A COUNTRY FRAMEWORK REPORT 34113 Public Disclosure Authorized Private Solutions for Infrastructure Public Disclosure Authorized in Angola Public Disclosure Authorized Public Disclosure Authorized PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY THE WORLD BANK Private Solutions for Infrastructure in Angola Private Solutions for Infrastructure in Angola A Country Framework Report The Public-Private Infrastructure Advisory Facility and the World Bank Group © 2005 The findings, interpretations, and conclusions expressed herein are those of The International Bank for Reconstruction the author(s) and do not necessarily reflect the views of the Board of Execu- and Development/ THE WORLD BANK tive Directors of the World Bank or the governments they represent. 1818 H Street, NW The World Bank does not guarantee the accuracy of the data included in Washington, DC 20433 this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street, NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail [email protected] Cover photos: Josef Hadar/World Bank (top); José Martins, consultant team member ISBN 0-8213-6017-5 Library of Congress Cataloging-in-Publication Data has been applied for. Contents Acronyms and Abbreviations ix Acknowledgments xi Executive Summary 1 1. Introduction 11 Study Goal 11 2. Country Context and Role of PPI 13 Economic and Political Setting 13 Infrastructure in Angola 15 Potential Role of Private Participation in Infrastructure 16 Critical Importance of Independent Regulation 17 Advantages of PPI and Range of Possible Forms 18 PPI Investor Criteria 19 3. Crosscutting Issues 21 Economic Environment 21 Legal and Regulatory Environment 26 4. Electricity and Gas 38 Introduction to the Electricity Sector 38 Key Organizations 38 Legal and Regulatory Framework 39 Current Situation in the Electricity Sector 40 PPI Opportunities in Electricity 45 Identification of Barriers to PPI in Electricity 49 Introduction to the Gas Sector 52 Gas Sector Structure 52 Legal and Regulatory Issues 53 Current Situation in the Gas Sector 53 Future PPI Opportunities 55 Conclusions on Gas 56 5. Water and Sanitation 59 Introduction 59 Legal and Regulatory Framework for the Water Sector 59 Water Sector Structure 60 v Contents Current Situation in the Urban Sector 61 Water Supply and Sanitation in Rural Centers 64 PPI Opportunities 65 PPI Constraints—Water and Sanitation 70 Solid Waste Collection in Luanda 70 6. Transport 75 Roads and Highways—Organizations 75 Legal and Regulatory Framework 75 Roads and Highways—Current Situation 75 PPI Opportunities in Roads 76 PPI Barriers in Roads and Highways 78 Railways—Sector Structure and Key Organizations 79 Legal and Regulatory Framework 79 Railways—Current Situation 80 PPI Opportunities in Railways 82 PPI Barriers in Railways 83 Ports—Sector Structure and Key Organizations 84 Legal and Regulatory Framework 84 Ports Sector—Current Situation 84 PPI Opportunities in Ports 85 PPI Barriers in Ports 87 Airports—Sector Structure and Key Organizations 87 Legal and Regulatory Framework 87 Airports Sector—Current Situation 87 PPI Opportunities in Airports 89 PPI Barriers in Airports 90 7. Telecommunications 91 Scope of Sector 91 Key Organizations and Sector Structure 92 Legal and Regulatory Framework 93 Current Situation in the Sector 95 PPI Opportunities in Telecommunications 100 Identification of PPI Barriers 100 8. Promoting PPI: Key Measures and Recommendations 102 Crosscutting Issues 102 Electricity 105 Water, Sanitation, and Solid Waste 109 Transport 113 Telecommunications 115 Appendixes Appendix A: Independent Regulation 121 Appendix B: Multi-Utility Regulator 123 Appendix C: Targeting Subsidies 125 Appendix D: Power Plants 129 Appendix E: Telecommunications White Paper Privatization Steps 131 Appendix F: Telecommunications Sector Liberalization 132 Appendix G: Angola Telecom Sales 133 vi Contents Appendix H: PPI Approval and Post-Approval Issues 135 Appendix I: Angola Power Sector (Map) 137 Appendix J: Angola Water Sector (Map) 138 Appendix K: Angola Transport Sector Potential PPI Opportunities (Map) 139 Appendix L: Angola Telecommunications Sector Proposed Development of Transmission Backbone (Map) 140 Figures 2.1 Forms of PPI 18 3.1 Approval Process for Investments (US$ 100,000 to US$ 5 million) 35 3.2 Approval Process for Investments (US$ 5 million to US$ 50 million) 35 3.3 Contractual Regime 36 3.4 Post-approval Process 36 4.1 Power Sector Institutions 39 5.1 Institutional Arrangements for PPI in Urban Water in Mozambique 67 6.1 Road Network in Angola 76 6.2 Port of Luanda Performance 84 6.3 Port of Luanda Forecasts 85 7.1 Growth in Sales of AT by Service 98 Tables 1.1 PPI Investor Criteria 3 2.1 Educational Expenditures 14 2.2 Main Economic Indicators 14 2.3 SADC Infrastructure Indicators 15 2.4 PPI Experience in Angola 16 2.5 PPI Investor Criteria 19 2.6 Increasing Requirements for Satisfaction of PPI Criteria 20 3.1 Provisions of Law on Tax and Customs Incentives for Private Investment 24 3.2 Main Legal Instruments Relevant to PPI Investors 27 3.3 Infrastructure Sector Legal Instruments 28 4.1 Key Energy Statistics 41 4.2 Forecast Growth in Generation, 2006–2016 41 4.3 ENE’s Power Generation Capacity 42 4.4 ENE Rehabilitation Investment Plan 43 4.5 Low Voltage Electricity Tariffs 43 4.6 EDEL Profit/Loss 2001 44 4.7 ENE Profit/Loss 2000 44 4.8 PPI Constraints in Electricity 51 5.1 PPI Constraints in Water and Sanitation 71 6.1 Road Network by Type 76 6.2 Rail Rolling Stock by Company 81 6.3 Operating and Financial Data by Rail Company 81 6.4 Operating and Financial Statistics of Angolan Ports, 2001 85 vii Contents 6.5 Main Airport Network 88 6.6 Airport Passengers and Cargo Traffic, 2000 88 7.1 Telecommunications Act 93 7.2 Forecast of Fixed and Mobile Markets 96 7.3 SADC Countries: Comparative Teledensity 97 7.4 Estimate for Active Mobile Customers 99 8.1 Recommendations: Crosscutting Issues 104 8.2 Recommendations: Electricity 108 8.3 Recommendations: Water and Sanitation 110 8.4 Recommendations: Transport 116 8.5 Recommendations: Telecommunications 119 A1.1 Safeguards to Ensure “Independence” 122 C1.1 Designing Incentive Structures 126 C1.2 Structuring Subsidy Flows 127 C1.3 Contract Procurement 127 D1.1 Hydro Power Plants in Angola 129 D1.2 Thermal Power Plants in Angola 130 E1.1 Privatization Steps Proposed in the Telecommunications White Paper 131 F1.1 Preparation for Liberalization 132 F1.2 MCT Strategies and Liberalization 132 G1.1 Angola Telecom Sales 133 G1.2 Angola Telecom UTT Sales 134 Boxes 3.1 Infrastructure Political Risk Factors of Concern to PPI Investors 22 3.2 Improved Accounting and Fiscal Discipline in Public Enterprises 22 3.3 Angolan Taxation Policy and Levels 23 3.4 Concessionary Finance for Infrastructure Investments 25 4.1 Electricity Supply in Huambo 47 4.2 Guatemala: Large-Scale Rural Electricity Implementation 48 4.3 Cambodia: Small Rural Electricity Enterprises 49 5.1 Luanda’s Chafarizes 63 5.2 Technologies to Provide Different Levels of Water Supply Service 66 5.3 PPI to Disseminate Alternative Water Delivery Technologies 68 5.4 Community Involvement in Solid Waste Management in Luanda 72 6.1 Private Sector Involvement in Road Maintenance and Construction in Mozambique 79 6.2 Recent Trends in Private Participation in Port Facilities 86 6.3 Recent Trends in Private Participation in the Airport Sector 90 H1.1 Legal Fees and Registration 135 viii Acronyms and Abbreviations ANIP National Private Investment Agency DEORSA Western Electric Distribution Company, (Agência Nacional de Investimento Guatemala (Distribuidora Eléctrica de Privado) Oriente, S.A) AT Angola Telecom DNA National Directorate of Water (Direcção bbl Barrel Nacional de Águas) BCI Banco de Comércio e Indústria DNE National Directorate of Electricity bcmBillion cubic meters (Direcção Nacional de Electricidade) bn Billion DNT National Directorate of BNA National Bank of Angola (Banco Nacional Telecommunications (Direcção de Angola) Nacional das Telecomunicações) BOO Build-own-operate EAIF Emerging Africa Infrastructure Fund BOT Build-operate-transfer EDC Cambodia Electric Power Company BPC Banco de Poupança e Crédito (Electricité du Cambodge) CCGT Combined-cycle gas turbine EDEL Electricity Distribution Company of CFB Railway Company of Benguela Luanda (Empresa de Distribuição de (Companhia de Caminhos de Ferro Electricidade de Luanda, E.P.) de Benguela) ELISAL Sanitation and Wastewater Company CFL Railway Company of Luanda of Luanda (Empresa de Limpeza e (Empresa de Caminhos de Ferro