PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: PIDA2486 Public Disclosure Copy Project Name MM: Telecommunications Sector Reform (P145534) Region EAST ASIA AND PACIFIC Country Myanmar Sector(s) Telecommunications (70%), Public administration- Information and communications (20%), General information and communications sector (10%) Theme(s) Regulation and competition policy (70%), e-Government (20%), Infrastructure services for private sector development (10%) Lending Instrument Investment Project Financing Project ID P145534 Borrower(s) Ministry of Finance and Revenue Implementing Agency Ministry of Communications and Information Technology Environmental Category B-Partial Assessment Date PID Prepared/Updated 09-Dec-2013 Date PID Approved/Disclosed 09-Dec-2013 Estimated Date of Appraisal 06-Dec-2013 Completion Estimated Date of Board 06-Feb-2014 Public Disclosure Copy Approval Decision I. Project Context Country Context 1. Myanmar is the largest country in mainland Southeast Asia with a land area of about 654,000 square kilometers and is endowed with significant natural resources and agricultural potential. With an approximate population of 50 million, Myanmar has one of thelowest population densities in the region. Its geographic location between China, India and Thailand, and more than 2,800 kilometers of coastline, leaves it well-positioned to resume its traditional role as a regional trading hub and key supplier of minerals, natural gas and agricultural produce. 2. However, Myanmar is also one of the poorest countries in East Asia, with an estimated GDP per capita of between $500-$800 and a poverty headcount of 26 percent. Since 2011, leaving behind decades of isolation, fragility, and conflict, Myanmar is embarking on a triple transition: from an authoritarian military system to democratic governance; from a centrally-directed economy to market-oriented reforms; and from 60 years of conflict to peace in the border areas. 3. The Government of the Republic of the Union of Myanmar (hereinafter referred to as Page 1 of 7 “Government”) has embarked on an ambitious economic, political and governance reform program. It has announced and begun implementation of a series of reforms to remove economic distortions, such as floating the currency, new fiscal regulations to rationalize personal income tax and reduce Public Disclosure Copy consumption tax, liberalizing the telecommunications sector, reforms aimed at developing the private sector and stimulating direct foreign investments, a review of the financial sector, promotion of access to finance, and creating an environment conducive to job creation Sectoral and institutional Context 4. The Government's ICT sector reform plans recognize that expanding the quantity and quality of basic infrastructure and improving access to affordable and reliable telecommunications and Internet services is crucial for inclusive socioeconomic growth and poverty reduction. With the current monopoly provision of services by the state-owned Myanmar Post and Telecommunications (MPT) agency, the availability and quality of telecommunication services in Myanmar lags international and regional benchmarks. At present, the country's mobile-phone penetration is below that of North Korea, and the cost of ICT services is prohibitively high for the average Myanmar citizen. Recent data suggests that mobile-phone penetration has reached approximately ten percent of the population, which is far short of the 93 percent figure in Lao PDR and more than 120 percent in Cambodia and Thailand. 5. The Government has adopted a policy framework for the development of the country's telecommunications market by facilitating competition in this sector. The policy intent is to support the overall achievement of Myanmar’s development goals and facilitate telecommunications sector growth which is broad-based and where the benefits of investment are maximized for the citizens of Myanmar. The main high level goals of this policy are: (a) to increase the overall teledensity (phones per 100 population) of the country to 75 to 80 percent by 2015 to 2016; (b) to make telecommunications services available to the public at affordable prices in both urban and rural areas; (c) to give citizens and enterprises the ability to choose their telecommunications services Public Disclosure Copy and providers; and (d) more broadly, to develop the ICT sector. With such aggressive access goals, it has been estimated by industry experts and analysts that Myanmar requires investments in the magnitude of approximately $5 billion by 2016. 6. The Government's policy framework plans for: (a) the adoption of a new Telecommunications Act and related regulations, (b) the issuance of two new telecommunications service licenses within 2013, (c) the creation of an independent regulator in 2015, (d) restructuring of the existing state-owned operator, Myanmar Post and Telecommunications (MPT), and (e) creating a framework for the provision of universal services. The Telecommunications Act was signed into Law on October 8, 2013. The law was developed following wide-ranging consultations with stakeholders over the previous 12 months. Some of the key objectives of the Telecommunications Act are to: (a) support the development of the country and to foster national economic growth by the widespread adoption of telecommunications technology; (b) enable more private sector participation in developing the telecommunication sector; (c) give more opportunity to the general public for the use of telecommunication services by expanding the telecommunication network throughout the entire country and facilitating the development of the Myanmar telecommunication sector; (d) ensure the efficient use of national resources for the citizens of the Union of Myanmar, including the radio frequency spectrum; and (e) put in place a regulatory framework and institution for the sector. The policy framework and the telecommunications law also provide for the establishment of an independent regulator, Myanmar Page 2 of 7 Telecommunications Commission (MTC) by 2015. 7. The approval of the Act is being followed by the issuance of two new telecommunications Public Disclosure Copy service licenses and the adoption of key regulations. A competitive licensing process was conducted in 2013 with the support of international advisors and was widely recognized as being transparent. The Government received 91 expressions of interest on February 8, 2013 and issued pre-qualification criteria to all interested parties on February 21, 2013. On April 11, 2013, a total of 12 companies were pre-qualified from a long list of 22 companies that submitted their documentation. MCIT issued a detailed information memorandum, bidding documents, and a draft License to the 12 pre-qualified bidders. Eleven bidders submitted their bids, and two were competitively selected on June 27, 2013. Telenor from Norway and Ooreedoo from Qatar were selected and they are expected to receive their operating licenses within 2013. 8. The Telecommunications Act specifically makes provisions for the establishment of an independent regulator, the Myanmar Telecommunications Commission (MTC), by 2015. It also provides MCIT the ability to establish various mechanisms to fulfill universal service obligations, including the establishment of a Universal Service Fund. The transition arrangements are for the existing Post and Telecommunications Department (PTD) in the MCIT, which has recently taken up regulatory functions, such as numbering and spectrum planning, from MPT to function as the regulator. PTD recently received support from the World Bank’s Public Private Infrastructure Advisory Facility (PPIAF) to develop an operational sector road map, institute a regulation making process and develop and promulgate key regulations on licensing, competition, access, spectrum and numbering that will enable MCIT to address key bottlenecks to fair competition and increased private participation in the sector. Public consultations on five key regulations will be held in November 2013. PPIAF funds of $0.54 million are, however, limited and are not adequate to address all the challenges facing MCIT and PTD. 9. Over the next few years, the market structure in Myanmar will change from a monopoly into a Public Disclosure Copy multi-operator environment. The PTD will transition into an independent telecommunications regulator, MTC. The MTC will be established either through amendments to the existing Telecommunications Law or through the approval of new legislation that specifically creates the regulator in 2015. The state-owned operator MPT, will be restructured into a commercial entity and eventually privatized, operating under the Companies Act. The ministry will be responsible for ICT sector policy making and will be the key line- ministry that supports the implementation of eGovernment initiatives in Myanmar. 10. The overall ICT regulatory framework for Myanmar is also under development. The Electronic Transaction Law is being revised to reflect good practice and is largely modeled on the UN Model Law on Electronic Commerce (1996, as amended) , and the UN Model Law on Electronic Signatures (2001) . Myanmar presently does not have explicit privacy, right to information or cybercrime legislation. Cybersecurity issues are handled by the Myanmar Computer Emergency Response Team (http://www.mmcert.org.mm). The recently-approved Telecommunications Act has streamlined the import of communications equipment, and import permits will be required only for a notified set of equipment. 11. The MCIT and PTD face the mammoth challenges of institution building and establishing the regulatory regime for a liberalized telecommunications sector. The Government fully recognizes the need to develop PTD’s capacity to regulate a competitive market. The Government also needs Page 3 of 7 to address issues such as universal service, tariff regulation, quality of service, license compliance monitoring and infrastructure sharing, among others. Further, capacity building for the implementation of the regulatory framework also needs to be completed. Public Disclosure Copy 12. There is consensus among senior Government decision-makers that the restructuring of the state-owned operator MPT is one of the priority issues that needs to be addressed to dramatically improve sector performance and prevent distortions in the market. Under the Telecommunications Act, the MCIT has retained policy-making responsibility, but this is likely to be viewed by new operators as being indistinguishable from MPT. MPT has until now been MCIT’s primary advisor on technical elements of policy issues and MCIT is responsible to Government for MPT’s revenue, which could likely create policy distortions in MPT’s favor. Thus, policy and regulatory support (particularly capacity building) is needed for MCIT and PTD to perform the policy-making and regulatory functions independently of MPT. 13. MPT restructuring will help with the separation of the Government’s policy function from operations and, in addition, enable MPT to operate as a commercial enterprise with the necessary financial and administrative autonomy to compete with private operators in the dynamic multi- operator environment. The licensing of new operators in the market reinforces the need to establish a level playing field, where MPT’s operations are subject to regulation by PTD in the same manner as other private operators. Toward this objective, MPT will receive a license to operate under the new Telecommunications Act. MPT restructuring, which is expected to be completed within 18 to 24 months, is imperative for its pro-competitive behavior in the market. 14. MCIT also recognizes that despite market competition, some very remote areas in the country will not receive services as it will not be commercially viable for operators to provide them. The telecommunications law provides for: (a) the regulator to develop plans, in conjunction with industry to promote the widespread availability of telecommunications services throughout the nation by encouraging expansion of network facilities and telecommunications services into the Public Disclosure Copy under served areas of the country; and (b) the establishment of various mechanisms to fulfill the telecommunications sector’s universal service objectives, including establishing a universal service fund. 15. There is also recognition that Myanmar must embark on and adopt ICT-enabled governance reforms. On August 9, 2013, President U Thein Sein, in a speech delivered during his meeting with the Cabinet, Ministers, regional and state chief ministers and deputy ministers, acknowledged the importance of eGovernment. During his intervention, the President underlined that, “it is the lack of capital and technology that has made the country to lag behind in development” and he urged the MCIT Minister to lead the national eGovernment program. Furthermore, he acknowledged its direct application for joining the ASEAN Single Window initiative, recognizing its enabling power for trade facilitation. In line with this priority, the proposed project includes an eGovernment component to provide public administrations with shared platforms that, if used appropriately, can increase efficiency and quality standards of public service delivery. The Asian Development Bank (ADB) is supporting the Government to develop an eGovernment master plan which will be ready by mid-year 2014. II. Proposed Development Objectives The development objectives of the project are to: (a) improve the enabling environment for the telecommunications sector and extend coverage in selected remote pilot locations; and (b) establish Page 4 of 7 priority eGovernment technological foundations and institutional capacity for Government to embark on its public sector reform program. Public Disclosure Copy III. Project Description Component Name Creating an enabling environment for connectivity Comments (optional) The Project will finance technical assistance and investments to support MCIT and PTD in designing and implementing a policy and regulatory environment that establishes a pro-competitive sector. Component Name Extending connectivity to rural areas Comments (optional) The Project will support the development of the Universal Service Strategy and fund pilots to accelerate the provision of telecommunications services in selected remote areas of Myanmar. Component Name Enabling eGovernment Foundations Comments (optional) The Project will support the design and implementation of a Myanmar National Portal for the provision of Government information and services, and will support eLeadership capacity building. Component Name Project Implementation Support Comments (optional) Project funds will be used to support the MCIT with project implementation support. Public Disclosure Copy IV. Financing (in USD Million) Total Project Cost: 31.50 Total Bank Financing: 31.50 Financing Gap: 0.00 For Loans/Credits/Others Amount BORROWER/RECIPIENT 0.00 International Development Association (IDA) 31.50 Total 31.50 V. Implementation 16. MCIT will be the implementing agency for the project. The implementation arrangements are based on MCIT’s existing organization and business processes which will be strengthened through capacity building and technical assistance in key areas, including (a) technical design and supervision of implementation of the spectrum management and monitoring systems; (b) procurement and contract management; (c) financial management (FM) and reporting which is carried out by MCIT’s finance department; (d) monitoring and evaluation (M&E) and safeguards; and (e) communications and translations. 17. Consultants will work closely with officials in MCIT (office of deputy minister) and PTD and Page 5 of 7 will report to the Project Director, who will be a full-time Government staff of the MCIT. The MCIT will be responsible for the project, including coordination of the overall implementation, results monitoring, financial management, procurement, and reporting to and communicating with Public Disclosure Copy the Bank. The Project Director, with support initially from the PTD’s finance department, will maintain the project accounts, request and receive disbursements, conduct procurement, sign contracts, make payments, and carry out the financial management functions. The Project Director will work with staff from MCIT and PTD to develop all technical inputs such as the terms of reference and technical specifications. As and when needed, technical working groups will be set up to deal with specific tasks related either to the development of terms of reference/technical specifications or elicitation and verification of user requirements related to the development of the IT systems. 18. MCIT will provide technical oversight of MPT restructuring (under Component 1) and Enabling eGovernment Foundations (Component 3). PTD, a department under MCIT, will provide technical oversight for Components 1 and 2 (Creating an enabling environment for connectivity and Extending connectivity to rural areas). Upon the transformation of PTD into the independent Myanmar Telecommunications Commission (MTC) , MCIT will retain responsibility for FM and procurement. MTC will take over technical oversight for relevant aspects of Components 1 and 2. 19. MCIT will be responsible for the procurement activities of the project, assisted by a team of consultants to prepare the technical specifications, following international practice and support for preparation of bidding documents, evaluation reports and other procurement activities. 24. A Project Steering Committee (PSC) will be established. The PSC will be headed by the Minister, MCIT, and comprise the Deputy Ministers, Director General of PTD, and representatives from the Ministry of Finance and Foreign Economic Relations Department (FERD). The PSC will provide strategic guidance to the project and will meet quarterly (at least) to facilitate coordination, provide overall policy guidance, and review progress reports. Public Disclosure Copy 25. The Terms of Reference for the Project Director and the various key consultants (FM, Procurement, M&E, and safeguards) will be included in the Project Implementation Manual which will be in place within January 2014. VI. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 ✖ Natural Habitats OP/BP 4.04 ✖ Forests OP/BP 4.36 ✖ Pest Management OP 4.09 ✖ Physical Cultural Resources OP/BP 4.11 ✖ Indigenous Peoples OP/BP 4.10 ✖ Involuntary Resettlement OP/BP 4.12 ✖ Safety of Dams OP/BP 4.37 ✖ Projects on International Waterways OP/BP 7.50 ✖ Projects in Disputed Areas OP/BP 7.60 ✖ Page 6 of 7 Comments (optional) Public Disclosure Copy VII. Contact point World Bank Contact: Tenzin Dolma Norbhu Title: Senior ICT Policy Specialist Tel: 5739+125 / 9 Email: tnorbhu@worldbank.org Borrower/Client/Recipient Name: Ministry of Finance and Revenue Contact: Nwe Nwe Win Title: Budget Director Tel: 66-95-6741-0322 Email: nwenwewin1957@gmail.com Implementing Agencies Name: Ministry of Communications and Information Technology Contact: Than Htun Aung Title: Director Tel: 9567407435 Email: thanhtunaung@mptngw.net.mm VIII. For more information contact: The InfoShop The World Bank 1818 H Street, NW Public Disclosure Copy Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop Page 7 of 7