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December 29, 1995

Ecuador: First Telecommunications Project (Loan 3052-EC)

The Project Completion Note (PCN) on the Ecuador First Telecommunications project (Loan 3052-EC, approved in FY89) was prepared by the Latin America and Caribbean Regional Office. A Bank loan for US$45 million equivalent was approved on May 5, 1989, and cofinancing was provided by the Commonwealth Development Corporation, Italy, France, Japan, Spain, Brazil, and Mexico. The loan was canceled at the request of the Borrower on January 7, 1994, ahead of the original closing date of June 30, 1995. No disbursements took place. There are no comments from the Borrower.

The objectives of the project were to: (i) rehabilitate and expand the telecommunications network; (ii) strengthen IETEL's (the national telephone company's) management and organization, (iii) modernize and expand international telephone, telex and data services; (iv) improve procurement practices; and (v) increase private sector participation as installation and construction contractors. The project consisted of: (a) an investment program that included the addition of exchange equipment, rehabilitation of the cable network, expansion of its long distance network, installation of rural exchanges, installation of an international exchange, extension of telex and data services, and installation of a mobile phone service; and (b) an institutional improvement program that included a twinning arrangement, a management development program and technical assistance for strengthening IETEL's project implementation capacity.

The borrower has implemented most of the cofinanced components of the project, amounting to about 78 percent of total financing, which allowed the project to achieve some of its physical objectives. This fact, combined with the Bank's supervision of the project, appears to have contributed to modest improvements in the Borrower's planning, management and financial management capacity, and improvements in telephone tariffs. These advances have laid the groundwork for continued Bank involvement in the sector through the recent Structural Adjustment Loan (Loan 3819-EC) and Public Enterprise Reform Technical Assistance Loan (Loan 3821-EC). A law for the privatization of EMETEL (the successor to IETEL) was approved on August 5, 1995.

The outcome of the project is rated as satisfactory because the major relevant physical and policy objectives have been achieved. The institutional development outcome is rated as moderate. The sustainability of these outcomes is uncertain, as it is too early to determine the success of the radical transformation the sector is undergoing. The Bank's performance has been satisfactory.

The main lesson from this project is that project objectives can be achieved even in the absence of any disbursements.

The Project Completion Note is satisfactory. However, a fuller coverage of the implementation experience of the project would have been useful to provide feedback to the Borrower and improve the design of future operations.

No audit is planned.

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