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         Second telecommunication project

The Ghana Second Telecommunications Project, supported by Credit 1946-GH for US$18.0 million equivalent, was approved in FY89. The credit was closed in FY96, three years behind schedule, and US$0.7 million equivalent was canceled. Cofinancing totaling US$183.0 million was provided by Overseas Economic Cooperation Fund (OECF–Japan), the Japanese and Dutch Governments, and Caisse Franšaise de Developpement (CFD–France). The Implementation Completion Report (ICR) was prepared by the Africa Regional Office. No contribution was received from the Borrower and comments from co-financiers are not included.

The project's objectives were to: (i) support a program of institutional and management improvement for the telecommunications sector; (ii) improve the quality of service through rehabilitation and modernization of the network and improved maintenance practices; and (iii) improve the finances of Ghana Posts and Telecommunications Corporation (GPT), so as to eliminate the need for Government subsidies and eventually enable it to become a net contributor to the Treasury. The cost of the project was about evenly distributed between: (a) physical investments in switching, transmission, local exchange, radio and satellite facilities, as well as vehicles and office equipment; and (b) technical assistance and training for GPT staff in the area of organization and manpower development, accounting and billing, procurement, digital technology, and sector policy and regulation.

The project’s most important objectives were either not achieved or achieved after substantial delays. Project implementation was delayed by three years, due mainly to Government interference in procurement and high senior management turnover. The original 1992 target for consumer connections was only reached in 1995; telephone density stagnated through 1994 and the expected improvements in operational efficiency and quality of service did not, for the most part, take place. Some indicators even deteriorated. As a result of insufficient tariff increases, poor collection practices and excessive public sector arrears, GPT has been unable to fully service its debt, let alone make a net contribution to the treasury, and remained virtually insolvent throughout the project implementation period. Data provided in the ICR is insufficient to reconcile the relatively high ex-post economic rate of return/financial rate of return (ERR/FRR) calculated in the ICR (23 percent, as compared to 21 percent estimated at appraisal) with the reported dismal financial performance. Finally, some key institutional components and/or conditions were either not carried out (tariff studies and preparation of annual corporate plans) or have had only limited impact so far (set up of new financial reporting system and establishment of a data processing center). In light of these poor results, the Government recently decided to embark on a major restructuring of the sector and initiated steps, with the Bank’s support, towards partial privatization of GPT, setting-up of a regulatory agency, and licensing of a second network operator. If and when satisfactorily completed, these reforms should lead to rapid improvements in the sector’s ability to meet demand and achieve better service standards.

The Operations Evaluation Department (OED) rates project outcome as marginally unsatisfactory but institutional development impact as substantial (compared to satisfactory and partial, respectively, in the ICR). Sustainability is rated as uncertain (instead of likely in the ICR) at this point, since it hinges on the success of recently initiated sector reforms and on the Government’s willingness to permanently reverse its past practices of interfering with the sector’s commercial and financial autonomy. The Bank’s performance is rated as satisfactory (as in the ICR).

This project once again confirms the difficulty of bringing about lasting institutional and financial improvements to the telecommunication sector in the context of a traditional monopolistic environment.

OED rates the ICR as unsatisfactory because it fails, inter alia, to include: (i) a plan for future operation (including a set of indicators adequate for monitoring GPT’s future operations); (ii) sufficient information on GPT’s finances during implementation; and (iii) contributions or comments from co-financiers.

No audit is planned.

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