IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-37900) ON A CREDIT IN THE AMOUNT OF SDR 6.70 MILLION (US$ 9.12 MILLION EQUIVALENT) TO THE

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-37900) ON A CREDIT IN THE AMOUNT OF SDR 6.70 MILLION (US$ 9.12 MILLION EQUIVALENT) TO THE PEOPLE S REPUBLIC OF BANGLADESH FOR A TELECOMMUNICATIONS TECHNICAL ASSISTANCE PROJECT June 30, 2010 Global Information and Communication Technologies Department Bangladesh Country Unit South Asia Regional Office

2 CURRENCY EQUIVALENTS (Exchange Rate Effective: March 23, 2010) Currency Unit = Bangladesh Taka (Tk.) Tk = US$ US$ 1.00 = Tk FISCAL YEAR July 1 to June 30 ABBREVIATIONS AND ACRONYMS BTCL BTRC BTTB CAS cctld FM GDP GOB Government ICR ICT IDA I-PRSP IT KPI MOPT M&E NFAP PDO PMC PSTN QOS SMMS TAPP WBG WTO XDR/SDR Bangladesh Telecommunications Company Limited Bangladesh Telecommunications Regulatory Commissions Bangladesh Telegraph and Telephone Board Country Assistance Strategy Country Code Top Level Domain Financial Management Gross Domestic Product Government of Bangladesh Government of Bangladesh Implementation Completion Report Information and Communication Technologies International Development Association Interim Poverty Reduction Strategy Paper Information Technology Key Project Indicators Ministry of Post and Telecommunications Monitoring and Evaluation National Frequency Allocation Plan Project Development Objectives Project Management Consultants Public Switched Telephone Network Quality Of Service Spectrum Management and Monitoring System Technical Assistance Project Proforma World Bank Group World Trade Organization International Monetary Exchange Special Drawing Rights

3 Vice President: Isabel M. Guerrero, SARVP Country Director: Ellen A. Goldstein, SACBD Sector Manager: Philippe Dongier, CITPO Project Team Leader: Tenzin D. Norbhu, CITPO ICR Team Leader: Tenzin D. Norbhu, CITPO

4 BANGLADESH Telecommunications Technical Assistance Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR (unedited) Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents MAP

5 A. Basic Information Country: Bangladesh Project Name: Telecommunications Technical Assistance Project Project ID: P L/C/TF Number(s): IDA ICR Date: 06/29/2010 ICR Type: Core ICR Lending Instrument: TAL Borrower: Original Total Commitment: Revised Amount: XDR 6.3M Environmental Category: C GOVERNMENT OF BANGLADESH XDR 6.7M Disbursed Amount: XDR 6.3M Implementing Agencies: Bangladesh Telecommunication Regulatory commission Ministry of Post and Telecommunications Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 01/30/2003 Effectiveness: 11/24/ /24/2003 Appraisal: 03/27/2003 Restructuring(s): Approval: 06/19/2003 Mid-term Review: 09/25/ /16/2005 Closing: 06/30/ /31/2009 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Satisfactory Substantial Moderately Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Not Applicable Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Not Applicable Overall Bank Overall Borrower Moderately Satisfactory Performance: Performance: Moderately Satisfactory i

6 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: No Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Telecommunications Theme Code (as % of total Bank financing) Regulation and competition policy State enterprise/bank restructuring and privatization E. Bank Staff Positions At ICR At Approval Vice President: Isabel M. Guerrero Mieko Nishimizu Country Director: Ellen A. Goldstein Frederick Thomas Temple Sector Manager: Philippe Dongier Pierre A. Guislain Project Team Leader: Tenzin Dolma Norbhu Rajesh B. Pradhan ICR Team Leader: ICR Primary Author: Tenzin Dolma Norbhu Siou Chew Kuek F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) Improve the performance of the telecommunications sector through establishment of an institutional and regulatory framework favorable to the competitive provision of telecommunications infrastructure and services. Revised Project Development Objectives (as approved by original approving authority) ii

7 (a) PDO Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Increase overall telephone penetration from 0.83 % in 2002 to 3.3 percent by end of 2006 Value quantitative or Qualitative) % Date achieved 02/02/ /31/ /30/ /31/2009 Comments (incl. % achievement) The targets were exceeded significantly led by growth in the mobile segment. Over 100% achievement Indicator 2 : Lines per employee increased from 29 in 2002 to 40 beyond 2006 Value quantitative or Qualitative) 29 >40 >80 >80 Date achieved 02/02/ /31/ /30/ /31/2009 Comments (incl. % 100% achievement achievement) New operators to be licensed to provide fixed line local services by December Indicator 3 : International long distance segment of market to be opened to competition. All segments of the telecommunications market has been Private operators Value opened to licensed to provide quantitative or Private operators licensed competition with services in Qualitative) new private Bangladesh. operators providing services in all market segments Date achieved 02/02/ /31/ /31/2009 Comments (incl. % All market segments are competitive. 100% achievement achievement) Indicator 4 : Increased private investments in telecommunications sector resulting from improved policy and regulatory environment. Value quantitative or Qualitative) 330 million USD 4.5 billion USD > 4.5 billion USD Date achieved 02/02/ /31/ /31/2009 Comments (incl. % 100% achievement achievement) iii

8 (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Radio frequency assigned within 15 days of application by end of 2006, for 90% Indicator 1 : of applications Timeliness of 80% of all Value radio frequency applications (quantitative No baseline data available assignment for processed within 15 or Qualitative) selected bands days of receipt Date achieved 02/02/ /30/ /31/2009 Comments Approximately 75% of all spectrum assignment data has been colllected and (incl. % entered into database. 80% achievement achievement) Indicator 2 : Spectrum re-farming for mobile spectrum completed. Value (quantitative or Qualitative) Spectrum made available to No baseline data availableoperators for 2G, 3G and other new services Spectrum refarming completed and additional spectrum awarded to operators in Wimax spectrum awarded. Date achieved 02/02/ /31/ /31/2009 Comments (incl. % 3G spectrum identified. achievement) G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 07/15/2003 Satisfactory Satisfactory /15/2003 Satisfactory Satisfactory /04/2004 Satisfactory Satisfactory /10/2004 Satisfactory Satisfactory /26/2004 Satisfactory Satisfactory /11/2004 Satisfactory Satisfactory /15/2005 Satisfactory Moderately Satisfactory /13/2005 Satisfactory Moderately Satisfactory /05/2006 Moderately Satisfactory Moderately Unsatisfactory /01/2006 Moderately Satisfactory Moderately Unsatisfactory /13/2006 Satisfactory Moderately Satisfactory 1.63 iv

9 12 03/26/2007 Satisfactory Moderately Satisfactory /28/2007 Satisfactory Moderately Satisfactory /11/2008 Satisfactory Moderately Satisfactory /03/2008 Satisfactory Moderately Satisfactory /17/2009 Satisfactory Satisfactory /02/2009 Satisfactory Satisfactory 8.58 H. Restructuring (if any) Not Applicable I. Disbursement Profile v

10 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Sector Background The performance of the Bangladesh telecommunications sector had fallen far short of its potential, and remained a significant constraint to economic growth at the time of project appraisal in The main sector issues at appraisal were classified under two broad categories: i. Poor sector performance: Despite being the first country in the region to license private operators to provide services in 1989, Bangladesh lagged behind all countries in the South Asia region both in the coverage and quality of telecommunications services; and ii. Weak competition and private investment environment: There were inadequate incentives for high levels of private investment to take place due to the (i) lack of separation between policy and operational roles of Government; (ii) limited competition in various market segments; and (iii) limited capacity of the regulator, Bangladesh Telecommunications Regulatory Commission (BTRC). The Government had undertaken several initiatives before 2003 to reform the telecommunications sector, including approving the National Telecommunications Policy 1998 and Bangladesh Telecommunications Act 2001 and establishing the sector regulator, BTRC in These initiatives and actions were clear indications of the Government's commitment to reform the telecommunications sector. However, Bangladesh needed to undertake comprehensive sector reforms if it was to improve overall sector performance and reach the level of growth that was required to improve access and, subsequently, socioeconomic development in the country. The Government had realized this and had begun implementing reforms, and requested a number of donors for assistance. As there was strong Government commitment and willingness to undertake reforms, it was important for support to be provided in a timely manner. The Government recognized the importance of open competition and private sector investment supported by a stable and transparent regulatory environment to achieve this. The Government set out to address key regulatory issues such as interconnection and licensing which were thwarting sector growth. Initial technical assistance support was provided through the Public Private Infrastructure Advisory Facility (PPIAF). Consequently, IDA support provided technical assistance resources to the Ministry of Post and Telecommunications (MOPT) and BTRC to (i) separate the policy and 1

11 operational role of the Government through restructuring of BTTB; (2) strengthen the policy function of MOPT; (3) strengthen BTRC and (4) improve spectrum management. 1.2 Original Project Development Objectives (PDO) and Key Indicators The overall PDO was to improve the performance of Bangladesh s telecommunications sector through strengthening elements of the policy, institutional, and regulatory framework in order to promote the competitive provision of telecommunications infrastructure and services. The specific objectives were to: i. Separate the policy and operational roles of the Government in the sector by restructuring the Bangladesh Telegraph and Telephone Board (BTTB) to operate on a commercial basis; ii. Strengthen the policy function of the Ministry of Post and Telecommunications (MOPT); and iii. Strengthen the regulatory capacity of the Bangladesh Telecommunication Regulatory Commission (BTRC). The Key Performance Indicators (KPIs) were: i. Increased overall telephone penetration from 0.83 percent in 2002 to 3.3 percent by end of ii. BTTB restructured by end of iii. BTTB or its successor company's lines per employee increased from 29 in 2002 to 40 by end iv. BTTB or its successor company awarded a pro-competitive license by BTRC by end of v. Telecommunications Policy of 1998 reviewed and new policy announced by end vi. Universal access policy adopted by GOB by end vii. Transparent licensing and regulatory regime and clear rules of business by end viii. New operators licensed to provide fixed-line local and domestic long distance services by end of ix. Rebalancing of sector tariffs by end of x. Radio frequency assigned within 15 days of application by end of 2006, for 90 percent of applications. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO and KPIs were not revised as it remained relevant throughout the project. However, the KPI targets for overall telephone penetration rate and number of lines per employee had to be revised significantly upwards during mid-term review due to the phenomenal growth of the sector (especially due to mobile growth) during the project 2

12 period. Hence they were increased respectively from 3.3% to 12%, and 40 to 80 lines per employee. The project was designed in 2003 when emphasis on measuring results in technical assistance projects was not as well defined as after the push for the Results Agenda (which started after 2006). The KPIs as originally designed were, therefore, more outputoriented. During project implementation additional indicators were added, with a view to better monitor sector performance especially in the area of investments in the sector, reflecting project activities related to improving the sector s policy and regulatory environment. 1.4 Main Beneficiaries As this was a sector-wide project, the primary target group was the Bangladeshi population as a whole who would benefit from the increased availability, affordability, and quality of traditional and modern telecommunication services. The capacity building components were expected to bring improvements in sector governance, competition, and liberalization. This would expand and improve telecommunications services and in turn, create opportunities to enhance the lives of the people and contribute to economic development through the timely delivery of information. The capacity building and spectrum management component would provide the telecommunications industry with an enabling framework for doing business. The secondary beneficiaries would include the large non-resident Bangladeshi community who have benefitted from improved efficiency and affordability of communication services to Bangladesh. In addition, the country s IT industry and other businesses will benefit from lower costs and the availability of a greater variety of value added services, as they increasingly depend upon communications services to be competitive. 1.5 Original Components The project as approved had two main components: (i) Separation of MOPT s Policy and Operational Roles; and (ii) BTRC strengthening. The project was estimated at $11.11 million with proposed IDA financing of $9.12 million; and cost breakdowns are provided in the table below: 3

13 The summarized components were as follows: 1. MOPT Component: The main objective of this component was to separate the policy and operational roles of the Government. This was to be achieved through: a. Restructuring the Bangladesh Telegraph and Telephone Board (BTTB): Technical assistance would be provided to implement BTTB restructuring and convert it from a Government board into a company, registered under the Company's Act. This included: (i) reexamining Ordinance XII of 1979 that established BTTB; (ii) allocation of asset and liabilities as they were reflected as Government property; (iii) financial audit and creation of opening financial statements; (iv) conducting a cost-based tariff study; and (v) the development of a business plan and performance contract for BTTB. b. Strengthening the policy function in MOPT: Technical assistance support for consultancy and training programs to strengthen MOPT's capacity to carry out its policy functions. This included: (i) policy review and formulation, establishment of processes and procedures for policy monitoring and evaluation, and re-examination of Bangladesh's WTO commitments and preparation of a new telecommunications offer; (ii) development of a universal access strategy; (iii) other studies on policy issues, such as convergence, market structure, and competition; (iv) capacity building and professional development through in-country, on-the-job and external training programs; and (v) procurement of equipment and systems to facilitate information sharing and dissemination, within and outside of MOPT. c. Strengthening project management: Limited support to procure services of local project management consultants in order to strengthen MOPT s capacity to manage and implement the project. b. BTRC Component: The objective of this second component was to strengthen BTRC s capacity to effectively regulate a multi-operator environment and ensure a level playing field for all operators. Support under this component included: 4

14 a. Strengthening regulatory capacity: Technical assistance support to: (i) develop and implement credible regulations 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 BTTB 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 would be provided to BTRC to carry out important studies on issues, such as country code top level domain (cctld) administration and convergence. b. Strengthening spectrum management: Support for strengthening BTRC s spectrum management function to: (i) assist in reviewing and rationalizing spectrum use, including development of a spectrum allocation plan and a database of spectrum use; (ii) develop a spectrum pricing policy; and (iii) train BTRC staff in addressing spectrum management and monitoring issues. BTRC would also be provided assistance to procure and implement a Spectrum Management and Monitoring System (SMMS) so that it would have the tools to effectively manage the radio spectrum. 1.6 Revised Components There were no significant revisions of the components. 1.7 Other Significant Changes The project closing date was extended once for a total of eighteen months - from June 30, 2008 to December 30, 2009, in order to allow for completion of key project activities, including the installation and commissioning of the SMMS. The amount of US$ funds available under the project was also increased to US$10.02 million from US$ 9.12 million in 2008 due to the devaluation of the US dollar (SDR 6.7 million equivalent). 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Background analysis, lessons incorporated, and rationale for Bank s intervention The project was well aligned with the World Bank s 2001 Country Assistance Strategy (CAS) objective of accelerating and broadening private sector-led growth by supporting governmental efforts to remove structural impediments and establish a conducive environment for private investment. It also supported the Government's Interim Poverty Reduction Strategy Paper (I-PRSP) pillar of accelerating pro-poor growth, through 5

15 substantial expansion of the capacity and quality of infrastructure services, including telecommunications. It also took into account the government s commitment to reforms and concrete actions in the sector, such as parliamentary approval of the Bangladesh Telecommunications Act in 2001, establishment of BTRC as the sector regulator in 2002 and adoption of the National Telecommunications Policy in The project was also consistent with the World Bank Group's ICT Sector Strategy (April 2002) which called for: (i) completing telecommunications sector reform in countries that have not undergone sector restructuring; (ii) supporting the establishment of clear, stable, and transparent regulatory regimes and building client country regulatory capacity; and (iii) promoting private sector leadership in extending the reach of ICT. Lessons from the Bank s earlier operations were taken into account and turned out to be highly relevant for the project including the fact that newly-established regulatory agencies are frequently overwhelmed; need for a clear and predictable regulatory framework to encourage investments; and need for speed in the telecommunications sector (thus, the need for a project that is strategic, focused and simple to administer). Project Design The overall project design was straightforward and uncomplicated. Strengths included a simple and clear component structure and standardized implementation arrangements. The objectives were also described with sufficient clarity. They were also realistic and important for the country because they were fully aligned with and supported the Government s immediate objectives. Hence, there was borrower buy-in for the project throughout the design phase, as the objectives were part of the Government s stated mandate. The two main components were also adequately designed to support the project s objectives as they were relevant, multi-dimensional, and holistic in its approach. The project was also well organized in terms of structure. The borrower s project implementing agencies were limited to the main players in the sector, with MOPT as policy maker and BTRC as regulator. The multiple activities under the two main components were well aligned with each agency s mandate and capabilities at the time of project appraisal. At the time of project preparation, it was mutually decided not to establish a separate project implementation unit given the relatively simple design of the project and the fact that most project activities were included in the regular work program of the implementing agencies. The project made provisions for Project Management Consultants (PMC) to support MOPT and a Project Implementation Specialist (PIS) at BTRC to assist with project implementation issues. 6

16 Assessment of risks and mitigation measures The assessment of risks at the time of appraisal was satisfactory. Most of the risks and mitigations were identified and assessed correctly, e.g. the BTTB risks was correctly identified as major, although the mitigation options turned out to be insufficient. 2.2 Implementation The project became effective in November 2003 and was implemented during a period of significant political transitions. There were three different governments during this period. The project got off to a relatively slow start, with delays in the procurement of services of the PMC and PIS. During implementation, insufficient human resources at the implementing agencies posed a major challenge. The efficacy of the PMC was very limited as staff within the Ministry was unable to dedicate time to guide project implementation activities. The fact that the project did not have a separate implementation unit, nor a dedicated project director meant that there was a lack of dedicated and incentivized staff to support implementation at MOPT. The Joint Secretary also served as Project Director. At BTRC, key positions were not fully filled during the first years of the project, and there were insufficient staff to support implementation initially. Frequent change in personnel at both the MOPT and BTRC also led to implementation delays. There were numerous changes of the MOPT Secretary, project director and BTRC Chairman positions during the project period. Further, the positions of key members of BTRC, both commissioners and officers, were vacant for long periods. These impacted the implementation in terms of continuity, commitment and pace of progress. Implementation of two key subcomponents of the project, BTTB restructuring and goods procurement for spectrum management was delayed significantly. First, there was a delay in the procurement of consultant services to advice on BTTB restructuring as approval was required from the Cabinet Purchase Committee. A contract was signed only in September Second, although the Government at highest levels had stated its intention to restructure BTTB into a government-owned company, there was a high level of labor union resistance to restructuring. When faced with such resistance, there was insufficient political will to implement the restructuring. The consultants were prevented from accessing BTTB sites, management, and information and the assignment was suspended in December While the consultants had prepared a detailed public relations, communications and engagement strategy to ensure transparency of the restructuring process, they were not permitted to share this with all employees of BTTB. In 2007, the consultants started working once again on the assignment and BTTB was finally restructured in June Inordinate delays in contract approval and ensuing implementation meant that the consultants also had to change personnel on their team, as experts could not be expected to dedicate their time to a project that was not making progress. 7

17 The technical assistance aspects of the spectrum management subcomponent were implemented on time. However, the procurement of the national radio spectrum management and monitoring system took longer than originally envisaged due to: (i) slow recruitment of staff for the spectrum department of BTRC; (ii) delays in acquiring sites for fixed monitoring stations; and (iii) uncertainty on the final office location of BTRC headquarters in Dhaka. The implementation of the BTRC component was expedited as soon as a dedicated BTRC officer was appointed in mid 2007 as the project director for the project. The system was successfully installed and commissioned and staff has been permanently recruited to carry out the spectrum management and monitoring function. The Government carried out a review of the National Telecommunications Policy and its consultant developed a draft for Government approval. However, the policy is yet to be revised in totality. During the term of the caretaker government, the BTRC in 2007 issued an International Long Distance Telecommunications Policy to introduce competition in the market. Licenses were auctioned for a number of services, including International Gateway, Internet Exchange and Interconnection Exchange services. Further, three broadband wireless access licenses were also auctioned. While on the one hand, competition was introduced, the ILDTS policy fragmented the market further. Given the significant growth in services, including mobile coverage, it was decided that a universal access strategy would not be developed under the project. With a growing mobile market, BTRC proactively addressed quality of service (QOS) issues and decided to use savings under the project to procure equipment to help it monitor QOS levels. The World Radio Conference was held in Thereafter, BTRC also conducted a second round of review of the National Frequency Allocation Plan (NFAP) in order to ensure that the NFAP remained relevant given sector developments. The project s eventual success (especially in implementation of the BTTB restructuring and strengthening of BTRC) is attributable to a number of key factors: i. An exceptional change in the implementation pace of reforms in 2007 as resistance to BTTB s restructuring by labor unions was no longer an issue. ii. iii. The subsequent appointment of key management positions (chairman and commissioners) and increase in staff resources and appointment of a dedicated project director to support the implementation in BTRC enabled the implementation of the largest component of the project for the Spectrum Management and Monitoring System (47.3% of total project cost at appraisal). The project s flexible approach to implementation. For example in the BTTB restructuring process, the valuation process for assets and liabilities was switched to a results-based approach from the comprehensive approach which enabled the project to proceed even as labor unions continued to prevent the consultants from accessing BTTB sites, management, and information. The consultants scope of work for PMC and restructuring were also adjusted during implementation when 8

18 it became obvious that the implementing agencies would not be able to meet certain conditions for work to proceed. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Design The design was appropriate and effective. Most of the KPIs have a direct relationship with the project inputs, e.g. BTTB restructured by end of 2004, and rebalancing of sector tariffs was done by Each objective was also sufficiently covered by, at least, one direct KPI; and key KPIs could be readily measured from national and international statistics, or published reports of the agencies. However, the KPI target for mobile penetration rates (3.3 percent by 2006) was exceedingly low, although the underestimate is understandable given the unexpected growth rates worldwide. Hence, the KPIs were adjusted during mid-term review to reflect realities. In terms of implementation and utilization, data was collected appropriately from the sources identified and used for evaluation purposes as designed, and the key KPIs were used consistently in the Bank s monitoring reports. Implementation Relevant data was collected by various means, and as applicable, for each indicator. The project relied on data from BTRC and from feedback provided by industry stakeholders. Over the project period, BTRC also built capacity to better collect and report sector statistics and today publishes key indicators on its website. During mid-term review of the project, a number of outcome targets were revised, as some of the targets had already been met, and others delayed. For example, teledensity targets were increased from those set at appraisal. Most of the performance indicators will remain relevant beyond project closing, especially teledensity, telephone lines per employee, licensing of new operators, and time to assign radio frequencies - as they are applicable even for highly developed telecommunication markets. 2.4 Safeguard and Fiduciary Compliance Safeguard Compliance. No issues were reported regarding compliance with Bank policy and procedural requirements. The project components had minimum environmental implications as there was no need for supporting roads, significant civil works, or powersupply installations. Financial Management. The project has largely complied with all fiduciary requirements, in spite of delays in the submission of annual procurement plan, financial management reports and audits. Financial management at MOPT was problematic due to lack of staff resources. There was some staff turnover at the PMC which affected financial 9

19 management. Project accounting and internal controls were adequate, and the team provided the needed supervision in fiduciary matters. Disbursements. Of the original credit of SDR 6.7 million, SDR 0.37 million was undisbursed and cancelled after closing. A total of SDR 6.33 million or 94.5% of the credit was fully disbursed. Procurement. Significant procurement delays took place, especially in the first half of project implementation. However, timely revisions to the procurement plan took place and activities were satisfactorily completed. 2.5 Post-Completion Operation/Next Phase The project has helped establish key institutional mechanisms, policies, regulations, guidelines, and systems that will continue to serve the sector after project completion. On the two largest components of the project, BTTB has been restructured (18.7% of total project cost) into a corporation (BTCL) and reversal of the status is unlikely, as it has become increasingly obvious to governments worldwide that they should refrain from being an operator in the telecommunications sector due to their inability to cope with its tremendous growth and developments. Given the shrinking market share of BTCL and significant fragmentation of the Government s telecommunication assets across four state-owned companies, it is important for Government to rationalize the structure of its telecommunications assets. The long-term sustainability of BTCL and the establishment of a truly level playing field require the Government to consider steps beyond corporatization, including potentially selling a stake to a strategic partner. This would allow for much needed large investments in the company and bring in commercial practices that will enable BTCL to become a competitive operator. The major spectrum management and monitoring system (47.3% of total cost) should also be sustainable as it has been fully tested and implemented, and BTRC has regularized trained technical personnel as staff to support ongoing operations. The management and monitoring tools have equipped the government to better manage national radio spectrum resources. Numerous important regulatory instruments developed under the project have also been approved. Hence, they will continue to be of key importance for sector development in the foreseeable future as changes to each will require adoption of a similarly comprehensive consultative process. In particular the regulatory capacity of the BTRC has improved due to the capacity building activities under the project and related increase in professional staff within the organization. However, recently proposed Amendments to the Telecommunications Act of 2001, if approved, could have a negative impact on sector development. The proposed transfer of certain regulatory powers such as licensing and tariff-setting from the BTRC to MOPT could lead to uncertainty in the sector. Sector investment and growth is driven by:(i) the independence of the regulator; (ii) the transparency of the regulatory process; (iii) adequate legal processes for regulation; and (iv) clear investment rules applied in a fair 10

20 and transparent manner. The proposed amendments would lead to a concentration of policy, regulatory functions and aspects of operations under a single entity, which would increase uncertainty in the sector. They would also likely have a negative effect on new investments in the sector, as well as raising the costs of doing business for existing operators. Next Phase: Key priority actions for Government to address in the sector include: (i) (ii) (iii) (iv) (v) (vi) Improving sector governance by clearly separating the policy and operational roles of Government. MOPT, the telecommunications policy maker plays a prominent role in the board of the state-owned incumbent BTCL, BSCL and Teletalk. Such a role could prevent MOPT from setting policies that promote overall sector development and, thus, hinder effective competition in the sector, and more importantly, sector performance and growth. Approve a new forward-looking telecommunications policy that will support the implementation of the Government s goals for Digital Bangladesh. The policy should also address development of the broadband infrastructure in Bangladesh. Ensure that proposed amendments to sector legislation does not negatively impact sector development. Developing a strategy for leveraging the extensive mobile network for improving public service delivery. Further promoting policy and regulatory institutional capacity through the set up of a technical policy unit within MOPT, and implementing more marketbased remuneration packages in BTRC to attract and retain qualified staff. Rationalize the tax regime for the telecommunications sectors for a more effective and efficient sector taxation system, and to expand lower-income group s access to telecommunications services. Priority actions for the Bank would be to support follow-up work to address key bottlenecks in the sector and leverage the infrastructure developed to date for service delivery. This could include: (i) technical assistance in the areas of emerging sector issues, such as convergence; (ii) continued capacity building for policy maker and regulator; (iii) support for developing a reliable and robust backbone infrastructure; and (iv) technical assistance and investment support to promote mobile applications, wider Internet use, egovernment applications and IT industry development. Follow-on support in the sector would yield substantial economic and social benefits for the country, especially in the area of job creation and improved service delivery that has transformative impact for the poor. The World Bank s Country Assistance Strategy for FY recognizes the importance of leveraging ICT for growth and improved public service delivery. Broader assistance is foreseen over the next CAS period in supporting the growth of the IT and IT enabled service industry and implementation of a national electronic identification program. 3. Assessment of Outcomes 11

21 3.1 Relevance of Objectives, Design and Implementation This was a highly relevant project at the time of its design, and remains equally relevant at the time of this ICR from various perspectives. The objectives are highly relevant and important from a country priority perspective as it is needed to ensure continued growth and competitiveness in a fast-developing economic sector. Continued strengthening and improvements in these areas are also required for the Government to be able to cope with the breakneck speeds of development in the sector. However, new policies, regulations, and institutional mechanisms will also need to be developed for the country to be able to manage emerging and converging technologies such as broadband, wireless data services, and mobile-based applications. In addition, sector development is of utmost importance as the telecommunications industry has become the largest source of investments in the country (cumulative investments of $4.5 billion since project started). Strengthening these frameworks is also particularly important at this stage of sector development as the next major growth area for telecommunications (especially mobile) is amongst the lower income and rural communities, and will have significantly higher digital divide and poverty reduction implications. These objectives also remain highly relevant in the current global landscape because sector development worldwide requires the same policy, and regulatory and institutional framework to be put in place for Bangladesh to manage emerging and converging technologies, and to provide an enabling environment to compete and attract investments from international investors. In addition, the objectives are highly relevant with regard to the Bank s proposed CAS for FY11-14, as access to telecommunications is a proven means to empower the poor. 3.2 Achievement of Project Development Objectives The project has largely achieved its overall PDO of strengthening of the regulatory and institutional framework for promoting competitive provision of telecommunications infrastructure and services. Sector performance has improved significantly. Approximately 98 percent of the population is now covered by at least one mobile telephone network, and market penetration of telephony is equivalent to 40 percent of the population. Tariffs have also fallen significantly, and jobs created directly or indirectly by increased investment and activity in the telecommunications industry. For example, the BTTB has been corporatized, the National Frequency Allocation Plan has been revised twice, and systems are in place to ensure proper management of the radio spectrum. In addition, teledensity stands at approximately 40 percent 1 currently compared to 0.83 percent at appraisal, competition has been introduced into all market segments, and sector tariffs have fallen significantly due to competition. However the project has only achieved modest strengthening of the policy framework and the 1 Based on BTRC data: 12

22 institutional framework still does not allow for full separation of the operational and policy roles of the Government. The details on the outputs and outcomes, and their causal links are provided in Annex 2; and the following describes the achievement of specific PDOs: i. Separate the policy and operational roles of the Government in the sector by restructuring the BTTB to operate on a commercial basis: The project has significantly achieved this objective. This is the most important (and most challenging) objective as it represents the culmination of efforts since the 1998 National Telecommunications Policy to corporatize BTTB and was achieved despite strong resistance by the labor unions. However, the objective is not fully achieved as the restructured BTCL has a board headed and composed of Government officials. ii. iii. Strengthen the policy function of the Ministry of Post and Telecommunications (MOPT): The project has only been modestly successful in achieving this PDO as the policy function has only been strengthened to a limited extent. The policy review, staff training, and website of MOPT has been completed, although key policies included in the KPIs were not fully completed. However this objective is of relatively lower importance as the general policy framework is in place (e.g. National Telecommunications Policy of 1998), albeit outdated, and are not expected to have excessive adverse impact on sector performance. Strengthen the regulatory capacity of the Bangladesh Telecommunication Regulatory Commission (BTRC): The project significantly achieved this objective as most of the regulatory instruments and systems have been delivered. This includes interconnection regulations, spectrum policy, licensing framework, and quality of services. In addition, the important spectrum management and monitoring system (representing 47.3 percent of total project cost at appraisal) is commissioned and fully operational, enabling BTRC to carry out this major regulatory function. This objective is of significant importance as the project has contributed significantly to building a credible and functional regulatory framework from scratch. There was a lack of institutional credibility, key regulations, and enforcement mechanisms that were stifling sector competition to a large extent when the project started. BTRC was also a young organization that faced simultaneous challenges in institutional building, establishing the regulatory regime, and developing regulatory credibility. 3.3 Efficiency Economic analysis was not conducted at appraisal due to the relatively small size (SDR 6.7 million) and technical assistance nature of the project. However, a quick estimate of the economic impact was developed based on readily available existing studies (refer to Annex 4 for detailed analysis) to provide a sense of the efficiency of this project. Specifically, the analysis relies on a commonly-cited global study that has shown that every 10 percent increase in mobile penetration rates is associated with a 0.59 percent 13

23 increase in GDP, and another study in India which finds an associated increased of 1.2 percent. Other available measures also provide a gauge of the project s efficiency 2. During the project period: i. Average tariff decreased from $0.06 (Jan 2004) to $0.01 (Dec 2009); ii. Mobile operators contribution to Government revenue has increased from 2.4 percent (in ) to 8.0 percent ( ); iii. Investments by mobile operators has increased from $7 million in 2002, to $65 million per year on average since the project started; and iv. Cumulative investments are $4.5 billion since While these sector developments cannot be fully attributed to the project due to the rapid pace of developments worldwide, nevertheless, the project supported much needed technical assistance to establish the required regulatory framework to enable sector growth and development. 3.4 Justification of Overall Outcome Rating Rating: Satisfactory The rating is satisfactory as the project has been relevant throughout its period and continues to be so at the time of the ICR. In addition, it has achieved its major PDOs of strengthening the institutional and regulatory framework, and the economic analysis and measures suggest a highly efficient project. However, there were minor shortcomings due to Government ownership and management of BTCL, and the limited outcomes achieved at the policy level with MOPT. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Access to quality communications services is an important component of the overall poverty reduction strategy for most developing countries. The expansion of the telecommunications industry has created new economic activities. It also represents an improved investment climate. The project is likely to have good impact on poverty reduction as the penetration rate for telecommunications is increasing. The project has also provided a strengthened institutional and governance framework for the expansion of telecommunications services (especially mobile phone) to the poorest section of the population, as the market is expected to expand services to these groups for their next stage of growth. The gender and social development impacts are also limited as this is largely a technical assistance project. 2 All figures that follow are from BTRC Bangladesh Telecommunications Sector Evolution ( ). Presentation by BTRC Chairman

24 (b) Institutional Change/Strengthening The intended institutional change and strengthening has been significantly achieved. The institutional framework has been improved due to BTTB s restructuring into a corporation; and BTRC has significantly increased its regulatory capacity due to the development of key regulations, and provisions of systems for managing spectrum and quality of services. However, there had only been modest strengthening of MOPT s policy functions as key activities were not completed or implemented. (c) Other Unintended Outcomes and Impacts (positive or negative) Nil. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable. 4. Assessment of Risk to Development Outcome Rating: Substantial The risk to development outcome is substantial as key sustainability risk exists: i. The revised National Telecommunications Policy has not yet been approved and announced; hence, it might be challenging for the Government to cope with the rapid pace of technological and market developments in the years ahead. However, the impact is not expected to be detrimental as the policy of 1998 still exists. ii. There is still a need for strengthening the technical capacity of MOPT for policymaking, and the transfer of civil service staff as per Government norms will be a continued hindrance unless a stable and core technical unit is established. iii. Existing taxes pose a particular challenge to the continued expansion of telecommunication services in Bangladesh. The SIM and handset taxes are a particular challenge for the sector as operators seek to reach the lower-income groups for their next stage of growth. iv. The proposed amendments to the Telecommunications Act could negatively impact sector development by creating uncertainty in the sector. 15

25 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately satisfactory The Bank has developed this project appropriately to maximize the window of opportunity for sector reforms. The project was appraised just two years after BTRC was established; hence, there was a unique opportunity to assist in strengthening a critical regulatory agency. In addition, the major sector development issues were well identified and appropriate components were put in place to address each of these key issues. The components and sub-components were well designed as they were directly linked with the PDOs. However, the design was probably overambitious on hindsight as BTTB s restructuring was completed only in 2008 instead of MOPT s National Telecommunications Policy had also not been approved and announced to date, and BTRC had a slow start on key activities such as the procurement of the spectrum management and monitoring equipment. In addition, the design did not prove sufficient to address the high level of resistance encountered eventually for BTTB s restructuring, and to address the continued slow pace of progress on MOPT s policy sub-component. A dedicated project director at MOPT and BTRC could have led to smoother implementation. (b) Quality of Supervision Rating: Satisfactory The supervision team was proactive in identification and resolution of threats across the project s lifespan and components, as well as highly focused on the PDOs. For instance, on the important task of auditing and accounting for BTTB, the team recognized in advance the inability of the counterparts to provide required support and information as contracted for the consultants to complete the work. Hence, the team raised the issue and proposed for the expansion of the consultant s scope to be revised, as the restructuring would not be possible, otherwise. The team also provided more than adequate supervisory inputs and processes. The supervision was precise as it focused on major issues for implementation, and was highly result-oriented as feasible solutions and/or clear steps forward for each issue was discussed with the implementing counterparts. The team was also firm in supervision, but flexible when required. For example, the team constantly reminded MOPT of its responsibility for the BTTB restructuring agenda instead of the PMC, and exercised flexibility by accepting a results-based approach when the originally envisaged full comprehensive approach would have jeopardized the completion of this task. The team was also focused on wider development outcomes for the country. Hence, significant sector dialogue was carried out on issues outside the scope of the project, such as sector taxation and convergence as they have longer-term development impact. The 16