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Jordan: First Telecommunications Project (Loan 2953-JO)

The Project Completion Note (PCN) on the First Telecommunications Project in Jordan (Loan 2953-JO, approved in FY88), prepared by the Middle East and North Africa Regional Office, was reviewed by the Operations Evaluation Department (OED). No Borrower contribution was included. The loan of US$36.0 million was approved in June 1988 but was subsequently withdrawn at the request of the Government without being signed. The loan was formally closed in August 1989.

The project's objectives were: (a) to expand the country's telecommunications network, improve the quality of telecommunications services and introduce new services; (b) to strengthen and reorganize the Jordan Telecommunication Corporation (TCC), the state-owned operator, to make it a more efficient and commercially-oriented agency; and (c) to help the Government formulate and implement policy changes aimed at rebalancing tariffs and restructuring the sector. Accordingly, the project encompassed: (a) TCC's 1988-92 investment program (US$338 million), including, inter alia, the construction of a new switching center, an earth satellite station, switching equipment, and the installation of 235,000 new subscriber lines; and (b) a program of technical assistance in the areas of project management and procurement, system planning and operation, management information systems, and tariff policy. A major share of the investment program was to be cofinanced by export and commercial credits.

Due to the country's deteriorating macroeconomic situation and the need to undertake a major structural adjustment program, the Government decided in August 1989, i.e., about a year after loan approval, to cancel the investment program for the telecommunication sector and all related financing. The cuts also affected other major sectors of the economy. As a result, telecommunication investments between 1989 and 1993 were limited to those financed entirely out of TCC's own resources-in addition to the completion of already on-going works. Only 50,000 new subscribers were connected and more than 30 percent of expressed demand could not be satisfied (in spite of the inception of mobile telephone service). The Government finally decided in 1993 to implement a market-oriented strategy for the sector and requested Bank assistance to support it. The Bank approved a Second Telecommunications Project in May 1994 (supported by a US$20 million loan and a US$50 million partial risk guarantee) which supports sector restructuring and the privatization of TCC (to be concluded by end-1997).

The experience of this project has shown that, in spite of the project's cancellation for macroeconomic reasons, the Bank was able, through a close dialogue on sector issues, which it established during project preparation, to have a critical, although belated, impact on sector reform. The quality of the sector dialogue can be attributed in large part to the Bank staff's ability to promote consensus among the various country stakeholders on contentious issues of public sector reform.

The PCN is thorough in its coverage and its quality is assessed as satisfactory. No audit is planned.

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