Algeria - ICT Development Support Project

Report No. PID10992 Project Name Algeria-ICT Development Support Project Region Middle East and North Africa Region Sector Telecommunications & Informatics Project ID DZPE75664 Borrower(s) DEMOCRATIC AND POPULAR REP. OF ALGERIA Implementing Agency Address MINISTRY OF POST AND TELECOMMUNICATIONS Address: 4 Boulevard Krim Belkacem, Algiers, Algeria Contact Person: Project Coordination and Implementation Unit - ICT Development Support Project Tel: +213 21 73 17 69 Fax: +213 2 71 20 07 Email: ucsp@postelecom.dz Environment Category C Date PID Prepared January 23, 2002 Projected Appraisal Date July 15, 2002 Projected Board Date January 7, 2003 1. Country and Sector Background Until recently, the telecommunications sector was dominated by a state monopoly, the Ministry of Post and Telecommunications (MPT), which acted both as the policy maker and the service provider. The sector's monopoly and public administration status have been a significant constraint to network expansion. With the assistance of the World Bank (Telecommunications and Postal Sector Reform Project, Loan No 7027-DZ, approved on June 27, 2000), the Government of Algeria (GoAl) initiated a comprehensive sector reform program to: (i) establish a new legal, regulatory, and institutional framework; (ii) implement gradual liberalization of all market segments in the sector; (iii) privatize the main telecommunications operator through a transparent and competitive bidding process; and (iv) elaborate a comprehensive postal development strategy, ensuring the financial viability of the postal operator.To date, the following steps have been implemented:A new Telecommunications and Postal Law (Law 2000-03) was promulgated on July 30, 2000. All major decrees and secondary legislation have been prepared and enacted;An independent and autonomous regulatory authority, Autorite de Regulation de la Poste et des Telecommunications (ARPT), has been established and is operational;A GSM license was awarded on a transparent and competitive basis on July 25, 2001 to Orascom for the amount of US$737 million.The government will award two VSAT and two rural telecommunications licenses in 2002 and has also confirmed its commitment to award a third GSM license in December 2003.Steps to establish new operating entities (Algerie Poste and Algerie Telecom) have been taken, and new management teams are expected to be appointed in the near future.An interconnection agreement between Algerie Telecom and Orascom was signed in January 2002.These  represent the first-generation reforms necessary to create a competitive, private sector-friendly environment for the ICT sector. However, the government recognizes that further second-generation reforms are necessary to take full advantage of the potential offered by the ICT revolution for economic growth and employment creation. It has asked the Bank for assistance through this project in order to implement those reforms and tackle the following constraints to ICT growth, consistent with its strategy: (i) nascent competition in the provision of telecommunications services; (ii) lack of an appropriate regulatory environment to develop electronic transactions; (iii) business environment of Algeria perceived as unattractive; (iv) lack of financing instruments to support the development of ICT start-ups or attract ICT multinational corporations; (v) a weak domestic private sector; (vi) underdeveloped logistic and payment systems; and (vii) cultural barriers to electronic payments. 2. Objectives The project objective is to create an enabling environment to : (i) improve access to efficient and affordable information and communications technology (ICT) services (ICT services are defined as hardware, software, networks, and media for collection, storage, processing, transmission, and presentation of information in the form of voice, data, text, and images, and in this project they include telecommunications, information technology, and postal services); (ii) facilitate private sector growth in the ICT sector; (iii) improve the competitiveness of national firms; and (iv) enhance the efficiency of the delivery of government services. The project will support the Government of Algeria's program to: (i) strengthen the ICT policy and regulatory framework; (ii) leverage ICT to promote business and government competitiveness; (iii) support "net-enterprise" development; and (iv) strengthen communications strategy and capacity building. 3. Rationale for Bank's Involvement The Bank is involved in dialogue on telecommunications sector reform, postal sector reform, and IT development in fifty countries all over the developing world, including the MENA region (Morocco, Egypt, Saudi Arabia, Jordan, Tunisia, and Lebanon). The Bank would provide advice on second-generation reform issues, especially convergence, further liberalization, and universal access. The GoAl recognizes the Bank's extensive international experience in telecommunications and postal sector reform as well as in designing effective policies for helping countries to tackle the transition to an information-based economy, and has sought Bank support as they embark on their reform program. 4. Description Strengthen ICT policy and regulatory framework This component will provide technical assistance on the following: (i) adopting a National Information Society Program and establishing an ICT policy unit with a data-collection function (national ICT observatory) to oversee program implementation within a restructured Ministry of Post and Telecommunications; (ii) adopting a pro-liberal development strategy opening the mail market to competition and ensuring the preservation of universal service; (iii) updating telecommunications policy to accelerate the pace of sector liberalization and prepare for Algeria's membership in - 2-  the WTO; (iv) drafting all primary and secondary legislation with regard to the development of e-commerce and e-government; (v) establishing a certification mechanism for IT suppliers to ensure compliance with technology standards; and (vi) strengthening the operational capacity of ARPT to implement e-commerce regulation. Leverage ICT to promote business and government competitiveness This component will support initiatives promoting the diffusion and effective use of ICT on the part of business and government entities by: (i) providing advisory services and matching grants to help Algerian small and medium enterprises (SMEs) prepare for e-business (access to information networks, internal computerization, reengineering of internal processes, implement and operate e-business solutions); (ii) supporting the transformation process of Algerie Poste into an e-commerce enabler (internal management reorganization, implement and operate a management information system (MIS), an enterprise resource planning (ERP) system, and a geographic information system (GIS); communication interfaces with customers and suppliers, modernizing and expanding corporate IT infrastructure; reengineering the supply chain and modernizing warehouses and transport facilities; implement and operate a portal activity); and (iii) implementing e-government flagship applications (implement and operate an electronic housing market system and a web-based tax filing system). "Net-enterprise" development program This component involves a range of technical assistance activities supporting private sector development in relation to ICT functions, needs, and businesses. They include: (i) setting up and operating a technology park in Algiers for which the government has already earmarked US$130 million in its Economic Recovery Plan; (ii) establishing an incubation facility with the technology park to support ICT research and development (R&D) initiatives or start-up companies with innovative projects; (iii) establishing a seed capital R&D grants mechanism to support IT start-ups and innovative SMEs; and (iv) providing institutional development support to the Institut National des Telecommunications (INT) and to the Ecole Centrale des Postes et Telecommunications to renew its curricula and courses on ICT management and cyberentrepeneurship. Strengthen communications strategy and capacity building A Project Coordination and Implementation Unit (PCIU) is already operational within the Ministry of Post and Telecommunications under the ongoing Telecommunications and Postal Sector Reform Project. This component will strengthen its capacity for this new project as well as provide it with technical assistance to prepare and implement an effective communications strategy to raise awareness of and build political consensus for the National Information Society Program by: (i) increasing awareness of the benefits of the transformation to an information society; and (ii) strengthening the capacity of the existing PCIU by hiring: (a) a financial specialist to oversee the implementation of matching grant mechanisms and an investment program dedicated to the postal company; and (b) a technology development specialist to oversee the implementation of the technology park, its incubation facility, and the institutional - 3 -  development support provided to the existing ICT colleges (INT, ECPT). 5. Financing Total ( US$m) BORROWER 2.5 IBRD 22.5 Total Project Cost 25 6. Implementation Implementation periodThe project will be implemented over a period of five years and three months from January 1, 2003 to December 31, 2007.Executing agency The executing agency for implementation of the sector reform program and the project is the Ministry of Post and Telecommunications (MPT). MPT will consult and coordinate with other ministries as necessary for the preparation and implementation of ICT policy, the preparation of the WTO offer, and the development of e-business and e-government. During pre-appraisal and appraisal, implementation arrangements will also be refined to ensure close coordination among relevant government institutions and the private sector.Implementing agencyThe implementing agency is the Project Coordination and Implementation Unit (PCIU). The PCIU is operational and is coordinating the ongoing Telecommunications and Postal Reform Project. It is already staffed by a project manager, a financial/accounting specialist, and a procurement specialist. However, due to the complexity of the ICT Development Support Project, the PCIU's capacity will be strengthened through the appointment of a technology development specialist and a financial specialist. The technology development specialist will oversee the implementation of the technology park and its incubation facility and the institutional development support provided to INT and ECPT. The financial specialist will oversee the implementation of matching grant mechanisms and the postal company investment program supported by the project. 7. Sustainability By developing a competitive framework for market-based telecommunications, postal, and IT based service provision, the project will help accelerate investment and improve service levels by new private operators and investors. Empowering the newly-created institutions to charge levies and fees with respect to some provided services will enable them to be sustained without dependence on budgetary support. Supporting the institutional capacity of MPT would also lead to formulation of policies conducive to private sector investment in IT, which would in turn reduce the government's budget allocation to IT investment. 8. Lessons learned from past operations in the country/sector The following lessons were learned and reflected in the project design:A clear, predictable, and reliable regulatory framework with autonomous regulatory agencies is a prerequisite for attracting private investment into ICT subsectors;Newly-created regulatory agencies are frequently overwhelmed but have little expertise to draw upon. Support from onsite advisers and operational advice during the initial stage to deal with priority issues are invaluable;Telecommunications sector policy 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;Consultations with stakeholders are essential - 4 -  for the success of reforms. These consultations should start at the design phase; andProject implementation units integrated into executing agencies have demonstrated better performance both in results and responsiveness. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues : This is a telecommunications, postal, and IT sector reform project which encompasses policy, legal, regulatory, and institution-building activities and a limited investment component to help the postal company with its management and information system (MIS), enterprise resource planning (ERP) system, and geographic information system (GIS) and to start e-business activity. There are no environmental issues in this project. 11. Contact Point: Task Manager Paul Noumba Um The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: (202) 473-0151 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 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. This PID was processed by the InfoShop during the week ending March 1, 2002. -5-