Tanzania - Third Telecommunications Project

1Dument of The World Bank FOR OITICLAL USE ONJLY Report No, P-5977-TA MEMORANDUM AND RECONMENDUTION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 53.6 MILLION (US$74.45 MILLION) EQUIVALENT TO THE UNITED REPUBLIC OF TANZANI FOR A "IRD TELEC014lICATIONS PROJECT APviIL 2, 1993 ,j j,,eit '':? j,- This document has a restricted distribution and may be osed by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EOUIVALENTS Currency Unit = Tanzanian Shilling Tsh 1.0 = US$0.003 US$ 1.0 = Tsh 325 MEASURES Metric System ABBREVIATIONS AND ACRONYMS ADB African Development Bank DANIDA Danish International Development Agency DDGT Deputy Director General Telecoms DEL Direct Exchange Line EAC East African Community EEC European Economic Commimnity ERP Economic Recovery Program - 1986 ERR Economic Rate of Return ESAP Economic and Social Action - 1989-1992 GOT Government of the United Republic of Tanzania IDA International Development Association IRR Internal Rate of Return JICA Japan International Cooperation Agency MD Ministerial Directive MOC Ministry of Transport and Communications MOU Memorandum of Understanding PMU Project Management Unit PPF Project Preparation Facility SAP Structural Adjustment Program - 1982 SIDA Swedish International Development Agency TDP Total Demand Potential TPTC Tanzania Posts and Telecommunications Corporation TRP Telecoms Recovery Program FISCAL YEAR Januay I to December 31  FOR OMFCIL USE ONLY TANZANIA THIRD TELECOMMUNICATIONS PROJECT CREDIT AND PROJECT SIUMARY Borrower: The Government of Tanzania (GOT) Beneficiary: Tanzania Posts and Telecommunications Corporation (TPTC) Credit Amount: SDR 53.6 million (US$74.45 million equivalent) Terms: US$74.45 will be lent to the Government of Tanzania (GOT) on standard IDA terms. Of this, US$ 20 million will be invested in TPTC as equity by GOT and US$ 53.50, million will be onlent to TPTC at 8% interest rate per annum with a 20 year repayment period, ir._luding a 5 year grace period on the repayment of principal. TPTC will bear the foreign exchange risk. Fincing Plan: TPTC US$ 30.4 million IDA US$ 74.4 million ADB US$ 45.9 million DANIDA US$ 8.3 million EEC US$ 17.2 million JICA US$ 2.2 million smDA US$ 41.7 million Total US$220.1 million Rate of Return: Financial 27 % Economic 52% Staff Appraisal Report: 11539 - TA Mav: 23747 This document has a restricted distribution and may be used by recipients only in the perf.. ^-.n; of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF TIIE INTAERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO TANZANIA FOR A THIRD TELECOMMUNICATIONS PROJECT 1. I submit for your approval the following memorandlun. and recommendation on a development credit to the Government of Tanzania (GOT) for SDR 53.6 million, she equivalent of US$74.45 million, on standard IDA terms with a maturity of 40 years to help finance a project in the telecommunications sector. This Credit would be part of a US$ 220.1 million investment programn with a US$ 189.7 million foreign exchange component. The amount of US$ 20 million of the Credit will be invested in TPTC as equity by GOT; US$ 53.5 million will be onlent to the Tanzanian Posts and Telecommunications Corporation (TPTC) f'r 20 years including 5 years grace, at 8% rate of interest, with TPTC taking the foreign exchange risk on debt. The remainder of the Credit of US$ 950,000 will be used by the Ministry of Conmmunication (MOC) for restructuring of the sector. The project would be co-financed by ADB, DANIDA, EEC, JICA, and SIDA. 2. algklgmdqg.. In 1967, Tanzania's leadership embarked on an era of socialismn and introduced sweeping economic and social changes. They sought a path of self determination with the goal of making public sector activity the primary means of achieving economic development. By the end of the 1970's, however, the economy was faltering. A turning point was reached in 1984 when the GOT, faced with economic stagnation, introduced a new, more pragmatic economic plan. In 1986, the Government introduced a comprehensive Economic Recovery Program (ERP) followed by an Economic and Social Action Program (ESAP) in 1989. Tanzania's main development objectives under these programs are to achieve a 5% growth rate in per capita income; to lower the inflation rate; to restore a sustainable balance of payments position; to rehabilitate and improve the provision of social services; and to improve the effectiveness of external assistance. Tanzania's strategy to fulfill these objectives is to shift from a centrally planned system to a dynamic, market-oriented economy. Key sources of growth and profitability in this economy are expected to be a) growth in the size and productive output of the private sector, b) competition by producers and retailers within and across sectors, c) liberalization of producer and consumer prices, and d) improved efficiency and profitability of the institutions that will remain in the public sector. 3. A reasonably reliable telecommunications sector is crucial to the sustained economic recovery of Tanzania. The main linkages between telecommunications and economic recovery are (a) the requirements of business and government in a market economy for timely, accurate, and reliable information; (b) telecommunications as a prime medium for transmitting information quickly, cheaply, and easily; (c) the cost to the economy of foregone economic oppornmities due to an inadequate and unreliable domestic and international telecommunication network; (d) the expense to the GOT of operating a loss-making telecommunications network; and (e) the sector's importance as a major foreign exchange earner. Reliable communication capabilities are especially important for financial, tourism, mining, transport, service, and export-oriented business activities in Tanzania and are becoming increasingly important in the sale and distribution of agricultural products. 4. The existing telecommunications infrastructure in Tanzania has grossly insufficient capacity and a very poor quality of service. In 1991, .3% of Tanzanians had telephones or 25% less than the average percentage of the population owning telephones in Sub-Saharan Africa. In addition, only 60-  -2- 70% of the installed phones actually worked. Fault rates are 30 times higher than those in developed countries. The fmancial position of the sector is quite weak. TPTC, the main operator, was insolvent by 1988 due to a lack of tariff increases, substantial foreign exchange losses, and operational inefficiencies. The financial position has improved with 300 - 500% increases in tariffs, conversion to equity of debt owed by TPTC to GOT; and improvements in operational efficiency. 5. The GOT is onimitted in the medium term to ensuring that reasonably priced and satisfactory guality telecommunication services are available to satisf,r business demand in terms of quantity and scope of services to support economic development. To achieve this the GOT will establish a market oriented sector which allows for private sector participation, and, where feasible, competition. 6. v e active participation of private operators in the sector, particularly in value-added services, is a cornerstone to the success of the GOT's mission. The current legal structure does not, however, allow for private sector operators. Nor is there a regulatory body in place with experience in market- oriented regulation. Under the existing environment the.e is limited interest from experienced and reputable private firms in investing or operating basic services in the sector. To encourage private investment the GOT will take a differentiated strategy for the basic (local, long distance, and international) and non basic (all other services) market segments. Non basic market segments, where there is greater potential for private interest, will be opened to private investment in the near to medium term. investnent in basic services will be done in a gradual and systematic manner to ensure that the correct building blocks are in place to enable successful privatization and competition. The Government is issuing a Sector Policy statement outlining their intentions. 7. As part of a program to increase private interest in TPTC, in the past eighteen months, TPTC was restructured, a code of conduct established (through a Memorandum of Understanding) signed by TPTC and GOT, a new Director General was recruited from the private sector, staff salaries were increased and a staff incentive program was introduced. To complete the program, GOT will 1) split postal and telecommunication activities, 2) corporatize telecommunication activities, 3) divest TPTC of non-core activities, and 4) conunercialize TPTC's operations. This process is expected to take two years to 2 1/2 years to complete. In addition, the MOC will establish a regulatory body, revise the telecommunications law to allow for private investment, and legalize investmnent in TPTC. Over time, the GOT will invite bids for private sector investment in telecommunication as well as postal activities. Competition in basic services will be introduced gradually; particularly in unbundled services within the basic network (customer premise equipment, laying cables, etc.). 8. Project ObJectives. To achieve its mission in the medium term the GOT has identified three key objectives for the sector. The first is to ensure that efficiency and financial viability drive sector development. The second is to eliminate the existing bottlenecks in the availability of telecommunication services to business subscribers in key areas of economic importance. The third is to optimize the availability and effectiveness of public and private resources invested in the sector. Three building blocks provide the base from which these objectives will be carried out: a) establishment of a market-oriented regulatory and policy framework; requiring a regulatory body to license private operators to provide non-basic services in Tanzania; and developing an action plan to secure private investment in basic services in the medium term; b) commercialization and corporatization of the state-owned monopoly provider of basic telecommunication services; and 3)  -3 - rehabilitation and expansion of the local and long distance telecommunication network. 9. Project i)escription. The project has three major components. These are to (a) establish a market oriented regulatory and policy framework in part to promote private sector involvement and competition; (b) strengthen the institutional capacity of TPaC to ensure improved operational and financial performance and augment TPTC's implementation capacity through a performance contract with an external consultant to implement new works; and (c) rehabilitate and expand the local and long distance telecommunications network in Tanzania. The total project cost is $220.1 million. TPTC will fund $30.4 million in local costs and external donors will fund $189.7 nillion in foreign costs. The IDA credit will concentrate on policy and regulation and institutional development in finance, management, and computers as well as funding for investment costs. The regulatory component will inciude technical assistance to establish an appropriate regulatory structure and policies, a study on securing private sector investment, and training of staff. 10. The institutional development component is designed to advise and assist TPTC in: (a) studies required to implement the institutional reforms including studies on manpower planning, computerization strategy, and organizational structure; (b) corporate planning activities; (c) network planning related to overall planning, optimization, and c ,ordination of the natio'ial network; (d) operations and marketing; (e) financial planning and controls and recruitment of a fiancial controller; (f) provision of experts in manpower and training; (g) course development at the staff college; and (h) training fellowships. To increase TPTC's implementation capaci y, TPTC will retain a consulting firm to be responsible for supervision of procurement, supply, and installation of new works under the program. In addition, all equipment contracts will be implemented on a turnkey basis. All network expansion will be evaluated and compensated on performance based. output oriented results. 11. The investment program will relieve the worst bottlenecks in the national network as well as in local networks in Dar-Es-Salaam and regional centers. Given the poor financial position of TPTC, high revenue-generating subscriber areas are given preference. The equipment purchased will be used to (i) rehabilitate existing switching, transmission and external line plant equipment including the provision of spare parts; (ii) supply, installation, and commissioning of 91,000 lines of switching equipment including 44,000 lines in Dar-Es-Salaam and 47,000 lines in regional centers; a complementary external line plant for these new lines, an external line plant for exchanges requiring additional cabling, digital microwave radio links and fiber optical systems to interconnect the above mentioned exchanges; power and air conditioning equipment related to the above mentioned switching and transmission equipment; (iii) provide 20,000 telephone instruments and 500 pay phones to replace unserviceable instruments and comect new subscribers, 200 teleprinters and 500 fax machines; (iv) provide 50 motor vehicles for planning, construction, and maintenance works; (v) construct buildings to accommodate equipment and staff; and (vi) supply ancillary equipment, including postal equipment, computers and software for critical financial systems. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursement are shown in Schedule B. A timetable of key project processing events and the status of Bank group operations in Tanzania are given in Schedules C and D, respectively. A map is also attached. 12. Project ImhlemenWtaton. The establishment of a regulatory body will be the responsibility of the MOC. A key goal of the program is to build the institutional capacity of TPTC staff to manage  -4 - their on-going activities. To ensure successful project irnplementation, line managers will be responsible for managing technical assistance in their functional area in addition to their on-going activities. The existing team within the Corporate Pianning department will be expanded into a Project Management Unit (PMU). This unit composed of TPTC staff and selected consultants will monitor the project, prepare reports for the Director General and Donors; monitor overall technical assistance effecti;eness, and ensure compliance with donor requirements. The physical and institutional project components will be managed by the Deputy Director General Telecoms (DDGT) and his senior staff. Since TPTC has not planned and executed such a large project, to expand their implementation capacity and ensure its timely completion TPTC will employ a consulting firm to be responsible for supervision of overall preparation, coordination, evaluation of tenders, execution of contracts, and supervision of implementation of new works. The majority of contracts will be on a turnkey basis. An Efficiency Audit of TPTC's performance will be -repared annually and made available for IDA's review. The audit will compare TPTC's performance with agreed performance indicators. A Mid-Term Review will be carried out by December 31, 1995. Commitment of contracts in the second phase of the project are subject to TPT- having sufficient implementation capacity. 13. Proiect Sinabilitv: The MOC will issue a statement of sector policy indicating its intention to establish a regulatory body and to legalize and promote private investment and competition in telecommunications to promote sector growth and expansion. A Memorandum of Understanding signed between the MOC/GOT and TPTC in March 1992 outlines an action plan for the commercialization of TPTC. This action plan increases management autonomy and accountability. The plan also enables TPTC to set tariffs automatically to cover inflation and devaluation and provides autonomy in determining staff compensation. Further, the plan provides for the restructuring of TPTC. The agreement also establishes a performance standard including tariff levels, requirements for the number of lines installed and lines working, billing ratios, days receivables, staffing reductions, and project impnementation milestones that will ensure TPTC's operational and financial soundness. 14. Lessons Leamned from Previous World Bank and lDA Exuerle=ce. IDA, in cooperation with other donors, has financed two previous telecommunications projects in Tanzania. While implementation of the first project was successful overall, a number of problems were encountered in the phvsical implementation and institutional development of TPTC during the second project. These problems were interpreted in the light of experience gained in the supervision and project completion work done for this project as well as IDA and World Bank telecommunication projects worldwide. The following issues to overcome as related to TPTC were identified: Sectoral (a) unclear role defimition in regulation, policy, and operations; and (b) a lack of private sector involvement and competition. Financial: (c) tariff policies based on social and political rather than economic considerations; (d) weak financial controls and audits particularly in billing and collections; (e) an unhedged foreign exchange position leading to accrued losses by 1991 of Tanzanian Shilling 17.8 billion; Operational (f) a lack of autonomy of TPTC's board and management; (g) loosely defined operational (and financial) objectives and perfonnance targets for TPTC mnagement and staff; (h) operational inefficiency; (i) shortage of skilled staff and appropriate training; Project Implementation/Precurement (j) limited leadership in TPTC to coordinate donor investments leading to a myriad of technologies being introduced that resulted in an expensive, poorly configured network  .5- with a low quality of operation that required highly skilled btaff to operate ;t; and (k) poor donor coordination which resulted in exchanges being purchased for which there was no outside plant. 15. Rationale for Worid Bank Involvement and Ie with te Countrv Asistance Strat. IDA has an important catalytic role. Several donors have indicated willir-ness to invest provided that IDA takes a lead role to 1) coordinate donor funding to ensure a coherent investment program, and 2) overseeing institutional and sectoral reforms (including privatization) and monitoring project implementation. IDA has significant sectorJ experience, particularly in Africa, to bring to bear when designing a project. Further, IDA involvement is based upon and will reinforce IDA's support to the overall adjustment process in Tanzania. Specifically, as per paras. 3-5, the project supports the country's strategic objectives to (a) gfow the size and productive output of the private sector (through improved communication services), (b) introduce competition (in specialized telecommunication services) and (c) improve the profitability and efficiency of public institutions (TPTC). The project fits with the current country strategy. The country assistance strategy will be reviewed by the Executive Directors later this fiscal year. 16. Through advice and investments, IDA will assist the GOT in their efforts to restructure the sector, promote private investment, commercialize TPTC and rehabilitate and expand the network. IDA conditionality is tied to GOT and TPTC fulfillment of these efforts. Capital investments are to be implemented in phases to ensure TPTC's implementation capacity. Commitment of contracts for the second phase are subject to satisfactory completion of the Mid-Term Review evaluating the level of progress on the restructuring of TPTC. IDA is actively working with the GOT to 1) coordinate donor investments, 2) rationalize the network design, and 3) encourage donors to allow competitive bidding for equipment and thus make prices competitive. The latter is important given the history in Tzania of donors investing in the sector on an ad hoc basis. Approximately 80% of the program will have some form of competitive bidding. The urgent requirements for telecommunications and the very real potential for other donors to invest in an uncoordinated fashion are the main reasons why investments in equipment are not being delayed until a regulatory framework is established and private sector investment is secured. 17. AAreements Reached at Negotiations. The GOT shall (a) establish a regulatory body and transfer responsibility for regulation of the telecommunications sector to this body by March 31, 1994; (b) split, by no later than March 31, 1994, TPTC's post and telecommunication functions; and (c) furnish to IDA for its review, by the date of the mid-term review, the recommendations of a study on the scope and extent of private sector participation and submit to IDA an action plan for private sector involvement in the telecommunications sector. In addition, the GOT will take all actions necessary to have or cause to (a) permit private sector involvement in Basic and Non Basic Telecommunications services; (b) issue, by December 31, 1993, at least one license for a cellular operator; and (c) issue, by December 31, 1995, licenses to private sector operators or investors for two other Non-Basic Telecommunications services. 18. TPTC will (a) prepare annually, for IDA's review, an analysis of their actual performance against mutually agreed performance indicators; (b) divest: (i) by December 31, 1993, its motor vehicle repair, printing and building construction works; and (ii) by December 31, 1994, its customer premise installations, and sale of customer terminal equipment and equipment repair activities; (c) by  - 6- December 31, 1994, introduce Frofit and cost centers for its network installations, bill collections, and staff college; (d) by March 31, 1995, install a comprehensive billing system; (e) by the date of the mid-term review (December 31, 1995) furnish to IDA its time bound action plan to irnplemeiit the recommendations of the MOC to insroduce private sector participation into basic telecommunication services; (f) adjust tariffs semi-annually by March and September in each year to cover "iflation and devaluation; and (g) maintain a debt equity ratio of 60:40. The MOC and TPTC, shall by not later than December 31, 1995, carry out jointly with IDA and the Donors, a mid-term review of the Project. 19. Conditions for Credit Effectiveness will be: (a) selection of consultants for the efficiency audit, and financial review completed; (b) execution of the Subsidiary Loan Agreement; (c) submission of TPTC's audited financial statements for 1992; (d) se;ection and commencement of procurement of a comprehensive billing system; (el submission to IDA of a Letter of Sector Poiicy; and (f) TPTC will have seected a Financial Controller with qualifications and experience, and under terms and conditions of employment satisfactory to IDA. 20. 'Conditions for Disbursement will be: (a) Payments made for expenditures under the first phase can be made once TPTC has employed a firm with qualifications and experience satisfactory to IDA to be responsible for the supervision of the procurement and implementation of capital construction activities under the Project; (b) payments for expenditures under the second phase can be made after IDA notifies TPTC that it may enter into such commitments. 21. Environmental Issues. The proposed project is expected to have no major environmental effects. Efficient use of telecommunications will substitute for personal transportation and correspondingly reduce environmental pollution and promote energy conservation. An environmental impact summary and mitigation plan have been prepared to highlight specific environmental issues and identify a plan for addressing these issues. 22. ProEram Objective Categories. The project seeks to build the basic infrastructure of the country, both in urban and rural areas through the expansion of telecommunication capacity. It also supports development of the private sector by promoting private participation in the sector and possible private investment in TPTC. 23. Benefits. The project will reduce a major infrastructural constraint to economic development and adjustment in Tanzania by upgrading and expanding telecommunication services. It will maximize resources available to the sector by improving the enabling environment for private sector investment and will improve quality and access to services by promoting competition. hnproved telecommunication services will provide major benefits across all sectors by improving the flow of information and enhancing communication. It will lay a new technological base for the industrial sector as a precondition for successful long-term development of the economy. Furthermore, institution building and commercialization of TPTC will result in full cost recovery, improved financial viability, more efficient operations, and improved quality of service to subscribers.  -7- 24. W_h The principal risk in the sector is the effect of non-collection of revenues. There are some indications that a considerable amount of traffic both for national and international calls are not being billed. The financial projections are based on historical revenues, which excludes all non-billed traffic, and is therefore a conservative estimation. However, if non-collections continues to increase over the project period, the financial viability of the project may be compromised. Calcuations indicate that if non-collections exceed 25% of the projected revenues, the financial rate of return will become negative. One of the main objectives of this project is to institute controls in the billing system, and carefully calibrated project conditionality (including linkage of staff salary bonuses to financial performance) which will ensure that non-billing and non-collections will not be an issue in the future. The other risks that this sector in particular and all other sectors in general face in Tanzania is that of devaluation of the currency. Since this risk is a factor of many macro economic variables it is not possitle for the telecommunications company to control this risk. However, all possible measures are being taken by TPTC (e.g. tying international calls to the US Dollar) to safeguard against this constraint. In addition, the IRR and ERR is an indication that the project is financially sound. 25. Recsmendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and reconmnend that the Executive Directors approve the proposed credit. Lewis T. Preston President Attachments Washington, DC April 2, 1993  SCHEDULE A TANZANI - TELECOM If PROJECT PlRC9JCT COU, S1ARMY:. --US$ Million Equivalent-- 1. Telephone Exchanges 2.04 27.43 29.47 2. External Line Plant 5.93 55.35 61.28 3. Transmission 8.67 48.17 56.84 4. Upgrade Std. A Earth Sation 0.00 0.50 0.50 5. Telephones and Teleprinters 0.00 2.28 2.28 6. Power and A/C 0.50 3.50 4.00 7. Buildings 3.00 0.00 3.00 8. Vehicles 0.10 1.50 1.60 9.A Traing - MOC 0.00 .20 .20 9.A Training - TPTC 1.70 2.80 4.50 10. Consultancy to TPTC 2.76 14.02 16.78 11. Consultaucy to MOC 0.00 0.75 0.75 11. Postal 1.70 2.80 4.50 12. Computers 0.00 5.72 5.72 Base Cost 26.39 165.04 191.42 Physical ContIngency 1.32 8.23 9.56 Price Contingency -.ZO 16.45 19212 30.40 189.78 220.12 PROJECT FIN ANCING PLAN.: Source ILoa1 Foreign Total ---US$ Million Equivalent-- IDA - 74.2 74.4 ADB - 45.9 45.9 EEC - 17.2 17.2 DANI]DA - 8.3 8.3 JICA - 2.2 2.2 SIDA - 41.7 41.7 TPTC 30.4 - 30.4 Total 31)4 M92A2 220.1  SCXIEDW a Psge 1 of 2 TANZANIA - TELECOM ILI PROrCT SUMMARY OF PROCUTRECMT ARRANGEMENTS (UJS$ million) Negotiated Project Item ICE Purchase NB_ Other Total Switching 26.0 1,2 4.4 2.3 33.9 (5.S) (1.2) (6.7) Ext.Line Plant 45.3 - 18.3 6.9 70.5 (13.2) (13.2) Transmission 49.2 2.2 4.6 10.0 66.0 (32.5) (2.2) (34.7) Terminals 1.7 0.6 0.3 - 2.6 (1.7) (0.6) (2.3) Power & A/C 4.0 - - 0.6 4.6 (4.0) (4.0) Buildings - - 3.5 - 3.5 Vehicles 1.7 - - 0.1 1.7 (1.2) (1.2) computers 6.6 - - - 6.6 (3.8) (3.8) Consultancy-TPTC - - - 18.45 18.45 (2.45) (2.45) Consultancy-MOC - - - .75 .75 (.75) (.75) Training - TPTC - - - 5.2 5.2 (1.0) (1.0) Training - MOC - - - .2 .2 (.2) (.2) Postal - Equipment - 2.0 - 1.5 3.5 (2.0) (2.0) Postal-Construction - - - 1.7 1.7 (1.2) (1.2) PPF - - - .88 .88 (.88) (.88) TOTAL 134.5 6.0 31.1 48.6 220.1 (61.9) (6.0) (6.5) (74.4) NOTE: Figures in parentheses are amounts to be financed by the IDA Credit. ICB - International Competitive Bidding NoF a Not Bank Financed Negotiated Purchase . e.g. purchase of spare parts from original suppliers Other = e.g. TPTC's local cost, selection of consultants.  SCHEDULE B Page 2 of 2 TANZANIA - TELECOM III PROJECT A. IDA DISBURSEMENT CATEGORIES Amount % Financed by Category (US$ Million) IDA 1. Equipment and installation under: 100% foreign (a) Phase I of Part C.8 28,000,000. expenditure of the Project (b) Phase 11 of Part C.8 25,000,000. of the Project 2. Vehicles, computers 100% foreign and office equipment: expenditure (a) Computers & 3,300,000. office equipment (b) Vehicles 1,000,000. 3. Training 100% foreign (a) For Part A of Project 200,000. expenditures (b) For Part B of Project 900,000. a Consultant's Services 100% foreign (a) For Pzrt A of Project 750,000. expenditures (b) For Part B 1,920,000. of the Project 5.(a) Postal equipment 1,800,000. 100% foreign and vehicles for Part expenditures C.7 of the Project (b) Consultant's 1,000,000. 100% foreign services and training for expenditures Part B.7 of the Project 6. Refunding of Project 880,000. 100% foreign Preparation Advance expenditure 6. Unallocated (Contingency) 9,700,000. Total 74.450.000. B. ESTIMATED DISBURSEMENT SCHEDULE IDA's FY 1993 1994 1995 1996 1997 1998 1999 Annual .8* 1.2 9.9 16.0 19.4 18.1 9.0 Cumulative .8 2.0 11.9 27.9 47.3 65.4 74.4 * iJnehuing 2PPF ' Pt  TANZANIA TELECOMMUNICATIONS III PROJECT Timetable of Key Project Procesing Events (a) Time taken to prepare: 30 months (b) Prepared by: TPTC, Consultants (c) First Bank Mission: April 1990 (d) Appraisal Mission departure: May 19921/ (e) Negotiations: January 1993 (f) Planned date of effectiveness: June 1993 (g) List of relevant PCRs and PPARs: Telecommunications:PCR for Credit 1173-TA (h) Government Signing of Ministerial Directive and Memorandum of Understanding: March 1992 (i) Govermnent's statement on sector policy: March 1993 1/ Mission Members include: Ms. Ann Ishee Mr. Inge Vabo Division Chief: Mr. David Cook Departen Director: Mr. Stephen Denning  STATUS OF SANK GROUP OPERATIONS IN TANZANIA Schedule D ............................................. ---Pase 1 of 3 A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of December 30, 1992) -USS Mitlion. - Amount(Less Cancellations) Loan or Fiscal Undis- Credit No. Year Borrower Purpose 8ank IDA bursed .... ...... .... ... ...... Nineteen (19) Loans and sixty five (65) Credits fully disbursed, 313.06 908.37 of which SECALS, SALs and Program Loans/Credits: a/ Cr. 11330 1981 Tanzania Export Rehab. 50.00 0.00 Cr. A0240 1987 Tanzania Multi-Sec. RN 1 46.20 0.00 Cr. 17410 1987 Tanzania Multi-Sec. RN I 50.00 0.00 Cr. A0241 1988 Tanzania Multi-Sec. RH 1 26.00 0.00 Cr. 17411 1988 Tanzania Multi-Sec. RH I 30.00 0.00 Cr. 19691 1989 Tanzania Ind. & Trade Adjus. Cr. 12.50 0.00 Cr. 19692 1990 Tanzania Ind. & Trade Adjus. Cr. 10.30 0.00 Cr. 21161 1991 Tanzania Agric. Adjustment 16.10 0.00 Cr. 21162 1992 Tanzania Agric. Adjustment 11.30 0.00 ..... ..... . . ..... ....... 252.40 0.00 Cr. 10150 t980 Tanzania Grain Storage & Nill 43.00 1.36 Cr. 15360 1985 Tanzania Ports Rehab. 27.00 0.69 Cr. 16040 1985 Tanzania Petro Sector T.A. 8.00 2.86 Cr. 16870 1986 Tanzania Power Rehab./Energy 40.00 1.67 Cr. 16880 1986 Tanzania Roads Rehab. 50.00 8.24 Cr. 18100 1987 Tanzania Telec. II 23.00 1.38 Cr. 18910 1988 Tanzania Agr. Exports R.h. 1 30.00 21.23 Cr. 19690 b/ 1989 Tanzania Ind. & Trade Adjus. Cr. 135.00 8.67 Cr. 19700 1989 Tanzania Nat0l. Ag. & Liv. Res. 8.30 6.77 Cr. 19940 1989 Tanzania Agric. Ext. 18.40 11.19 Cr. 20500 1989 Tanzania Tree Crops 25.10 17.13 Cr. 20950 1990 Tanzania Ports Modernization 37.00 36.11 Cr. 20980 190 Tanzania Health & Nutrition 47.60 45.24 Cr. 21160 b/ 1990 Tanzania Agric. AdJustment 200.00 19.83 Cr. 21370 1990 Tanzania Educ. Plaming & Rehab. 38.30 33.43 Cr. 21490 1990 Tanzania Roads I 180.40 157.34 Cr. 22020 1991 Tanzania Petrol Rehab 46.00 46.33 Cr. 22670 1991 Tanzania Railways Restructuring 76.00 71.87 Cr. 22910 1992 Tanzania Urban Sector Eng. 11.20 9.50 Cr. 23080 b/ 1992 Tanzania Fin. Sector 200.00 112.78 Cr. 23300 1992 Tanzania Engineering Credit 10.00 6.60 Cr. 23350 1992 Tanzania Forest Resources Man 18.30 17.68 Cr. 23081 b/ 1993 Tanzania Financial Sector 11.32 11.23 Cr. 24130 1993 Tanzania Financial & Legal Ma 20.00 18.93 Total 313.06 2210.29 668.06 of which repaid 204.67 53.26 Total held by Bank & IDA 108.39 2157.03 TOTAL Undisbursed 668.06 ~~~~. ........ .............. .............. a/ Approved after FY80. b/ SAL, SECAL or Program Loan/Credit c/ Not yet effective. tanledl .wkl 01-25-93  Schedule D Peg 2 of 3 S. STATEMENT OF IFC INVESTNENTS IN TANAIA (as of December 30, 1992) Amount in USS Niliofn FiEcat ........... Year Obligor Typo of 0usins Loan Equfty Total 1985 Aboni Agricultural ard Livestock Prod. 5.36 0.00 5.36 1978 Highland Soap Mfg. of Soap & Cleening Prep 1.38 0.37 1.75 1fO Kiltabero Nfg. of Food qweres & Tobacco 3.50 0.00 3.50 1964 4.37 0.70 5.07 1979 Netal Products Nfg. of Fabric Netal Prodamts 1.33 0.18 1.51 1991 Nufind Tea Beverage Indstries 2.80 0.00 2.8C 1990 Tasco Spminrg Weaving & Finishine 2.00 0.00 2.00 Total Gross Coami tmnts 20.74 1.25 21.99 Less: repayments, cancellations exchange adjustments, writeoffr. terinations and salts 13.35 1.25 14.60 Total Commitmnts now hold by IFC 7.39 .00 7.39 Total lndisbursed 2.17 0.00 2.17 Total Outstanding IFC 5.22 0.00 5.22 tan2edl.wkl 01.25-93  SCHEDULE D Page 3 of 3 DISBURSEMENT ISSUES 1. IDA's portfolio in Tanzania at the end of calendar year 1992 consisted of 24 projects (investment plus adjustment) for a total commitment of US$ 1.4 billion, of which US$ 668 million was undisbursed. Of the total committed, US$ 756 million was for 20 investment operations, for which the US$ 47.7 disbursed in FY 92 corresponded to a disbursement factor of only 9.5 (ratio of disbursements to net commitments at the beginning of the FY). One reason for the slow disbursement of investment projects is the relatively young age structure of the portfolio. Of the 20 investment projects, 10 were approved in FY 89 or earlier and have an undisbursed amount of US$ 72.5 million. Since FY 90 another ten have been approved and have an undisbursed amount of US$ 443 million. The main reason for the slow disbursement, however, is the limited domestic capacity. This is also the main cause of the slow disbursement of import support funds through the adjustment operations. 2. Limited domestic capacity has been a major constraint across sectors and a proposed Public Sector Adjustment Credit (FY 93) is intended to address issues of civil service reform which should lead to increased efficiency of the civil service. In addition, an agriculture sector management project to reinforce the sector's capabilities is being prepared; and supervision of the projects in the PHR sector has been intensified. 3. Another issue has been a lack of counterpart funding due to severe budget constraints. This issue will require greater prioritization of public expenditures under the rolling expenditure framework, improved financial management capabilities (to be developed under the recently approved Financial and Legal Management Upgrading project (Credit 24130-TA)) and better revenue generation through tax reform, also being supported by IDA. 4. A Country Implementation Review (CIR) is planned for the second half of FY 93 to review the above issues and others of relevance to improved implementation of the Tanzania portfolio.  ThM.M._ w TOKihi 360 430 IBRD 23747 t ukobA '' AN/A, - A CN 1KENYA TA \ 7ANI I )wanz Mpandai / SlNGitl.)A ) &osZAIREGWN5 8 ' < { j<_d;ngw~~~~~~~lylla ARi ?hECNAR AD 0 N','l \'. \ ZAMBIA g / apd,Z CAASM B _ RWN A THIRD TELECOMMUNICATION PROJECT PRIMARY EXCHANGE SECONDARYfrETRRIRY EXCHAINGE TAMbitb, MAN MICROWAVE EOU,ES/ CAACEIY Isan NEM EXCHANGE C.APACEW bieroUl DSC 01 TheWoddEnnk } \ p (](lo 7 MdS73Jr MMoTgoro MAN ROAD bar R ES >'lANtJARY SEC NA 40'00 ~ ~ ~ ~ ~ ~ ~ ~ ~~~~8 MP NC,11,-),A 41 00 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~REGIONCAPTL LJK Ru DAR [5 SA~~~~~~~~~~~~~~~ EGONBUNARE IECNDiaYNO Moo,.) on Of Tho mbwangdBABGE M2VEMEK Groop.Th donnunoon p-pd INDIAN,vr- byd Ih. booodar-o. WoI,Mtwar iofcl, Aodrn- f3T0 -S- .;r.Th. d-..;-ti.' .d livill,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~AN.AR 19