Benin - Telecommunications Project

,KC / /'7 C - k< A V ror keterbnce Document of Not to be taken from this room The World Bank FOR OFFICIAL, USE ONLY Report No. 7375-BEN STAFF APPRAISAL REPORT PEOPLES' REPUBLIC OF BENIN OFFICE DES POSTES ET TELECOMMUNICATIONS DU BENIN (OPTB) TELECOMMUNICATIONS PROJECT October 7, 1988 Africa Technical Department Africa Country Department 1 This document has -a restrdetd distribution and may be used by recipients only in the performance- ofI their official dudes. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = CFAF Franc (CFAF) $1.0 - CFAF 300 (floating) FF 1 = CFAF 50 (fixed) FISCAL YEAR Government = January 1 - December 31 OPTB = January 1 - December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ADB - African Development Bank BCEAO - Central Bank for West African States CCCE - Caisse Certrale de Cooperation Economique (France) CCP - Postal Checking System CEN - National Executive Council CIDA - Canadian International Development Agency CNE - National Savings Bank DEL - Direct Exchange Line EIB - European Investment Bank EPIC - Industrial or Commercial Public Enterprise FAC - Fonds d'Aide et de Cooperation (France) GDFCF - Gross Domestic Fixed Capital Formation GDP - Gross Domestic Product GNP - Gross National Product GOB - Government of Peoples' Republic of Benin ICB - International Competitive Bidding ITU - International Telecommunications Union LIB - Limited International Bidding MFE - Ministry of Finance and Economy MIC - Ministry of Information and Communications OPTB - Office des Postes et Telecommunications du Bdnin PNAM - National Maintenance Improvement Plan PPF - Project Preparation Facility SAC - Structural Adjustment Credit SAP - Structural Adjustment Program a SOE - Statement of Expenditures  NJu. L. ILEAL UoL UNLY PEOPLES' REPUBLIC OF BENIN OFFICE DES POSTES ET TELECOMMUNICATIONS DU BENIN (OPTB) TELECOMMUNICATIONS PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. CREDIT AND PROJ T SUMMARY . ....................... - iii I. INTRODUCTION ........ .. .... . 1 Project History ............. . ........ . 1 Economic Context .. ..... 1 II. THE TELECOMMUNICATIONS SECTOR . . ............... 2 Sector Background ......................... . 2 Sector Issues ..... 4 Sector Strategy and Goals ................. . 4 III. THE ENTITY . . .................................. 6 Institutional Background .... 6 Institutional Issues ... 7 Organization and Management ... 7 Staff and Training ... 8 Accounting System .... 9 Audit ... 9 Billing and Collection ... 10 Institutional Strategy and Goals ... 10 IV. THE ROLE OF THE BK ... ..11 V. THP, PROGRAM AND THE PROJECT....... 12 The Telecommunications Investment Program.. 12 The Project ...12 Objectives ..12 Description. . 13 Cost ..14 Financing . .15 Procurement. . 16 Disbursement. . 17 Project Implementation: . . 18 Timetable and Organization . .18 Performance Indicators. . 19 Program Contract and Action Plan .19 This report is based on the findings of a mission composed of Messrs. Stephen Brushett (Task Manager). Philippe Lecharny, Martin Page, and Herman Ruud. This documcnt has a restricted distribution and may be used by recipients only in the performance of their official duties. Its conternts may not otherwise be disclosed without World Bank authorization.  -2- Page No. VI. FINANCIAL ANALYSIS .................. ......... 19 Past Performance ................. 19 Present Position ...................... ..... 21 Projected Financial Performance ............ 21 Financial Restructuring .................... 23 Projected Financing Plan .................. . 23 VII. ECONOMIC ANALYSIS . ................. .......... 24 Tariffs ........... . ................ 24 Benefits ......... . ............... 24 Least Cost Solution . . 25 Return on Investment .. 25 Risks .. . 26 Environmental and Health Aspects ........... 26 VIII. RECOMMENDATIONS .................. ..... . ..... .26 Agreements Reached at Negotiations .. 26 Conditions of Credit Effectiveness .. 27 Recommendation ......... . ........ . 28 List of Annexes and Charts Page No. 1. Basic Data - Benin Telecommunications ....... 29 2. Comparative Telecommunications Data ......... 31 3. Demand for Connection to the Planned Telephone System . ............. . 32 A. Draft Program Contract ...................... 33 5. Institutional and Management Action Plans ... 39 6. Actual Organization Chart ................... 44 7. Staff Summary ........... . . ................ . 46 8. Project Description ......................... 47 9. Investment Program.(1988-93) ................ 50 10. Schedule of Technical Assistance for Improvement in OPTB Management ............ 52 11. Schedule of Disbursement . . 53 12. Implementation Schedule ..................... 54 13. Performance Indicators .................... . 56 14. Assumptions Underlying Financial Projections ....... ........ 60 15 Telecommunications Tariff .. .. . 71 16. Return on Investment ........................ 73 17. List of Documents in Project File ........... 79 MAP: No. IBRD 21009  PEOPLES' REPUBLIC OF BENIN OFFICE DES POSTES ET TELECOMMUNICATIONS DU BENIN (OPTB) TELECOMMUNICATIONS PROJECT Credit and Project Summary Borrowers Peolples' Republic of Benin (GOB). Beneficiary: Office des Postes at Telecommunications du Benin (OPTB). IDA Credit: SDR 12.5 million ($16.0 million equivalent). Terms: Standerd IDA, 40 years maturity. Onlending Terms: GOB will onlend the credit proceeds to OPTB at an interest rate of 7.5Z. The repayment period will be 20 years including five years grace. Interest will be capitalized. though OPTB will pay the equivalent of the credit commitment and service charges during the grace period. OPTB will bear the foreign exchange risk. Proiect Obiectivess The project will support: (a) the execution of a program of institutional and management improvement in the telecommunications sector: (b) the improvement of the quality of service to present subscribers, and the extention of the provision of services on a least cost basis; and (c) the improvement of the financial position and performance of OPTB, with a view to creating a positive flow of funds from the sector. The project will support the objectives of the GOB structural adjustment program (SAP) and in particular the improvement of public resource management and of investment programming. Project Descrigtion: The project comprises: (a) the 1988-92 investment program which is the first phase of the medium term development strategy, ac agreed between GOB, OPTB and the donors at the November 1987 round-table; and (b) the action plan for management and institut.onal improvement in the sector as agreed between GOB, OPTB and the donors in March 1988. The ma5n components include: (i) training and technical assistance for institutional and management improvement, particularly in the areas of accounting and financial management including tariffs; planning and project execution; computerization; management information systems; commercial management and operatic,s, postal and financial services' operations; and manrower development; (ii) rehabilitation and replacement of local networks in Cotonou and Porto Novo to meet demand to year 2000, i.e., 34,000 lines; (iii) replacement and extension of switching capacity in Cotonou and Porto Novo and of the interexchange network;  - ii - (iv) rehabilitation and selected upgrading of the trunk transmission network; and tv) installation of multi- access systems for rural telecommunications. Prolect Benefits The project would help rehabilitate and develop an And Risks: essential infrastructure sector and improve productivity in other sectors. The ptoject will help meet unsatisfied demand through improved service quality and efficient network expansion, especially in Cotonou and Porto Novo. The project will contribute to the realization of the SAP, inter alia, through improved investment programming and public resource management in the telecommunications sector. The risk that poor investment coordination could lead to inappropriate decisions is already being minimized, inter alia, through the 'ovember 1987 donor round-table meeting. The risk that inappropriate institutional structures and poor sector management could negate the expected project benefits is being minimized by the agreement reached in March 1988 on an appropr-.ate action plan and through the adoption of the new OPTB statutes and a program contract between GOB and OPTB to be signed before credit effectiveness. The risk that the poor financial situation of OPTB could compromise project objectives is to be minimized through the adoption of a financial restructuring program. Estimated Costs: ----GCFAF Billion--- -- $ Million----- Local Foreign Total Local Foreign Total 1. Local network 2.0 5.5 7.5 6.8 18.2 25.0 2. Transmission 0.5 3.3 3.8 1.7 9.9 11.6 3. Switching centers 0.6 2.1 2.7 1.9 7.1 9.0 4. Rural telephony - 0.1 0.4 0.5 0.3 1.5 1.8 5. Institutional development 0.2 1.1 1.3 0.5 3.7 4.2 6. Training center 0.2 0.4 0.6 0.5 1.4 1.9 Total base cost 3.5 12.9 16.4 11.7 41.8 53.5 Physical contingencies 0.3 1.0 1.3 0.9 3.0 3.9 Price contingencies 0.8 1.6 2.4 2.5 5.4 7.9 Total telecommunications project 4.6 15.5 20.4 15.1 50.2 65.3  - iii - Financing Sources: ---S Million Equivalent--- Local Forrign Total IDA 3.5 12.5 16.0 ADB -- 16.0 16.0 CCCE 1.3 7.7 9.0 CIDA 0.7 2.8 3.5 EIB 3.1 10.9 14.0 FAC -- 0.3 0.3 OPTB 6.5 -- 6.5 Total 15.1 50.2 65.3 Estimated Disbursements:a/ -------$ Million Equivalent---------- IDA FY FY89 FY90 FY91 FY92 FY93 Annual 1.5 6.7 2.9 2.6 2.3 Cumulative 1.5 8.2 11.1 13.7 16.0 a/ Based on expected project implementation rather than the standard IDA profile due to completion of most procurement activity prior to credit effectiveness. Economic Rate of Return: 282 Staff Appraisal Report: No. 7375-SEN, dated October 7, 1988 MaP: IBiD No. 21009  a S  PEOPLES' REPUBLIC OF BENIN OFFICE DES POSTES ET TELECOMMUNICATIONS DU BENIN (OPTB) TELECOMMUNICATIONS PROJECT 1. INTRODUCTION Proiect History 1.01 The Government of the Peoples' Republic of Benin (GOB) first requested the assistance of IDA in 1982, for the financing of the telephone cable requirements of the telecommunications sector. Further to the work of two brief reconnaissance missions, IDA produced a sector report in October 1963. The report concluded that: (a) desp4te substantial past investment in the bector, telecommunications actually constituted a Major bottleneck for economic development, largely due to the insufficiency and poor maintenance standards of local networks; and (b) the operating entity, the Office des Postes et Telecoumunications du Benin (OPTB), was ineffective due to manpower, organizational and financial constraints. The purpose of the project is to provide the necessary resources to resolve these problems. 1.02 The request of GOB for an advance of $500,000 under the Project Preparation Facility (PPF) was approved by IDA in March 1984. This advance contributed to the cost of preparatory engineering and management assistance to the project. Work was substantially complete by November 1986. A second advance of $250,000 was approved in June 1987 to finance the cost overrun due to exchange rate fluctuation. A third advance of $500,000 was approved in February 1988 to help finance the costs of finalizing tender documentation and of the technical assistance and training required for project execution and program coordination. The project cost has been estimated at $65 million, for which an IDA credit of the equivalent of $16 million has been requested. The project is expected to be completed in five years. Economic Context 1.03 The IDA strategy in Benin is to support GOB '.4fforts aimed at economic recovery and financial stabilization, to be executed through a structural adjtustment program (SAP). This sZ.pport will be tendered through a structural adjustment credit (SAC), appraised in July 1988 and to be presented to the Board before December 1988, and through a series of relevant sector specific lending operations, including in the telecommiuncations sector. The principal goal of the SAP is to raise the real GDP growth rate over the medium term to three percent annually within a viable macroeconomic framework. The main objectives of the SAP are tot (a) strengthen GOB capacity to manage its resources, including restoration of the viability of the budget; (b) improve allocation of resources for investment in favor of high quality projects that remove specific bottlenecks to growth; (c) reform the policy environment to enabl.e private  - 2 - sector contribution to the higher growth objective; (d) reorganize the banking system to enable it to resume effective financial intermediation; and (e) remove policy and regulatory constraints on the performance of the public enterprise sector. 1.04 The project is expected to make a significant contribution towards the achievement of these objectives. The project supports the 1988-92 telecommunications investment program, which has been focussed on the high priority works needed to eliminate network bottlenecks and which will thus contribute to the encouragement of business development, particularly in the rivate sector. The implementation of this program is to be reviewed on an annual basis with IDA participation (para 6.09). The project also supports an action plan for management and institutional improvement in the sector. To this end, a program contract ('contrat de programme*) is to be concluded between GOB and OPTB (para 3.04). A series of measures are provided for which would improve the policy and regulatory environment in the se tor, and would permit more rapid and appropriate sector growth in line with demand. Public rew,urce management should be strengthened through control of current consumption of telecommunications services and elimination of arrears of payments. An appropriate framework for sector pricing will be created through the introduction of specific financial parfazmace objectiwv and of a tariff review mechanism. II. THE TELECOMMUNICATIONS SECTOR Sector Background 2.01 As of December 1987, there weLe 12,848 direct exchange lines (DELs) installed in Benin, of which 7,637 were in Cotonou (Annex 1). The average annual growth in DELs over the previous ten years %as 7.3Z. However, the rate of growth since 1980 has only been 52 per annum. This level of service corresponds to a density of just over 0.3 DEIs per 100 population, slightly under the averake for sub-Saharan Africa (Annex 2). The density is estimated for Cotonou at 1.4 per 100 and for Porto Novo at 1.0 per 100, both very low for cities of some importance for business. Automatic service is available in only 31 towns. Outside of these, access to telephone sorv4._ is limited and there is no rural telecommunications system. About 15X of present subscribers are classified as government or parastatal, and 78Z are private subscribers of whom the great majority are either full or part time business users. 7? of available lines a:e reserved for service and test purposes. The number of government lines is not excessive by regional standards, though the percentage of lines for service purposes appears high. The official waiting list, which represents the lower limit of unsatisfied demand, was 7,504 at May 1987. This is however considered an unreliable indicator as long waiting times and lack of information in the past on expansion plans tended to discourage registration by waiters. Informal estimates put unsatisfied demand at present tariff levels as at least double this figure. 2.02 There are 34 automatic telephone exchanges with a total capacity of 23,600 DELs in Benin. The capacity of the four exchanges in Cotonou alone is 10,000 DELs. The exchange capacity fill is thus 562 which is low  by regional standards and reflects the shortage in the subscriber cable network, some underdimensloning of the exchanges and shortages of spare parts and maintenance equipment. Most of the exchanges, which utilize crossbar electromechanical technologies., have been installed in the last 10 years, though the Ganhi exchange in Cotonou which assures national transit is nearly 25 years old. The Ganhi exchange as well as those in Abomey and Bohicon are saturated. 2.03 There is one automatic telex exchange, installed in 1978, with a capacity of 528 lines of which 278 were connected to subscribers, 942 of them in Cotonou. There remains however a small unsatisfied demand for telex service due to a lack of cable pairs. There is a well developed domestic transmission network based around a backbone microwave system extending to the borders with Niger. Togo and Nigeria. The system, first installed in 1974, now covers 1,180 km and is mostly equipped to 960 channels. The system is currently under adaptation to handle television transmission and will be extended to the border with Burkina Faso. The availability and quality of international communications is good. There is a digital HT20 international exchange linked to a satellite earth station type A which were both installed in June 1984. At present levels of usage, the facilities are only used 20-25Z. Benin is also linked to COte d'Ivoire and Nigeria by submarine cable. 2.04 Local telephone cable networks are largely insufficient and poorly designed and maintained. Other than in the three centers of Cotonou, Porto Novo and Abomey the configuration is rigid. Existing underground cables are not ducted and are poorly protected from humidity and water seepage. Abnut one third of the overhead network of 1,994 km is out of service at any one time. Maintenance personnel are poorly organized and lack adequate training. Therefore the quality of service offered is low, though there has been little effort to date to routinely collect data and monitor performance. Fault incidence and duration on local cable networks is extremely high due to poor maintenance of overhead cable and inadequate ducting and protection for underground cable. Fault incidence averages three per subscriber per year where a figure of one would be a regional norm. Fault duration is relatively lengthy with only 20Z of faults cleared the same day and only 70Z within eight,days. Partial data suggest the call completion rates for long distance and international calls is about 50Z which is around regional average. 2.05 Total investment in the telecommunications sector through OPTB in the period 1980-85 is estimated at CFAF 11.1 billion. This is equivalent to about 32 of total capital formation in Benin in the period. In terms of regional comparisons, telecommunications investment as a percentage of GDP has been relatively high, at 0.8Z over the period 1980-83 about double a representitive sub-Sahara Africa sample (Annex 2). However, this investment has not always been carried out in a cost effective manner. Asset cost/DEL is relatively high in Benin due to firstly a number of inappropriate investments being undertaken, for exwaple the 34 district towns subproject, and secondly inadequate provision for investment in local networks in major urban centers, resulting in past investment elsewhere in the system not being fully utilized. This is reflected also in the relatively low usage rates of the telephone service. In 1936, estimated revenue per subscriber was CFAF 320,000, which is both one of the lowest in West Africa, and which has been declining in real terms since 1983.  -4- 2.06 Past sector financial performance has been poor in relation to potential. Profitability has been moderate due to low usage rates and relatively high operating costs. The average rate of return of 13Z over the period 1981-86 is misleading due to very low rates of collection of telecommunications billings averaging 55Z. On a cash basis telecommunications has not typically covered its operating cost and investment requirements and has had to finance the deficit through firstly drawings on GOB Treasury and secondly through a strong negative working capital position including a large net debt on pos.al operations (para 6.02). The situation risks being aggravated as debt service requirements on past foreign loans fall due from 1985 onwards. Sector Issues 2.07 The main sector issues which arise from the foregoing discussion and which require to be addressed in any sector strategy are as follows: (a) Los service level relative to demand: Informal estimates put unsatisfied demand at present tariff levels at double the official waiting list of 7,504, i.e., total demand equivalent to more than double the present service level (para 2.01). (b) Low effective utilization of the existing network: The exchange capacity fill is 56Z due to shortages in the aubscriber network, underdimensioning of some exchanges and shortages of maintenance equipme-t. A number of exchanges are saturated (para 2.02). (c) Inadequacy of local subscriber networks: Local networks are insufficient and largely poorly designed and maintained (para 2.04). (d) Weaknesses in maintenance and organization: Maintenance personnel are poorly crganized and lack adequate training. Fet&lt incidence and duration is extremely high by regional standards (para 2.04). (e) Poor planning and coordination of investment: There has been significant recent investment in the sector, but this has not been carried out in a cost effective manner with the local network inadequacies leading to low utilization of existing assets (para 2.05). (f) Poor past financial performance: Lov usage rates and relatively high operating costs have led to only moJderate profitability in the sector. The cash position has been in deficit because of very low collection rates (para 2.06). Sector Strategy and Goals 2.08 In affirmation of the importance of telecommunications for the economic development of Benin and of the need to effectively respond to the issues, GOB has established its goals for the sector as follows:  5 (a) to satisfy demand for service in the most important centers; (b) to improve the quality of service offered to all subscribers; (c) to redress the financial situation of the sector; and (d) to establish the basis for the creation of a digital network. 2.09 A number of steps have already been taken to meet these goals. A National Master Plan for Telecommunications was prepared in 1986 with assistance from the International Teleconmunications Union (ITU). The plan determined the network configuratlon required to permit the introduction of digital technologies and to meet all anticipated demand up to year 2005. Demand was projected rather optimistically to grow at 8.32 per annum on average. A lower figure of average just under 6.5Z has been retained for the purposes of project planning however on the basis of a more sanguine assessment of medium term economic developments in Benin and on the assumption that the SAP is effectively implemented. It has not been assumed that all demand can be immediately met other than in Cotonou and Porto Novo, consistent with GOB's sector goals (Annex 3). Thus whilst projected demand by year 2000 is over 44,000 DELs, it is expected that only 33,000 DELs would by then be connected. This implies however a tripling of the network over 15 years and an equivalent density of 0.70 DELs per 100 population by year 2000. 2.10 On the basis of this Master Plan, a medium term investment program of priority telecommunications works has been identified (para 5.01). The program, costed at about $65 million equivalent of which 76Z is in foreign exchange, has been drawn up after a meeting of GOB, OPTB and interested donors in November 1987 and will be supported by the project. The program, which includes a significant component for local network rehabilitation and replacement, is expected to be executed over the period 1988-92. 2.11 A National Maintenance Improvement Plan (PNAM) has been drawn up in June 1986 with the help of ITU. The PNAM is currently under execution and provides for the materials, equipment and technical assistance necessary for improvement of the existing network in the provincial towns. Targets for improvement over the program period have been set as follows: (a) raise call completion rates to an average 70Z per year; (b) reduce fault rates to an average one/subscriber/year; and (c) reduce average fault clearance delays to one day. These targets are to be integrated into the comprehensive indicators of sector performance under the proposed project (para 5.17). 2.12 In order to redress the financial Eituation of the sector, the stratejy of GOB has two main dimensions. Firstly an action plan to be supported by the project is to be adopted for management and institutional improvement (para 3.04). The plan would, inter alia, provide for major improvements in financial management and particular for significant increases in the rate of collection of bills. Secondly, a program of financial restructuring is to be prepared under which a series of measures  - 6 - will be taken to redress the current financial position of the sector and to provide a sustainable basis for the anticipated future development of the sector and for an eventual positive flow of funds from the sector (para 6.07). The studies for financial restructuring program are to be completed by October 1988. Tho respective obligations of GOB and OPTB under the finally agreed program will be included in the program contract, whose signature is a condition of credit effectiveness (para 3.04). I. THE ENTITY Institutional Background 3.01 The monopoly for the development and exploitation of both domestic and international public telecommunications is exercised by the Office des Postes et Telecommunications du Benin (OPTB). OPTB also has responsibility for the provision of postal and financial services, though these activities are on a relatively modest scale and account for about 1OZ of turnover and only 6Z of total assets. In 1986, mail volume was about 7.2 million items or under two/capita/year. The number of postal checking accounts (CCP) was about 50,000 and total deposits were net of OPTB's own accounts, about CFAF 4.11 billion relative to total bank deposits of approximately CFAF 80 billion. The number of postal savings accounts was 145,000 with total deposits of about CFAF 3.35 billion. 3.02 OPTB was established by decree in 1959, modified in 1971, as an '6tablissement public I caractere industriel et commercial" (EPIC), and enjoys a separate legal status and some financial autonomy, e.g., full accounting separate from that of Government. The National Savings Bank (CNE) which has responsibility for postal savings has a separate statute but is managed by OPTB. OPTB has since 1984 been subject to the supervision of the Ministry of Information and Communications tMIC). OPTB is managed by a Board of Directors representing GOB, staff and union interests but under the chairmanship of the Minister of Information and Communications. Day zo day decisions are taken by a Management Committee chaired by the Director General and on which staff interests are represented. In practice though, no decisions of consequence have been taken without the approval of the supervising ministry and there has been thus far little effective delegation of authority. In the absence of clear performance objectives for OPTB, interventions have been frequent and not always coherent. Furthermore the power to nominate the Board, Director General and all Directors of OPTB currently resides with the National Executive Council (CEN). 3.03 GOB has recognized that the present framework is not particularly suited to the telecommunications sector, and is taking action in two main areas consistent with its general policy for public enterprise reform (para 1.03). Firstly, a new General Law on the institutional framework for relations between GOB and public enterprises has been introduced. Following the new model statutes provided for by this law, a new draft statute for OPTB has been prepared. The new statute provides, inter alia, for the following improvements:  -7- (a) OPTB management will henceforth enjoy enhanced autonomy in taking personnel and organizational decisions, e.g., recruitment, promotion, changes in organizational structure and job definitions; (b) OPTB Board of Directors will be streamlined and private sector participation will be permitted; and (c) *A posteriori' control by GOB of OPTB will be permitted by mean of a program contract (3contrat de programme") (para 3.64). Whilst these improvements are modest, they will contribute to increased flexibility and autonomy in sector management. During negotiations, agreement was reached that OPTB's new statute will be put into effect as a condition of credit effectiveness (para 8.02). 3.04 Secondly, the instrument of the program contract is to be applied to the telecommunications sector, as provided for in the new General Law. A draft contrat de programme" betwe.n GOB and OPTB has been prepared (Annex 4). The program contract will contribute to the clarification of the specific objectives of OPTB ix the period 19a9-91. GOB will make concrete undertakings to control its telecommunications consumption and clear arrears. Jointly, GOB and OPTB are to agree on a rational approach to pricing, future resource mobilization from the sector and on a financial restructuring program for OPTB. OPTB will, as one of its obligations, undartake an action plan for management improvement (Annex 5) (para 5.18). During negotiations, agreement was reached that: (a) the program contract satisfactory to IDA will be signed and finmalized as a condition of credit effectiveness; (b) GOB and OPTB will perform their respective obligations under the program contract; and (c) implementation of the cont.act will be subject to a review in which IDA will participate no later than September 30 each year (paras 8.01 and 8.02). Institutional Issues Organization and Management 3.05 The organization of OPTB has ,1ot changed since 1971. The organization is not well adapted to the particular requirements for the telecommunications and postal sectors. Furthermore internal procedures are lengthy, control mechanisms poorly developed and management information systems insufficient for a commercially oriented organization. There is excessive centralization at Director General level with the previously observed limited managerial autonomy. The National Conference for the Improvement of the Operating Structures of OPTB was called in November 1985 and identified a number of measures which will be put into effect as follows: (a) increase flexibility by decentralization of financial authority in the organization, a step already taken for the international telecommunications operations; (b) addition of a central planning cell, together with planning divisions in the departments for Telecommunications and for Postal Services;  (c) .7sengthening of the Telecommunications Department through the c.-eation of separate international and national network services (including a separate local network division); and (d) creation of regional services for Telecommunications and Postal Services to take on most day-to-day functions. The new organizational structure proposed and the present which is to be replaced are at Annex 6. The new organizational structure is adequate and is to be introduced at the same moment as the new OPTB statute. However, the new organization still lacks firstly a fully fledged financial management capability (para 3.10) and secondly internal audit and management control functions. Under the action plan for management improvement to be supported by the project, OPTB is to undertake a further study of its organization with a view to: (a) responding to these omissions; and (b) preparing for the progressive separation of the management of postal and of telecommunications services. 3.06 OPTB has suffered from past lack of continuity in top management. There have been four different Director Generals in the past five years. The holders of the position have rarely been given a clear set of objectives towards which to work; (para 3.04) and have generally lacked broad management skills and training. A new management team was appointed in July 1987 which is perceptibly stronger in these latter areas. The new Director General had been successful in setting up the new international telecommunications service for OPTB. The proposed program contract will contain clear objectives for management and is thus expected to contribute to the increased effectiveness of management. Staff and Training 3.07 As of April 1988, total staff of OPTB was as follows: 1,369 in telecommunications operations; 812 in postal and financial services; and 557 tn common services; for a total of 2,742 (Annex 7). Total staff involved direcvly or indirectly in telecommunications was put at 1,703, the equivaltnt of 135 per 1,000 DELs. There has been a 33Z increase in staff for telecommunications over the past five years, with recruitment of lower level staff in excess of requirements. Even allowing for the relatively labor intensive technologies currently in use and the dispersion of operating equipment, this ratio is very high by regional standards. The average figure for francophone West Africa is about 91 and that for sub- Sahara Africa on average about 85 (Annex 2). No full analysis exists for future manpower requirements, particularly for the higher skill categories required by the new digital technologies. At present only 39 telecommunications staff are at a level requiring first degree or higher level training. A detailed human resource and training needs study, which would determine, inter alia, where staff reductions could be effected, is to be carried out under the project as part of the action plan for management improvement (para 5.04). 3.08 A traieing center for postal and telecommunications staff has been in existence in Benin since 1961. With only six full time instructors, the center's capacity is rather limited and courses are restricted to middle and lower level technical staff of whom about 200 receive training in any one  year. At the higher level, OPTS has access to multilateral schools for posts at Abidjan and for telecommunications at Dakar, and to training grants from a number of bilateral donors principally France, Canada, Belgium and Switzerland. OPTB does not at present offer financial and management training though it does intend to start basic accounting cour