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Benin: Telecommunications Project (Credit 1960-BEN)

The Implementation Completion Report (ICR) on the Benin Telecommunications project (Credit 1960-BEN, approved in FY89), prepared by the Africa Regional Office, was reviewed by the Operations Evaluation Department (OED). No comments were received from the Borrower. The credit for an amount of US$16 million equivalent was approved in November 1988, and closed in June 1995, eighteen months behind schedule. The credit was fully disbursed. Cofinancing was provided by the African Development Bank, France and Canada. No comments were received from the cofinanciers.

The objectives of the project, the first financed by the Bank in the sector in Benin, were to help meet a growing demand for, and improve the quality of, telecommunications services by: (i) expanding and modernizing the country's telecommunications infrastructure; and (ii) helping improve the efficiency and financial performance of Office des Postes et Telecommunications du Benin (OPTB), the state-owned postal and telecommunications agency. To this end, the project comprised: (a) a program of rehabilitation, improvement and extension of local lines and switching installations and of the trunk transmission network (including in rural areas); and (b) a broad program of technical assistance, studies and training (covering management, planning and construction, system operations, marketing and finances). These objectives, which in retrospect appear somewhat unambitious, were consistent with the traditional approach to public utilities prevailing at the time.

In spite of start-up delays due mainly to late effectiveness of some cofinanciers' funding, the project was carried out satisfactorily, at a cost slightly below the appraisal estimate. Physical objectives were fully achieved, and in some cases exceeded, with switching capacity reaching 35,700 lines by end-1993 (vs. an appraisal forecast of 31,000); targets for improvement in the quality of service were also achieved, albeit belatedly in some cases (e.g. number of faults per line and call completion ratios). Most of the institutional components were carried out but some important studies' recommendations (e.g. regarding the managerial and financial separation of postal and telecommunications activities, tariff rebalancing and accounting system integration) are yet to be implemented. The achievement of financial objectives was only partial, as OTPB's receivables stayed above the covenanted four months limit due to continued Government arrears and its rate of return on assets in 1994 (8 percent) fell slightly short of the covenanted 10 percent; however, OTPB's internal contribution to investments remained satisfactory throughout the project implementation period. A sector restructuring study, financed under a subsequent Public Enterprise loan, is currently underway.

On balance, the outcome of the project is rated as satisfactory and sustainability as likely; but institutional development impact is rated as only moderate in light of the above-mentioned shortcomings. Bank performance which was characterized, inter alia, by good staff continuity and sustained consultation with other donors, is rated as satisfactory. These ratings are consistent with those in the ICR.

Several lessons can be drawn from this project: (i) the institutional strengthening of public utilities is critically dependent on strong Government commitment, particularly in areas such as staffing flexibility and public sector arrears; (ii) Bank staff continuity and sustained consultation among donors contribute to smoother project implementation; and (iii) the complexity and time required to implement the indepth reform of sectors traditionally operated in a monopolistic environment, such as postal services and telecommunications, should not be underestimated, particularly where Government commitment is lukewarm and attractiveness to foreign investors limited.

The ICR is reasonably thorough and informative and is assessed as satisfactory, although it should have included contributions from the Borrower and cofinanciers. Key future performance indicators are included. No audit is planned.

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