Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 58263-AFR Public Disclosure Authorized

PROJECT APPRAISAL DOCUMENT

ON

A PROPOSED CREDIT

IN THE AMOUNT OF SDR 19.8 MILLION (US$31.0 MILLION EQUIVALENT)

Public Disclosure Authorized TO THE REPUBLIC OF SIERRA LEONE

AND

A PROPOSED CREDIT

IN THE AMOUNT OF SDR 16.3 MILLION (US$25.6 MILLION EQUIVALENT)

TO THE REPUBLIC OF

FOR THE Public Disclosure Authorized WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROJECTS (APL 1A)

UNDER THE FIRST PHASE OF THE WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM (APL1) IN A GLOBAL AMOUNT EQUIVALENT TO US$300.0 MILLION

December 22, 2010

ICT Sector Unit Africa Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

(Exchange Rate Effective December 1, 2010)

Currency Unit = SDR = US$ 0.6362 = SDR 1

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

$ dollar, all dollars are US dollars unless otherwise indicated ACE Africa Coast to Europe AfDB African Development Bank AICD Africa Infrastructure Country Diagnostic APL Adaptable Program Loan BP Bank Procedures C&MA Construction and Maintenance Agreement CAS Country Assistance Strategy CCL Cable Consortium for Liberia EASSy Eastern Africa Submarine Cable System ECOWAS Economic Community of West African States EEZ Exclusive Economic Zone EIA Environmental Impact Assessment EMP Environnemental Management Plan ESIA Environmental and Social Impact Assessment ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan ESMAP Energy Sector Management Assistance Program FDI Foreign Direct Investment FM Financial Management Gbps Gigabit per Second GDP Gross Domestic Product GoL Government of Liberia GoSL Government of Sierra Leone GPT General Purpose Technology GSM Global System for Mobile Communication GTZ Gesellscharft für Technische Zusammenarbeit HIPPSA Harmonization of ICT Policies in Sub-Saharan Africa ICT Information and Communication Technology IDA International Development Association IFC International Finance Corporation 2

IFR Interim Financial Report IRU Indefeasible Rights of Use ISP Service Provider ITES Information Technology Enabled Services ITU International Union IXP Internet Exchange Point LDC Least Developed Country LTA Liberia Authority M&E Monitoring and Evaluation Mb Megabyte MIGA Multilateral Investment Guarantee Agency Mbps Megabit per second NCBC National Communications Backbone Company OD Operational Directives OMVS Organisation pour la mise en Valeur du fleuve Sénégal OP Operational Procedures OPGW Optical Ground Wire ORAF Operational Risk Assessment Framework PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementation Unit PPA Project Preparation Advance PPIAF Public-Private Infrastructure Advisory Facility PPP Public Private Partnership RAP Resettlement Action Plan REP Regional Economic Plan RIAS Regional Integration Assistance Strategy RPF Resettlement Policy Framework R-PRSP Regional Poverty Reduction Strategy Paper SAFE Far East Cable SAT- South Atlantic 3/West Africa Submarine Cable 3/WASC SALCAB Sierra Leone Cable Limited SIL Specific Investment Loan SMART Specific, Measureable, Achievable, Relevant, Timebound SME Small and Medium Enterprise SPV Special Purpose Vehicle SSA Sub-Saharan Africa TA Technical Assistance UNPAN United Nations Public Administration Network WACS WAPP West Africa Power Pool WARCIP West Africa Regional Communications Infrastructure Program WATRA West Africa Telecommunications Regulators Authority WBG World Bank Group

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Vice President: Obiageli Katryn Ezekwesili Regional Integration Director: Yusupha B. Crookes Sector Director: Jose Luis Irigoyen Country Director for Liberia and Sierra Leone: Ishac Diwan Sector Manager: Philippe Dongier Task Team Leaders for WARCIP: Mavis Ampah and Boutheina Guermazi Task Team Leader for WARCIP- Sierra Leone: Mavis Ampah Task Team Leader for WARCIP- Liberia: Boutheina Guermazi

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Table of Contents I. Strategic Context ...... 1 A. Regional and Country Context ...... 1 B. Sectoral and Institutional Context ...... 2 C. Higher Level Objectives to which the Program Contributes ...... 8 II. Program Development Objectives ...... 12 A. PDO ...... 12 1. Program Beneficiaries ...... 12 2. PDO Level Results Indicators for APL1-A ...... 13 III. Program Description ...... 13 A. Program Components ...... 13 B. Program Financing ...... 16 1. Lending Instrument ...... 16 2. Indicative Program costing Table Financing Table...... 17 C. Lessons Learned and Reflected in the Program Design ...... 18 IV. Implementation ...... 19 A. Institutional and Implementation Arrangements ...... 19 B. Results Monitoring and Evaluation ...... 20 C. Sustainability ...... 21 V. Potential Risks and Mitigation ...... 21 VI. Appraisal Summary ...... 23 A. Economic and Financial Analysis ...... 23 B. Technical ...... 24 C. Financial Management ...... 24 D. Procurement ...... 24 E. Social and Environment ...... 24 Annex 1: Results Framework and Monitoring...... 27 Annex 2: Detailed Program Description ...... 29 Annex 3: Implementation Arrangements ...... 39 Annex 4 Operational Risk Assessment Framework (ORAF) ...... 50 Annex 5: Implementation Support Plan ...... 53 Annex 6: Team Composition ...... 56 Annex 7: Economic and Financial Analysis ...... 58 Annex 8: Cable Route Map for ACE Cable ...... 62

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WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM ADAPTABLE PROGRAM LOAN (APL1-A)

FOR

LIBERIA (WARCIP LIBERIA)

AND

SIERRA LEONE (WARCIP SIERRA LEONE)

PROGRAM APPRAISAL DOCUMENT

AFRICA ICT Sector Unit

Date: December 22, 2010 Sector(s): Telecommunications (50%), Country Director: Yusupha Information technology (50%) Crookes Sector Director: Jose Luis Theme(s): Regional integration (40%), Irigoyen Regulation and competition policy (40%), Country Director for Liberia and Infrastructure services for private sector Sierra Leone: Ishac Diwan development (20%) Sector Manager: Philippe Dongier Team Leader(s): Mavis Ampah, EA Category: B (Partial Assessment) Boutheina Guermazi Project ID: P116273 Lending Instrument: APL

Project Financing Data:

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Proposed terms: IDA Credit on regular terms, with maturity 40 years, including grace period of 10 years.

[ ] Loan [ X ] Credit [ ] Grant [ ] Guarantee [ ] Other: Source Total Amount (US$M) Total Program Cost: US$300.0 million of which

APL1-A US$56.6 million APL1-B US$88.0 million APL2 US$55.5 million APL3 US$94.9 million Regional Grant US$ 5 million

Total Project (APL1-A) Cost US$56.6 million

Co-financing: Borrower: US$56.6 million Total Bank Financing:

IBRD IDA: US$56.6million New Recommitted

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Borrower: - Republic of Liberia - Republic of Sierra Leone

Responsible Agencies: Liberia Telecommunications Authority (Liberia) Contact Person: Angelique Weeks Telephone No.: 231 6 588168 No.: n/a : [email protected]

Ministry of Information and Communication (Sierra Leone) Contact Person: Gilbert Heveans Cooper Telephone No.: 232 33320101 Fax No.: n/a Email: [email protected]

Estimated Disbursements – APL 1-A (Bank FY/US$ m) FY 2011 2012 2013 2014 Annual 20.00 20.00 10.00 6.60 Cumulative 20.00 40.00 50.00 56.60

Project Implementation Period: Start March 31, 2011, End March 31, 2015 Expected effectiveness date: March 31, 2011 Expected closing date: September 30, 2015 Does the project depart from the CAS in content or ○ Yes X No other significant respects?

If yes, please explain:

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Does the project require any exceptions from Bank ○ Yes X No policies? ○ Yes ○ No Have these been approved/endorsed (as appropriate by Bank management? ○ Yes X No Is approval for any policy exception sought from the Board?

If yes, please explain:

Does the project meet the Regional criteria for X Yes ○ No readiness for implementation?

If no, please explain:

Program Development Objective:

WARCIP seeks to increase the geographical reach of broadband networks and reducing the costs of communications services in West Africa. Under APL1-A, the objectives of the Projects, thus, are to increase the geographical reach of broadband networks and to reduce costs of communications services in the territory of Liberia and Sierra Leone.

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Program description The program will be structured around three components: 1. Component 1- Supporting connectivity. (a) International Connectivity and (b) Regional/National Connectivity which leverages alternative Infrastructure. This component will improve connectivity in the region by addressing the missing infrastructure links, providing competitive access to submarine cables where opportunity exists, and commercializing excess fiber capacity where electricity transmission lines and other alternative networks are the appropriate platform.

2. Component 2- Creating an enabling environment for connectivity. This component will create an enabling environment for connectivity and applications and institutional strengthening to remove existing bottlenecks for private sector participation, and improving viability of incumbent operators where necessary to be competitive.

3. Component 3- Project implementation. This component will give support to countries to implement the program through the setting up of project implementation units, communications, resettlement costs where relevant, and Monitoring and Evaluation.

Safeguard policies triggered?

Environmental Assessment (OP/BP 4.01) X Yes ○ No Natural Habitats (OP/BP 4.04) ○ Yes X No Forests (OP/BP 4.36) ○ Yes X No Pest Management (OP 4.09) ○ Yes X No Physical Cultural Resources (OP/BP 4.11) ○ Yes X No Indigenous Peoples (OP/BP 4.10) ○ Yes X No Involuntary Resettlement (OP/BP 4.12) X Yes ○ No Safety of Dams (OP/BP 4.37) ○ Yes X No Projects on International Waters (OP/BP 7.50) ○Yes X No Projects in Disputed Areas (OP/BP 7.60) ○ Yes X No

Conditions and Legal Covenants:

Financing Agreement Description of Condition/Covenant Date Due Reference Conditions and Legal Covenants for Liberia

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Effectiveness Conditions for Liberia

(a) The Subsidiary Grant Agreement, in form and substance satisfactory to IDA, has been executed on behalf of the Liberia and the Liberia Telecommunications Authority.

(b) The Contractual Arrangement, in form and substance satisfactory to IDA, has been executed on behalf of Liberia and the Cable Consortium of Liberia, Inc.

(c) Liberia shall have established the Project Implementation Unit (PIU) under terms of reference and with staff in numbers and with qualifications satisfactory to IDA. (d) The Government of Liberia shall have adopted the Project Implementation Manual in form and substance satisfactory to IDA.

Disbursement Conditions for Liberia:

No disbursement shall be made for the setting up of the Universal Access Fund, until and unless the LTA shall have: (i) issued the regulations on the operation of the Universal Access Fund; and (ii) approved the operating manual for the implementation of the Universal Access Fund, all in form and substance satisfactory to IDA.

Legal Covenants for Liberia

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1. Liberia shall:

(a) ensure that the construction of the landing station related Before to component 1 (a) of the Project does not commence until and construction of unless: (i) IDA shall have approved the environmental and social landing station impact assessment (ESIA), environmental and social management plan (ESMP), and/or the resettlement plan (RAP), as the case may be, and the same documents have been consulted on and disclosed as approved by IDA; and (ii) it shall have verified, through its own staff, outside experts, or existing environmental/social institutions, that the activities under component 1 (a) of the Project meet the environmental and social requirements of appropriate national and local authorities and that they are consistent with IDA’s applicable environmental and social assessment and safeguard policies and comply with the environmental and social review procedures set forth in the Project Implementation Manual;

(b) take all measures required on its behalf to carry out, or to ensure that the special purpose vehicle company (SPV) carry out, the ESIA, ESMP, and/or the RAP, as the case may be, in accordance with the provisions of the environmental and social management framework (ESMF) and the resettlement policy framework (RPF); and (c) ensure that the relevant mitigation and monitoring provisions of the ESIA, ESMP, and/or RAP, as the case may be, are appropriately implemented.

2. Liberia shall, not later than four (4) months after the Effective Date, recruit an external auditor for the Project Financial Management Unit on the basis of terms of reference Not later than 4 and with qualifications and experience satisfactory to the months after the Association. effectiveness date

Conditions and Legal covenants for Sierra Leone

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Effectiveness Conditions for Sierra Leone

(a)The Contractual Arrangement, in form and substance satisfactory to IDA, has been entered into between Sierra Leone and SALCAB.

(b) Sierra Leone shall have established the Project Implementation Unit (PIU) under terms of reference and with staff in numbers and with qualifications satisfactory to IDA. As part of such staffing, there shall be in place for the PIU: (i) the Project coordinator under terms of reference and with qualifications and experience satisfactory to IDA; and (ii) a financial management specialist and a procurement specialist, both under terms of reference and with qualifications and experience satisfactory to IDA.

(c) Sierra Leone shall have adopted the Project Implementation Manual in form and substance satisfactory to IDA.

Disbursement Conditions for Sierra Leone

Sierra Leone has issued an offer to sell its shares in SALCAB in an amount and manner satisfactory to IDA prior to the final disbursement of the Consortium Fee to ACE.

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Legal Covenants for Sierra Leone Sierra Leone shall: (a) ensure that the construction of the landing station related to Before component 1 (a) of the Project does not commence until and construction of unless: (i) IDA shall have approved the environmental and social the landing impact assessment (ESIA), environmental and social station management plan (ESMP), and/or the resettlement plan (RAP), as the case may be, and the same documents have been consulted on and disclosed as approved by IDA; and (ii) it shall have verified, through its own staff, outside experts, or existing environmental/social institutions, that the activities under component 1 (a) of the Project meet the environmental and social requirements of appropriate national and local authorities and that they are consistent with the IDA’s applicable environmental and social assessment and safeguard policies and comply with the environmental and social review procedures set forth in the Project Implementation Manual; (b)take all measures required on its behalf to carry out, or to ensure that the Special Purpose Vehicle (SPV) carry out, the ESIA, ESMP, and/or the RAP, as the case may be, in accordance with the provisions of the environmental and social management framework (ESMF) and the resettlement policy framework (RPF); and (c) ensure that the relevant mitigation and monitoring provisions of the ESIA, ESMP, and/or RAP, as the case may be, are appropriately implemented.

Other Covenants (a) Sierra Leone shall, not later than four (4) months after the Effective Date, recruit an external auditor for the Project Not later than 4 Implementation Unit on the basis of terms of reference and with months after qualifications and experience satisfactory to IDA. effectiveness (b)Sierra Leone to publish in a national newspaper of wide circulation its action plan and timeline setting forth the steps and actions required to liberalize its international telecommunications By four (4) and internet gateway not later than September 30, 2011; and months after the (c)Sierra Leone to submit for the vote of its Parliament, a bill, in Effective Date form and substance satisfactory to IDA, introducing amendments but no later than to the Telecommunications Act to reverse the monopoly of September 30, Sierratel over Sierra Leone’s international telecommunications 2011 and internet gateway.

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I. Strategic Context

A. Regional Context

1. The ECOWAS region has seen steady economic growth since 2000. Rising raw material prices, increased macroeconomic stability and a substantial increase in development assistance resulted in robust economic growth for the 15 countries of the Economic Community of West African States (ECOWAS)1 in the years preceding the financial crisis of 2008 and the global economic downturn that followed. Indeed the average annual growth rate of real Gross Domestic Product (GDP) between 2000 and 2008 was around 5.3 percent compared to 2.9 percent during the 1990’s. While the impact of the financial crises was not immediately visible in ECOWAS countries, studies carried out by the IMF reveal that a drop of 1 percentage point in the global economic growth could result in a drop of 0.5 percentage point of the growth in Sub-Saharan Africa (SSA).2

2. Infrastructure has been critical to the region’s growth. It is estimated that between 1995 and 2005, infrastructure improvements boosted West Africa’s growth by about one percentage point per capita per year. The positive growth was almost entirely attributed to the Information and Communication Technology (ICT) revolution while deficient power infrastructure held back economic growth by about 0.1 percentage point per capita per year. It is estimated that if infrastructure could be upgraded to the level of the best performing country in Africa (Mauritius), the impact on per capita economic growth would be in the order of 5 percent. 3

3. However, the region faces economic and social challenges despite progress. ECOWAS countries continue to be ranked among the poorest in the world. The region has 12 least developed countries (LDCs) out of the 15 countries, and is characterized by a low GDP per capita4 and basic social indicators below the average for sub-Saharan Africa. About 48 percent of the population lives on less than a dollar per day. Literacy rates for adults over the age of 15 years average around 50 percent across the region5.

4. The region remains highly fragmented, resulting in uneven distribution of resources, and high cost of doing business. The region is characterized by a large number of small scale economies many of which are physically cut off from key resources. The estimated population of 306 million in 20106 is unevenly distributed among countries, with containing over half of the total, and three countries (, the Gambia and Guinea Bissau) having 2 million or less inhabitants. Population density is generally low, except in the urbanized areas along the Atlantic coast. The long distances, and disparities in land mass and resources, has resulted in high cost and uneven distribution of infrastructure in the region that translates into an especially

1 Benin, Burkina Faso, Cape Verde, Cote d’Ivoire, Gambia, , Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and . Mauritania left ECOWAS in 2002 to favor its membership in the Arab Maghreb Union (AMU). The official French name for ECOWAS is Communauté Economique des États de l'Afrique de l'Ouest (CEDEAO). 2 IMF and WB Report on the Financial crisis, December 2008. 3 AICD Report – ECOWAS’s Infrastructure: A Regional Perspective, July 2010. 4 GDP per capita is lowest in Burkina Faso ($522), Niger ($354), Guinea ($505), Liberia ($219) and Sierra Leone ($418) and highest in Nigeria ($1450), Senegal ($1088) and Cote d’Ivoire ($1137). 5 World Development Indicators 2009, World Bank. 6 United National Statistics Division. 1

high cost of doing business in the sub-region. The challenging geography makes it particularly important for a regional approach to infrastructure development.

5. The governments of West Africa aim to deepen integration of their economies to improve economic growth in the region. In 2007, the ECOWAS and the West Africa Economic and Monetary Union finalized a joint regional poverty reduction strategy (R-PRSP) for West Africa, the first of the kind in Sub-Saharan Africa. Recognizing that the region is not on track to achieve the Millennium Development Goals (MDGs), the regional PRSP emphasizes the need for enhanced cooperation among West African countries and deeper regional integration to help them accelerate growth, reduce poverty, and improve performance on the MDGs. It proposes four strategic directions for regional intervention: (i) improve governance, prevent and manage conflicts, and facilitate the free movement of people across the sub-region; (ii) integrate markets to increase competitiveness and economic growth; (iii) develop and interconnect infrastructures; and (iv) build up human resources. The R-PRSP is operationalized in the form of a Regional Economic Plan (REP) with similar objectives. The integration and opening up of the regional market should lead to improved competitiveness for the service sectors but also for productive agricultural and industrial sectors which would gain through greater access to more efficient and less expensive basic services (transport, telecoms, banking and insurance).

6. The World Bank Regional Integration Assistance Strategy for Sub-Saharan Africa (RIAS) (2008) and the West Africa Implementation Action Plan (2010) supports these efforts and aims to create a unified economic space. The World Bank’s response and support to the region’s efforts is underpinned by a comprehensive Regional Integration Assistance Strategy, 2008 (RIAS) for the continent and Implementation Action Plan for West Africa (2011-2015). RIAS seeks to create economies of scale, facilitate intra-regional trade and exports and connect landlocked countries to regional and global trade routes by reducing barriers to movement of goods and services between countries, and improve the regional business environment. The RIAS places significant emphasis on the need for improved regional physical connectivity (electricity, surface and air transport and ICT infrastructure) as critical foundation for effective regional integration.

B. Sectoral and Institutional Context

(i) Status of Access to ICT Services

7. Considerable developments in the ICT sector have resulted in improved communications access. A wave of reforms in the ECOWAS region during the last few years, particularly on policy and regulatory improvements at the national level, increased competition, and increased harmonization at the regional level, has resulted in improved access in the sub-region. The combined impact of an emergence of strategic pan-regional operators, and collaboration between regional operators and regulators on roaming arrangements is transforming the region both in terms of access and quality of service.

8. Reforms have resulted in increased investment and explosion in mobile services. Reforms implemented over the last decade have unleashed competitive forces in the telecommunications and ICT sectors, fostered private sector participation in the fixed and mobile phone markets in

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particular, and continue to nurture an Internet Service Provider (ISP) market. The result has been an unprecedented increase in investment in the telecom and ICT sectors. Thanks in particular to the explosive growth of the mobile sector - rising from 2.1 million in 2000 to 134 million in 2009. Within the region the number of estimated internet users rose from 0.9 million in 2000 to over 19.6 million users in 2009. The ECOWAS region currently has a higher mobile phone penetration level (45.3 %) than South Asia (33 %) and Sub-Saharan Africa as a whole (37 %).

9. Significant gaps remain despite impressive progress. The impressive developments, however, mask the challenge that the ECOWAS region faces in providing access to modern ICT for its over 300 million inhabitants. Discounting Nigeria, ECOWAS countries support an internet penetration of 3.4 %, compared to 8.71% in Sub-Saharan Africa, and nearly 27 % globally. Broadband penetration is also below the Sub-Saharan average, at between 0.07 and 0.09 %, compared to the continent at 0.11%. In both the mobile and internet sectors wide inter-regional variations exist, with the highest mobile penetration levels recorded in The Gambia, Cape Verde, Ghana, Nigeria and Cote d’Ivoire- all above 60 %- and the lowest in Niger, Sierra Leone, Burkina Faso and Liberia- all below 21%. Countries with the greatest popular access to the internet include Cape Verde and Nigeria where internet penetration is around 30%, followed by Gambia, Senegal, Ghana and Togo, where only 5% of the population are internet users. Price of ICT services in ECOWAS region are very costly, with a fixed broadband sub-basket costing about 3 times more than the global average- costing on average 122% of national GNI, as indicated in Table 1 below.

Table 1: Price of and in West Africa.

Country Global ICT Price Basket Fixed-telephone Mobile sub-basket Fixed broadband sub- rank sub-basket as a as % of GNI per basket as % of GNI (out of % of GNI per capita per capita 161) capita 2009 2009 2008 2009 2008 2009 2008 2009 2008 Niger 161 67.6 72.4 47.0 58.2 55.7 59.0 966.9 249.2 Togo 160 58.5 67.9 38.9 43.6 37.2 60.1 558.4 352.8 Burkina Faso 155 55.0 58.6 28.8 28.7 36.1 47.1 228.1 5193.6 Benin 151 47.7 51.7 17.3 22.4 25.7 32.7 204.6 220.4 Mali 149 46.8 49.3 19.5 23.7 20.8 24.0 114.6 139.6 Gambia 147 42.2 45.9 7.3 15.1 19.3 22.6 945.4 1439.3 Guinea 142 39.6 40.2 9.2 10.2 9.6 10.6 1546.2 24.0 Nigeria 141 38.9 43.0 5.9 13.3 10.7 15.7 108.6 890.1 Cote d'Ivoire 129 31.6 37.0 26.5 30.0 14.0 19.5 54.3 61.4 Ghana 128 31.4 40.5 6.8 9.5 7.6 12.0 79.6 131.0 Senegal 126 29.8 33.0 29.7 25.4 10.3 12.2 49.2 61.3 Cape Verde 105 7.1 11.3 1.9 4.2 6.0 9.9 13.4 19.7 Average West Africa 41.3 45.9 19.9 23.7 21.1 27.1 405.8 731.9 Average World 12.8 15.0 5.9 - 5.7 - 122 - Source: ITU, Measuring the Information Society, 2010. NB. No ITU price information available for Guinea Bissau, Liberia and Sierra Leone.

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(ii) Status of Enabling Environment

10. Sector liberalization is largely incomplete in the region. A number of market segments still run under a monopoly regime in the ECOWAS region. Monopoly policy structures over access to international broadband fiber optic gateways continue to constrain the development of broadband in a number of ECOWAS countries including Benin, Burkina Faso and Sierra Leone. There appears to be significant pressure from both private and incumbent public operators to re- monopolize the gateways in yet a few others. Incumbent suppliers also often have monopolies on fixed-voice services in several countries including Benin, Burkina Faso, the Gambia, Guinea- Bissau, Liberia, Sierra Leone and Togo resulting in low penetration of fixed networks and sub- optimal development of the internet sector. In general, the goal of creating a fully integrated telecom market in the sub-region remains to be achieved.

11. Addressing remaining challenges in policy and regulatory reform and harmonization at both national and regional levels is required for success. Continuous capacity building, harmonization, and dissemination of emerging promising practices of regional policy and regulatory guidelines for telecommunications is critical for an effective West Africa Connectivity Program. The new opportunities with submarine cables for example, require that National Regulatory Authorities develop guidelines and frameworks to manage the regulation of submarine fiber cable systems. Some initial support is being provided by Gesellscharft für Technische Zusammenarbeit (GTZ), International Telecommunication Union (ITU) and HIPPSA (ITU-European Union project to support Harmonization of ICT Policies in Sub-Sahara Africa) to develop draft frameworks to provide, inter alia, guidance on areas such as the process of granting cable landing licenses; price controls; competitive and open access; jurisdiction; transparency. But there is a need to go beyond the framework to develop the institutional capacity at the regional level to work with countries on adoption, development of performance indicators, collection of data to support the calculation of benchmarks on a range of indicators, collation/dissemination of information on pricing, co-location of equipment at landing station, etc.

12. Similar harmonization is required at the regional level on the broader policy, legal and regulatory environment of countries which want to capitalize on alternative networks. This is especially key in the areas of licensing and interconnection frameworks to ensure open and competitive supply of excess capacity, including resale, rights of way and co-location, cross- subsidization, pricing and accounting separation, universal service and quality of service.

(iii) Status of Infrastructure Development

13. Africa represents a very low share of international . Africa’s access to international internet bandwidth represents less than 0.80% of total international bandwidth, just 397 Gbps, compared to Europe which has 27,728 Gbps (see Table 2 below). With the exception of South Africa, sub-Saharan African countries have far less internet capacity than their northern counterparts. This situation reflects the relatively small number of internet users in these countries, the high cost of capacity, and the limited access to international bandwidth. Many countries within the ECOWAS region have access to less than 10 Mbit of data per second.

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Senegal is one of the highest in the region with about 4660 Mbit of data per second (see Figure 1 below).

Table 2: International internet bandwidth by region, Gbps (2010). Gbps (%) Africa 397 0.80 Asia 6,015 12.08 Europe 27,728 55.67 Latin America 3,566 7.16 USA and Canada 12,098 24.29 Total 49,804 100 Source: Telegeography Global Internet Geography, 2010. Notes: Figures represent Internet bandwidth connected across international borders as of mid-year. Domestic routes are excluded.

Figure 1: International internet bandwidth by ECOWAS country (Mbit/s).

(Latest figures for each country between 2006-2009). Source: World Bank based on ITU World Telecommunications/ICT Database, 2010.

14. Smaller and post-conflict ECOWAS states, in particular, are often seen as unattractive investment opportunities and consequently bypassed by private submarine cable consortia. Sierra Leone, Liberia, Guinea, Guinea Bissau, Gambia and Togo are among a handful of countries in the region which are not connected to the global network of broadband infrastructure. Small states in the region are often by-passed by submarine cable consortia, because their markets are not attractive enough. Sierra Leone and Liberia have the additional tag of being post-conflict and fragile states. For these countries, in particular, poor access to international telecommunications capacity, over-dependence on costly satellite technologies (satellite prices between US$4,000-5,000/Mbps/month, compared to countries connected to submarine cables which can access capacity at much lower prices - approximately US$500/Mbps/month in East Africa and US$200 in the US), and absence of competitive access to capacity via submarine cables are critical constraints limiting opportunities for growth and development, and ability to trade competitively with the rest of the world. High connectivity

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prices translate into some of the highest prices in the world for international calls and Internet costs - even compared to other countries in the region and limits the potential of these countries to create jobs, expand production of goods and services.

15. Landlocked countries suffer from their geographical positions but have the potential to be an important link in a regional connectivity network. In the case of Burkina Faso, Mali and Niger, given their landlocked status, they have always depended on neighbors for international access, often at high risk and uncompetitive prices. These countries, however, also benefit from advantageous geographic positions in the center of West Africa, and could play a key route for a number of the large telecom groups in the region. Burkina Faso for example has six neighboring countries (Mali, Niger, Benin, Ghana, Togo, Cote d’Ivoire) and could provide opportunity for such regional players to complete their international connections and regional rings. There is therefore a significant potential international demand provided Burkina and the other landlocked counties can offer robust national and international network capacity. One option is to develop backhaul transmission infrastructure from landlocked countries to landing points in coastal countries using either buried or aerial cable. The other option would be to establish virtual landing points which would be managed jointly by all the operators. The program will review the most viable options for reducing the cost of international bandwidth to landlocked countries, and possibly provide financing for the backhaul transmission infrastructure. There is more urgency for Burkina which is not associated with ACE. For Mali and Niger, although they are landlocked, they are expected to gain access to the ACE cable through their Orange subsidiaries who are members of the ACE cable consortium. Subsequent phases of the program will assess more effective connectivity solutions for these countries.

16. Countries in the region with more advanced ICT sectors need to improve the redundancy of their networks and leverage existing fiber to create regional connectivity networks. There is a group of countries within the region which have better access to international connectivity but require redundancy of their networks. Most of these countries also have advanced electricity transmission lines and alternative telecom networks which can be leveraged for their fiber infrastructure at both the national and regional levels. At the regional level, the proposed West Africa Power Pool (WAPP) network provides a unique opportunity for a regional transmission network to be developed based on WAPP power lines to serve as a regional backhaul network, interconnecting all countries and aggregating traffic for the submarine cables which serve the ECOWAS Region. It would provide redundancy to existing routes to submarine cables (in cases where buried fiber is cut or damaged), a diversity of routes, and complete the missing gaps where other connectivity projects such as the ECOWAS Commission’s Intelcom II program have not yet been fully implemented. The leveraging of electricity transmission lines is in view of the enormous untapped fiber potential in power transmission lines, particularly at the national level. Power companies in West Africa are beginning to play a significant role in provision of telecommunications infrastructure. A number of these companies have extensive networks of high voltage power transmission infrastructure which reach out to the most remote areas of the sub-region, most of them embedded (or with potential to embed) with fiber optic cables. These cables often contain either 9 or 12 pairs of fibers (18 or 24 fibers) of which usually two are equipped for communications purposes and used by the electricity company for its own internal communications. The remaining surplus of 7 or 10 fiber pairs, which if they are not equipped are called “dark fiber”, can be split so that the asset could be commercialized in potentially up to 7

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or 10 different ways, to provide either national or international transmission services. It is expected that significant excess fiber capacity will be available for commercial use. At the national level, the WAPP fiber network could also strengthen national backbones and cross- border links. Countries in this group include Nigeria, Ghana, Benin, Cote d’Ivoire, Mali, Senegal.

17. West African governments desire to create a West African telecommunications market, leveraging existing infrastructure where possible. There is considerable interest among governments in the region to address the existing sector constraints and develop an efficient West African telecommunications market as key to promoting regional integration, better resource allocation, economic growth and development of member states. A primary interest of the ECOWAS Community is to be able to leverage existing and emerging regional infrastructure to address regional communications infrastructure gaps and create an integrated regional communications market. Within this context, members of the Community would like to leverage emerging regional and international cables such as ACE, Glo 1 and , as well as utilise excess fiber communications capacity on the high-voltage cross-border power transmission infrastructure of WAPP. This would provide a unique opportunity to create a seamless regional transmission network and interconnect all ECOWAS countries. Such a regional network could both integrate, and co-exist, with the partially completed regional transmission networks and provide redundant links to the SAT-3 submarine cables.

(iv) Relevance of WARCIP

18. The proposed West Africa Regional Communications Infrastructure Program (WARCIP), will therefore provide a comprehensive solution to address connectivity gaps in the ECOWAS Region. The focus will be on international, national and regional connectivity to enable the creation of a fully integrated network which will eventually link all countries’ networks in the region and provide affordable high speed connectivity within countries.

19. ACE represents a unique opportunity for international connectivity for un- and under- connected countries. For most of the countries without established access to international submarine cable connectivity, the ACE cable represents a unique opportunity for countries to gain international bandwidth access. WARCIP activities will include providing support to ensure that these countries participate in the new submarine cable systems being planned in the region. For some of these countries, this may be one of the single opportunities for these countries to be connected to submarine fiber and would provide about 7Gbps capacity initially. Also Sierra Leone, Liberia, Guinea and the Gambia have no possibilities of using power lines for their bandwidth requirements.

20. Following due diligence analysis ACE has been found as the most economic option for countries without international fiber connectivity. Additional due diligence on financial, economic, legal, fiduciary, and safeguard aspects of the submarine cable opportunity was conducted to confirm that ACE represents the best and most economic option for Sierra Leone and Liberia to secure international connectivity. ACE is the only cable in planning that presents the advantage of providing these countries with dedicated landing stations and independent access to international capacity. Cables like Main 1 and West Africa Cable System (WACS)

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also did not propose landing stations in Liberia, Sierra Leone, The Gambia and Guinea. The team’s assessment is that the ACE consortium is being structured in a manner consistent with international good practices in the industry, and is led by major industry players.

21. The World Bank has already approved two PPAs to help Liberia and Sierra Leone capitalize on the ACE opportunity. An initial PPA for US$ 1.5 million each was granted to the two countries to support project preparation activities. Support included finalizing the shareholder agreements for the SPV in the case of Liberia, and developing the framework for divestiture from the SPV in the case of Sierra Leone, as well as the requisite policy, legal and regulatory environment for open access. The PPAs also provided support for environmental and social safeguards, as well as support for setting up the PIUs and capacity building support for the implementation Units.

22. To ensure timely funding of the first installments in ACE7, the World Bank also approved supplemental PPAs for US$ 5 million each to support the payment of the initial contributions by Liberia and Sierra Leone, including the initial installment of 15% of the countries’ contributions plus the subsequent immediate payments. Given that the requested amounts exceeded the aggregate ceiling of US$ 3.0 million per project for non-emergency projects set out in OP 8.10 (Project Preparation Facility), Bank Management granted a waiver on June 3, 2010 to ensure that the two countries would not miss out on the ACE opportunity. Full disbursement of the supplemental PPA has already been made to ACE under direct disbursement. In the case of Sierra Leone, the Government has contributed an additional US$2.5million to address funding gap up to December 2010, in anticipation that there will be reimbursement after the project becomes effective. This is part of retroactive financing agreement between the World Bank and the Government of Sierra Leone.

23. Preparatory work for leveraging the West Africa Power Pool (WAPP) is well advanced. Detailed technical, financial, commercial and legal studies for leveraging fiber in power transmission lines were launched in September 2009 with funding from ESMAP and PPIAF. The studies were conducted with input from the WAPP secretariat and the ECOWAS Commission. The results of the feasibility studies have been endorsed by key stakeholders and will facilitate project preparation for follow up phases of the program.

C. Higher Level Objectives to which the Program Contributes

24. A full connectivity solution will contribute to promoting cheaper access to communications and promote more effective global integration. WARCIP proposes to be a full connectivity solution, building on new and existing communications opportunities. The Program is expected to be stand-alone and focus on providing catalytic financing for additional links to international and national infrastructure where gaps exist that cannot be addressed by the private sector alone, and where there is clear evidence of positive externalities. The Program builds on the opportunities of the fiber in power transmission lines, the civil works of new roads, and the availability of new submarine cables along the West Africa Coast. By providing access to

7 Countries were required to pay a 15% advance payment , equivalent to US$3.75 by June 5, 2010 in order to secure membership in ACE 8

international cables, countries will have better and cheaper access to communications and be able to connect more effectively with the rest of the world.

25. Addressing connectivity gaps at the international, regional and national level could: accelerate the realization of an integrated regional ICT market. The Africa Infrastructure Country Diagnostic (AICD)8 report highlights the importance of regional integration, in particular for the smaller countries in the region which could each independently spend between 5-30% of their GDP on addressing infrastructure gaps, in contrast with 1% of regional GDP. Integrating and sharing physical infrastructure could allow countries to gain scale economies, harness regional public goods and enable deeper economic growth. A regional approach to addressing the combined effects of the three level connectivity gaps could reduce the cost for each of the countries involved, and result in positive effects on prices and capacity, increased availability of end-to-end high-capacity bandwidth at competitive rates and hence broadband provisioning within the region.

26. An integrated ICT market would stimulate economic growth and enhance trade. The region’s prosperity depends on how well it is integrated into the global economy. Information and Communication Technologies (ICT), particularly high-speed Internet, is playing an increasingly central role in this - enhancing trade, facilitating cross-border payments, increasing productivity and improving the quality of public service delivery – all key components of economic growth and poverty reduction. A number of ECOWAS countries are at the initial stages of positioning themselves as preferred destinations for IT and IT enabled services (ITES) in the region. Key countries include Senegal, Ghana and Nigeria. The global addressable market for the IT/ITES is estimated at US$475 billion of which only about 15% has been realized, and every job created is projected to yield about four additional jobs in ancillary services. If the ECOWAS region were to capture only a fraction of this addressable market, the socioeconomic impact would be tremendous. A robust local ICT industry would help generate more economic output, attract foreign investment, energize local exports, create more employment for the local populations, and overall the region would see a boost to its economic integration and diversification efforts. Realizing this objective would depend on availability and affordability of robust transmission infrastructure (within and between national and international ICT systems) which is one of the weakest links in the drive towards greater integration of the region.

27. A functioning ICT market would also improve public service delivery and attract foreign investors. Connectivity gaps also prevent the region from capitalizing on innovative applications to increase growth and improve service delivery in both the public and private sectors. For example, most ECOWAS countries ranked very low in e-government applications9 according to the UNPAN Web Measure Index which measures the level of sophistication of a government’s online presence, based on five stages of e-government evolution (emerging presence, enhanced presence, interactive presence, transactional presence and networked presence). The region as a whole also lags behind in investment attractiveness as evidenced in the relatively weak showing in the AT Kearney’s top 50 Global Services Location Index (2009)10 where only 2 of the 15 countries (Ghana and Senegal) make it into the assessment.

8 AICD - ECOWAS’s Infrastructure: A Regional Perspective, July 2010 9 UNPAN Web Measure Index ranking. http://www2.unpan.org/egovkb/datacenter/CountryView.aspx. 10 A global ranking of the top 50 of the World’s most attractive location for offshore business. 9

28. WARCIP is underpinned by studies which confirm ICT as a General Purpose Technology (GPT) that contributes to economic growth. ICT is a general purpose technology that can help to bring radical innovation, achieve a fundamental restructuring of national and regional economies, and result in significant spill –over effects which can be sustained over an extended period. The remarkable contribution of ICT to economic growth has been demonstrated in many studies. For example, a recent cross-country analysis found that the growth effect of ICT can be significantly stronger in developing countries than in developed countries (Figure 2) indicating that, with the appropriate enabling environment, ICT can be used as a tool to leapfrog development. Furthermore, the contribution of broadband networks to economic growth is much more pronounced than that of narrowband networks. For instance, a 10 percent point increase in the penetration of broadband (high-speed Internet) in developing countries is linked to a 1.4 per cent increase in GDP per capita (wealth).

Figure 2: Effect of a ten percentage point increase in broadband penetration on economic growth in high and low/middle income economics.

Source: Qiang 2009, “Telecommunications and Economic Growth.”

29. The program would have a positive impact on ICT sector performance. The Bank has been supporting over 30 countries in Sub-Saharan Africa to develop conducive and enabling environment for private sector investment in the sector, and is providing continuous support to countries to update policy and regulatory frameworks to address evolving market dynamics and technological developments. Results show that reforms translate in improved connectivity and lower prices of communications services. In Kenya, the introduction of competition in the international voice/data market has resulted in a drop in international call prices of 50 percent. Further reforms included a clear sector policy, privatization of Kenya in late 2007, and setting the stage for multiple submarine cables to land in Mombasa. All of these together have helped push the mobile and fixed telephony penetration to 51 percent in 2009 from 15 percent in 2005 and drastically reduced the price of international high-speed Internet. World Bank support was channeled through non lending TA as well as through a regional Connectivity project. Ghana is another prime example of how reforms of the sector combined with healthy

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competition in the ICT markets can impact the level of connectivity. Competition at the domestic level (6 mobile operators; 2 of them within the last 3 years), and international level (liberalization of the international gateway and landing rights provided to two new submarine cable providers), have profoundly changed the connectivity landscape: Today the telephone penetration has reached 65percent of the population in Ghana, against 5 percent seven years ago, and a number of ranking agencies, including AT Kearney have ranked the country as one of the leading destinations for business process outsourcing in Africa.

30. WARCIP leverages private sector investment. In most countries in Africa, the private sector is quite active in the sector. In order not to crowd out private investment, the program will focus on putting in place PPP frameworks, where relevant, to leverage private sector investment. Additional support from IFC and MIGA will be explored by private sector players on a case by case basis. Where private investment cannot be guaranteed upfront, the program provides guidance and resources to affect a clear exit strategy and transfer of public assets to private sector. The proposed full connectivity solution is expected to cost about US$300 million and is expected to be complemented by Government and private sector resources (See detailed program costing in Table 4.

31. Investment in telecommunications networks will have public-good elements. Investments in telecommunications infrastructure development will benefit all the users simultaneously. Communications networks are becoming the world’s largest platform to deliver information as well as a wide range of public and social services. Broadband infrastructure, in particular, is increasingly being used to deliver public and social services including payment of taxes, land registration, education programs, job search, health care, and voting, which are all examples of services that were previously delivered manually or not available at all, but are now being automated and delivered to communities including those in remote areas, more timely and cost effectively. This is especially important for developing countries where useful information and many of the conventional public services are not available to a large part of the population, leading to market failures in some cases and increasing inequality in others. Governments in the developing world therefore have a keen interest in facilitating broadband as a distribution platform of knowledge as well as public and social services.

32. The program fits with regional and country assistance strategies. By providing technical assistance to help the governments create an enabling environment for the ICT sector and by providing targeted catalytic resources to improve connectivity, the proposed Program will support governments in the ECOWAS region in achieving their vision and leveraging the sector as a key driver of growth, competitiveness, and improved governance, as outlined in Regional Strategies, including in the RIAS, Country Assistance Strategies, and Poverty Reduction Strategies of the different countries.

33. WARCIP also addresses key Millennium Development Goals (MDGs)11. ICT can play an important role to help countries reach a number of MDG targets. The development of ICT sectors and establishment of an integrated regional economic space will promote economic growth helping to eliminate poverty and create new opportunities for the unemployed and underemployed (MDG 1- Poverty). ICT has the potential to promote the delivery of more

11 See http://www.un.org/millenniumgoals/ for complete list of MDGs. 11

effective and efficient health services , for instance enabling the efficient delivery of health information in remote areas, and disease and medical supplies tracking through mobile communication (MDG 4 and 5 -Health). The Program gives specific consideration to the special telecommunication needs of landlocked countries ensuring that they will be able to connect to coastal fiber optic cables without experiencing exorbitant prices (MDG 8- Global Partnerships). Through its PPP structure and policy of open access the Program encourages private sector investment in ICT facilitating universal access to new technologies (MDG 8).

II. Program Development Objectives

A. PDO 34. The program development objective of WARCIP is to increase the geographical reach of broadband networks and reducing costs of communications services in West Africa. For APL1-A, the Projects development objectives are to contribute to increasing the geographical reach of broadband networks and to reducing the costs of communications services in each of the territory of Liberia and Sierra Leone.

35. Adoption of an integrated approach to improve connectivity. In order to reach this objective, the program proposes an integrated approach focusing on improving connectivity in the region by: addressing the missing infrastructure links, providing competitive access to submarine cables where opportunity exists, commercializing excess fiber capacity where electricity transmission lines and other alternative networks are the appropriate platform, and creating an enabling environment and institutional strengthening to remove existing bottlenecks for private sector participation in both regional infrastructure and applications.

36. Opportunity to create a more unified regional economic space. The ultimate objective of the program is to contribute to reducing fragmentation of the West Africa region’s economies and support the countries to create a more unified regional economic space.

1. Program Beneficiaries

37. WARCIP will benefit the entire population of West Africa. All over Africa, businesses, governments, teachers, doctors, farmers, and fishermen, are using ICTs to communicate, share information, improve productivity and service delivery, find better prices, improve access to markets, and increase their bargaining power. The situation is the same in West Africa where about 30 percent of the African and over 35 percent of the SSA population lives12. The project will therefore benefit the entire population of the region including Telecom operators, telecom users, universities, schools, hospitals, banks, corporate users, and Government ministries and departments. Additionally it is expected that the entire West Africa region would benefit by having access to new communications services, sources of information and knowledge, enhanced and diversified employment opportunities, improved delivery of public and private sector services, increased productivity and transparency of government, and more rapid and coordinated response to emergencies. Overall, the region would see a boost to its competitiveness, social inclusion, economic diversification and regional integration efforts. However, for the purpose of M&E, the PIUs in each country will define Direct Project

12 United National Statistics Division, 2010. 12

Beneficiaries in a more restrictive way (e.g. internet users, or active mobile users). See Annex 1 for more details.

2. PDO Level Results Indicators for APL1-A

Table 3: PDO level results indicators for APL1-A.

Project Development Outcome Indicators At closing of the project Objective To increase the . Volume of international traffic (Kbit/s per person) . SRL 40, LB 40 geographical reach of . Access to telephone services (%) . SRL 43%, LB 47% broadband networks and . Access to internet services (%) . SRL 2%, LB 3% reduce costs of . Average monthly price of wholesale international E1 . SRL $2,000, LB <$2,000 communications services capacity link from capital city to Europe in West Africa. . Number of direct project beneficiaries, of which female . SRL 3.2 million, LB 1.4 million

III. Program Description

A. Program Components

38. WARCIP will contribute to a full connectivity solution for the ECOWAS region. In order to maximize flexibility, client-responsiveness and address specific national needs, the Program will include a menu of connectivity options including (i) connecting countries that are currently least connected to international communications infrastructure and (ii) improving regional connectivity by leveraging alternative infrastructure to create a seamless network between countries in the region.

39. WARCIP will leverage private sector investment. The approach that will be used for the infrastructure component will be to minimize Government funding and leverage private sector investment. In cases where private sector funding is not immediately available, the approach is to support countries to provide bridge financing, with clear exit/divestiture strategies. In all cases, important support is needed to create enabling environments in the different countries and at the regional level for the success of the infrastructure component. Countries will join the program depending on their interest and readiness, and upon meeting triggers which will include government commitment to liberalization and open access principles, and existence of PPP framework.

40. WARCIP offers countries a menu of options to design country specific activities. The program proposes a menu of activities from which the participating countries will have to choose depending on their specific situation. The program will be structured around three components (i) supporting connectivity, (ii) enabling environment and (iii) implementation support.

Component 1- Supporting Connectivity.

(a) International Connectivity

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41. International connectivity component focuses on connecting countries to submarine fiber- optic cable. The international connectivity component will focus on (i) support to provide access to those countries without established access to international submarine cable connectivity and (ii) supporting countries with limited/ indirect access to have alternative access to improve terms of access to capacity and lower cost.

42. Nine West African countries are candidates for support under this component: Burkina Faso, Sierra Leone, Liberia, Guinea, Guinea Bissau, Mali, Gambia, Niger, and Togo. There is a wide disparity amongst ECOWAS countries in terms of availability of infrastructure and services beyond mobile telephony. The region has huge contrast and non homogeneous development of ICT. The situation is particularly acute in a number of coastal countries that remain to date without connectivity to submarine cable and rely exclusively on satellite communications. For example, civil unrest and fragility prevented Liberia, Sierra Leone, Guinea and Togo from participating fully in the submarine communication cables known as the South Atlantic 3/West Africa Submarine Cable/South Africa Far East (SAT-3/WASC/SAFE), originating in Europe (), and running along the west coast of Africa down to southern Africa and across – via Mauritius (and Reunion island) – to the Far East. In addition, Burkina Faso, Niger and Mali, as landlocked countries face communications challenges because of their geographical position. Operators in these countries must physically transport their traffic through the territory of adjacent littoral countries in order to access the submarine . The coastal countries which have missed the international submarine cable opportunities are eager to join one of the new submarine cable systems planned for the region, while the landlocked countries are eager to maximize connectivity towards several coastal landing points to increase their bargaining power (to bring down the cost of international bandwidth made available to them by countries and operators with direct access to a submarine cable). The focus of this component will, therefore, be on countries with the least access to submarine cables.

43. For APL1-A the international connectivity component will amount to a total of US$45 million. This amount will be made available to secure participation for Liberia and Sierra Leone into the Africa Coast to Europe (ACE) submarine cable and allow both countries to have access to bandwidth capacity in ACE.

(a) Regional/national Connectivity which leverages alternative infrastructure

44. The regional connectivity component will contribute to the connection of major urban centers in the ECOWAS region for seamless regional connectivity. In order to ensure the viability of international and regional connectivity initiatives, it is important to ensure adequate traffic is made possible by accelerating national infrastructure roll-out and cross-border links to create a seamless regional communications network connecting major urban areas in the ECOWAS region. National links will be connected across borders, leveraging cross-border alternative infrastructure, including roads, railways and power transmission infrastructure.. This is critical to provide redundancy linkages for the region. Proposed activities would include (i) Financing investment required to equip existing fiber (electronics necessary to activate the dark fiber and provide telecom services) or retrofit existing power lines with Optical ground Wire (OPGW) technology, (ii) Implement OPGW on the segments that are part of the WAPP Transmission Grid Improvement Program or part of committed or planned national programs,

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(iii)Financing additional links to national infrastructure and landing points as per detailed feasibility studies, (iv) Purchase of capacity on fiber-based transmission networks, including electricity, to connect rural and underserved areas, as well as targeted users (eg. schools, universities, hospitals, and other priority groups) with discounted capacity prices (v) the establishment of national and regional Internet Exchange Points (IXPs), and (vi) creating high speed government virtual private networks.

45. Regional connectivity component will leverage alternative Infrastructure. The objective of leveraging electricity transmission lines in West Africa is in view of the enormous untapped fiber potential in power transmission lines, at the national and regional level. It is expected that significant excess fiber capacity will be available for commercial use through the WAPP Program. The opportunity also exists to retrofit existing non-WAPP power lines with OPGW or installing OPGW in new lines under construction. Detailed feasibility studies recently undertaken by the World Bank confirm that the extra costs of installing OPGW when a new power is being constructed are relatively marginal.

46. For APL1-A, the regional connectivity component will focus on rolling-out of the terrestrial broadband backbone fiber networks, and cross-border connectivity. This component will be financed by minimum IDA resources of about US$2.7 million and is expected to be complemented by proceeds of divestiture of Government shares in the local special purpose vehicles (Cable Consortium of Liberia or CCL and SALCAB in Sierra Leone).

Component 2- Creating an Enabling Environment for connectivity.

47. Public private partnerships (PPP) will be used to foster open access. This component will focus on the transaction design and operating model for ownership and management of international, regional and national infrastructure using PPP frameworks and related open access principles to create an enabling environment for improved connectivity13. The PPP framework would focus on principles of open and non-discriminatory access while maximizing the role of the private sector. This sub-component will support the implementation of Component 1 (international and regional connectivity). For instance this will include technical assistance for commercialization of excess fiber capacity along power transmission lines with due consideration of private sector investment.

48. Creating a policy and regulatory environment to allow competition. In addition to transaction design, this component will focus on addressing policy and regulatory bottlenecks at both regional and national levels to maximize the benefits of the proposed connectivity agenda, and to enable regional e-government applications.

49. Institutional capacity strengthening at the international and national level. Significant institutional strengthening support is needed to ensure that the PPP agreements and principles are implemented effectively. ECOWAS countries are already collaborating on sharing experiences on submarine cable licensing in the region and have held several meetings with support from GTZ. Additional institutional strengthening is necessary to focus mostly on regional institutions

13 Open access is broadly defined as an equal opportunity for operators to have unfettered access to given infrastructure or services under similar terms and conditions 15

and supplement national level on a case by case basis. A regional grant will be pursued to complement institutional support to the ECOWAS Commission, the West Africa Telecommunications Regulators Authority (WATRA), and the West Africa Power Pool (WAPP) Secretariat which are collectively managing and coordinating the policy and regulatory environment for regional communications infrastructure development. For APL1-A countries, the proposed budget is US$ 6.3 million to support the enabling environment.

Component 3- Project Implementation.

50. Capacity strengthening to ensure effective implementation. This activity will provide support needed to strengthen the capacity of the governments to implement the connectivity project, including setting up very small Project Implementation Units (PIUs) which will be mainstreamed into the respective Executing Agencies. The core PIUs consist, on a case by case, of a project coordinator, procurement specialist, finance specialist, accountant and an office assistant. Technical specialists may also be hired if required for implementation of the project. The component will also cover office equipment, incremental operating costs, audits and communications. The component will also cover environmental and social studies, their implementation and/or the monitoring of their implementation.

51. In the case of APL1-A countries, the proposed budget is US$ 2.6 million to support setting up dedicated PIUs for the project. The PIUs will report to the Ministry of Information and Communication in the case of Sierra Leone, and to the Liberia Telecommunications Authority in the case of Liberia.

B. Program Financing

1. Lending Instrument 52. Lending will be done via a Horizontal Adaptable Program Loan (APL) allowing countries to enter when readiness is confirmed. The rationale for using an APL instrument is to ensure a phased and modular support which will facilitate the inclusion of countries according to their level of readiness. The APL phased approach would allow long-term and sustainable development of ICT infrastructure and services in the region, with a focus on building effective public-private partnerships, leveraging private capital, developing institutions, building capacity, and deepening sector reforms over time. The scope, scale and timing of inclusion would depend on the commitment to the sector reforms, and through this, the ability of the countries to attract private capital on their own to develop national and cross-border infrastructure.

Program phasing

53. The program will be composed of three horizontal APL Phases where APL1 will focus on coastal countries with no or limited access to submarine cable broadband capacity. APL1- A will initially deal with Sierra Leone and Liberia focusing on improving connectivity to international communications infrastructure. The decision on Liberia and Sierra Leone is based on the urgent request by the two countries to meet tight deadlines for an upcoming International Cable, detailed analysis of country readiness and commitment by the two countries to additional sector reforms. Total proposed budget for APL1-A is US$ 56.6 million. In the cases of Liberia

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and Sierra Leone a single APL is adopted with most issues related to creating the enabling environment treated under project preparation advances of US$1.5 million approved for each country. Other countries in similar situation as Liberia and Sierra Leone which do not have current access to international submarine Cables include the Gambia, Guinea and Togo. These countries will likely be included in subsequent sub-phases of APL 1 (B, C.) depending on their readiness.

54. APL 2 will focus on landlocked countries. Landlocked countries (Mali, Burkina Faso and Niger) face communications challenges because of their geographical position. Operators in these countries must physically transport their traffic through the territory of adjacent littoral countries in order to access the submarine cable landing point. This results in high cost of communications and in most cases lower quality of services.

55. APL 3 will deal with providing regional connectivity by leveraging alternative networks. This phase will include selected countries which have the most advanced alternative telecom networks including electricity transmission lines. Particular attention will be devoted to leveraging the proposed WAPP network, to strengthen national backbones. Because the WAPP program is not expected to be operational until 2012 at the earliest, candidates for this category of intervention will be included in subsequent APLs. This phase will include Nigeria, Ghana, Benin, Senegal and Cote d’Ivoire which will join this phase depending on their interest and readiness. 2. Indicative Program Costing Table14. Table 4: Indicative Program costing (for extended table see Annex 2)

Program Phases and Indicative Costs Proposed Components (US$ million) (US$ million) APL 1 -A Liberia, Sierra Leone. Connectivity: 47.7 US$56.6 million Enabling Environment: 6.3 Project Implementation: 2.6 APL 1-B Togo, Gambia, Guinea, Guinea-Bissau. Connectivity: 70 US$88 million Enabling Environment: 11 Project Implementation: 7 APL 2 Burkina Faso, Niger, Mali. Connectivity: 39.5 US$55.5 million Enabling Environment: 10 Project implementation: 6 APL 3 Benin, Cote d’Ivoire, Ghana, Nigeria, Senegal. Connectivity: 70 US$94.9 million Enabling Environment: 16 Project implementation: 8.9 Support to regional institutions (Regional grant) U$5 million Enabling environment TOTAL APL US$300 million

Program Triggers

56. A number of readiness triggers will be applied on a case by case basis to determine whether a given country is ready to join WARCIP. Those triggers would signal the robustness of the

14 Note: the total cost of each phase depends on a number of factors including cable routing, backhaul costs etc. 17

overall enabling environment for the success of the proposed investment. Triggers include (i) government commitment to liberalization and open access principles, (ii) existence of PPP framework (or willingness to formulate one as part of preparatory activities), and (iii) government commitment to increased sector competition as evidenced by pro-competitive policy and regulatory frameworks.

57. Depending on particular circumstances of each country, vertical APLs could be considered to ensure that the enabling environment is in place before investing in connectivity. In countries where the policy and regulatory environment is not yet ripe for the proposed investment, it is proposed that vertical phases are included before the proposed investment. In those cases, a vertical APL focusing on technical assistance for policy and regulatory reforms will be included and clear triggers negotiated with countries. This will be done on a case by case basis.

C. Lessons Learned and Reflected in the Program Design

58. WARCIP will operate on the principle of country commitment. The program draws on lessons learned from previous and ongoing World Bank-financed projects in ICT. Broad global experience in ICT project implementation indicates that ICT project success is primarily contingent on strong country commitment from reform and implementation.

59. WARCIP will leverage existing fiber to create regional networks, providing redundancy and diversity routes. Key stakeholders in the ECOWAS Community,15 (including ECOWAS and WAPP Members, Ministers and Regulators), have endorsed that the WAPP fiber opportunity should be conceived at the regional level to address some of the regional connectivity bottlenecks in a cost effective manner. Regional transmission networks based on WAPP power lines would serve as a regional backhaul network, interconnecting all countries and aggregating traffic for the submarine cables which serve the ECOWAS Region. It would leverage submarine cables and provide redundancy to existing routes (in cases where buried fiber is cut or damaged), a diversity of routes, and complete the missing gaps where other connectivity projects such as the Intelcom II program have not yet been fully implemented.

60. The World Bank has experience in coordinating ICT infrastructure projects. The Bank has developed a good experience in coordinating and financing similar ICT projects in the World in general, and Africa in particular. In the East and Southern Africa, the World Bank has approved a US$ 424.0 million Regional Communications Infrastructure Program (RCIP) covering about 25 countries. The IFC has contributed US$32.7 million and mobilized additional investment of more than US$ 200.0 million for the East African Submarine Cable System (EASSy), a 10,000 km submarine fiber-optic cable which will run along the East Coast of Africa from Sudan to South Africa. The World Bank Group also recently approved a US$ 215.0 million Central Africa Backbone project which will leverage the fiber along the Chad- Cameroun oil pipeline and provide improved connectivity to the region. These experiences are being leveraged in the preparation of WARCIP. With the addition of the West Africa Regional

15 During Workshops in Cotonou, 26-27 June 2008, and Ouagadougou, June 14-20, 2010 where Recommendations on the WAPP Broadband Opportunity were presented. 18

Communications Infrastructure Program, most Africans in the West, Central and East/Southern would be provided the opportunity for more affordable and seamless communication.

61. The World Bank is coordinating with regional institutions. The Bank is collaborating with other development partners in the region including the African Development Bank (AfDB) and the Islamic Development Bank who are interested in supporting the regional connectivity agenda. To this extent, the Bank program will complement the ongoing ECOWAN Project which is expected to interconnect ECOWAS institutions and its specialized affiliated Agencies and relevant Government Ministries, Departments, or Agencies, including Offices of Heads of State to the ECOWAN e-Governance platform. All concerned institutions have agreed on open and competitive access to communications infrastructure funded by development partners.

62. WARCIP is benefitting from the results of the Independent Evaluation Group (IEG)’s assessment of regional programs The assessment in December 2006 highlights the need to design projects which have: i) better integration of regional programs with national country assistance programs, ii) strong country commitment to regional cooperation, iii) a scope of project which matches national and regional capacities, and iv) clear delineation and coordination of the roles of national and regional institutions. The WARCIP team has worked closely internally with country , and externally with the ECOWAS Commission, WAPP Secretariat and WATRA (in addition to ECOWAS countries) to ensure that the program responds to national and regional gaps. The program includes resources which will support targeted national and regional institutional capacity building to ensure more efficient implementation.

63. WARCIP is also benefitting from the Bank’s Quality Assurance Group (QAG) (assessment of the performance of ICT components in World Bank projects, conducted in July 2006. The assessment rates quality at entry of Bank ICT Projects at 42 percent “satisfactory’ below the Bank average of 64 percent. The low rating is attributed to poor project design (implementation planning, poor risk assessment), inadequate skills mix and inadequate resources for project supervision. Extensive upfront work has been undertaken to improve quality at entry, including detailed feasibility studies to confirm financing and resource gaps, PPAs for initial capacity building, active engagement with the private sector, and upfront commitment from Government on additional sector reforms, including open and competitive access to communications infrastructure.

IV. Implementation

A. Institutional and Implementation Arrangements

64. National implementation will be done via Project Implementation Units (PIUs). Implementation arrangements will be designed for each country. In cases where PIUs for other projects can be leveraged, WARCIP could consider sharing PIUs to minimize implementation costs. Project Implementation Units will be established, where none exist, to support implementation of projects. The PIUs will be mainstreamed to Ministries of communications or regulatory authorities, as may be required. The PIUs will consist of a project coordinator, procurement specialist, finance specialist and an accountant as required. Technical specialists

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may also be hired if required for implementation of the project. In addition to PIUs, steering and oversight committees with representatives from governments, regulatory authorities, private sector and civil society will be considered to provide overall guidance to the PIUs. Detailed implementation arrangements will be included in Technical annexes for each country operation.

65. Regional institutions will be supported. Given the importance of regional buy-in and need for coherent regulatory framework for the success of the program, special attention will be devoted to providing support to ECOWAS Commission, WAPP Secretariat and WATRA in coordination with existing partners. While the project will be implemented at national level, the role of regional institutions needs to be emphasized. Their capacity to coordinate and harmonize national initiatives is key to the success of the program. To this end, support in the amount of US$5 million grant is being sourced to assist capacity building of regional institutions. The funds will complement work that is being undertaken by other development partners (eg. EU, ITU, GTZ). The regional resources are expected to be available in 2012.

66. Regional frameworks will guide the regulation of submarine cable systems. The regulatory complexities involved in submarine cable systems requires some regional framework that provides guidance for countries in the sub-region in distinguishing between national and international jurisdictional issues and requisite authorizations and regulations. Both ECOWAS Commission and WATRA are in the process of developing and/or mainstreaming supplementary Acts which may address some regulatory gaps but may not be sufficient to deal with some of these emerging and challenging issues.

67. Regional frameworks will guide regulation of excess fiber capacity on power lines. Additional complexities are linked to using alternative networks. In considering the WAPP opportunity, the region, (through the WAPP Secretariat) needs to address a number of regulatory issues related to the provision of excess capacity for commercial use as well as cross border licensing and interconnection issues.

B. Results Monitoring and Evaluation

68. PIUs will monitor and evaluate national projects. The PIUs in different countries will bear the primary responsibility for project monitoring and evaluation (M&E), and, as such, will establish standard formats and guidelines for data collection and reporting, and will organize training sessions for project stakeholders in their use. Monitoring and evaluation of the program will be embedded in the various components of the program to ensure results. An independent assessment of all the APL1, 2 and 3 countries will be undertaken to confirm project progress. 69. The views of direct beneficiaries will be brought into the monitoring and evaluation process. Comprehensive M&E reporting will be needed to monitor the results and performance of the project. It will involve mainly the direct beneficiaries of project activities, but will be extended to other beneficiaries such as telecommunications operators and private ICT firms, which ultimately are the main beneficiaries of the project’s outcomes. The PIUs will review and validate the reports on performance indicators and recommend corrective action if necessary.

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70. Regional institutions will also be brought in to evaluate progress. In addition, the program, through the proposed grant, will create cooperative arrangements within different PIUs to work with WATRA and the ECOWAS Commission to enhance their M&E capacities.

C. Sustainability

71. The sustainability of the project benefits will depend on government commitment to ICT and their ability to create and maintain enabling environments. The sustainability of project benefits will depend on a number of factors, including the commitment of policy makers to putting ICT reform at the forefront of the development agenda; the ability to create effective competition in the telecommunications industry in order to keep prices low; and the ability to establish the PPP framework for connectivity. Commitment of both national governments and regional organizations has been very strong for this program. 72. Improved access and lower prices will be sustained. Improved service coverage and quality at more competitive prices for international connectivity and for data services will be sustained as it will create opportunities for advanced applications, using more bandwidth and creating more traffic. 73. Local capacity will be strengthened through training and technical assistance. The program will make significant investments in capacity-building efforts through training and technical assistance to build technical expertise, social capital, and knowledge. With the focus on building sustainable capacity in key institutions such as regulators and Ministries at national level as well as proposed support to ECOWAS, WAPP and WATRA (through complementary regional grants), the benefits of the project are expected to last far beyond program completion. As such capacity will support the creation of ICT policy and regulatory know-how to guide sector growth and applications in the future.

V. Key Risks and Mitigation 74. Table 5 below summarized Key risks and proposed mitigations measures for the WARCIP program. Detailed risk analysis of risks for APL 1-A countries is provided in Annex 4.

Table 5: Key Risks and Mitigation.

Main risks Mitigation measures General Risks Inadequate interest from Private sector to finance Established PPA to support PPP structures that will make it attractive PPP for submarine landing and for regional for private investment. Private sector already signaled significant infrastructure interest under transparent conditions. Discussing with other development partners for potential parallel or co-financing. Risk could be further mitigated with possible involvement of MIGA at the request of the client(s). Delays in Government implementation of Targeted support will be provided under PPA for participating divestiture of shares to private operators countries to guide the process and ensure success. Under APL1-A, an offer of sale of Government shares in SALCAB (Sierra Leone) is introduced as a disbursement condition of the final payment to ACE. Delays in implementation of reforms including TA activities will be provided to address liberalization issues.

21 liberalization of international gateways Commitments on opening up the sector and securing an enabling environment are being discussed and addressed through covenant to increase transparency of the liberalization process in Sierra Leone, where the issue is particularly relevant. The team will also liaise with African Union and ECOWAS and seek their support to ensure that countries implement reforms

Potential "veto" by existing private licensees and Detailed due diligence to identify incentives for existing operators to government operators over different aspects of the willingly participate in the proposed infrastructure is contemplated program. under APL 1 of the project. Additional work will be done for subsequent phases of the program Limited institutional capacity at regional and TA program built in for national and regional levels to create and national levels sustain capacity Inadequate Regional Ownership and support Establishment of a coordinating team consisting of ECOWAS (ECOWAS, WATRA,WAPP) Commission and WAPP Secretariat members to manage preparatory work in dealing with the fiber on power transmission lines. Additional TA program will be built in for regional institutions such as WATRA which is currently leading the dialogue on international cable landing regulations. This will be done through a proposed regional grant. Risk resulting from project complexity given the TA for institutional strengthening, coordination and better delineation large number of institutions involved. of functions between national and regional institutions.

Summary of specific Risks to APL 1 A phase Governance of the international cable access Legal due diligence has been conducted. PPA resources used to support governments to ensure that C&MA incorporates open access principles. Non-materialization of ACE opportunities16 Project will still focus on improving international connectivity by looking at alternative approaches including possible virtual landing points to existing cables and building terrestrial links.

Risk of disconnect between client safeguard World Bank has worked with ACE consortium and clients to define studies and willingness of consortium to the scope of environmental and safeguard studies. implement.

Non conformance with linkage conditionality Program structured so that if the Financing Agreement for one country (cross-effectiveness conditions and cross- never enters into effect or if disbursements thereunder are suspended, suspension remedies) for regional cooperation this would only reduce the scope but not affect the overall implementation of the national activities, that can be carried out despite lack of progress of the Project in another country Risk of delays could result in penalty to clients Discussion with ACE Consortium on flexibility of installment for missing ACE payment milestone payments; discussion with governments to provide bridge financing to be reimbursed once project becomes effective Project commercially not viable due to Early results of traffic assessment confirm viability. Detailed traffic insufficient demand for services study will be conducted and Demand stimulating approaches will be explored to address potential risk Security risk/ Instability in targeted countries due As in many conflict-affected countries, a deterioration of the security to post conflict status. situation constitutes the largest source of risk for the program. These country risks are exogenous and their mitigation falls largely outside the scope of this operation

16 This could be for many reasons for example, reneging on payments and/or late payments which may result in lost cash advance, other countries dropping out. 22

VI. Appraisal Summary

A. Economic and Financial Analysis

75. The ECOWAS region is highly fragmented, characterized by a large number of small scale economies, many of which are physically cut off from key resources. National markets are tiny and regional markets are underdeveloped. Long distances and disparities in land mass and resources between countries has resulted in high cost and uneven distribution of infrastructure in the region and translated into an especially high cost of doing business in the sub-region. The challenging geography makes it particularly important for a regional approach to infrastructure development. WARCIP will bring extensive benefits to the region including i) significant savings to countries, ii) Improved connectivity and reduced cost of doing business, ii1) improved social and economic integration, iv) increased use of ICT to improve productivity, and iv) new business opportunities and increased revenues for citizens and governments.

76. Connecting to Submarine Cables will result in financial savings for beneficiaries. Experience from other African countries suggests that connecting a country to a submarine cable through competitive arrangements, could reduce broadband prices by as much as 75 percent. A clear indication of the advantages of investing in the ACE project, for example, is shown by the savings that are expected to be accrued. Currently the operators in these countries are paying upwards of US$4000/Mbps/month for satellite bandwidth and as a conservative estimate this should drop to less than US$500/Mbps/month in 2012, immediately after the cable lands (for conservative analysis purposes the financial models assume that ACE will be ready for service from the beginning of 2013). Based on current bandwidth use, and assuming that pricing on fiber is as much as US$500/Mbps/month, Sierra Leone’s current annual satellite bandwidth cost of about US$4.2 million would drop to about US$540,000 using ACE. In the case of Liberia, current satellite bandwidth costs of about US$1.9 million per year would drop to about US$240,000 per year after ACE is in place in 2012. Estimated conservative annual savings for the two countries would be over US$5 million.

77. Leveraging the Fiber in Regional and National Transmission Lines will result in additional savings. A regional transmission network based on WAPP power lines could serve as a regional backhaul network, interconnecting all countries and aggregating traffic for the submarine cables which serve the ECOWAS Region. It would provide redundancy to existing routes to submarine cables (in cases where buried fiber is cut or damaged), a diversity of routes, and complete the missing gaps where other connectivity projects such as the Intelcom II program have not yet been fully implemented. High level study17 shows that savings in leveraging existing transmission lines could be in the range of 50 percent compared to buried fiber optic cable on a green-field basis.

78. Benefits from targeted countries will spill over to neighboring countries. The benefits projected to accrue in the targeted countries (i.e. increased access to quality and affordable ICT services) spill over country boundaries as: (i) higher volumes increase the viability of the regional communications infrastructure network, decrease cost of access and increase trade between African countries, and (ii) cross-border initiatives provide countries with the incentives

17 Hamilton and Maddens Report for World Bank June 2008 23

to develop missing infrastructure to increase ICT access. Indeed, the implementation of the WARCIP will have a transformational impact on regional connectivity which will impact regional trade and overall economic integration of the participating ECOWAS countries. However, while in the long-term bandwidth is expected to increase by at least 20 times over the life of the cable, the anticipated cost savings will take time to filter down to the consumer. In the short-term it is therefore critical that there is sound competition between service providers to drive down prices.

B. Technical

79. WARCIP recognizes that infrastructure and policy environment bottlenecks need to be addressed to ensure better communications access. The technical design of the project reflects lessons learned in the sector and international best practices. For most developing countries, a major obstacle to the uptake of ICT remains the lack of adequate access to ICT infrastructure. A lack of investment in ICT infrastructure and access networks, coupled with inefficient provision of services, are the most important factors undermining the development of networked economies. The main lesson derived is that success is mainly market driven. Creating a predictable legal and policy environment is key to improving investor confidence and restoring trust in the ICT sector. A key focus of the program is to create PPP frameworks, in particular, for international connectivity. The program will establish an enabling institutional and regulatory environment to help attract and sustain private investment in the telecommunications sector.

C. Financial Management

80. The assessment of the project’s financial management arrangements being implemented by the Project Implementation Units as documented in the Annex 3 indicates that the systems to be used to manage the project satisfy the Bank’s minimum FM requirements under OP/BP10.02

D. Procurement

81. For APL1-A, under the international connectivity component, IDA procurement guidelines will not apply. This is because IDA funding for the international connectivity does not go towards a procurable item which is subject to compliance with World Bank procurement Guidelines. The payment is for membership fees (paid in different installments) against a set of rights including use of a certain amount of capacity at preferred rates and a share of ownership of an indivisible cable infrastructure asset.

82. For other components of the project, Procurements will be carried out in accordance with World Bank guidelines. Procurement for the proposed program would be carried out in accordance with the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 2006 and May 2010; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006 and May 2010, the IDA Anticorruption Guidelines dated July 1, 2005 and as amended through October 15, 2006; and the provisions stipulated in the Grant Agreement and Legal Agreements of each project.

E. Social and Environment 24

83. Connection to the ACE cable is not expected to have significant environmental impact. The proposed project is rated as a Category B project. The proposed borrowers/recipients would have to have prepared draft Environmental and Social Management Frameworks (ESMFs) (consistent with national laws, any applicable treaty concerning international waters, and Resettlement Policy Frameworks (RPFs) for the lateral cables and any associated equipment that will be laid from the junction with the main cable through territorial waters and onto the national shores, and also for the fiber on transmission lines, as required. The draft ESMFs that have been prepared for Liberia and Sierra Leone indicate that the proposed landing sites have very limited marine activities and not likely to experience significant disturbances. The seaward limit of coverage for the ESMF is the seaward limit of both Sierra Leone and Liberia’s EEZ, defined as extending 200 nautical miles (370 km) from the shorelines. The RPFs are being prepared in case the project may require land acquisition and resettlement, and/or restricted access to natural resources, although this is not expected based on the preliminary Cable Route Survey work. For the purposes of subsequent environmental assessment work regarding benthic habitat and ecology, the Cable Route Survey being undertaken by the Cable Suppliers will provide this analysis between the outer limit of the EEZ and the 50 m isobath. Between the 50 m isobath and the shoreline, the Cable Route Survey will provide environmental baseline information regarding benthic habitat and ecology, augmented as deemed necessary by other sources of information. Activities of cable-laying ships and support vessels will be required to comply with Sierra Leone and Liberia regulations regarding such maritime activities. While it may not be necessary for member countries to conduct environmental impact assessments (EIAs) for placing the cable in the deep sea within their EEZs, this should not deter them from considering in the screening and scoping phases of their EIAs whether there are areas of deep sea traversed by ACE and within the geographical limits of application of their domestic EIA legislation to which attention should be paid.

84. Once the final sites of the Landing Stations are chosen and the specific civil works identified, an Environmental and Social Management Plan (ESMP) for each country will be prepared, consulted on, and disclosed. An Environmental and Social Impact Assessment (ESIA) may also be prepared along with the ESMP, although the preliminary analysis prepared for the ESMFs indicates that the ESMP is the appropriate Safeguards instrument for this project in these two countries. The final decision will be made as the Cable Route Survey identifies the preferred routing in territorial seas and in nearshore shallow water at the landfall site. Although involuntary resettlement or displacement from land-based livelihoods is not expected, a Resettlement Policy Framework (RPF) has also been drafted for each country as a contingency measure in case a resettlement action plan needs to be prepared along with the ESMP and/or ESIA.

85. Leveraging the Fiber in Power Transmission Lines is expected to have minimal environmental Impact. For the fiber on transmission lines, most of the fiber is already embedded and the additional electronic equipment that will be required to ‘light’ the fiber is not expected to have any perceptible effect on the quality of surrounding locations. At the national level, the physical component of this phase of the program will consist of building missing links between the power stations where the WAPP fiber ends and the landing station/national infrastructure. There may be cases where fiber may need to be strung on the transmission lines.

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An ESMF and RPF consistent with national laws for the sections of the transmission lines that may require additional equipment or fiber will be prepared. These safeguards documents will be disclosed and consulted on before appraisal of relevant country projects in this phase of the program (APL3). Once the specific sites are known, Environmental Impact Assessments (EIAs) and Resettlement Action Plans for the cables in transmission lines and equipment will be prepared as part of project preparation, but before the cable is laid.

86. WARCIP is expected to have positive social benefits. The main social impacts of the project are the increased possibility of better access to ICT services for the population and improved government service delivery. The project will (i) enable ICT to become a driver for sustainable economic growth; (ii) enable the Government to use ICT to provide decentralized services; (iii) improve access and quality of ICT services for the population, businesses, and the Government; (iv) reduce isolation and enhance economic activities in rural areas; and (v) create additional opportunities for women entrepreneurs to own ICT-related SMEs.

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Annex 1: Results Framework and Monitoring COUNTRY: Sierra Leone and Liberia Results Framework

Regional APL (WARCIP) Objective): To increase the geographical reach of broadband networks and reduce costs of communications services in West Africa. Project Development Objective (PDO): To increase the geographical reach of broadband networks and reduce costs of communications services in Sierra Leone 18 and Liberia . Responsibility Program/Project DO Level Results Cumulative Target Values** Data Source/ Unit of Measure Baseline Frequency for Data

Indicators* Core Methodology YR 1 YR 2 YR3 YR 4 Collection Indicator One: Volume of impact Kbit/s Annual Operator/regu international traffic: (Internet, voice, per person lator and Data)

Sierra Leone 3 3 3 40 40 NATCOM Liberia 1 1 2 2 40 PIU/LTA

Indicator Two: Access to internet Number per 100 6 months Operators/reg services (number of subscribers per 100 ulator people)

Sierra Leone 0.28 0.28 0.4 1 2 NATCOM Liberia 1.5 1.6 1.6 2.4 3 PIU/LTA

Indicator Three: Access to telephone Number per 100 6 months Operator/regu services (fixed mainlines plus cellular lator phones per 100 people)

Sierra Leone Liberia 25% 30% 34% 38% 43% NATCOM 24% 27% 30% 36% 47% PIU/LTA Indicator Four: average monthly price of wholesale international E1 capacity link from capital city to Europe US$/ Sierra Leone month/2Mbps Yearly Operators/reg Liberia $8000 $8000 $7000 $5000 $2000 ulator NATCOM $8000 <$8000 <$7000 <$5000 <$2000 PIU/LTA

18 All the other countries that will be covered by the following APL phases will use the same PDO. 27

Indicator Four: Direct project Number, Annual Survey beneficiaries19, of which female (%) Sierra Leone 2 million 2.2 million 2.4 million 2.8 million 3.2 million NATCOM (43) (45) (45) (48) Liberia (43) 700,000 800,000 900,000 1.2 million 1.4 million (45) (45) (48) (50) LTA (45)

INTERMEDIATE RESULTS

Intermediate Result (Component One):

Intermediate Result indicator One: Number, Annual Operators Retail price of internet services (per US$ Mbit/s per Month) Sierra Leone $1,500 $1,500 $1,500 $ 1000 $800 NATCOM/PIU Liberia $1,200 $1,200 $1,000 <$ 800 <$500 LTA/PIU

Intermediate Result indicator Two: In Gbit/s Annual Volume of available international Survey capacity International Communications

(Internet, Telecoms, and Data) bandwidth Sierra Leone 0.3 0.4 0.5 6.0 6.0 SALCAB NATCOM Liberia 0.065 0.065 0.07 1.12 1.12 LTA

Intermediate Result (Component Two):

Intermediate Result indicator One: Composite Annual Survey Impact on Telecom sector of World score: 1-low Bank technical assistance impact to 5 –

high impact 0 1 2 2 3 PIU

Sierra Leone 0 1 2 3 4 LTA LTA Liberia

19 A Direct Project Beneficiary is defined for Sierra Leone as “a subscriber to mobile service” and in Liberia as “a user of voice and/or internet service” 28

Annex 2: Detailed Program Description

A. Program Components

1. The program will contribute to a comprehensive solution to address connectivity gaps in the ECOWAS Region. It will focus on international, national and regional connectivity to enable the creation of a fully integrated network which will eventually link all countries’ networks in the region and provide affordable high speed connectivity within countries. This is expected to be a stand-alone program which focuses catalytic financing for additional links to international and national infrastructure where gaps exist, building on the opportunities of the fiber in power transmission lines, the civil works of new roads, and the availability of new submarine cables along the West Africa Coast, and leveraging private sector investment.

2. The program will be structured around three components (i) Supporting connectivity, (ii) Creating an enabling environment for connectivity (iii) project implementation.

Component 1- Supporting Connectivity.

a) International Connectivity

3. International connectivity component focuses on connecting countries to submarine fiber- optic cable. The international connectivity component will focus on (i) support to provide access to those countries without established access to international submarine cable connectivity and (ii) supporting countries with limited/ indirect access to have alternative access to improve terms of access to capacity and lower cost

4. Nine West African countries are candidates for support under this component. The focus will be on countries with the least access to submarine cables. Candidates which could benefit from intervention would include Burkina Faso, Sierra Leone, Liberia, Guinea, Guinea Bissau, Mali, Gambia, Niger, and Togo. A number of these countries have been by-passed by regional cables and do not have direct access to submarine cables.

5. Landlocked countries have been geographically disadvantaged. In addition, Burkina Faso, Niger and Mali are landlocked countries and face communications challenges because of their geographical position. Telecommunications operators in these countries must physically transport their traffic through the territory of adjacent littoral countries in order to access the submarine cable landing point, often at uncompetitive prices.

6. Countries without access to submarine cable rely on expensive satellite communication. There is a wide disparity amongst ECOWAS countries in terms of availability of infrastructure and services beyond mobile telephony. The region has huge contrast and non homogeneous development of ICT. The situation is particularly acute in a number of coastal countries that remain to date without connectivity to submarine cable and rely exclusively on satellite communications. For example, civil unrest and fragility prevented Liberia, Sierra Leone, Guinea

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and Togo from participating fully in a the submarine communication cables known as the South Atlantic 3/West Africa Submarine Cable/South Africa Far East (SAT-3/WASC/SAFE), originating in Europe (Portugal), and running along the west coast of Africa down to southern Africa and across – via Mauritius (and Reunion) – to the Far East. These countries are eager to join one of the new submarine cable systems planned for the region.

7. APL 1 will initially cover Liberia and Sierra Leone (APL1-A). IDA resources will be used to support Liberia and Sierra Leone’s membership to the ACE cable. Other countries in the region including Gambia, Guinea-Bissau, Guinea and Togo have joined ACE or other cables without support from the Bank for the initial payment. For these countries support to international connectivity would include a slight variation over support proposed to Liberia and Sierra Leone but with the same objective. Gambia, Guinea-Bissau, Guinea and Togo can also be part of APL1 (APL 1 B, C, etc.).

8. ACE represents a unique opportunity for international connectivity for un- and under- connected countries. For most of the countries without established access to international submarine cable connectivity, the ACE cable represents a unique opportunity for countries to gain international bandwidth access. Program activities will include providing support to ensure that these countries participate in the new submarine cable systems being planned in the region. For some of these countries, this may be one of the single opportunities for these countries to be connected to submarine fiber and would provide about 7Gbps capacity initially. Also Sierra Leone and Liberia have no possibilities of using power lines for their bandwidth requirements. The most economically viable option therefore in these countries is access to the ACE submarine cable via landing stations in each country. In addition an analysis of other possible options for improving international connectivity in Liberia and Sierra Leone clearly shows that connecting to other cables will involve a higher cost than connection through ACE. Cables like Main 1 and WACS did not include proposed landing stations in Liberia and Sierra Leone.

9. Specific Activities under this component could include (i) supporting the cost of connectivity to international cable consortiums, (ii) buying capacity at reduced cost to facilitate Government applications, (iii) supporting governments to warehouse capacity for future operators under a divestment approach for Government ownership of the cable and (iv) building terrestrial links to neighboring countries to have access to cable facilities.

10. APL 2 will apply to landlocked countries and focus on activities to improve regional connectivity. For landlocked countries (Burkina Faso, Niger and Mali) specific activities to improve regional connectivity could include (i) terrestrial links to landing station in neighboring countries and or building virtual landing points. Options for support could include development of alternative and competitive backhaul transmission infrastructure from landlocked countries to landing points in neighboring countries using either buried or aerial cable. Another option would be to establish virtual landing points (VLPs) which would be managed jointly by all the operators and provide inland connecting points for international connectivity that is more or less identical to the coastal landing points for submarine connections. The primary objective would be to foster low cost passage through coastal nations, delivering competitive bandwidth services at VLPs.

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11. Virtual Landing Points (VLPs) could be established to provide access for landlocked countries. The VLP is essentially a high capacity multiservice router consisting of Line Terminating Equipment (LTE), which contains both optical and digital units. It could be equipped with line cards of different types to enable connection of operator equipment, including fiber optic cables. The only difference from being directly connected at a coastal landing point is the extra cost of the terrestrial or aerial link to the VLP.

12. Capacity prices (Mbps) at VLP will be the same for all operators. In practical terms, an operator in a landlocked country who wants access to a submarine connection will lease or purchase capacity at the multiplexer at the VLP. The price charged per capacity unit (Mbps) includes the routes to neighbouring countries with international access. The prices in each country are transparent and the same for all operators. The cost of the connections should be the same for all operators and (ideally) be distance independent.

13. The VLP concept can be very advantageous in creating competition. Regarding competition, if one country has a monopoly supplier of submarine bandwidth at the coast, selling services at high prices to national operators, competition can be introduced with a VLP supplied through another neighbouring country. For all commercial purposes, the VLP would be accessible by all licensed operators in the individual countries on equal and transparent terms. What is important is that no single operator should have exclusive rights of any kind that may block others from directly accessing the VLP connection

Figure 2.1: VLP approach for Burkina Faso. (This will be similar for the other landlocked countries).

14. Competition can be created by connecting the landlocked country to coastal landing points in multiple coastal countries. The green line represents the present situation in West Africa with SAT3 being the only submarine cable serving the ECOWAS region. It is anticipated that at least 31

one of the new submarine cable consortia will construct a landing point in Capital B. An alternative network, possibly through the fiber on Power lines (but also possible through terrestrial fiber) – shown by the blue lines – will enable the establishment of VLPs in all neighbouring capitals (A, C and D) thus introducing competition in areas where the new cable does not have any landing points. It is anticipated that with proper and optimal implementation of the Alternative Network and supporting enabling legislation, all new submarine cables should be able to offer bandwidth at competitive rates in all countries ECOWAS countries, coastal and landlocked.

15. The VLP will require minimal regulation. As a regulatory matter, a VLP will require minimal regulation unless it enjoys” significant market power” in its relevant market, i.e., the provision of wholesale capacity. It may have such power if there is an absence of effective competition, which is possible if the only competition a single VLP faces is the incumbent operator. Under any VLP project scenario, however, it would likely be appropriate to restrict existing wholesale providers of international capacity in the landlocked countries from control of, or possibly any shareholding in, the VLP in order to avoid further entrenching existing significant market power in the international capacity market. These countries will be included in AP L 2 of the program.

b) Regional/National Connectivity which leverages alternative Infrastructure

16. APL 3 will deal with providing regional connectivity leveraging alternative networks. This phase will include selected countries which have the most advanced alternative telecom networks including electricity transmission lines. Particular attention will be devoted to leveraging the proposed WAPP network, to strengthen national backbones. Because the WAPP program is not expected to be operational until 2012 at the earliest, candidates for this category of intervention will be included in subsequent APLs. This phase will include Nigeria, Ghana, Benin, Senegal and Cote d’Ivoire which will join this phase depending on their interest and readiness.

17. Regional connectivity component will link major urban centers in the ECOWAS region to create a regional telecommunications network. In order to ensure the viability of international and regional connectivity initiatives, it is important to ensure adequate traffic is made possible by accelerating national infrastructure roll-out and cross-border links to create a seamless regional communications network connecting major urban areas in the ECOWAS region. National links will be connected across borders, leveraging cross-border alternative infrastructure, including roads, railways and power transmission infrastructure, in order to create a seamless regional transmission network and interconnect countries in West Africa. This is critical to provide redundancy linkages for the region. Proposed activities would include (i) Financing investment required to equip existing fiber or lay fiber on existing electricity transmission lines, (ii) Financing additional links to national infrastructure and landing points as per detailed feasibility studies, (iii) Purchase of capacity on fiber-based transmission networks, including electricity, to connect rural and underserved areas, as well as targeted users (eg. schools, universities, hospitals, and other priority groups) with discounted capacity prices (iv) the establishment of national and regional Internet Exchange Points (IXPs), and (v) high speed government virtual private networks.

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18. The regional connectivity component will tap fiber potential in existing power transmission lines. The objective of leveraging electricity transmission lines in West Africa is in view of the enormous untapped fiber potential in power transmission lines, particularly at the national level. The proposed activity will leverage and commercialize the excess fiber communications capacity on the high-voltage of national and cross-border power transmission infrastructure in the region. Power companies in West Africa are beginning to play a significant role in provision of telecommunications infrastructure. A number of these companies have extensive networks of high voltage power transmission infrastructure which reach out to the most remote areas of the sub-region, most of them embedded (or with potential to embed) with fiber optic cables. These cables contain either 9 or 12 pairs of fibers (18 or 24 fibers) of which usually two are equipped for communications purposes and used by the electricity company for its own internal communications. The remaining surplus of 7 or 10 fiber pairs, which if they are not equipped are called “dark fiber”, can be split so that the asset could be commercialized in potentially up to 7 or 10 different ways, to provide either national or international transmission services. It is expected that significant excess fiber capacity will be available for commercial use.

19. Proposed plan for leveraging transmission lines for regional network involves two rings. Following detailed feasibility studies on potential areas where fiber in power transmission lines could be leveraged for the regional backhaul network, it is possible to develop two regional ring structures in order to ensure redundancy and thus increasing the reliability of an integrated ECOWAS regional communications The two rings, Western and Eastern, could interconnect nine of the WAPP countries, with a possibility to extend the service also to Benin, Nigeria and Togo once new electricity lines are constructed.

Figure 2.2: Global View of Regional Power Transmission Rings.

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20. The Western Ring could have a total length of 4570 km, including 2664 km of optical fiber on power lines.  1,293 km is the l’Organisation pour la mise en Vleur du fleuve Sénégal (OMVS) Dakar– Bamako link, which is already operational.  572 km is new construction included in the WAPP Inter-zonal Transmission Hub Subprogram.  799 km will involve adding fiber cables on existing 225 kV transmission lines.  1,906 km is the temporary solution leasing submarine cable capacity until the terrestrial segments are completed.

21. The Eastern Ring would primarily serve Burkina Faso as well as open up an opportunity to feed cheap bandwidth to the northern parts of Togo and Benin. This ring could have a total length of approximately 2710 km.  1,286 km is already operational (including route segments operated by National Communications Backbone Company (NCBC, Ghana.)  1,218 km - of which 459 km is already included in the Western Ring - will involve adding fiber cables on existing 225 kV transmission lines (including NCBC’s route segments).  206 km is new construction included in the WAPP Inter-zone Transmission Hub Subprogram Project.

22. Retrofitting existing power lines with Optical Ground Wire (OPGW) is projected to cost US$ 15 per meter. The Technical Report used a cost estimate of US$ 15 per meter for retrofitting existing power lines with fiber optic cables, which involves replacing the existing static wire with an OPGW cable. This estimate applies to a cable containing 24 pairs (or 48 fibers) and covers all costs of infrastructure, including shelters and other infrastructure components as well as the costs of installing and commissioning dark fibers on the power lines. However, it excludes all electronics necessary to activate the dark fiber and provide telecom services. In addition, the cost estimate is based on installing the cable while the line is not electrified and excludes all costs associated with possible revenue loss by the relevant electric power generation, transmission and distribution providers during installation. 23. For new power lines that projected costs of installing OPGW is US$ 7.5 per meter. The extra costs of installing OPGW when a new power transmission line is constructed are relatively marginal. The primary issue is how the cost should be shared between the different users of the fiber capacity. For simplicity, we use a cost figure of half the costs to put OPGW on existing power lines (US$ 7.5 per meter). We recommend that WAPP initiate discussions with its member utilities to agree on a unified cost figure to be used by all member companies involved in creating the WAPP Rings by constructing new power lines. Detailed costs are expected to be developed as part of project preparation for respective countries.

Component 2 - Creating an Enabling Environment for connectivity.

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24. Public private partnerships (PPP) will be used to ensure open access. This component will focus on the transaction design and operating model for ownership and management of international, regional and national infrastructure using PPP frameworks and related open access principles to create an enabling environment for improved connectivity. The PPP framework would focus on principles of open and non-discriminatory access while maximizing the role of the private sector.

25. For countries under APL1-A, the proposed PPP framework will focus mostly on the structure of the landing station for each country, ownership, resale of and access to submarine cable bandwidth capacity. A Special Purpose Vehicle (SPV) representing investors from both Government and private sector will be created to own and manage the landing station. Funding for participation in the cable consortium will be shared based on the PPP framework. Specific support will include technical assistance to establish the SPV and define its bylaw, develop shareholder agreement and related contractual and regulatory instruments for the SPV.

26. A feasibility study has been completed using PPIAF resources to assess the most viable PPP option for WAPP For program phase related to using WAPP opportunity, the PPP framework will consist of establishing structures to commercialize the excess fiber in WAPP. A feasibility study has been completed with PPIAF resources to assess the most viable PPP option for WAPP. Early results of the study confirm that a possible option is to create regional SPVs to run the regional networks. This is in line with ongoing efforts of WAPP, per decisions contained in the Supplementary Act of 2008 adopted by the Heads of State and governments of ECOWAS, to use SPVs to realize the priority projects of WAPP. Support under this component will include developing governance structure of SPV including rights and obligations of participants, dispute settlement mechanisms, approaches for operation and maintenance. Support will also include technical assistance to develop contractual arrangement by which electricity company grant the right of use of 1 (or 2) fiber pairs for agreed period of time, Contractual arrangement for Indefeasible Right of Use (IRUs), Contractual arrangements to be signed to access capacity in submarine cables and other contractual arrangements needed to implement the program.

27. SPVs will also be created to finance and run backbone networks linking major urban centers. For activities related to backbone to link major cities, the PPP framework will also consist in creating private sector-owned SPVs to build and operate the transmission networks or design other types of PPP regimes to ensure adequate participation of the private sector in financing and running the infrastructure.

28. Support to the PPP framework will be included under the project preparation advance facility. Given the importance of the PPP framework for the success of the project, support to the PPP framework will be included under project advance facilities as part of project preparations. For countries and phases where PPP framework could take longer to establish, a vertical phase of APL could be considered on a case by case basis.

29. Creating a policy and regulatory environment to allow competition. In addition to transaction design, this component will focus on addressing policy and regulatory bottlenecks at both regional and national levels to maximize the benefits of the proposed connectivity agenda, and to enable regional e-government applications. Support for policy and regulatory reforms is

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needed across countries in the ECOWAS region for both regulators and policy makers: the specifics of the support depend on their level of reform and maturity of regulatory institutions in each country. While many countries require advanced skills to deal with the challenges of regulating dynamic markets and new technologies, many other countries still have unfulfilled needs at the more generic operational level or at the specific skills level associated with an earlier stage of their market development. Targeted support will be designed for each country and will be detailed in technical annexes for each phase. 30. Institutional capacity strengthening at the international and national level. Significant institutional strengthening support is needed to ensure that the PPP agreements and principles are implemented effectively. In addition, given the important regional dimension of the project, institutional strengthening will focus mostly on regional institutions and will be supplemented by national strengthening of capacities at national level on a case by case basis. Activities could include: Institutional support to ECOWAS Commission, the West Africa Telecommunications Regulatory Association (WATRA), WAPP Secretariat and possibly the regional SPV to manage the excess fiber.

31. Funding for these regional institutions will be secured through regional grants. The estimated funding required for the 3 institutions is US$5 million. The regional grant will be available for follow up WARCIP phases. Given time needed to finalize the regional grant, APL1-A will not include support to regional institutions. Tentative Breakdown of the US$5 million grant is as follows:

32. WATRA (US$1.5 million): WATRA was established in 2004 as the regional regulatory body for the telecommunications sector in West Africa. WATRA currently has 15 members who are all regulators. WATRA’s objectives include working with regulators: to encourage the establishment of modern legal and regulatory structures for telecommunications service delivery; to seek the development and harmonization of regulations for telecommunications service delivery and pricing; and to encourage increased liberalization and competition initiatives in network development and to enhance efficiency in telecommunications service delivery in the sub-region.

33. WATRA is to establish a guidance framework for National Regulatory Authorities to manage the regulation of submarine fiber cable systems. With the arrival of a host of new submarine cables along the West Africa coast (Glo-1, Main One, ACE) WATRA is taking the lead in establishing a guidance framework for National Regulatory Authorities to manage the regulation of submarine fiber cable systems. Some initial support has been provided by GTZ, HIPPSA and ITU to develop draft framework which will provide a.o guidance on the following areas: Process of granting cable landing licenses; Price controls; Free and open access; Jurisdiction; Transparency. Beyond the framework, WATRA would need to have capacity to work with countries on adoption, develop performance indicator, collect data to support the calculation of benchmarks on a range of indicators, collate/disseminate information on pricing etc.

34. WAPP Secretariat (US$2 million): The WAPP is an ECOWAS project with the aim to utilize and commercialize excess fiber communications capacity on high-voltage, cross-border power transmission infrastructure. The ECOWAS Community sees the opportunity to leverage existing

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and emerging regional infrastructure to address regional communications infrastructure gaps and create an integrated regional communications market, and recognizes that alternative networks have potential to meet this objective. Within this context, an important opportunity exists today to utilize and commercialize, on a wholesale level, excess fiber communications capacity on the high-voltage cross-border power transmission infrastructure of West African Power Pool (WAPP). There are 14 members of West African Power Pool (WAPP) - all ECOWAS countries excluding Cape Verde.

35. WAPP needs support to determine the optimal legal and regulatory environment and pricing regime to run the regional network. Once the type of structure and the associated licensing and interconnection issues have been determined, the broader policy, legal and regulatory environment of the participating countries needs to be addressed so as to ensure open and competitive supply of excess capacity, including resale, rights of way and co-location, cross- subsidization, pricing and accounting separation, universal service and quality of service.

36. ECOWAS Commission (US$1.5 million): Continuous capacity building and dissemination at the national level of the regional policy and regulatory guidelines for telecommunications is critical for WARCIP. A regional telecommunications and regulatory framework was adopted by West African Head of State at the thirty-first session of the authority of Heads of State and Government, in Ouagadougou on January 2007 to develop supplementary ACTS to deepen competition and harmonization in the region. ECOWAS needs to continue to support the translation of these regional guidelines into national legislation. Dissemination of these guidelines in stakeholder for a will ensure broad-based participation for amending national legislation (including of civil society, private sector, government, parliamentarians).

37. All three institutions have the requisite legal status and fiduciary capacity to receive grant funding and the legal authority to carry out the activities being proposed. The institutions are regional in nature but do not meet eligibility requirements to take on IDA credit. The proposed activities are also regional in nature and not easily allocated to national program. Separate grant agreements will be developed between IDA and these regional institutions.

Component 3: Project Implementation.

38. Capacity strengthening to ensure effective implementation. This activity will provide support needed to strengthen the capacity of the governments to implement the connectivity project, including setting up the Project Implementation Units (PIUs). The PIU consist of a project coordinator, procurement specialist, finance specialist, accountant and an office assistant. Technical specialists may also be hired if required for implementation of the project. The component will also cover office equipment, incremental operating costs, audits, communications and environmental and social studies.

B. Program Financing

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Table 2.1: Indicative Program Costing and Status.

Program Phases and Proposed Components Scope & Status Indicative Costs (US$ million) (US$ million) APL 1 -A Liberia, Sierra Connectivity: 47.7 . Project preparation advance of US$5 million each to Leone. Enabling Environment: 6.3 enable upfront payments to join ACE cable consortium . US$56.6 million Project Implementation:2.6 . Project Preparation Advance of US$1.5 million each to support initial preparatory work , including: o draft technical specifications, technical and economic analysis. o Legal and regulatory analysis o Environmental Impact Assessment o PIUs established in both countries. . International connectivity to ACE submarine cable. . Backhaul, government networks and urban centers connections as part of regional communications network. . Enabling environment support.

APL1-B Togo, Gambia, Connectivity: 70 . Initial options assessment and technical and economic Guinea, Guinea-Bissau. Enabling Environment: 11 analysis to be undertaken Project Implementation: 7 . Support for direct international connectivity including in- US$88 million country landing station. . PIUs to be established . Backhaul and urban centers connections as part of regional communications network. . Enabling environment support. APL 2 Burkina Faso, Connectivity: 39.5 . Initial options assessment and technical and economic Niger, Mali. Enabling Environment: 10 analysis to be undertaken. Project implementation: 6 . Overland connectivity links to international submarine US$55.5 million cable and provision for shared use of landing stations in coastal countries. . PIUs to be established . Backhaul , government networks, and urban centers connections as part of regional communications network. . Enabling environment support.

APL 3 Benin, Cote Connectivity: 70 . Initial options assessment and technical and economic d’Ivoire, Ghana, Nigeria, Enabling Environment: 16 analysis to be undertaken Senegal. Project implementation: 8.9 . PIUs to be established . Market liberalization and regulatory stabilization. US$94.9 million . Backhaul and urban centers connections as part of regional communications network. . Retrofitting existing transmission lines with OPGW . Financing OPGW in new transmission lines . SPVs to manage and operate Excess Fiber opportunities Support to regional U$5 million . Regional grant application in process institutions (Regional Enabling environment grant) TOTAL APL US$300 million

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Annex 3: Implementation Arrangements

i. Program administration mechanisms

1. The administration of the program will include national level Project Implementation Units, implementing the project on behalf of sector ministries or regulatory authorities, national level steering or oversight committees providing guidance to PIUs, and regional institutions to ensure that the program’s regional aspects are well reflected during implementation.

(a) Project Implementation Units

2. Project Implementation Units (PIUs) will be established to support implementation of projects. In cases where PIUs exist for other projects, WARCIP could consider sharing PIUs to minimize implementation costs. The PIUs will consist of a project coordinator, procurement specialist, finance specialist and an accountant, as required. Technical specialists may also be hired if required for implementation of the project. For APL1 Sierra Leone, Liberia and Burkina Faso, an international procurement specialist may be hired to operate in all three countries working with each PIU and procurement specialist if required. Technical specialists could also be hired for more than one country to minimize cost.

3. The PIUs will be Grant/Credit Administrator and deal with all financial management. The PIUs will serve as the Grant/Credit Administrator of the program and will handle all administrative matters in accordance with the Project Implementation Manuals (PIM). They will also ensure financial management and handle disbursements, and include the preparation and submission of replenishment requests to IDA. The Units will also be responsible for (i) maintaining Management Information System (MIS) for tracking progress in all project subcomponents in various countries, both in terms of financial performance and meeting implementation targets and monitor the performance of all contractors under the various projects (ii) preparing annual work programs and budgets, and if necessary, reviewing, in consultation with IDA, the reallocation of resources across the various components of the projects as lessons emerge as to patterns of demand and development impact. In all cases, PIUs will be established under project advances to ensure that the project implementation teams are in place before project effectiveness.

4. The PIUs will be linked to relevant Ministries of regulatory authorities. In all countries, the PIUs will be linked to either sector Ministry or regulatory authority. The decision will be made on a country by country level after an assessment of ministry capacity to implement the project and depending on government preference. The coordinators for the projects could report either to the Minister, the chief of staff, a director in the Ministry in cases where the PIU is linked to the Ministry. In cases where the PIU is linked to the regulatory authority, the coordinator will report to the head of the regulatory authority.

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(b) Task teams/ focal points

5. The PIU will be assisted by a Task Team. In some countries the PIU will be assisted by a task team composed of focal points. The focal points will be responsible for initiating activities related to specific components, including developing Terms of Reference (ToRs) and draft procurement documents, and will be the focal points for monitoring progress of their components and for collecting and updating indicators for the components they manage. A typical task team will be composed of representatives from the regulatory authority focusing on regulatory aspects, representatives from Ministry dealing with policy aspects and representatives from finance Ministries or national investment commissions to deal with divestment aspects. The description of task teams and their proposed activities will be defined on a case by case basis in technical annexes and Project implementation manuals of each project

(c) Steering and Oversight committees

6. Steering and Oversight committees who liaise with PIUs will be established with representation from the private sector and civil society as determined by the borrowers. Given the PPP nature of the project and possible involvement of a number of ministries in addition to the telecom ministry ( Finance, Planning), it is proposed that steering and oversight committees with representatives from governments, regulatory authorities, private sector and civil society will be considered to provide overall guidance to the PIUs. Detailed terms of reference for the oversight arrangements will be discussed on a case by case basis.

ii. Financial Management, Disbursements and Procurement

(a) Financial Management

7. Financial Management Assessments will be undertaken for each PIU. Specific Financial management assessments will be carried out for each implementation Unit during project preparation to ensure that the systems to be used to manage the project satisfy the Bank’s minimum FM requirements under OP/BP10.02. In the case of APL1-Acountries such assessment have been concluded for both Liberia and Sierra Leone. Results of assessment, summary of risks and proposed mitigation measures are identified in the technical annex of each country.

(b) Disbursements

8. The Program will use transaction based disbursement (SOE Reports), (where institutional capacity is relatively weak) for reporting on the uses of project funds and also for requesting for subsequent funds (Except for direct payments to ACE in the case of APL1- A). For countries with more established institutional capacity, a report based transaction will be used. Supporting documentation will be retained by the implementing agencies for review by the IDA missions and external auditors. The Bank’s FM team will periodically assess the adequacy of financial management systems and this will form the basis of any change in disbursement methods. Additional instructions for disbursements and operating the Designated Account will be provided in a Disbursement Letter issued for each country.

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(c) Procurement

9. Procurements for WARCIP will be carried out in accordance to World Bank guidelines (Except for activities related to payment of consortium fees to ACE in the case of APL1-A). Procurement for the proposed program would be carried out in accordance with the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 2006 and May 2010; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006 and May 2010, the IDA Anticorruption Guidelines dated July 1, 2005 and as amended through October 15, 2006; and the provisions stipulated in the Grant Agreement and Legal Agreements of each project.

10. Capacity of each PIU will be assessed. Procurement assessment will be conducted for all implementation Units to assess their experience and capacity to carry out procurement activities related to the proposed program. The procurement plan for each phase will be prepared at project Appraisal and will be updated at least annually (or as required) to reflect project implementation Assessment for APL1-Awas conducted and results included in the technical annexes for Liberia and Sierra Leone. Procurement risks and mitigation measures have been identified for APL 1 countries. A similar exercise will be undertaken for all countries joining different phases of WARCIP.

11. Where procurement risks are identified, detailed mitigation measures will be developed for each country. In the case of APL1-A countries possible mitigation measures include (a) hiring a Procurement Specialists with relevant experience in World Bank procurement policies and procedures; ( b) recruiting procurement advisor for short period and the ability to provide on-the- job training to PIU and senior management of implementation Unit who may participate as evaluation committee members for the selection of various consultants; (c) Implementation of the procurement plan will be monitored using SEPA, a web-based procurement monitoring system; (d) regular and ad-hoc trainings in the Bank’ procurement policies and procedures by the Bank’s procurement specialists; (e) regular support, guidance, supervision by the Bank’s procurement specialists during the Project implementation; and (f) procedures that stipulated in the Project Implementation Manual that include delegation of approval authorities; internal guidelines for recordkeeping of procurement documents for Bank-financed contracts; procurement policies and procedures to be followed; templates of Bank’s standard bidding documents and Request for Proposals; discuss anticorruption guidelines and include provisions related to disclosure of conflict of interests, code of ethics for evaluation committee.

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12. The procurement methods and prior review thresholds are indicated in the Table below.

Table 3.1: Procurement Thresholds Prior Review Thresholds Procurement Method Thresholds Proposed (US$) Proposed US$ Least Individual SSS ICB DC Shopping QCBS QBS CQS Cost Consultant Goods $50,000 and first ≥70,00 TBD <0.075 ------(Including shopping contract 00 Design, Supply and Installation) Consulting >100,000 for Firms - - - default TBD <100, TBD TBD TBD Services 25,000 for 000 individuals First Individual and first Firm Contracts SSS: all (including sole sourcing of individual consultants)

13. Logistic services for international and national symposia, seminars, workshops and other training programs (if needed) would be procured using Shopping procedures. In case of very large training programs, exceeding the threshold of USD$ 100,000, the procurement would be advertised at least 30 days in advance in the national or international press as appropriate, and documents agreed by the Bank will be used.

14. Anti-Corruption Action Plan: The Bank team intends to maintain customary oversight and will carry out prior review of all major contracts according to the thresholds that will be regularly reviewed and adjusted as needed in the Procurement Plan. Initial set up thresholds are provided in this Annex. The following measures will be carried out to mitigate corruption risk:

 Training of fiduciary staff: Starting from the project launch and periodically thereafter customized to procedure and methods that would be required in the next 12 months period. Following the project launch will include on-the-job training during supervision missions and regional training provided by the RPM office for the countries in the region;  Prior review: Intensive and close supervision by Bank procurement accredited staff. In addition, all contract amendments will be subject to prior approval by the Bank.  Publication of Advertisements and Contracts: All publications of advertisements and contract awards, including the results of the awards will be done in accordance with the Guidelines requirements and published in the client connection system, on external websites, i.e. UNDB and dgMarket websites.  Debarred Firms: Appropriate attention will be given to the need to ensure that debarred firms or individuals are not given opportunities to compete for Bank-financed contracts;

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 Complaints: All complaints by bidders will be diligently addressed and monitored in consultation with the Bank.  Evaluation Committee: The Bank will review and comment on qualifications and experience of proposed members of the Evaluation committee(s) with a view to avoid that unqualified or biased candidates are nominated. All members will require to sign a disclosure form (sample will be included in Operational Manual).  Monitoring of contract awards: All contracts are required to be signed within the validity of the bids/proposals and, in case of prior review contracts, promptly after the no objection is issued. Procurement Plan format shall include information on actual dates (of no objections and award) and will be monitored for cases of delay which will be looked at on a case-by-case basis to identify the reasons. The LTA will maintain up to date procurement records and to be available to all concerned Bank staff, auditors and INT members of the Bank.  Monitoring of Payments: All contracts shall include bank account information. The bank account shall be in the name of the same supplier/consultant that submitted the bid and awarded the contract. Payments to local suppliers -consultants shall be made in local currency only and paid to the accounts of banks located within the country.  Timeliness of Payments: Payment to suppliers and consultants will be monitored through semi-annual interim un-audited financial reports (IFRs) to ensure timely payments. The PIUs will maintain a system/database to ensure payments to the suppliers and contractors are paid without delay according to the conditions of the contract.

iii. Environmental and Social (including safeguards)

For APL 1 countries Safeguard Issues extend to both deep sea activities and shallow water activities.

15. The Landing Station is the location where a submarine or other underwater cable makes landfall. The landing (or termination) station can also be the point at which the submarine cable connects into the land-based infrastructure or network. Sections of the cable (particularly both wet and dry plants of each country’s lateral connection to the main cable) lie within the territorial waters of the landing parties while remaining sections lie in international waters, normally in deep seas. The lateral connecting cable to landfall near Freetown, Sierra Leone, is approximately 235 km in length, connecting to the main cable beyond the 3000 m isobath. This is well beyond the territorial seas and contiguous zone, and well off the continental shelf. The lateral connecting cable to landfall near , Liberia, is approximately 170 km in length, connecting to the main cable well beyond the 2500 m isobath. Deep ocean fiber optic cables are no larger than 17- 21 mm diameter – about the size of a domestic garden hose- and are laid mainly upon the surface of the ocean floor.

16. Given that much of the deep ocean lies beyond national jurisdictions, few EIAs for any marine activities have been undertaken in this zone and thus there is little evidence of any environmental issues, except in cases of oil and gas exploration and very deep sea trawling. No specific environmental studies are undertaken for submarine cables; however, prior to laying cables, a detailed Cable Route Survey is done to ensure that the cable is not located in high risk locations

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or geological features (e.g., thermal vents) that often harbor unique faunal assemblages at abyssal depths. Most of the larger companies operating in the submarine cable industry typically work to standards and quality management systems set by the International Organization for Standards under the ISO 9000 and ISO 9001 schemes. Furthermore, the International Cable Protection Committee (ICPC) publishes recommendations on key issues such as cable routing, cable protection and cable recovery that are available to anyone on request. This very stringent standard puts pressure on cable companies to adhere to strict environmental standards. The general experience is that the section of the cable that lies in the deep sea has minimal impact on marine mammals and fish. The extensive studies that are undertaken by the cable suppliers prior to final cable laying tend to work as effective safeguards against any possible environmental disruption, since in large part they are intended to identify routes for the cable that will avoid seamounts, volcanoes, canyons, vents, seeps, deepwater reefs, dissected terrain – all areas that tend to be associated with higher biological value than the general abyssal plain.

17. As the cable gets closer to the shores in water depths shallower than 1,500m, the cable’s diameter may increase to about 40-50 mm due to the need to add protective wire armoring. The small environmental disturbances caused by laying connecting cable from the shore in Liberia and Sierra Leone to a deep sea submarine fiber optic cable are not expected to have any perceptible effect on the quality of the coastal waters of the Atlantic Ocean or on marine species or habitat. For the cable and associated equipment onshore, there may be some temporary, low to moderate environmental and social impacts including localized impacts to nearshore marine life and local fishermen access.

Deep Sea20 Activities

18. In principle, deep ocean fiber optic cables are no larger than 17-21 mm diameter – about the size of a domestic garden hose- and are laid mainly upon the surface of the ocean floor (“surface laid”). Sections of the cable (including both wet and dry plants) lie within the territorial waters of the landing parties while remaining sections lie in international waters. According to the 1982 United Nations Convention on the Law of the Sea (UNCLOS), of which Sierra Leone and Liberia are signatory, international waters start 12 nautical miles from the coast. Beyond the 12 nautical mile limit there is a further 12 or 24 nautical miles from the territorial sea, a contiguous zone, in which a state could continue to enforce laws in four specific areas: pollution, taxation, customs and immigration (see figure 1, below). UNCLOS further provides for economic zones which could extend from the edge of the territorial sea out to 200 nautical miles. In the exclusive economic zones, states have no sovereign rights but can enforce laws on pollution, taxation, customs and immigration (see figure below). Within their territorial waters, on the other hand, countries have sovereign rights. Foreign nations have the freedom of laying submarine pipes and cables in the exclusive economic zones.

20 Deep Sea is mainly a technical term with no precise definition used to describe zone/areas beyond which cable burial is not required (mainly because threats to the cable from trawling activities are non-existent. This starts usually after 1000/ 1500 meters depth. Given this challenge, perhaps Bank environment focus should be on territorial vs international waters, though it is acknowledged that maritime jurisdictional zones are not defined by reference to water depth or marine ecology. 44

Figure 3.1: Designated ocean zones according to UNCLOS.

19. After the signing of the Supplier Contract, Alcatel-Lucent conducted a cable route Study to refine the initial route (Cable Route Estimate) and corridor taking into account seabed contours, volcanoes, environmentally sensitive areas (i.e., conservation areas, coral reefs), oil exploration zones and fisheries etc. along the route and included visits to possible landing countries/sites to discuss environmentally sensitive areas, requirements for permits, fisheries etc. Information obtained during this period was instrumental in determining an optimal route design of the cable system which reflects these discussions. Alcatel-Lucent has indicated they will share the results of this preliminary assessment which could be useful for the ESMFs that are being prepared by the various countries in respect of their territorial waters. Alcatel-Lucent is following up the preliminary survey with a more detailed survey of the seabed to fine-tune the cable route which will also be based on confirmed landing sites (countries are still in the process of finalizing this) and provide more detailed information on the level of bottom trawl fishing and shipping activities (closer to the shore), and deep sea activities, including oil drilling21. The more detailed route survey (“Marine Survey”) is expected to be completed as follows:

 Segment 1 countries – Already completed, results available  Segment 2 countries – Mid-October, results available Mid-November  Segment 3 countries – Early December, results available Mid-December  Segment 4 countries – TBC subject to availability of funding

21 Alcatel-Lucent has already completed a separate study of oil drilling activities in the region which could be made available to the World Bank. 45

20. In general, however, it is our understanding that the section of the cable that lies in the deep sea has minimal impact on marine mammals and fish. The threat of whale entanglements has diminished significantly with improvements since 1956 in the design of cable and in the precision with which they can be laid in close conformity with the seabed profile, and without loops and twists.

21. Generally speaking, there are no significant environmental issues concerning fiber cables in the deep sea (significant issues are concentrated on shallow waters and the coastal areas/beach). The extensive studies that take place prior to final cable laying tend to work as effective safeguards against any possible environmental disruption, since in large part they are intended to identify routes for the cable that will avoid seamounts, volcanoes, canyons, vents, seeps, deepwater reefs, dissected terrain–all areas that tend to be associated with higher biological value than the general abyssal plain.

22. Because much of the deep ocean lie beyond national jurisdictions, few EIAs for any marine activities have been undertaken in this zone and thus there is little evidence of any environmental issues, except in cases of oil and gas exploration and very deep sea trawling. No specific environmental studies are undertaken for submarine cables; rather the detailed Cable Route Survey effectively serves this purpose. At the surface, pollution of the high seas by oil and wastes discharged from vessels can be effectively controlled if those vessels observe compliance with maritime conventions such as the International Convention for the Prevention of Pollution From Ships, 1973, as modified by the Protocol of 1978 (MARPOL).

23. Based on these experiences, it may not be necessary for member countries to conduct EIAs of the deep sea, though this should not deter member countries from considering in the screening and scoping phases of their EIAs whether there are areas of deep sea traversed by ACE and within the geographical limits of application of their domestic EIA legislation to which attention should be paid.

Shallow Water Activities

24. As the cable gets closer to the shores in water depths shallower than 1,500m, the cable’s diameter may increase to about 40-50 mm due to the need to add protective wire armoring. It may also be necessary to bury the cable to protect it.

25. It is possible, depending on the topology of the country, that the 12 nautical miles of territorial waters will straddle between shallow waters and deep sea. It is also likely that there may be fishing and other maritime activities, particularly in the shallow waters which could be disturbed during the route survey and cable laying process (but this is short-lived as the duration of cable- laying operations is usually no more than a few days).

26. The cable landing or Terminal Station is expected to be at the seashore, and requires a building, power feed and a power grounding (earthing) system. The building will typically be 150 to 200 square meters in size with approximately half of this space for equipment and the balance for maintenance, training, and office spaces. The borrowers would have to have prepared draft Environmental and Social Management Frameworks (ESMFs) (consistent with national laws,

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any applicable treaty concerning international waters, and OP 4.01) and Resettlement Policy Frameworks (RPFs) for the lateral cables and any associated equipment that will be laid from the junction with the main cable through territorial waters and onto the national shores, and also for the fiber on transmission lines, as required. The seaward limit of coverage for the ESMF is the seaward limit of each country’s EEZ, defined as extending 200 nm (370 km) from the shorelines. The RPFs are being prepared in case the project may require land acquisition and resettlement, and/or restricted access to natural resources, although this is not expected based on the preliminary Cable Route Survey work. The ESMFs related to the submarine cable will be prepared, disclosed and consulted on before appraisal. Once the specific sites are known, Environmental and Social Management Plans for the lateral cable and shore-based facilities, Environmental and Social Impact Assessments (ESIAs) and/or Resettlement Action Plans, as the case may be,if it is determined that these are required, will be prepared as part of project implementation but before the cable is laid. Key stakeholders for consultation will include current inhabitants (where applicable) of landing sites, the Environmental Protection Agencies of the client countries, businesses and civil society.

27. An ESMF will be prepared and disclosed prior to APL 3 of the program concerning the ‘lighting’ of fiber on existing power lines. Similarly for the fiber on transmission lines, while most of the fiber is already embedded in the transmission lines, and the additional electronic equipment that will be required to ‘light’ the fiber is not expected to have any perceptible effect on the quality of surrounding locations, there may be cases where fiber may need to be strung on the transmission lines which could result in minor environmental disturbances. An ESMF will be prepared and disclosed prior to Appraisal of this phase of the program (APL 3), and consultations will be conducted in all countries in this phase.

iv. Monitoring & Evaluation

28. Where will the data for the project’s outcome and results indicators come from? PIUs will monitor and evaluate national projects. The PIUs in different countries will bear the primary responsibility for project monitoring and evaluation (M&E), and, as such, will establish standard formats and guidelines for data collection and reporting, and will organize training sessions for project stakeholders in their use.

29. As indicated above, an M&E system will be set up within the PIUs to keep track of and evaluate implementation progress of the proposed IDA project within the broader context of the institutional framework for the telecommunications sector. Although increased geographical reach and reduction of costs at the country level remains the hallmark of success of an enabling environment, the program’s M&E systems will seek first to measure results that are closely associated with project activities. Hence, the first order of indicators that the M&E systems will look at shall include lower indicators related to quality, cost, quantity, and time (see Annex 1). Ultimately, improvement of laws and decrees by the project activities (component 2) will have positive ripple effects on the whole sector and, it is hoped, on service delivery.

30. What capacity is available to collect data? If limited, how will it be strengthened? The PIUs may recruit or designate a person responsible for M&E, based on the capacity assessment of the

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PIU staff right after effectiveness. More specifically, the person responsible for M&E will liaise with all the project’s stakeholders (through designated focal points) to gather relevant information and data regularly.

31. What additional costs will be required to support M&E? In addition to the salaries of the persons responsible for M&E in each PIU, and the potential costs entailed by data gathering, the number of project beneficiaries (direct or indirect) may require at time the recruitment of a consultant to carry out ad hoc surveys.

32. How will data be used assess the project’s effectiveness during implementation? Regional institutions will also be brought in to evaluate progress. In addition, the program will create cooperative arrangements within different PIUs to work with WATRA and ECOWAS to enhance their M&E capacities. M&E Consultants hired for different PIUs will have regional tasks.

33. The views of direct beneficiaries will be brought into the monitoring and evaluation process. Comprehensive M&E reporting will be needed to monitor the results and performance of the project. It will involve mainly the direct beneficiaries of project activities, but will be extended to other beneficiaries such as telecommunications operators and private ICT firms, which ultimately are the main beneficiaries of the project’s outcomes. The PIUs will review and validate the reports on performance indicators and recommend corrective action if necessary.

34. Monitoring of Outcome Indicators: Specific, Measurable, Achievable, Relevant and Timebound (SMART) indicators will be used as an initial monitoring guide. As indicated above, an M&E system will be set up within the PIU to keep track of and evaluate implementation progress of the proposed IDA project within the broader context of the institutional framework for the telecommunications sector. Although improved ICT and telecommunications services at the operator level remains the hallmark of success of an enabling environment, the project’s M&E system will seek first to measure results that are closely associated with project activities. Hence, the first order of indicators that the M&E system will look at shall include SMART indicators related to quality, cost, quantity, and time. Ultimately, improvement of laws and decrees by the project activities will have positive ripple effects on the whole sector and, it is hoped, on service delivery.

35. Implementation support missions will be conducted at least twice a year. The governments may perform evaluations jointly with the World Bank team and conduct supervision or implementation support missions at least twice a year. Missions will be based on the latest quarterly implementation and financial monitoring reports prepared by different governments. The team will apply for regional M&E grant to boost capacity of ECOWAS and WATRA for collecting, monitoring and evaluating performance indicators in the sector.

v. Role of Partners

36. World Bank will work with the African Development Bank and Islamic Bank at appropriate stages. At the program level, different donors expressed interest to co-finance including African Development Bank and Islamic Development Bank. The AfDB and the

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Islamic Development Bank are in the process of assisting the ECOWAS Commission to develop an ECOWAS (ECOWAN) project to link all Member State Institutions, projects and Government offices via high speed communications network. The World Bank is in discussions with the two institutions to identify areas where the infrastructure networks being developed in the various countries could complement the World Bank sponsored West Africa Regional Communications Infrastructure Program and vice versa. The specific modalities of cooperation and amounts are still under discussion and will depend on country needs and requirements.

37. All institutions agree to a policy of open access and pro-competitive frameworks. All three institutions have agreed on an open access strategy which ensures competitive access by all operators and service providers to Infrastructure funded through development partners, and reasonable certainty that entrants will be able to compete on a level playing field (including transparency of terms and conditions; fair and coherent technical access and pricing.

38. World Bank will also coordinate work program with the ECOWAS Commission. The World Bank and the African Development Bank are discussing additional collaboration in leveraging existing infrastructure in the region. AfDB has already agreed on a Memorandum of Understanding with the ECOWAS Commission to ensure that all new electricity, road and railway infrastructure in the region funded with AfDB resources will include fiber and leverage rights of ways respectively.

39. World Bank will also coordinate with the ITU. The program will also coordinate with ITU in the area of capacity building for regional regulatory authorities, given existent programs by ITU in this area.

40. On project level, donor cooperation will be discussed on a case by case basis depending on specific donors’ activities in given countries and will likely adopt a parallel financing strategy. Those details will be included in country specific technical annexes.

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Annex 4 Operational Risk Assessment Framework (ORAF)

Project Development Objective(s)

To increase the geographical reach of broadband networks and reduce costs of communications services in Sierra Leone and Liberia

PDO Level Results 1. Volume of international traffic Indicators: 2. Access to telephone services 3. Access to internet services 4. Average monthly price of wholesale international E1 capacity link from capital city to Europe 5. Number of direct project beneficiaries, of which female

Risk Category Risk Rating Risk Description Proposed Mitigation Measures

Project Stakeholder Risks MI Tensions within the sector may reduce private PPP framework would provide value for LTC sector’s interest in Liberia. participating in the PPP framework and provide guarantees to operators to invest. In addition the legal

framework does not give advantages to LTC. Finally

there is ongoing pre-privatization support to LTC and ongoing strategic advice on how to create value in LTC Lack of collaboration of stakeholders in Sierra PPA support for divestment including managing the Leone. process, due diligence, and negotiating with potential Divestment process less successful than anticipated buyers in Sierra Leone. Implementing Agency Risks MI GoL capacity in project implementation and The Bank will fund targeted TA and capacity building fiduciary procedures needs to be developed rapidly. activities as part of the program throughout the project implementation.

GoSL capacity in project implementation and fiduciary procedures needs to be developed rapidly.

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Project Risks

 Design MI Design of this Program phase is complex and risky The Project will benefit from upfront technical studies (Public Private Partnership) for ownership and and legal support under PPA. This will provide clarity management of landing station. of all design issues. Institutional arrangements (role of each institution) will be further clarified in the Project Implementaion Manual. The project will support comprehensive reform to the sector to improve investors’ confidence  Social and MI The physical component of the Program will be An Environmental and Social Management Environmental limited to the building of national terrestrial Framework (ESMF) and a Resettlement Policy backbones and the deployment of missing links Framework (RPF) have been conducted, reviewed by between the regional network and the national the World Bank, and publicly disclosed in Liberia and landing points. Sierra Leone. A specific Environmental, Management Plan and Resettlement Action Plan will be prepared as necessary for terrestrial facilities during project implementation, in line with ESMF and RFP, once the locations of those facilities have been identified. Civil works for the first 12-18 month of project implementation should be screened for environmental and social impacts and EAs / EMPs needed for those sites should be ready for disclosure before commencement. During preparation, the project team carefully assessed the capacity of all constituencies Finally, since the Program will involve PPP schemes, appropriate technical clauses will be prepared and included in the biddings documents for the Private Entity when necessary, to ensure the execution of agreed environmental and social safeguards measures or instruments.

 Program and Donor N/A N/A

 Delivery Quality ML The Program’s expected results depend on many The Program includes M&E activities that have been factors sometimes outside the project’s scope. This discussed in details with the clients during 51

may also affect the sustainability of the Program’s preparation. The M&E system will ensure an efficient achievements. monitoring of results achievement and should prevent major issues. The commitment of the Program stakeholders to the new PPP arrangements as well as the institutional and policy framework improvement will ensure sustainability of program results beyond its completion.

Overall Risk Rating at Overall Risk Rating During Comments Preparation Implementation MI Major issues and risks will be dealt with by effectiveness through targeted activities financed by the PPF. The MI MI rating for implementation is mainly due to the risky country and institutional contexts, outside the project scope.

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Annex 5: Implementation Support Plan

Strategy and approach for implementation support

1. The strategy for Implementation Support (IS) has been developed based on the nature of the program and its risk profile. It will aim at making implementation support to the client more flexible and efficient, and will focus on implementation of the risk mitigation measures defined in the ORAF.

 Procurement. Implementation support will include: (a) hiring an international procurement specialist as semi- resident advisor to PIUs as needed (b) providing training to members of the Procurement Committee and related staff in the regional project offices, as well as the Projected Management Consultant; (c) reviewing procurement documents and providing timely feedback to the Procurement Committee; and (d) providing detailed guidance on the Bank’s Procurement Guidelines to the Procurement Committee; and (e) monitoring procurement progress against the detailed Procurement Plan.

 Financial management. Supervision will review the individual project’s financial management system, including but not limited to, accounting, reporting and internal controls. Supervision will also cover sub- projects on a random sample basis.

 Environmental and Social Safeguards. The Bank team will supervise the implementation of the agreed Environmental Management Plan and provide guidance to PIUs and governments.

 Other Issues. Sector level risks will be addressed through policy dialogue with the governments’ Ministries and Regulatory Authorities. Technical advisors will be hired for PIUs, regulatory authorities and Ministries.

Implementation Support Plan

2. Given the limited size and the relatively simple nature of the project supervision of this project is not likely to require a very intensive supervision, especially after the first year of implementation. The Bank team members will be based either in Washington DC, or in the Africa Region, and will be available to provide timely, efficient and effective implementation support to the client. Formal supervision and field visits will be carried out semi-annually initially, with possibility for annual visits in later years of the project. Detailed inputs from the Bank team are outlined below:

 Technical & Legal inputs. Technical and legal telecommunications and regulatory related inputs are required to review bid documents to ensure fair competition through proper technical specifications and fair assessment of the technical aspects of bids. ICT Policy Specialists will provide technical support and conduct supervision visits whenever needed. Legal support will be provided as necessary.

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 Fiduciary requirements and inputs. Training has been provided by the Bank’s financial management s and procurement specialists before launch of PPA. Additional training will be provided before the commencement of project implementation as needed. The Bank teams will also help identify capacity building needs to strengthen its financial management capacity and to improve procurement management efficiency. Both the financial management and the procurement specialists will be based in the region to provide timely support. Formal supervision of financial management will be carried out semi-annually or annually, while procurement supervision will be carried out on a timely basis as required by the client.

 Safeguards. Inputs from environment and social specialists may be required, though the program’s social and environmental impacts are limited and client capacities are generally adequate.

 Operation. The co-TTLs will also provide day to day supervision of all operational aspects, as well as coordination with the clients and among Bank team members. If needed, a consultant may be used to support this role.

The main focus of implementation support is summarized below.

Partner Time Focus Resource Estimate Role Project Team leadership, technical, legal and ICT Policy Specialist 8 duration procurement review of the bidding SWs documents and Institutional ICT Legal Specialist 2 arrangement and project supervision SWs coordination Procurement specialist(s) 2 Procurement training SWs FM specialist 2 FM training and supervision SWs Social specialist .5 SWs Environmental and Social Issues Environmental specialist(s) .5 SWs Note: SW – Staff-Week

Staff skill mix required is summarized below. ` Skills Needed Number of Staff Weeks Number of Trips Comments Task team leader, legal 10 SWs annually Fields trips as DC or Country and ICT Policy required. office based Specialist Procurement 2 SWs annually Fields trips as Country office based required. Social specialist 0.5 SWs annually Fields trips as Country office based required. 54

Environment specialist 0.5 SWs annually Fields trips as Country office based required. Financial management 2 SWs annually Fields trips as Country office based specialist required.

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Annex 6: Team Composition

World Bank staff and consultants who worked on the project: World Bank staff and consultants who worked on the project:

Name Title Unit

Mavis Ampah Senior ICT Policy Specialist ICT Sector Unit

Boutheina Guermazi Senior Regulatory Specialist ICT Sector Unit

Alexandra Bezeredi Regional environmental and Safeguards Advisor AFTOS

Anthony Mensa-Bonsu Procurement Consultant AFTPC

Beatrix Allah-Mensah Social Development Specialist AFTCS

Charles Taylor Procurement Consultant AFTPC

Claudia M. Pardiñas Ocaña Sr. Counsel LEGAF

David Satola Sr. Counsel LEGPS

Deo Ndikumana Sr. Operations Officer ACFRI

Diego Garrido Martin ETC AFTDE

Doyle Gallegos Lead ICT Policy Specialist ICT Sector Unit

Fatu Karim-Turay Team Assistant AFMSL

Ferdinand Tsri Apronti Procurement Specialist AFTPC

Fredrick Yankey Sr. Financial Management Specialist AFTFM

Gurcharan Singh Sr. Procurement Specialist ICT Sector Unit

Harvey Van Veldhuizen Lead Environmental Specialist OPCQC

Ismaila Ceesay Lead Financial Management Specialist AFTFM

Joyce Olubukola Agunbiade Financial Management Specialist AFTFM

Kaoru Kimura Operations Analyst ICT Sector Unit

Kymberly Thompson STC ICT Sector Unit

Marc Jean Lixi Sr. Operations Officer ICT Sector Unit

Maxwell Bruku Dapaah Financial Management Specialist AFTFM

Michele Ralisoa Noro Senior Program Assistant ICT Sector Unit

Nyaneba E. Nkrumah Sr. Natural Resource Management Specialist AFTEN

Omar Andres Martinez ETC LEGPS

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Rajiv Sondhi Sr. Finance Officer CTRFC

Robert De-graft Hansen Financial Management Specialist AFTFM

Said Al Habsy Operations Advisor AFTDE

Sarah Brierley Consultant ICT Sector Unit

Thomas Watson Consultant AFTOS

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Annex 7: Economic and Financial Analysis

1. Connecting to ACE minimizes transit costs and is most cost-effective long term option. Financial analysis was performed for Liberia, Sierra Leone and Guinea. The analysis considered a variety of satellite and fiber options and concluded that a submarine fiber link is the best overall option in terms of long-term cost effectiveness and bandwidth availability. The ACE cable is the best fiber option. The cable has the potential to substantially address by 2012 the urgent need for high capacity access to the international backbone at substantially lower cost than currently available in these countries via satellite (VSAT). Although upfront costs are higher, the key cost saving with the ACE compared to alternative fiber options is the high cost involved in the purchasing of transit from an existing landing station to the global backbones. The cost of transit on existing African cables linking to Europe (e.g. MainOne or SAT-3) is at least US$200/Mbps/month, and most likely to be higher- closer to US$500/Mbps/month. By contrast the cost of transit in Europe is much more competitive and is closer to US$10/Mbps/month. By participating in ACE, which lands traffic directly in Europe, transit costs to the global backbones are minimized. ACE also has an advantage over the cross-border fiber option in terms of speed and costs and is without the need for independent management, planning and maintenance. The ACE cable design is both “state of the art” and proven, and involves no significant technology risk. The choice of SDH electronics is conservative and has reasonable efficiencies carrying Internet Protocol (IP) traffic. High capacity international connectivity will mitigate the existing technological marginalization of these three countries and bridge the digital divide by expediting broadband rollout, e-Government and e-Services, new media and ICT development in urban and rural areas of these countries, for the benefit of ordinary citizens. Specific steps would need to be taken, however, in particular to establish a clear regulatory regime for the landing point, in order to ensure the full benefits from the potential connectivity that the cable offers.

2. Fiber cable has an advantage over satellite in terms of price and quality of service. The fiber option has the advantage of high speed and quality, and low cost. There is a single point of purchase and low local management overhead. In the ACE case the Consortium is already in place. The disadvantage of fiber connection in the ACE solution is the high CAPEX. However, this solution in the long term offers the lowest prices.

3. Assumptions of financial analysis. Financial comparisons of satellite versus fiber options were done using the following assumptions:  Study period: 10 years  Capital costs for ACE: 25m  Initial capacity of ACE: 5.9 Gbps, using an average of 2.5Gbps over the study period.  Annual operating and maintenance costs: 3% of CAPEX  Average geostationary satellite transponder costs: US$2000 per month per Mbps.  Cost for capacity on existing cables: MainOne and SAT-3: US$280-800 per month per Mbps.

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4. Connecting to ACE will see Liberia and Sierra Leone breakeven between 2015 and 2017, and an average NPV to 2025 of US $20.2 million. Initial calculations indicated that with dedicated landing stations in each of Liberia and Sierra Leone, breakeven would take place at a later date, with Internal Rate of Returns at ranging from –1.3% to 13%. However a reassessment of the potential market demand and bandwidth pricing was carried out in January 2011 to take into account the recently observed trends in East and Southern Africa where new competitive submarine cables have now been in place for over a year and where data has recently been made public. Due to the competitive pressure there, bandwidth prices have fallen substantially and consumption/demand has increased dramatically. Bandwidth pricing in the region is now moving toward US$50-US$100/month/Mbps at a wholesale level (for long-term - i.e, 15 year, IRU type pricing), producing much higher levels of demand. This has already necessitated the commissioning of upgrades to submarine cable capacity, much earlier than initially planned. Since there are likely to be competitive cable landings in West Africa that will bring down prices and result in requirements for additional bandwidth, the East African trends in bandwidth uptake levels and pricing were used in the economic model to revise the estimated Internal Rate of Return (IRR) to between 4% and 12% for Liberia, and 15%-24% for Sierra Leone, depending on the bandwidth pricing adopted (US$50 or US$100/Mbps/month)22. The assumptions for these calculations are as follows: wholesale bandwidth pricing (US$50-100/Mbps/month); uptake forecast of 7-18 Gbps). The final breakeven year will depend on the actual wholesale price of bandwidth and capacity uptake, but is expected by 2017 at the latest, for the most conservative estimate. After the breakeven year the project would be cash-flow positive, and substantial revenues would be made if these wholesale pricing levels are maintained. Investment data was calculated based on a discount rate of 15%.

5. Previous experience with fiber cables shows a rapid increase in demand when price of bandwidth decreases. The effect that lowering the cost of access has on the amount of bandwidth sold can be modeled using a price elasticity curve. The SAT-3 example (SAT-3 is between Portugal and South Africa) shows a clear relationship between volume and tariffs, if the cost on SAT-3 were dropped to US$250 per month. The chart below compares the price of access on SAT-3 (per E1 half-circuit to Sessimbra, Portugal) against the volume of international bandwidth sold. This shows the effect that price decreases between 2004 and 2006 have had on the volume of bandwidth sold in each of four countries where comparable data was available. The increase in international bandwidth demand increases because broadband services first become more viable for operators to deploy, and secondly because as retail prices decrease the service become increasingly affordable and penetration increases. Réunion is included here as a particularly clear case which shows that when price was US$20,466 per Mb the volume was just 4 Mbps, but when it decreased to US$1,967 volume increased to 180 Mbps. If the price were to drop further to US$500 per Mb, it is projected that the volume would increase to 1.656 Gbps. If the price were to decrease to US$250 per Mbps per month, the volume is projected to grow to 5.02 Gbps. This increase comes about because of the multiplier effects: monthly prices for broadband decrease, in turn improving affordability and increasing uptake of services.

22 In the case of the more developed and competitive Sierra Leone market it is likely that the bandwidth pricing would reduce more over the life of the cable (rather than being static over the entire period) 59

Figure 7.1: Bandwidth Price Elasticity

Price Elasticity On Sat-3 Ghana Nigeria 45,000 Reunion South Africa Nigeria PE South Africa PE 40,000 Ghana PE Reunion PE 35,000 30,000 25,000 20,000 15,000 10,000 Price (US$ per month) per (US$ Price 5,000 - - 1,000 2,000 3,000 4,000 5,000 Volume (Mbps)

6. The predicted bandwidth demand for Liberia and Sierra Leone with access to fiber averages 12,500 Mbps compared to 500 with expanded geostationary satellite and 900 with inclined satellite. In this analysis it is assumed that there is no effective limit on the amount of satellite bandwidth that can be purchased. This is unlikely given that many countries in the region will be switching from satellite to fiber with the launch of ACE and other cables, and satellites with West African footprints continue to be launched. Extrapolating current usage and growth in users could provide an indication of future bandwidth demand, however due to the current high cost of service (relative to income levels) and the relatively slow speeds available, this would tend to substantially underestimate pent-up demand when bandwidth availability improves and costs decrease. Given the trends worldwide in broadband adoption levels, and especially encouraged by the explosion of mobile broadband23 (3G), the estimates used appear relatively conservative, especially toward the end of the analysis period (2021), by which date it is expected that almost every mobile phone user would have access to broadband on their handset. However, this is dependent on the introduction of high-bit-rate mobile services into the market, and unless increased competition is introduced into the sector, the operators may not be encouraged to introduce these types of new services.

7. Bandwidth requirement per user has the potential to advance rapidly with further social and economic development, especially with the development of tourism and BPO sector. There can be a wide divergence in forecasting bandwidth requirements per user. The last 10 years has seen massive increases in end-user bandwidth demand resulting from the popularity of social network, image and video sites such as FaceBook and YouTube. Fortunately these bandwidth demands have kept pace with technology developments which are now seeing domestic broadband services delivering 100Mbps and even 1Gbps in some advanced countries. If we assume that these countries will have the

23 3G data service uptake from the consumer has been massive and unprecedented in other developing countries such as Kenya 60

opportunity catch up at least partially with these developments over the next decade then we can expect a relatively high level of growth in bandwidth use. There are also some special sources of additional demand which could also significantly increase international transmission requirement: Tourism and development of Business Process Outsourcing (BPO) sector. Although tourism is comparatively small in these countries, it could increase significantly in future. Tourism creates demand for international telecommunication services through demand of administrative and marketing service as well as demand for internet access, international calls and money transactions. BPO and Internet call centre service companies can generate significantly more Internet traffic if bandwidth prices can be reduced and fiber connections made available. Sourcing channels for television rebroadcasting is currently carried out by satellite but could be substituted by fiber if bandwidth prices are sufficiently competitive.

8. Fast internet has been shown to boost the productivity of firms as well as generate employment opportunities. New growth theory suggests that long-run economic growth emanates from spillover arising from innovation and investment in new technologies. Fast internet access can be considered one important new technology, and broadband is increasingly recognized to promote productivity and boost aggregate economic growth (OECD, 2003). Analytical studies have shown that firms using standard broadband (defined as connection speeds above 256 Kbps (OECD, 2002)) were on average 10 percent more productive than firms using dial-up internet access. Faster internet speeds are also causally related to increased employment opportunities with analysis showing that for every one percentage point increase in broadband penetration within a region, employment increases by 0.2-0.3 percent per year for the private, non-farm economy (Crandall et al, 2007). Indeed, studies show a clear positive relationship between employment and broadband penetration in the manufacturing and service industries, with business growth shown to be particularly significant for larger businesses and for IT intensive sector (Lehr et al, 2006). The results of these studies support the hypothesis that broadband penetration enhances economic activity. Increased broadband speeds and less expensive data access have the potential to promote economic activities in West Africa, supporting the growth and productivity of businesses and gradual transfer of employment from agricultural to service industries and expansion of the region’s nascent ICT and Business Process Outsourcing sector.

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Annex 8: Cable Route Map for ACE Cable

Figure 8.1: Map of cable route for ACE cable.

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Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: T7737-SL

REPUBLIC OF SIERRA LEONE TECHNICAL ANNEX

ON A PROPOSED CREDIT

IN THE AMOUNT OF SDR 19.8 MILLION (US$31.0 MILLION EQUIVALENT)

TO THE REPUBLIC OF SIERRA LEONE

FOR THE

WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROJECT (APL 1A – SIERRA LEONE)

UNDER THE FIRST PHASE OF THE WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM (APL1)

December 22, 2010

ICT Sector Unit Africa Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

(Exchange Rate Effective December 1, 2010)

Currency Unit = SDR = US$ 0.6362 = SDR 1

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

$ United States dollar, all dollars are US dollars unless otherwise indicated ACE Africa Coast to Europe Submarine Cable AfDB African Development Bank AICD Africa Infrastructure Country Diagnostic APL Adaptable Program Loan ATU African Telecommunications Union AUC African Union Commission AWP&B Annual Work Program and Budget BP Bank Procedures CAS Country Assistance Strategy EASSy Eastern Africa Submarine Cable System EEZ Exclusive Economic Zone EMP Environmental Management Plan ESMF Environmental and Social Management Framework EU European Union FDI Foreign Direct Investment GDP Gross Domestic Product GLO-1 GlobaCom-1 Cable GoSL Government of Sierra Leone GPT General Purpose Technology GSM Global System for Mobile Communication ICT Information and Communication Technology IDA International Development Association IRR Internal Rate of Return ISP Internet Service Provider ITU International Telecommunication Union IXP Internet Exchange Point JCAS Joint Country Assistance Strategy Mb Megabyte

2

MDAs Ministries, Departments and Agencies M&E Monitoring and Evaluation MoIC Ministry of Information and Communication NATCOM National Telecommunications Commission NPV Net Present Value OD Operational Directives OM Operational Manual OPCPR Procurement Policy and Services Group PAD Project Appraisal Document PDO Project Development Objectives PIU Project Implementation Unit PPA Project Preparation Advance PPP Public Private Partnership RAP Resettlement Action Plan RPF Resettlement Policy Framework SALCAB Sierra Leone Cable Limited SAT-3 South Atlantic Three cable SIERRATEL Sierra Leone Telecom Company SIL Specific Investment Loan SLIXP Sierra Leone Internet Exchange Point UNDP United Nations Development Programme VSAT Very Small Aperture Terminal WAPP West Africa Power Pool WARCIP West Africa Regional Communications Infrastructure Project WASC West African Submarine Cable WATRA West Africa Telecommunications Regulators Authority WBG World Bank Group

Vice President: Obiageli Katryn Ezekwesili Regional Integration Director: Yusupha Crookes Sector Director: Jose Luis Irigoyen Country Director for Sierra Leone: Ishac Diwan Sector Manager: Philippe Dongier Task Team Leaders for WARCIP Mavis Ampah and Boutheina Guermazi Task Team Leader for WARCIP Sierra Leone: Mavis Ampah

3

Table of Contents I. Strategic Context ...... 1 A. Country Context ...... 1 B. Sectoral and Institutional Context ...... 2 C. Higher Level Objectives to which the Project Contributes ...... 5 II. Project Development Objectives...... 7 A. PDO ...... 7 1. Project Beneficiaries ...... 7 2. PDO Level Results Indicators ...... 8 III. Project Description ...... 8 A. Project Components ...... 8 B. Project Financing ...... 11 1. Lending Instrument ...... 11 2. Project Financing Table ...... 12 C. Lessons Learned and Reflected in the Project Design ...... 12 IV. Implementation ...... 13 A. Institutional and Implementation Arrangements ...... 13 B. Results Monitoring and Evaluation ...... 14 C. Sustainability ...... 15 V. Key Risks ...... 16 VI. Appraisal Summary ...... 17 A. Economic and Financial Analysis ...... 17 B. Technical ...... 18 C. Financial Management ...... 20 D. Procurement ...... 20 E. Social and Environment ...... 21 Annex 1: Results Framework and Monitoring...... 26 Annex 2: Detailed Project Description ...... 27 Annex 3: Implementation Arrangements ...... 32 Annex 4: Operational Risk Assessment Framework (ORAF) ...... 51 Annex 5: Implementation Support Plan ...... 53 Annex 6: Team Composition ...... 56 Annex 7: Economic and Financial Analysis ...... 57 Annex 8: Environmental and Social Safeguards ...... 60 Annex 9: Payment Schedule for ACE Cable ...... 63

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I. Strategic Context

A. Country Context

1. A decade-long civil war destroyed social and physical infrastructure in Sierra Leone. Between 1991 and 2002, Sierra Leone suffered a brutal civil war that had a devastating impact on the people and physical infrastructure of the country. Tens of thousands of Sierra Leoneans lost their lives and over 2 million people (more than one-third of the population) were displaced during this period.

2. Since 2002 there has been impressive political developments and economic growth. Some eight years on, Sierra Leone is one of the few post-conflict countries that has achieved a democratic transition of government, having been through two peaceful and credible presidential and parliamentary elections, and a 2007 elections which resulted in the orderly alternation of power from the governing to the opposition party. Real economic growth rebounded strongly after the war, 27 percent in 2002, 9 percent in 2003, and just over 7 percent between 2005-2007, before slowing down to 5.5 percent in 2008. Unfortunately, the global financial and economic crisis resulted in a slowed growth rate of 4.0 percent for the country in 2009. It is expected that an improving global economic situation will move Sierra Leone’s economy back to pre-recession levels, with 6 percent annual growth projected in 2011 and 2012.1 Gross Domestic Product (GDP) per capita was US$352 in 2009 – up from $206 in 2002. Sierra Leone is among a small number of countries designated as “post conflict” by International Development Assistance (IDA) and as such is eligible for specific development programs to support a rapid recovery.

3. Sierra Leone, however, still remains a Least Developed country with high poverty levels. Despite progress in economic growth and a fall in poverty, Sierra Leone’s poverty head count is more than 60 percent compared to approximately18 percent in Ghana, and continues to rank among the poorest countries in the world according to various measures (e.g. 180 of 182 countries in the 2008-09 United Nations Development Programme Human Development Index ratings). To address these challenges, the Government of Sierra Leone (GoSL) has launched a new national strategy, the Agenda for Change, which focuses on the growth and human development agenda in priority areas (agriculture, energy, and transport infrastructure, education, health, and water/sanitation) which have great potential to stimulate growth.

4. Regional integration is critical for stimulating national economic growth. The need for greater regional economic and infrastructural integration is critical, and the lack of such infrastructure holds back small economies such as Sierra Leone from achieving greater economic growth and satisfying the Millennium Development Goals. The Africa Infrastructure Country Diagnostic (AICD)2 report highlights the importance of regional integration, in particular for the smaller countries in the region which could each spend between 5-30 percent of their GDP on addressing infrastructure gaps, in contrast with 1 percent of regional GDP. Between 1995 and 2005, infrastructure improvements boosted West Africa’s growth by about one percentage point per capita per year. The positive growth

1 Economic statistics and GoSL’s growth strategy as presented in the “Joint Country Assistance Strategy for the Republic of Sierra Leone, for FY10-FY13”, by the World Bank and the African Development Bank, March 4, 2010. 2 AICD - ECOWAS’s Infrastructure: A Regional Perspective, July 2010 1

was almost entirely attributed to the Information and Communication Technology (ICT) revolution while deficient power infrastructure held back economic growth by about 0.1 percentage point per capita per year.3 The report concludes that if infrastructure could be upgraded to the level of the best performing country in Africa (Mauritius), the impact on per capita economic growth would be in the order of 5 percent. Sierra Leones’s growth agenda is therefore highly dependent on an effective regional integration program. For these and other reasons, Sierra Leone is an active member in the African Union and in the Economic Community of West African States (ECOWAS). Regional cooperation remains high on the GoSL national agenda, and should help the country capitalize on regional infrastructure, and benefit from growing regional trade and investment.

5. The West Africa Regional Communications Infrastructure Project (WARCIP) will contribute to a comprehensive solution to address connectivity gaps in the country. The focus of WARCIP Sierra Leone is to contribute to a comprehensive solution to address connectivity gaps in Sierra Leone, focusing on international, national and regional connectivity to enable the creation of a fully integrated network which will eventually link all countries’ networks in the region and provide affordable high speed connectivity within Sierra Leone and between with its neighbours.

B. Sectoral and Institutional Context

6. Sierra Leone has seen partial sector liberalization since 2003. The telecommunications sector in Sierra Leone experienced important developments following the war (post-2002), with a government decision to embrace liberalization and open the market to competition in 2003. The market currently includes three active private Global System for Mobile Communication (GSM) operators (Zain -previously Celtel and recently acquired by Bharti, Comium, and Africel), two new GSM Operators about to begin operations (Intergroup and Ambitel trading as Greenet) and one state-owned fixed line operator and Code Division Multiple Access (CDMA) operator (SierraTel). There have been some consolidations in the sector, with Tigo being recently acquired by Africel, while Datatel’s License was acquired by CellCom. Cellcom has yet to start operating in Sierra Leone.

7. As a result of sector liberalization the mobile telecommunications sectors witnessed high growth. Results from the early sector liberalization indicate significant improvement in access in the mobile sector, lower prices and diversified products to end-users. Sierra Leone has made notable strides in terms of mobile penetration. Penetration stood at 0.28 percent in 2000 and 18 percent by 2008. Today it stands at 27 percent with approximately 2.2 million GSM subscribers. Within the ECOWAS region however, Sierra Leone still lags behind all other countries aside from landlocked Niger4.

8. Infrastructure for fixed-line network, however, remains in poor condition, and international internet nodes have low bandwidth. Unfortunately, the fixed-line network in the country has not experienced any significant growth within the last 10 years; the civil war resulted in extensive destruction of the telecommunications infrastructure (terrestrial microwave systems, rural networks and exchanges). While there has been some improvement

3 AICD Report– ECOWAS’s Infrastructure: A Regional Perspective, July 2010 4 ITU World Telecommunications/ICT Indicators Database, 2010. 2

in the incumbent SierraTel’s network (primarily through its CDMA services), for the most part, demand for fixed line services still far outweigh supply, and most of the services are concentrated in the key urban centers. The poor state of the country’s network infrastructure has in turn impeded growth in the Internet sector. In addition, SierraTel’s monopoly over the international gateway, and the low bandwidth of the Media Gateway, have had a negative impact on the growth of telecoms and internet The number of internet subscribers does not exceed 0.3 percent of the total population, and the number of broadband subscribers is less than 1,000 (Figure 1). This usage rate, coupled with high cost of access, puts Sierra Leone at the lowest position in the West Africa region in 2009.5 In the absence of reliable international connectivity and national backbone infrastructure, Very Small Aperture Terminal (VSAT) based internet connectivity has become the leading platform for internet access. The National Telecommunications Commission (NATCOM) has made efforts to improve the situation by licensing ten ISP’s which include all the functional GSM operators. Recent efforts have also been made by the Internet Society (Sierra Leone Chapter) and the Ministry of Information and Communication to establish the Sierra Leone Internet Exchange Point (SLIXP) to keep local traffic local, in order to reduce bandwidth costs. This has yet to make a marked difference in improving the flow and cost of data.

Figure 1: Internet and broadband penetration in West Africa, 2009.

Source: World Bank, based on data from ITU World Telecommunication/ICT Database, 2010.

9. Sierra Leone is making credible attempts at improving the policy and regulatory environment. New developments have occurred on the policy and regulatory front during the past few years to deepen sector reforms, beginning with the merger of the Ministries of Information and Communications into one Ministry, and the establishment of an independent regulator NATCOM. NATCOM has had moderate success licensing and regulating the sector to promote fair competition, universal service and improve the integration of Sierra Leone into the global digital economy.

5 ITU World Telecommunication/ICT Indicators database, 2010. 3

10. The new ICT Policy places e-government high on the agenda of ICT development. Sierra Leone’s ICT Policy places significant emphasis on government connectivity and the use of ICT to improve services. The GoSL, in partnership with the UNDP, has completed a comprehensive e-government readiness survey. This survey is expected to lay the foundation for the country’s e-government framework and the deployment of innovative applications to improve public service delivery. Both policy and survey point to the need for robust national and international infrastructure to achieve the vision of ICT for Development. The MoIC has established a Dedicated Communications Directorate to focus on implementing the ICT Policy and ensuring ICTs effective use, particularly to improve Government Services.

11. A Presidential Council has been established to further place ICT at the center of government. A new GoSL ICT Council chaired by the President, which includes public entities, private operators and a large representation from civil society has been established to drive the ICT agenda. The work of the Council is underpinned by the pro-competitive National ICT Policy6 which has been approved by Cabinet and is expected to be ratified by Parliament. The Council is expected to provide leadership in implementing the Policy as well as general ICT development in the country.

12. Connectivity bottlenecks at international and national levels remain, despite progress. The ICT sector’s potential to improve the competitiveness of Sierra Leone’s economy, facilitate economic growth and social reconstruction, and ensure fuller integration of the country in the global economy is constrained by a number of factors. These factors include connectivity bottlenecks at international and national levels, as well as weak institutional policy and regulatory capacity to sustain existing reform and drive additional reform. In particular, the legal framework raises serious concerns on the decision to restore monopoly to SierraTel over the international gateway. This decision became effective following the 2006 Telecommunications Act, which stipulated in Article 33 (5) that “The incumbent operator shall own and operate the only international gateway for a period of two years after the commencement of this Act and shall thereafter be renewed by the Commission.” Exclusivity of the first two years which expired in August 2008, has been extended for another 5 years, till 2013, through a Ministerial Cabinet Decree. In May 2010, however, and as part of the GoSL’s efforts to improve the country’s connectivity, the Minister of Information and Communication issued a government memorandum to announce the launch of a new process to re-liberalize the international gateway. Processes and activities necessary for the realization of the re-liberalization project will be supported by WARCIP Sierra Leone.

13. The lack of connectivity to broadband optical fiber results in high prices for bandwidth. Sierra Leone is among a handful of countries in the region which is not connected to the global network of broadband optical fiber infrastructure. Civil unrest and fragility prevented the country from participating fully in the 2001 South Atlantic-3/West Africa cable system (SAT-3/WACS), the only existing submarine cable system serving West Africa at the time. Connectivity between Sierra Leone and the outside world relies exclusively on expensive satellite with limited availability of high-capacity bandwidth. As a result, Sierra Leone has some of the highest connectivity costs in the world - with average satellite prices between US$4,000-5,000 for 1 Mbps (compared with about US$200 in the

6 ICT Policy was developed by a Task Force Chaired by the Vice President 4

US, and approximately US$500 in East Africa). Limited speed monthly packages are US$200 a month, representing 56.8 percent of GDP per capita. This, coupled with a lack of national backbone infrastructure, has created a difficult environment for expanding availability of Internet services and advanced applications. The lack of access to low price and high quality telecommunications services is a factor that limits the potential of the country to create jobs, expand production of goods and services, and trade competitively with the rest of the world.

14. ACE represents a unique opportunity for international connectivity in Sierra Leone: For purposes of international connectivity along the coast of West Africa and with the rest of the world, the most attractive and viable option for Sierra Leone (following feasibility study) is to connect to the ACE submarine cable. This submarine cable system will be approximately 17,000km and will connect South Africa to Europe along with 23 countries including a landing station in Sierra Leone. In all likelihood, there are no other opportunities for Sierra Leone to connect to another submarine cable for many years to come. Cables like Main 1 and WACS did not include proposed landing stations in Sierra Leone.

Figure 2: Map of cable route for ACE cable.

C. Higher Level Objectives to which the Project Contributes

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15. A full connectivity solution will promote cheaper access to communications and more effective global integration. WARCIP Sierra Leone proposes to contribute to a full connectivity solution, building on new and existing communications opportunities. The proposed project is expected to focus on catalytic financing for additional links to international and national infrastructure (where gaps exist that cannot be addressed by the private sector, and where there’s clear evidence of positive externalities). By gaining access to international cables, Sierra Leone will have better and cheaper access to communications and be able to connect more effectively with the rest of the world.

16. Intensification of broadband networks will stimulate investment and economic growth. The contribution of broadband networks to economic growth is much more pronounced than that of narrowband networks. Additional studies have confirmed that for every 10 percentage-point increase in high-speed internet connections, there is an increase in economic growth of 1.3 percentage points.7 New businesses in the ICT and IT enable services sectors often result from improved access to high-speed internet. The mobile phone platform is highlighted especially as the single most powerful way to reach and deliver public and private services to hundreds of millions of people in remote and rural areas across the developing world.

17. ICT can help promote peace and social cohesion whilst rebuilding the economy. ICT can be an instrumental tool for post-conflict, poverty reduction and revitalization of the economy. ICT provides a key platform for restoring peace and security and provides immediate tools for economic rebuilding and for strengthening social cohesion in war-torn countries. Limited empirical data exists about the effects of information and communication technology capacity-building and state-building initiatives in post-conflict societies. In Uganda for example, ICT is being used to improve the country’s registration system. In Rwanda ICT is being used to enable customers to pay utility bills using mobile scratch cards. Within Ethiopia, ICT is utilized in the country’s Court Reform system. While these may not be traditional examples of state-building exercises, they provide useful and innovative examples of the state-building functions that can be done via a semi-autonomous public utility company. Such initiatives may enhance social and economic stability by creating opportunities for entrepreneurship and formal-sector employment.

18. WARCIP Sierra Leone will increase access to ICT services, lower costs and improve service quality. By addressing connectivity bottlenecks, the proposed project will support Sierra Leone in obtaining better and shared access to ICT services with improved quality and reduced cost, allowing improved communications and information dissemination, better access to limited public resources which could in turn facilitate a smoother transition from post-conflict recovery to long-term development. By providing technical assistance to help the GoSL create an enabling environment for the ICT sector as well as resources to improve connectivity, the proposed project would leverage the sector as a key driver of growth, competitiveness, and improved governance. This could assist the GoSL in achieving its vision and Agenda for Change strategy, by using ICT to transform service delivery in its priority areas of agriculture, energy, transport infrastructure, education, health, and water/sanitation and helping to achieve its objective of increased growth and improved human development. Such aims are also in line with the Joint Country Assistance Strategy

7 Word Bank - Information and Communications for Development 2009: Extending Reach and Increasing Impact. 6

(JCAS) which shares similar objectives of growth and improved service delivery, as well as the cross cutting themes of governance and private sector development.

19. Increased and cheaper bandwidth will provide opportunity for Sierra Leone to develop e-government applications for improving governance and accountability. The Project will also assist in improving governance within the country. ICT can play a key role in supporting the governance pillar of the JCAS by enhancing the transparency and accountability of key public institutions. Although the proposed project does not address e- Government specifically, it will provide Sierra Leone with the opportunity to obtain needed bandwidth to stimulate development of innovative applications for use in government institutions. Ultimately, better access to ICT will also support the GoSL’s goal of rebuilding core state functions and institutions.

20. Improved ICT will reduce transaction costs for businesses and increase productivity and profitability. Furthermore, the proposed project will assist in improving private sector development. The telecommunications and ICT sectors have been proven to improve business productivity and profitability in terms of lower transaction costs. This in turn has the potential to generate more tax revenues for the GoSL. In this context, policy makers and regulatory officials in Sierra Leone will need to be well equipped to provide the most conducive environment for the Private sector to invest and use ICT. Empowering the national regulator and key policy makers with adequate tools and skills to design, implement, and upgrade the regulatory environment is a critical element for successful sector reform and development.

II. Project Development Objectives

A. PDO

21. The project development objective of WARCIP Sierra Leone is to increase the geographical reach of broadband networks and reduce costs of communications services in the territory of Sierra Leone8. 22. In order to reach this objective, the project proposes an integrated approach focusing on: i) the connection of Sierra Leone to global broadband fiber optics infrastructure, ii) the creation of a coordinated national transmission network which would ensure that Sierra Leone is able to connect effectively within its national borders, and with the rest of the World, including its neighbors in the region, and (iii) creating an enabling environment and institutional strengthening to remove existing bottlenecks for private sector participation in both national and regional infrastructure development. This should contribute to reduce the isolation of Sierra Leones’s economy and support its participation in the global economy.

1. Project Beneficiaries

23. WARCIP will benefit the citizens of Sierra Leone. All over Africa, businesses, governments, teachers, doctors, farmers, and fishermen, are using ICT to communicate, share information, improve productivity and service delivery, find better prices, improve access to markets, and increase their bargaining power. Similar outcomes are taking place

8 All the other countries that will be covered by the following APL phases will use the same PDO. 7

in Sierra Leone. The proposed project will therefore benefit the entire population of Sierra Leone including telecommunications operators, telecommunications services users, universities, schools, hospitals, banks, corporate users, and GoSL ministries and departments. However, for the purpose of M&E, the PIU will define Direct Project Beneficiaries in a more restrictive way (e.g. internet users, or active mobile users). See Annex 1 for more details.

2. PDO Level Results Indicators

Table 1: PDO Level Results Indicators.

Project Development Objective Outcome Indicators At close of the project Connectivity development objective: . Volume of international traffic 40 Increase the geographical reach of (Kbit/s per person) broadband networks and reduce costs . Access to telephone services 43% of communications services in Sierra . Access to internet services Leone. (subscribers) 2% . Average monthly price of wholesale $ 2,000 international E1 capacity link from capital city to Europe . Number of direct project 3.2 million beneficiaries, of which female

III. Project Description

A. Project Components

24. WARCIP Sierra Leone is structured to address critical connectivity gaps in the country, and will have three components. These include: (i) Infrastructure to improve connectivity ii) Technical Assistance to strengthen enabling environment and institutions, and (iii) Project Implementation Support.

Component 1: Supporting Connectivity (US $26.7million).

a) International Connectivity- (US $25million)

25. Sierra Leone will be connected to the Africa Coast to Europe (ACE) international broadband fiber optic cable. Improving international connectivity through funding Sierra Leone’s participation to the ACE submarine cable is the main focus of WARCIP Sierra Leone. It is expected that $25.0 million of the total IDA funding will be transferred in its entirety to Sierra Leone Cable Limited (SALCAB), a Special Purpose Vehicle (SPV) created solely for the purpose of owning and managing GoSL shares in ACE. SALCAB in turn will give the received funds to the ACE consortium to perform any of GoSL obligations under the ACE Construction and Maintenance Agreement. An initial installment of US$5 million has already been paid using Project Preparation Advance (PPA) resources. The GoSL has furthermore committed to pay an installment of US$2.5 million towards the settlement of September and December 2010 obligations towards ACE consortium, with the understanding that this will be reimbursed when WARCIP Sierra Leone becomes effective under the retroactive financing mechanism (see Annex 3 for details). This is part of retroactive financing agreed between the World Bank and the Government of Sierra Leone. The remaining US$17.5 million payment will be made in line with ACE payment milestones

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and in different installments until July 2012 when cable is expected to be completed. A disbursement condition is included in financing agreement to ensure that an Offer for Sale for at least 50 percent of Government shares has been issued prior to disbursements of the final payments to ACE. Sierra Leone’s payment guarantees the country approximately 2.8 percent of the total cable capacity which will be fully owned and managed initially by SALCAB. The Offer for Sale supports Government’s commitment to engage private sector in the ownership and management of the submarine cable. Annex 9 shows the Advanced Billing Cycle for the ACE Payments.

26. The World Bank has already approved two PPAs to help Sierra Leone capitalize on the ACE opportunity. An initial PPA for US$ 1.5 million was granted to Sierra Leone to support project preparation activities. Support included finalizing the development of the framework for divestiture from the SPV as well as preparing the requisite policy, legal and regulatory environment for open access.

27. To ensure timely funding of the first installments in ACE9, the World Bank also approved a supplemental PPA of US$ 5.0 million to support the payment of the initial contributions by Sierra Leone. This includes the initial installment of 15% of the country’s contributions and the subsequent immediate payments. Given that the requested amounts exceeded the aggregate ceiling of US$3.0 million per project for non-emergency projects set out in OP 8.10 (Project Preparation Advance), Bank Management provided a waiver on June 3, 2010 to ensure that Sierra Leone would not miss out on the ACE opportunity. Full disbursement of the supplemental PPA has already been made to ACE under direct disbursement. The GoSL has contributed an additional US$2.5million to address funding gap up to December 2010, in anticipation that there will be reimbursement after the project becomes effective.

b) National connectivity (IDA US$1.7 million)

28. Broadband will be provided to improve priority services. While international fiber links could potentially facilitate better and cheaper access to communications in Sierra Leone, the full benefits of this access cannot be achieved without further investments in national infrastructure and effective use of ICT for critical services. IDA resources will therefore be used to fund: i) a high speed government virtual private network of selected priority Ministries, Departments and Agencies (MDAs) within Freetown, ii) a national emergency communications network, and iii) support for the national Internet Exchange Point (IXP). This last part will be managed by the Communications Directorate.

29. The GoSL is likely to complement IDA resources for the purpose of additional national backbone infrastructure. It is expected that the GoSL will complement IDA resources for the purpose of additional national broadband infrastructure by investing the proceeds from the sale of shares in SALCAB into expanding government network to include remaining MDAs within Freetown, and in key cities outside of the capital. Resources from Project Preparation Advance are helping to develop the framework, plans and support for the divestiture.

9 Countries were required to pay a 15% advance payment by June 5, 2010 in order to secure membership in ACE. 9

30. The Islamic Development Bank will complement project funding. IDA resources will be further complemented by funding projected to come from the Islamic Development Bank, for additional national and cross-border infrastructure in Sierra Leone. The Islamic Development Bank funding is expected to be made in parallel and likely to finance terrestrial broadband backbone fiber networks and broadband connections within and between the Sierra Leone and its neighbors. The government is still in the process of finalizing discussions on this funding.

Component 2- Creating an Enabling Environment for connectivity (US $2.9 million).

31. Public private partnerships (PPP) will be facilitated to ensure open access. Component Two will focus on the transaction design and operating model for ownership and management of international, regional and national infrastructure using PPP frameworks consistent with open access principles to create an enabling environment for improved connectivity.10 The PPP frameworks would focus on principles of open and non- discriminatory access while maximizing the role of the private sector. This component will support the implementation of both sub-component (a) (international connectivity) and sub- component (b) (national connectivity). The MoIC has already commenced the tendering process for Financial Advisers to assist in developing the PPP frameworks and assisting GoSL to divest shares from SALCAB. It is expected that the advisory work will be completed and the PPP framework will be in place before the cable is commercialized in 2012.

32. The Financial Advisory work will include: i) PPP design for the SPV for the landing station, ii) legal and regulatory support for improved connectivity, iii) definition of GoSL participation in SALCAB and divestiture strategy, iv) process and support for engagement of private sector to participate in share purchase, v) design of use of proceeds of sale of GoSL shares in SALCAB, and vii) capacity building support to the MoIC and NATCOM.

33. A policy and regulatory environment to allow competition will be created. In addition to transaction design, this component will focus on addressing policy and regulatory bottlenecks at the national level to maximize the benefits of the proposed connectivity agenda, and maximize benefits from access to international capacity and liberalized international gateway. Most of the activities under enabling environment are also included as part of PPA. The activities have been designed so that key elements for the PPP framework (i.e. SPV for the landing station) are in place for the investment component. Other activities related to the GoSL’s commitment to legal and regulatory reforms including liberalization of the international gateway will be implemented in parallel. A dated covenant - submission of an amendment to the telecom law to reverse the monopoly - will be agreed with Government to support Cabinet’s endorsement and efforts to liberalize the international Gateway. A proposed amendment to the 2006 Act would ensure non-discrimination and put in place mechanisms for effective management and monitoring of national and international gateways.

34. The commercialization of SierraTel will be supported. The Government-owned telecom company suffered huge destruction of its infrastructure during the decade-long war. Its

10 Open access is broadly defined as an equal opportunity for operators to have unfettered access to given infrastructure or services under similar terms and conditions 10

microwave radio transmission equipment and solar power plants installed in the provinces were destroyed, and the majority of the telephone system outdated, with only a few exchanges and part of the transmission network in Freetown converted to digital technology. The Government would like to improve the performance of SierraTel through an initial change in management while simultaneously making the company more attractive for private investment in the future. This component will assist the company with options and strategy for improving the efficiency, productivity, customer service delivery, and provide technical and capacity building support to facilitate overall financial and operational performance.

35. Support for the liberalization of the International Gateway. Project resources will assist GoSL in managing the process to liberalize access to the country’s international gateway which is currently controlled by SierraTel in an effort to protect the company’s financial viability. Resources from the project will support the valuation and drafting of licenses, the tender and consultation process, as well as evaluation and selection of licensed operators,

36. Capacity building support will be given. The project will include capacity building support to the MoIC to guide sector policies as well as to the National Telecommunications Commission to strengthen its capacity to regulate the sector. Specific activities include in- house training, study tours and financing of technical advisors.

Component 3: Project Implementation(US$ 1.3 million).

37. Under this component the establishment of the Project Implementation Unit (PIU) and capacity building will be supported. The project will be implemented by a PIU within the MoIC. The PIU will be responsible for the overall coordination, implementation, and supervision of the project. This activity will provide support needed to strengthen the capacity of the GoSL to implement the connectivity project, including setting up the PIU, and hiring seasoned and dedicated staff to work on the project, including a Project Coordinator, a Procurement specialist and a Financial Management Specialist. The component will also cover office space and equipment, vehicles, incremental operating costs, audits, monitoring and evaluation (M&E), communications and environmental and social studies for both PIU and SALCAB. If required, an international procurement advisor will be recruited for short period.

B. Project Financing

1. Lending Instrument

38. Lending will be via an Adaptable Program Loan The lending instrument is an Adaptable Program Loan (APL). WARCIP Sierra Leone is part of APL1-A of the regional WARCIP program. The objectives of WARCIP Sierra Leone are fully in line with the objectives of WARCIP. The proposed project will be implemented over a 4 year period.

39. Breakdown of Regional and National IDA allocations. Activities under the proposed project meet the regionality criteria and therefore are eligible for regional IDA funding. As per IDA15 policy framework, a country’s contribution to regional projects is capped to a maximum of 20 percent of its national IDA allocation, the balance coming from the regional IDA funding. Taking into account its participation in other regional projects, Sierra Leone 11

reaches this 20 percent threshold after contributing from its IDA allocation of US$6.0 million to the funding of this project. The table below provides a summary of the regional/national IDA breakdown for Sierra Leone.

Table 2: Funding breakdown for the proposed project.

Regional National US$ million IDA IDA Total

WARCIP 25.0 6.0 31.0 S. LEONE

2. Project Financing Table

Table 3: Project Financing Table

Activities IDA US$ (000s) Component 1: Improving Connectivity 26,750 Financing GoSL Participation in ACE 25,000 Financing National Connectivity 1,700 Financing Resettlement Costs 0,050 Component 2: Enabling Environment for connectivity 2,930 PPP Design and GoSL participation in SALCAB and related instruments 0,500 Legal and Regulatory instruments for open access 0,350 Revised Law, Regulatory Instruments 0,350 Strategy and Organizational Plan (NATCOM) 0,200 Support for Liberalization of International Gateway 0,200 Support for Commercialization of SierraTel 0,450 Strengthening policy making and regulatory capacity 0,740 Support for Implementation of National ICT 0,090 Communication Strategy and Support 0,050 Component 3: Project implementation 1,320 PIU set up and operating expenses 0,500 SALCAB set up and operating expenses 0,200 Environmental Assessments 0, 070 M&E 0,050 Technical experts for PIU 0,410 Project Operational Manual 0,030 Audits 0,060 Total 31,000

C. Lessons Learned and Reflected in the Project Design

40. Country commitment to the proposed project is important. The proposed project draws on lessons learned from previous and ongoing World Bank-financed projects in ICT as well as from ongoing efforts in countries in similar situations as Sierra Leone. Broad global experience in ICT project implementation indicates that an ICT project success is primarily contingent on strong country ownership and a sustained commitment to implementation. The proposed project design has been guided by the Sierra Leone’s National ICT Policy for more competitive access to communications infrastructure, the ongoing efforts to improve the policy and regulatory environment, including liberalization of the international gateway and commercialization of the incumbent Telecom Operator, and thus, is fully owned and supported by the GoSL.

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41. Providing support to regulatory capacity building is relevant. Regulatory capacity is necessary to enable fair competition as problems may develop over time—particularly, the interconnection and pricing of noncompetitive services. Building such capacity takes time, however, Sierra Leone could benefit from the extensive experience of other countries in this area. The proposed project focuses on building the capacity of the regulatory authority by promoting twinning arrangements and creating opportunities for peer-to-peer learning from more advanced regulators and the sharing of experiences.

42. There is a need for limited public funding for infrastructure to improve access to ICT where the market fails. For most developing countries, a major obstacle to the adoption of ICT remains the lack of adequate access to ICT infrastructure. A lack of investment in ICT infrastructure and access networks coupled with inefficient provision of services are the most important factors undermining the development of networked economies. Public funding for infrastructure development is justified in infrastructure market segments that fail to attract private investment. In this project, the GoSL’s original proposed option for owning and managing the cable was through a Special Purpose Vehicle (SPV) which included 3 shareholders - SierraTel (30%), Global Link (30%) and GoSL (40%). The GoSL’s rational for proposing this structure was to encourage a co-ordination of resources as previously both SierraTel and Global Link were separately negotiating with ACE to be members of the consortium. This arrangement would have resulted in two landing stations in Freetown, higher investment requirements, and perhaps a sub-optimal use of resources. This approach was rejected for a number of reasons, including the potential monopoly of the new international gateway (landing station), lack of adequate funding capacity of SierraTel and Global Link, and unclear legal/regulatory environment for international connectivity. The revised proposal was to seek the use of IDA funding to finance upfront cost of participation in the ACE consortium through a new wholly government-owned SPV, with clear exit strategy and timeframe for divesting at least 50 % of shareholding before commercialization of cable.

43. Providing alternative solutions to the use of satellite capacity can ensure sustainability. While the proposed project could finance long term purchase of satellite capacity, this would not be sustainable in the long run, given the associated high prices of such service. The proposed project therefore builds on the fiber opportunity provided by ACE. Sierra Leone’s decision to join ACE is the result of an analytical process comparing available and potential connectivity options. Both the GoSL and the World Bank commissioned a due diligence review of the process followed by Sierra Leone to reach the decision to join ACE. The due diligence confirms that the decision was in line with the principle of efficiency, transparency and adherence to good practice in the industry, when considering options such as buying satellite capacity or gaining access to fiber by joining submarine cable consortia. The due diligence also confirms that the option selected is by far the most economical for Sierra Leone. (Additional economic/financial analysis in Annex 7)

IV. Implementation

A. Institutional and Implementation Arrangements

44. The Ministry of Information and Communication is the executing agency and will coordinate the implementation of the proposed project. The proposed project will be implemented under the aegis of the MoIC. A PIU will be established within MoIC and will 13

be responsible for the overall coordination, implementation, and supervision of the proposed project. The PIU will be headed by a Project Coordinator who will report to the Permanent Secretary who will in turn report to the Minister through the Deputy Minister. The PIU will also coordinate the activities projected to support both the Regulatory Agency (NATCOM) and the SPV (SALCAB). The PIU will work closely with the Ministry’s Communications Directorate which will manage the National Connectivity Component and Implementation of the National ICT Policy.

45. The PIU will be assisted by a core project team composed of a Project Coordinator, Procurement and FM Specialists and representatives from the MoIC. The Project will only finance the costs of the core team. The PIU will be in charge of: (i) day-to-day activities under the project, in particular, procurement and monitoring activities; (ii) coordination with the other entities responsible for project implementation; (iii) preparation of annual work programs, budgets, and procurement plans under the project; (iv) carrying out the Monitoring and Evaluation aspects of the project; (v) dissemination of internal and external audit reports; (vi) implementation of their recommendations; and (vii) Interact with the World Bank for the requisite no objections of bidding documents, RFPs and evaluation reports etc, Procurement for key staff is at selection stage and being financed through Project Preparation Advance. In the interim, the Ministry has put together a Project Team which is engaging with key stakeholders, including the private sector and ACE.

B. Results Monitoring and Evaluation

46. Monitoring arrangements and data collection will be conducted by the PIU and NATCOM. The PIU within the Ministry of Information and Communications (MoIC) will be primarily responsible for collecting the relevant data throughout the project implementation. The PIU will get its information from the different project stakeholders, in particular NATCOM, the regulator, but also directly from the operators when necessary. In order to ensure a smooth and regular collection of information, the PIU must identify within each source of data a focal point that will serve as the PIU counterpart for M&E so that the person can anticipate data collection and the necessary resources. The M&E activities will be mainstreamed within the MoIC and NATCOM following project completion.

47. Indicators. The project includes 8 indicators to measure the success or not of this operation. The first 5 are PDO level indicators, measuring the progress toward PDO achievement. Each of these 5 indicators assesses a particular aspect of the Project Development Objective. At the end of the project, the success of this operation will be measured against the target values of the PDO indicators. The project team will be able to measure whether the implementation is on track of not by benchmarking the yearly targets. If the project execution goes off track, the PIU must propose a list of corrective actions (see section on Reporting).

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48. The views of direct beneficiaries will be brought into the monitoring and evaluation process. Comprehensive M&E reporting will be developed to monitor the results and performance of the project. It will involve mainly the direct beneficiaries of project activities, but will be extended to other beneficiaries such as telecommunications operators and private ICT firms. The PIU will review and validate the reports on performance indicators and recommend corrective action if necessary.

49. The PIU will be responsible for data collection, consolidation, analysis, and evaluation. The PIU will submit to the PS of the MoIC the M&E quarterly report that will include the updated Results Framework and the Action Table, listing the corrective actions to be implemented with deadlines and persons responsible clearly identified. The report will be sent to the Bank for information.

50. Implementation support missions will be conducted at least twice a year. The GoSL, through the PIU, may perform evaluations jointly with the World Bank team and conduct supervision or implementation support missions at least twice a year. Additional support will be provided by Field Base World Bank Staff. Missions will be based on the latest quarterly implementation and financial monitoring reports prepared and submitted by MoIC. The Project is providing implementation support to the MoIC.

51. A mid-term review will be conducted within 30 months of credit effectiveness. It will be conducted within 30 months of credit effectiveness to assess progress and make recommendations, if necessary, for any changes in Project Development Objectives (PDO), the content of components, resource allocation, and performance indicators.

52. At project closing, MoIC will prepare a completion report documenting the project’s achievements and results and drawing lessons for future interventions. The completion report will in part be based on the project’s technical, economic, social, and environmental impact survey studies, as well as an assessment of beneficiaries’ satisfaction.

C. Sustainability

53. The GoSL is very committed to the project and has established an ICT Council chaired by the President. On the policy front, the GoSL is very committed to the proposed project and has already taken some bold steps to make a public announcement of GoSL’s intentions to liberalize the international gateway and to develop an enabling environment for deepened sector reforms. Further indications of commitment include the recent establishment of an ICT Council, chaired by the President himself, which will take over the work of the Task Force and provide leadership in implementing the Policy as well as general ICT development in the country. The MoIC has also formed a Committee which is reviewing options for liberalizing the international gateway. ICT council will work through the Office of the President’s Chief of Staff to provide oversight over the project.

54. Support for legal and regulatory reform is expected to have a sustainable impact. Given that a number of private operators already exist in the market and that there is potential for additional players beyond the sector, it is likely that NATCOM will have sufficient resources and capacity through license and regulatory fees to become a self- funded institution and sustain the required regulatory capacity to supervise sector development. The additional support to develop a more pro-competitive legal framework, 15

and a strategy for managing the sector should further strengthen NATCOM and provide more credibility to its capability to manage the sector.

55. Improved access and lower prices will be sustained. Improved service coverage and quality at more competitive prices for international connectivity and for data services will be sustained as it will create opportunities for advanced applications.

56. Local capacity will be strengthened through training and technical assistance with long-term effects. The proposed project will make significant investments in capacity- building efforts through training and technical assistance to build technical expertise, social capital, and knowledge. With the focus on building sustainable capacity in key institutions such as NATCOM and the MoIC, the benefits of the proposed project are expected to last far beyond project completion as such capacity will support the creation of ICT policy and regulatory know-how to guide sector growth and applications in the future.

57. The commercialization of SierraTel will improve the performance of the company and its long term financial viability. The commercialization of SierraTel will improve the performance and financial viability of the incumbent company and minimize its dependence on revenues from the international gateway.

58. Proceeds from Divestiture of Assets will provide revenues to the GoSL for additional sector investments beyond current project scope.

V. Key Risks

59. The proposed project is technically a simple project. Potential risks are summarized in the Operational Risk Assessment Framework (see Annex IV). Risks identified are manageable and mitigation measures are in place.

Table 4: Risks and mitigation measures Risk Factor Description of risk Mitigation measure Technical/design Design of the proposed project is complex The proposed project will benefit from upfront and risky (Public Private Partnership) for technical studies and legal support under PPA. ownership and management of landing This will provide clarity to the design issues. station

Inadequate financing Pre-feasibility studies indicates need for PPP structuring is likely to provide comfort for significant investment and contributions both private and public investors. from both private and public sources; risk that private sector contributions May not materialize Implementation Targeted TA and regulatory support will be capacity and Very limited capacity of policy makers and provided under the proposed project to support sustainability young regulatory institution without prior NATCOM and MoIC as they assume their experience with open access regimes and roles. effective liberalization of the essential international gateway facilities Delays in divestiture GoSL could be tempted to keep GoSL The GoSL has made a public commitment to of GoSL shares ownership of landing station to maximize liberalize the international Gateway. Full government revenues. disbursement of World Bank funding is contingent upon satisfactory progress in the divestiture process. In addition, targeted support will be included under the PPA to ensure that all elements of the divestiture of

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shares are in place and implemented. Landing station is envisaged by its shareholders to be operated as a cost centre with no profits, mitigating interest of GoSL in holding shares in long term. Full Disbursements for cable construction are contingent upon IDA satisfaction of divestiture process. Divestment process Private operators could not be as PPA support for divestment including running less successful than forthcoming as anticipated and GoSL may the process, due diligence, road show and anticipated end up holding more equity in SALCAB negotiating with potential buyers than planned Lack of collaboration SierraTel could put pressure on GoSL to Project funds supporting options for improving of stakeholders have GoSL shares transferred to SierraTel operational efficiency of SierraTel in response to increase company value ahead of to government request. Private sector already privatization. Private sector players could expressed interest in SALCAB in light of decide to stay away from joint investment regulatory and sector reforms being supported with Sierra Tel given tensions in the sector under the PPA Proceeds from Proceeds could be used for other purposes Government has committed to reinvesting divestment are not and will not support the connectivity agenda proceeds in the sector. The engagement of used for improving private sector will also ensure appropriate use connectivity beyond of resources. Separately, improving access to ACE connectivity is a high priority in GoSL agenda. Non conformance Disbursements under the Financing Project structured so that if the Financing with linkage agreement with Sierra Leone could start Agreement for Liberia never enters into effect conditionality (cross- even if the Financing Agreement for Liberia or if disbursements thereunder are suspended, effectiveness has not been declared effective and there is this would only reduce the scope but not affect conditions and cross- no disbursement of funds. In addition, the overall implementation of the national suspension remedies) disbursements under the Financing activities, that can be carried out despite lack of for regional Agreement with Sierra Leone could not be progress of the Liberia Project cooperation suspended even if disbursements under the Financing Agreement with Liberia have been suspended.

VI. Appraisal Summary

A. Economic and Financial Analysis

60. Connecting to ACE will see Sierra Leone breakeven between 2015 and-2017 with an NPV to 2025 of US$20.9 million. Initial calculations indicated that with a dedicated landing station in Sierra Leone, breakeven would take place at a later date, with an Internal Rate of Return of 10-13.2%. However a reassessment of the potential market demand and bandwidth pricing was carried out in January 2011 to take into account the recently observed trends in East and Southern Africa where new competitive submarine cables have now been in place for over a year and where data has recently been made public. Due to the competitive pressure there, bandwidth prices have fallen substantially and consumption/demand has increased dramatically. Bandwidth pricing in the region is now moving toward US$50-US$100/month/Mbps at a wholesale level (for long-term - i.e, 15 year, IRU type pricing), producing much higher levels of demand. This has already necessitated the commissioning of upgrades to submarine cable capacity, much earlier than initially planned. Since there are likely to be competitive cable landings in West Africa that will bring down prices and result in requirements for additional bandwidth, the East African trends in bandwidth uptake levels and pricing were used in the economic model to revise the estimated Internal Rate of Return (IRR) to between 15.2% (US$50/Mbps/month) and 23.8% (US$100/Mbps/month). The assumptions for these calculations are as follows: wholesale bandwidth pricing (US$50-100/Mbps/month) and ultimate uptake forecast of 18Gbps. The

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final breakeven year will depend on actual capacity uptake and the wholesale price of bandwidth. After 2017 at the latest, the project would be cash-flow positive and substantial revenues would be made if these wholesale pricing levels are maintained. Investment data was calculated for based on a discount rate of 15%. Under these assumptions NPV to 2025 with a dedicated cable is $ US20.9 million. On this basis full membership in ACE, if accompanied by robust regulation by NATCOM to ensure competitive pricing releases demand, has potential to provide low cost international access to a broad range of the population.

61. Joining ACE represents the most cost-effective and efficient way to improve international telecommunication access in Sierra Leone. A World Bank due diligence considered a variety of satellite and fiber options and concluded that a submarine fiber link is the best overall option in terms of long-term cost effectiveness and bandwidth availability. Although upfront costs may be higher, the key cost saving with the ACE compared to laying an independent cable to one of the other African countries, with an existing fiber landing station, is the high cost of purchasing transit from there to the global backbones. The cost of transit on existing African cables linking to Europe (e.g. MainOne or SAT-3) is at least $200/Mbps/month, and most likely to be higher- closer to $500/Mbps/month. By contrast the cost of transit in Europe is much more competitive and is closer to $10/Mbps/month. So, by participating in ACE, which lands traffic directly in Europe, transit costs to the global backbones are minimized.

62. The proposed project will increase access to internet, create jobs, improve education opportunities and public administration and increase GoSL revenues. Concerning the Technical Assistance component, The proposed project will bring significant benefits to Sierra Leone in a number of ways including (i) increased public access to Internet services (ii) a broad range of social benefits through increased labor productivity, employment creation, learning opportunities for youth, participation by women in the labor market, and improved public administration (iii) greater fiscal returns due to new sources of revenue for the GoSL. It must be noted, however, that the economic and financial benefits of a technical assistance component is generally difficult to quantify because of the inadequacy of data available at the outset.

B. Technical

63. WARCIP Sierra Leone recognizes that infrastructure and policy environment bottlenecks need to be dismantled to ensure better communications access. Technical design of the project reflects lessons learned in the ICT sector and international best practices. For most developing countries, a major obstacle to the uptake of ICT remains the lack of adequate access to ICT infrastructure. A lack of investment in ICT infrastructure and access networks, coupled with inefficient provision of services, are the most important factors undermining the development of networked economies. The main lesson derived is that success is mainly market driven. Creating a predictable legal and policy environment is key to improving investor confidence and restoring trust in the ICT sector. The focus of the proposed project is to create a PPP framework for international connectivity. The project will establish an enabling institutional and regulatory environment to help attract and sustain investment in the telecommunications sector.

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64. The ACE consortium is deemed to be technically qualified and structured according to best practices in the industry. The team’s assessment is that the ACE consortium is being structured in a manner consistent with international good practices in the industry, and is led by major industry players. Given the experience of key consortium members in designing, commissioning and operating submarine cables, the implementation risk is minimal. As with all cables, there is, however, a risk of breaks on the operational system.

65. The cost of membership for Sierra Leone to the ACE consortium will be US $25 million. The total estimated cost of the ACE submarine cable is US$700million based on the latest basic system configuration with twenty one (21) landing stations, connecting twenty three countries between and South Africa, via the West coast of the continent. As a member of the consortium, Sierra Leone will obtain a fixed ownership percentage and an allocated capacity (based on kilometers and branch capacity) at a fixed price. It is agreed that for a single landing station membership, Sierra Leone will obtain approximately 2.8 percent of the capacity at a cost of approximately $25 million. The percentage and dollar amounts are based on a membership cost model developed by ACE consortium management. The model enables members to specifically determine the payment required for membership and the bandwidth capacity that will be allocated. While the model and the resulting payment amounts were finalized when the consortium Construction and Maintenance Agreement (C&MA) was signed by all members on June 5, 2010, there may be slight variations around the $25 million estimate, depending on final configuration of the system and the final list of ACE members.

Legal due diligence – Key Issues:

66. Transactional. On the transactional side, this can be divided into the “wet” segment and the domestic (cable landing station segment. The transactional issue on the wet segment relates to (i) succession of the SPV vehicles from the parties to the existing C&MA, and (ii) the ability of the GoSL to divest their interests in the SPVs that are making the investment into the ACE consortium, as well as unbundling the equity interest in the consortium from the capacity allocated to the SPV. It is not assumed that there will be any problem with succession of the C&MA. However with regard to divestiture, the C&MA requires the unanimous consent to the assignment of an entity’s interest or new entry in the consortium. On the domestic level, there may be issues related to the strategy for divestiture as well as governance issues related to the ownership and operation of the landing station.

67. Regulatory. The main issue is ensuring “open access” (fair and transparent pricing and access) to the bandwidth capacity provided by the ACE cable at the domestic level once the bandwidth capacity comes on shore. This is primarily a domestic regulatory issue. A review of the agreement indicates transparent access to known capacity at known prices. A review of sector regulations, including licensing conditions, will be conducted at the national level. The Project is providing resources to support these activities.

68. Public Private Partnership (PPP) Arrangements. The GoSL has confirmed that the ongoing PPP arrangements under WARCIP would be exempted from a new PPP law which had been submitted for Parliament’s approval. The GoSL requested the World Bank’s support to review the PPP Law to advise whether there would be any negative impact on SALCAB operations. Both GoSL and World Bank agreed that the PPP law would not have any negative impact on SALCAB’s operation. The team and GoSL subsequently agreed during 19

negotiations on revised definition of PPP, reflected in the Financing Agreement ensures that SALCAB operations would not be affected and reads as follows: PPP means, and includes, the general financing, governance and other contractual matters between a public sector entity and one or more private sector entities, which PPP is hereby deemed not to fall within the scope and application of any public-private partnership law in force in the Recipient’s territory”

C. Financial Management

69. The proposed financial management arrangements of the project satisfy the Bank’s minimum requirements. While the proposed financial management arrangements of the project satisfy the Bank’s minimum requirements under OP/BP 10.02, the overall financial management residual risk is rated ‘substantial.’ The proposed project will be implemented under the auspices of the MoIC and through a PIU. A qualified and experienced financial management consultant will be recruited and in place before effectiveness and will serve as one of the incremental staff of the PIU for a period of at least 12 months. A designated account will be established at a Commercial Bank in Freetown and into which the credit proceeds will be disbursed after project effectiveness and upon receipt by IDA of approved withdrawal applications. The account will be denominated in US Dollars and a subsidiary Leone transaction account will be established within the same Bank to cater for local currency expenditures.

70. Disbursements. Banking and processing of eligible expenditure payments will be managed by the authorized signatories of the Permanent Secretary of MoIC with any one of (i) Project Coordinator and (ii) Project Financial Management Specialist. The proposed project will use transaction-based disbursements though the use of Statements of Expenditures (SOE) on the uses of project funds. A forecast of the first 4 months expenditures expected to be paid from the Designated Account (DA) will form the basis for DA ceiling which has been set at US$300,000. An initial advance will be disbursed to the DA upon Credit Effectiveness, and subsequent advances will equally be based the submission of documentation on the use of the initial/previous advance. Withdrawal applications shall be submitted to the Bank monthly. Retroactive financing will be used for expenditures paid by the GoSL before the legal agreement date but on or after June 1, 2010 for eligible project expenditures under component 1.

71. The proposed project will follow a cash basis of accounting and financial reporting and will submit, within 45 days of each calendar quarter, quarterly interim financial reports of the project including: (at the minimum) (a) Actual and Forecast Cash Flow Statement according to Components, Sub-components and Activities; (b) Summary Statement of Expenditures according to Categories; (c) Designated Account Reconciliation Statement; (d) Physical Progress Report; and (e) Procurement Status Monitoring Report. The annual audited financial statements of the project, including for the SPV, shall be submitted to IDA within 6 months of the end of the GoSL’s fiscal year (i.e. by June 30 each year). The audit will be conducted by a private sector auditor, upon approval of the Auditor General, and the auditor shall be appointed within four months of project effectiveness. The terms of reference of the audit will be agreed at negotiations.

D. Procurement

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72. A procurement assessment has been carried out and has concluded that MoIC and its staff do not have capacity to carry out procurement activities related to the proposed project. Most of the risks concerning the procurement component for implementation of the project have been identified. The overall project risk for procurement is rated high. Risk mitigation measures have been discussed with MoIC and agreed. The procurement plan for the project has been received by the Bank and found to be acceptable. It will be updated at least annually (or as required) to reflect project implementation needs. A brief summary of the procurement capacity assessment and project procurement arrangements are provided in Annex 3.

73. The MoIC is in the process of establishing a PIU which will be responsible for developing and updating the consolidated Project Implementation Plan. The PIU plan will ensure that project activities are implemented according to the PIM, reporting on project progress to the Permanent Secretary, interacting with the World Bank, and ensuring Procurement for Goods and Consultants Services will be carried out in accordance with the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" published May 2004 and revised in October 2006 and May 2010 (Procurement Guidelines); and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" published May 2004 and revised in October 2006 and May 2010 (Consultant Guidelines) and the provisions stipulated in the Financial Agreement. More details will be available in project files.

74. IDA funding for component 1 (a) on international connectivity does not go towards a procurable item subject to the application of World Bank procurement guidelines. This is because such funding is for membership fees (paid in different installments) against a set of rights including use of a certain amount of capacity at preferred rates and a share of ownership of an indivisible cable infrastructure asset. For other project components (1 b, 2 and 3), IDA procurement guidelines will apply.

75. Preliminary Assessment shows that MoIC satisfies the Bank’s minimum Procurement requirement. The assessment of the project’s procurement arrangements being implemented by the Ministry of Information and Communication as documented in the annex indicates that the systems to be used to manage the proposed project satisfy the Bank’s minimum Procurement requirements under OP/BP11. Additional institutional strengthening will be provided before and after project implementation.

E. Social and Environment

76. Connection to the ACE cable is not expected to have significant environmental impact. The proposed project is rated as a Category B project. The cable system is likely to have a submerged or ‘wet plant’ part, and a ‘dry plant’ part which interfaces at proposed Landing Stations. The Landing Station is the location where a submarine or other underwater cable makes landfall. The landing (or termination) station can also be the point at which the submarine cable connects into the land-based infrastructure or network. The lateral connecting cable to landfall near Freetown, Sierra Leone, is approximately 235 km in length, connecting to the main cable beyond the 3000 m isobath. This is well beyond the territorial seas and contiguous zone, and well off the continental shelf. Deep ocean fiber optic cables are no larger than 17-21 mm diameter – about the size of a domestic garden hose- and are laid mainly upon the surface of the ocean floor. 21

77. A Cable Route Survey will be done to ensure the cable is not located in high risk locations or geological features. No specific environmental studies are undertaken for submarine cables which lie in deep sea. However, prior to laying cables, a detailed Cable Route Survey is done to ensure that the cable is not located in high risk locations or geological features (e.g., thermal vents) that often harbor unique faunal assemblages at abyssal depths. Most of the larger companies operating in the submarine cable industry typically work to standards and quality management systems set by the International Organization for Standards under the ISO 9000 and ISO 9001 schemes. Furthermore, the International Cable Protection Committee (ICPC) publishes recommendations on key issues such as cable routing, cable protection and cable recovery that are available to anyone on request. This very stringent standard puts pressure on cable companies to adhere to strict environmental standards. The extensive studies that are undertaken by the cable suppliers prior to final cable laying tend to work as effective safeguards against any possible environmental disruption, since in large part they are intended to identify routes for the cable that will avoid seamounts, volcanoes, canyons, vents, seeps, deepwater reefs, dissected terrain – all areas that tend to be associated with higher biological value than the general abyssal plain.11

78. As the cable gets closer to the shores in water depths shallower than 1,500m, the cable’s diameter may increase to about 40-50 mm due to the need to add protective wire armoring. The small environmental disturbances caused by laying connecting cable from the shore in Sierra Leone to a deep sea submarine fiber optic cable are not expected to have any perceptible effect on the quality of the coastal waters of the Atlantic Ocean or on marine species or habitat. For the cable and associated equipment onshore, there may be some temporary, low to moderate environmental and social impacts including localized impacts to near shore marine life and local fishermen access. Detailed note on Submarine Cable Characteristics and related Environmental safeguard issues attached as Annex 8. . 79. Sierra Leone has prepared a draft Environmental and Social Management Framework (ESMF) (consistent with national laws, any applicable treaty concerning international waters, and OP 4.01) and a Resettlement Policy Framework (RPF) for the lateral cables and any associated equipment that will be laid from the junction with the main cable through territorial waters and onto the national shores as required. The draft ESMF indicates that the proposed landing sites have very limited marine activities and not likely to experience significant disturbances. The seaward limit of coverage for the ESMF is the seaward limit of both Sierra Leone’s exclusive economic zone (EEZ), defined as extending 200 nm (370 km) from the shorelines. The RPF is being prepared in case the project may require land acquisition and resettlement, and/or restricted access to natural resources, although this is

11 The Letter of Agreement for the second PPA required that, not later than August 31, 2011, the government prepare, consult on, and disclose an environmental impact assessment under the proposed Project for the international waterways in relation to the marine surveys to be carried out under the Construction and Maintenance Agreement. This condition for individual country EIAs for the deep sea, however, is considered no longer relevant, as the: i) Provisional Cable Route Study includes detailed information to address any environment and safeguard issues, and ii) likely environmental issues are very minimal in the deep sea. The first supervision mission will confirm that such information from the cable route survey has been provided to the country, and appropriate decisions made after screening the final Cable route Survey to determine if there are areas of deep sea traversed by ACE within the geographical limits of application of the country’s domestic EIA legislation to which attention should be paid for further impact assessment. . 22

not expected based on the preliminary Cable Route Survey work. For the purposes of subsequent environmental assessment work regarding benthic habitat and ecology, the Cable Route Survey being undertaken by the Cable Suppliers will provide this analysis between the outer limit of the EEZ and the 50 m isobath. Between the 50 m isobath and the shoreline, the Cable Route Survey will provide environmental baseline information regarding benthic habitat and ecology, augmented as deemed necessary by other sources of information. Activities of cable-laying ships and support vessels will be required to comply with Sierra Leone’s regulations regarding such maritime activities. While it may not be necessary for member countries to conduct EIAs of placing cable in the deep sea within their EEZs, this should not deter Sierra Leone from considering in the screening and scoping phases of its EIA whether there are areas of deep sea traversed by ACE and within the geographical limits of application of the its domestic EIA legislation to which attention should be paid.

80. Once the final sites of the Landing Stations are chosen and the specific civil works identified, an Environmental and Social Management Plan (ESMP) for Sierra Leone will be prepared, consulted up, and disclosed. An Environmental and Social Impact Assessment may also be prepared along with the ESMP, although the preliminary analysis prepared for the ESMF indicates that the ESMP is the appropriate Safeguards instrument for this project. The final decision will be made as the Cable Route Survey identifies the preferred routing in territorial seas and in near shore shallow water at the landfall site. Although involuntary resettlement or displacement from land-based livelihoods is not expected, a Resettlement Policy Framework (RPF) has also been drafted as a contingency measure in case a resettlement action plan needs to be prepared.

81. OP/BP 7.50-on “Projects on International Waterways” does not apply. While the main cables are to be placed in non-territorial, deep sea locations, OP/BP 7.50, Projects on International Waterways, does not apply. The types of waterways covered under the policy do not contemplate an “open sea.” For purposes of the policy, international waterways include semi-enclosed coastal waters, closed seas, national rivers flowing into those waters, and transboundary groundwater. It should be noted that the definition of international waterways under the policy is at variance with the definitions under the rules established by the Institut de Droit and the International Law Association, as well as the United Nations Convention on the Law of the Non-Navigational Uses of International Waters Watercourses.

82. The proposed project is expected to have positive social benefits. The main social impacts of the proposed project are the increased possibility of better access to ICT services for the population, and improved GoSL service delivery. The project will contribute to (i) enabling ICT to become a driver for sustainable economic growth; (ii) enabling the GoSL to use ICT to improve services; (iii) improving access and quality of ICT services for the general population, businesses, and the GoSL; and (iv) reducing isolation and enhance economic activities in rural areas.

Credit conditions and covenants

83. Effectiveness conditions:

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(a) The Contractual Arrangement, in form and substance satisfactory to IDA, has been entered into between the Sierra Leone and SALCAB.

(b) Sierra Leone shall have established the PIU under terms of reference and with staff in numbers and with qualifications satisfactory to IDA. As part of such staffing, there shall be in place for the PIU: (i) the Project coordinator under terms of reference and with qualifications and experience satisfactory to IDA; and (ii) a financial management specialist and a procurement specialist, both under terms of reference and with qualifications and experience satisfactory to IDA.

(c) Sierra Leone shall have adopted the Project Implementation Manual in form and substance satisfactory to IDA.

Disbursement Conditions:

84. Sierra Leone shall not withdraw funds to finance the last payment of the Consortium Fee due to the ACE Consortium until and unless the GOSL has issued an offer to sell its shares in SALCAB in an amount and manner satisfactory to IDA.

Legal covenants:

85. Sierra Leone shall:

(a) ensure that the construction of the landing station related to component 1 (a) of the Project does not commence until and unless: (i) IDA shall have approved the ESIA, ESMP, and/or the RAP, as the case may be, and the same documents have been consulted on and disclosed as approved by IDA; and (ii) it shall have verified, through its own staff, outside experts, or existing environmental/social institutions, that the activities under component 1 (a) of the Project meet the environmental and social requirements of appropriate national and local authorities and that they are consistent with the Association’s applicable environmental and social assessment and safeguard policies and comply with the environmental and social review procedures set forth in the Project Implementation Manual;

(b) take all measures required on its behalf to carry out, or to ensure that the SPV carry out, the ESIA, ESMP, and/or the RAP, as the case may be, in accordance with the provisions of the ESMF and the RPF; and

(c) ensure that the relevant mitigation and monitoring provisions of the ESIA, ESMP, and/or RAP, as the case may be, are appropriately implemented.

86. Sierra Leone shall: (a) not later than four (4) months after the Effective Date, publish in a national newspaper of wide circulation the Sierra Leone’s action plan and timeline setting forth the steps and actions required to liberalize the international telecommunications and internet gateway not later than September 30, 2011; and

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(b) not later than seven (7) months after the Effective Date, submit to the vote of its Parliament, a bill, in form and substance satisfactory to IDA, introducing amendments to the Telecommunications Act to reverse the monopoly of SierraTel over international telecommunications and internet gateway.

87. Sierra Leone, through the PIU, shall:

(a) prepare a draft Annual Work Program and Budget (AWP&B) for each Fiscal Year, setting forth, inter alia: (i) a detailed description of planned activities for the Project for the Fiscal Year; (ii) the sources and uses of funds therefore; and (iii) responsibility for execution of said Project activities, budgets, start and completion date, outputs, and monitoring indicators to track progress of each activity;

(b) not later than November 30 immediately prior to each such Fiscal Year, furnish to the Association for its comments and approval, the draft AWP&B and, promptly thereafter, finalize the AWP&B taking into account the Association’s views and recommendations thereon; and

(c) adopt and sign the final version of the AWP&B in the form approved by the Association not later than December 31 immediately prior to each such Fiscal Year.

88. Sierra Leone through its MoIC, shall ensure overall coordination, implementation and supervision of the Project is carried out by the Project Implementation Unit with due diligence and efficiency. To this end, Sierra Leone shall maintain the Project Implementation Unit throughout Project implementation under terms of reference satisfactory to IDA and with staff and resources adequate to enable it to carry out its responsibilities under the Project.

89. The MoIC has completed the recruitment process for the core team in the PIU and has developed a draft terms of reference for consultant to prepare the Project Implementation Manual. It is expected that these processes will be completed before effectiveness

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Annex 1: Results Framework and Monitoring COUNTRY: Sierra Leone Responsibility Program/Project DO Level Results Unit of Cumulative Target Values** Data Source/ Baseline Frequency for Data

Indicators* Core Measure Methodology YR 1 YR 2 YR3 YR 4 Collection Indicator One: Volume of international impact traffic: International Communications Kb/s per 3 3 3 40 40 6 months Operators NATCOM (Internet, Telecoms, and Data) bandwidth person per person Indicator Two: Access to internet services Number per .28 .28 .4 1 2 6 months Operators NATCOM (number of subscribers per 100 people) 100 Indicator Three: Access to telephone Number per services (fixed mainlines plus cellular 25% 30% 34% 38% 43% 6 months Operators NATCOM 100 phones per 100 people) Indicator Four: average monthly price of US$/ wholesale international E1 capacity link month/2Mb $8,000 $8,000 $7,000 $5,000 $2,000 Yearly Operators NATCOM from capital city to Europe ps Indicator Five: Direct project beneficiaries, 2.4 2.8 3.2 Number, 2 million 2.2 million of which female million million million Annual Survey12 NATCOM (%) (43) (43) (45) (45) (48) INTERMEDIATE RESULTS Intermediate Result (Component One): Intermediate Result indicator One: Volume of available international capacity: In Gbit/s .3 .4 .5 6.00 6.00 Annual SALCAB NATCOM International Communications (Internet, Voice) bandwidth Intermediate Result indicator Two: Retail NATCOM/ price of internet services (per Mbit/s per US$/month 1500 1500 1500 1000 800 Yearly Operators PIU Month, in US$) Intermediate Result (Component Two): Intermediate Result indicator One: Impact 1-low on Telecom sector of World Bank technical impact to 5 0 1 2 2 3 6 months Stakeholders13 PIU assistance (composite score) –high impact

12 The regulator will carry out a short annual survey on a representative sample of voice and data service users and will extrapolate to obtain country level results 13 The PIU will gather information from different project stakeholders (operators, regulator, ISPs) to measure this composite indicator 26

Annex 2: Detailed Project Description

A. Project Components

1. WARCIP Sierra Leone is structured to address critical connectivity gaps and will have three components. These include: (i) Infrastructure to improve connectivity ii) Technical Assistance to strengthen enabling environment, and (iii) Project Implementation Support. Component 1 – Supporting Connectivity (US $26.7million) 2. The main focus of the proposed project is to connect Sierra Leone to Global Broadband infrastructure through the ACE Submarine cable. Improving international connectivity through funding access to ACE submarine cable is the main focus of WARCIP Sierra Leone. For purposes of international connectivity along the coast of West Africa and with the rest of the world, the most attractive and efficient viable option for Sierra Leone is to connect to the ACE project, which is anticipated to be an approximately 17,000 km submarine cable system, which will connect South Africa to Europe and also connect 23 countries including a landing station in Sierra Leone. In all likelihood, there are no other opportunities for Sierra Leone to connect to another submarine cable for many years to come. Analysis has confirmed that other submarine cable projects under preparation in the region are not viable options for Sierra Leone. 14 Other connectivity priorities are treated as a secondary focus, and to the extent that they are critical to the viability of the submarine cable.

a) International connectivity: Funding Sierra Leone’s membership in ACE submarine cable (US $25 million)

3. Connecting Sierra Leone to international broadband fiber optic cable. Sierra Leone will pay US$25 million for a 2.8% share of capacity about 7Gbps, a substantial increase from the current 1Gbps. The total estimated cost of the ACE submarine cable is around US $700 million based on the final basic system configuration with 21 landing points and is to be operational by the end of 2012. On June 5, 2010, the GoSL signed the ACE Construction and Maintenance Agreement (C&MA) of the ACE consortium via a wholly GoSL owned special purpose vehicle (SPV), the Sierra Leone Cable Company (SALCAB)15 and committed to paying its contribution of $25m. It is expected that the IDA funding will be transferred in its entirety to SALCAB. SALCAB in turn will give the received funds to the ACE consortium to perform any of GoSL obligations under the ACE Construction and Maintenance Agreement. Through a Project Preparation Advance (PPA), the GoSL was able to make the initial instalment of US$5 million. The GoSL has furthermore committed to pay an instalment of US$2.5 million towards the settlement of September December 2010 obligations, with the understanding that this will be reimbursed when WARCIP Sierra Leone project becomes effective. The remaining US$17.5 million payment will be made in line with ACE payment milestones and in different instalments until July 2012 when cable is expected to be completed.

4. Private Participation in SALCAB will begin before Commercialization of the Cable. SALCAB was created for the purpose of becoming the PPP (Public Private Partnership) structure to own and manage the ACE submarine cable landing station. Because of the urgency to secure participation in the ACE, the chosen approach was for GoSL to take a

14 Mike Jensen Report entitled ‘International Connectivity Options for Sierra Leone, Liberia and Guinea’ for the World Bank (May 2010). 15 SALCAB was incorporated on March 26, 2010, under the Sierra Leone Company Act, Cap. 29, and registered as a business enterprise (No. 3762). 27

100% ownership position in SALCAB on an interim basis while the PPP arrangements could be finalized. The plan is for GoSL to divest at least 50% of its interest in the ACE consortium to the private sector before commencement of commercial operations. The GoSL is in the process of securing the services of a Financial Advisory Team to assist in this process.

b) National connectivity (US $1.7 million)

5. Providing broadband to improve priority services: The GoSL has expressed interest in the development of high speed government virtual private networks for selected institutions within Freetown. The institutions include: i) State House, ii) Ministry of Information and Communications, iii) Ministry of Finance and Economic Development, iv) Ministry of Foreign Affairs and International Cooperation, v) Ministry of Health and Sanitation, vi) Ministry of Trade and Industry, vii) Public Sector: (Cabinet Secretariat, Public Sector Reform Unit (PSRU), Human Resource Management Office, and Public Service Commission) and viii) the Ministry of Justice. The UNDP has provided some resources to undertake an initial needs assessment of these institutions. It is expected that World Bank funding will leverage this preliminary work.

6. The need for fast and reliable emergency communication. Recently emerging from conflict, GoSL is placing important emphasis on the need for a reliable and fast national emergency communications network which could assist government to be responsive to emergencies, and citizens to react efficiently to emergency notifications.

7. Support to establish an IXP. Another important area to stimulate local demand for capacity would be funding of equipment and capacity building for the recently established national Sierra Leone Internet Exchange Point (SLIXP). This would likely include the hosting of shared time-servers, local DNS servers and caching servers. A fully functional Internet Exchange could help Sierra Leones to exchange traffic locally, and avoid paying high bandwidth prices. The World Bank funding will be targeted to these requests.

8. Additional national/regional connectivity gaps to be funded through divestiture proceeds. In the long-term, significant national connectivity infrastructure is likely to be put in place by competing private telecommunication operators. But given the low income levels in Sierra Leone, and the relatively low levels of use of bandwidth intensive applications, multiple competing fiber backbones reaching throughout the country are unlikely to be built for many years, if not a decade. It is expected that proceeds from divestiture in SALCAB will be used to further develop national and cross-border connectivity gaps. IDA support will assist in defining how the divestiture transaction will be undertaken and how capacity will be sold. A disbursement condition will be included to ensure that an Offer for Sale has been issued prior to the commercialization of the submarine cable.

9. Strategic partnerships to roll-out additional national infrastructure to improve access. While international fiber links will provide the potential for massively improved access to communications in Sierra Leone, the full benefits of this cannot be achieved without even greater investments in national infrastructure and onward connections to neighboring countries. This will both stimulate demand by reducing costs and improving the range of services to the end user through increased competition. This component will complement planned national and cross-border infrastructure programs expected to be funded by the Islamic Development Bank (USS$ 18.5million), and the GoSL through Exim Bank of India (USD$ 29.4million).

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Component 2- Creating an Enabling Environment for connectivity (US$ 2.9million).

10. Enabling environment to allow competitive access and predictable regulatory services. This component will provide support for Technical Assistance and capacity building necessary for the successful implementation of component 1 of the project. Specifically, support will focus on putting in place PPP frameworks for improved connectivity, strengthening the policy and regulatory environment and promoting further sector reform in order to maximize benefits from access to international capacity. Most of the activities under enabling environment are included as part of the PPA. The following activities will be supported: (i) PPP design for the SPV for the landing station and definition, (ii) legal and regulatory support for improved connectivity and open access, (iii) definition of GoSL participation in SALCAB and of divestiture strategy and process for GoSL shareholding, and (iv) capacity building support to policymaker, regulator and SPV.

i. PPP framework for the landing station. Under this component legal and financial advisory services will be hired to put in place the PPP structure for the landing station. Those services will include: (i) designing and negotiating PPP contracts and related stakeholders agreement’s, (ii) defining the rights and obligation of different stakeholders (currently fully Government owned but expected to include private parties before cable commercialization in 2012), and (iii) defining appropriate risk sharing and commensurate financial rewards between parties. This activity will also support the design of GoSL participation in SALCAB, the development of a divestiture strategy for GoSL shareholding, and the development of instruments (designing contracts and regulatory instruments) for pre-purchase of international capacity by public institutions.

ii. Legal and regulatory support for open access to International connectivity. This activity will finance legal and regulatory support to ensure open and non discriminatory access to cable landing facility, including issues related to licensing of SPV: International gateway facilities, fully liberalized international gateways, open access regime (national and international backbone essential facilities), wholesale price cap control mechanism and quality outsourcing of operations and maintenance. iii. Strengthening policy making and regulatory capacity. This component will also provide technical capacity building and assistance to the agencies of GoSL involved in the ICT sector. The key agencies are the Ministry of Information and Communications (MoIC) and the National Telecommunications Commission (NATCOM). The technical capacity building component will support a range of activities designed to assist these agencies in project specific work and in improving the overall competitive and regulatory environment for the ICT sector, and will include a Revised Telecommunications Act and related regulations, new strategic plan for NATCOM, and support to MoIC for the implementation of the ICT Policy. Given the key role that SALCAB is expected to play in infrastructure ownership and management, it is important to provide it institutional and capacity building support. Advisors will be hired for the Ministry, NATCOM and SALCAB, and training programs will be designed and implemented during project

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11. Support for the Commercialization of SierraTel. The government owned telecom company suffered huge destruction of its infrastructure during the decade long war. Its microwave radio transmission equipment and solar power plants installed in the provinces were destroyed, and almost the entire telephone system outdated, with only a few exchanges and part of the transmission network in Freetown converted to digital technology. This component will assist the company with options and strategy for improving the efficiency, productivity, customer service delivery, capacity building and overall financial and operational performance.

12. Support for the Liberalization of the International Gateway. Project resources will assist GoSL in managing the process to liberalize access to the country’s international gateway which is currently controlled by SierraTel in an effort to protect the company’s financial viability. Resources from the project will support the valuation and drafting of licenses, the tender and consultation process, as well as evaluation and selection of licensed operators,

Component 3: Project implementation (US $1.3 million).

13. Capacity strengthening to ensure effective implementation. This activity will provide support needed to strengthen the capacity of the GoSL to implement the connectivity project, including setting up the Project Implementation Unit (PIU) and hiring dedicated staff to work on the project, hiring experienced Procurement and Financial Management specialists and a Project Coordinator. The component will also cover office equipment including vehicles, incremental operating costs, audits, communications and environmental and social studies for both the PIU and SALCAB.

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Figure 2.1: Diagram of Program Structure

IDA $31m Loan GoSL of Sierra Leone (Ministry of Finance) IDA loan investment in investment $1.7m Govt connectivity$1.7m Govt Building Support Capacity for Implementation/ Institutional MoIC/NATCOM/SALCAB to $4..3

ACE cable $25m

Sierra Leone Cable Limited (SALCAB)

institutions priority to capacity 20% subsidized 30% shares/capacity for future use for divestiture shares 50% At least

Selected Public Institutions e.g. Hospitals, Universities, Schools, Post Offices, Ministries, Other Govt. Private Institutions. Operators

of shares Proceeds from sale

Note: Project structure does not necessarily translate into Fund flow.

National Cross-border links, IXP support, Govnet & priority e-Gov. Applications

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Annex 3: Implementation Arrangements

Overall Coordination and Oversight Arrangements 1. The Ministry of Information and Communication (MoIC) will have overall responsibility of the project. The implementation period for WARCIP Sierra Leone is four years – from 2011to 2015. The MoIC will be the Project Executing Agency and will have overall responsibility for the management of the project. The MoIC will identify a core team of consultants and staff from the Ministry and relevant institutions who will be responsible for the overall project coordination and management. 2. The project will be implemented by a Project Implementation Unit (PIU) within the Ministry of Information and Communication. A PIU is in the process of being established within the MoIC which will be responsible for the overall coordination, implementation, and supervision of the project. The PIU will be headed by a Project Coordinator who will report to the Deputy Minister and Minister through the Permanent Secretary. The PIU will be composed of core project team of seasoned Procurement and Financial Management Specialists and representatives from the MoIC. The PIU will be in charge of the (i) day-to- day activities under the project, in particular, procurement and monitoring activities; (ii) management and coordination of work under the 3 project components, (iii) coordination with the other entities responsible for project implementation, including SALCAB; (iv) preparation of annual work programs, budgets, and procurement plans under the project; (v) dissemination of internal and external audit reports; (vi) implementation of their recommendations, and (vii) interaction with the Bank for obtaining the requisite no objections. 3. The PIU will be the primary focal point within the Ministry which ensures that the project is effectively implemented. In addition to the specific implementation support, the PIU will also be the primary focal point within the Ministry which ensures that the appropriate issues are addressed to facilitate the achievement of project results. Key emphasis will be on management of the activities under component 2 which address critical challenges in the enabling environment to ensure open access. In this regard, the Ministry will also benefit from the services of a Policy Adviser, who will be hired to advise the Ministry on policy and technical matters relating to provision of telecommunications services, competition policies, implementation of the ICT policy, and open access to communications in Sierra Leone. The PIU is being established with funding under the PPA and expected to be fully functional prior to Board. The MoIC has already completed a tendering process and developed a shortlist of potential candidates for the key positions. All the positions will be in place before Project Effectiveness. 4. The project will provide institutional support to SALCAB. In view of the very important role that the SPV, SALCAB, will play in managing the international fiber under component one, the project will also provide implementation support to SALCAB up until the time of divestiture of GoSL interest. During this period, the PIU under the MoIC will provide Procurement, Financial Management (FM) and Monitoring and Evaluation (M & E) support to SALCAB. The project will also support a competitively selected core team including a Chief Executive Officer and Technical Consultants, or as recommended by the Advisers who shall also be tasked with designing SALCAB’s business plan and institutional arrangements. Additional support will be provided to NATCOM for a new strategic plan. 5. To ensure that the proposed WARCIP Sierra Leone Project continues to receive priority attention and support from GoSL, the project is proposing that the Office of the Chief of Staff under the President’s office provides primary oversight of WARCIP.

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The Chief of Staff’s office has been established as an advisory body to the President to advice on the implementation performance of all MDAs. The office will provide strategic guidance to the MoIC and ensure effective coordination across the various MDAs, the relevant private sector and SALCAB. The Chief of Staff’s office will be responsible for ensuring that the Project Development Objectives are achieved, and will take key decisions to ensure smooth implementation of the project. The Chief of Staff’s office will advise the ICT council on progress of the Project and challenges that need to be addressed. The organogram below illustrates the implementation arrangements of the WARCIP Sierra Leone project.

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Figure 3.1 : Proposed WARCIP Sierra Leone Implementation Arrangements

Office of the Chief of Ministry of Staff Communications (MoiC)

Implementation Team Designated IDA Accountant

Support to SALCAB NATCOM Communicati Project ons Coordinator Directorate CEO MDAs*Policy Advisor Tech . Tech. Consultants Consultants Financial Procurem Engineering Legal/regulat Managme ent * ory Technical Technical Technical nt Specialist Specialist Specialist

Beneficiary Private Operators

Beneficiary MDAs

Support on Enabling Enabling international Environment connectivity Environment Component Component /PPP/national /PPP connectivity

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Financial Management and Disbursement Arrangements

Introduction

6. In line with the guidelines as stated in the Financial Management Manual issued by the Financial Management Sector Board on March 1, 2010, a financial management assessment for the proposed WARCIP was conducted on the Ministry of Information and Communications (MoIC). The objective of the assessment is to determine: (a) whether the project implementing unit in the Ministry has adequate financial management arrangements to ensure project funds will be used for purposes intended in an efficient and economical way; (b) the project’s financial reports will be prepared in an accurate, reliable and timely manner; and (c) the entities’ assets will be safeguarded. The FM assessment also included, a review of the (i) number and quality of financial management staff at the Ministry that will have fiduciary responsibilities under the project; (ii) FM organization structure of the Ministry and its impact on the internal control processes to be employed under the project; and (iii) the proposed FM systems and processes to be established in support of the implementation of the proposed project. 7. The assessment of the financial management arrangements concludes that adequate systems will be in place, by effectiveness, that satisfy the Bank’s minimum requirements under OP/BP10.02. Nevertheless, the assessment rates the financial management residual risk as ‘Substantial.’

Overview of Project and Implementation Arrangements

8. The proposed project, which will be implemented over a period of 4 years, will be managed under the auspices of a Project Implementation Unit (PIU) within the MoIC. The PIU will be staffed by core staff of the ministry and supported by incremental consulting staff with specialist skills. The $1.5 million Project Preparation Advance (PPA), approved for the project, will finance the preparatory requirements of, among other things, the setting up of the PIU. The PIU will be headed by a dedicated Project Coordinator who will report to the Permanent Secretary who will in turn report to the Minister through the Deputy Minister of Information and Communications. The overall responsibility of the PIU will include the (i) day-to-day management and coordination of the activities under the three components of the project, in particular, procurement and monitoring activities; (iii) coordination with the other entities involved in project implementation; (iv) preparation of annual work programs, budgets, and procurement plans under the project; (v) preparation of interim progress reports and annual financial statements of the project, (v) implementation of the recommendations of the internal and external auditors on the project. The Office of the Chief of Staff, at the Presidency, charged with providing implementation advice to all MDAs, will have primary oversight responsibilities for the WARCIP. 9. The development objective of the proposed WARCIP Sierra Leone is to increase the geographical reach of broadband networks and reduce costs of communications services in Sierra Leone’s territory. The proposed project will be implemented under three key components: (1) Supporting connectivity, (2) Creation of an Enabling Environment for connectivity and (3) Project implementation.

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Country Issues

10. The Sierra Leone fiduciary environment has undergone substantial transformation since 2006. By mid 2007, arising from the implementation of a broad and sustained program of public financial management reforms, the performance of Sierra Leone’s fiduciary arrangements, according to the PEFA PFM performance measurement framework assessment of 2007 (supported by the PER Report of 2010), were placed at par with the regional average. With the aim of widening and deepening the reforms, the GoSL established a PFM Oversight Committee, chaired by the Financial Secretary, along with five sub-committees. A National Action Plan for PFM reform was then formulated and implementation of the reform actions became more aggressively pursued with financial and technical assistance support from a number of development partners including the Bank. The legal and institutional framework for PFM was strengthened. Key among the milestones achieved include: (a) the adoption of a new Financial Management Regulations in 2007, thus further strengthening the legal foundation for fiduciary standards- the Government Budgeting and Accountability Act (GBAA) of 2005; (b) the appointment of a qualified Accountant General and 8 other professional accountants after a long period of low PFM human resource capacity; (c) the strengthening the capacity of the external audit function by enhancing the terms and conditions of service of the Auditor General and by new recruitment and training; (d) establishment of an internal audit function in MDAs. Resulting from a number of reforms initiated since 2007, the annual public accounts and their audit have been brought up to date after several years of backlog, and the publication of quarterly unaudited accounts became normal routine. The fact that all central GoSL expenditures are now transacted in the IFMIS (a component of the Bank-financed IPFMRP) and a GFS-compliant chart of accounts was adopted, has also meant that the financial reports of the GoSL are more reliable, comprehensive, and accurate and can be used for more informed fiscal decision making in the public sector. 11. Notwithstanding substantial progress already made in a number of areas of financial governance, Sierra Leone’s overall ranking in the Transparency International tables has deteriorated from 150 in 2007, to 158 in 2008, out of 179 and 180 respectively. With the establishment of a vibrant anti-corruption institution, the GoSL has also taken major steps aimed at controlling corruption. The peaceful transfer of power from one elected national GoSL to another in September 2007 is a notable achievement in sub-Saharan Africa, and even more so in a post-conflict situation.

Project Risk Assessment and Mitigation

12. The table below shows the results of the risk assessment for the proposed project. The table identifies risk elements that could impact the achievement of project objectives as well as measures designed to mitigate the risks.

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Table 3.1: Main risks and mitigation measures.

Risk Risk Risk Mitigating Measures/Remarks Residual Conditions for Rating Risk Effectiveness/ Rating Negotiations Inherent Risk Country Level Weaknesses in PFM capacity; H Deepened improvement in PFM capacity S No uneven levels of transparency through the IPFMRP and complementary in the effective use of public donor support to GoSL. Completion of roll- funds; weak oversight and out of IFMIS across MDAs, and accountability. strengthened capacity of internal audit in MDAs. Entity Level ( MoIC) The proposed implementation arrangements Lack of Bank project H such as including the establishment of a S No implementation oversight dedicated PIU (with professional staffing) as experience at MoIC, and well as focusing the Office of Chief of Staff possible distortion potential at the Presidency on an oversight role in in administrative coordination implementing WARCIP will both reduce the due to introduction of impact of lack of experience of MoIC in additional oversight layers project implementation as well as support beyond MoIC. rather than undermine coordination oversight. Project Level The recruitment of an experienced and Being the first Bank project S qualified incremental FM staff to support M Yes – Before FM at the project level, and the development for MoIC, lack of knowledge Effectiveness about IDA policies and and implementation of a Project procedures can hamper Implementation Manual (including FM smooth implementation. procedures) will provide the requisite knowledge base on IDA policies and procedures at the project level. Intensive IDA supervision to help identity and address weaknesses will be in place. Overall Inherent Risk H S Control Risk Budgeting With specialist market based staff to be Budget and annual work-plan H recruited to the project – procurement S No preparations may be delayed specialist, FM specialist, advisors etc., and and may not be with the oversight role of the Permanent comprehensive. Risk of cost Secretary of MoIC as well as the strategic overruns and adverse advisory role of the Chief of Staff at the variations in expenditure presidency, this risk could be averted. Also, could arise due to potential budget execution reporting through slow implementation. quarterly IFRs monitored by IDA, project budget planning and implementation will be

facilitated for orderly project implementation. Accounting Excel will be used initially by qualified FM Failure to, or delay in, S staff to be recruited under the project. The M No appropriately accounting for project implementation manual will provide

37 project funds and provide a reference basis for service standards in full supporting managing the accounting function of the documentation could result project. in IDA invoking it remedies and thus delay project implementation progress. Internal Controls The Project Implementation manual will Risk of non compliance to M outline procedures for internal control that M No internal control processes, will be applied and monitored by the including the separation of Internal Audit unit of the MoIC (already in duties in expenditure place) during its bi-annual systemic audits. processing and Regular IDA supervision missions and implementation of reviews will also help ascertain level of appropriate procurement compliance. systems. Funds Flow Simplified funds flow arrangements will be Delays in funds reaching H documented in the Project Implementation S No third parties for effective Manual project implementation Financial Reporting With the recruitment of a qualified FM Delays in processing and S Specialist who will be trained on Bank M No submitting IFRs and other reporting procedures will facilitate the progress reports and delays preparation of the reports and statements in submitting annual audited and ensure the timely availability of draft financial statements resulting annual financial statements for audit. to IDA invoking remedies. Specimen reports will be discussed and agreed with the PIU at negotiations. Auditing The audit terms of reference will be agreed Yes at Audited financial statements S at negotiations. M Negotiations and audit reports not (Audit ToR) submitted within the The external auditor will be appointed (as a covenanted deadline. dated covenant) within 4 months of project Yes within 4 effectiveness. months of effectiveness (Auditor Appointment) Procurement

The MoIC staff do not have The PIU will provide on-the-job training to M the requisite capacity to H the MoIC staff and to the evaluation No undertake the proposed committee members. The PIU will be procurement work under the responsible to provide assistance in the project. They do not have preparation of bidding documents, request experience in international for proposal, bid evaluation report and procurement or procurement contract agreements; and An initial training under World Bank in procurement under the World Bank procurement guidelines Guidelines will also be provided by the Bank staff during the project launch workshop

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The evaluation committee M PIU will be providing on job training to L No members used so far are not evaluation committee members. In addition, familiar with international a detailed Procurement Manual (a volume in procurement procedures, and the PIM) will be prepared by the selected may delay the procurement consultant prior to credit n effectiveness. process, especially the The procurement volume of the PIM will evaluation of bids and include inter alia: (a) TORs and consultants’ proposals qualifications requirements for procurement staff and procurement advisor, evaluation committee members, (b) conflict of interest disclosure forms (for MoIC staff and evaluation committee members to sign prior to each evaluation),

Lack of awareness of M Carry out aggressive public awareness L No procurement opportunities programs using various media, such as available in the project for newspapers, brochures, radio, TV, project goods and services web-site, etc

Overall Risk Rating M L

H – High S – Substantial M – Modest L – Low

Strengths and weaknesses of the Financial Management System

13. Strengths: As part of the project preparation, certain critical activities which needed to be completed, including the setting up of appropriate institutional arrangements for the project, and the strengthening of the financial management arrangements at the PIU, are expected to be achieved, prior to the effectiveness of the project. The PPA, granted by the World Bank to the GoSL, is meant to support the Ministry of Information and Communication (MoIC) establish the overall project implementation mechanisms, including adequate fiduciary arrangements. The project provides for recruitment of a qualified Financial Management Specialist who will be a key member of the PIU team to support the MoIC accounting staff at least during the initial year of project implementation. Since the IPAU at the Ministry of Finance (well endowed with adequately qualified and experienced staff) will provide initial support to the PIU’s FM unit in terms of budgeting, accounting, funds flow, preparation of interim and annual financial statements, the implementation of the financial management arrangements will be facilitated. Equally, with an internal audit unit already established in the MoIC, systemic control checks on the project’s financial management implementation will constitute part of the functions of that unit. The proposed project’s financial management procedures will be documented in the Project Implementation Manual and serve as the reference point for implementing the financial management aspects of the project.

14. Weaknesses: As in other post conflict environments, the overall fiduciary environment in Sierra- Leone, while improving, remains weak, overall. The major weakness is due to the lack of prior experience of the MoIC in implementing donor-funded projects and inadequate knowledge of IDA procedures and processes. These limitations can lead to delays, errors, and instances of non compliance with eligibility criteria and other financial convents as stated in the Financing

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Agreement. It is to address these weaknesses that the financial management arrangements of the project provide for incremental staffing and for initial support oversight to be provided by the IPAU of MoFED.

Budgeting Arrangements

15. The MoIC, through the PIU/ Project Coordinator, will be responsible for preparing annual budgets and work plans based on agreed programs and components under the project. The preparation of the Annual work-plan and budget will be carried out by the incremental FM staff that the project will recruit and deploy before effectiveness and subjected to IDA approval. The project will be included in the GoSL’s annual development budget.

Accounting Arrangements

16. A qualified and adequately experienced Project Financial Management Specialist, currently being recruited, will be responsible for overall financial management of the project. The Specialist will work with, support, and mentor the MoIC Accountant. The project will adopt a cash basis of accounting. The PIU structure provides for adequate staffing with personnel that have the requisite qualifications and experiences needed for project implementation and segregation of duties and responsibilities will be ensured. The processes and procedures for receiving invoices and receipts and expenditure transaction processing will be conducted in line with the project financial management procedures to be documented in the Project Implementation Manual.

Internal Control & Internal Auditing

17. Although it is not foreseen that the implementation of the proposed project will be integrated within the direct work program of the internal audit unit of the MoIC, the unit will carry out bi- annual reviews of systems and procedures adopted under the project. The required level of segregation of duties with respect to financial management will be maintained and will be a focus of attention during Bank supervision missions to ensure that the internal control procedures are complied with.

Funds Flow and Disbursement Arrangements

18. The proposed project, initially being financed through two PPAs in the total sum of US$6.5 million, will establish a Designated Account with a Commercial Bank acceptable to the Bank. The proposed project will use direct payment for component 1 (a) where all withdrawals will be made directly to ACE Proceeds of the remaining Credit will be released into the Designated Account(s) after submission of approved withdrawal applications. Banking and processing of eligible expenditure payments will be managed by the authorized signatories at the MoIC – the Permanent Secretary of MoIC with any one of (i) Project Coordinator and (ii) Project Financial Management Specialist. The proposed project will use transaction-based disbursements though the use of Statements of Expenditures (SOE) on the uses of project funds. A forecast of the first 4 months’ expenditures expected to be paid from the DA will form the basis for DA

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ceiling which has been set at US$300,000. An initial advance will be disbursed to the DA upon Credit Effectiveness, and subsequent advances will equally be based the submission of documentation on the use of the initial/previous advance. Retroactive financing will be used for expenditures paid by the GoSL before the legal agreement date but on or after June 1, 2010 for eligible project expenditures under component 1.1. Withdrawal applications shall be submitted to the Bank monthly. Supporting documentation will be retained by the implementing agencies for review by the IDA missions and external auditors.

19. The Financing Agreement stipulates 4 disbursement categories, comprising seven types of Eligible Expenditures, and the methods of disbursement will include direct payments, reimbursements, advance, and special commitments. The World Bank’s FM team will periodically assess the adequacy of financial management systems and this will form the basis of any change in disbursement methods. Additional instructions for disbursements and operating the Designated Account will be provided in a Disbursement Letter issued for this project.

Allocation of Credit Proceeds:

Table 3.2: Allocation of Credit Proceeds.

Category Amount of the Credit Percentage of Expenditures to be Financed Allocated (expressed in SDR) (inclusive of Taxes)

(1) Goods, works, 2,900,000 100% consultants’ services, training and workshops under the Project, and Operational Costs

(2) Consortium Fees under 100% Part 1.1 of the Project: 11,900,000 (a) due before March 1, 2012 (b) due on or after March 1, 2012 800,000

(3) Refund of Preparation 1,000,000 Amount payable pursuant to Section 2.07 of the General Advance No. Q 7180 SL Conditions

(4) Refund of Preparation 3,200,000 Amount payable pursuant to Section 2.07 of the General Advance No. Q 7240 SL Conditions

TOTAL AMOUNT 19,800,000

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Financial Reporting Arrangements

20. The Project Coordinator of the PIU will, through the Project Financial Management Specialist, be responsible for generating quarterly Interim unaudited Financial Reports (IFRs) and any other financial reports as may be required during implementation. Formats of the IFRs for management reporting and for withdrawals from the Credit will be discussed and agreed with the PIU at the MoIC by negotiations. The financial reports have been designed to provide relevant and timely information to the project management, implementing agencies, and various stakeholders involved in monitoring the project’s performance. The constituents of the quarterly IFRs, that will be submitted to IDA within 45 days of each calendar quarter, shall be as follows: (a) Actual and Forecast Cash Flow Statement according to Components, Sub-components and Activities; (b) Summary Statement of Expenditures according to Categories; (c) Designated Account Reconciliation Statement; (d) Physical Progress Report; and (e) Procurement Status Monitoring Report. In respect of the project’s annual financial statements, these will be prepared by the PIU within three months of end of each GoSL fiscal year and submitted to the project auditor for auditing. The annual financial statements will include, at a minimum, the sources and uses of project funds by project components and sub-components, applicable accounting policies, and detailed notes to the accounts.

External Auditing

21. The Office of the Auditor General is primarily responsible for the auditing of all GoSL projects, however due to capacity constraints, it is usual for the Auditor General to sub-contract the audit of donor funded projects to private firms. Under the PIU, this arrangement will be followed subject to the Bank’s necessary procurement and technical clearance of the TOR for the engagement of the audit firms. The project auditor will be appointed within four months of project effectiveness. The audit will be completed and the audited financial statements for the project, including the SPV, will be submitted to IDA within six months of the end of the GoSL’s fiscal year (i.e. on or before June 30, each year).

Supervision plan

22. The FM supervision mission’s objectives will include that of ensuring that strong financial management systems are maintained for the project throughout project life. The supervision will include desk reviews of IFRs and SoEs, review of audit reports and evaluation of the efficiency of the payment processing, internal control processes, and funds flow arrangements. A major focus of supervision will be to review the technical competence of the MoIC’s PIU staff in preparing accounts and generating credible reports that can be substantiated by the records.

Financial Management Covenants

23. Due to a number of actions yet to be completed but which were factored in the risk matrix in assessing the residual risks of the project, and bearing in mind the need to maintain and sustain the FM arrangements as designed, the following shall constitute the key FM covenants in the Financing Agreement for the project:

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i. Sierra Leone shall maintain or facilitate to be maintained a financial management system in accordance with the provisions of Section 4.09 of the General Conditions, which states that the client shall ensure that the financial management arrangements of the project remain adequate in terms of staffing. ii. Sierra Leone shall prepare and furnish to the Association, not later than forty five (45) days after the end of each calendar quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Association. iii. Sierra Leone shall have the project’s Financial Statements audited in accordance with the provisions of Section 4.09 (b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one Fiscal Year, commencing with the Fiscal Year in which the first withdrawal under the Project Preparation Advance was made. The audited Financial Statements for each such period shall be furnished to the Association not later than six months after the end of the GoSL fiscal year.

Conclusion

24. A description of the proposed project’s financial management arrangements above indicates that they satisfy the Bank’s minimum requirements under OP/BP10.02. Nevertheless, the fiduciary environment in Sierra Leone, while improving, is not without risks. The assessment of the FM risk therefore remains at ‘substantial’, particularly due to the lack of experience of MoIC in implementing Bank-financed projects and the scale and quantum of funds to be provided under the proposed project.

Procurement

25. For component 1 (a) related to payment of membership fee to ACE, Bank procurement rules are not applicable Indeed, IDA funding for component 1 (a) on international connectivity does not go towards a procurable item subject to compliance with World Bank procurement Guidelines. This is because such funding is for membership fees (paid in different installments) against a set of rights including use of a certain amount of capacity at preferred rates and a share of ownership of an indivisible cable infrastructure asset. For other project components (1 b, components 2 and 3), IDA procurement guidelines will apply.

26. Procurement involving the use of resources that SALCAB will receive from the proceeds of divestiture of GoSL shares can be carried out in accordance with established private sector or commercial practices which are acceptable to the Bank

A procurement assessment has been carried out which concluded that the Ministry of Information and Communication (MoIC) has no experience and capacity to carry out procurement activities related to the proposed project. The MoIC has a Procurement Unit headed by the Deputy Secretary supported by an Assistant Secretary. The procurement function is mainly limited to procurement of off-the-shelf items using the Shopping Method in accordance

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with the local law and occasionally recruiting consultant with very small amount. As a result, procurement risk is assessed as HIGH for the component that is procurable under the project (US$6m). Risk mitigation measures have been discussed with MoIC and agreed. The procurement plan for the proposed project will be prepared at project Appraisal and will be updated at least annually (or as required) to reflect project implementation needs. 27. A Governance and Accountability Framework (GAF) will also be developed for the project to mitigate fraud and corruption risks during Project Implementation. It will indicate the actions to be agreed and undertaken by the MoIC and its agencies to reinforce project governance, thereby enhancing transparency of project activities, increasing public accountability, and reducing opportunities for corruption, collusion or fraud.

The procurement methods and prior review thresholds are indicated in Table appended below.

Table 3.3 Procurement Thresholds. Prior Review Thresholds Proposed Procurement Method Thresholds Proposed (US$) US$ Least Individual SSS ICB DC Shopping QCBS QBS CQS Cost Consultant Goods $50,000 and first ≥75,00 TBD <0.075 ------(Including shopping contract 00 Design, Supply and Installation) Consulting >100,000 for Firms - - - default TBD <100, TBD TBD TBD Services 000 25,000 for individuals

First Individual and first Firm Contracts

SSS: all (including sole sourcing of individual consultants)

28. Logistic services for International and National Symposia, Seminars, Workshop and other training programs (if needed) would be procured using Shopping procedures. In case of very large training programs, exceeding the threshold of $100,000, the procurement would be advertised at least 30 days in advance in the national or international press as appropriate, and documents agreed by the Bank will be used. 29. Procurement for the proposed project would be carried out in accordance with the World Bank’s "Guidelines. Except for the payments of the ACE consortium fee, procurement for the proposed project would be carried out in accordance with the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 2006 and May 2010; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006 and May 2010, the IDA Anticorruption Guidelines dated July 1, 2005 and as amended through October 15, 2006; and the provisions stipulated in the Grant Agreement and Legal Agreement. For the ACE payment, the

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Association’s procurement rules are not triggered. As IDA funding for international connectivity does not go towards a procurable item subject to compliance with World Bank procurement Guidelines. This is because such funding is for membership fees (paid in different installments) against a set of rights including use of a certain amount of capacity at preferred rates and a share of ownership of an indivisible cable infrastructure asset. 30. The Procurement Plan for the project, prepared by MoIC, has been reviewed by the Bank and accepted. This plan will be updated annually to reflect the latest circumstances. The Procurement Plan comprises several goods contracts and QCBS contracts, as indicated in Table below. Consulting firms would be required for advisory services procurement in the areas described in Project Description. Individual consultants might also be required for highly specialized subjects and for support to the MoIC as well as the PIU. The World Bank Standard Bidding Documents for all ICB and Standard Request for Proposal Documents for all QCBS contracts will be used in above contracts respectively. For the other contracts the documents agreed by the Bank will be used. As indicated in the footnotes of Table some of the contracts have already been signed or procurements initiated under PPA. 31. The project will be implemented by the MoIC. An assessment of the capacity of the MoIC to implement procurement actions for the project was carried out by the Bank in October 2010. The environment for conducting procurement under the proposed project was assessed as high risk. The assessment reviewed options for procurement management and the interaction between the staff responsible for procurement, financial management and project management. 32. The key issues and risks concerning procurement have been identified and mitigation measures discussed. Both are tabulated below: Table 3.4: Procurement Risks and mitigation measures.

Procurement Risk Risk Risk Mitigating Measures Residual Risk Rating Rating

The MoIC staff lack capacity to The PIU will provide on-the-job training undertake the proposed to the MoIC staff and to the evaluation procurement work under the committee members. The PIU will be project. They do not have responsible to provide assistance in the experience in international H preparation of bidding documents, request procurement or procurement for proposal, bid evaluation report and S under World Bank procurement contract agreements; and An initial guidelines training in procurement under the World Bank Guidelines will also be provided by the Bank staff during the project launch workshop

The evaluation committee M PIU will be providing on job training to L members are not familiar with evaluation committee members. In international procurement addition, a detailed Procurement Manual procedures, and may obstruct or (a volume in the PIM) will be prepared by delay the procurement process, the selected consultant prior to credit n especially the evaluation of bids effectiveness. The procurement volume of and consultants’ proposals the PIM will include inter alia: (a) TORs and qualifications requirements for procurement staff and procurement advisor, evaluation committee members, (b) conflict of interest disclosure forms (for MoIC staff and evaluation committee

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members to sign prior to each evaluation),

Lack of awareness of M Carry out aggressive public awareness L procurement opportunities programs using various media, such as available in the project for goods newspapers, brochures, radio, TV, project and services web-site, etc

33. Anti-Corruption Action Plan: The Bank team intends to maintain customary oversight and will carry out prior review of all major contracts according to the thresholds that will be regularly reviewed and adjusted as needed in the Procurement Plan. Initial set up thresholds are provided in this Annex. The following measures will be carried out to mitigate corruption risk:  Training of fiduciary staff starting from the project launch and periodically thereafter customized to procedure and methods that would be required in the next 12 months period. Following the project launch will include on-the-job training during supervision missions and regional training provided by the RPM office for the countries in the region;  Prior review: intensive and close supervision by Bank procurement accredited staff. In addition, all contract amendments will be subject to prior approval by the Bank;  Publication of Advertisements and Contracts: all publications of advertisements and contract awards, including the results of the awards will be done in accordance with the Guidelines requirements and published in the client connection system, on external websites, i.e. UNDB and dgMarket websites;  Debarred Firms: Appropriate attention will be given to the need to ensure that debarred firms or individuals are not given opportunities to compete for Bank-financed contracts;  Complaints: all complaints by bidders will be diligently addressed and monitored in consultation with the Bank;  Evaluation Committee: The Bank will review and comment on qualifications and experience of proposed members of the Evaluation committee(s) with a view to avoid that unqualified or biased candidates are nominated. All members will require to sign a disclosure form (sample will be included in Operational Manual);  Monitoring of contract awards: All contracts are required to be signed within the validity of the bids/proposals and, in case of prior review contracts, promptly after the no objection is issued. Procurement Plan format shall include information on actual dates (of no objections and award) and will be monitored for cases of delay which will be looked at on a case-by-case basis to identify the reasons. The MoIC and PIU will maintain up to

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date procurement records and to be available to all concerned Bank staff, auditors and INT members of the Bank;  Monitoring of Payments: All contracts shall include bank account information. The bank account shall be in the name of the same supplier/consultant that submitted the bid and awarded the contract. Payments to local suppliers -consultants shall be made in local currency only and paid to the accounts of banks located within the country.;  Timeliness of Payments: Payment to suppliers and consultants will be monitored through semi-annual interim un-audited financial reports (IFRs) to ensure timely payments. The PFMU will maintain a system/database to ensure payments to the suppliers and contractors are paid without delay according to the conditions of the contract.

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Procurement Plan:

Ref. No. Description Estimated Packages/Lots Type Selection Cost Method Component 1: Improving Connectivity Warcip SL/Comp1/A1 Resettlement Cost 50,000.00 Warcip SL/Comp1/3G- A2 Government Network - Hw and Sw 1,100,000.00 3.00 G ICB Warcip SL/Comp1/1 CS- A2 TA for Government Network 200,000.00 1.00 CS QCBS Warcip SL/Comp1/1G- A3 HW and SW for Emergency National Communications Network 200,000.00 1.00 G ICB Warcip SL/Comp1/1 CS- A4 TA support for SL Internet Exchange (SLIXP) 200,000.00 1.00 CS QCBS Total Component 1 1,750,000.00 Component 2: PPP, Enabling Environment and Institutional strengthening Warcip SL/Comp2/1CS- B1 PPP Design/Divestiture Govt share In SALCAB 500,000.00 1.00 QCBS

Warcip SL/Comp2/1CS-B2 Legal and regulatory safeguards for open access 350,000.00 1.00 QCBS

Warcip SL/Comp2/1CS -B3 Revised Telecom Law, Related Regulatory Instruments 350,000.00 1.00 QCBS

Warcip SL/Comp2/1CS- B4 Consultants to NATCOM - Strategy and Organizational Plan 200,000.00 1.00 QCBS

Warcip SL/Comp2/1CS-B5 Support for Liberalization of Int. Gateway 200,000.00 Support for Commercialization Options Assessment for Sierra Tel 50,000.00 Warcip SL/Comp2/1CS-B6 Support for Commercialization of Sierra Tel 400,000.00 1.00 QCBS

Warcip SL/Comp2/T-B7 Training/Study tour for NATCOM 300,000.00 Warcip SL/Comp2/TS-B8 Training Study Tour for MoIC 200,000.00 Warcip SL/Comp2/1CS-B9 Policy Adviser for MoIC (ICT Directorate) 120,000.00 1.00 CQ

Warcip SL/Comp2/2CS-B10 Legal Adviser for MoIC (ICT Directorate) 120,000.00 2.00 IC Warcip SL/Comp3/CS-c8 Communications strategy and support 50,000.00 CQ

Warcip SL/Comp2/B11 Technical Assistance for Implementation of National ICT 90,000.00 2,930,000.00 Component 3: Implementation support - Incremental Operating Cost Warcip SL/Comp3/IC-c1/PIU PIU Coordinator 170,000.00 CS IC Warcip SL/Comp3/c2/PIU PIU Procurement Specialist 120,000.00 CS IC Warcip SL/Comp3/c2/PIU PIU FM Specialist 120,000.00 Warcip SL/Comp3/c4/PIU Project Operational Manual 30,000.00 CS IC Warcip SL/Comp3/c5/PIU/OC ESMF, RPF, EIA 70,000.00 CS CQ Warcip SL/Comp3/c7 M&E 50,000.00 CS CQ Warcip SL/Comp3/c9 PIU Set up and operating expenses 500,000.00 Warcip SL/Comp3/c10/PIU/OC SALCAB set up and operating expenses 200,000.00 CS SS Warcip SL/Comp3/c11/PIU /audit Audit 60,000.00 CS LCS Total Component 3 1,320,000.00 Grand Total 6,000,000.00 48

For Detailed Environmental and Social (including safeguards) see Annex 8.

Monitoring & Evaluation

34. Where will the data for the project’s outcome and results indicators come from? The PIU will monitor and analyze indicators data received from the different sector stakeholders, in particular NATCOM and the operators. The PIU will bear the primary responsibility for project monitoring and evaluation (M&E), and, as such, will establish standard formats and guidelines for data collection and reporting, and will organize training sessions for project stakeholders in their use. The data collection mechanisms (source and channel) have been identified during appraisal and are summarized in Annex 1.

35. The first order of indicators that the M&E system will look at shall include lower indicators related to quality, quantity, and time. As indicated above, an M&E system will be set up within the PIU to keep track of and evaluate implementation progress of the proposed IDA project within the broader context of the institutional framework for the telecommunications sector. Although increased geographical reach and reduction of costs at the country level remains the hallmark of success of an enabling environment, the project’s M&E system will seek first to measure results that are closely associated with project activities. Hence, the first order of indicators that the M&E system will look at shall include lower indicators related to quality, quantity, and time (see Annex 1). Ultimately, improvement of laws and decrees by the project activities (component 2) will have positive ripple effects on the whole sector and on service delivery.

36. What capacity is available to collect data? If limited, how will it be strengthened? The PIU will recruit or designate a person responsible for M&E, based on the capacity assessment of the PIU staff right after effectiveness. More specifically, the person responsible for M&E will liaise with all the project’s stakeholders (through designated focal points) to gather relevant information and data regularly. With the design and set-up of a simple and automated M&E system, the consolidation and analysis aspects of the M&E should take minimal resources and time from the PIU.

37. What additional costs will be required to support M&E? In addition to the salaries of the persons responsible for M&E in the PIU, and the potential costs entailed by data gathering, the number of project beneficiaries (direct or indirect) may require at time the recruitment of a consultant to carry out ad hoc surveys. In particular, the PIU, with the help of the operators and NATCOM and for the purpose of the Direct Beneficiaries indicator assessment, may need to organize quick surveys among a sample of internet users (cyber cafes)and mobile users (mobile operators).

38. The views of direct beneficiaries will be brought into the monitoring and evaluation process. Comprehensive M&E reporting will be needed to monitor the results and performance of the project. It will involve mainly the direct beneficiaries of project activities, but will be extended to other beneficiaries such as telecommunications operators and private ICT firms,

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which ultimately are the main beneficiaries of the project’s outcomes. The PIU will review and validate the reports on performance indicators and recommend corrective action if necessary.

Role of Partners

39. The World Bank is collaborating with the work with the African Development Bank and Islamic Bank to develop a seamless communications network for Sierra Leone. The GoSL is in the process of requesting additional support from the Islamic Development Bank. This support will help Sierra Leone to be part of an ECOWAS Wide Area Network (ECOWAN) project to link all Member State Institutions, projects and GoSL offices via high speed communications network. The network is also expected to provide terrestrial connectivity between Sierra Leone and its neighbors The World Bank is in discussions with the Islamic Development Bank to identify areas where the infrastructure networks being developed in the country could complement the World Bank sponsored Program and vice versa. The specific modalities of cooperation and amounts are still under discussion. The Bank is also coordinating with the UNDP which has provided some initial resources for a needs assessment of selected government institutions. The World Bank will also coordinate with the ITU and GTZ in the area of capacity building for regional regulatory authorities, given existing programs by the institutions in this area.

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Annex 4: Operational Risk Assessment Framework (ORAF)

SIERRA LEONE WARCIP

Project Development Objective(s)

To increase the geographical reach of broadband networks and reduce costs of communications services in Sierra Leone.

PDO Level Results 1. Volume of international traffic Indicators: 2. Access to telephone services 3. Access to internet services 4. Average monthly price of wholesale international E1 capacity link from capital city to Europe 5. Number of direct project beneficiaries, of which female

Risk Category Risk Rating Risk Description Proposed Mitigation Measures

Project Stakeholder Risks MI Lack of collaboration of stakeholders PPA support for divestment including running the process, due diligence, road show and negotiating with potential Divestment process less successful than anticipated buyers Implementing Agency Risks MI GoSL capacity in project implementation and fiduciary The Bank will fund targeted TA and capacity building procedures needs to be developed rapidly. activities as part of the program throughout the project implementation. Project Risks

 Design MI Design of the project is complex and risky (Public Private Lack of reforms in the sector and constant reversal of policy Partnership) decisions resulted mistrust of private operators. The project will support comprehensive reform to the sector to restore investors’ confidence  Social and Environmental ML The physical component of the Program will be limited to An Environmental and Social Management Framework the building of national terrestrial backbones and the (ESMF) and a Resettlement Policy Framework (RPF) have deployment missing links between the regional network been conducted for the program prior to Project appraisal. and the national landing points. The draft ESMF and RPF have been reviewed by the World Bank and publicly disclosed in the country. A specific Environmental, Management Plan and Resettlement Action Plan will be prepared as necessary for terrestrial facilities during project implementation, in line with ESMF and RFP, once the locations of landing station has been identified. Civil works for the first 12-18 month of project implementation should be screened for environmental and 51

social impacts. During preparation, the project team will assess the capacity of all constituencies Finally, since the Program will involve PPP schemes, appropriate technical clauses will be prepared and included in the biddings/bindings documents for the Private Entity when necessary, to ensure the execution of agreed environmental and social safeguards measures or instruments.  Program and Donor N/A N/A

 Delivery Quality ML The Project expected results depend on many factors The Project includes M&E activities that have been sometimes outside the project’s scope. This may also discussed in details with the clients during preparation. affect the sustainability of the Program’s The M&E system will ensure an efficient monitoring of achievements. results achievement and should prevent major implementation issues. The commitment of the Project’s stakeholders to the new PPP arrangements as well as the institutional and policy framework improvement will ensure sustainability of project results beyond its completion.

Overall Risk Rating at Overall Risk Rating During Comments Preparation Implementation MI Major issues and risks will be dealt with by effectiveness through targeted activities financed by the PPA. The MI rating for implementation is mainly MI due to the risky country and institutional contexts, outside the project scope.

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Annex 5: Implementation Support Plan

1. The World Bank has been collaborating with partners to ensure better broadband access since 2007. Following the Connect Africa Summit (Kigali, 2007), the World Bank has been collaborating with other Development Partners (African Union Commission (AUC), African Development Bank (AfDB), International Telecommunications Union (ITU), and Africa Telecommunication Union (ATU)) on key strategies and funding to ensure Broadband access in Africa. These commitments were recently re- affirmed during the AU Heads of States Summit (Addis Ababa, 2009) where the World Bank and other Development Partners committed to accelerate with established goals to ensure Africa participates effectively in the digital world.

2. The World Bank has engaged with Development Partners to agree to promote open and competitive access. To mitigate the risks involved in infrastructure development and management, the World Bank has engaged with Development Partners to foster Open and Competitive Access to communications Infrastructure, actively engaging private sector through PPPs, and strengthening policy and regulatory frameworks / institutional capacity to facilitate enabling environment. The Bank has also had extensive engagement with client countries and regional institutions and worked with them to develop detailed feasibility studies to support proposed infrastructure investment decisions.

3. Policy, regulatory, environmental and social safeguards are being put in place prior to full implementation of APL 1. Project Preparation Advances (PPAs) granted to WARCIP APL1 a) countries are expected to ensure that the policy, regulatory, environmental and social safeguards, as well as requisite capacity are in place before Board. The PPAs are also expected to ensure that the countries have the requisite Transaction, Legal and Regulatory experts to ensure open access, effective structuring of PPPs to own and manage communications infrastructure. Additional resources have been provided to support countries to undertake environmental assessments and to put in place mitigation measures. These activities are in various stages of implementation and expected to be completed before project effectiveness.

4. The team has conducted preliminary assessments of the institutions expected to execute the proposed project. The strategic partnerships and collaboration, combined with active client engagement and upfront preparatory work, are expected to facilitate achievement of the Program Development Objective. Furthermore, the team has conducted preliminary assessments of the institutions expected to execute the proposed program to ensure that they meet the minimum requirements of the World Bank’s fiduciary obligations.

5. The WARCIP team is structuring WARCIP to ensure that direct payments are made to the cable consortium. Beyond this, and to further mitigate risks, the team is structuring WARCIP to ensure that direct payments are made to the cable consortium which is managing the submarine cable construction on behalf of consortium members. This will mean that at least 80% of funds targeted for APL1 will be paid directly to the cable consortium, and the countries manage less than 20% of the targeted funds which will be used primarily for institutional and implementation support and to improve the enabling environment.

6. FM and Procurement Assessments show that Sierra Leone will need significant support in the initial stages of implementation. Preliminary assessments of both the FM and Procurement Capacity suggest that countries in APL1-A, while they have the minimum capacity to meet World Bank’s fiduciary obligations, will require significant support during the initial stages of implementation. Arrangements have already been made to solicit support from other World Bank program PIUs in the country and the process to procure fiduciary staff has already been initiated. 53

What would be the main focus in terms of support to implementation during: Time Focus Skills Needed Resource Estimate Partner Role First twelve months Creation/Strengthening of Procurement, FM, $1.5m N/A PIU, Establishment of Program Coordinators SALCAB office Experienced Transaction and Legal Teams Transaction/Legal Advisory Work 12-48 months Divestiture of Gov. Shares Transaction/Legal Teams $4m N/A in SPV

Legal Teams Revision of Telecom Law

Options Study for the commercialization of Transactions/Commercial SierraTel; TA for Advisors institutional reform in SierraTel

Development of Government Network Other

Implementation Support Plan

7. The Bank team members will be based either in DC or in the region, and will be available to provide timely, efficient and effective implementation support to the client. Formal supervision and field visits will be carried out semi-annually initially, with possibility for annual visits in later years of the project. Detailed inputs from the Bank team are outlined below:

 Technical inputs. Technical telecommunications and regulatory related inputs are required to review bid documents to ensure fair competition through proper technical specifications and fair assessment of the technical aspects of bids. ICT Policy Specialists and regulatory specialists will provide technical support and conduct supervision visits whenever needed.

 Fiduciary requirements and inputs. Training will be provided by the Bank’s financial management specialist and procurement specialist before the commencement of project implementation as needed. The team will also help PASS identify capacity building needs to strengthen its financial management capacity and to improve procurement management efficiency. Both the financial management and the procurement specialist will be based in the region to provide timely support. Formal supervision of financial management will be carried out semi-annually or annually, while procurement supervision will be carried out on a timely basis as required by the client.  Safeguards. Inputs from an environment specialist and a social specialist may be required, though the project’s social and environmental impacts are limited and client capacity is generally adequate. No field visits are likely to be required, but this will be confirmed - the social and environmental specialists will be available on a need basis.

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 Operation. The TTLs will also provide day to day supervision of all operational aspects, as well as coordination with the client and among Bank team members. If needed, a consultant may be used to support this role.

The main focus of implementation support is summarized below.

Partner Time Focus Resource Estimate Role Project Team leadership, technical and procurement duration review of the bidding documents and ICT Policy Specialist 8 SWs Institutional arrangement and project supervision coordination Procurement training Procurement specialist(s) 2 SWs

FM training and supervision FM specialist 2 SWs Social specialist 0.5 SWs Environmental and Social Issues Environmental specialist(s) 0.5SWs

Note: SW – Staff-Week

Staff skill mix required is summarized below. ` Skills Needed Number of Staff Weeks Number of Trips Comments Task team leaders 8 SWs annually Fields trips as required. DC or Country office based Procurement 2 SWs annually Fields trips as required. Country office based Social specialist 0.5 SWs annually Fields trips as required. Country office based Environment specialist 0.5 SWs annually Fields trips as required. Country office based Financial management 2 SWs annually Fields trips as required. Country office based specialist Legal support 1 SW Fields trips as required DC based

III. Partners

Name Institution/Country Role Islamic Development Financing of cross-border Bank infrastructure/ECOWAN

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Annex 6: Team Composition

World Bank staff and consultants who worked on the project:

Name Title Unit

Mavis Ampah Senior ICT Policy Specialist ICT Sector Unit

Boutheina Guermazi Senior Regulatory Specialist ICT Sector Unit

Alexandra Bezeredi Regional environmental and Safeguards Advisor AFTOS

Beatrix Allah-Mensah Social Development Specialist AFTCS

Claudia M. Pardiñas Ocaña Sr. Counsel LEGAF

David Satola Sr. Counsel LEGPS

Deo Ndikumana Sr. Operations Officer ACFRI

Doyle Gallegos Lead ICT Policy Specialist ICT Sector Unit

Fatu Karim-Turay Team Assistant AFMSL

Fredrick Yankey Sr. Financial Management Specialist AFTFM

Gurcharan Singh Sr. Procurement Specialist ICT Sector Unit

Harvey Van Veldhuizen Lead Environmental Specialist OPCQC

Ismaila Ceesay Lead Financial Management Specialist AFTFM

Joyce Olubukola Agunbiade Financial Management Specialist AFTFM

Kaoru Kimura Operations Analyst ICT Sector Unit

Kymberly Thompson STT ICT Sector Unit

Marc Jean Lixi Sr. Operations Officer ICT Sector Unit

Michele Ralisoa Noro Senior Program Assistant ICT Sector Unit

Nyaneba E. Nkrumah Sr. Natural Resource Management Specialist AFTEN

Omar Andres Martinez ETC LEGPS

Rajiv Sondhi Sr. Finance Officer CTRFC

Robert De-graft Hansen Financial Management Specialist AFTFM

Said Al Habsy Operations Advisor AFTDE

Sarah Brierley Consultant ICT Sector Unit

Thomas Watson Consultant AFTOS

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Annex 7: Economic and Financial Analysis

1. Connecting to ACE minimizes transit costs and is most cost-effective long term option. Financial analysis was performed for Sierra Leone. The analysis considered a variety of satellite and fiber options and concluded that a submarine fiber link is the best overall option in terms of long-term cost effectiveness and bandwidth availability. The ACE cable is the best fiber option. The cable has the potential to substantially address by 2012 the urgent need for high capacity access to the international backbone at substantially lower cost than currently available in Sierra Leone via satellite (VSAT). Although upfront costs are higher, the key cost saving with the ACE compared to alternative fiber options is the high cost involved in the purchasing of transit from an existing landing station to the global backbones. The cost of transit on existing African cables linking to Europe (e.g. MainOne or SAT-3) is at least US$200/Mbps/month, and most likely to be higher- closer to US$500/Mbps/month. By contrast the cost of transit in Europe is much more competitive and is closer to US$10/Mbps/month. By participating in ACE, which lands traffic directly in Europe, transit costs to the global backbones are minimized. ACE also has an advantage over the cross-border fiber option in terms of speed and costs and is without the need for independent management, planning and maintenance. The ACE cable design is both “state of the art” and proven, and involves no significant technology risk. The choice of SDH electronics is conservative and has reasonable efficiencies carrying Internet Protocol (IP) traffic. High capacity international connectivity will mitigate the existing technological marginalization of Sierra Leoneans and bridge the digital divide by expediting broadband rollout, e-Government and e- Services, new media and ICT development in urban and rural Sierra Leone, for the benefit of ordinary Sierra Leoneans. Specific steps would need to be taken, however, in particular to establish a clear regulatory regime for the landing point, in order to ensure that Sierra Leone fully benefits from the potential connectivity that the cable offers.

2. Fiber cable has an advantage over satellite in terms of price and quality of service. The fiber option has the advantage of high speed and quality, and low cost. There is a single point of purchase and low local management overhead. In the ACE case the Consortium is already in place. The disadvantage of fiber connection in the ACE solution is the high CAPEX. However, this solution in the long term offers the lowest prices.

3. Assumptions of financial analysis. Financial comparisons of satellite versus fiber options were done using the following assumptions:  Study period: 10 years  Capital costs for ACE: 25m  Initial capacity of ACE: 5.9 Gbps, using an average of 2.5Gbps over the study period.  Annual operating and maintenance costs: 3% of CAPEX  Average geostationary satellite transponder costs: US$2000 per month per Mbps.  Cost for capacity on existing cables: MainOne and SAT-3: US$280-800 per month per Mbps.

4. Connecting to ACE will see Sierra Leone breakeven between 2015 and-2017 with an NPV to 2025 of US US$20.9 million. Initial calculations indicated that with a dedicated landing station in Sierra Leone, breakeven would take place at a later date, with an Internal Rate of Return of 10-13.2%. However a reassessment of the potential market demand and bandwidth pricing was carried out in January 2011 to take into account the recently observed trends in East and Southern Africa where new competitive submarine cables have now been in place for over a year and where data has recently been made public. Due to the competitive pressure there, bandwidth prices have fallen substantially and consumption/demand has increased dramatically. Bandwidth pricing in the region is now moving toward US$50- US$100/month/Mbps at a wholesale level (for long-term - i.e, 15 year, IRU type pricing), producing much higher levels of demand. This has already necessitated the commissioning of upgrades to submarine cable

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capacity, much earlier than initially planned. Since there are likely to be competitive cable landings in West Africa that will bring down prices and result in requirements for additional bandwidth, the East African trends in bandwidth uptake levels and pricing were used in the economic model to revise the estimated Internal Rate of Return (IRR) to between 15.2% ($50/Mbps/month) and 23.8% (US$100/Mbps/month). The assumptions for these calculations are as follows: wholesale bandwidth pricing (US$50-100/Mbps/month) and ultimate uptake forecast of 18Gbps. The final breakeven year will depend on actual capacity uptake and the wholesale price of bandwidth. After 2017 at the latest, the project would be cash-flow positive and substantial revenues would be made if these wholesale pricing levels are maintained. Investment data was calculated for based on a discount rate of 15%. Under these assumptions NPV to 2025 with a dedicated cable is US$20.9 million. On this basis full membership in ACE, if accompanied by robust regulation by NATCOM to ensure competitive pricing releases demand, has potential to provide low cost international access to a broad range of the population.

5. Previous experience with fiber cables shows a rapid increase in demand when price of bandwidth decreases. The effect that lowering the cost of access has on the amount of bandwidth sold can be modeled using a price elasticity curve. The SAT-3 example (SAT-3 is between Portugal and South Africa) shows a clear relationship between volume and tariffs, if the cost on SAT-3 were dropped to US$250 per month. The chart below compares the price of access on SAT-3 (per E1 half-circuit to Sessimbra, Portugal) against the volume of international bandwidth sold. This shows the effect that price decreases between 2004 and 2006 have had on the volume of bandwidth sold in each of four countries where comparable data was available. The increase in international bandwidth demand increases because broadband services first become more viable for operators to deploy, and secondly because as retail prices decrease the service become increasingly affordable and penetration increases. Réunion is included here as a particularly clear case which shows that when price was US$20,466 per Mb the volume was just 4 Mbps, but when it decreased to US$1,967 volume increased to 180 Mbps. If the price were to drop further to US$500 per Mb, it is projected that the volume would increase to 1.656 Gbps. If the price were to decrease to US$250 per Mbps per month, the volume is projected to grow to 5.02 Gbps. This increase comes about because of the multiplier effects: monthly prices for broadband decrease, in turn improving affordability and increasing uptake of services.

Figure 7.1: Bandwidth Price Elasticity

Price Elasticity On Sat-3 Ghana Nigeria 45,000 Reunion South Africa Nigeria PE South Africa PE 40,000 Ghana PE Reunion PE 35,000 30,000 25,000 20,000 15,000 10,000 Price (US$Price per month) 5,000 - - 1,000 2,000 3,000 4,000 5,000 Volume (Mbps)

6. The predicted bandwidth demand for Sierra Leone with fiber access is over 18000 Mbps compared to 500 with expanded geostationary satellite and 900 with inclined satellite. In this analysis it is assumed that there is no effective limit on the amount of satellite bandwidth that can be purchased. This is unlikely 58

given that many countries in the region will be switching from satellite to fiber with the launch of ACE and other cables, and satellites with West African footprints continue to be launched. Extrapolating current usage and growth in users could provide an indication of future bandwidth demand, however due to the current high cost of service (relative to income levels) and the relatively slow speeds available, this would tend to substantially underestimate pent-up demand when bandwidth availability improves and costs decrease. Given the trends worldwide in broadband adoption levels, and especially encouraged by the explosion of mobile broadband16 (3G), the estimates used appear relatively conservative, especially toward the end of the analysis period (2021), by which date it is expected that almost every mobile phone user would have access to broadband on their handset. However, this is dependent on the introduction of high- bit-rate mobile services into the market, and unless increased competition is introduced into the sector, the operators may not be encouraged to introduce these types of new services.

7. Bandwidth requirement per user has the potential to advance rapidly with further social and economic development, especially with the development of tourism and BPO sector. There can be a wide divergence in forecasting bandwidth requirements per user. The last 10 years has seen massive increases in end-user bandwidth demand resulting from the popularity of social network, image and video sites such as FaceBook and YouTube. Fortunately these bandwidth demands have kept pace with technology developments which are now seeing domestic broadband services delivering 100Mbps and even 1Gbps in some advanced countries. If we assume that Sierra Leone will have the opportunity catch up at least partially with these developments over the next decade then we can expect a relatively high level of growth in bandwidth use. There are also some special sources of additional demand which could also significantly increase international transmission requirement: Tourism and development of Business Process Outsourcing (BPO) sector. Although tourism is comparatively small in Sierra Leone, it could increase significantly in future. Tourism creates demand for international telecommunication services through demand of administrative and marketing service as well as demand for internet access, international calls and money transactions. BPO and Internet call centre service companies can generate significantly more Internet traffic if bandwidth prices can be reduced and fiber connections made available. Sourcing channels for television rebroadcasting is currently carried out by satellite but could be substituted by fiber if bandwidth prices are sufficiently competitive.

8. Fast internet has been shown to boost the productivity of firms as well as generate employment opportunities. New growth theory suggests that long-run economic growth emanates from spillover arising from innovation and investment in new technologies. Fast internet access can be considered one important new technology, and broadband is increasingly recognized to promote productivity and boost aggregate economic growth (OECD, 2003). Analytical studies have shown that firms using standard broadband (defined as connection speeds above 256 Kbps (OECD, 2002)) were on average 10 percent more productive than firms using dial-up internet access. Faster internet speeds are also causally related to increased employment opportunities with analysis showing that for every one percentage point increase in broadband penetration within a region, employment increases by 0.2-0.3 percent per year for the private, non-farm economy (Crandall et al, 2007). Indeed, studies show a clear positive relationship between employment and broadband penetration in the manufacturing and service industries, with business growth shown to be particularly significant for larger businesses and for IT intensive sector (Lehr et al, 2006). The results of these studies support the hypothesis that broadband penetration enhances economic activity. Increased broadband speeds and less expensive data access have the potential to promote economic activities in West Africa, supporting the growth and productivity of businesses and gradual transfer of employment from agricultural to service industries and expansion of the region’s nascent ICT and Business Process Outsourcing sector.

16 3G data service uptake from the consumer has been massive and unprecedented in other developing countries such as Kenya 59

Annex 8: Environmental and Social Safeguards

Note on ACE Environment/Safeguards

1. The Infrastructure Component of WARCIP APL1-A includes connections to the ACE submarine cable, an approximately 17,000 km submarine cable system which is expected to connect South Africa to Europe, potentially connecting up to 23 countries, including landing stations in Liberia, Sierra Leone and Sao Tome.

2. The ACE submarine cable is configured into 4 segments as follows:

 Segment 1: Between the Penmarch (France) and the Dakar (Senegal) Terminal Stations  Segment 2: Between the Dakar (Senegal) and the (Cote D’Ivoire) Terminal Stations  Segment 3: Between the Abidjan (Cote D’Ivoire) and the Santana (Sao Tome) Terminal Stations, and  Segment 4: Between the Santana (Sao Tome) and the Cape Town (South Africa) Terminal Stations (however the contract for this segment is not effective yet).

3. The physical cable system will comprise two fiber pairs that provide two separate bi-directional paths (i.e., one fiber in each pair carries signals in the outbound direction and the other fiber in the return or inbound direction). The cable system is likely to have a submerged or ‘wet plant’ part, and a ‘dry plant’ part which interfaces at proposed Landing Stations.

Safeguard Issues

Deep Sea17 Activities

4. In principle, deep ocean fiber optic cables are no larger than 17-21 mm diameter – about the size of a domestic garden hose- and are laid mainly upon the surface of the ocean floor (“surface laid”). Sections of the cable (including both wet and dry plants) lie within the territorial waters of the landing parties while remaining sections lie in international waters. According to the 1982 United Nations Convention on the Law of the Sea (UNCLOS), of which Sierra Leone is signatory, international waters start 12 nautical miles from the coast. Beyond the 12 nautical mile limit there is a further 12 or 24 nautical miles from the territorial sea, a contiguous zone, in which a state could continue to enforce laws in four specific areas: pollution, taxation, customs and immigration (see figure 1, below). UNCLOS further provides for economic zones which could extend from the edge of the territorial sea out to 200 nautical miles. In the exclusive economic zones, states have no sovereign rights but can enforce laws on pollution, taxation, customs and immigration (see figure below). Within their territorial waters, on the other hand, countries have sovereign rights. Foreign nations have the freedom of laying submarine pipes and cables in the exclusive economic zones. The seaward limit of coverage for the ESMF in Sierra Leone is the seaward limit of the EEZ, defined as extending 200 nm (370 km) from the shorelines.

17 Deep Sea is mainly a technical term with no precise definition used to describe zone/areas beyond which cable burial is not required (mainly because threats to the cable from trawling activities are non-existent. This starts usually after 1000/ 1500 meters depth. Given this challenge, perhaps Bank environment focus should be on territorial vs international waters, though it is acknowledged that maritime jurisdictional zones are not defined by reference to water depth or marine ecology 60

Figure 8.1: Designated ocean zones according to UNCLOS.

5. After the signing of the Supplier Contract, Alcatel-Lucent conducted a cable route study to refine the initial route (Cable Route Estimate) and corridor taking into account seabed contours, volcanoes, environmentally sensitive areas (i.e., conservation areas, coral reefs), oil exploration zones and fisheries etc. along the route and included visits to possible landing countries/sites to discuss environmentally sensitive areas, requirements for permits, fisheries etc. Information obtained during this period was instrumental in determining an optimal route design of the cable system which reflects these discussions. Alcatel-Lucent has indicated they will share the results of this preliminary assessment which could be useful for the ESMFs that are being prepared by the various countries in respect of their territorial waters. Alcatel-Lucent is following up the preliminary survey with a more detailed survey of the seabed to fine-tune the cable route which will also be based on confirmed landing sites (countries are still in the process of finalizing this) and provide more detailed information on the level of bottom trawl fishing and shipping activities (closer to the shore), and deep sea activities, including oil drilling18. The more detailed route survey (“Marine Survey”) is expected to be completed as follows:

 Segment 1 countries – Already completed, results available  Segment 2 countries – Mid-October, results available Mid-November  Segment 3 countries – Early December, results available Mid-December  Segment 4 countries – TBC subject to availability of funding

18 Alcatel-Lucent has already completed a separate study of oil drilling activities in the region which could be made available to the World Bank. 61

6. In general, however, the section of the cable that lies in the deep sea has minimal impact on marine mammals and fish. The threat of whale entanglements has diminished significantly with improvements since 1956 in the design of cable and in the precision with which they can be laid in close conformity with the seabed profile, and without loops and twists.

7. Generally speaking, there are no significant environmental issues concerning fiber cables in the deep sea (significant issues are concentrated on shallow waters and the coastal areas/beach).

8. The extensive studies that take place prior to final cable laying tend to work as effective safeguards against any possible environmental disruption, since in large part they are intended to identify routes for the cable that will avoid seamounts, volcanoes, canyons, vents, seeps, deepwater reefs, dissected terrain – all areas that tend to be associated with higher biological value than the general abyssal plain.

9. Because much of the deep ocean lie beyond national jurisdictions, few EIAs for any marine activities have been undertaken in this zone and thus there is little evidence of any environmental issues, except in cases of oil and gas exploration and very deep sea trawling. No specific environmental studies are undertaken for submarine cables; rather the detailed Cable Route Survey effectively serves this purpose. At the surface, pollution of the high seas by oil and wastes discharged from vessels can be effectively controlled if those vessels observe compliance with maritime conventions such as MARPOL.

Shallow Water Activities

10. As the cable gets closer to the shores in water depths shallower than 1,500m, the cable’s diameter may increase to about 40-50 mm due to the need to add protective wire armoring. It may also be necessary to bury the cable to protect it.

11. It is possible, depending on the topology of the country that the 12 nautical miles of territorial waters will straddle between shallow waters and deep sea. It is also likely that there may be fishing and other maritime activities, particularly in the shallow waters which could be disturbed during the route survey and cable laying process (but this is short-lived as the duration of cable-laying operations is usually no more than a few days).

12. The cable landing or Terminal Station is expected to be at the seashore, and requires a building, power feed and a power grounding (earthing) system. The building will typically be 150 to 200 square meters in size with approximately half of this space for equipment and the balance for maintenance, training, and office spaces. Sierra Leone has prepared draft Environmental and Social Management Framework (ESMF) (consistent with national laws, any applicable treaty concerning international waters, and OP 4.01) and a Resettlement Policy Framework (RPF) for the lateral cables and any associated equipment that will be laid from the junction with the main cable through territorial waters and onto the national shores, and also for the fiber on transmission lines, as required. The seaward limit of coverage for the ESMF is the seaward limit of each country’s EEZ, defined as extending 200 nm (370 km) from the shorelines. The RPF is being prepared in case the project may require land acquisition and resettlement, and/or restricted access to natural resources, although this is not expected based on the preliminary Cable Route Survey work. The ESMF related to the submarine cable has been prepared, and disclosed both in country and at Infoshop. Once the specific sites are known, Environmental and Social Management Plans for the lateral cable and shore-based facilities, and Environmental and Social Impact Assessments (EIA) and Resettlement Action Plan if it is determined that these are required, will be prepared as part of project implementation but before the cable is laid. Key stakeholders for consultation will include current inhabitants (where applicable) of landing sites, the Environmental Protection Agency of Sierra Leone, businesses and civil society.

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Annex 9: Payment Schedule for ACE Cable

ADVANCED BILLING CYCLE FOR ACE PROJECT CBP Billing Cycles Payment Nr. Time Issue Date Due Date (USD) % Total(USD) 1 T0 7/6/2010 22/07/2010 25,000,000 15.00 3,750,000.00 2 T0+ 2months 9/8/2010 23/09/2010 25,000,000 10.00 2,500,000.00 3 T0+ 5months 8/11/2010 23/12/2010 25,000,000 5.00 1,250,000.00 4 T0+ 8months 7/2/2011 24/03/2011 25,000,000 16.00 4,000,000.00 T0+ 5 11months 9/5/2011 23/06/2011 25,000,000 16.00 4,000,000.00 T0+ 6 14months 8/8/2011 22/09/2011 25,000,000 18.00 4,500,000.00 T0+ 7 17months 7/11/2011 22/12/2011 25,000,000 15.00 3,750,000.00 T0+ 8 20months 7/2/2012 23/03/2012 25,000,000 5.00 1,250,000.00

* Contingencies excluded 100.00 25,000,000.00

63

Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: T7738-LR

REPUBLIC OF LIBERIA TECHNICAL ANNEX

ON A PROPOSED CREDIT

IN THE AMOUNT OF SDR 16.3 MILLION (US$25.6 MILLION EQUIVALENT)

TO THE REPUBLIC OF LIBERIA

FOR THE

WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROJECT (APL 1A – LIBERIA)

UNDER THE FIRST PHASE OF THE WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM (APL1)

December 22, 2010

ICT Sector Unit Africa Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

(Exchange Rate Effective December 1, 2010)

Currency Unit = SDR = US$ 0.6362 = SDR 1

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

$ United States dollar, all dollars are US dollars unless otherwise indicated ACE Africa Coast to Europe AfDB African Development Bank AICD Africa Infrastructure Country Diagnostic APL Adaptable Program Loan AWP&B Annual Work Program and Budget BP Bank Procedures CAS Country Assistance Strategy DFIs Development Financial Institutions CCL Cable Consortium for Liberia EASSy Eastern Africa Submarine Cable System EMP Environmental Management Plan ESMF Environmental and Social Management Framework EEZ Exclusive Economic Zone FDI Foreign Direct Investment GEMAP Governance and Economic Management Assistance Program GDP Gross Domestic Product GoL Government of Liberia GSM Global System for Mobile Communication HIPC Heavily indebted Poor Country ICT Information and Communication Technology IDA International Development Association IRR Internal Rate of Return ISP Internet Service Provider ITU International Telecommunication Union IXP Internet Exchange Point LTA Liberia Telecommunications Authority LTC Liberia Telecommunications Corporation

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M&E Monitoring and Evaluation MoPT Ministry of Posts and Telecommunications NPV Net Present Value OD Operational Directives OM Operational Manual OPCPR Procurement Policy and Service Group PAD Project Appraisal Document PEMFAR Public Expenditure Management and Financial Accountability Review PFM Public Finance Management PFMU Project Financing Management Unit PIU Project Implementation Unit PRSP Poverty Reduction Strategy Paper PPA Project Preparation Advance PPP Public Private Partnership RAP Resettlement Action Plan RPF Resettlement Policy Framework SIL Specific Investment Loan SMART Specific, Measureable, Achievable, Relevant, Timebound SPV Special Purpose Vehicle USAID United States Agency for International Development WARCIP West Africa Regional Communications Infrastructure Program WATRA West Africa Telecommunications Regulators Authority WAPP West Africa Power Pool WBG World Bank Group

Vice President: Obiageli Katryn Ezekwesili Regional Integration Director: Yusupha Crookes Sector Director: Jose Luis Irigoyen Country Director for Liberia: Ishac Diwan Sector Manager: Philippe Dongier Task Team Leaders for the WARCIP Mavis Ampah and Boutheina Guermazi Task Team Leader for WARCIP Liberia: Boutheina Guermazi

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Table of Contents I. Strategic Context ...... 1 A. Country Context ...... 1 B. Sectoral and Institutional Context ...... 2 C. Higher Level Objectives to which the Project Contributes ...... 6 II. Project Development Objectives...... 7 A. PDO ...... 7 1. Project Beneficiaries ...... 8 2. PDO Level Results Indicators ...... 8 III. Project Description ...... 8 A. Project Components ...... 8 B. Project Financing ...... 11 1. Lending Instrument ...... 11 2. Project Financing Table ...... 12 C. Lessons Learned and Reflected in the Project Design ...... 12 IV. Implementation ...... 13 A. Institutional and Implementation Arrangements ...... 13 B. Results Monitoring and Evaluation ...... 14 C. Sustainability ...... 15 V. Key Risks ...... 16 VI. Appraisal Summary ...... 17 A. Economic and Financial Analysis ...... 17 B. Technical ...... 19 C. Financial Management ...... 20 D. Procurement ...... 20 E. Social and Environment ...... 21 F. Credit conditions and covenants ...... 23 Annex 1: Results Framework and Monitoring...... 26 Annex 2: Detailed Project Description ...... 27 Annex 3: Implementation Arrangements ...... 33 Annex 4: Operational Risk Assessment Framework (ORAF) ...... 52 Annex 5: Implementation Support Plan ...... 55 Annex 6: Team Composition ...... 58 Annex 7: Economic and Financial Analysis ...... 59

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I. Strategic Context

A. Country Context

1. Liberia’s progress since the end of the civil war in 2003 has been notable. Liberia is in the process of overcoming the effects of years of civil war and is showing strong signs of economic recovery and progress in attaining political stability. Liberia’s progress since the end of the civil war in 2003 has been notable. Its resolve to improve governance has been marked by the agreement on Governance and Economic Management Assistance Program (GEMAP) with donors, the establishment of the Anti-corruption Commission, the completion of more than 20 high quality audit reports and the achievement of Extractive Industry Transparency Initiative compliance. Infrastructure is also being rebuilt and the delivery of social services is advancing. The Government of Liberia (GoL) is determined to maintain these reforms in the context of the Poverty Reduction Strategy (PRS) being implemented from April 1, 2008 to June 30, 2011. Liberia reached the completion point of the Heavily Indebted Poor Countries (HIPC) Initiative on July 30, 2010.

2. Liberia remains the second poorest country in the world. Although Liberia has made notable progress on many fronts, the country remains fragile with substantial political and socioeconomic risks. The political risks are of particular importance as Liberia heads into national elections in 2011. Despite relatively high rates of GDP growth in recent years until the global financial crisis, Liberia, with a gross national income per capita of US$150, remains the second poorest country in the world. An estimated 63.8 percent of the population, or more than one and a half million Liberians, live below the national poverty line, with 47.9 percent of the population living in extreme poverty.1 Many working age persons are still unemployed and countless are underemployed.

3. Regional integration is critical for stimulating national economic growth. The need for greater regional economic and infrastructural integration is obvious and the lack of such infrastructure holds Liberia and other countries back from achieving greater economic growth and satisfying the Millennium Development Goals. The African Infrastructure Country Diagnostic (AICD) report posits that if West Africa’s infrastructure could be upgraded to the level of the best performing country in Africa (Mauritius), the impact on per capita economic growth would be in the order of 5 percentage point2. Liberia’s growth is very dependent on addressing regional challenges and more effective regional integration. Regional cooperation is therefore high on the GoL’s national agenda in order to take advantage of regional infrastructure, benefit from growing regional trade and investment. Liberia is an active member in the African Union and the Economic Community of West African States (ECOWAS).

4. A regional telecommunications market is key for effective regional integration and growth. Between 1995 and 2005, infrastructure improvements boosted West Africa’s growth by about one percentage point per capita per year. The positive growth was almost

1 Core Welfare Indicator Questionnaire 2007. 2 Africa Infrastructure Country Diagnostic Report – ECOWAS’s Infrastructure: A Regional Perspective, April 2010 1

entirely attributed to the Information and Communication Technology (ICT) revolution while deficient power infrastructure held back economic growth by about 0.1 percentage point per capita per year.3

5. The West Africa Regional Communications Infrastructure Project (WARCIP) will contribute to a comprehensive solution to address connectivity gaps in Liberia. The focus of WARCIP Liberia is to contribute to a comprehensive solution to address connectivity gaps in the country, focusing on international, national and regional connectivity to enable the creation of a fully integrated network which will eventually link all Liberia with the rest of the region and provide affordable high speed connectivity to the country.

B. Sectoral and Institutional Context

6. The GoL is committed to using ICT as a tool for economic development. The GoL places a high priority on the reform of the telecommunication sector as a tool for economic development in the context of post war reconstruction and has made important progress to this end.

7. The GoL has adopted a comprehensive legal framework that guides telecommunication sector reform. Over the last few years, the GoL embarked on a telecommunication sector reform with World Bank multi-year non-lending Technical assistance. Reforms include the formulation of a telecommunication sector policy, a comprehensive legal framework and the creation of an independent regulatory authority. A telecommunication Act was adopted in 2007. It provides for the creation of an enabling environment based on certainty, predictability and transparency; and promotes a private sector-led, competitive environment overseen by a permanent independent regulator. The objectives of the telecommunication Act are to create a legal environment that promotes investment, and relies on competition and market forces to foster sector growth and encourage wider access to telecommunication services by the Liberian population.

8. The Liberia Telecommunications Authority (LTA) is the first regulatory authority in post conflict Liberia. The law embodies a clear separation between operation, policy making and regulation. It gives the Ministry of Posts and Telecommunications responsibility for development of sector policy, and coordinating sector policy with broader GoL policies, encouraging sector development generally. The law creates LTA as an independent regulator reporting directly to the President.

9. Reforms have resulted in increased private sector participation and in an increase in subscribers. To a large extent, the reforms have resulted in significant benefits including increased private sector participation and a dramatic increase in subscriber base, thanks

3 Africa Infrastructure Country Diagnostic Report – ECOWAS’s Infrastructure: A Regional Perspective, April 2010 2

primarily to rapid growth in the mobile telephony sector. Mobile phone density grew from 0.06 % in 2003 to 22 % in 2010 according to industry reports.

10. The mobile telecommunications sector is vibrant and dominated by private operators. Competition in the mobile telecommunications sector is vibrant with four mobile operators aggressively competing for market share in this growing market. This competition has led to substantial price declines and growth in subscribers since launch by the first mobile operator, Lonestar, in August 2001. All mobile telecommunications operators are private companies with regional presence (MTN, Cellcom, Comium and Libercell/Hits Telecom).

11. A slowly re-emerging fixed line operator is migrating to wireless technology. Virtually all the assets of Liberia Telecommunications Corporation (LTC), the incumbent fixed telecommunications operator, were destroyed during the conflict and much of the remaining equipment is now obsolete with the exception of a recently acquired voice and data wireless mobile network. Primary service offerings on this new network include: pre- paid and post-paid limited mobile telephony, and wireless high speed internet access.

12. Liberia is not connected to global broadband optical fiber resulting in very high prices for high capacity bandwidth. Liberia is among a handful of countries in the region which is not connected to the global network of broadband optical fiber infrastructure. Civil unrest and fragility prevented the country from participating fully in the 2001 West Africa submarine cable, SAT-3. Connectivity between Liberia and the outside world relies exclusively on expensive satellite (VSAT) with limited availability of high-capacity bandwidth. Liberia has some of the highest connectivity costs in the region - with average satellite prices between US$4,000-5,000 for 1 Mb (compared with about US$200 in the US, and approximately US$500 in East Africa). This high cost, coupled with the lack of national backbone infrastructure, has created a difficult environment for expanding the availability of Internet services and advanced applications.

13. Liberia has a very low internet penetration. Current internet penetration of 0.5% is among the lowest in the Africa region as shown in the map below. In addition, prices paid by Liberian users are usually 2 to 3 times above regional average. In the absence of a reliable backbone infrastructure, VSAT based Internet connectivity has become the leading platform for Internet access. The combined effect of poor electricity, frequent virus attacks and high prices has constrained the development of the sector and placed it out of reach for many Liberians. Liberia represents a very small market for Internet services.

14. Access to bandwidth remains very low in Liberia by regional and sub-regional standards. Internet services are provided via Internet cafes in Monrovia, by several of the mobile telecommunications operators to business customers in Liberia, and by LTC to business and residential customers. However, the available speed generally averages less than 128Kbps and some services are more reliable than others. ISPs have no economic incentives to provide more bandwidth to customers; as a result many companies prefer to

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own their own VSAT and purchase bandwidth directly from satellite resellers and other satellite operators.

Figure 1: Internet and broadband penetration in West Africa, 2009.

Source: World Bank, based on data from ITU World Telecommunication/ICT Database, 2010.

15. Poor telecommunications services constrain social and economic development. Despite noteworthy developments since the initiation of the reform agenda, the sector’s potential to improve the competitiveness of Liberia’s economy, facilitate economic growth and social reconstruction and ensure fuller integration of the country in the global economy is constrained. The lack of access to international submarine cables, coupled with the absence of national backbone has resulted in low bandwidth and high price of Internet service, which prevents Liberia from benefiting from advanced ICT enabled applications. The lack of access to low price and high quality telecommunications services is a factor that limits the potential of Liberia to create jobs, expand production of goods and services, and trade competitively with the rest of the world. 16. ACE represents a unique opportunity for international connectivity in Liberia. For purposes of international connectivity along the coast of West Africa and with the rest of the world, the most attractive and efficient viable option for Liberia is to connect to the ACE submarine cable, which is to be an approximately 17,000km submarine cable system connecting South Africa to Europe and connecting 23 countries including a landing station in Liberia. In all likelihood, there are no other opportunities for Liberia to connect to another submarine cable for many years to come. An analysis of other possible options for improving international connectivity in Liberia and Sierra Leone clearly shows that connecting to other cables will involve a higher cost than connection through ACE. Cables like Main 1 and WACS did not include proposed landing stations in Liberia.

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Figure 2: Map of cable route for ACE cable.

17. The World Bank has already approved two PPAs to help Liberia capitalize on the ACE opportunity. An initial PPA for US$ 1.5million was granted to Liberia to support project preparation activities. Under this PPA a legal advisor was hired to help the set up of the SPV that was created for the cable landing in Liberia. Support included finalizing the shareholder agreement for CCL and supporting internal discussion among CCL members. Additional support for environmental and social safeguards acceptable to the Association was provided under the PPA and allowed the development of an ESMF and RPF for the project. The PPA also included policy, legal and regulatory environment for open access, support for setting up the PIU as well as capacity building support for the implementation

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Unit. Furthermore, to ensure timely funding of first instalments in ACE, the World Bank approved a supplemental PPA for US$5.0 million to support limited initial implementation activities. More specifically, the Advance was used for the payment of the initial contributions by Liberia, including the initial instalment of 15 percent of the country’s contribution plus the subsequent immediate payments. The requested amount exceeded the aggregate ceiling of US$3.0 million per project for non-emergency projects set out in OP 8.10 (Project Preparation Facility) and as such a waiver was approved on June 3, 2010. Payments have already been made to ACE under direct disbursement. The Government will contribute US$1.0 million to address funding gap up to December 2010, in anticipation that there will be reimbursement after the project becomes effective.

C. Higher Level Objectives to which the Project Contributes

18. A full connectivity solution will promote cheaper access to communications and promote more effective global integration. WARCIP Liberia proposes to contribute to a full connectivity solution, building on new and existing communications opportunities. The Project is expected to focus on catalytic financing for additional links to international and national infrastructure (where gaps exist that cannot be addressed by the private sector, and where there’s clear evidence of positive externalities). By gaining access to international cables, Liberia will have better and cheaper access to communications and be able to connect more effectively with the rest of the world.

19. Intensification of broadband networks stimulates investment and economic growth. The contribution of broadband networks to economic growth is much more pronounced than that of narrowband networks. Additional studies have suggested that a 10 percent increase in the penetration of broadband in developing countries equates to a 1.4 percent increase in GDP per capita4 The mobile platform is highlighted especially as the single most powerful way to reach and deliver public and private services to hundreds of millions of people in remote and rural areas across the developing world. New businesses in the ICT and IT enabled services sector often result from improved access to broadband.

20. ICT can help promote peace and social cohesion whilst rebuilding the economy. ICT can also be instrumental as a tool for post-conflict, poverty reduction and revitalization of the economy. ICT provides a key platform for restoring peace and security and provides immediate tools for economic rebuilding and for strengthening social cohesion in war-torn countries.

21. WARCIP Liberia will increase access to ICT services, lower costs and improve service quality. By addressing connectivity bottlenecks, the proposed project will support Liberia in obtaining better access to ICT services with improved quality and reduced cost, allowing improved communications and information dissemination, better access to limited public resources which could in turn facilitate a smoother transition from post-conflict recovery to long-term development. By providing technical assistance to help the GoL

4 Information and Communications for Development 2009: Extending Reach and Increasing Impact. 6

create an enabling environment for the ICT sector and by providing resources to improve connectivity, the proposed Project would also leverage the sector as a key driver of growth, competitiveness, and improved governance as outlined in the Country Assistance Strategy (CAS) and in the Poverty Reduction Strategy Paper (PRSP). Although WARCIP is not included in Liberia CAS (2009-2011), the program will support achieving CAS objectives of (i) rehabilitating infrastructure to jump-start economic growth and (ii) facilitating pro- poor growth.

22. Increased and cheaper bandwidth access will provide opportunity for Liberia to develop e-government applications for improving governance and accountability. ICT can play a key role in supporting the governance pillar of the CAS by enhancing the transparency and accountability of key public institutions. Although the proposed project does not address e-Government specifically, it will provide Liberia with the opportunity to obtain needed bandwidth to stimulate development of innovative applications for use in government institutions. Ultimately better access to ICT will also support GoL’s goal of rebuilding core state functions and institutions.

23. Improved ICT will reduce transaction costs for businesses and increase productivity and profitability. Furthermore, the proposed project will assist in improving private sector development. The telecommunications and ICT sectors have been proven to improve business productivity and profitability in terms of lower transaction costs. This in turn has the potential to generate more tax revenues for the government.

24. Policy and regulatory frameworks need to be highly adaptable to keep up with the latest developments in the industry. The telecommunications and ICT sectors are highly dynamic, characterized by a high rate of innovation, both with regard to technologies and business models. In this context, policy and regulatory frameworks need to be highly adaptable, and in tune with the latest developments in the industry. Empowering regulators and policy makers with adequate tools and skills to design, implement, and upgrade their regulatory environment is a critical element for successful sector reform and development. The related support from the proposed project is also consistent with the CAS cross-cutting theme of building capacity.

II. Project Development Objectives

A. PDO

25. The project development objective of WARCIP Liberia is to increase the geographical reach of broadband networks and reducing costs of communications services in Liberia5.

5 All the other countries that will be covered by the following APL phases will use the same PDO. 7

26. In order to reach this objective, the project proposes an integrated approach. The focus will be on (i) the connection of Liberia to global broadband fiber optics infrastructure, as well as supporting the creation of a coordinated national transmission network which would ensure that Liberia is able to connect effectively within its national borders, and with the rest of the World, including its neighbours in the region, and (ii) creating an enabling environment and institutional strengthening to remove existing bottlenecks for private sector participation in both national and regional infrastructure development. This should contribute to reduce the isolation of Liberia’s economy and support its participation in the global economy.

1. Project Beneficiaries

27. WARCIP will benefit the citizens of Liberia. All over Africa, businesses, governments, teachers, doctors, farmers, and fishermen, are using ICTs to communicate, share information, improve productivity and service delivery, find better prices, improve access to markets, and increase their bargaining power. The situation is the same in Liberia. The proposed project will therefore benefit the entire population of Liberia including telecommunications operators, telecommunications users, universities, schools, hospitals, banks, corporate users, and GoL ministries and departments. However, for the purpose of M&E, the PIU will define Direct Project Beneficiaries in a more restrictive way (e.g. internet users, or active mobile users). See Annex 1 for more details.

2. PDO Level Results Indicators

Table 1: PDO Level Results Indicators. Project Development Objective Outcome Indicators At close of the project Increase the geographical reach of  Volume of international  40 Kbit/s per person broadband networks and reduce traffic costs of communications services in  Access to telephone  47% Liberia. services  Access to internet  3% services  Average monthly price of  Less than $ 2,000 wholesale international E1 capacity link from capital city to Europe  Number of direct project  1,400,000 beneficiaries, of which female

III. Project Description

A. Project Components

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28. WARCIP Liberia will have three components: (i) Supporting connectivity (infrastructure) (ii) Creation of an Enabling Environment for Connectivity (technical assistance) and (iii) Project implementation.

Component 1 – Supporting Connectivity (IDA US$ 21.0 million).

(a) International connectivity (IDA US$ 20.0 million)

29. International connectivity will be improved through co-funding Liberia’s consortium fee to the Africa Coast to Europe (ACE) submarine cable. The bulk of this component (US$20.0 million) will be used to co-finance Liberia’s participation in ACE, a new submarine cable linking Europe to the West Coast of Africa. Private operators already contributed US$5 million towards Liberia’s participation in ACE (US$2.5 million from Lonestar and from Cellcom). IDA funding is expected to cover the funding gap towards full participation in ACE (US$25.0 million). Initial installments for US$5.0 million have already been paid using Project Preparation Advance (PPA) resources. The withdrawal of IDA funds will be channeled to the ACE consortium through CCL. This payment will be made following ACE payment milestone at different installments until full membership is reached.

(b) Regional connectivity (IDA US$ 1.0 million)

30. The regional connectivity sub-component will support the roll-out of terrestrial broadband backbone fiber networks and last mile broadband connections. While international fiber links could potentially facilitate better and cheaper access to communications in Liberia, the full benefits of this access cannot be achieved without further investments in cross-border and national infrastructure. IDA resources will therefore be leveraged by the GoL to roll-out terrestrial broadband backbone fiber networks and deploy last mile broadband connections within and between the key urban areas. It is expected that the GoL will complement IDA resources for the purpose of regional broadband infrastructure by investing the proceeds from the divestiture from CCL.

31. Roll-out of regional connectivity will be done through a public private partnership (PPP) arrangement using a universal access fund. IDA funding will be channeled through a universal access fund, to be established as provided for in the 2007 Telecommunication Act and the Ministry’s 2010 ICT Policy, and will be used to attract additional private investment and cover part of the costs of rolling out national and regional connectivity under PPP arrangements. IDA resources will be considered a seed capital contribution in the universal access fund to cover the part related to network extension. Developing the details of funding mechanism, the modalities for the management and monitoring of the fund, are included under the enabling environment component of the proposed project. In addition, technical assistance will be provided for the preparation, the launching and marketing of the bidding process of projects to be financed with universal access fund resources.

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Component 2: Creation of an Enabling Environment for Connectivity (US$3.32 million).

32. This component will support three activities (a) development of Public Private Partnerships (PPP), (b) policy and regulatory support for competition and open access and (c) institutional strengthening

(a) Creating PPP framework:

33. This activity will focus on the transaction design and operating model for ownership and management of international and regional infrastructure using PPP frameworks consistent with open access principles to create an enabling environment for improved connectivity. The PPP frameworks would focus on principles of open and non-discriminatory access while maximizing the role of the private sector6. This component will support the implementation of component 1 for both international and regional connectivity. The LTA has already commenced the tendering process for Financial Advisers to assist in developing the PPP frameworks and assisting GoL to divest shares from CCL. It is expected that the advisory work will be completed and the PPP framework will be in place before the ACE cable is commercialized in 2012. The following activities will be covered under this component:

 PPP design for a special purpose vehicle (SPV) for the landing station  definition of GoL participation in SPV and divestiture strategy and implementation  Design of use of proceeds of sale of GoL shares (in CCL)  Design of PPP framework for backbone infrastructure

(b) Creating an appropriate policy and regulatory environment:

34. In addition to transaction design, this component will focus on addressing policy and regulatory bottlenecks at the national level. This will maximize the benefits of the proposed connectivity agenda, and maximize benefits from access to international capacity. The following activities will be supported:

 Legal and regulatory support for improved connectivity (including support for licensing CCL, interconnection framework, wholesale regulation framework) ; and,  Support to formulate the regime for using the universal access fund for the national connectivity component and related technical assistance support for its implementation,  Support for repositioning LTC in the market through strategic advice and implementation support to increase the performance of the operator.

6 Open access is broadly defined as an equal opportunity for operators to have unfettered access to given infrastructure or services under similar terms and conditions. 10

(c) Institutional capacity strengthening.

35. Significant institutional strengthening support is needed to ensure that the PPP agreements and principles are implemented effectively. Most of the activities related to the enabling environment are included as part of the Project Preparation Advance (PPA). The activities have been designed so that key elements for the PPP framework (i.e. SPV for the landing station) are in place for the investment component. Other activities related to GoL participation and legal and regulatory framework will be implemented in parallel.

36. The proposed project will also include capacity building support to the Ministry of Posts and Telecommunications to guide sector policies as well as to the Liberia Telecommunications Authority to strengthen its capacity to regulate the sector. Specific activities will include in house training, study tours and financing technical advisors. This activity will be implemented at national level.

Component 3: Project implementation (US$ 1. 28 million).

37. The establishment of the Project Implementation Unit (PIU) will be supported. This component will mainly focus on technical assistance to build capacity of the LTA to implement the project. It will provide support needed to strengthen the connectivity activities, including establishing the PIU, recruiting dedicated staff to work on the proposed project, and hiring an procurement specialist and a technical advisor. The component will also cover office equipment, incremental operating costs, audits, communications and environmental and social studies. Setting up the PIU is funded under the PPA. Recruitment activities are underway and will be finalized before effectiveness.

B. Project Financing

1. Lending Instrument

38. Lending will be via an Adaptable Program Loan. The lending instrument is a horizontal Adaptable Program Loan (APL). WARCIP Liberia is part of the first phase of WARCIP. The objectives of WARCIP Liberia are fully in line with the objectives of WARCIP. The proposed project will be implemented over a 4 year period.

39. Breakdown of Regional and National IDA allocations. Since the activities under the proposed project are eligible for IDA regional funding, regional IDA can be used for up to two thirds of the full proposed IDA amount of the project, with the country allocations covering one third of the project cost attributable to each individual country involved. The nature of the national IDA funding (credit/grant) will also apply to the regional IDA portion. The table below provides a summary of the regional/national IDA breakdown for Liberia

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Table 2: Funding breakdown for the proposed project.

Regional National US$ million IDA IDA Total

WARCIP Liberia 17.1 8.5 25.6

2. Project Financing Table

Table 3: Project Financing IDA (in US$000) Component 1: Supporting Connectivity 21,000 Co-funding Liberia’s participation in ACE submarine cable 20,000 Contribution to universal access Fund for regional connectivity 1,000 Component 2: Creation of an Enabling Environment for 3,320 Connectivity. Creating PPP framework for Liberia Cable landing 0,250 Action plan related instruments, and implementation support for 0,500 use of Divestiture Proceeds Legal and Regulatory instruments for open access 0,350 Action plan and related instruments national and regional 0,500 connectivity through Universal Access Fund Support for LTC repositioning in the sector 0,500 Backbone feasibility study and open access regime 0,400 Strengthening policy making and regulatory capacity 0,820 Component 3: Project implementation 1,280 PIU set up and operating expenses 0,925 Communications, M&E and environnemental 0,265 Hiring international procurement specialist 0,090 Total 25,600

C. Lessons Learned and Reflected in the Project Design

40. Country commitment to the proposed project is important. The proposed project draws on lessons learned from previous and ongoing World Bank-financed projects in ICT and from ongoing efforts in countries in similar situations as Liberia. Broad global experience in ICT project implementation indicates that an ICT project success is primarily contingent on strong country commitment to implementation. The proposed project design has been guided by the telecommunications sector national policy. GoL has

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made it clear that without Bank support Liberia would not be able to participate in a submarine cable. The proposed project is thus fully supported by the GoL.

41. Providing support for regulatory capacity building. Regulatory capacity is necessary to enable fair competition as problems can and will develop over time. Building such capacity takes time. At the same time, Liberia could benefit from the extensive experience of other countries in this area. The proposed project focuses on building this capacity in the regulatory authority by using in-house training, study tours, twinning arrangements and creating opportunities for peer-to-peer learning from more advanced regulators and the sharing of experiences.

42. There is a need for limited funding for infrastructure to improve access to ICT where the market fails. . For most developing countries, a major obstacle to the adoption of ICT remains the lack of adequate access to ICT infrastructure. A lack of investment in ICT infrastructure and access networks coupled with inefficient provision of services are the most important factors undermining the development of networked economies. Public funding for infrastructure development is justified in infrastructure market segments that fail to attract private investment. In this project, there were initial discussions about providing IDA funding for the total cost of international connectivity to ACE. This approach was rejected in favor of seeking contribution from private operators and focusing efforts on project preparation to create a PPP framework and support operators to create CCL.

43. Providing alternative solutions to the use of satellite capacity can ensure sustainability. While the proposed project could finance long term purchase of satellite capacity, this would not be sustainable in the long run, given the associated high prices of such service. The proposed project therefore builds on the fiber opportunity provided by ACE. Liberia’s decision to join ACE is the result of an analytical process comparing available and potential connectivity options. Both USAID and the World Bank commissioned a due diligence review of the process followed by Liberia to reach the decision to join ACE. The due diligence confirms that the decision was in line with the principle of efficiency, transparency and adherence to good practice in the industry, when considering options such as buying satellite capacity or gaining access to fiber by joining submarine cable consortia. The due diligence also confirms that the option selected is by far the most economical for Liberia. (For more details see Annex 7).

IV. Implementation

A. Institutional and Implementation Arrangements

44. The Liberia Telecommunications Authority (LTA) will coordinate the proposed project. The proposed project will be implemented under the aegis of the Liberia Telecommunications Authority (LTA). A Project Implementation Unit (PIU) will be established within LTA and will be responsible for the overall coordination, implementation, and supervision of the proposed project. The PIU will be headed by a

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Project Coordinator who will report to the chairperson of LTA. The PIU will be assisted by a project team composed of representatives from the Liberia Telecommunications Authority (LTA), and the Ministry of Posts and Telecommunications (MoPT).

45. The rationale for selecting LTA as the implementing unit include the predominant regulatory nature of the proposed project and the existence of a core team of professionals at LTA that have the technical and project management experience needed for the success of the proposed project. The LTA is an independent regulatory authority established under the 2007 telecommunication Act. The MoPT will be one of the beneficiaries of capacity building under the project and will be associated with the proposed project through the ICT4D steering committee which will serve as an Advisory Committee to the Project.

46. A PIU will implement the proposed project. The PIU will be in charge of: (i) day-to-day activities under the proposed project, in particular, procurement and monitoring activities; (ii) preparation of annual work programs, budgets, and procurement plans under the proposed project; (iii) dissemination of internal and external audit reports; (iv) Interaction with the World Bank for the requisite no objections of bidding documents, RFPs and evaluation reports etc.

47. A PFMU will manage the finances of the proposed project. Financial management functions will be conducted by the Project Financial Management Unit (PFMU) within the Ministry of Finance.

B. Results Monitoring and Evaluation

48. The PIU will monitor and evaluate the project. The Project Implementation Unit (PIU) will bear the primary responsibility for project Monitoring and Evaluation (M&E) of both project progress and project outcomes, and, as such, will establish standard formats and guidelines for data collection and reporting, and will organize training sessions for project stakeholders in their use. The PIU will submit to the LTA the M&E quarterly report that will include the updated Results Framework and the Action Table, listing the corrective actions to be implemented with deadlines and persons responsible clearly identified. The report will be sent to the Bank for information.

49. The views of direct beneficiaries will be brought into the monitoring and evaluation process. Comprehensive M&E reporting will be needed to monitor the results and performance of the proposed project. It will involve mainly the direct beneficiaries of project activities, but will be extended to other beneficiaries such as telecommunications operators and private ICT firms, which ultimately are the main beneficiaries of the proposed project’s outcomes. The PIU will review and validate the reports on performance indicators and recommend corrective actions if necessary. There will be focal points as to

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who will be responsible for providing relevant information and monitoring progress, using relevant performance indicators.

50. Specific, Measurable, Achievable, Relevant and Timebound (SMART) indicators will be used as an initial monitoring guide. An M&E system will be set up within the PIU to keep track of and evaluate implementation progress of the proposed IDA project within the broader context of the institutional framework for the telecommunications sector. Although improved ICT and telecommunications services at the operator level remains the hallmark of success of an enabling environment, the proposed project’s M&E system will seek first to measure results that are closely associated with project activities. Hence, the first order of indicators that the M&E system will look at shall include SMART indicators related to quality, cost, quantity, and time. Ultimately, improvement of laws and decrees by the project activities will have positive ripple effects on the whole sector.

51. Implementation support missions will be conducted at least twice a year. The GoL, through the PIU, may perform evaluations jointly with the World Bank team and conduct supervision or implementation support missions at least twice a year. Missions will be based on the latest quarterly implementation and financial monitoring reports prepared and submitted by LTA.

52. A mid-term review will be conducted within 30 months credit/grant effectiveness (or earlier once the connectivity component has disbursed). It will assess progress and make recommendations, if necessary, for any changes in Project Development Objective (PDO), the content of components, resource allocation, and performance indicators.

53. LTA will prepare a complete project review upon closure of the proposed project. At project closing, LTA will prepare a completion report documenting the project’s achievements and results and drawing lessons for future interventions. The completion report will in part be based on the project’s technical, economic, social, and environmental impact survey studies, as well as an assessment of beneficiaries’ satisfaction.

C. Sustainability

54. The GoL is very committed to the project enhancing sustainability. On the policy front, the GoL of Liberia is very committed to the proposed project and continues to emphasize the aim of placing ICT at the center of its new growth strategy, as clearly demonstrated in its 2010 ICT policy. Additional commitment to telecommunications reform is clear in the GoL’s effort to adopt a new telecommunications law and its approach to resolving the GSM license crisis and adopt new mirror licenses to all operators to create a level playing field among operators. Significant progress was made under the policy agenda with a multi-year technical assistance program by the Bank and complementary support from USAID.

55. Legal and regulatory reforms are expected to have sustainable impact. Support for legal and regulatory reform is expected to have a sustainable impact. Predictability and

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transparency of the legal and regulatory framework that is conducive to private sector participation and competition will increase the demand for affordable quality ICT services, including advanced applications. Given that a number of private operators already exist in the market and that there is potential for additional players beyond the wireless sector, it is likely that the regulatory authority will have sufficient resources and capacity through license and regulatory fees to become a self-funded institution and sustain the required regulatory capacity to supervise sector development.

56. Improved coverage and prices will be sustained through the implementation of advanced applications. Improved service coverage and quality at more competitive prices for international connectivity and for data services will be sustained as it will create opportunities for advanced applications.

57. Local capacity will be strengthened through training and technical assistance. The proposed project will make significant investments in capacity-building efforts through training and technical assistance to build technical expertise, social capital, and knowledge. With the focus on building sustainable capacity in key institutions such as LTA and the MoPT, the benefits of the proposed project are expected to last far beyond project completion as such capacity will support the creation of ICT policy and regulatory know-how to guide sector growth and applications in the future.

V. Key Risks

58. The proposed project is a technically simple project. Potential risks are summarized in the Operational Risk Assessment Framework (see Annex IV). Risks identified are manageable and mitigation measures are in place.

Table 4: Key Risks and Mitigation measures Risk Factor Description of risk Mitigation measure Technical/design Design of the proposed project is highly The Proposed project will benefit from complex and risky (Public Private upfront technical studies and legal support Partnership for ownership and under PPA. This will provide clarity to the management of landing station) design issues.

Inadequate Pre-feasibility studies indicates need for PPP structuring is likely to provide financing significant investment and contributions from comfort for both private and public both private and public sources; risk that investors. private sector contributions May not materialize Implementation Very limited capacity of policy makers Targeted TA and regulatory support will capacity and and young regulatory institution without be provided under the proposed project to sustainability prior experience with open access support LTA and ministry as they assume regimes their roles Delays in divestiture GoL could be tempted to keep GoL The sector is very open in Liberia and is of GoL shares ownership of landing station to private sector driven. Policy and legal maximize GoL revenues. environment are conducive to private

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sector participation. In addition, targeted support will be included under the PPA to ensure that all elements of the divestiture of shares are in place and implemented. Landing station is envisaged by its shareholders to be operated as a cost centre with no profits, mitigating interest of GoL in holding shares in long term. Divestment process Private operators could not be as PPA support for divestment including less successful than forthcoming as anticipated and GoL may running the process, due diligence, road anticipated end up holding more equity in CCL than show and negotiating with potential planned buyers Lack of LTC could put pressure on GoL to have PPP framework would provide value for collaboration of government shares transferred to LTC to LTC participating in the PPP framework stakeholders increase LTC value ahead of and would provide guarantees to operators privatization. Private sector players to invest. In addition the legal framework could decide to stay away from joint does not give advantages to LTC. Finally investment with LTC given tensions in there is ongoing pre-privatization support the sector to LTC and ongoing strategic advice on how to create value in LTC. Two major Liberian operators have committed a total of US$5 million to invest in the SPV along side LTC, so they will share similar goals and risks in the SPV with LTC, encouraging collaboration as connectivity is rolled out Proceeds from Proceeds could be used for other Improving connectivity is a high priority in divestment are not purposes and will not support the GoL agenda. A mechanism will be in place used for improving connectivity agenda to ensure that proceeds are contributed connectivity beyond directly to Universal Access Fund. access to ACE Targeted TA designed to support the enabling environment for this component. IDA contribution to universal access fund will be contingent upon successful sale of GoL shares. Non conformance Disbursements under the Financing If the Financing Agreement for Sierra with linkage agreement with Liberia could start even Leone never enters into effect or if conditionality if the Financing Agreement for Sierra disbursements thereunder are suspended, (cross-effectiveness Leone has not been declared effective this would only reduce the scope but not conditions and and there is no disbursement of funds. affect the overall implementation of the cross-suspension In addition, disbursements under the national activities, that can be carried out remedies) for Financing Agreement with Liberia could despite lack of progress of the Sierra regional cooperation not be suspended even if disbursements Leone Project under the Financing Agreement with Sierra Leone have been suspended.

VI. Appraisal Summary

A. Economic and Financial Analysis

59. Connecting to ACE will see Liberia breakeven between 2016 and 2017 with an NPV to 2025 of US$19.5 million. Initial calculations indicated that with a dedicated landing station in Liberia, breakeven would take place at a later date, with Internal Rate of Return

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below 3%. However a reassessment of the potential market demand and bandwidth pricing was carried out in January 2011 to take into account the recently observed trends in East and Southern Africa where new competitive submarine cables have now been in place for over a year and where data has recently been made public. Due to the competitive pressure there, bandwidth prices have fallen substantially and consumption/demand has increased dramatically. Bandwidth pricing in the region is now moving toward US$50- US$100/month/Mbps at a wholesale level (for long-term - i.e, 15 year, IRU type pricing), producing much higher levels of demand. This has already necessitated the commissioning of upgrades to submarine cable capacity, much earlier than initially planned. Since there are likely to be competitive cable landings in West Africa that will bring down prices and result in requirements for additional bandwidth, the East African trends in bandwidth uptake levels and pricing were used in the economic model to revise the estimated Internal Rate of Return (IRR) to between 4.4% (US$50/Mbps/month) and 12.4% ($100/Mbps/month). The assumptions for these calculations are as follows: wholsesale bandwidth pricing between US$50 and 100/Mbps/month and ultimate uptake forecast of 7 Gbps. The final breakeven year will depend on actual capacity uptake and the wholesale price of bandwidth. After this the project would cash-flow positive and substantial revenues would be made if these wholesale pricing levels are maintained. Investment data was calculated for based on a discount rate of 15% and two difference scenarios, a dedicated cable versus a shared cable. Under these assumptions NPV to 2025 with dedicated cable is US$ US 19.54 million for Liberia. On this basis full membership in ACE, if accompanied by robust regulation by LTA to ensure competitive pricing releases demand, has potential to provide low cost international access to a broad range of Liberians.

60. Joining ACE represents the most cost-effective and effective way to improve international telecommunication access in Liberia. Countries and their companies' decision to join ACE is the result of an analytical process comparing available and potential connectivity options. The World Bank commissioned a due diligence review of the process followed by Liberia to reach the decision to join ACE submarine cable. The due diligence confirms that it was in line with the principle of efficiency, transparency and adherence to good practice in the industry, when considering options of buying satellite capacity or joining submarine cable consortia. Analysis of other possible options for improving international connectivity clearly shows that connecting to other cables or satellites would ultimately result in a less compelling business case than connection through ACE. Cables like MainOne, Glo-1 and SAT-3/WACS did not include the possibility of a landing station in Liberia. The option of obtaining further satellite capacity to connect Liberia to satellite was also analyzed, but the significantly lower bandwidth costs obtained through ACE compensate for the higher investment and maintenance cost.

61. The proposed project will increase access to internet, create jobs, improve education opportunities and public administration and increase GoL revenues. Concerning the Technical Assistance component, The Proposed project will bring significant benefits to Liberia in a number of ways including (i) increased public access to Internet services (ii) a broad range of social benefits through increased labor productivity, employment creation, learning opportunities for youth, participation by women in the labor market, and

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improved public administration (iii) greater fiscal returns due to new sources of revenue for the GoL. It must be noted, however, that the economic and financial benefits of a technical assistance component is generally difficult to quantify because of the inadequacy of data available at the outset.

B. Technical

62. The proposed project recognizes that infrastructure and policy environment bottlenecks need to be dismantled to ensure better communications access. Technical design of the project reflects lessons learned in the ICT sector and international best practices. For most developing countries, a major obstacle to the uptake of ICT remains the lack of adequate access to ICT infrastructure. A lack of investment in ICT infrastructure and access networks, coupled with inefficient provision of services, are the most important factors undermining the development of networked economies. The main lesson derived is that success is mainly market driven. Creating a predictable legal and policy environment is key to improving investor confidence and restoring trust in the ICT sector. The focus of the proposed project is to create a PPP framework for international connectivity. The project will establish an enabling institutional and regulatory environment to help attract and sustain investment in the telecommunications sector.

63. The ACE consortium is deemed to be technically qualified and structured according to best practice in the industry. The team’s assessment is that the ACE consortium is being structured in a manner consistent with international good practices in the industry, and is led by major industry players. Given the experience of key consortium members in designing, commissioning and operating submarine cables, the implementation risk is minimal. As with all cables, there is, however, a risk of breaks on the operational system.

64. The cost of membership for Liberia to the ACE consortium will be US$25 million. The total estimated cost of the ACE submarine cable is around US$700 million based on the final basic system configuration with twenty one (21) landing stations, connecting twenty three countries between France and South Africa, via the West coast of the continent. As a member of the consortium, Liberia will obtain a fixed ownership percentage and an allocated capacity (based on kilometers and branch capacity) at a fixed price. It is agreed that for a single landing station membership, Liberia will obtain approximately 2.8% of the capacity at a cost of approximately $25 million. The percentage and dollar amounts are based on a membership cost model developed by ACE consortium management. The model enables members to specifically determine the payment required for membership and the bandwidth capacity that will be allocated. While the model and the resulting payment amounts were finalized when the consortium Construction and Maintenance Agreement (C&MA) was signed by all members on June 5, 2010, there may be slight variations around the $25.0 million estimate, depending on final configuration of the system and the final list of ACE members.

65. Legal due diligence- Transactional issues. On the transactional side, this can be divided into the “wet” segment and the domestic (cable landing station) segment. The transactional issue on the wet segment relates to (i) succession of the SPV vehicles from the parties to

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the existing C&MA, and (ii) the ability of the GoLs to divest their interests in the SPVs that are making the investment into the ACE consortium, as well as unbundling the equity interest in the consortium from the capacity allocated to the SPV. It is not assumed that there will be any problem with succession of the C&MA. However with regard to divestiture, the consortium agreement requires the unanimous consent to the assignment of an entity’s interest or new entry in the consortium. On the domestic level, there are issues related to the strategy for divestiture as well as governance issues related to the ownership and operation of the cable landing station.

66. Legal Due diligence- Regulatory Issues. The main issue is ensuring “open access” (fair and transparent pricing) to the bandwidth capacity provided by the ACE cable at the domestic level once the bandwidth capacity comes on shore. This is primarily a domestic regulatory issue. A review of the agreement indicates transparent access to known capacity at known prices. A review of sector regulatory, including licensing conditions, will be conducted at the national level. As indicated above, the first PPA was designed to include technical assistance to support these activities.

C. Financial Management

67. Assessment shows that PFMU satisfies the Bank’s minimum FM requirement. The assessment of the proposed project’s financial management arrangements being implemented by the PFMU as documented in the annex indicates that the systems to be used to manage the project satisfy the Bank’s minimum FM requirements under OP/BP10.02.

D. Procurement

68. IDA funding for component 1 (a) on international connectivity does not go towards a procurable item subject to compliance with World Bank procurement guidelines. This is because such funding is for membership fees (paid in different installments) against a set of rights including use of a certain amount of capacity at preferred rates and a share of ownership of an indivisible cable infrastructure asset. For other project components (1 b, components 2 and 3), IDA procurement guidelines will apply.

69. A procurement assessment has been carried out. Assessment concluded that LTA and its staff do not have capacity to carry out procurement activities related to the proposed project. Most of the risks concerning the procurement component for implementation of the project have been identified. As a result, procurement risk is assessed as high. Risk mitigation measures have been discussed with LTA and agreed. The procurement plan for the project has been received by the Bank and found to be acceptable. It will be updated at least once in six months (or as required) to reflect project implementation needs. A brief summary of the procurement capacity assessment and project procurement arrangements are provided in Annex III. More details are available in the project files.

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E. Social and Environment

70. Connection to the ACE cable is not expected to have significant environmental impact. The proposed project is rated as a Category B project. The cable system is likely to have a submerged or ‘wet plant’ part, and a ‘dry plant’ part which interfaces at proposed Landing Stations. The Landing Station is the location where a submarine or other underwater cable makes landfall. The landing (or termination) station can also be the point at which the submarine cable connects into the land-based infrastructure or network. Sections of the cable (particularly both wet and dry plants of each country’s lateral connection to the main cable) lie within the territorial waters of the landing parties while remaining sections lie in international waters, normally in deep seas. The lateral connecting cable to landfall near Monrovia, Liberia, is approximately 170 km in length, connecting to the main cable well beyond the 2500 m isobath. Deep ocean fiber optic cables are no larger than 17-21 mm diameter – about the size of a domestic garden hose- and are laid mainly upon the surface of the ocean floor. 71. Little evidence of environmental issues in deep ocean: Since much of the deep ocean lies beyond national jurisdictions, few environmental impact assessments (EIAs) for any marine activities have been undertaken in this zone and thus there is little evidence of any environmental issues, except in cases of oil and gas exploration and very deep sea trawling. No specific environmental studies are undertaken for submarine cables; however, prior to laying cables, a detailed Cable Route Survey is done to ensure that the cable is not located in high risk locations or geological features (e.g., thermal vents) that often harbor unique faunal assemblages at abyssal depths. Most of the larger companies operating in the submarine cable industry typically work to standards and quality management systems set by the International Organization for Standards under the ISO 9000 and ISO 9001 schemes. Furthermore, the International Cable Protection Committee (ICPC) publishes recommendations on key issues such as cable routing, cable protection and cable recovery that are available to anyone on request. This very stringent standard puts pressure on cable companies to adhere to strict environmental standards. The general experience is that the section of the cable that lies in the deep sea has minimal impact on marine mammals and fish. The extensive studies that are undertaken by the cable suppliers prior to final cable laying tend to work as effective safeguards against any possible environmental disruption, since in large part they are intended to identify routes for the cable that will avoid seamounts, volcanoes, canyons, vents, seeps, deepwater reefs, dissected terrain – all areas that tend to be associated with higher biological value than the general abyssal plain7.

77The Letter of Agreement for the second PPA required that, not later than August 31, 2011, the government prepare, consult on, and disclose an environmental impact assessment under the proposed Project for the international waterways in relation to the marine surveys to be carried out under the Construction and Maintenance Agreement. This condition for the individual country EIA for the deep sea, however, is considered no longer relevant, as : i) the provisional Cable Route Study includes detailed information to address any environment and safeguard issues; and ii) the likely environmental issues are very minimal in the deep sea. The first supervision mission will confirm that such information from the cable route survey has been provided to the country, and appropriate decisions made after reviewing the final Cable Route Survey to determine if there are areas of deep sea traversed by ACE within the geographical limits of application of the country’s domestic EIA legislation to which attention should be paid to further impact assessment. 21

72. As the cable gets closer to the shores in water depths shallower than 1,500m, the cable’s diameter may increase to about 40-50 mm due to the need to add protective wire armoring. The small environmental disturbances caused by laying connecting cable from the shore in Liberia to a deep sea submarine fiber optic cable are not expected to have any perceptible effect on the quality of the coastal waters of the Atlantic Ocean or on marine species or habitat. For the cable and associated equipment onshore, there may be some temporary, low to moderate environmental and social impacts including localized impacts to near shore marine life and local fishermen access. 73. The borrower has prepared a draft Environmental and Social Management Framework (ESMF). The Recipient prepared a draft ESMF (consistent with national laws, any applicable treaty concerning international waters, and OP 4.01) and a Resettlement Policy Framework (RPF) for the lateral cables and any associated equipment that will be laid from the junction with the main cable through territorial waters and onto the national shores, and also for the fiber on transmission lines, as required. The draft ESMF that has been prepared indicate that the proposed landing site has very limited marine activities and not likely to experience significant disturbances. The seaward limit of coverage for the ESMF is the seaward limit of Liberia’s EEZ, defined as extending 200 nm (370 km) from the shorelines. The RPF is being prepared in case the project may require land acquisition and resettlement, and/or restricted access to natural resources, although this is not expected based on the preliminary Cable Route Survey work. For the purposes of subsequent environmental assessment work regarding benthic habitat and ecology, the Cable Route Survey being undertaken by the Cable Suppliers will provide this analysis between the outer limit of the EEZ and the 50 m isobath. Between the 50 m isobath and the shoreline, the Cable Route Survey will provide environmental baseline information regarding benthic habitat and ecology, augmented as deemed necessary by other sources of information. Activities of cable-laying ships and support vessels will be required to comply with Liberia regulations regarding such maritime activities. While it may not be necessary for Liberia to conduct an environmental impact assessment (EIA) for placing the cable in the deep sea within their EEZs, this should not deter Liberia from considering in the screening and scoping phases of the EIA whether there are areas of deep sea traversed by ACE and within the geographical limits of application of its domestic EIA legislation to which attention should be paid. 74. Once the final sites of the Landing Stations are chosen and the specific civil works identified, an Environmental and Social Management Plan (ESMP) will be prepared, consulted upon, and disclosed. An Environmental and Social Impact Assessment (ESIA) may also be prepared along with the ESMP, although the preliminary analysis prepared for the ESMFs indicates that the ESMP is the appropriate Safeguards instrument for this project in Liberia. The final decision will be made as the Cable Route Survey identifies the preferred routing in territorial seas and in near shore shallow water at the landfall site. Although involuntary resettlement or displacement from land-based livelihoods is not expected, a Resettlement Policy Framework (RPF) has also been drafted for Liberia as a contingency measure in case a resettlement action plan needs to be prepared.

75. OP/BP 7.50-on “Projects on International Waterways” does not apply. While the main cables are to be placed in non-territorial, deep sea locations, OP/BP 7.50, Projects on

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International Waterways, does not apply. The types of waterways covered under the policy do not contemplate an “open sea.” For purposes of the policy, international waterways include semi-enclosed coastal waters, closed seas, national rivers flowing into those waters, and transboundary groundwater. It should be noted that the definition of international waterways under the policy is at variance with the definitions under the rules established by the Institut de Droit and the International Law Association, as well as the United Nations Convention on the Law of the Non-Navigational Uses of International Waters Watercourses.

76. The proposed project is expected to have positive social benefits. The main social impacts of the proposed project are the increased possibility of better access to ICT services for the population and improved GoL service delivery. The project will contribute to (i) enabling ICT to become a driver for sustainable economic growth; (ii) enabling the GoL to use ICT to improve services; (iii) improving access and quality of ICT services for the general population, businesses, and the Go; and (iv)reducing isolation and enhance economic activities in rural areas.

F. Credit conditions and covenants

77. Effectiveness conditions:

(a) The Subsidiary Grant Agreement, in form and substance satisfactory to IDA, has been executed on behalf of the Liberia and the Liberia Telecommunications Authority.

(b) The Contractual Arrangement, in form and substance satisfactory to IDA, has been executed on behalf of Liberia and the Cable Consortium of Liberia, Inc.

(c) Liberia shall have established the PIU under terms of reference and with staff in numbers and with qualifications satisfactory to IDA.

(d) Liberia shall have adopted the Project Implementation Manual in form and substance satisfactory to IDA.

78. Disbursement Conditions:

No disbursement shall be made for the setting up of the Universal Access Fund, until and unless the LTA shall have: (i) issued the regulations on the operation of the Universal Access Fund; and (ii) approved the operating manual for the implementation of the Universal Access Fund, all in form and substance satisfactory to IDA.

Legal covenants:

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79. Liberia shall, throughout Project implementation, maintain the PFMU adequately staffed with professionals hired under terms of reference and with qualifications and experience satisfactory to the Association, including a manager, an accountant, and an internal auditor.

80. Liberia shall:

(a) ensure that the construction of the landing station related to component 1 (a) of the Project does not commence until and unless: (i) IDA shall have approved the ESIA, ESMP, and/or the RAP, as the case may be, and the same documents have been consulted on and disclosed as approved by IDA; and (ii) it shall have verified, through its own staff, outside experts, or existing environmental/social institutions, that the activities under component 1 (a) of the Project meet the environmental and social requirements of appropriate national and local authorities and that they are consistent with IDA’s applicable environmental and social assessment and safeguard policies and comply with the environmental and social review procedures set forth in the Project Implementation Manual;

(b) take all measures required on its behalf to carry out, or to ensure that the CCL carry out, the ESIA, ESMP, and/or the RAP, as the case may be, in accordance with the provisions of the ESMF and the RPF; and

(c) ensure that the relevant mitigation and monitoring provisions of the ESIA, ESMP, and/or RAP, as the case may be, are appropriately implemented.

81. Liberia shall, not later than four (4) months after the Effective Date, recruit an external auditor for the PFMU on the basis of terms of reference and with qualifications and experience satisfactory to the Association.

82. The LTA shall ensure that the overall coordination, implementation and supervision of the Project is carried out by its Project Implementation Unit with due diligence and efficiency. The PIU shall be headed by the Project Coordinator, who shall report to the Chairperson of the LTA, and its composition shall include a procurement specialist. To this end, the LTA shall maintain the Project Implementation Unit throughout Project implementation under terms of reference satisfactory to the Association and with staff and resources adequate to enable it to carry out its responsibilities under the Project.

83. The LTA, through the PIU, shall:

(a) prepare a draft Annual Work Program and Budget (AWP&B) for each Fiscal Year, setting forth, inter alia: (i) a detailed description of planned activities for the Project for the Fiscal Year; (ii) the sources and uses of funds therefore; and (iii) responsibility for execution of said Project activities, budgets, start and completion date, outputs, and monitoring indicators to track progress of each activity;

(b) not later than November 30 immediately prior to each such Fiscal year, furnish to the Association for its comments and approval, the draft AWP&B and, promptly thereafter,

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finalize the AWP&B taking into account the Association’s views and recommendations thereon; and

(c) adopt and sign the final version of the AWP&B in the form approved by the Association not later than December 31 immediately prior to each such Fiscal Year.

84. LTA, through the PIU, shall:

(a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with the Monitoring and Evaluation Indicators, the carrying out of the Project and the achievement of the objectives thereof;

(b) prepare, under terms of reference satisfactory to the Association, and furnish to the Association, on or about June 15, 2013, a report integrating the results of the monitoring and evaluation activities and setting out the measures recommended to ensure the efficient carrying out of the Project and achievement of the objectives thereof during the period following such date; and

(c) review with IDA on or about July 31, 2013, or such later date as IDA shall request, the report referred to in the preceding paragraph (b), and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and IDA’s views on the matter.

85. The LTA has launched the recruitment process for core team in the PIU, and has developed a draft terms of reference for consultant to prepare the Project Implementation Manual. It is expected that these processes will be completed before effectiveness.

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Annex 1: Results Framework and Monitoring COUNTRY: Liberia Responsibility Data Source/ Cumulative Target Values** Frequency for Data Program/Project DO Level Results Unit of Methodology Baseline Collection Indicators* Core Measure YR 1 YR 2 YR3 YR 4 Indicator One: Volume of international impact 1 2 2 40 Annual Operators PIU / LTA traffic: International Communications kbit/s per 1

(Internet, Telecoms, and Data) person bandwidth per person Indicator Two: Access to internet Number 1.5 1.6 1.6 2.4 3.0 6 months Operators PIU / LTA services (number of subscribers per 100 per 100 people) Indicator Three: Access to telephone Number 24% 24% 30% 36% 47% 6 months Operators PIU / LTA services (fixed mainlines plus cellular per 100 phones per 100 people) Indicator Four: average monthly price US$/ $8,000 Less than Less than Less than Less than Yearly Operators PIU / LTA of wholesale international E1 capacity month/2M $ 8,000 $ 7,000 $ 5,000 $ 2,000 link from capital city to Europe bps Indicator Five: Direct project Number, 700,000 800,000 900,000 1,200,000 1,400,000 Annual Survey9 LTA 8 beneficiaries, of which female % 45% 45% 45% 48% 50% INTERMEDIATE RESULTS Intermediate Result (Component One): Intermediate Result indicator One: In Gbit/s 0.065 0.065 0.07 1.12 1.12 Annual LTA Volume of available international capacity: International Communications (Internet, Telecoms, and Data) bandwidth Intermediate Result indicator Two: US$/month $1,200 $1,200 $1,000 Less than Less than 500 yearly Operators LTA/PIU Retail price of internet services (per 800 Mbit/s per Month, in US$) Intermediate Result (Component Two): Intermediate Result indicator One: 1-low 0 1 2 3 4 yearly LTA PIU Impact on Telecom sector of World impact to

Bank technical assistance (composite 5 –high score) impact .

8 Direct Project Beneficiaries are defined in section II paragraph 27 of the core text 9 The Direct Project Beneficiaries survey will be coordinated by LTA and will use different stakeholders of the ICT sector to collect information from a representative sample of beneficiaries. 26

Annex 2: Detailed Project Description

1. WARCIP Liberia will have three components. WARCIP Liberia will have 3 components: (1) Supporting Connectivity (2) Creation of an Enabling Environment for Connectivity (3) Project Implementation..

Component 1 – Supporting Connectivity (US$21 million).

2. The main focus of the proposed project is to connect Liberia to ACE, a submarine cable connect the West Coast of Africa to Europe and to the global high-speed internet infrastructure. Improving international connectivity through funding access to ACE submarine cable. Other connectivity priorities are treated as a secondary focus.

a) International connectivity: Funding Liberia’s membership in ACE submarine cable (US$20 million)

3. Connecting to ACE represents a unique window of opportunity. For purposes of international connectivity along the coast of West Africa and with the rest of the world, the most attractive and efficient viable option for Liberia is to connect to the ACE submarine cable, which is to be an approximately 17,000km submarine cable system. Connecting South Africa to Europe and connecting 23 countries including a landing station in Liberia. In all likelihood, there are no other opportunities for Liberia to connect to another submarine cable for many years to come. Analysis has confirmed that other submarine cable projects under preparation in the region are not viable options for Liberia.10

4. Liberia will pay US$25 million for a 2.8% share of capacity. The total estimated cost of the ACE submarine cable is around US$700 million based on the final basic system configuration with 21 landing points and is to be operational in the first half of 2012. On June 5, 2010, the GoL signed the ACE Construction and Maintenance Agreement (C&MA) of the ACE consortium via Cable Consortium of Liberia CCL), a special purpose vehicle, and committed to paying its contribution of US$25 million. This will ensure that a cable landing station is constructed in Monrovia and that Liberia thereby gains access to the international telecommunications capacity to be made available by ACE’s planned submarine fiber optic cable. Liberia is set to obtain approximately 2.8% of the total capacity. It is expected that Liberia will secure the US$25 million from different sources, through a combination of public and private sector funds. Two of the mobile operators have committed to contribute about US$5 million to CCL. IDA funding is expected to cover the funding gap towards full membership in ACE.

5. IDA funding constitutes payment of Liberia’s membership fee in ACE. Such membership fees will be paid in different installments against a set of rights including use of a certain amount of capacity at preferred rates and a share of ownership of an indivisible cable infrastructure. It is expected that the private operators will contribute US$5 million

10 Mike Jensen Report entitled ‘International Connectivity Options for Sierra Leone, Liberia and Guinea’ for the World Bank (May 2010).

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towards ACE membership. The funding gap will be paid as direct payment to ACE in different installments.

6. Initial Payment was made using PPA resources. Initial installments for US$5 million have already been paid using Project Preparation Advance (PPA) resources. The withdrawal of IDA funds was channeled to the ACE consortium through CCL. As Contractual agreement was signed between MoF, CCL and LTC as part of effectiveness conditions of the PPA referring to the 5 million as LTC participation in CCL

7. Government shares in CCL will be divested over time. Possible buyers of GoL shared in CCL are likely to include:

 Additional purchases by Lonestar and Cellcom (which have already agreed to acquire equity in CCL), for example to provide capacity on negotiated basis to satellite resellers who are interested in obtaining fiber capacity (such negotiations are currently taking place);  Telecommunications operators who have not yet agreed to acquire an interest in CCL (ie. Comium, Libercell, WATS) though these operators are severely financially constrained;  Liberian banks, which have a total capital of approximately US$65 million and are not permitted to lend more than a limited percentage of their capital to one investment. If interested, banks could be expected not to convert the loans to equity as they will prefer the safety associated with loans.  Liberian public share offering under IPO, similar to sale to Liberian public offering of convertible debentures by Cellcom in 2009 and 2010.

8. Pre-purchase discounted bandwidth for ministries and designated institutions. GoL will make advance payment for the cost of obtaining discounted price for internet capacity (internet access). In return for obtaining this advance from GoL, CCL provides subsidized internet access to specific ministries and / or institutions to be designated from time to time by GoL. Price paid by the designated ministries and institutions for this service would be a discounted price, lower than the normal wholesale or retail price for internet access, possibly equal to the actual costs of operation of CCL during the period in which the internet service is provided. This price or discount level could be negotiated in advance if necessary with CCL.

9. The discount value will be determined according to the difference between ACE operating costs and wholesale price. The “value” of the benefit or discount that GoL receives in return for the advance is calculated as the difference between actual ACE operating costs for the amount of capacity used and the actual wholesale price in effect for the volume of capacity used (or alternatively the wholesale price ceiling established by LTA) at the time the access is actually used. It is estimated based on analysis of demand that the pre-purchase of capacity will not exceed US$ 4 million.

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b) Regional connectivity (IDA US$1 million)

10. Connecting Capital cities will be set up on county-capitals. While international fiber links will provide the potential for massively improved access to communications in Liberia, the full benefits of this cannot be achieved without even greater investments in national infrastructure. This will both stimulate demand by reducing costs and improving the range of services to the end user through increased competition. The study under component 2 will identify the extent of public investment needed to complement private sector investment to bridge connectivity gap and propose options for the technology to be used for connecting capitals. Fiber-optic Metropolitan Area Networks (MANs) in each county capital are also likely to be required to ensure that the high density of users can gain sufficient access. Compared to the national backbone costs, these are much less substantial, and are unlikely to exceed US$10 million per city (except for perhaps Monrovia). Connections could also use rehabilitation of the main railway bisecting Liberia could provide another low cost opportunity to lay fiber optic cable to important county capitals.

11. Roll-out of regional connectivity will be through PPP arrangement using a universal access fund. IDA resources will be channeled through a universal access fund, to be established as provided for in the 2007 telecommunication Act and the Ministry’s 2010 ICT Policy, and will be used to complement private sector investment and cover part of the costs of rolling out national connectivity under PPP arrangements. IDA resources will be considered a seed capital contribution in the universal access fund to cover part of the related to network extension. Developing the details of funding mechanism and the modalities for the management and monitoring of the fund, is included under the enabling environment component of the proposed project. In addition technical assistance will be provided for the preparation, the launching and follow up and marketing of the bidding process of projects to be financed with universal access fund resources.

Component 2- Creation of an Enabling Environment for Connectivity (US$3.320 million).

12. This component will provide technical assistance and capacity building necessary to support the successful implementation of Component 1 of the proposed project. Specifically, support will focus on (i) putting in place a PPP framework for improved connectivity, (ii) strengthening the policy and regulatory environment to promote further sector reform in order to maximize benefits from access to international capacity and (iii) strengthening institutional capacity

(i) Development of Public private partnership frameworks (PPP)

13. Under this component legal and financial advisory services will be hired to put in place the PPP structure for the landing station and to design and implement the divestiture process for GoL shares in CCL. Those services will include (i) designing and negotiating PPP contracts and related stakeholders agreement’s, (ii) defining the rights and obligation of different stakeholders (GoL, LTC, private operators), and (iii) defining appropriate risk sharing and commensurate financial rewards between parties (iv):development of the divestiture strategy 29

for GoL shareholding including defining the scope of the exit clauses, valuation of public shares, as well as timing and transition process for divestiture; and (v) support to implement the divestiture process.

(ii) Creating an enabling policy and regulatory environment

14. In addition to transaction design, this component will focus on addressing policy and regulatory bottlenecks at the national level to maximize the benefits of the proposed connectivity agenda, and maximize benefits from access to international capacity. The following activities will be supported:

 Legal and regulatory support for improved connectivity: This activity will finance legal and regulatory support to ensure open and non discriminatory access to cable landing facility, including issues related to licensing of CCL: international gateway facilities, fully liberalized international gateway (landing station), open access regime (national and international backbone essential facilities), wholesale price cap control mechanism and quality outsourcing of operations and maintenance.

 Support to formulate the regime for using the universal access fund for the national connectivity component and related technical assistance support for its implementation. This component include definition of universal access regime, development of operating manual for universal access fund, development of regulatory instruments, as well as technical assistance to support implementation of the national connectivity component.

 Support for strategic repositioning of LTC in the market by covering the fixed cost of an investment Bank to conduct the transaction. This last activity was not included in the original design of the project but was added during appraisal. The mission agreed with this addition and considers that a successful repositioning of LTC will improve the enabling environment of the sector and include more competition. It will also improve capacity of LTC to participate in CCL and to participate in PPP framework for the backbone infrastructure.

 Support feasibility study for national backbone and development of instruments for PPP framework.

(iii) Institutional Strengthening

15. Significant institutional strengthening support is needed to ensure that the PPP agreements and principles are implemented effectively. The proposed project will also include capacity building support to (i) the Ministry of Posts and Telecommunications to guide sector policies, (ii) the Liberia Telecommunications Authority to strengthen its capacity to regulate the sector and to (iii) LTC to facilitate its repositioning in the sector. Specific activities will include (a) setting up ICT Unit in Ministry, (b) financing technical advisors to Ministry LTA and LTC as well as financing in house training, study tours for LTA staff and Ministry staff.

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Component 3: Project implementation (US$1.28 million).

16. Support to establish Project Implementation Unit (PIU). This activity will provide support needed to strengthen the capacity of the LTA to implement the connectivity activities, including setting up the Project Implementation Unit (PIU), hiring dedicated staff to work on the proposed project, and hiring an international procurement specialist and a technical advisor. The component will also cover office equipment, incremental operating costs, audits, communications and environmental and social studies.

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Diagram of Structure of Operators Banks

Connectivity component

Notes: The drawing does not represent flow of funds, but rather the financing structure for connectivity component.

GoL sells loan to operators operators loan to GoL sells & banks, who may convert to equity or keep as debt

IDA US$ 20m Government of Liberia (Ministry of Finance) Credit credit equity (with allocated equity (with to CCL loan to CCL convertible US$1m transfer to USO Fund loan US$5m LT shareholder prepayment for capacity Lonestar Cellcom

US$2.5m US $2.5m capacity

LTC US$5m Cable Consortium of common shares Liberia (Special Purpose Vehicle) Universal Ministries, institutions or discount capacity priced at Access other entities designated by GoL receive internet Fund access at cost from ACE (value of discount = difference between Nat’l backbone Ring FO Monrovia Lay FO cable on RR wholesale price (or price ceiling) and actual cost of CCL to provide the service (ie. Cost at which Lonestar, Libtelco and Cellcom obtain their Post Universities capacity. When Hospitals Offices cumulative difference totals $4 million, 32 discounted access ceases (because prepaid capacity Other Govt exhausted). Schools Ministries Institutions

Annex 3: Implementation Arrangements

I. Project administration mechanisms 1. The proposed project will be implemented by a PIU within the LTA. The proposed project will be implemented under the aegis of the LTA. A Project Implementation Unit (PIU) will be established within LTA and will be responsible for the overall coordination, implementation, and supervision of the proposed project. The PIU will be headed by a Project Coordinator who will report to the Chairperson of LTA. The PIU will be assisted by a project team composed of representatives from LTA and Ministry of Posts and Telecommunications. The PIU is in the process of being established. Project coordinator and procurement specialist are in the process of being hired and will be in place before project goes to Board.

2. The PIU will be in charge of running the proposed project that include (i) day-to-day activities under the project, in particular, procurement and monitoring activities; (ii) preparation of annual work programs, budgets, and procurement plans under the project; (iii) dissemination of internal and external audit reports, (iv) interact with the Bank for obtaining the requisite no objections.

3. Hire of a procurement advisor to assist with procurement and train local staff. Given capacity constraints on procurement, the project provides for hiring a procurement advisor to support the implementation Unit. The international expert will be hired under the PPA and will be hired as a semi-resident advisor for the PIU to help with procurement aspects and to mentor the procurement specialist who will be hired for the PIU.

4. PFMU within MoF will be responsible for the finances of the proposed project. Given capacity constraints in financial management, the project will outsource this function to the Project Financial Management Unit (PFMU) within the Ministry of Finance.

5. Hire of technical advisor. Because of capacity constraints on technical aspects of the proposed project, it is proposed that international technical advisor is hired to support the PIU.

6. ICT4D steering committee will provide guidance for the project implementation. Finally, given the PPP nature of the proposed project and the importance to have the private sector and civil society involved in the project, the project proposes to use ICT4D Steering Committee to serve as an advisory body and provide guidance for project implementation. ICT D steering committee is an existent committee with representatives from finance, planning and telecommunications Ministries, Mobile operators, ISPs, interest groups and civil society. The Steering Committee will only provide guidance and will not be involved in day to day operation. The Chairperson of LTA will have the responsibility for approving the annual work program. Details of the interaction between the chair of LTA and ICT 4 D committee will be detailed in the Project Implementation Manual.

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II. Financial Management, Disbursements and Procurement

Introduction

7. A Financial Management (FM) assessment has been done to assess the financial management to be used in implementing the proposed project. In accordance with the Financial Management Practices Manual issued by the Financial Management Sector Board on March 2010, a financial management assessment was done to assess the adequacy or otherwise of the financial management for to be used in implementing the PPA.

8. In line with the existing financial management arrangements as pertain in Liberia , the financial management of the proposed project will be carried out through the Project Financial Management Unit (PFMU) at the Ministry of Finance (MoF). The PFMU over the years developed financial management structures, functions, and responsibilities acceptable to the IDA. The Project will thus rely on the already existing fiduciary arrangements established by the PFMU for the financial management of all IDA Projects in Liberia.

Implementation Arrangements

9. Financial management for the proposed project will be handled by the Project Financial Management Unit (PFMU) of the Ministry of Finance. A memorandum of understanding (MoU) detailing the respective financial management responsibilities of the parties will be signed between the PFMU and the LTA prior to project effectiveness.

In general terms under the MoU the PFMU is tasked with the following responsibilities:

 Operate an efficient financial management system acceptable to the IDA,  Establish effective accounting and transaction processing procedures to support the payment of all eligible expenditure,  Provide internal audit services and periodically review the control environment to ensure that policies and procedures are being complied with,  Prepare on a timely basis quarterly financial reports and any other financial reports as may be requested by the IDA and the LTA  Lastly, in consultation with the LTA ensure that the financial statements of the project are audited and conform to the financial covenants as per the Credit Agreement.

Country Issues

10. A CFAA has not yet been carried out in Liberia due to conflict. Due to the extended conflict situation in the country which led to disengagement, the Bank has not carried out a Country Financial Accountability Assessment (CFAA) or similar Financial Management (FM) related Economic and Sector Work (ESW) in Liberia in recent years. A joint IMF-World Bank diagnostic report on the PFM system in Liberia was completed in 2007 along with the World Bank led multi donor PEMFAR report. The draft of this report has been finalized, and it includes

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a full PEFA assessment that was completed in 2007. The limited country knowledge that we have is therefore based solely on project implementation experience, which itself is still in its infancy. Both physical and bureaucratic infrastructure was decimated by the war, including an exodus of most skilled personnel. Thus the human capital in the area of FM is decidedly short, affecting both the private and public sectors. A decision was made early in the re-engagement process to develop a ‘centralized’ project financial management unit, the PFMU in the MoF, to create a reservoir of skilled personnel that would be available for all projects. It is this institutional arrangement that this project will also tap into, to avoid the obvious FM capacity constraints.

11. To this end, the IDA supported the establishment of a centralized project financial management unit within the Ministry of Finance in order to create a reservoir of skilled personnel that would be offer satisfactory financial service for all projects.

Project Risk Assessment and Mitigation

12. The table below shows the results of the risk assessment identified during the FM assessment which may hinder the achievement of project objectives; together with risk mitigating recommendations on how the PFMU should address these risks.

Table 3.1 Risk Rating Summary

Type of Risk Risk Risk Mitigating Conditions for Residual Rating Measures/Remarks Negotiation or Risk Rating Effectiveness (Yes/No) Inherent Risk Country Level Weaknesses in public H There is a an inherent risk that GoL No S financial management by state entities are too weak to fulfill their institutions due to lack of functions, implement project technical capacity. activities, and to comply with Bank’s environmental, social and fiduciary safeguards

This risk is being mitigated through engagement by the IDA and other donors aimed at strengthening the role of the public institutions in FM capacity building through ongoing reforms.

The PFMU has been set up in the MoF and staffed with qualified personnel to provide financial management support for all projects. Entity Level Weak fiduciary, monitoring H To address fiduciary risk, the No S and enforcement arrangements PFMU will be responsible for 35

Type of Risk Risk Risk Mitigating Conditions for Residual Rating Measures/Remarks Negotiation or Risk Rating Effectiveness (Yes/No) within the LTA financial management.

Project Level Being the first Bank project H No M for LTA , there is the risk The involvement of the PFMU in associated with inexperience financial management will and lack familiarity with IDA minimize this risk. procedures.

Overall IR H Control Risk Budgeting Delays in preparing detailed H The PFMU tasked with FM No S budget estimates and annual responsibilities will assist in work plans. finalizing the budgets. Accounting M The financial management No M Workload challenges within responsibility will be done through the PFMU. the PFMU, which is adequately staffed and technically competent. But since it is responsible for all IDA projects this can be a challenge.

Internal Controls/Internal Auditing M No M The PFMU has a qualified Internal Risk of non compliance with Auditor who will oversee the internal control procedures. control environment of the project. In addition it has adopted an IDA funded Operational & Procedures Manual (OM) will provide guidelines on policies and procedures.

Funds Flow Possible delays in processing M This risk is minimized because the No M withdrawal applications PFMU will be responsible for leading problems in honouring preparing and submitting payments to third parties. withdrawal application and the Unit is familiar with Bank processes.

Financial Reporting Quality and timeliness in M The PFMU operates an efficient No M submitting IFR and other computerized system capable of reports. generating reliable reports.

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Type of Risk Risk Risk Mitigating Conditions for Residual Rating Measures/Remarks Negotiation or Risk Rating Effectiveness (Yes/No)

Auditing Delays in the submission of S To ensure timeliness of audit No M audit reports and the compliance, the engagement of an timeliness of management acceptable auditor will be done 6 follow up on audit issues. months after effectiveness.

Procurement

1. The LTA staff lack capacity H The PIU will provide on-the-job No M to undertake the proposed training to the LTA and MOPT, the procurement work under the Committee staff and to the project. They do not have evaluation committee members. experience in international The PIU will be responsible to procurement or procurement provide assistance in the preparation under World Bank of bidding documents, request for procurement guidelines proposal, bid evaluation report and contract agreements; and An initial training in procurement under the World Bank Guidelines will also be provided by the Bank staff during the project launch workshop

2. The evaluation committee M PIU will be providing on job NO L members are not familiar with training to evaluation committee international procurement members. In addition, a detailed procedures, and may obstruct Procurement Manual (a volume in or delay the procurement the PIM) will be prepared by the process, especially the selected consultant prior to credit n evaluation of bids and effectiveness. The procurement consultants’ proposals volume of the PIM will include inter alia: (a) TORs and qualifications requirements for procurement staff and procurement advisor, evaluation committee members, (b) conflict of interest disclosure forms (for LTA staff and evaluation committee members to sign prior to each evaluation),

3. Lack of awareness of M Carry out aggressive public No L procurement opportunities awareness programs using various available in the project for media, such as newspapers, goods and services brochures, radio, TV, project web- site, etc

H – High S – Substantial M – Modest L – Low

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Strengths and weaknesses of the Financial Management System

Strengths:

13. The project FM is strengthened by the involvement of the PFMU. The project financial management is strengthened primarily by the involvement of the PFMU which has satisfactorily supported the financial implementation arrangements of project in the Liberia portfolio. The Unit has a centralized accounting unit which handles all financial management for most of the IDA and other donor-funded projects in Liberia. The unit is very familiar with the key requirements for implementing IDA projects and has instituted policies and programs which are acceptable to the IDA. 14. The Internal Auditor will be given oversight responsibility of the project. The oversight responsibility of the Internal Auditor of the PFMU will also help to strengthen fiduciary compliance, although the staffing capacity will have to be enhanced to ensure regular supervision. Currently transaction processing is based on the use of Sun Accounting System software which has been customized to suit the day-to-day transaction processing at the unit, and generate financial reports acceptable to the IDA.

Weaknesses:

15. As in other post-conflict environments, the overall fiduciary environment in Liberia is weak. The major weakness is due to the lack of experience of the LTA in implementing donor funded projects and knowledge in IDA procedure and processes.. These limitations can lead to delays, errors and instances of non compliance with eligibility criteria and other financial convents as stated in the Grant Agreement. It is to address this weakness that the project is relying on the PFMU’s staff and its financial management capabilities to provide technical support during implementation and supervision missions.

Project Financial Management

16. Project FM will be managed by the PFMU. The project will be implemented by the LTA through the Project Implementation Unit. However, the financial management functions and responsibilities will be handled by the PFMU of the Ministry of Finance. The working relationship and the respective responsibilities between the PFMU and the LTA Project Unit will be outlined in a Memorandum of Understanding to be signed between the parties

17. The PFMU has a Unit Manager/ Head who is responsible for ensuring the overall direction and direction of work at the unit. Under the direction and supervision of the Unit Manager, the entire PFMU accounting team led by the Project Accountant, is responsible for all the day-to-day financial management functions at the Unit, including budgeting, keeping adequate books and records, recording transactions correctly and ensuring that periodic management reports are produced to facilitate management decisions.

Budgeting Arrangements

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18. The LTA through the PIU/ Project Coordinator is responsible for preparing annual budgets and work plans. The LTA is responsible for preparing annual budgets and work plans. Budgets and work plans will be based on agreed programs and components as outlined in the Project Paper. The budget will be done and supervised by the PFMU staff and on an annual basis the budget and work plans will be reviewed jointly by the LTA and the PFMU and copied to the IDA for approval.

Accounting Arrangements

19. PFMU will work in collaboration with the accounts staff of the LTA. The Unit Manager of the PFMU will be responsible for overall financial management of the project working in collaboration with the accounts staff of the LTA to facilitate processing of transactions. The PFMU is adequately staffed with personnel that have the requisite qualification and experiences needed for project implementation. The currently staff numbers ensure a fairly balanced distribution of workload and adequate segregation of duties and responsibilities. The processes and procedures for receiving invoices and transaction processing for accounting will be done in line with the procedures as documented in the IDA approved Financial Procedures Manual (FPM) of the PFMU.

20. The PFMU uses Sun Accounting package. The PFMU uses Sun Accounting package and our assessment indicates that it is suitable for recording all accounting transactions and reporting correctly the assets and liabilities of different projects and can be relied upon for effective processing of accounting data.

Internal Control & Internal Auditing

21. The internal auditor will be responsible for ensuring that the control environment for implementation is satisfactory. The internal auditor of the PFMU will be responsible for ensuring that the control environment for implementation is adequate and satisfactory. In addition, project implementation will seek to comply with the internal control procedures of the PFMU as documented in the Financial Procedures Manual (FPM).

22. Duties of the internal auditor are indicated in an Internal Audit Manual. The duties and responsibilities of the internal auditor are documented in an Internal Audit Manual and these include reviewing the internal control systems of the all IDA projects under the supervision of the PFMU.

Funds Flow Arrangements

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23. The project is expected to be initially financed through two PPAs of the equivalent US$1.5 million and US$ 5 million to be disbursed over a 15 month period. For the first PPA disbursements into the Designated Account will be through the submission of approved withdrawal applications for the initial deposit and subsequent replenishment as per the Disbursement Letter. Banking and payment processing will be managed centrally by the PFMU in order to ensure adequate control and financial monitoring. All approvals and processing of payments will be done at the LTA/ level and supporting documents transferred to the PFMU for processing for payment to third parties. Payments under the second PPA were through Direct payment to the Central billing party of Cable Consortium ACE.

Disbursement Arrangements

24. The project, initially being financed through two PPAs in the total sum of US$6.5 million, will establish a Designated Account(s) with a Commercial Bank(s) acceptable to the Bank. The project will use direct payment for component 1 (a) where all withdrawals will be made directly to ACE. Proceeds of the remaining Credit will be released into the Designated Account(s) after submission of approved withdrawal applications. Banking and processing of eligible expenditure payments will be managed by the authorized signatories. The project will use transaction-based disbursements though the Statements of Expenditures (SOEs) on the sources and uses of project funds. A forecast of the first4 months expenditures expected to be made from the DA will form the basis the DA ceiling, which has been set at US$400,000. The advance up to the DA ceiling will be made upon effectiveness and that the Recipient’s request and subsequent advances to the DA will be made upon providing documentation on the use of the initial/previous advance. Withdrawal applications shall be submitted to the Bank quarterly. Supporting documentation will be retained by the implementing agencies for review by the IDA missions and external auditors.

25. Retroactive Financing: Approximately US$1 million will be disbursed under the retroactive financing mechanism for payments made prior to the expected signing of the Financing Agreement but on or after November 1, 2010 by the Government of Liberia from its own resources for the Consortium Fee under component 1.

26. The Financing Agreement stipulated 4 disbursement categories, comprising seven types of Eligible Expenditures, and methods of disbursement will include direct payments, reimbursements, advance, and special commitments.

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Table 3.2 Allocation of Credit Proceeds:

Category Category Amount of Grant Percentage of Expenditures Allocated (expressed in to be Financed USD) 1 Consortium Fee in ACE under Component 15 million 100% 1.1 2 Goods, works and consultants’ services for 4.1million 100% the Project, training and workshops under component 2 and 3 and Operating costs

3 Refund of Project Preparation Advances [6.5 million] Total [25.6million]

27. The Bank’s FM team will periodically assess the adequacy of financial management systems and this will form the basis of any change in disbursement methods. Additional instructions for disbursements and operating the Designated Account will be provided in a Disbursement Letter issued for this project.

Financial Reporting Arrangements

28. The Project Accountant of the PFMU will be responsible for generating quarterly unaudited Financial Reports Due to the Bank 45 days after the end of each quarter. The Project Accountant of the PFMU, working under the direct supervision of the Head of the PFMU will be responsible for generating quarterly Interim unaudited Financial Reports (IFRs) and any other financial reports as may be required during implementation. Formats of the various periodic financial monitoring reports to be generated from the financial management system have been developed and discussed with the PFMU. The financial reports have been designed to provide relevant and timely information to the project management, implementing agencies, and various stakeholders involved in monitoring the project’s performance. The FM assessment of the accounting package indicates the systems in place will be able to generate these reports.

Auditing

29. Due to capacity constraints Auditing will be sub-contracted to a private firm. The Auditor General of Liberia is primarily responsible for the auditing of all government projects; however due to capacity constraints it is usual for the Auditor General to subcontract the audit of donor funded projects to private firms. Under the MoU between the PFMU and the MOPT this arrangement will be followed subject to the Bank’s necessary procurement and technical clearance of the TOR for the engagement of the audit firms. The project needs to be audited at the end of each fiscal year. The audit report needs to be sent to the Bank six months after the end of each fiscal year.

Supervision plan

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30. The FM supervision mission’s objectives will include that of ensuring that strong financial management systems are maintained for the project throughout project tenure. The supervision will include desk reviews of IFR and SOE returns, review of audit reports and evaluation of the efficiency of the payment processing and fund flow arrangements. A major focus of supervision will be to review the technical competence of the PFMU staff in preparing accounts and generating credible reports which can be substantiated by the records and a review of the role of internal audit in ensuring compliance.

Conclusion

31. Our assessment of the project’s financial management arrangements being implemented by the PFMU as documented in the preceding paragraphs indicates that the systems satisfy the Bank’s minimum requirements under OP/BP10.02.

32. The overall financial risk rating for the project is not more than substantial.

Procurement

33. For component 1 (a) related to payment of membership fee to ACE, Bank procurement rules are not applicable. Indeed, IDA funding for component 1 (a) on international connectivity does not go towards a procurable item subject to compliance with World Bank procurement Guidelines. This is because such funding is for membership fees (paid in different installments) against a set of rights including use of a certain amount of capacity at preferred rates and a share of ownership of an indivisible cable infrastructure asset.

34. For other components of the project Procurements will be carried out in accordance to World Bank guidelines. Procurement for the proposed program would be carried out in accordance with the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 2006 and May 2010; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006 and May 2010, the IDA Anticorruption Guidelines dated July 1, 2005 and as amended through October 15, 2006; and the provisions stipulated in the Grant Agreement and Legal Agreements of each project.

35. Procurement Assessments: A procurement assessment of the capacity of the LTA to undertake project procurement was conducted using the web-based Procurement Risk Assessment Management System (P-RAMS) and is included in the project files. LTA does not have adequate experience and capacity to carry out procurement activities related to the proposed project. Procurement for the two components under the project will be handled by the PIU (yet to be formed) who will coordinate project implementation, procurement and will coordinate with PFMU for financial management. LTA initially depended on their own procurement unit staff to help them start with the procurement process for critical packages. LTA does not have a procurement planning process and knowledge of Bank’s procurement and consultant guidelines, which may delay bidding/selection process and contract management. Based on these findings

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the following mitigating measures were proposed and agreed upon: (a) LTA to seek initial support from the Procurement Specialist of their procurement unit; (b) select a Procurement Specialist with relevant experience in World Bank procurement policies and procedures; The LTA will also recruit procurement advisor for short period to provide on-the-job training to PIU procurement specialist as well as LTA and MOPT senior management who may participate as evaluation committee members for the selection of various consultants; (c) regular and ad-hoc trainings in the Bank’ procurement policies and procedures by the Bank’s procurement specialists; (d) regular support, guidance, supervision by the Bank’s procurement specialists during the Project implementation; and (e) procedures that stipulated in the Project Implementation Manual that include delegation of approval authorities; internal guidelines for recordkeeping of procurement documents for Bank-financed contracts; procurement policies and procedures to be followed; templates of Bank’s Standard Bidding documents and Request for Proposals; discuss anticorruption guidelines and include provisions related to disclosure of conflict of interests, code of ethics for evaluation committee. The procurement plan covering the first 18 months of project implementation has been prepared and sent to the Bank for its approval. It will be updated at least annually (or as required) to reflect project implementation needs.

36. The procurement methods and prior review thresholds are indicated in the Table below.

Table 3.3 Procurement Thresholds Prior Review Thresholds Procurement Method Thresholds Proposed (US$) Proposed US$ Least Individual SSS ICB DC Shopping QCBS QBS CQS Cost Consultant Goods $50,000 and first ≥75,00 TBD <0.075 ------(Including shopping contract Design, Supply and Installation) Consulting >100,000 for Firms - - - default TBD <100, TBD TBD TBD Services 000 25,000 for individuals

First Individual and first Firm Contracts

SSS: all (including sole sourcing of individual consultants)

37. Logistic services for international and national symposia, seminars, workshops and other training programs (if needed) would be procured using Shopping procedures. In case of very large

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training programs, exceeding the threshold of $100,000, the procurement would be advertised at least 30 days in advance in the national or international press as appropriate, and documents agreed by the Bank will be used.

38. The Procurement Plan for the project, prepared by LTA, has been reviewed by the Bank and accepted. This plan will be updated annually to reflect the latest circumstances. The Procurement Plan comprises four goods contract and about six QCBS contracts, as indicated in Table 3.3 below. Consulting firms would be required for advisory services procurement in the areas described in Annex II above. Individual consultants might also be required for highly specialized subjects and for support to the implementing Departments as well as the PIU. The World Bank Standard Bidding Documents for all ICB and Standard Request for Proposal Documents for all QCBS contracts will be used in above contracts respectively. For the other contracts the documents agreed by the Bank will be used. Some of the contracts have already been signed or procurements initiated under PPA.

39. The project will be implemented by the LTA. An assessment of the capacity of the LTA to implement procurement actions for the project was carried out by the Bank in October 2010. The environment for conducting procurement under the proposed project was assessed as high risk. The assessment reviewed options for procurement management and the interaction between the staff responsible for procurement, financial management and project management.

40. The key issues and risks concerning procurement have been identified and mitigation measures discussed. Both are tabulated below:

Table 3.4 Procurement risks Risk Description Risk Mitigation Measure Residual Rating Risk Procurement The PIU will provide on-the-job training to the LTA and MOPT, the Committee staff and The LTA staff lack capacity to H to the evaluation committee members. The M undertake the proposed procurement PIU will be responsible to provide assistance work under the project. They do not in the preparation of bidding documents, have experience in international request for proposal, bid evaluation report procurement or procurement under and contract agreements; and An initial World Bank procurement guidelines training in procurement under the World Bank Guidelines will also be provided by the Bank staff during the project launch workshop

The evaluation committee members M PIU will be providing on job training to L are not familiar with international evaluation committee members. In addition, procurement procedures, and may a detailed Procurement Manual (a volume in obstruct or delay the procurement the PIM) will be prepared by the selected process, especially the evaluation of consultant prior to credit n effectiveness. The bids and consultants’ proposals procurement volume of the PIM will include inter alia: (a) TORs and qualifications requirements for procurement staff and procurement advisor, evaluation committee members, (b) conflict of interest disclosure

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forms (for LTA staff and evaluation committee members to sign prior to each evaluation),

Lack of awareness of procurement M Carry out aggressive public awareness L opportunities available in the project programs using various media, such as for goods and services newspapers, brochures, radio, TV, project web-site, etc

41. Anti-Corruption Action Plan: The Bank team intends to maintain customary oversight and will carry out prior review of all major contracts according to the thresholds that will be regularly reviewed and adjusted as needed in the Procurement Plan. Initial set up thresholds are provided in this Annex. The following measures will be carried out to mitigate corruption risk:  Training of fiduciary staff: Starting from the project launch and periodically thereafter customized to procedure and methods that would be required in the next 12 months period. Following the project launch will include on-the-job training during supervision missions and regional training provided by the RPM office for the countries in the region;  Prior review: Intensive and close supervision by Bank procurement accredited staff. In addition, all contract amendments will be subject to prior approval by the Bank;  Publication of Advertisements and Contracts: All publications of advertisements and contract awards, including the results of the awards will be done in accordance with the Guidelines requirements and published in the client connection system, on external websites, i.e. UNDB and dgMarket websites;  Debarred Firms: Appropriate attention will be given to the need to ensure that debarred firms or individuals are not given opportunities to compete for Bank-financed contracts;  Complaints: All complaints by bidders will be diligently addressed and monitored in consultation with the Bank;  Evaluation Committee: The Bank will review and comment on qualifications and experience of proposed members of the Evaluation committee(s) with a view to avoid that unqualified or biased candidates are nominated. All members will require to sign a disclosure form (sample will be included in Operational Manual).  Monitoring of contract awards: All contracts are required to be signed within the validity of the bids/proposals and, in case of prior review contracts, promptly after the no objection is issued. Procurement Plan format shall include information on actual dates (of no objections and award) and will be monitored for cases of delay which will be looked at on a case-by-case basis to identify the reasons. The LTA will maintain up to date procurement records and to be available to all concerned Bank staff, auditors and INT members of the Bank.  Monitoring of Payments: All contracts shall include bank account information. The bank account shall be in the name of the same supplier/consultant that submitted the bid and awarded the contract. Payments to local suppliers -consultants shall be made in local currency only and paid to the accounts of banks located within the country.

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 Timeliness of Payments: Payment to suppliers and consultants will be monitored through semi-annual interim un-audited financial reports (IFRs) to ensure timely payments. The PFMU will maintain a system/database to ensure payments to the suppliers and contractors are paid without delay according to the conditions of the contract. Table 3.5 Procurement Plan:

Estimated Selection Ref. No. Description Type Cost Method Component 1: Supporting Connectivity Seed capital for Universal access 1,000,000.00 Component 2: Creation of an Enabling Environment for Connectivity PPA Divestiture of Government shareholding In CCL 500,000.00 CS QCBS PPA Legal and regulatory safeguards for open access 350,000.00 CS QCBS Project Setting up universal access Fund 500,000.00 CS QCBS Project Advisory support to LTC repositioning in the Market 500,000.00 CS QCBS Project Backbone feasibility and Open Access regime 400,000.00 CS QCBS PPA PPP Advisor 125,000.00 CS IC PPA Legal Advisor to CCL 125,000.00 CS IC Business Advisor to LTC 100,000.00 CS IC Regulatory Advisor LTA 200,000.00 CS QCBS Support for setting up ICT unit in MoPT 180,000.00 CS QCBS ICT Unit manager 50,000.00 CS IC Operationalizing ICT Unit 40,000.00 G S Training/Study Tour LTA 200,000.00 T Training /Study Tour (Ministry) 50,000.00 T Total Component 2 3,320,000.00 Component 3: Project implementation PIU coordinator 240,000.00 CS IC PIU procurement specialist 200,000.00 CS IC International Procurement Specialist 90,000.00 CS IC Support Staff 50,000.00 CS IC Project Operational Manual 50,000.00 CS IC ESMF and RPF 65,000.00 CS CQ EIA 75,000.00 CS CQ M&E 50,000.00 CS CQ Communications 75,000.00 CS CQ Office supply and computers 50,000.00 CS S Rent 200,000.00 PFMU Fee 135,000.00 Total Component 3 1,280,000.00

III. Environmental and Social safeguards

42. The physical cable system will comprise two fiber pairs that provide two separate bi-directional paths (i.e., one fiber in each pair carries signals in the outbound direction and the other fiber in

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the return or inbound direction). The cable system is likely to have a submerged or ‘wet plant’ part, and a ‘dry plant’ part which interfaces at proposed Landing Stations.

Safeguards for Deep Sea11 Activities

43. Deep ocean fiber optic cables are no larger than 17-21 mm diameter – about the size of a domestic garden hose- and are laid mainly upon the surface of the ocean floor (“surface laid”). Sections of the cable (including both wet and dry plants) lie within the territorial waters of the landing parties while remaining sections lie in the exclusive economic zones of such states. [All states concerned are parties to the 1982 United Nations Convention on the Law of the Sea (UNCLOS), and have declared exclusive economic zones of 200 miles. In the exclusive economic zones, states have no sovereign rights but can enforce laws on pollution, taxation, customs and immigration (see figure 1, below). Within their territorial waters, on the other hand, countries have sovereign rights. Foreign nations have the freedom of laying submarine pipes and cables in the exclusive economic zones.

44. After the signing of the Supplier Contract, Alcatel-Lucent conducted a cable route Study to refine the initial route (Cable Route Estimate) and corridor taking into account seabed contours, volcanoes, environmentally sensitive areas (i.e., conservation areas, coral reefs), oil exploration zones and fisheries etc. along the route and included visits to possible landing countries/sites to discuss environmentally sensitive areas, requirements for permits, fisheries etc. Information obtained during this period was instrumental in determining an optimal route design of the cable system which reflects these discussions. Alcatel-Lucent is following up the preliminary survey with a more detailed survey of the seabed to fine-tune the cable route which will also be based on confirmed landing sites (countries are still in the process of finalizing this) and provide more detailed information on the level of bottom trawl fishing and shipping activities (closer to the shore), and deep sea activities, including oil drilling12. The more detailed route survey (“Marine Survey”) is expected to be completed late November.

11 "Deep Sea", as used here, describes areas beyond which cable burial is not required (mainly because threats to the cable from trawling activities are non-existent). This starts usually after 1000/ 1500 meters depth.

12 Alcatel-Lucent has already completed a separate study of oil drilling activities in the region which could be made available to the World Bank. 47

Figure 3.1: Designated ocean zones according to UNCLOS.

45. In general, however, the section of the cable that lies in the deep sea has minimal impact on marine mammals and fish. The threat of whale entanglements has diminished significantly with improvements since 1956 in the design of cable and in the precision with which they can be laid in close conformity with the seabed profile, and without loops and twists.

46. Generally speaking, there are no significant environmental issues concerning fiber cables in the deep sea (significant issues are concentrated on shallow waters and the coastal areas/beach).

47. The extensive studies that take place prior to final cable laying tend to work as effective safeguards against any possible environmental disruption, since in large part they are intended to identify routes for the cable that will avoid seamounts, volcanoes, canyons, vents, seeps, deepwater reefs, dissected terrain – all areas that tend to be associated with higher biological value than the general abyssal plain.

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48. Given that much of the deep ocean lie beyond national jurisdictions, few EIAs for any marine activities have been undertaken in this zone and thus there is little evidence of any environmental issues, except in cases of oil and gas exploration and very deep sea trawling. No specific environmental studies are undertaken for submarine cables; rather the detailed Cable Route Survey effectively serves this purpose. At the surface, pollution of the high seas by oil and wastes discharged from vessels can be effectively controlled if those vessels observe compliance with maritime conventions such as MARPOL.

49. Based on these experiences, it may not be necessary Liberia to conduct EIAs of the deep sea, though this should not deter Liberia from considering in the screening and scoping phases of their EIAs whether there are areas of deep sea traversed by ACE and within the geographical limits of application of its domestic EIA legislation to which attention should be paid.

Safeguards for Shallow Water Activities

50. As the cable gets closer to the shores in water depths shallower than 1,500m, the cable’s diameter may increase to about 40-50 mm due to the need to add protective wire armoring. It may also be necessary to bury the cable to protect it.

51. It is possible, depending on the topology of the country that the 12 nautical miles of territorial waters will straddle between shallow waters and deep sea. It is also likely that there may be fishing and other maritime activities, particularly in the shallow waters which could be disturbed during the route survey and cable laying process (but this is short-lived as the duration of cable- laying operations is usually no more than a few days).

52. The cable landing or Terminal Station is expected to be at the seashore, and requires a building, power feed and a power grounding (earthing) system. The building will typically be 150 to 200 square meters in size with approximately half of this space for equipment and the balance for maintenance, training, and office spaces. The borrower has prepared draft Environmental and Social Management Frameworks (ESMF) (consistent with national laws, any applicable treaty concerning international waters, and OP 4.01) and Resettlement Policy Framework (RPF) for the lateral cables and any associated equipment that will be laid from the junction with the main cable through territorial waters and onto the national shores, and also for the fiber on transmission lines, as required. The seaward limit of coverage for the ESMF is the seaward limit of each country’s EEZ, defined as extending 200 nm (370 km) from the shorelines. The RPF are being prepared in case the project may require land acquisition and resettlement, and/or restricted access to natural resources, although this is not expected based on the preliminary Cable Route Survey work. The ESMF related to the submarine cable has been prepared, disclosed and consulted on before appraisal. Once the specific sites are known, an Environmental and Social Management Plan, for the lateral cable and shore-based facilities, and Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan, if it is determined that these are required, will be prepared as part of project implementation but before the cable is laid. Key

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stakeholders for consultation will include current inhabitants (where applicable) of landing sites, the Environmental Protection Agencies of the client countries, businesses and civil society.

IV. Monitoring & Evaluation

53. The PIU will monitor and evaluate national projects. The will bear the primary responsibility for project monitoring and evaluation (M&E), and, as such, will establish standard formats and guidelines for data collection and reporting, and will organize training sessions for project stakeholders in their use.

54. The first order of indicators that the M&E system will look at shall include lower indicators related to quality, quantity, and time. An M&E system will be set up within the PIU to keep track of and evaluate implementation progress of the proposed IDA project within the broader context of the institutional framework for the telecommunications sector. Although increased geographical reach and reduction of costs at the country level remains the hallmark of success of an enabling environment, the project’s M&E system will seek first to measure results that are closely associated with project activities. Hence, the first order of indicators that the M&E system will look at shall include lower indicators related to quality, quantity, and time (see Annex 1). Ultimately, improvement of laws and decrees by the project activities (component 2) will have positive ripple effects on the whole sector and on service delivery.

55. The PIU will recruit or designate a person responsible for M&E, based on the capacity assessment of the PIU staff right after effectiveness. More specifically, the person responsible for M&E will liaise with all the project’s stakeholders (through designated focal points) to gather relevant information and data regularly.

56. The views of direct beneficiaries will be brought into the monitoring and evaluation process. Comprehensive M&E reporting will be needed to monitor the results and performance of the project. It will involve mainly the direct beneficiaries of project activities, but will be extended to other beneficiaries such as telecommunications operators and private ICT firms, which ultimately are the main beneficiaries of the project’s outcomes. The PIUs will review and validate the reports on performance indicators and recommend corrective action if necessary.

V. Role of Partners

57. USAID is a key partner for this project. Working very closely with USAID support, early efforts to create CCL, develop feasibility study have been conducted by USAID and the Bank Technical Assistance. In addition, USAID is providing key input to defining national connectivity component (defining technical feasibility and costing of backbone) as well as providing support for e-government application and creating demand for bandwidth that will be created by Liberia’s access to ACE.

58. USAID support consists of: (i) providing full time resident advisor support to ministry of planning, ministry championing ICT applications across government, as well as lunching studies

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conducted by international consultants. The Bank team worked closely with USAID in the design of the terms of reference for the study, providing technical input and supporting with validating results. This approach helped fast- tracking project preparation and more effective use of donor resources.

59. The World Bank is collaborating with the work with the African Development Bank and Islamic Bank to develop a seamless communications network for Liberia. The AfDB and the Islamic Development Bank are in the process of assisting the ECOWAS Commission to develop an ECOWAS Wide Area Network (ECOWAN) project to link all Member State Institutions, projects and Government offices via high speed communications network. The World Bank is in discussions with the two institutions to identify areas where the infrastructure networks being developed in the country could complement the World Bank sponsored Program and vice versa. The specific modalities of cooperation and amounts are still under discussion.

60. The World Bank will also coordinate with the ITU. The program will also coordinate with ITU in the area of capacity building for regional regulatory authorities, given existing programs by ITU in this area.

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Annex 4: Operational Risk Assessment Framework (ORAF)

Liberia WARCIP

Project Development Objective(s)

To increase the geographical reach of broadband networks and reduce costs of communications services in Liberia

PDO Level Results 1. Volume of international traffic Indicators: 2. Access to telephone services 3. Access to internet services 4. average monthly price of wholesale international E1 capacity link from capital city to Europe 5. number of direct project beneficiaries, of which female

Risk Category Risk Rating Risk Description Proposed Mitigation Measures

Project Stakeholder Risks MI Tensions within the sector may reduce private sector’s PPP framework would provide value for LTC participating interest in Liberia. in the PPP framework and provide guarantees to operators to invest. In addition the legal framework does not give

advantages to LTC. Finally there is ongoing pre- privatization support to LTC and ongoing strategic advice on how to create value in LTC Implementing Agency Risks MI Government capacity in project implementation and The Bank will fund targeted TA and capacity building fiduciary procedures needs to be developed rapidly. activities as part of the program throughout the project implementation.

Project Risks

 Design MI Design of the project is complex and risky (Public Private The Project benefited from upfront technical studies and Partnership) for ownership and management of landing legal support under PPA This will provide clarity of all station. design issues. Institutional arrangements (role of each institution) have been clarified ahead of Board approval.  Social and Environmental MI The physical component of the Program will be limited to An Environmental and Social Management Framework 52

the building of national terrestrial backbones and the (ESMF) and a Resettlement Policy Framework (RPF) will deployment missing links between the regional network be conducted for the program prior to Project appraisal. The and the national landing points. ESMF and RPF will be reviewed by the World Bank and publicly disclosed in all countries participating in the program. A specific Environmental, Management Plan and Resettlement Action Plan will be prepared as necessary for terrestrial facilities during project implementation, in line with ESMF and RFP, once the locations of those facilities have been identified. Civil works for the first 12-18 month of project implementation should be screened for environmental and social impacts and EAs / EMPs needed for those sites should be ready for disclosure (along with the draft ESMF) before appraisal. During preparation, the project team assessed the capacity of all constituencies Finally, since the Program will involve PPP schemes, appropriate technical clauses will be prepared and included in the biddings/bindings documents for the Private Entity when necessary, to ensure the execution of agreed environmental and social safeguards measures or instruments. All safeguards instruments prepared for the project have been disclosed before Board presentation.  Program and Donor N/A N/A

 Delivery Quality ML The Project expected results depend on many factors The Project includes M&E activities that have been sometimes outside the project’s scope. This may also discussed in details with the clients during preparation. The affect the sustainability of the Program’s achievements. M&E system will ensure an efficient monitoring of results achievement and should prevent major implementation issues. The commitment of the Project’s stakeholders to the new PPP arrangements as well as the institutional and policy framework improvement will ensure sustainability of project results beyond its completion.

Overall Risk Rating at Overall Risk Rating During Comments Preparation Implementation MI Major issues and risks will be dealt with by effectiveness MI through targeted activities financed by the PPF. The MI rating for implementation is mainly due to the risky 53

country and institutional contexts, outside the project scope.

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Annex 5: Implementation Support Plan

1. The World Bank has been collaborating with partners to ensure better broadband access since 2007. Following the Connect Africa Summit (Kigali, 2007), the World Bank has been collaborating with other Development Partners (AUC, AfDB, ITU, ATU) on key strategies and funding to ensure Broadband access in Africa. These commitments were recently re-affirmed during the AU Heads of States Summit (Addis Ababa, 2009) where the World Bank and other Development Partners committed to accelerate with established goals to ensure Africa participates effectively in the digital world.

2. The World Bank has engaged with Development Partners to agree to promote open and competitive access. To mitigate the risks involved in infrastructure development and management, the World Bank has engaged with Development Partners to foster Open and Competitive Access to communications Infrastructure, actively engaging private sector through PPPs, and strengthening policy and regulatory frameworks / institutional capacity to facilitate enabling environment. The Bank has also had extensive engagement with client countries and regional institutions and worked with them to develop detailed feasibility studies to support proposed infrastructure investment decisions.

3. Policy, regulatory, environmental and social safeguards are being put in place prior to full implementation of APL 1. Project Preparation Advances granted to WARCIP APL1 countries are expected to ensure that the policy, regulatory, environmental and social safeguards, as well as requisite capacity are in place before Board. The PPAs are also expected to ensure that the countries have the requisite Transaction, Legal and Regulatory experts to ensure open access, effective structuring of PPPs to own and manage communications infrastructure. Additional resources have been provided to support countries to undertake environmental assessments and to put in place mitigation measures. These activities are in various stages of implementation and expected to be completed before project effectiveness.

4. The team has conducted preliminary assessments of the institutions expected to execute the project. The strategic partnerships and collaboration, combined with active client engagement and upfront preparatory work, are expected to facilitate achievement of the Program Development Objective. Furthermore the team has conducted preliminary assessments of the institutions expected to execute the Program to ensure that they meet the minimum requirements of the World Bank’s fiduciary obligations.

5. The WARCIP team is structuring the WARCIP Program to ensure that direct payments are made to the Cable consortium. Beyond this, and to further mitigate risks, the team is structuring the WARCIP Program to ensure that direct payments are made to the Cable consortium which is managing the submarine cable construction on behalf of consortium members. This will mean that at least 80% of funds targeted for APL1 will be paid directly to the Cable Consortium, and the countries manage less than 20% of the targeted funds which will be used primarily for institutional and implementation support and to improve the enabling environment.

6. FM and Procurement Assessments show that Liberia will need significant support in the initial stages of implementation. Preliminary assessments of both the FM and Procurement Capacity suggest that countries in APL1, while they have the minimum capacity to meet World Bank’s fiduciary obligations, will require significant support during the initial stages of implementation. Arrangements have already been made to solicit support from other World Bank program PIUs in the country and the process to procure fiduciary staff has already been initiated.

What would be the main focus in terms of support to implementation 55

Time Focus Skills Needed Resource Estimate Partner Role First twelve Creation/Strengthening Procurement, FM, $1.5m months of PIUs Program Coordinators Transaction/Legal Experienced Advisory Work Transaction and Legal Teams 12-48 months Divestiture of Gov. Transaction/Legal Shares in SPV Teams

Application of Divestiture Proceeds Other

Implementation Support Plan

7. The Bank team members will be based either in Washington DC or in the Africa region, and will be available to provide timely, efficient and effective implementation support to the client. Formal supervision and field visits will be carried out semi-annually initially, with possibility for annual visits in later years of the project. Detailed inputs from the Bank team are outlined below:

 Technical inputs. Technical telecommunications and regulatory related inputs are required to review bid documents to ensure fair competition through proper technical specifications and fair assessment of the technical aspects of bids. ICT Policy Specialists and regulatory specialists will provide technical support and conduct supervision visits whenever needed.

 Fiduciary requirements and inputs. Training will be provided by the Bank’s financial management specialist and procurement specialist before the commencement of project implementation as needed. The team will also help PASS identify capacity building needs to strengthen its financial management capacity and to improve procurement management efficiency. Both the financial management and the procurement specialist will be based in the region to provide timely support. Formal supervision of financial management will be carried out semi-annually or annually, while procurement supervision will be carried out on a timely basis as required by the client.

 Safeguards. Inputs from an environment specialist and a social specialist may be required, though the project’s social and environmental impacts are limited and client capacity is generally adequate. No field visits are likely to be required, but this will be confirmed - the social and environmental specialists will be available on a need basis.

 Operation. The TTLs will also provide day to day supervision of all operational aspects, as well as coordination with the client and among Bank team members. If needed, a consultant may be used to support this role.

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The main focus of implementation support is summarized below.

Partner Time Focus Resource Estimate Role Project Team leadership, technical and duration procurement review of the bidding ICT Policy Specialist 8 documents and Institutional SWs arrangement and project supervision coordination Procurement training Procurement specialist(s) 2 SWs FM specialist 2 FM training and supervision SWs Social specialist 0.5 SWs Environmental and Social Issues Environmental specialist(s) 0.5 SWs Note: SW – Staff-Week

Staff skill mix required is summarized below. ` Skills Needed Number of Staff Weeks Number of Trips Comments Task team leaders 8 SWs annually Fields trips as DC or Country required. office based Procurement 2 SWs annually Fields trips as Country office based required. Social specialist 0.5 SWs annually Fields trips as Country office based required. Environment specialist 0.5 SWs annually Fields trips as Country office based required. Financial management 2 SWs annually Fields trips as Country office based specialist required. Legal support 1 SW Fields trips as DC based required

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Annex 6: Team Composition

World Bank staff and consultants who worked on the project:

Name Title Unit

Boutheina Guermazi Senior Regulatory Specialist ICT Sector Unit

Mavis Ampah Senior ICT Policy Specialist ICT Sector Unit

Alexandra Bezeredi Regional environmental and Safeguards Advisor AFTQK

Beatrix Allah-Mensah Social Development Specialist AFTCS

Claudia M. Pardiñas Ocaña Sr. Counsel LEGAF

David Satola Sr. Counsel LEGPS

Deo Ndikumana Sr. Operations Officer ACFRI

Doyle Gallegos Lead ICT Policy Specialist ICT Sector Unit

Fatu Karim-Turay Team Assistant AFMSL

Fredrick Yankey Sr. Financial Management Specialist AFTFM

Gurcharan Singh Sr. Procurement Specialist ICT Sector Unit

Harvey Van Veldhuizen Lead Environmental Specialist OPCQC

Ismaila Ceesay Lead Financial Management Specialist AFTFM

Joyce Olubukola Agunbiade Financial Management Specialist AFTFM

Kaoru Kimura Operations Analyst ICT Sector Unit

Kymberly Thompson STT ICT Sector Unit

Marc Jean Lixi Sr. Operations Officer ICT Sector Unit

Maxwell Bruku Dapaah Financial Sector Specialist AFTFM

Michele Ralisoa Noro Senior Program Assistant ICT Sector Unit

Nyaneba E. Nkrumah Sr. Natural Resource Management Specialist AFTEN

Omar Andres Sierra ETC ICT Sector Unit

Rajiv Sondhi Sr. Finance Officer CTRFC

Robert De-graft Hansen Financial Management Specialist AFTFM

Said Al Habsy Operations Advisor AFTRL

Sarah Brierley Consultant ICT Sector Unit

Thomas Watson Consultant AFTQK

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Annex 7: Economic and Financial Analysis

1. Connecting to ACE minimizes transit costs and is most cost-effective long term option. Financial analysis was performed for Liberia. The analysis considered a variety of satellite and fiber options and concluded that a submarine fiber link is the best overall option in terms of long-term cost effectiveness and bandwidth availability. The ACE cable is the best fiber option. The cable has the potential to substantially address by 2012 the urgent need for high capacity access to the international backbone at substantially lower cost than currently available in Liberia via satellite (VSAT). Although upfront costs are higher, the key cost saving with the ACE compared to alternative fiber options is the high cost involved in the purchasing of transit from an existing landing station to the global backbones. The cost of transit on existing African cables linking to Europe (e.g. MainOne or SAT-3) is at least $200/Mbps/month, and most likely to be higher- closer to $500/Mbps/month. By contrast the cost of transit in Europe is much more competitive and is closer to $10/Mbps/month. By participating in ACE, which lands traffic directly in Europe, transit costs to the global backbones are minimized. ACE also has an advantage over the cross-border fiber option in terms of speed and costs and is without the need for independent management, planning and maintenance. The ACE cable design is both “state of the art” and proven, and involves no significant technology risk. The choice of SDH electronics is conservative and has reasonable efficiencies carrying Internet Protocol (IP) traffic. High capacity international connectivity will mitigate the existing technological marginalization of Liberians and bridge the digital divide by expediting broadband rollout, e-Government and e-Services, new media and ICT development in urban and rural Liberia, for the benefit of ordinary Liberians. Specific steps would need to be taken, however, in particular to establish a clear regulatory regime for the landing point, in order to ensure that Liberia fully benefits from the potential connectivity that the cable offers.

2. Fiber cable has an advantage over satellite in terms of price and quality of service. The fiber option has the advantage of high speed and quality, and low cost. There is a single point of purchase and low local management overhead. In the ACE case the Consortium is already in place. The disadvantage of fiber connection in the ACE solution is the high CAPEX. However, this solution in the long term offers the lowest prices.

3. Assumptions of financial analysis. Financial comparisons of satellite versus fiber options were done using the following assumptions:  Study period: 10 years  Capital costs for ACE: 25m  Initial capacity of ACE: 5.9 Gbps, using an average of 2.5Gbps over the study period.  Annual operating and maintenance costs: 3% of CAPEX  Average geostationary satellite transponder costs: $2000 per month per Mbps.  Cost for capacity on existing cables: MainOne and SAT-3: $280-800 per month per Mbps.

4. Connecting to ACE will see Liberia breakeven between 2016 and 2017 with an NPV to 2025 of US $19.5 million. Initial calculations indicated that with a dedicated landing station in Liberia, breakeven would take place at a later date, with an Internal Rate of Return below 2%. However a reassessment of the potential market demand and bandwidth pricing was carried out in January 2011 to take into account the recently observed trends in East and Southern Africa where new competitive submarine cables have now been in place for over a year and where data has recently been made public. Due to the competitive pressure there, bandwidth prices have fallen substantially and consumption/demand has increased dramatically. Bandwidth pricing in the region is now moving toward $50-$100/month/Mbps at a wholesale level (for long-term - i.e, 15 year, IRU type pricing), producing much higher levels of demand. This has already necessitated the commissioning of upgrades to submarine cable capacity, much earlier than initially planned. Since there are likely to be competitive cable landings in West Africa that will bring down prices and result in requirements

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for additional bandwidth, the East African trends in bandwidth uptake levels and pricing were used in the economic model to revise the estimated Internal Rate of Return (IRR) to between 4.4% ($50/Mbps/month) and 12.4% ($100/Mbps/month). The assumptions for these calculations are as follows: wholsesale bandwidth pricing between $50 and 100/Mbps/month and ultimate uptake forecast of 7 Gbps. The final breakeven year will depend on actual capacity uptake and the wholesale price of bandwidth. After 2017 at the latest, project would be cash-flow positive and substantial revenues would be made if these wholesale pricing levels are maintained. Investment data was calculated for based on a discount rate of 15%. Under these assumptions NPV to 2025 with dedicated cable is $ US 19.54 million for Liberia. On this basis full membership in ACE, if accompanied by robust regulation by LTA to ensure competitive pricing releases demand, has potential to provide low cost international access to a broad range of Liberians.

5. Previous experience with fiber cables shows a rapid increase in demand when price of bandwidth decreases. The effect that lowering the cost of access has on the amount of bandwidth sold can be modeled using a price elasticity curve. The SAT-3 example (SAT-3 is between Portugal and South Africa) shows a clear relationship between volume and tariffs, if the cost on SAT-3 were dropped to US$250 per month. The chart below compares the price of access on SAT-3 (per E1 half-circuit to Sessimbra, Portugal) against the volume of international bandwidth sold. This shows the effect that price decreases between 2004 and 2006 have had on the volume of bandwidth sold in each of four countries where comparable data was available. The increase in international bandwidth demand increases because broadband services first become more viable for operators to deploy, and secondly because as retail prices decrease the service become increasingly affordable and penetration increases. Réunion is included here as a particularly clear case which shows that when price was US$20,466 per Mb the volume was just 4 Mbps, but when it decreased to US$1,967 volume increased to 180 Mbps. If the price were to drop further to US$500 per Mb, it is projected that the volume would increase to 1.656 Gbps. If the price were to decrease to US$250 per Mbps per month, the volume is projected to grow to 5.02 Gbps. This increase comes about because of the multiplier effects: monthly prices for broadband decrease, in turn improving affordability and increasing uptake of services.

Figure 7.1: Bandwidth Price Elasticity

Price Elasticity On Sat-3 Ghana Nigeria 45,000 Reunion South Africa Nigeria PE South Africa PE 40,000 Ghana PE Reunion PE 35,000 30,000 25,000 20,000 15,000 10,000 Price (US$ per month) per (US$ Price 5,000 - - 1,000 2,000 3,000 4,000 5,000 Volume (Mbps)

6. The predicted bandwidth demand for Liberia with fiber access is over 7000 Mbps compared to 500 with expanded geostationary satellite and 900 with inclined satellite. In this analysis it is assumed that there is no effective limit on the amount of satellite bandwidth that can be purchased. This is unlikely given that many countries in the region will be switching from satellite to fiber with the launch of ACE and other 60

cables, and satellites with West African footprints continue to be launched. Extrapolating current usage and growth in users could provide an indication of future bandwidth demand, however due to the current high cost of service (relative to income levels) and the relatively slow speeds available, this would tend to substantially underestimate pent-up demand when bandwidth availability improves and costs decrease. Given the trends worldwide in broadband adoption levels, and especially encouraged by the explosion of mobile broadband13 (3G), the estimates used appear relatively conservative, especially toward the end of the analysis period (2021), by which date it is expected that almost every mobile phone user would have access to broadband on their handset. However, this is dependent on the introduction of high-bit-rate mobile services into the market, and unless increased competition is introduced into the sector, the operators may not be encouraged to introduce these types of new services.

7. Bandwidth requirement per user has the potential to advance rapidly with further social and economic development, especially with the development of tourism and BPO sector. There can be a wide divergence in forecasting bandwidth requirements per user. The last 10 years has seen massive increases in end-user bandwidth demand resulting from the popularity of social network, image and video sites such as FaceBook and YouTube. Fortunately these bandwidth demands have kept pace with technology developments which are now seeing domestic broadband services delivering 100Mbps and even 1Gbps in some advanced countries. If we assume that Liberia will have the opportunity catch up at least partially with these developments over the next decade then we can expect a relatively high level of growth in bandwidth use. There are also some special sources of additional demand which could also significantly increase international transmission requirement: Tourism and development of Business Process Outsourcing (BPO) sector. Although tourism is comparatively small in Liberia, it could increase significantly in future. Tourism creates demand for international telecommunication services through demand of administrative and marketing service as well as demand for internet access, international calls and money transactions. BPO and Internet call centre service companies can generate significantly more Internet traffic if bandwidth prices can be reduced and fiber connections made available. Sourcing channels for television rebroadcasting is currently carried out by satellite but could be substituted by fiber if bandwidth prices are sufficiently competitive.

8. Fast internet has been shown to boost the productivity of firms as well as generate employment opportunities. New growth theory suggests that long-run economic growth emanates from spillover arising from innovation and investment in new technologies. Fast internet access can be considered one important new technology, and broadband is increasingly recognized to promote productivity and boost aggregate economic growth (OECD, 2003). Analytical studies have shown that firms using standard broadband (defined as connection speeds above 256 Kbps (OECD, 2002)) were on average 10 percent more productive than firms using dial-up internet access. Faster internet speeds are also causally related to increased employment opportunities with analysis showing that for every one percentage point increase in broadband penetration within a region, employment increases by 0.2-0.3 percent per year for the private, non-farm economy (Crandall et al, 2007). Indeed, studies show a clear positive relationship between employment and broadband penetration in the manufacturing and service industries, with business growth shown to be particularly significant for larger businesses and for IT intensive sector (Lehr et al, 2006). The results of these studies support the hypothesis that broadband penetration enhances economic activity. Increased broadband speeds and less expensive data access have the potential to promote economic activities in West Africa, supporting the growth and productivity of businesses and gradual transfer of employment from agricultural to service industries and expansion of the region’s nascent ICT and Business Process Outsourcing sector.

13 3G data service uptake from the consumer has been massive and unprecedented in other developing countries such as Kenya 61