax, e-mail or financial services, such as money-wiring and government payment delivery (e.g. pensions). In 1999, the Post had carried out a study (financed by the Universal Postal Union) focusing on the development of new services to keep up with rising competition and allow the post to become commercially viable but there have not been enough funds available for implementing the recommendations.Air transport: LAM, the national carrier is in a dominant position, as the quasi sole provider of air services within the country and offering a whole range of services through joint ventures on an exclusive basis (groundhandling services, maintenance). In comparison to other airlines, though, it has very limited market presence in the region to capture premium traffic from regional and international travellers. Without strategic alliance to a major airline - 5-  group, the airline does not benefit from economies of scale as a feeder to other international or charter airlines. It does not benefit either from economies of scope in terms of marketing, information and reservation systems, frequent flyer programs and other electronic commerce amenities which today's travelers are looking for when selecting an airline. These resulting high costs of operations make it impossible to face competition and attract more traffic. As a result, LAM is currently in financial distress and unable to finance critically needed investments to support development of air services in line with growing demand.Finally, there is no hub and spoke airport in the country to feed in traffic connections from international and regional airports both in and through Mozambique. In addition, MIA operates in a very competitive environment with the proximity of several international airports and a hub in Johannesburg located within a radius of less than 200 km from Maputo.The impact of these barriers on traffic development is best illustrated by a comparison of yield per mile for various destinations. It costs US$0.7 /mile to fly from Europe to Maputo compared to the US$0.3 from Europe to Asia and US$0.4 - 0.5 from Europe to West Africa and South Africa. Unless specific actions are taken to liberalize the sector effectively, there is a risk of traffic being further diverted to neighboring competing tourists destinations with less restrictive regulations and airports infrastructure under expansion.Government StrategyTelecommunication: The Ministry of Transport and Communication (MTC) is in the process of developing a new telecommunication policy, that will be guided by the following main principles: (i) promotion of competition to meet growing demand through the liberalization of the telecommunications market and awarding new mobile telephony licenses, (ii) ensuring that the government divests its interest in the state-owned telecommunication entity, TelecomunicaO3Aes de Mozambique (TDM); and (ii) promoting universal access to communications services. The Government is also committed to enact necessary laws and regulations in support of the implementation of the telecommunication policy and to ensure effective competition and strong and independent sector regulation. A draft letter of sector policy embodying these underlying principals has already been prepared.Information and Communications Technologies: An Information and Communications Technologies (ICT) Committee has been established under the chairmanship of the Prime Minister to prepare a national ICT strategy for Mozambique. The draft strategy prepared highlights six priority areas: education, health, human resources, universal access, information infrastructure and government, in which coordinated public-private action is needed to foster ICT use and development. The draft strategy will be presented at a conference in September 2001 bringing together various partners in the area.Post: MTC intends to define a new postal sector strategy to ensure that the postal network and accessibility to postal services is improved, while at the same time taking the opportunity to develop new services (e-mail, marketing or financial services) to allow commercial viability of the postal entity in an open environment. Different options of private entry (e.g. through private partnerships, management contract, concessioning) into the main postal operator will also be considered to bring private capital, management skills, technology and know how into the currently inefficient entity.Air Transport: MTC plans to develop a new air transport policy to effectively improve access to efficient air services. Under the umbrella of regional Open Sky framework, the main principles of the new policy will be to evolve the sector from its current regulated structure to one that will allow the sector to expand and align Mozambican - 6 -  air transport to the key drivers of competitiveness in air transport worldwide. The Government has announced its intention to (i) promote immediate liberalization of the skies; (ii) promote private-sector led competition and investments to upgrade air services, air navigation services and airport infrastructure to meet fast growing demand (iii) privatize the main carrier and airports to attract traffic flows and reduce tariff, and; (iv) provide expanded access throughout the country for social routes. The Government will adopt a new air transport policy and enact key legislation to accelerate the passing of an Open Sky policy and set up strong autonomous supervisory bodies and financing mechanisms for sustainable and safe air transport development. 2. Objectives The project objective is to improve access to and quality of efficient and affordable communications services through creating an enabling environment for competition and private participation in key sectors deemed critical to facilitate national and regional market integration i.e. telecommunications, postal and air transport infrastructure and services. 3. Rationale for Bank's Involvement The Bank is uniquely placed to assist GOM in the provision of support for its planned telecommunication, postal and air transport reform program, given its: (a) experience in the process of regulatory reform, and in promoting private sector participation in the telecommunication, postal and air transport sectors, and in setting up of accompanying legal and institutional regulatory framework; (b) regional role, particularly through its support to SADC in coordination with other donors to ensure that national reforms in the telecommunication, postal and air transport sectors are in harmony with broader regional objectives; (c) extensive knowledge and experience in privatization of government undertakings in IDA countries and its expertise in designing reform programs encouraging both foreign direct and local investments (d) its proven catalytic role in mobilizing private investment in telecommunications infrastructure and services in remote areas through injecting limited seed money into universal access funds.The involvement of IDA provides a renewed confidence in GOM's commitment to establish a viable framework for sector reforms and enforce the legal regulations necessary to bring about benefit for the country's overall development. Private sector participants, in such large scale infrastructure projects, would look favorably towards IDA's support so that there is constructive partnership between the government undertaking and the private sponsor. This partnership will allow sharing of risks and responsibilities within a well positioned framework defined by the government itself. In the context of adverse global investment climate, and possible adverse consequences on foreign direct investment, IDA experience and large array of products in risk mitigation can be quickly deployed to reaffirm GOM commitment and encourage private participation. The importance of IDA portfolio in Mozambique and the strategic focus provided by the Country Team will bring invaluable benefits in articulating a liberalization and privatization program of the telecoms, post and air transport sectors consistent with broader policy reforms and building as well on several linkages, particularly in terms of growth and poverty alleviation; fiscal policy; public expenditure program; and environment mitigation. Finally, the composition of the team, which draws on the multi-country and multi-region -7 -  expertise of staff with in depth experience in regional departments and coming from global practices uniquely places IDA in a position to respond to GOM's request for assistance with a pool of staff which can be flexibly deployed. 4. Description The project will have three major components, each assisting a reform process in telecommunications, post and air transport sectors, respectively. In addition, the project will assist in strengthening project management, procurement and financial management capacity to ensure effective project implementation. 1. Telecommunication sector reform 2. Postal sector reform 3. Air transport sector reform 4. Project management and implementation 5. PPF refinancing 5. Financing Total ( US$m) BORROWER 1.30 IDA 12.30 Total Project Cost 13.6 6. Implementation Implementation Period: The project will be implemented over a four year period from January 1, 2002 to December 31, 2005.Implementing Agency: The implementing agency will be the Ministry of Transport and Communications (MTC). Project Administration: A task force has been formed at the Ministry of Transport and Communications to oversee the implementation of the sector reform programs, and consists of a group of experts from the various agencies involved: MTC, INCM, UGPTC and INAC. In terms of fiduciary responsibilities, this task force will be supported by the existing Gabinete de Projectos MarUtimos (GAPROMAR) department at MTC, recently transformed into Unidade de Gestao dos Projectos de Transporte e Communica6yAes (UGPTC). The UGPTC, reporting directly to the Minister, is currently responsible for the preparation and implementation of all donor-funded transport and communications projects executed under the MTC, and it is staffed with a Manager assisted by an economist, an accountant, a translator and an administrative assistant. A senior-level staff from UGPTC will be part of the task force, in order to ensure smooth coordination between the agreed implementation strategy, the technical aspects of the project and the procurement and financial management activities.Procurement and Financial Management: The UGPTC has already been providing support for the implementation of several of MTC's Bank-funded projects, such as the Roads and Coastal Shipping project (ROC1) and most recently the Rail and Port Restructuring Project (RPRP); and has developed some procurement and financial management capacity. Additional assistance to strengthen project and financial management, as well as procurement capacity is envisaged under the RPRP project. Outside consultants are being recruited to assist the UGPTC in (i) preparing a study looking at overall donor assistance to Mozambique in the field of transport and communications and managed by the MTC, (ii) providing as needed, legal, technical, financial and economic assistance, (iii) building capacity in project management and procurement, (iv) carrying out the accounting for the RPRP project and (v) setting up a financial - 8 -  management system satisfactory to IDA, with the necessary improvements to be able to use Project management Reports as a basis for disbursement, in a period of 18 months. The Terms of Reference of the consultancies emphasize training of the economist, accountant and procurement of UGPTC, who should be able to become fully responsible within two years.Under the supervision of the Chief of the Finance Department of MTC, the Project Accountant will be responsible for ensuring that financial management and reporting procedures will be acceptable to the Government, the World Bank, and other Cooperating Partners.Monitoring and evaluation: The task force chairperson will be responsible for monitoring progress via performance indicators. Monitoring and evaluation will be guided by the Project Design Summary in Annex 1 and the Project Implementation Plan. The Project Implementation Plan will specify reporting responsibilities for each component, and will require the generation and submission to the Bank of quarterly progress reports. 7. Sustainability By developing a competitive framework for market-based telecommunications, postal and air transport service provision, the project will help accelerate investment and improve service levels by new private operators. Incentives to sustain project objectives include codification of rights and obligations of the incumbent and new operators, not only in legislation and decrees, but also in licenses. Improved service coverage and quality at more competitive prices will be sustained as private investment grows in both infrastructure and services. Empowering the new regulatory authorities to charge levies and fees on operators will enable regulatory functions to be sustained without dependence on budgetary support.The project involves substantial risks despite inclusion in the project design of stakeholder feedback and lessons from other reform programs. The most important risk relate to political pressure from various stakeholders resulting in weakening GOM commitment. Fear of foreign domination and resistance of local groups with vested interests may result in a slow down of reform pace and reduce transparency. In addition, weak implementation capacity increases the risk of discretionary process. These risks are being mitigated upfront by adoption and implementation of clear regulatory frameworks for each sector, precise procedures for the selection of private entrants with objective and clear selection and evaluation criteria, requirement for public disclosure of evaluation results and launch of communications campaign. 8. Lessons learned from past operations in the country/sector The following lessons were learned and reflected in the project design from:a. Other telecommunication, postal and air transport restructuring and privatization projects around the world:A clear and reliable regulatory framework, is a prerequisite to attract private investment into these sectors.The establishment of a self-financed and effective regulatory entities to prepare recommendations for new licenses/authorizations, solve disputes among operators and service providers, and protect consumer interest, is essential for the development of efficient competitive markets.The policy for the telecommunications sector should include a set of incentives to promote access to services to remote populations and to improve the affordability of services to the poor in both rural and urban areas.The implementation of a comprehensive air transport reform covering all interdependent subcomponents of the sector is critical in ensuring the promotion of safe and sustainable air - 9-  transport services. Liberalization of economic regulation should be accompanied by airport upgrading to avoid bottleneck at entry point for new carriers, simultaneously safety procedures and air navigation services need to be improved b. Other infrastructure and/or privatization projects in Mozambique:Examining the experience of the railway privatization (RPRP project), and in specific the delays and complexity of the retrenchment issues, it was decided that (i) a social assessment may be carried out within the scope of this small technical assistance operation, but (ii) actual compensations, if necessary, will be supported by the structural adjustment credit under preparation (EMPSO) .Experience in the energy sector (UHEP project) with licensing independent rural operators and allowing them to charge cost-effective tariffs (higher than the uniform tariff offered by the incumbent) has so far indicated that people were able to pay the higher tariffs, and that access stimulated new demand. Under the rural and universal access component of this project several institutional options will be examined to leverage on existing demand and bring services to remote areas. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues : This is a communications sector restructuring technical assistance project, which mainly involves policy, legal and regulatory and institution-building work in the field of telecommunications, post and air transport. The privatization of the telecommunications company (TDM), the national airline (LAM) and the concessioning of the Maputo airport supported by the project may raise question of responsibility for pre-existing liabilities. This aspect will be studied during an environmental pre-audit. The current environmental legislation in Mozambique is mostly in line with the World Bank guidelines. However, the legislation does not cover the issue of transfer of pre-existing environmental liabilities at privatization. The Government has agreed to ensure that, during the privatization transaction, an agreement be reached between the former owner and the strategic investor regarding (i) sharing of responsibilities, (ii) institutional arrangements, (iii) costs and (iv) time frame for addressing pre-existing environmental liabilities. In addition, the environmental pre-audit will identify any gaps between WB environmental policies and legislation in Mozambique relevant to this project. 11. Contact Point: Task Manager Mohammad A. Mustafa The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: (202) 473-4296 Fax: (202) 522-3001 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 - 10 -  Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. - 11 -