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         Third Telecommunications

The Third Papua New Guinea Telecommunications Project, supported by Loan 3154-PNG for US$17.2 million, was approved in FY90. A portion of the loan (US$4 million) was reassigned, in agreement with the Bank, to the Gazelle Restoration Authority to repair damage caused by the 1994 volcanic eruption. The loan was closed in FY96, at which time US$5.5 million was canceled. The Implementation Completion Report was prepared by the Industry and Energy Department and the East Asia Regional Office. No comments were received from the Borrower.

The project’s objectives were to: (i) help the Government prepare and implement appropriate sector policies, regulations and procedures; (ii) strengthen Post and Telecommunications Corporation (PTC), the public monopoly; and (iii) rehabilitate and expand telecommunications facilities. The physical components of the project included: (a) rehabilitation of 27,000 existing subscriber lines and connection of 10,000 new ones, (c) installation of new transit exchanges; (d) rehabilitation and expansion of the long distance network; and (e) construction of a new international earth satellite station and replacement of obsolete HF radio communication stations. The institutional development component (US$ 6.9 million, or 9 percent of total project cost) included: (a) technical assistance and training to the Department of Finance and Planning to improve its performance monitoring of PTC ; (b) technical assistance and studies for PTC in the areas of tariff policy, organization and finances (including set up of a computerized MIS system ); and (c) training of PTC staff (including secondment to foreign telephone companies).

Physical objectives were only partially met and little was achieved on the institutional and policy front, primarily due to high management turnover and the absence of Government commitment. There was little increase in exchange capacity prior to 1993 and the increase between 1989 and 1995 (about 15,000 lines) was only half the program target. The implementation of Bank-funded components was hampered by serious procurement and disbursement problems and some (e.g. HF and radio coastal radio systems) were not carried out. About half of the institutional development components (primarily training activities) were not completed and those that were (MIS, tariff studies) had only limited impact. On the other hand, PTC’s finances have remained satisfactory and the ex-post ERR on the project is a high 21 percent (24 percent estimated at appraisal), primarily a reflection of PTC’s very high tariffs. After an abortive attempt to issue private licenses in 1994, the Government has only recently moved towards reforming the sector, with the January 1997 enactment of new legislation ( including, inter alia, the separation of postal from telecommunications services and the establishment of a regulatory authority) These latest developments should pave the way for much needed improvements in the sector.

The Operations Evaluation Department (OED) rates project outcome as unsatisfactory, institutional development impact as modest, and sustainability as uncertain (as in the ICR). The Bank’s performance is rated as satisfactory (as in the ICR), but only marginally so in view of its somewhat unrealistic assessment of Government commitment at appraisal and of shortcomings in supervision (high task manager turnover and lax enforcement of covenants).

One particular lesson learned from this project is that particular attention should be paid during the preparation and appraisal of projects with small telecommunications operators to the issue of compatibility between multiple switching technologies, and its potential implications in terms of the type of procurement methods to be used.

The ICR is satisfactory.

No audit is planned.

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