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Document o f The World Bank
FOR OFFICIAL USE ONLY Report No: 25561
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 6.70 MILLION (USS9.12 MILLION
EQUIVALENT)
TO THE
PEOPLE'S REPUBLIC OF BANGLADESH
FOR THE
TELECOMMUNICATIONS TECHNICAL ASSISTANCE PROJECT
May 20,2003
Global Information and Communication Technologies Bangladesh
Country Unit South Asia Region
This document has a restricted distribution and inay be used by
recipients only in the performance of their official duties. I t s
contents inay not otherwise be disclosed without World Bank
authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective May 1,2003)
Currency Unit = Bangladesh Taka (Tk.) Tk.1 = US$0.1219
U S S l = Tk.58.20
BTRC BTTB CAS ccTLD C I D A CPAR
DFID FMR GOB I A IC I C T IDA I IFC ISP JBIC M O F MOPT N
Shopping N C B PIP PIS P M C P M T PPIAF PSC PSTN QCBS SA SMMS TAPP
TRB U N D P VOIP W T O
CQ
FISCAL YEAR July 1 -- June30
ABBREVIATIONS AND ACRONYMS Bangladesh Telecommunication
Regulatory Commission Bangladesh Telegraph and Telephone Board
Country Assistance Strategy Country Code Top Level Domain Canadian
International Development Agency Country Procurement Assessment
Report Consultant Qualifications Department for Intemational
Development Financial Management Report Govemment o f Bangladesh
Implementing Agency Individual Consultant Information and
Communications Technologies Intemational Development Association
Infrastructure Investment Facilitation Center Intemet Service
Provider Japan Bank for Intemational Cooperation Ministry o f
Finance Ministry o f Post and Telecommunications National Shopping
National Competitive Bidding Project Implementation Plan Project
Implementation Specialist Project Management Consultants Project
Management Team Public Private Infrastructure Advisory Facil ity
Project Steering Committee Public Switched Telecommunications
Network Quality and Cost Based Selection Special Account Spectrum
Management and Monitoring System Technical Assistance Project
Proforma Telecommunications Regulatory Board United Nations
Development Program Voice-over Intemet Protocol Wor ld Trade
Organization
Vice President: Mieko Nishimizu
Sector ManagedDirector: Pierre A. Guislain Rajesh B. Pradhan
Country ManagedDirector: Frederick Thomas Temple
Task Team LeadedTask Manager:
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FOR OFTICLAL USE ONLY
BANGLADESH TELECOMMUNICATIONS TECHNICAL ASSISTANCE PROJECT
CONTENTS
A. Project Development Objective
1. Project development objective 2. Key performance
indicators
B. Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal
supported by the project 2. Ma in sector issues and Government
strategy 3. Sector issues to be addressed by the project and
strategic choices
C. Project Description Summary
1. Project components 2. Key policy and institutional reforms
supported by the project 3. Benefits and target population 4.
Institutional and implementation arrangements
D. Project Rationale
1. Project alternatives considered and reasons for rejection 2.
Major related projects financed by the Bank andor other development
agencies 3. Lessons learned and reflected in the project design 4.
Indications o f borrower commitment and ownership 5 . Value added o
f Bank support in this project
E. Summary Project Analysis
1. Economic 2. Financial 3. Technical 4. Institutional 5 .
Environmental 6. Social 7. Safeguard Policies
F. Sustainability and Risks
1. Sustainability 2. Critical r i sks
Page
2 2
2 3 9
11 14 15 15
17 18 18 19 20
20 20 21 21 22 22 23
23 33
This document has a restricted distribution and may be used by
recipients only in the performance of their official duties. I t s
contents may not be otherwise disclosed without W o r l d Bank
authorization.
-
3. Possible controversial aspects 25
G. Main Conditions
1. Effectiveness Condition 2. Other
H. Readiness for Implementation
I. Compliance with Bank Policies
Annexes
Annex 1: Project Design Summary Annex 2: Detailed Project
Description Annex 3: Estimated Project Costs Annex 4: Fiscal Impact
o f Sector Reform Annex 5: Financial Summary for Revenue-Earning
Project Entities, or Financial Summary Annex 6: (A) Procurement
Arrangements
(B) Financial Management and Disbursement Arrangements Annex 7:
Project Processing Schedule Annex 8: Documents in the Project File
Annex 9: Statement o f Loans and Credits Annex 10: Country at a
Glance
25 25
26
26
27 31 35 36 38 39 50 56 57 58 60
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BANGLADESH Telecommunications Technical Assistance Project
Project Appraisal Document South Asia Regional Office
CITPO
BORROWER
Date: M a y 20,2003 Sector ManagedDirector: Pierre A. Guislain
Country ManagedDirector: Frederick Thomas Temple Project ID: PO8
1849 Lending Instrument: Technical Assistance Loan (TAL)
Team Leader: Rajesh B. Pradhan Sector(s): Telecommunications
(100%) Theme(s): Regulation and competition policy (P), State
enterpriseibank restructuring and privatization (P)
[ ] Loan [XI Credit [ ] Grant [ ] Guarantee [ ]Other:
For LoanslCreditslOthers: Amount (US$m): $9.12
Proposed Terms (IDA): Standard Credit
1.99 1 0.00 I 1.99
Grace period (years): 10 Commitment fee: 0.00-0.50%
Total:
Years to maturity: 40 Service charge: 0.75%
1.99 1 9.12 1 11.11 [DA I 0.00 I 9.12 I 9.12
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A. Project Development Objective
1. Project development objective: (see Annex 1)
through strengthening elements o f the policy, institutional,
and regulatory framework in order to promote the competitive
provision o f telecommunications infrastructure and services. This
w i l l be achieved by: (a) separating the policy and operational
roles o f the government in the sector by restructuring the
Bangladesh Telegraph and Telephone Board (BTTB) to operate on a
commercial basis; (b) strengthening the policy function o f the
Ministry o f Post and Telecommunications (MOPT); and (c)
strengthening the regulatory capacity o f the Bangladesh
Telecommunication Regulatory Commission (BTRC). At the end o f the
project period, i t i s envisaged that there w i l l be a clear
separation in the operational and policy roles o f the government
and that BTRC's capacity to effectively regulate a competitive
telecommunications sector would be improved.
The project objective i s to improve the performance o f
Bangladesh's telecommunications sector
2. K e y performance indicators: (see Annex 1)
wi l l include the following: The key performance indicators to
measure the achievement o f project development objectives
Increase overall telephone penetration from 0.83 percent in 2002
to 3.3 percent by end o f 2006. BTTB restructured by end o f 2004.
BTTB or i t s successor company's l ines per employee increases
from 29 in 2002 to 40 by end 2006. BTTB or i t s successor company
awarded a pro-competitive license by BTRC by end o f 2004.
Telecommunications Policy o f 1998 reviewed and new policy
announced by end 2005. Universal access policy adopted by the
Government o f Bangladesh (GOB) by end 2005. Transparent licensing
and regulatory regime and clear ru les o f business by end 2004.
New operators licensed to provide fixed-line local and domestic
long distance services b y end o f 2005. Rebalancing o f sector
tariffs by end o f 2006. Radio frequency assigned within 15 days o
f application by end o f 2006, for 90 percent o f applications.
B. Strategic Context 1. Sector-related Country Assistance
Strategy (CAS) goal supported b y the project: (see Annex 1)
Document number: 21326-BD
The project i s consistent with the CAS objective o f
accelerating and broadening private sector-led growth by supporting
governmental efforts to remove structural impediments and establish
a conducive environment for private investment. The project w i l l
assist in enabling private sector-led growth through regulatory and
structural reform in the telecommunications sector. I t w i l l
promote competition and private participation in the provision o f
telecommunications services by supporting the development o f a
sound policy, legal, regulatory, and institutional sector
framework. This w i l l facilitate private sector growth and more
efficient delivery o f services resulting in a reduction in costs
for other sectors; and also establish a level playing field for a l
l operators. The project i s also in l ine with the CAS strategy o
f being responsive to Government initiatives and opportunistic in
supporting areas with good
Date of latest CAS discussion: 02/08/2001
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prospects for reforms.
The project also supports the Government's Interim Poverty
Reduction Strategy Paper (I-PRSP) pillar o f accelerating pro-poor
growth, through substantial expansion o f the capacity and quality
o f infrastructure services, including telecommunications, which
serve as an important backbone o f a growing economy.
The project i s consistent with the World Bank Group's
Information and Communications Technologies (ICT) Sector Strategy
(April 2002), which calls for:
0 Completing telecommunications sector reform in countries that
have not undergone sector restructuring by (a) shifting the
government's role from ownership and operations to policy making
and regulation, (b) promoting efficiency and service quality, and
(c) promoting effective competition and increasing private sector
participation in the provision o f infrastructure and services.
0 Supporting the establishment o f clear, stable, and
transparent regulatory regimes and building client country
regulatory capacity through policy advice, training, and technical
assistance.
0 Promoting private sector leadership in extending the reach o f
Information and Communications Technologies (ICT) through
development o f information infrastructure and providing technical
and investment assistance to extend access beyond the market.
2. M a i n sector issues and Government strategy:
telecommunications sector management and structure in
Bangladesh. Sector overview. The following section provides an
overview o f and summarizes the
Bangladesh Telecommunications Regulatory Commission (BTRC)
Service Providers
Basic Fixed Services Local (limited competition)
Domestic Long Distance (monopoly) International Long Distance
(monopoly)
Cellular Services Value Added Competition Services
Competition
VSAT service Telecom Authority providers and others
Telephone Board
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The MOPT i s the government ministry responsible for formulating
the government's policy for the telecommunications sector. The
National Telecommunications Policy o f 1998 i s currently being
implemented. The telecommunications sector in Bangladesh i s
governed b y the Bangladesh Telecommunication Act, 2001. The law
provides an adequate framework for the development o f a workable
regulatory regime. Through enactment o f this legislation, the
Government created the BTRC, which resulted in the transfer o f
regulatory functions from MOPT to BTRC, and the Government
appointed the chairman and commissioners o f BTRC to start
operation on January 3 1, 2002. BTRC i s responsible for regulating
the sector in keeping with both the Act and telecommunications
policy as determined by MOPT. I t i s responsible for licensing
operators and ensuring compliance with license terms and
conditions; managing the radio spectrum; ensuring technical
compatibility and effective interconnection between service
providers; monitoring carrier quality o f service; approving
tariffs; and providing equipment type approval.
The incumbent monopoly operator i s the government-owned BTTB,
established by the 1979 BTTB Ordinance No. XII, to function under
the MOPT. This ordinance was amended in 1995, to create the
Telecommunications Regulatory Board (TRB) also functioning under
the MOPT. TRB was the precursor to BTRC. BTTB has been operating as
a GOB department. BTTB's management board consists o f a Chairman,
four full time members and three part time members, all o f whom
are appointed by the Government. The MOPT reviews BTTB's annual
development plans, the Ministry o f Finance (MOF) approves the
financing plan and allocates funds. The Planning Commission
approves the Annual Development Plan and allocates capital
development funds for BTTB.
BTTB has a de facto monopoly on domestic fixed-line public
telephony and a de jure monopoly over international telephony. The
telecommunications sector in Bangladesh has limited competition,
with four licensed private sector mobile operators and a number o f
value added service providers, including Internet Service Providers
(ISPs). The mobile operators are directly responsible for 72
percent o f al l new l ines in service since 1996. Grameen Phone,
the largest mobile operator leases capacity from Bangladesh
Railways' fiber optic network and provides nationwide mobile
services.
Main sector issues. The performance o f the Bangladesh
telecommunications sector has fallen far short o f i t s potential
and remains a significant constraint to economic growth. The main
sector issues can be classified under two broad categories: (a)
poor sector performance, and (b) weak competition and private
investment environment. These issues are further discussed in the
following sections.
Poor sector performance. Despite being the f i rs t country in
the region to license private operators to provide services in
1989, Bangladesh lags behind all countries in the South Asia
region, both in the coverage and quality o f telecommunications
services as evidenced by the indicators in Table 2.
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Table 2: South Asia ICT Indicators (ITU, WDI 2001) I Population
(in millions) GDP per capita (US$)
Main telephone l ines in operation (in million) Cellular mobile
telephone subscribers (in million) Fixed teledensity * Mobile
teledensity Total teledensity Rest-of-country teledensity ** Number
o f internet hosts
0.50
Sangladesh 133.4
386
0.56
0.52 0.43 0.40 0.83 0.19
3
0.25 0.15
India 1,033.4
472
38.54
6.43 3.75 0.63 4.38 3.58
82,979
7.00
Nepal 23.6
250
0.30
0.02 1.31 0.08 1.39 0.22 1,513
0.06
Pakistan 141.5
52 1
S r i Lanka 19.6
869
0.81 2.33 0.56 2.89 1.74
11.319
0.67 4.43 3.56 7.99 3.51 2,286
* Teledensity means number o f lines per 100 people ** Rest o f
country means excluding largest city, data for 2000
This poor performance can be evidenced by a number o f
factors:
e Limited access to telecommunications services. The overall
level o f teledensity in Bangladesh i s very low at approximately
0.83 l ines per hundred persons compared to an international low
income group average o f 4.00 lines per hundred persons. This low
level o f teledensity reflects the failure o f initiatives to
attract the private investment needed for the sector as well as the
poor performance o f the dominant operator BTTB to meet customers’
demand. BTTB’s capacity limitations constrain supply within the
overall sector. Despite high fixed-line connection charges (only
recently reduced to approximately USS150 from approximately US$350)
BTTB cannot keep up with demand, and installation wait times
average several years. Capacity constraints similarly affect
interconnection for mobile operators, who in the absence o f
adequate interconnection, offer mobile-to-mobile only services for
a majority o f their customers and are unable to expand services in
l ine wi th growth in demand. The results are (a) a significant
unmet demand for basic telephone lines, estimated at about 3.5 mill
ion immediately, growing to 10 mi l l ion within three years; and
(b) inadequate fixed-line national and international services.
e Low rura l teledensity: Although approximately 80 percent o f
Bangladesh’s population resides in rural areas, access to services
in these areas i s limited. Non-Dhaka and rural teledensity i s
estimated to be only about 0.19 l ines per hundred persons. A t
present, the two private rural fixed-line operators provide only
about 26,000 main lines in the rural areas. Telecommunication
services provided by cellular companies are not accessible to most
o f the rural population. Although some cellular operators l ike
Grameen Phone have initiated a village phone program to bring
connectivity to rural areas, less than one-third o f Bangladesh’s
68,000 villages have access to phones. Given the economic
importance o f access to rural communities and the high cost o f
rural provision, there i s a need for public policy and regulatory
intervention to promote access in rural areas.
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e Poor performance of BTTB. The government-owned and controlled
incumbent operator BTTB has not improved i t s performance despite
substantial public investments in the organization. It continues to
operate under a protective regime with l i t t le accountability to
both i t s owners and customers. For example, as an indicator o f
efficiency, the BTTB has approximately 29 l ines per employee (in
2002), compared to the international low income group average o f
69 l ines per employee. BTTB has found it difficult to improve
efficiency in an environment where it has: (a) faced limited
competition, (b) needed to follow civ i l service procedures for
staffing and procurement, and (c) had inadequate access to capital.
BTTB, in i t s current structure, lacks the resources--financial,
technical, human resources--and the autonomy to achieve i t s
target o f meeting demand. I t has very limited decision making
authority and needs M O F and MOPT approval for most investments
and general expenditures. This has led to limited service
availability, lack o f new product rollout and generally poor
service quality. Competition i s also growing in several forms:
mobile telephony i s creating a viable substitute for BTTB’s
services, voice-over Internet protocol (VOIP) (authorized or
unauthorized) and falling international settlement rates have
eroded BTTB’s highly profitable international monopoly. As BTTB
lacks the autonomy and incentive to productively invest i t s
profits back into building i t s network, national infrastructure
and sector performance i s crippled and this reduces the value o f
BTTB as a government asset.
Competition and private investment environment. Many factors can
be attributed to the low level o f private investment in the
sector. In general, there are inadequate incentives for high levels
o f private investment to take place. Factors contributing to
limited competition and poor private sector investment include:
Lack of separation between policy and operational roles of
government. BTTB i s MOPT’s primary advisor on technical elements o
f policy issues and MOPT i s responsible to government for BTTB’s
revenue. This has not necessarily ensured transparent and
accountable development o f policies in the sector. I t has instead
created policy distortions in BTTB’s favor and an uneven playing
field for private investors in a sector where the government i s
responsible for both policy formulation and service provision.
Further, MOPT’s capacity to formulate sector policies remains
weak.
Limited competition. Important market segments such as
international long distance remain closed to competition. While the
National telecommunications Policy o f 1998 clearly indicates that
the basic services and national long distance segments will be
opened to private participation, no new operators have as yet been
licensed. Further, despite the liberalization o f very small
aperture terminals (VSAT) service, private VSAT operators are not
permitted to resell excess capacity on their networks.
Provision of mobile services by the public sector. Progress i s
being made for the provision o f mobile services by the public
sector. Public sector provision o f mobile services w i l l have to
take place in a pro-competitive manner. That is, BTTB has to ensure
fair transfer pricing, provide the new public operator and other
private operators the same conditions for interconnection and
sharing o f facilities, and the government has to provide adequate
safeguards that level the playing field. The public mobile operator
should operate in a pro-competitive basis, without public subsidies
or government guarantees.
Limited capacity of BTRC. BTRC i s a young organization and
faces the challenge o f institution building while establishing the
regulatory regime. BTRC has the authority to establish the
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regulatory regime relative to issues such as interconnection,
licensing, tariffs, spectrum allocation, and other issues that w i
l l affect competitiveness o f the sector. Using these tools to
create the initial regime and communicate them to sector players w
i l l be key to creating and maintaining a level playing field that
provides certainty and adequate incentives for private investment
in the sector. I t i s critical to build capacity in BTRC so that
it can establish and maintain regulatory credibility, which w i l l
partly be measured by i t s ability to render impartial,
transparent and enforceable decisions and through the establishment
o f transparent regulatory processes and procedures. While the Act
generally provides for a significant degree o f independence for
BTRC, it includes certain provisions which may compromise this
independence, including: (a) BTRC Commissioners are appointed by
government; (b) BTRC reports on i t s activities through the MOPT,
not directly to parliament; (c) MOPT has the right to promulgate
rules pertaining to the Act and to direct the BTRC to modify
regulations; and (d) BTRC i s subject to c iv i l service ru les
and salaries.
0 Inadequate interconnection arrangements. One o f the greatest
bottlenecks to enhanced competition and private investment i s the
lack o f interconnection capacity. Interconnection with BTTB i s
consistently named as one o f the top issues to be resolved in the
sector by private operators. The current interconnect environment i
s based on “revenue sharing agreements” between BTTB and the mobile
operators. These agreements are based on retail prices and
asymmetric payments (Le., BTTB does not compensate mobile operators
for call termination, but mobile operators pay BTTB for
termination). An additional feature o f the interconnect
environment i s inadequate supply and difficulty concluding
negotiations. An interconnection regime, conducive to fair
competition has not yet been established and has thwarted growth o
f existing cellular service providers. BTRC i s mandated to issue
interconnection guidelines and resolve interconnection disputes
among operators. In this regard, BTRC has received a limited
technical assistance grant from the Public Private Infrastructure
Advisory Facility (PPIAF) to establish a fair, pro-competitive,
interconnection regime. BTTB and the private cellular operators
recently signed a’memorandum o f understanding whereby the private
operators will invest approximately US$1.7 mi l l ion in order to
increase BTTB’s network capacity to provide increased
interconnection for cellular subscribers. This i s a positive
development.
0 Distorted t a r v s . Bangladesh‘s current tariff regime
cross-subsidizes local calls by revenues earned from the national
long distance and international calls. Further the price structure
does not reflect costs. This has led to an inefficient allocation o
f resources and has inhibited fair competition and private
investment in basic and cellular services.
0 Ineffective spectrum management. A rational and effective
spectrum management system that optimizes the use o f a valuable
national resource i s essential for an orderly and competitive
telecommunications market. The BTRC has not yet been able to
effectively manage the radio spectrum or reap fiscal benefits f rom
the optimal use o f this national resource. Ineffective radio
spectrum management has been identified as a significant problem by
private sector investors. Problems encountered include slow
processing o f spectrum licenses, excessive spectrum fees,
inadequate and inefficient allocation o f bandwidth, and
interference caused by unauthorized use o f spectrum. This has
created bottlenecks for sector development and served as a
deterrent for new investments in services using wireless
technologies.
Government strategy. The Government has undertaken several
initiatives over the past four years to reform the
telecommunications sector, including introducing competition and
sector regulation. Some o f the key policy initiatives and actions
taken by the Government are discussed below.
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The GOB'S prevailing National Telecommunications Policy o f 1998
recognizes competition and private participation as a means o f
promoting improved sector performance. Private investments and
operations are expected to play an increasingly important role in
the provision o f telecommunications services. The MOPT has an
informal goal for the sector o f a teledensity o f 3.3 by 2005.
Achievement o f this goal w i l l require a capacity increase o f
3.5 mi l l ion lines. MOPT also has an informal goal for telereach
o f having service available in every village in Bangladesh. With
assistance from the Infrastructure Investment Facilitation Center
(IIFC), the Government has had public stakeholder consultations and
reviewed the 1998 policy, with a view to revise the policy.
The Government announced its National Information and
Communications Technology Policy in September 2002, as it aspires
to use ICTs as a key engine o f economic growth. This policy
envisions building a knowledge-based society by the year 2006,
where access to information allows for citizen empowerment,
enhanced democracy, and sustainable economic development. I t
states that ICT infrastructure w i l l be developed for use in
human resource development, governance, E-commerce, banking, public
services and other ICT enabled services. The Government recognizes
the need for reliable and competitively priced telecommunications
infrastructure as a prerequisite for meaningful implementation o f
i t s ICT policy. The policy calls for accelerated deregulation o f
and private participation in the telecommunications sector. The
prime minister heads a high level national ICT task force which i s
spearheading the ICT development agenda.
Recognizing that BTTB's poor performance i s a key hurdle in
implementing i t s ICT policy, the GOB has taken the decision to
restructure BTTB in order to dramatically improve sector
performance and meet i t s ICT policy objectives. I t has
established a high level task force, led by the MOPT, to examine
the various options available for restructuring BTTB. The committee
w i l l provide i t s recommendation on BTTB restructuring to the
Government by the end o f June 2003. Key elements o f justification
o f such a restructuring are to: (a) create a level playing field
within the sector by separating the Government's policy function
from operations; (b) to empower BTTB to operate as a commercial
enterprise with the necessary financial and administrative autonomy
to compete wi th private operators in a dynamic multioperator
environment; (c) remove preferential treatment given b y the
Government to BTTB; (d) allow for the pro-competitive entry o f
BTTB into the mobile market on a level playing field; and (e) to
increase overall employment and government revenue in the sector by
allowing for a more robust competitive environment.
The establishment o f BTRC in January 2002, as stipulated in the
Telecommunications Act o f 2001, and appointment o f i t s chairman
and commissioners, are steps in the right direction towards
implementing telecommunications sector reforms. The Government has
recognized the need to strengthen BTRC's regulatory capacity to
ensure a level playing field in a multioperator environment and i s
seeking multilateral and bilateral assistance for BTRC capacity
building.
In addition, the Government has decided to introduce competition
in local and long distance services by licensing private operators.
The BTRC, assisted by the I IFC i s currently preparing the
necessary documentation to license new operators.
The above initiatives and actions are a clear indication o f the
Government's commitment to reforming the telecommunications sector.
Moreover, the National ICT Task Force o f the GOB, headed by the
prime minister, i s leading the reform process with the Principal
Secretary to the Government as the reform champion.
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The Bank has pursued policy dialogue with the Government and in
i t s assessment o f the telecommunications sector, has discussed
that a priority issue for improving performance o f the sector i s
to implement i t s 1998 policy, including BTTB's restructuring.
Recognizing that policy implementation requires a long-term view
and short-term actions, the GOB and Bank have agreed that the
overall long-term sector vision and plan w i l l necessarily
include actions on the priority issues in the associated time
frames as depicted in Table 3 below:
TABLE 3. Time Frame
Policy Objectives
Priority Issues
Priority Action Items
SECTOE Short-Term
IN PLAN Long-Term
1. To support independence between policy, regulatory, and
operational functions
field for telecom operators 2. To create a level playing
1. Separation o f policy making and operation roles for
Government
2. Sector liberalization
1. BTTB restructuring and MOPT strengthening
2. Revise Bangladesh's WTO Commitments on telecommunications
3. BTRC strengthening 4. Award new licenses 5. Establish and
implement a
fair interconnection regime
OBJECTIVES AND ACT Medium-Term
1. To ref ine business environment for telecom operators
2. To attract new investment to sector
3. To increase rural access to ICT services
1. Further restructuring o f BTTB's successor company
2.Universal Access Strategy
1. Develop options for private participation in BTTB
2. Legislative change to protect BTRC independence
Universal Access strategy
3. Adopt and implement
1. To continue to attract sufficient investment to serve the
needs o f the nation
2. To promote innovation and investment
1. Greater private sector opportunities
2. Convergence
1. To Be Determined
3. Sector issues to be addressed by the project and strategic
choices:
it i s to improve overall sector performance and reach the level
o f growth that i s required to improve access and thereby
socioeconomic development in the country. The Government has
realized this and has begun implementing reforms to improve
performance o f the sector. The Government has also requested a
number o f donors, including the World Bank, Canadian International
Development Agency (CIDA), United Nations Development Program
(UNDP), the Government o f Japan and the Department for
International Development (DFID) for assistance to implement
reforms. As there i s strong government commitment and willingness
to undertake reforms, i t i s very important that support be
provided in a timely manner, especially as the Government has
already made substantial progress on the issue o f restructuring
BTTB.
As the table above demonstrates, Bangladesh needs to undertake
comprehensive sector reforms if
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Issues to be Addressed by the Project
Within the issues summarized above and keeping in mind the
political realities in Bangladesh, including possible BTTB labor
union resistance, the proposed project will support selected
interventions that have the highest possibility o f improving
performance o f the telecommunications sector, through increased
competition and improved environment for private sector
participation. The interventions are intentionally limited to focus
IDA resources on addressing key bottlenecks that have affected
sector performance. Bank support complements assistance being
provided by other agencies such as CIDA, DFID, and PPIAF. IDA
resources w i l l be used to address the short-term policy
objectives as stated in Table 3. The project w i l l address (i)
separation o f the government's operational and policy roles; and
(ii) developing regulatory capacity in the BTRC to effectively
regulate a competitive telecommunications sector. In particular,
the following w i l l be addressed:
BTTB restructuring. This w i l l address issues related to both
the performance o f the sector and in improving the environment for
private investments and competition. Technical assistance w i l l
be provided to MOPT to implement the restructuring o f BTTB from a
Government department. Restructuring w i l l allow for: (a) a clear
separation o f government's role as a policy maker and operator;
(b) identification and removal o f a l l preferential treatment,
including tax and procurement, that BTTB as a government board
receives and i s a barrier to leveling the playing field; (c) BTTB
to be subjected to regulation by BTRC on the same lines as other
private sector operators, thereby allowing for all operators to
operate in a level playing field; and (d) the government to better
manage public expenditure accountability in the telecommunications
sector.
Restructuring w i l l prepare BTTB for competition through (i)
productivity and profitability improvements; (ii) change in
orientation towards becoming market and commercially focused; (iii)
internal culture change; and (iv) decision-making autonomy and
flexibility. This w i l l facilitate funding o f development
projects and also provide B T T B with access to private capital,
and strategic and commercial alliances. Overall, a restructured
BTTB will create long te rm shareholder value and generally improve
sector performance.
Strengthening thepolicy function of MOPT. A restructured BTTB
should not be able to influence MOPT's policy function. In
addition, MOPT w i l l no longer have a direct oversight function
over BTTB. This separation o f policy and operational roles in the
government, necessitates strengthening the policy function within
MOPT, so that i t can establish a policy and institutional
framework that encourages improved sector performance and growth,
with increased private participation and investments. MOPT will be
strengthened by Bank support through technical assistance to build
and develop capacity to formulate and oversee sound policy,
including the design o f a universal access strategy in Bangladesh.
Bangladesh has prepared a schedule o f specific World Trade
Organization (WTO) commitments under the telecommunications service
section o f the General Agreement on Trade in Services. This i s
currently being reviewed by the Ministry o f Commerce. Support will
be provided to review and revise this schedule o f commitments so
that Bangladesh can consider additional commitments on regulatory
disciplines, such as compliance with the W T O Regulatory Reference
Paper.
Strengthening BTRC's capacity to regulate a multioperator
environment and ensure a level playing for all operators.
Recognizing that the establishment o f a credible regulatory regime
in Bangladesh i s key to increasing competition and private
investment in the telecom sector, Bank support wi l l be utilized
to strengthen BTRC and assist in the development o f a
regulatory
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framework that i s W T O compliant. Technical assistance w i l l
be provided to: (a) establish credible regulations (e.g.,
interconnection, licensing and tariff regime) that lay the
foundation for a competitive telecommunications sector; (b)
implement further sector liberalization through the award o f new
licenses to private investors and removal o f barriers to
competitive provision o f services; (c) address a regulatory
strategy to improve rural access; and (d) build capacity within
BTRC to address regulatory issues and manage scarce resources l ike
the radio spectrum. BTRC will be provided with assistance to
procure and implement a spectrum management and monitoring
system.
Strategic Choices
In selecting the above areas, the project supports the
government’s efforts to strengthen the environment to promote
private investment and competition. The project intentionally does
not address:
Investments in interconnection infrastructure. The lack o f
adequate interconnection facilities in BTTB‘s network has always
been a key factor thwarting sector development in Bangladesh. The
GOB has asked for Bank assistance to provide funds to procure
equipment to facilitate interconnection. However, Bank policy in
telecommunications excludes direct financing o f telecommunications
infrastructure investments. Moreover, private cellular operators
are going to finance key equipment in BTTB’s network to facilitate
the interconnection o f their subscribers to BTTB’s network.
Instead, the Bank will focus on the establishment o f an
appropriate and credible interconnection regime that provides
incentives for BTTB to establish proper interconnection
arrangements. While this w i l l help resolve some o f the
problems, much larger investments are required by BTTB to address
this issue. The Japan Bank for International Cooperation (JBIC) has
indicated the possibility o f funding the expansion o f
interconnection capacity in BTTB’s network if BTTB: (a) adheres to
the interconnection regime established by the BTRC; and (b) i s
restructured to ensure a level playing field for al l operators
especially since it i s entering the mobile market. Furthermore, a
restructured BTTB wil l have the financial autonomy and incentives
to reinvest i t s profits to develop interconnection
infrastructure.
Investments in a rural accessprogram: Given the dismal state o f
rural connectivity in Bangladesh, an output based aid (OBA) type
program, targeted towards increasing access to telephony and ICTs
was considered. However, experience demonstrates that such programs
are more successful in countries where regulatory and
administrative obstacles to market entry and competition are f i rs
t removed. The proposed project therefore focuses on establishing a
policy and regulatory framework to improve the environment for
increased competition and private investment, and developing a
rural access strategy for future implementation.
C. Project Description Summary 1. Project components (see Annex
2 for a detailed description and Annex 3 for a detailed cost
breakdown):
The project includes two main components, the MOPT and BTRC
components: IDA will finance local and international consultant
services, studies and training as well as procurement o f necessary
equipment. The project i s estimated at $1 1.1 1 mi l l ion with
proposed IDA financing o f $9.12 million. The detailed project cost
and IDA financing by components/activities are provided in the
table below.
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-
1. MOPT Component (a) BTTB Restructuring (b) Strengthening
MOPT's policy functions (c) Strengthening project management
capacity
2. BTRC Component (a) Strengthening regulatory capacity o f BTRC
(b) Spectrum Management and Monitoring System
Total Project Costs
2.08 1.49 0.43
1.86 5.25
11.11
% of Total
18.7 13.4 3.9 0.0 0.0
16.7 47.3
100.0
0.07 0.00
1.49 16.3 4.70 51.5 9.12 100.0
The description o f the activities under the two components are
summarized below:
MOPT Component: The main objective o f this component i s to
separate the policy and operational roles o f the Government. This
w i l l be achieved through (i) restructuring BTTB; and (ii)
strengthening the policy function in MOPT.
0 Restructuring o f BTTB. Technical assistance w i l l be
provided to implement BTTB restructuring and convert it from the
present Government board into a company, registered under the
Company's Act. Support will be provided to carry out a number o f
activities including:
Re-examining Ordinance XII of 1979 (amended in 1995) that
established BTTB. The Government needs to approve the
recommendation made by the high level committee on BTTB
restructuring to guide the overall restructuring. Ordinance XI1 may
have to be amended to enable the restructuring. The process o f
drafting, presenting, and amending the ordinance w i l l be
undertaken. Further, other legal documents necessary for the
restructuring o f BTTB wil l also be prepared.
AssetAiability allocation. BTTB's assets and liabilities are
currently reflected as government property. In order for BTTB to
operate on a commercial basis, i t w i l l need title to i t s
assets and to develop depreciation and capital expenditure programs
to support them. In addition to developing an inventory and
valuation o f fixed assets, this task w i l l also include
negotiation o f land and building ownershiphse between BTTB and
Government. Appropriate levels o f debt to fund the assets to be
transferred from Government to BTTB w i l l also need to be
determined.
Financial audit and creation of openingjnancial statements. A
financial audit will both identify BTTB's operating position and
create the initial financial statements that the corporatized BTTB
wil l be required to maintain. The financial audit will also
provide valuable information about financial information systems to
be created for BTTB.
Cost-based tariffstudy. BTRC has a mandate to enforce a
reasonable, cost-based tariff
- 1 2 -
-
structure, which w i l l mean rate rebalancing for BTTB. In
parallel wi th BTTB restructuring, BTTB and BTRC w i l l work
together to establish cost-based rates and a plan to transition to
those rates. The transition would require carrying out a
benchmarking tariff study which w i l l provide: (a) a tariff
proposal by comparing it to other operators in the region, that run
their business efficiently; and (b) an action plan with a monthly
change in tariffs to rebalance tariffs in a couple o f years. This
w i l l also provide BTRC with the required analysis to support
implementation o f cost-based pricing for unbundled network
elements.
Examining options for rationalization of labor force. A
restructured BTTB w i l l l ikely need to employ fewer than i t s
current labor force o f 22,000 staff. As part o f the restructuring
process, an investigation should be made into a proposed new
organizational structure and reduction plan. This reduction plan w
i l l need to be negotiated with the union, as well as any
potential donors who might provide financing to implement it.
Public relations. Because o f the sensitivity o f the
stakeholder community, it i s critical that MOPT manage public
relations very closely throughout the restructuring planning
period. BTTB union officials w i l l be exposed to the experience o
f unions in telecommunications companies that were restructured in
other countries.
Development of a business plan. The restructuring o f BTTB w i l
l require that it develops a corporate business plan to guide i t s
operations after restructuring.
Development of aperformance contract for BTTB. In order to
ensure that the restructuring o f BTTB actually results in improved
performance, support w i l l be provided to develop a performance
contract for BTTB. Project funds wil l also be used to carry out
annual performance audits. Such a contract would provide incentives
to BTTB to improve performance. In the event that BTTB does not
fulfill i t s performance commitments, BTTB could, for example,
lose i t s exclusivity to provide certain services, earlier than
planned.
Other support as may be needed.
I t i s expected that the restructuring o f BTTB will (a) limit
BTTB's function only to operations, thereby removing the
possibility o f the incumbent distorting policy decisions in i t s
favor; (b) allow the GOB, through BTTB's corporate financial
statements, to get transparent information on the financial
performance o f B T T B and i t s contributions to the treasury;
and (c) ensure that BTTB i s subject to regulatory oversight by
BTRC on a level playing field with al l other operators in the
sector. These important changes w i l l positively impact sector
performance and encourage greater competition and private sector
participation.
Strengthening MOPT's policy function. Technical assistance
support for consultancy and training programs w i l l be provided
in order to strengthen MOPT's capacity to carryout i t s policy
functions. This w i l l include (i) policy review and formulation;
establishment o f processes and procedures for policy monitoring
and evaluation; and re-examination o f Bangladesh's W T O
commitments and preparation o f a new telecommunications offer;
(ii) development o f a universal access strategy; (iii) other
studies on policy issues such as convergence, market structure,
competition; (iv) capacity building and professional development
through in-country, on the job and external training programs; and
(v) procurement o f equipment and systems to facilitate information
sharing and dissemination, within and outside o f MOPT.
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-
Strengthening project management. Limited support will be
provided to procure services o f local project management
consultants in order to strengthen MOPT’s capacity to manage and
implement the project. In addition, the Government w i l l provide
budgetary support towards project management.
BTRC Component
Strengthening BTRC’s regulatory capacity. Technical assistance
support to BTRC would include: (i) developing and implementing
credible regulations through consultancy programs in the areas of:
tariff reform, spectrum management, licensing; fair competition,
universal access; interconnection, carrier performance monitoring,
dispute settlement, benchmarking and others; (ii) licensing new
operators and drafting new pro-competitive licenses for B T T B and
its subsidiaries; (iii) capacity building and professional
development through in-country, on the job and external training
programs; and (iv) establishing adequate tools and facilities for
information gathering, dissemination and sharing, including a
library, local area network, management information system and
website development. In addition, support w i l l also be provided
to BTRC to carry out important studies on issues such as country
code top level domain (ccTLD) administration and convergence, that
impact ICT development in a country.
Strengthening spectrum management: Support for strengthening
BTRC’s spectrum management function w i l l be provided to (i)
assist in reviewing and rationalizing spectrum use in Bangladesh
including development o f a spectrum allocation plan and a database
o f spectrum use; (ii) develop a spectrum pricing policy; and (iii)
train BTRC staff in addressing spectrum management and monitoring
issues. BTRC w i l l also be provided assistance to procure and
implement a Spectrum Management and Monitoring System (SMMS) so
that i t has the tools to effectively manage the radiospectrum.
Consultants wi l l assist BTRC in the development o f technical
specifications for the SMMS, preparation o f bidding documents, bid
evaluation and contract administration o f the system. Support w i
l l also be provided to design and implement an appropriate
arrangement wi th private sector to operate and maintain the
SMMS.
2. Key policy and institutional reforms supported by the
project: 0
0
0
0
Separation o f policy and operational role o f the government.
Strengthen the regulatory framework, to increase competition and
private investment in the sector. Award licenses and authorizations
to private operators and service providers in liberalized market
segments. Restructure BTTB and limit i t s activities to
telecommunications infrastructure and service provision.
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-
3. Benefits and target population:
affordability and quality o f traditional and modern
telecommunication services. Improved BTTB performance, the
introduction o f competition and a more effective regulatory
framework w i l l lead to the provision o f more competitive
services in terms o f price, quality and variety. I t w i l l also
reduce information isolation for populations living in rural areas.
The improvement and expansion o f telecommunication services wi l l
contribute to sustainable economic growth. Also, the large
non-resident Bangladeshi community w i l l benefit from improved
efficiency and affordability o f communications services to
Bangladesh.
The project w i l l benefit the Bangladeshi population as a
whole by increasing the availability,
The IT industry and businesses, which increasingly depend upon
communications services to be competitive, will especially benefit
from lower costs and the availability o f a greater variety o f
value added services. A modern telecommunications regulatory
framework, ensuring market innovations and competition, w i l l
make Bangladesh more attractive to foreign investors.
4. Institutional and implementation arrangements:
through December 3 1,2007. Implementation period. The project w
i l l be implemented over four years, September 1,2003
Project implementation and coordination. The two organizations
responsible for implementing the project are MOPT and BTRC. Each o
f the implementing agencies w i l l be responsible for executing i
t s respective component. Project Steering Committees (PSC) have
been established at each o f the implementing agencies to provide
overall guidance on the management o f the project components. The
PSC in MOPT and BTRC, w i l l be headed by the Secretary MOPT and
Chairman BTRC, respectively. Project Management Teams (PMT) have
been established at MOPT and BTRC to manage in a timely manner the
reforms supported by the project. The PMTs are headed by a Project
Director and include staff from within the MOPT and BTRC who are
knowledgeable in procurement and financial management. The Project
Directors for the PMTs are senior officials from MOPT and BTRC. The
PMTs in both MOPT and BTRC w i l l also be assisted by local
Project Management Consultants (PMC) and Project Implementation
Specialist (PIS), respectively, funded under the proposed credit.
Their principal task i s to support P M T in the implementation o f
the project components. The PMC w i l l assist wi th financial
management and facilitate the procurement o f the main activities
for each component and assist in the administration o f procurement
planning and preparation o f related documents for MOPT, including
BTRC.
Procurement: Procurement under the project w i l l involve
consultants’ services including training and goods. The project
supports the procurement o f the spectrum management and monitoring
system which wil l be procured through ICB procedures. For all
other goods, since the contracts‘ sizes are very small and shopping
i s the preferred procedure, IDA will carry out prior review o f
the f i rs t two contracts for shopping. All Goods financed under
the Credit will follow procedures outlined in the Bank’s
“Guidelines for Procurement under IBRD Loans and IDA Credits ”,
published in January 1995, and revised in January 1999. For
consultants’ services, IDA’S prior review wil l be required for
consultants’ services contracts estimated to cost US$ 100,000
equivalent or more for f i r m s and US$50,000 equivalent or more
for individuals. Consulting services and training will be hired in
accordance with the Bank’s “Guidelines: Selection and Employment of
Consultants by World Bank Borrowers ”, published in January 1997,
and revised in September 1997, January 1999 and May 2002.
Procurement o f goods and services will follow the Bank’s
approvedhtandard documents. An assessment o f the procurement
capacity o f the implementing agencies was carried out during
pre-appraisal and actions to meet the adequate procurement
management requirements were agreed upon. The assessment
- 1 5 -
-
and the action plan are provided in Annex 6, para 20.
Financial management. The beneficiary agencies financial
management capacity assessment was conducted by a Bank financial
management specialist. In order to mitigate potential financial
management r isks and to strengthen financial management
capacities, i t was agreed that MOPT and BTRC would employ project
management consultants and project implementation specialist,
respectively, prior to credit effectiveness. The detailed
assessment and the action plan agreed to improve the financial
management are provided in Annex 6(b).
Project reporting requirements, monitoring and evaluation
arrangements. The MOPT and BTRC will be responsible for maintaining
records and accounts o f the activities under their respective
project components. MOPT and BTRC w i l l prepare quarterly
Financial Management Reports (FMRs), which w i l l project
implementation progress, including status o f procurement
activities, sector reform initiatives, and financial aspects o f
the project, in accordance with the agreed upon format. The project
management consultants in MOPT w i l l assist in the preparation o
f FMRs to be submitted to the Bank within 45 days o f the end o f
each quarter. The project reporting, monitoring and evaluation
arrangements w i l l include, inter alia: (a) quarterly FMRs; (b)
three Bank supervision missions annually for the f i rs t two years
and biannual, thereafter; (c) jo int MOPT/Bank and BTRC/Bank annual
progress reviews and midterm review (about two years after date o f
effectiveness o f the loan); and (d) completion report to be
transmitted by the GOB to the Bank within six months o f the
closing o f the project.
Midterm Review. The midterm review w i l l be conducted jointly
between MOPT and the Bank and the BTRC and the Bank on the basis o
f a report prepared by the PMTs with the assistance o f the PMC in
such a manner as to: (a) assess progress in the implementation o f
key actions and performance indicators; (b) verify the continued
validity o f the design assumptions in light o f implementation
experience and the evolving environment; and (c) identify remedial
actions that might prove necessary to achieve the Project's
objectives. In addition to the above, during mid term review a
detailed sector assessment w i l l be carried out to evaluate
sector evolution, vis-a-vis, sector and market structure;
performance, issues and challenges. The Bank and GOB will also
identify the need for possible future interventions, especially on
issues related to deepening sector reform and accelerating rural
access to ICT services. Further, a review w i l l also be carried
out on the sector tariff rebalancing plans and agreement will be
reached on establishing tariff rebalancing indicators and
targets.
Audit. Project financial statements w i l l be audited annually
in accordance with standards on auditing acceptable to the Bank by
an independent auditor. The audit o f project accounts w i l l
include an assessment o f the adequacy o f accounting and internal
control systems, ability to maintain adequate documentation for
transactions, eligibility o f expenditures for Bank financing and
availability o f counterpart funds. The audited project financial
statements together with the auditor's opinions on financial
statements, Special Accounts (SA) and with respect to amounts
claimed on the statement o f expenditures separately for MOPT and
BTRC, will be submitted to the Bank not later than six months after
the close o f each fiscal year. The auditors o f the Foreign Aided
Projects Audit Directorate (FAPAD) o f the Comptroller and Auditor
General (C&AG) are acceptable to the Bank as independent
auditors for MOPT component. BTRC's statutory audit by a firm o f
Chartered Accountant, which are acceptable to the Bank, wi l l also
include an audit o f the project financial statements. Separate
BTRC's audit report on the entity and the project w i l l be
submitted to the Bank not later than six months after the close o f
each fiscal year.
Disbursement. There w i l l be two separate Special Accounts in
Convertible Taka (CONTASA)
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-
under the project for each o f the implementing agencies, in
accordance with M O F circular o f September 2, 1991, revised on
May 4, 1992 and December 24, 1992. Both the implementing agencies w
i l l be responsible for managing their respective Special Accounts
including submission o f withdrawal applications to IDA.
Transaction based or traditional disbursement procedures w i l l be
followed for withdrawal o f IDA funds. The proposed Credit wi l l
be made available to the Government at IDA standard terms and
conditions. The Government w i l l provide the proceeds o f the
Credit as grant to both MOPT and BTRC for technical assistance. The
Government would ensure timely availability o f i t s share o f
project funding. The counter-part fund for BTRC component would be
made available from i t s revenue earnings for timely utilization o
f IDA's fund. Counterpart fund o f the MOPT component w i l l be
included in the Annual Development Program and would be released
through the CAO (T&T) and would be paid directly to the
beneficiaries on the basis o f approved billshnvoices, requiring no
separate project bank account.
D. Project Rationale 1, Project alternatives considered and
reasons for rejection:
Rationale
Although gaps exist in Bangladesh's policy and regulatory
environment, there i s a strong government willingness to implement
sector reforms in Bangladesh, especially with regard to
restructuring BTTB. BTTB's behavior as a Government enterprise
department has been a key constraint to sector development. Given
the Government's commitment to reforms, including i t s support for
and readiness to separate the policy and operational roles o f
Government, the Bank can capture an opportunity to facilitate
improvements in Bangladesh's telecommunications sector performance.
The timing o f this proposed operation i s key to ensure that the
Bank responds adequately and in a timely manner to the GOB'S
request. Further the scope o f the project has deliberately been
kept very limited to address the short term objectives o f the
Government's reform agenda and focus on the key constraints that
have hampered sector development. The basic policy framework,
although not perfect, i s adequate to pursue this activity.
Further, the establishment o f the regulator BTRC, which i s being
provided limited support by both the PPIAF and CIDA, represents
sufficient forward movement for IDA to support the government in
implementing the remaining agenda on i t s sector reform
program.
The project outputs are also consistent wi th telecom sector
targets specified in the Bangladesh Development Support Credit
currently under preparation.
Alternatives
The following project design alternatives were considered and
rejected:
e Designing the project as a multisectoral (infrastructure
including telecommunications) technical assistance facility. This
approach was rejected for the following reasons: (a) a
multisectoral approach would not allow for fast track processing o
f a project that i s necessary to leverage upon the ongoing
telecommunications reform momentum in the Bangladeshi
telecommunications sector; (b) IDA i s already supporting IIFC and
the Infrastructure Development Company Limited (IDCOL), which can
provide consultancy services and financing for infrastructure
projects; and (c) the experiences from other umbrella technical
assistance projects in Bangladesh, to support focused technical
assistance projects wi th a significant portion o f pre-identified
components in the future.
- 17-
-
e Pursuing a broader Comprehensive reform project, rather than a
focused, limited project. The telecommunications sector reform
process in Bangladesh i s slow but ongoing. The Bank could pursue a
more comprehensive reform program that would involve overhauling
the existing legislative framework among others. However, given
that important, necessary steps to accelerate the reform process
have been taken (passage o f Telecommunications Act o f 2001 and
establishment o f BTRC), and that there i s high-level government
commitment to address the most critical impediments to sector
development (BTTB restructuring), a focused project, limited in
scope would address key issues that have the potential to make a
positive impact on sector performance. The implementation o f these
key reform initiatives would also demonstrate GOB'S seriousness to
undertake more comprehensive reforms which could be addressed in a
possible future IDA operation.
Sector issue
2. M a j o r related projects financed by the Bank and/or other
development agencies (completed, ongoing and planned).
Project
Ban k-financed Regulatory reform component
Support o f the government's objectives for the
telecommunications sector in the Second Five-Year Plan (1 98 1 to
1985)
Other development agencies
Sixth Technical Assistance Project (completed) Third
Telecommunications Project (completed)
International Finance Corporation (IFC), private sector
development Public Private Infrastructure Advisory Facility
(PPIAF)
Infrastructure Investment Facilitation Centre (IIFC) with
support from IDA (through the Private Sector Infrastructure
Development Project) C IDA and DFID
Grameen Phone (ongoing)
Technical assistance for the Bangladesh Telecommunication
Regulatory Commission (BTRC) (ongoing) Licensing o f Fixed Line
Operators and VOIP service providers
I
P/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U
(Unsatisfactory), HL
Latest Supervision (PSR) Ratings
(Bank-finance Implementation
Progress (IP)
S
S
Highly Unsatisfi
projects only) Development
Objective (DO)
S
S
ory)
3. Lessons learned and reflected in the project design:
international experience in the telecommunications sector and
are reflected in the project design The following lessons were
learned from other sector reform and restructuring projects and
from
e Newly established regulatory agencies are frequently
overwhelmed, but have l i t t le expertise and
- 1 8 -
-
resources to draw upon. Support from resident advisors,
operational advice and hand holding during the initial years o f
operation are invaluable.
Telecommunications sector policies should include a set o f
incentives to promote access to services for remote rural
communities and to improve the affordability and availability o f
services to the poor in both rural and urban areas.
Competition i s key to increasing growth in the sector.
A clear, predictable regulatory framework i s a prerequisite to
attracting investment in the sector. Furthermore, the momentum
created by policy reform initiatives can lead to sustained sector
growth, provided prompt implementation i s undertaken.
Government should not participate as a provider o f
telecommunications services, which are more efficiently run as
commercial entities.
Speed i s key to telecommunications reform. The design o f this
operation i s intended to achieve a quick w i n in the separation o
f the policy and operational roles o f government which i s a
cornerstone o f sector reform.
A project that i s focused and simple to administer (e.g.,
focusing just on telecommunications rather than including other
sectors) i s less likely to get bogged down by administrative or
other procedural delays.
Strong government commitment i s necessary for successful
implementation o f a technical assistance project.
4. Indications of borrower commitment and ownership:
establishing an effective regulatory framework and i t s
ownership for this project i s demonstrated by the following
actions and initiatives.
The extent o f the Government's commitment to opening the
telecommunications markets and
A high-level national ICT task force, led by the Prime Minister,
i s spearheading the ICT, including telecommunications reform
agenda with the Secretary, Prime Minister's office as the reform
champion.
The establishment o f a high-level committee to recommend
options to the Government for BTTB restructuring. The committee has
recommended that the Government restructure BTTB from a Government
enterprise department into a limited liabil i ty company in the
short term.
The Government has approved the National I C T Policy o f
September 2002, which places significant importance on the
establishment o f a reliable telecommunications infrastructure in
Bangladesh, through deregulation and increased private sector
participation in the sector.
The establishment o f the BTRC in January 2002.
Government's repeated request for Bank support to implement
reforms through a technical assistance program
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-
5. Value added of Bank support in this project:
including India, Afghanistan, Nepal, Pakistan, and Sr i Lanka in
the region. The Government recognizes the value added o f Bank
support in terms o f i t s extensive international experience in
addressing telecommunications sector reform, designing effective
policies and establishing regulatory frameworks. This experience
coupled with the Bank's neutrality i s attractive for the
Government. In addition, the Bank has developed significant
experience in supporting the international best practice approach
to spectrum management and monitoring. The Bank i s involved in
supporting spectrum management and monitoring in several countries,
such as India, Nigeria, Pakistan, Nepal, and Sri Lanka.
The Bank i s involved in dialogue on telecommunication sector
reform in over 60 countries,
E. Summary Project Analysis (Detailed assessments are in the
project fi le, see Annex 8) 1. Economic (see Annex 4): t - ' Cost
benefit - Cost effectiveness 0 Other (specify)
required. The project focuses on institutional, policy and
regulatory reforms which, if successfully implemented, will enable
supply and demand o f telecommunications to evolve favorably for
consumers. The economic benefits o f the project, resulting from
improved sector performance and therefore increased penetration and
access, are likely to include:
NPV=US$ million; ERR = % (see Annex 4) -
Given the small size and technical assistance nature o f the
project, an economic analysis i s not
improved range and quality o f service provision; reduced prices
for advanced services that w i l l allow businesses and the
Government to reduce business costs and expand their use o f
information technology; advanced information services also have
wide-ranging applications in health care and education, and these
will become more affordable as prices fall; improved investment
climate; significant increases in off-farm employment and income
generation across a number o f countries, including Bangladesh;
improvements in the quality o f service delivery by the government;
faster response to emergencies, as proximity to a telephone allow
customers to easily receive unsolicited information not requested
due to information asymmetries (for example, customers can receive
information about imminent major hurricanes that they would not
know in advance to request); and equalizing access to information
infrastructure has a significant impact on reducing inequality
within countries.
While, i t i s diff icult to provide a quantitative estimate o f
the response o f private investors to the regulatory and policy
environment, greater competition in the sector w i l l lead to
improved services, thereby stimulating economic growth, resulting
in a broader source o f revenues to GOB from tax receipts. Such
indirect benefits, although difficult to quantify, are certain.
2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = %
(see Annex 4)
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Fiscal Impact:
The fiscal impact analysis to estimate BTTB’s annual
contribution to the national treasury before and after the
restructuring i s summarized in Annex 4. Historically, BTTB has
produced a significant revenue surplus (cash revenues less cash
expenditures) that i s transferred to the treasury, which in tum
funds BTTB’s annual investment requirements. The restructuring o f
BTTB and the on-going sector reforms (regulation, tariffs,
interconnection, competition, licensing, etc.) wi l l greatly
influence the size, shape and direction o f the sector in the next
few years. Because o f a l l the changes that are taking place
simultaneously in the sector, an estimate o f the fiscal impact o f
BTTB’s restructuring factors in all o f these other elements. The
government w i l l experience an immediate cash f low impact as a
result o f the restructure process, but the overall magnitude o f
the contribution may not be as severely impacted. The treasury can
potentially gain more (net cash), year-over-year from BTTB as a
limited company. The net amount that i s actually transferred to
the treasury depends to a great extent on the level o f investment
made by BTTB. I t i s also important to note that beginning in 2003
the mobile operators begin to provide more to the national treasury
than BTTB, even though it i s assumed the mobile operators have
been granted a tax holiday through 2006. In a high growth scenario,
BTTB catches up to the mobile operators, in terms o f contributions
to the treasury, in the year 2010.
3. Technical:
help attract and sustain investment in the telecommunications
sector. Under this framework, technology choices in the sector will
be market-driven. Private investment in the telecom sector w i l l
lead to the import o f new technology and management know-how.
The project will assist in establishing an enabling
institutional and regulatory environment to
4. Institutional:
4.1 Executing agencies:
Regulatory Commission are the two implementing agencies.
4.2 Project management:
The Ministry o f Post and Telecommunications and the Bangladesh
Telecommunication
Each o f the implementing agencies will be responsible for
executing i t s respective component. As both MOPT and BTRC have
limited experience in managing and implementing World Bank
projects, Project Steering Committees (PSC) have been established
at each o f the implementing agencies to provide overall guidance
on the management o f the project components. Project Management
Teams (PMT) have been established at MOPT and BTRC to ensure timely
project implementation. The PMTs are headed by a Project Director
and includes staff responsible for procurement and financial
management aspects o f the project. The PMTs in both MOPT and BTRC
wil l also be assisted b y local Project Management Consultants
(PMC) funded under the credit and housed in MOPT. The Project
Implementation Plan includes detailed arrangements for project and
financial management, procurement and accounting procedures.
4.3 Procurement issues:
During pre-appraisal, the procurement capacity o f MOPT and BTRC
was assessed as high risk and an action plan was agreed upon with
the implementing agencies to mitigate this risk. See Annex 6 for
details.
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4.4 Financial management issues:
agencies was completed and actions to meet the financial
management fiduciary requirements were agreed. The detailed
findings o f the financial management review and the action plan to
mitigate these weaknesses are provided in Annex 6 (b). The
implementation o f the action plan during the project period will
improve the quality o f the financial management. Given the weak
financial management capacity, MOPT will appoint before credit
effectiveness, a Project Management Consultant (PMC) with a
financial management expert in i t s team to look after the project
accounting needs o f both MOPT and BTRC and to strengthen the
financial management capacity o f BTRC. The PMC w i l l define the
financial management needs o f BTRC and assist in the design and
implementation o f a computerized accounting system. The P M C will
also provide adequate training to all financial management staff to
transfer sk i l ls and knowledge to sustain an adequate system in
BTRC beyond the project period. In addition, MOPT and BTRC w i l l
hire a project accountant and an assistant Director (Finance and
Revenue), respectively, by January 1,2004.
During appraisal, the assessment o f the financial management
system in the implementing
5. Environmental: 5.1 Summarize the steps undertaken for
environmental assessment and EMP preparation (including
consultation and disclosure) and the significant issues and their
treatment emerging from this analysis.
N o issues.
5.2 What are the main features o f the EMP and are they
adequate?
NA
5.3 For Category A and B projects, timeline and status o f
EA:
NA 5.4 H o w have stakeholders been consulted at the stage o f
(a) environmental screening and (b) draft EA report on the
environmental impacts and proposed environment management plan?
Describe mechanisms o f consultation that were used and which
groups were consulted?
NA
5.5 What mechanisms have been established to monitor and
evaluate the impact o f the project on the environment? D o the
indicators reflect the objectives and results o f the EMP?
NA
6. Social: 6.1 Summarize key social issues relevant to the
project objectives, and specify the project's social development
outcomes.
BTTB and private operators to expand into rural areas, thus
enabling delivery o f better social and other services. The
restructuring o f BTTB may require labor retrenchment.
6.2 Participatory Approach: How are key stakeholders
participating in the project?
Environmental Category: C (Not Required)
Date o f receipt o f final draft:
There are no resettlement issues in the implementation o f this
project. The project w i l l facilitate
NA
6.3 H o w does the project involve consultations or
collaboration wi th NGOs or other c iv i l society
organizations?
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NA
6.4 What institutional arrangements have been provided to ensure
the project achieves i t s social development outcomes?
NA
6.5 H o w w i l l the project monitor performance in terms o f
social development outcomes?
NA
Risk From Outputs to Objective Government's commitment for the
restructuring o f BTTB wanes and timely approval to restructure
BTTB i s not received
Government's efforts to restructure - - -_l.l I__.._
7. Safeguard Policies:
Risk Rating
M
----I----
S
7.2 Describe provisions made by the project to ensure compliance
with applicable safeguard policies.
Risk Mitigation Measure
Despite slow progress in implementing reforms, the government
has shown commitment to introducing competition and increasing
private investment, including establishment o f a high-level
committee for BTTB restructuring.
BTTB management and unions wil l be fully I__ _I--__II - ~
NA
F. Sustainability and Risks 1. Sustainability:
By developing an adequate institutional and regulatory framework
for market-based telecommunications service provision, the project
will help accelerate investment and improve sector performance.
Incentives to sustain project objectives include strengthening the
regulatory framework so that the rights and obligations o f the
incumbent and private operators are codified both in the
legislation and licenses. Improved service coverage and quality at
more competitive prices w i l l be sustained as private investment
grows in telecommunications infrastructure and services.
2. Critical Risks (reflecting the failure o f critical
assumptions found in the fourth column o f Annex 1):
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BTTB meets opposition from BTTB management and unions
M
S
Government seeks to intervene in BTRC's actions, or BTRC could
take actions (possibly politically motivated) which would reduce
investor and consumer confidence.
involved in the dialogue on restructuring. Project support will
also be provided for carrying out public relations campaigns and
conducting workshops to allow union leaders from other telecom
operators in the region such as Malaysia and Sri Lanka, share their
experiences on restructuring wi th BTTB.
BTRC i s required to hold public consultations before making
decisions. This process w i l l minimize both undue government
influence and non transparent decisions.
Govemment has decided to issue license to the private sector for
provision o f local service. BTRC, wi th C IDA assistance, i s
already preparing PSTN licenses. The project w i l l support BTRC
in the licensing process.
Lack o f progress on sector liberalization1 award o f licenses
to new operators
M
M
N
N
M
From Components to Outputs Government unwilling to follow the
agreed upon strategy for BTTB restructuring.
Support for the planned implementation phase o f restructuring w
i l l not be provided under the project.
MOPT i s being provided with training support under the project
and MOPT has recruited new staff. Bank oversight o f terms o f
reference, selection, and work o f technical experts.
BTRC i s receiving PPIAF and CIDA support to establish a
consultation process and develop a track record in developing and
issuing consultation papers.
BTRC through i t s precursor TRB has experience in Bank
procurement. Bank oversight o f terms o f reference, selection, and
work o f technical experts.
BTRC has the mandate to levy fees on regulated companies to meet
i t s operating costs. Project funds w i l l be used to develop a
medium t e r m business plan for BTRC and support wi l l be
provided to fund priority tasks. Bank w i l l continue dialogue
with GOB to address BTRC's budget issues.
MOPT's ability to carry out i t s mandate i; undermined by lack
o f staff resources
BTRC management i s not effective in sarrying out public
consultations.
BTRC i s resource constrained and ?rocurement i s not
implemented in a :imely and effective manner
BTRC's ability to carry out i t s mandate i s indermined by i t
s lack o f financial mtonomy
Dverall Risk Rating
Risk Rating - H (High Risk), S (Substantial Ris M I
M (Modest Risk), N(Negligib1e or Low Risk)
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3. Possible Controversial Aspects:
None.
G. Main Loan Conditions 1. Effectiveness Condition
0 MOPT to select and recruit Project Management Consultants
(PMC) which shall include a financial management expert.
BTRC to select and recruit Project Implementation
Specialist.
Subsidiary Grant agreement between Ministry o f Finance and BTRC
to be executed
0
0
2. Other [classify according to covenant types used in the Legal
Agreements.]
0
0
0
0
0
0
0
0
0
0
Ministry o f Finance to make available to MOPT and BTRC the
proceeds o f the credit on a grant basis.
MOPT to appoint a Project Accountant by January 1,2004.
BTRC to appoint an Assistant Director (Finance and Revenue) by
January 1,2004.
BTRC shall announce by end 2003 an interconnection regime, which
includes interconnection regulations; model interconnection
agreement; guidelines and methodologies for determining
interconnection costs and charges; reference interconnection offer;
and dispute resolution mechanism. BTRC shall ensure that the regime
i s implemented by end 2004.
BTRC to have secured land for i t s spectrum monitoring
stations, prior to issuance o f bidding documents for the spectrum
management and monitoring system.
BTRC to develop and implement by end 2004, a National Frequency
Allocation Plan and spectrum pricing policy.
BTRC to submit to IDA, a Human Resources Development Plan for i
t s spectrum management and monitoring unit by end 2004.
BTRC's procedure for selecting and appointing the auditor should
be specified and be acceptable to IDA.
MOPT and BTRC to prepare Financial Monitoring Reports (FMRs) at
the end o f each quarter, and submit them to IDA within 45 days o f
the end o f each quarter.
The PMTs in MOPT and BTRC shall submit audit o f the project's
financial statements within six months after the end o f each
fiscal year.
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0 MOPT and BTRC shall establish and maintain a PSC and a PMT in
each o f the implementing agencies throughout the project
period.
The PMTs in MOPT and BTRC shall submit a midterm review report
by September 1,2005; and review said report with IDA by December
1,2005.
H. Readiness for Implementation 3 1. a) The engineering design
documents for the f i rs t year's activities are complete and ready
for the - start o f project implementation. I 1. b) Not
applicable.
L! 2. The procurement documents for the f i rs t year's
activities are complete and ready for the start o f - project
implementation. ,A 3. The Project Implementation Plan has been
appraised and found to be realistic and o f satisfactory
quality. 4. The following items are lacking and are discussed
under loan conditions (Section G):
I. Compliance with Bank Policies -~ ._J 1. This project complies
with all applicable Bank policies. - 2. The following exceptions to
Bank policies are recommended for approval. The project
complies
-
with all other applicable Bank policies.
//&&Ad Rajesh B. Pradhan Team Leader
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Annex 1: Project Design Summary BANGLADESH: Telecommunications
Technical Assistance Project
Sector-related CAS Goal: Accelerating and broadening private
sector-led growth by supporting governmental :fforts to remove
structural impediments and establish I conducive environment For
private investment
aroject Development 3bjective: [mprove the performance of :he
telecommunications sector through :stablishment o f an
.nstitutional and regulatory Framework favorable to the :ompetitive
provision o f :elecommunications nfrastructure and services
Sector Indicators: Increased private investment, as well as the
number (and market share) o f private operators in various segments
o f the telecommunications sector
Outcome / Impact Indicators: Increase overall telephone
penetration from 0.83 percent in 2002 to 3.3 percent by end o f
2006
BTTB restructured by end o f 2004
Lines per employee increased from 29 in 2002 to 40 by end
2006
New operators to be licensed to provide fixed l ine local
services by end 2005
New operators to be licensed to provide domestic long distance
services by end o f 2005
Transparent licensing and regulatory regime and clear rules o f
business :stablished by end 2004
Rebalancing o f sector - _ _ - . - " _ ~ -l--l.- ,,
ntinued commitment b
Private sector willingness to increase investments
Stable macroeconomic and political environment
project reports:
lnnual reports o f BTRC ind operators
(from Objective to Goal)
Continued government commitment to develop private sector
participation and a competitive market structure
2onsultant reports, BTTB innual reports
TU statistics and ndividual consultant 'eports
h n u a l report o f BTRC
3TTB's published tariffs
BTTB labor union approves o f restructuring plans
Sufficient supply response to new regulatory and institutional
framework
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Iutput from each :omponent: MOPT Component
3TTB restructured
vlOPT's policy function itrengthened
3TRC Component
3TRC's capacity to ,egulate the sector itrengthened
ariffs by end o f 2006
+equency assignments nade within 15 days o f ipplication for 90
percent )f applications by end o f !006. Iutput Indicators:
Restructuring option selected by mid 2003
0 Amendments to BTTB Ordinance XI1 adopted by end 2004
0 Universal access policy adopted by end o f 2005
Policy o f 1998 reviewed and new policy announced by end
2005
0 Tari f f regime announced by end o f 2005
0 Licenses awarded to fixed line operators by mid 2005
Transparent consultative process institutionalized by mid
2004
0 Interconnection regime announcedbyend2003
'roject reports:
celevant consultant reports celevant legislation
ielevant policy documents
4nnual reports o f BTRC
ielevant published -egulations
Zonsultant reports
from Outputs to Objective)
zontinued commitment in he govemment for the estructuring o f
BTTB and imely parliamentary ipproval for BTTB estructuring.
3TTB management and inion buy-in to BTTB ,estructuring
rimely govemment tpprovals o f policies
3overnment does not ntervene in BTRC actions ind BTRC does not
take ictions that could reduce nvestor and consumer :onfidence
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'reject Components I Sub-components: MOPT Component
Pestructuring of BTTB
TA for implementation o f BTTB restructuring
0 TA for other related support
TA to strengthen MOPT'S mlicy function
0 Policy review and formulation; establishment o f procedures
and processes for policy monitoring and implementation; and
preparation o f WTO offer
0 Other studies
0 Policy advisor
0 Professional Development
Computer hardware and software
0 Website development
0 Office Equipment
"A to strengthen MOPT'S v-oject implementation
".
Radio frequency assigned within 15 days o f application by end
2006, for 90% o f applications.
nputs: (budget for each Project reports: :omponent)
;2.08 mill ion
; 1.495 mi l l ion
Periodic progress report from project unit
Report on options and recommendations
Legislation for incorporation o f B T T B
Periodic progress report f rom project unit Draft policies
Training plan for MOPT
i 0.425 mi l l ion Consultant's reports
from Components to Iutputs)
3overnment follows the igreed upon strategy for 3TTB
restructuring,
idequate staff resources nade available
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apacity.
Timely provision o f local counterpart funds
BTRC has adequate staff and financial resources
BTRC can effectively institute a public consultation process
Procurement o f SMMS i s not delayed
lTRC Component
Periodic progress report from project unit
Draft License for BTTB
Draft regulations
Annual repo