Report No. 671a-BA Appraisal of the First Telecommunications Project (P&T) Burma April 29, 1975 FILE COPY South Asia Projects Department South Asia Regional Office Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association This report was prepared for official use only by the Bank Croup. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. CURRENCY EQUIVALENTS US$1 K 6.24 K 1 US$.1603 MEASURES EQUIVALENT 1 kilometer = 0.621 statute mile FISCAL YEAR April 1 - March 31 LIST OF ABBREVIATIONS, ACRONYMS AND DEFINITIONS Carrier - A system providing a number of telephone circuits over one radio link, coaxial cable or pair of wires. Channel - Frequency band of a carrier system carrying telephone, telegraph or data signals. Concentrator - A device which enables a few lines to be shared by a number of subscribers. Crossbar - An automatic telephone switching system utilizing a con- necting matrix with horizontal bars and vertical bridges. DEL - Direct exchange line. Gentex - Telegraph exchange switching system used by public tele- graph service. HF - High frequency (3-30 MHz). ITU - International Telecommunications Union. Lincompex - A device to improve the quality of speech on an HF radio- telephone system. Magneto - A manual exchange where the signaling is done by a magneto operated generator. MHz - Megahertz. Microwave - Radio system working at frequencies above 300 MHz but normally applied to systems working at frequencies above 1,000 MHz. Multiplex - The equipment in a carrier system which shifts and stacks the different circuits in the frequency spectrum appropri- ate to the particular carrier system. P&T - Posts and Telecommunications Corporation. STD - Subscriber trunk dialing. Telex - Teleprinter exchange service for public subscribers. UNDP - United Nations Development Program. BU M4A POSTS AND TELECOMINICATIGNS CORPORATION APPRAISAL OF A TELECOMOUICATIONS PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ................................... i-i 1. INTRODUCTION ............................................... 1 2. THE ECONOMY AND THE SECTOR ................................1 The Economy ........................................... The Telecommunications Sector ................ 2 Existing Telecommunications Facilities ................ 3 3. THE PROGRAM AND THE PROJECT ............................... 4 The Program ........................................... 4 The Project ........................................... 5 Cost of the Project ..................... 6 Contingencies ........................ 7 Items for IDA Financing ............................... 7 Procurement ................................. 7 Disbursement .......................................... 8 Ececution ................................. 8 4. JUSTIFICATION OF THE PRDJECT .............................. 9 Demand for Telecommunications Services .0............... l Least Cost Solution . .................................. 12 Rate of Return ........................................ 12 5. THE BENEFICIARY .................. ,. ... 13 Organization and Management ...... .................. ... 13 Technical Staff and Training ...... .................... 13 Accounting ... ......................................... 14 Audit ................................................. 15 Tariffs ................. .. ............................ 15 Taxes and Insurance ................. * ................. 16 This report is based on information provided by P&T and on the findings of G. E. Hams, R. C. Mitchell, M. Yokoi, and T. Miyawaki who visited Burma in November and December 1974. Page No. 6. FINANCES ...*..*................*...... .........0000 16 Backgrouad . . . . . . . .... 0 . *. 0. . . &. . 0. 00. . *. . *. 000. * 1 6 Postal Operations .. A..00--.00.0# ..0 17 Past Perforviancie .......... . .* A....... . *....... ... ... 1 7 Present Financial Position ....................... 17 Financing Plan 18 Future Financial Results .............. ... 0.0.. ...... ..... 1 9 7. RECOMENDATIONS AND AGREEMENTS 20 LIST OF ANNEXES 1. International Telephone Statistics 2. Basic Data 3. Existing Facilities 4. Annual Program Expenditures 5. Project Works 6. Estimated Schedule of Disbursements 7. The Impact of the Project on Business Enterprises Attachment 1 Attachment 2 Chart No. WB 9658 - Rangoon Telephone System Trunk Calls 8. Demand for Telephone Connections Chart No. WB 9505 - Demand for Direct Telephone Exchange Lines Chart No. WB 9657 - Development of Telephone Density, 1900-1974 9. Rate of Return Chart No. WB 9506 - Existing Organization 10. Representative Tariffs 11. Statement of Financial Position 12. Statement of Sources and Applications of Funds 13. Income Statement 14. Performance Indicators Map Proposed Main Trunk Routes - IBRD 11474 BURStA POSTS AND TELECOMMUNICATIONS CORPORATION (P&T) APPRAISAL OF THE FIRST TELECOMMUNICATIONS PROJECT SUMMARY AND CONCLUSIONS i. In May 1974 the Government of Burma requested IDA assistance in financing their FYs 1976-79 program of telecommunications development. ii. The present very inadequate telecommunications service in Burma is one of the bottlenecks to the growth of output of productive sectors. With only one telephone per 1,000 of population, Burma ranks amongst the IDA countries with lowest levels of service. There is a large number of pending applications for new subscriber connections and substantial unsat- isfied demand for trunk calls. The Posts and Telecommunications Corpora- tion (P&T), which is responsible for all public telecommunications service in Burma, has drawn up a program for telecommunications development for the FYs 1976-79 which represents the first major effort to improve telecom- munication services since the early 1960s when the only significant invest- ment of the post war period was made for the Rangoon telephone system. The estimated cost of this program is K 193 (US$30.9) million with a foreign exchange component of K 131 (US$21.0) million. iii. The four year project (FYs 1976-79) identified for the first Bank Group telecommunications lending operation in Burma would be this FYs 1976- 79 development program of P&T. It would provide for 17,000 lines of local exchange equipment and associated cable facilities to partially meet the demand for new telephone connections, trunk transmission equipment and switching equipment to interconnect major centers and exchange and switching equipment to meet the demand for telex service. An IDA Credit of US$21.0 million is proposed to cover the foreign exchange component of this develop- ment program. iv. All the equipment financed by the proposed Credit would be pro- cured through international competitive bidding except in respect of goods valued at about US$380,000, or less than 2% of the Credit amount, where for reasons of economy and compatibility it is proposed that certain equip- ment be directly purchased from existing suppliers. v. The project is the urgent, minimum level of investment that Burma should undertake to lessen the current handicaps to economic development. The project is the least cost method of achieving service objectives and is technically and financially sound. The minimum estimate of internal economic return is about 22%. Sensitivity analysis was conducted and even with an unfavorable combination of main parameters, the rate of return would not be less than 15%. - ii - vi. The Posts and Teleccmuaunications Corporation is a well managed entity which will be able to execute the project. Weaknesses in their training program and accounting system will be remedied during the project with the assistance of consultants. vii. The borrower would be the Government of Burma which would relend the funds to the beneficiary, the Posts and Telecommunications Corporation (P&T) for a term of 24 years, including a four year grace period, and at an annual interest rate of 8½j. viii. The project is suitable for an IDA Credit of US$21.0 million. BUJ4A POSTS AND TELECOMMUNICATIONS COIPORATION (P&T) APPRAISAL OF THE FIRST TELECOMMUNICATIONS PRDJECT 1. INT9DbUCTION 1.01 In May 1974 the Government of BUrma requested IDA assistance in financing the foreign exchange costs of its 1976-79 program of telecommuni- cations development. 1.02 The 4-year project (FYs 1976-79) proposed for Bank Group lending would be the first telecommunications lending operation in Burma and would comprise P&T's development program for that period. The project aims to meet part of the urgent demand for new telephone connections; to improve the service to be offered to existing and new subscribers by replacing worn-out equipment and by expanding the trunk network; and to improve tele- graph services by up-grading the public telegram service and by introducing a national telex service. The estimated cost of the project is K 193 (US$30.9) million with a foreign exchange component of K 131 (US$21.0) million. An IDA Credit of US$21.0 million is proposed to cover this foreign exchange component. 1.03 The Government of Burma would be the borrower and relend the proceeds of the Credit to the Posts and Telecommunications Corporation (P&T) at St% for a term of 24 years, including a four year grace period. P&T, the beneficiary of the Credit,is responsible for all public telecommunica- tions services within Burma and for international services to other countries. 1.04 The report is based on information provided by P&T and on the findings of G.E. Hams, R.C. Mitchell, M. Yokoi, and T. Miyawaki who visited Burma in November and December 1974. 2. THE ECONOMY AND THE SECTOR The Economy 2.01 The Union of Burma comprises Burma proper, administered directly by the Central Government and the States of Kachin, Shan, Kayah, and Karen, each with its own State Government. It is bounded by India, Bangladesh and the Bay of Bengal on the north and west; and China, Laos and Thailand on the east. Seventy percent of the population lives in the valleys and plains along the Irrawaddy River, its tributary, the Chindwin, the many river branches in the Irrawaddy delta and the lower Salween River. 2.02 The economy depends primarily on the agricultural and forestry sectors but mineral and oil resources are being exploited and have high potential. Much economic activity is concerned with the trade and movement of primary products. Agricultural produce of the delta and of central Burma is moved for consumption in the cities, towns and less fertile areas of the country and for export via Rangoon and Bassein. Forestry products, minerals and oil are moved from their sources to the Rangoon area for processing, redistribution of refined products or export. 2.03 The Burmese economy is operating below its potential. Improved performance requires not only a higher level of investment with immediate emphasis on quick-yielding projects but also better management at all levels and in all fields. Good telecommunication services are important for improving the operational efficiency of all productive and service sectors. Because of this, and the contribution that it can make in maintenance of national unity, the Burmese Government places high priority on improved telecommunications. The Telecommunications Sector 2.o4 Prior to 1972, telecommunication services were the responsibility of a Department of State, the Posts and Telecommunications Department. In response to a directive issued by the Chairman of the Revolutionary Council, P&T was established in March 1972 as a Government-owned corporation under the policy and direction of the Ministry of Transport and Communications, and a smaller department was retained within the Ministry of Transport and Communications to handle governmental responsibilities (see para. 2.05 below). This organization of the sector is in line with world trends and is satisfactory. 2.05 P&T is responsible for the provision and operation of all local, trunk and international public telecommunications services in Burma. The small Posts and Telecommunications Department of the Government is respon- sible for giving advice to the Minister on national telecommunications policy; for providing liaison with international bodies such as the ITU; and for exercising licensing functions for home and commercial radio receivers. 2.06 P&T is required to operate in a commercial manner in providing and operating Burma's telecommunications services. Its management has adequate autonomy and Government control of P&T is limited to policy direc- tion from the Minister of Transport and Communication; to the review of P&T's development plans and annual budgetary estimates by the Ministry of Planning and Finance and their approval by Parliament; approval of tariffs by the Minister of Transport and Communications and their tabling for con- sideration of the Council of Ministers; selection of senior management staff by the Public Services Selection and Training Board; and responsibility for auditing of P&T's accounts. -3- 2.07 P&T's corporate status will be formalized during 1975 with the issuing by the Ministry of Transport and Communications of a notification under "The Law Conferring Powers for the Construction of a Socialist Economic System, 1965". The draft notification made available to the Association adequately preserves P&T's present degree of autonomy. Existing Telecomminications Facilities 2.08 Barma, with 1 telephone per 1,000 population, ranks very low even amongst the IDA countries with poor levels of service (see Annex 1). As of December 31, 1973, 22,970 direct connections (DELs) were provided on 136 exchanges. Further basic data on the existing services are given in Annex 2 and existing facilities are described in the following para- graphs and in Annex 3. Only in Rangoon are there relatively modern automatic facilities but extension has fallen well short of demand. Else- where only manual service is available using obsolete and generally over-age plant. The trunk network is old, unreliable and its capacity inadequate. Local Telephone Service 2.09 Rangoon is served by a network of five automatic exchanges which use an earlier design crossbar switching system manufactured by L. M. Ericsson of Sweden, the ARF 101 system. The network has not been extended for more than a decade and although it has been well maintained, the central city exchanges are overloaded in the busy periods as usage of the limited available services has risen beyond design levels. Excessive congestion is a recurrent feature causing poor service. As of December 31, 1973 Rangoon had 15,479 connected subscribers(DELts) and the waiting list stood at 4,940. 2.10 Manual service is provided in 131 other towns and at December 31, 1973 there were 7,491 DELs. The larger of these exchanges and distribu- tion networks, which serve the 12 most important towns, are old and unreliable, the latest of these being 25 years old and 4 date from before W4orld War II. These twelve exchanges provided 3,523 DELs and had a waiting list of 1,002. The remaining 119 towns are served by small magneto exchanges of 100-line capacity or less which vary in vintage from pre-World War II to recent years. Trunk Telephone Service 2.11 The present trunk network is based principally on old pole lines which generally have been exploited with carrier systems to the limited extent permitted by their design. An old 24-channel vacuum tube type microwave radio system onnects Rangoon and Bassein; however the system has served its economic life and procurement of spares is difficult. Akyab is connected to the national network by one HF radio circuit only. 2.12 The capacity of the network is inadequate to meet the calling requirements of the present customers and delays are normal and can often - 4 - exceed one day. Transmission quality is poor due to the age of plant and route breakdowns are frequent because of deterioration due to age and also because of theft of copper wire from pole routes -- a present day problem common throughout the developing world. The service is thus poor and unreliable. International Telephone Service 2.13 International telephone services are operated from the Rangoon manual switchboard which is located in the Maungtaulay exchange building and has four international positions. HF radio schedules are maintained with Hong Kong, Tokyo, Pyongyang, Calcutta, Karachi, Dacca, Singapore and Shanghai. Service is largely restricted to the Rangoon area due to the poor quality of the internal long distance network and the fact that the international circuits are operated by HF radio. The present traffic level is very low indeed, amounting in total to about 10 calls a day. Two circuits to Tokyo and Hong Kong have recently been equipped with Lincompex equipment which improves somewhat the quality of telephone service on HF radio circuits. There is no doubt that Burma would benefit considerably from the improved telephone and telegraph contact with the rest of the world that would result from provision of a satellite earth station. However, the investment of approximately U3$5.0 million is at present beyond P&T's limited financial resources. Hence P&T must make do for a time with minor improvements to existing facilities. P&T might advance the provision of an earth station should it become possible for them to arrange suitable financing for this work. Telegraph and Telex Services 2.14 There are a total of 283 public telegraph offices throughout the country and transmission of messages is largely over land line Morse sounder circuits or through use of HF radio links. There is a total of 10 tele- printer circuits operating between main offices. Overseas telegraph services operate via a main route to Colombo which is kept open through the day and at fixed time schedules to Calcutta, Dacca, Karachi, Bangkok, Hong Kong, Tokyo, Shanghai, Manila, Pyongyang. Automatic error correcting facilities are only available on the Hong Kong link. Mutilations of the text are there- fore frequent and quality of service poor. 2.15 Telex service is restricted to international service originating and terminating in the City of Rangoon where a 50-line concentrator with three operating positions is installed. At present there are 30 subscribers; service is available only via Hong Kong to which three outlets with automatic error correcting facilities are available. Service standards appear reasonable. 3. THE PROGRAM AND THE PROJECT The Program 3.01 The program of expansion in the period FYs 1976-80 recommences - 5 - development of the Burmese telecommunications network which, other than for the installation of modern automatic telephone facilities in Rangoon in the period 1958-1964, has remained virtually static since World War II. It is a modest program in view of Burma's present resource limitations and consists of (a) P&T's ongoing works which continue through FY78 and essentially include provision of about 1,000 line units of manual telephone exchange equipment; (b) the project consisting of the FY1976-79 development program for the modernization and expansion of the basic telecommunications facilities; and (c) preliminary works in FY80 for the next development program. The program for FY1976-80 is estimated to cost K 315 (US$50) million with a foreign exchange component equivalent to K 210 (US$34) million. Annual and total capital expenditures are shown in Annex 4. The Project 3.02 The proposed project is the P&T's development program covering the period FY1976-79 and includes the following items: (a) Installation of 17,000 line units of local automatic telephone exchange equipment including replacement of 4,3)0 line units now in existing manual exchanges in 12 cities thus providing for a net additional capacity of 12,700 line units; (b) installation of cable and associated distribution network equip- ment to enable connection of about 12,000 new DELs and for upgrading the lines of the 3,400 existing subscribers connected to manual exchanges which are being converted to automatic working; (c) provision of subscriber apparatus including 22,750 automatic telephone instruments; (d) installation of trunk transmission facilities, including microwave radio systems and associated multiplex equipment interconnecting the major centers of Rangoon3 Moulmein, Mandalay, Bassein and important centers along the Irrawaddy River; low capacity radio systems for spur routes to the provincial centers of Akyab and Tavoy; and open wire carrier systems for existing pole routes; (e) installation of automatic trunk switching centers for Rangoon and Mandalay which will provide STD to all centers having automatic service and addition of 13 manual trunk exchanges at key centers in the network to give improved manual services from and to other communities; (f) installation of 120 telex and gentex exchange lines and 80 telex and subscriber units; and (g) provision of construction vehicles and assorted machines such as borers for cable crossings of roadways for use in local distri- bution networks and miscellaneous eauipment ancillaries to improve productivity in operation of telephone and telegraph services. Further details of the project are given in Annex 5. Cost of the Project 3.03 The estimated cost of the project summarized below is K 193 million including a foreign exchange component of K 131 (US$21.0) million. Details of the project including annual expenditures are given in Annex 4. K million US$ million Local Foreign Total Local Foreign Total Local Telephone Facilities Exchange equipment 5.68 24.03 29.71 0.91 3-85 4.76 Distribution networks 10.32 14.96 25.28 1.65 2.40 4.05 Subscriber apparatus 0.52 2.49 3.01 0.08 0.40 0.48 Trunk Line Facilities Switching 1.56 12.06 13.62 0.25 1.93 2.18 Trunk routes 9.65 46.17 55.82 1.55 7.40 8.95 Telegraph & Telex Switching 0.22 1.41 1.63 0.04 0.22 0.26 Teleprinters 0.28 1.67 1.95 0.04 0.27 0.31 Buildings 21.11 - 21.11 3.38 - 3.38 Vehicles, Construction ) 2.91 1.60 4.51 o.46 0.26 0.72 Machines & Misc. Equipment) Sub-total 52.25 104.39 156.64 8.36 16.73 25.09 Contingencies Price 9.36 25.33 34.69 1.50 4.06 5.56 Physical 0.34 1.32 1.66 0.06 0.21 0.27 PROJECT TOTAL 62.0 131.0 193.0 9.9 21.0 30.9 3-04 The project oost estimates for equipment to be imported are based on recent quotes obtained by P&T from suppliers of equipment and services; and on information on world price levels provided to them by visiting ITU missions. For local expenditures, they are based on pre- vailing civil works, buildings and staff costs and customs charges. The estimates are reasonable. Contingencies 3.05 Price contingencies provided for in the estimates of total proj- ect cost amount to 24% of foreign exchange costs and 18% local costs. The year-by-year allowances on foreign exchange costs are FY76, 7%; FY77, 16%; FY78, 25%; and FY79, 33%. These allowances should be ample since in tele- communications technological developments continue to be a cost reducing factor and the competition between suppliers is high. Moreover, the cost of the principal raw material, copper, has rapidly returned from the high levels of 1974 to a reasonable relationship with those costs previously prevailing. Fuel costs have only a small direct impact on the manufacture of telecommunication equipment. 3.06 A physical contingency provision has been allowed to cover uncertainty as to the trunk traffic increase which will occur when higher standard service is offered. It amounts to 5% of both the foreign exchange and local costs of the traffic dependent component of the trunk service items in the project. No other physical contingencies have been allowed for. Review of P&T's proposals carried out by the mission in conjunction with the ITU experts indicated that the quantities for local switching and other trunk items have been estimated accurately, and for the distribution networks, where a large number of component works are involved, deviations from individual estimates will tend to balance in the aggregate. Items for IDA Financing 3.07 An IDA Credit of US$21.0 million is proposed which would finance 100% of the foreign exchange cost of the project and would be allocated between the different components in the amounts shown under foreign costs in the table in para. 3.03. Procurement 3.08 All of the equipment to be financed by the credit would be pro- cured through international competitive bidding in accordance with Bank Group guidelines, with the exception of the following, estimated to cost approximately US$380,000 or less than 2% of the credit amount, where it is proposed that equipment be directly purchased without competitive bidding: (a) 1,000 lines of switching equipment to complete the 10,000 line unit serving the center of Rangoon. - 8 - (b) equipment to enable the existing automatic equipment in Rangoon to interwork with the new equipment to be obtained under international competitive bidding; and (c) cable network accessories of the type familiar to P&T staff and which have proved themselves in very wet and humid conditions, at an estimated total cost of US$100,000. P&T does not have the resources at present to carry out quickly the time-consuming task of testing alternative products for suitability under Burmese conditions. Disbursements 3.09 The proposed IDA Credit would be disbursed against the CIF cost of imported equipment and materials and the foreign exchange costs of services and training. Annex 6 shows estimated disbursements from the proposed Credit. As the project is part of a continuing investment pro- gram, it is proposed that any savings be made available, after consulta- tion with IDA, for the purchase of additional items of the same type. Execution 3.10 P&T has the capability of planning, designing and executing the project. P&TIs staff will install all local distribution networks, sub- scribers? apparatus and open wire carrier sets. P&T's staff will assist in the installation of the long distance transmission facilities, telephone exchanges and telex exchange under supervision of the supplier's engineers. 3.11 P&T has sought UNDP/ITU assistance for the provision of experts to assist principally with procurement of switching, telegraph, radio relay and multiplex equipment. In addition, the experts would provide relief to P&T in the early years of the project period in meeting the peak work load for detailed planning. UNDP funds have been allocated and an agreement is now being finalized; to shorten lead-time, ITU has already commenced recruitment of the experts. - 9 - 4. JUSTIFICATION OF THE PROJECT 4.01 The country economic reports on Burma stress the importance of stimulating output, of improving efficiency in most fields and of encour- aging enterprise. The 1973 economic report (No. 168a-BA) points to the inadequacy of telecommunications as one of the bottlenecks to the growth of output of productive sectors. Investment in telecommunications facili- ties has been almost totally neglected and the present service is very poor (see Section 2) being comparable to that existing in the developed countries at the start of this century when telephones were first being used (see Annex 8). 4.02 The project is a balanced allocation of the limited resources available to P&T and provides the minimum level of development necessary to adequately remove the bottleneck to growth. It provides services con- necting key distribution and production centers in the main production area of the country from the Lower Burma (Rangoon, Bassein, Moulmein) to the upper dry zone (Mandalay), along the Irrawaddy River (Prome, Magwe). Rice production and distribution are concentrated in this area and vital trans- portation activities and important industrial developments are carried on along the Irrawaddy River. Sufficient investment is allocated to upgrading the service given to existing subscribers by replacing worn out and out- dated exchange equipment and line plant and by augmenting the traffic carrying capacity of the network and the remainder is allocated to partially meeting the demand for new connections. The project forms an integrated development of the network in accordance with a sound national telecommuni- cation plan (see Para. 4.15). 4.03 The realization of objectives in agricultural, commercial, indus- trial, administrative or social fields requires coordination of a number of individual human efforts and the marshalling of several inputs at dispersed locations. Telecommunications are vital for achieving such coordination efficiently. Telecommunications overcome the impediment of distance and dispersion of operations and permit the fast personal contact and information interchange which is indispensable to management in a present day economy. This in turn leads to increased productivity and lower capital requirements and operating costs in all sectors. 4.04 Poor telecommunications service in Burma is undoubtedly a factor in the management problems now being experienced throughout the country in production; in marketing; and in commodity distribution. This is shown clearly in Annex 7 which records data obtained from interviews of the senior management of public corporations with different types of large scale opera- tions of consequence for the Burmese economy. For example, amongst other - 10 - similar cases it shows that transport sector management is unable to use its limited capacity (boat, trucks, etc.) efficiently and, in the agriculture sector, effective allocation of tractors in cooperative under- takings to fit with daily needs is made very difficult and even the pro- curement of spare parts and fuel is often delayed. The Burmese Government has recognized that the national benefits from improved efficiency in enterprises of all types will be considerable and therefore gives high priority to this investment. Demand for Telecommunications Services Local Telephone Service 4.05 Because of the low level of investment, P&T has been able to provide only 3,500 telephone connections over the last five years, bringing the total of DELs at December 31, 1973 to 22,970. Though potential users have been actively discouraged from seeking service, the waiting list, maintained for the 13 largest towns only, has grown at about 8% per annum and as of December 31, 1973 stood at 5,942 (4z,940 in Rangoon and 1,002 in the remaining 12 towns). Even with future growth at this highly damped rate, demand (DELs plus waiting applicants) at the end of FY79 would be 44,o000 DELs. The number of DELs provided at March 31, 1979 is expected to reach 36,200 under the project; leaving a waiting list of about 8,000 (see Annex 8). But experience in other developing countries indicates that the growth of demand will be much greater and a more likely estimate would place unsatisfied demand at at least 28,000 (see Annex 8). The scale of provision is therefore very modest. h.o6 The 7,200 lines to be provided in Rangoon will cater partially for outstanding demand in the capital and will bring improved service to existing customers by removing some of the overload resulting from excessive usage of the limited number of services now available. 4.07 Outside of Rangoon the remaining 9,800 lines of the project are spread as single exchange units serving the next 12 largest cities. The project will replace the present old and unreliable manual facilities with automatic service and provide for a limited amount of growth. Trunk Service h4o8 The present trunk network is based principally on very old pole routes which have been exploited to their maximum capacity. Delays on trunk calls have been increasing because of lack of sufficient circuits for traffic and increasing outages due to age of the line plant and to copper wire thefts. As a result traffic carried has been static or declining over recent years (see Attachment to Annex 7). If the proposed replacement of the backbone -- Mandalay-Rangoon-Moulmein route -- of the trunk network is not carried out as scheduled, this deterioration of service will continue with the possibility that a complete breakdown could occur within a few years. An example is the current Moulmein-Tavoy route which is rapidly becoming unworkable. - 1l - 4.09 The expansions required on the main routes in 1979 to provide good quality trunk service to existing and new subscribers have been estimated on the basis of experience under similar conditions within the region and are reasonable. The table at the end of this paragraph shows the number of circuits now existing and those required for public traffic in 1979. In addition a further increase in capacity is required for future growth and for other needs e.g. for leased lines, radio program lines and telegraph bearers. The figures in the table highlight the acute paucity of circuits at present. Existing Required 1979 Rangoon-Mandalay 21 170 Rangoon-Prome 9 67 Rangoon-Pegu 4 59 Rangoon-Bassein 11 89 Rangoon-Moulmein 12 78 Mandalay-Meiktila 6 54 Mandalay-Magwe 6 68 4.10 In addition to improving the main routes as shown in the pre- ceding paragraph improved service is also urgently required for Akyab and Tavoy -- important towns which serve as focuses for the economic activities in two regions. At present Akyab is connected by only one circuit provided through use of HF radio. The service is poor because of the inadequate traffic handling capacity and the inherent transmission inadequacy of HF radio working. Service to Tavoy is also very poor because the old pole route from Moulmein to Tavoy is almost continuously unworkable. 4.11 Microwave radio routes connecting Rangoon to Mandalay, Moulmein and Bassein and serving main centers in between, particularly those where automatic exchanges are being provided in the project, have been selected as the least cost method of providing the capacity required in this back- bone of the Burmese trunk network. Low capacity radio spur routes will connect Akyab (12-60 channels depending on detailed route survey) and Tavoy (6-12 channels) to the new network which will give significantly improved service to these more remote centers at minimum cost and will avoid works in inacessible or insecure areas. 4.12 Automatic trunk switching centers to be provided in Rangoon and Mandalay will enable STD to be provided between automatic exchanges on the microwave radio routes. New manual trunk exchanges will be located at 10 provincial centers providing improved access to the new network for the hinterland they serve. 4.13 The improved trunk network will bring additional benefits through the increased capacity, the quality of transmission and the reliability of service then available. Apart from providing improved telephone service to the public, it will be possible to relay at low cost programs from Rangoon - 12 - to regional centers for broadcasts using standard medium frequency waves. The major part of the Burmese population will then benefit from broadcasts of good strength and fidelity which can be received with low cost receivers. P&T will also be able to provide leased lines for Government authorities (railways, airline, security, etc.) and other large enterprises where required for efficient operation, avoiding the alternative of separate more costly investments for inferior facilities. 4.14 The new trunk network also provides the reliability needed for expansion of machine-based telegraphy. The small investment included in the project for telegraphy will give a significant improvement in the present public telegram service and will lay the foundation for its further develop- ment. National telex which will be introduced on a small scale will assist management of the large commercial enterprises. Least-Cost Solution 4.15 Despite the fact that no significant investment has been made for more than a decade in development of the Burmese network, P&T's staff has kept abreast of world developments and has prepared a master plan for future development of their national network. P&Tts ideas have been reviewed by ITU experts and the resulting plans have enabled the project to be designed to meet the urgent immediate needs and also to lay the basis for progressive development of an efficient and economical network, serving the whole nation. 4.16 The facilities to be provided and the engineering methods proposed were determined by P&T after discussions with ITU experts and the Association's identification mission. They were reviewed during the appraisal in collabor- ation with an ITU mission of three experts who were in Rangoon at that time to finalize the UNDP/ITUJ telecommunications training and advisory projects and found to be least-cost solutions for meeting the service objectives. Rate of Return 1.17 The internal rate of return on the project, defined as the discount rate which equalizes the stream of expected revenues attributable to the project with the capital and operating costs, excluding taxes, is 22% (Annex 9). If the foreign exchange component is shadow priced, the rate of return would decrease to 15%. Sensitivity analysis was conducted and even with an unfavorable combination of main parameters, the rate of return would decrease from 22% to not less than 15%. 4.18 Since all the above internal rates of return exceed the opportunity cost of capital in Burma, the foregoing indicates that, on average, the prices subscribers are asked to pay will exceed the long run marginal cost of tele- phone service. Normally this would imply that subscribers are able to demon- strate, by their willingness to pay, the benefits they receive from tele- communication facilities and therefore the justification of investments in the sector. In the case of Burma, where 60% of the users are Government sub- scribers, the use of payments as an economic measure may not be acceptable in all cases. However, the Government of Burma has directed that publicly- owned enterprises should, within the next few years, become profit-oriented in which case the role of price in signaling the justification of investment in telecommunications will become increasingly significant. The kind of benefits that result from telecommunications for such enterprises are sum- marized in Annex 7, which describes the series of interviews with directors - 13 - of major GovernLment business enterprises and provides a qualitative back- ground to the internal rate of return calculation. Over and above these privately perceived benefits however there are external benefits which accrue to parties other than those who pay directly for use of the facili- ties. 5. THE BENEFICIARY 5.01 P&T, the beneficiary of the proposed credit, is responsible for the provision and operation of all public telecommunication services in Burma. The responsibilities and relationship to Government are set out in paragraphs 2.05 and 2.06. Organization and Management 5.02 Since March 1972 when P&T changed from its previous position of a Government department to that of a Government owned corporation, P&T's management has been reorganizing its operation to accord with the new status so as to function effectively on commercial lines (see para. 2.06). 5.03 Accordingly a new financial relationship with the Government has been defined to place them on a commercial footing and steps have been taken within P&T to establish an appropriate commercial accounting system (see para. 5.07). P&T's organizational structure basically follows con- ventional lines and is satisfactory (see Chart WB9506). However, minor modifications should be considered in order to meet the requirements of the growing operations. Because of the insignificant volume of expansion works in the last decade, no separate group exists to plan, supervise and execute these construction activities. Such a group will be required to control these efforts in the future when larger expansion programs will be required. Also the financial and accounting responsibilities are currently placed in different organizational units. These functions are complementary and should be combined in one unit for effective functioning. P&T's management is aware of these two organizational weaknesses which presently, due to the small scale of their operations, are not creating any major difficulties. P&T should make the necessary changes at some future date in line with their expanding operations and requirements. 5.04 P&T has been organized and has been functioning during the past two years with the necessary degree of autonomy and is in a position to manage its operations on an efficient commercial basis. Its senior manage- ment staff is competent and adequate to discharge its responsibilities. Technical Staff and Training 5.05 At present, P&T has 4,200 staff employed on telecommunications. Their professional engineers (about 50 in number) are capable and have kept abreast of current technical progress through overseas training and visits sponsored under various aid programs. Their technicians and skilled staff - 14 - have done a commendable job in keeping their old plant operative and in maintaining the more modern switching equipment in the Rangoon network in good condition. 5.06 P&T has a small technical training school which has been pro- viding some simple basic technical training. The visiting ITU mission was also finalizing a US$1 million UNDP/ITU project, included in the UNDP indicative program for Burma, aimed at upgrading this school to meet the staff requirements necessary for the proposed expansion of the Burma net- work. The time schedule prepared for this project has been designed so that training facilities are ready in time to re-train the craftsmen and technicians needed for project execution and to operate the proposed expanded and modernized network. iormalities between the Government of Burma and UNDP are at an advanced stage and it is expected that the project leader will commence work in Burma before the end of 1975 as planned. Accounting 5.07 P&T's accounting system is on an accrual basis and provides for a segregation of corporate activities between Posts and Telecommunications operations. An effective record of plant investment, supported by a recent inventory, is maintained. However, the procedures and formats under which the accounting data are recorded and compiled into final accounts have been carried over from the cash system of accounting utilized prior to 1972. These procedures should be revised to fit into the accrual accounting system, meet current data requirements of management and make possible the utiliza- tion of accounting machines and computers. P&T and the Government of Burma are aware of the accounting system deficiencies and have employed a new Chief Accounts Officer to provide the direction and staff leadership required. They have also obtained the services of a systems consultant through Colombo Plan Assistance for a one year period commencing in January 1975. P&T plans to complete the accounting system review and have the improved system in operation for the FY77. It was agreed during negotiations that necessary improvements of the accounting system will have been instituted for the accounts of FY77. 5.08 Billing and collection procedures for non-government subscribers are satisfactory. Collections of Government accounts have not been effective and large outstanding accounts exist. At September 30, 1974, K 14.1 million or 78% of the outstanding accounts receivable were owed by Government sub- scribers, representing approximate 13 months' billings to this class of subscriber. Of this amount K 9.5 million was for services prior to September 30, 1973. The Ministry of Finance and Planning assured the mission that the Government of Burma and P&T would agree to a plan to settle the Government's old outstanding accounts and that the Government would assure the timely payment of current billings. During negotiations it was agreed that in the future all Government subscribers will pay current billings on a timely basis and will clear accumulated arrears with all reasonable accounts being paid by September 30, 1977. - 15 - Audit 5.09 Audits of all Government entities and corporations are required by the Constitution to be performed by the Central Audit and Inspection Office. The Central Audit and Inspection Office has a division which is devoted to the conduct of commercial type audits of Govermnent corporations. Ihis division is composed of commercially trained accountants headed by chartered accountants who are experienced in the conduct of commercial audits and, it appears, should be able to perform an audit of P&T that will satisfy Association requirements. There are no commercial accounting firms of any appreciable size doing business in Burma. During negotiations it was agreed that an annual audit of P&T shall be performed by the Central Audit and Inspection Office and that audited financial statements including the auditors' opinion shall be transmitted to the Association within six months after the close of the fiscal year. Tariffs 5.10 A summary of the current telecommunications tariff is provided in Annex 10. Although they have not been revised since the early 1960s the tariffs are generally comparable with the tariffs in many other develop- ing countries. Monthly rental of K 20 (US$3.21) and the trunk call charge for shorter distance calls are comparatively on the high side while the longer distance trunk call charges and, to a lesser extent, the local call charges are on the low side. The revenue per DEL is also somewhat low at US$138 per annum due primarily to the poor trunk service and low trunk usage. 5.11 The levels of the tariffs are presently adequate and have produced acceptable rates of return on past operations and have generated adequate funds to meet the limited past expansion programs. Since this condition is expected to continue through FY77 and telecommunication services are currently so poor as to make tariff increases extremely unpopular and difficult to justify, no increasesin tariffs have been proposed until FY78. The 1978 tariff increase, estimated at K 5.4 million (36% of local telephone revenues) is proposed for the telephone rental and local call charge tariffs. The second tariff increase proposedfor 1979, coincident with the initiation of STD, would reflect a rate structure change for trunk calls. This tariff increase is estimated to increase trunk revenues K 9.7 million (57%) in FY80, the first full year of its adoption. Tariff increases to generate these revenues are needed for earning an adequate rate of return (see para. 6.12) and for the financial plan (see para. 6.06). 5.12 The tariff structure generally follows conventional practices except for two departures - namely, a flat rate billing has been adopted for billing Government subscribers and trunk call charges level out for distances over 50 miles. 5.13 Government subscribers are charged a rental of K 37.50 per month compared to K 20 for non-government subscribers but are not charged for the - 16 - number of local calls made, the difference in rental in effect provides com- pensation to P&T for 175 calls per month which is consistent with the average number of calls currently experienced by metered subscribers. A test of Governnent subscribers, however, has shown a significantly higher calling rate. The Government and P&T agree that this practice is not desirable since it encourages high usage and is one of the reasons for the congestion being experienced in the local network. This practice also will be incompatible with pulse metering to be initiated with the introduction of STD. P&T plans to discontinue this flat rate billing practice as soon as the billing unit in the P&T is in a position to handle the additional work involved. During negotiations it was agreed that P&T will eliminate flat rate billing of Government subscribers as soon as possible but not later than the beginning of FY77. 5.14 The current trunk tariff provides call charges for calls of dis- tances of 0-10 miles, 10-25 miles, 25-50 miles and over 50 miles. The tariff structure provides for no rate steps for calls of distances over 50 miles which is inequitable and not conventional. The tariff proposed for initia- tion coincident with STD operation would create rate steps for 0-25, 26-50, 51-100, 101-200, 201-400 and over 400 miles with a lower than the present charge for the shorter distances and a higher charge for the longer distances. With the initiation of STD, a lower late-night tariff should also be estab- lished. Taxes and Insurance 5.15 P&T is required to pay normal custom duties on imported materials and equipment and is also subject to an income tax at the rate of 50%. 5.16 P&T, in the past, has not maintained property damage insurance coverage on its assets except for vehicles. P&T's assets have a wide geographic distribution and therefore present a limited concentration of risk. Experience elsewhere has confirmed that risks of significant damage to telecommunications plant are minimal and rehabilitation is comparably not expensive except in the event of a national catastrophe which is normally not included in the insurance coverage. P&T management however stated that they would review this position and take action if adequate protection could be obtained at a reasonable cost. Additional insurance, if desired, would have to be arranged through the Government insurance department. 6. FINANCES Background 6.01 Prior to 1972 P&T as a department of Government was required to deposit all receipts from operations in the Union Consolidated Fund and received all necessary operating funds and expansion funds (which - 17 - were extremely limited) from Government. In 1972 P&T was reorganized as a Government Corporation and provided with a degree of autonomy to handle its operations (see para. 5.04). Under this new organization P&T is required to deposit all receipts in the Union Consolidated Fund which are then credited to P&T's account and is allowed to withdraw funds for opera- tions and systems expansion in accordance with its approved plan. The consolidated fund therefore functions in the same manner as a commercial bank account. Fund requirements in excess of the above must be borrowed from the People's Bank or other designated authority and serviced on commercial terms. No equity funding will be provided by Government. Postal Operations 6.02 P&T in addition to its telecommunications services operates the postal services for Burma. Postal operations have made a small profit in most past years and P&T and the Government of Burma intend to continue to maintain a postal tariff which will cover postal expenditures and do not intend to use telecommunications receipts to support postal operations or development programs. During negotiations it was agreed that funds from telecommunications operations will not be made available for postal opera- tions or development until all financing requirements for telecommunications have been met. Past Performance 6.03 Commercial accounting practices were utilized for the first time for the period October 1, 1973 to March 31, 1974. P&T's telecom- munications rate of return after taxes on net plant for this six month period was the equivalent of the annual rate of 12% and its operating ratio (excluding income taxes) was 63%. P&T had no long-term debt at March 31, 1974. These results are satisfactory. Present Financial Position 6.O4 A summary of the financial position of P&T's telecommunication operations as of March 31, 1974 is given below. A detailed statement is shown in Annex 11. K U % (in millions) Assets Fixed Assets Gross plant in service 105.0 16.8 Less: Accumulated depreciation 62.6 10.0 Net plant in service 42 -7 55 Net Current Assets 34.5 XS 45 Total Assets 7b.9 123 100 Liabilities Equity 73.2 11.7 95 Other Liabilities 3.7 .6 5 Total Liabilities 76.9 L 100 - 18 - 6.o5 P&T has recently comoleted an inventory of its olant and has established the original cost and deoreciated value based on exoected lives. No effort has been made to revalue the assets to reflect infla- tionary trends or different currency parities. Most of the assets excent for the telephone plant in Rangoon are old and obsolete and provide very poor quality service, also these obsolete assets bear little similarity to the type of modern plant which would be utilized if this old plant were to be replaced. Also the gross and net values as shown in para. 6.04 are reasonably close per DEL to estimated current values in other pro- jections. Since no significant difference in value would be produced by revaluation, the distortion to the rate of return would be minimal. The present values of gross and net plant are therefore acceptable. Financing Plan 6.o6 Source and Application of Funds Statement for telecommunications operations is oresented in Annex 12. A summary of the telecommunications financing plan for the project, FY1976-79 is shown below: K US$b L Kin millions) Requirements Construction program Ongoing works 14.4 2.3 7 Proposed project 190.2 30.5 86 Future program 15.5 2.5 7 Total requirements 220,1 35.3 100 Sources Internal generation 62.8 10.1 Less: Debt service 18.9 3o Net internal generation 43.9 7.1 20 Decrease in working capital 16.0 2.6 7 Proposed IDA Credit* 128.5 20.6 58 Local borrowing 20.0 3.2 9 Customer deDosits and provident fund contributions .9 .1 1 Future program financing 10.8 1.7 5 Total sources 220.1 35.3 100 *The total proposed Credit is US$21 0 (K 131.0) millions of which US$0.4 (K 2.5) millions of retention payments will be disbursed during FY80. - 19 - 6.07 The above financing plan estimates tha+i internal generation and deposits will produce 21% of the fund requirement. An additional 7% will also become available by the reduction of the abnormally high working capital position. A further 58% of the total requirement will be provided by the proposed IDA Credit. The balance of 9% for the current program will be covered by local borrowing from the People's Bank on commercial lending terms in accordance with the Government decree on funds for Government corporations. 6.08 The financial projections assume that the proceeds of the Credit will be relent by Government to P&T for a period of 24 years including a four year grace period with an annual interest rate of 8½%. A subsidiary loan agreement incorporating these terms and providing that the exchange risk should be borne by P&T will be a condition of effectiveness of the proposed Credit. As a result of this IDA Credit and local bank financing P&T's debt- equity ratio will change from 0/100 at March 31, 1974 to 62/38 at March 31, 1979. Internal generation will coyer annual debt service at least 201 tines during each year of the project period. Both the debt-equity and the debt- service ratio are satisfactory. During negotiations agreement was reached on the inclusion of the standard covenant in the Credit Agreement requiring the agreement of the Association before contracting new debt unless the net revenues of P&T cover the maximum future debt service at least 1.5 times. 6.09 The financial plan, based on tariff increases in FY78 and FY79 (see para. 5.11), is satisfactory for the project period. However, the rapid increase in the level of debt servicing requirements during the project period and the need for additional debt financing in the future may present a problem in future expansion programs following the project. Since the pattern of revenues will significantly change during the project period due to the many changes in the physical structure of the telecommunications network, e.g., improved trunk facilities and STD operations; the magnitude of the financing requirements for the further expansion beyond the project cannot be accurately gauged at this time and should be subjected to a thorough review near the end of this period when new revenue patterns will have been established and the requirements of the subsequent development program more completely known. Future Financial Results 6.10 Forecast income statements for telecommunications operations are given in Annex 13. A summary of the results during the project period is shown below. Year ending March 31: 1975 1976 1977 1978 1979 1980 Revenue (K million) 31.7 32.8 34.4 42.2 50.7 75.0 Operating income 6.7 5.9 5.6 9.9 14.6 26.6 Operating ratio (%) 57 64 70 68 65 50 Rate of return after taxes 16.7 14.8 12.1 12.4 10.1 13.1 - 20 - 6.11 Operating revenues are projected to increase in proportion to the growth of subscribers and as a result of increased trunk revenues after the installation of the microwave systems and the initiation of STD in 1979. Revenue projections also reflect proposed tariff revision in FY78 and FY79 (see para. 5.11). Expense projections reflect growth rates experienced in the past adjusted for the anticipated staffing levels. 6.12 With the proposed tariff increases in FY78 and FY79, the inter- nally generated contribution is adequate to ensure the funding of the project and the servicing of debt. The financial projections show a rate of return on average net fixed assets in operations of not less than 10.1%, after income taxes (50%), during each year of the project period. Agree- ment was obtained during negotiations that tariffs will be maintained at a level to produce a rate of return on average net fixed assets in operations of not less than 10%. 6.13 Indicators which will help monitor P&T's performance are given in -nnex 1h. 7. RECONMENDATIONS AND AGREEMENTS 7.01 During negotiations agreement was reached on the following points: (a) P&T will institute improvement to the accounting system for the accounts of FY77 (para. 5.07); (b) the Government will take necessary action to clear the arrears and assure prompt payment of future billings to Government (para. 5.08); (c) P&T accounts will be audited annually by the Central Audit and Inspection Office and audited statements will be submitted to IDA within six months after the close of each fiscal year (para. 5.09); (d) P&T will eliminate flat rate billing of Government accounts by the beginning of FY77 (para. 5.13); (e) PUT will not utilize the funds of its Telecommunications Branch to support the operation or development program of its Postal Branch unless all telecommunications require- ments have been met (para. 6.02); (f) P&T will incur no debt without the agreement of IDA unless the net revenues cover debt service at least 1.5 times (para. 6.08); and - 21 - (g) P&T will maintain telecommunications tariffs at a level adequate to assure a minimum rate of return of 10% (para. 6.12). 7.02 A condition of effectiveness is that the subsidiary loan agreement incorporating the relending terms for the proceeds of the pro- posed Credit will be signed (para. 6.08). 7.03 With the above agreements the project is suitable for an IDA Credit of US$21.0 million. BIKIHIC POSTS A!L TELECII11]ICATIONS CORP)RACTiS IT'TEPNATIONAL 'TIEEHOEE STATIZItCS TELEPIH2ASI.- J O3AlJAK 1o14 GROSS NATIONAL rOPULAT1ONJ1I PR erUCT - 1972 aIIATOIAA PCRINCIPA CITIES B REST OF COSJNTRY Per Capita Av. Annual ,rowth Rate Growth Rate Percentage Percentage Jan. 1, 1974 Per Capita (1960-72) Total Io. Per 100 (1-65-74) Antonmatitaiori Total No. Per 100 .' ,atiotal Total No, Per 100 of National COUNTRY u000') 206 ,% (OOO's) Popolatio- 9) 9) (222'.) Population % (000's) Population % AE RICA Algeria l6,118 430 3.2 221 1.37 4.7 79.1 i64 6.o', 74 57 0.42 26 Egypt 35,473 24o 1.5 472 1.33 n.a. 92.4 299 1.88 63 173 o.88 37 Ethiopia 27,626 Bo 2.6 61 0.22 11.0 86.7 49 3.49 Bo 12 0.05 20 Ghana 9,443 300 0.0 52 0.55 4.8 69.8 44 2.88 84 6 0.10 16 loery Clant 4,497 342 4.2 25 o.56 3.6 90.7 17 2.88 69 3 0.20 31 Malawi 4,799 100 3.6 17 0.35 9.6 90.2 8 4.55 44 9 0.20 56 Nigeria 70,864 130 2.0 106 0.15 5.8 76,3 61 3.20 57 45 0.07 43 Senegal 4,203 26o (2.8) 32 0.75 2.3 92.2 29 3.37 90 3 0.10 10 Sudan 17,567 120 - 51 0.29 3.7 91.1 45 2.95 88 6 0.04 12 Zaire 22,738 100 3.3 25 0.11 2.4 76.o 15 0,62 6i 10 0.05 39 AMERICA Canada 22,306 4,440 3.6 11,668 52.31 5.2 99.5 5,592 59.15 48 6,076 47.28 52 Colombia 23,218 4oo 1.8 1,o80 4.65 10.2 97.6 64o 8.72 59 440 2.77 4] Costa Risa 1,917 630 3.1 89 4.62 15.2 98.2 82 io.44 93 7 0.58 r E1 Salvador 3,807 340 2.2 46 1.20 7.6 96.9 4o 2.81 87 6 0.25 13 Guatemala 5,569 420 2.2 53 0.95 8.5 103.0 53 4.94 100 - - _ Trinadad asd Tatge 958 970 2.8 66 6.92 6.1 99.9 41 41.14 62 25 2.93 38 United States 210,420 5,590 3.0 137,762 65.47 4.5 99.9 68,419 73.35 50 69,343 59.20 50 Venezuela 11,507 1,240 1.8 5o4 4.38 6.8 98.8 431 9.13 85 73 1.68 15 ASIA Pur_a 29,411 90 o.8 29 0.10 2.4 69.8 20 1.03 70 9 0.03 30 India 588,889 110 1.1 1,590 0.27 7.1 60.7 832 2.57 52 756 o.14 48 Indonesia 128,078 90 2.1 269 0.21 2.6 62.8 157 1.51 58 112 0.10 42 Iran 31,753 490 6.3 553 1.74 11.8 90.8 469 5.45 85 84 0.36 15 Iraq 10,608 370 2.7 129 1.22 7.6 92.4 n.a. n.a. m.a. n.a. n.a n.a. Japan 109,316 2,320 9.4 38,698 35.40 12.2 94.5 16,711 42.61 43 21,987 31.37 57 Malaysia 11,421 430 3.1 234 2os 6.5 95.3 n.a, n.a. n.a. n.a. n.a. n.a. Nepal 11,453 Bo 0.7 9 o.o8 11.8 76.2 9 2.97 99 - - 1 Pakistan 67,353 130 3.3 195 0.29 5.0 83.0 14o 1.49 72 55 0.10 28 Phllippinec 39,451 220 2.2 410 1.04 10.5 97.6 342 4.23 83 68 0.22 17 Singapore 2,202 1,300 7.1 250 11.36 12.2 120.0 250 ii.36 100 - - - Syria 6,890 320 3.4 143 2.08 7.1 89.4 121 5.23 85 22 o.48 15 Thailand 40,700 220 4.6 265 o.65 15.0 91.6 210 4.89 79 55 0.15 21 EUROCPE France 52,923 3,620 4.9 11,337 21.66 7.1 91.4 7,255 46.76 64 4,o82 10.91 36 Ger-any (Fed. Rep.) 6i,965 3,390 3.7 17,803 28.73 8.1 100.0 7,810 44.39 44 9,993 22.52 56 Sweden 8,144 4,480 3.2 4,984 61.20 3.9 130.0 2,416 72.95 48 2,568 53.13 52 Switzerland 6,501 3,940 2.9 3,604 55.44 5.4 100.0 1,728 - 73.0l 46 1,876 45.37 52 United Kirgdm 56,o64 2,600 2.3 19,095 34.06 6.7 99.6 7,665 44.33 4C 11,430 29.48 6o Yugoslavia 21,039 810 4.8 1,004 1li77 10.5 97.4 4 6 16.13 49 508 2.83 5) OCEANIA Australia 13,176 2,980 3.1 4,659 35.36 5.7 913.8 3,210 37.73 69 1,449 31.04 31 Fiji 551 270 2.7 23 4.09 8.3 86.9 13 16.16 55 10 ?.16 45 New Zealand 3,043 2,560 2.1 1,411 46.35 3.9 92.0 1,066 51.23 76 345 35.81 24 Papua New Guinea 2,491 290 5.6 32 1.30 14.3 97.6 24 17.01 74 8 o.36 26 SOURCES: 1. G.N.P.: World Balk Atlas 1974 2. Telephtne Statisties: World's Telephones by AT&T (Ja--ary 1, 1974) NOTES: 4 Population at January 1, 1974 dei-ed from the "Total Telephonen" anu. "Telephoneo per 100 Popolation" appe-ring in AT&TM'.s Pol,icati "World Telephoned' (Janusry 1, 1974) 9) "Principal Cities" are those considered principal cities it "World Telephones" (Ja-yary 1, 1974) exeept for l'Jeled Staten where principal tities are those fi 100,000 and aver population appearing in "World Telephones" (January 1, 1974) na.: sot available ANNEX 2 Page 1 of 2 pages BURMA POST AND TELECOMMUNICATIONS CORPORATION APPRAISAL OF THE FIRST TELECOMMUNICATIONS DEVEIOPMENT PROJECT Basic Data (as at December 31, 1973) I. Local Telephone Number of telephone stations 29,411 Number of subscriber connections (DEL) 22,970 Automatic 15,h79 Manual 7,491 Annual growth in subscriber connections (last three years) 3.8% Number of telephone exchanges Total 136 Automatic 5 Manual 131 Installed capacity 27,320 Exchange fill -84 Unsatisfied demand for subscriber connections Total 5,942 As a percentage of satisfied demand 26% As a percentage of total demand 21% II. Long Distance Telephone Total number of long distance circuits 329 Open wire carrier channels 172 Microwave channels 21 Physical circuits 131 HF radio circuits 5 III. Telegraph and Telex Number of telegraph offices 283 Number of telex offices 1 Telex subscribers 30 IV. International Facilities Telephone circuits 8 Telegraph circuits 10 Telex circuits 3 ANNEX 2 Page 2 of 2 pages V. Staff Total staff 8,796 Total telecommunications staff 4,200 Number of staff per 1,000 telephone (stations) 143 April 22, 1975 ANNEX 3 Page 1 of 5 pages BURMA POSTS AND TELECOMNUNICATIONS CORPORATION APPRAISAL OF THE FIRST TELECOMMUNICATIONS DEVELOPMENT PROJECT Existing Facilities A. Iong Distance Facilities 1. One old valve-type 24-channel microwave system working in the 2GHz band connects Rangoon with Bassein with drop-offs at Twante, Manbin, Wakema and Myaungmya. All other long distance facilities throughout the network are provided on open wire pole routes carrying copper or copperweld pairs with, in some cases, 3, 4, or 12-channel carrier systems working on them. The total number of trunk circuits is 329. 2. Trunk calls are handled manually and, because the number of lines is inadequate to meet the traffic needs of existing customers, callers have to wait normally for one to two hours and sometimes more than a day. 3. Transmission quality is poor due to the old age of the lines and equipment. For calls involving many of the exchanges in more remote areas, transmission has been further degraded due to their connection being made for reasons of expediency to the nearest point in the network without regard to the requirements of the national transmission plan. The service is also subject to frequent interruption due to the high fault-liability of the old open wire lines, the obsolescent equipment and the frequent theft of copper wire. B. Local Facilities 4. As at the end of 1973 there were 136 telephone exchanges servicing a total of 23,000 telephone subscribers (DELs); the total number of telephone stations being 29,411. 5. Telephone service in the city of Rangoon is relatively reliable, with five L.M. Ericsson crossbar exchanges installed between 1954 and 1961. The interexchange signalling system is an obsolescent DC pulsing one. Ninety-one percent of the installed capacity has been utilized and con- gestion exists during busy periods in the central city exchanges. Mandalay, the second largest city, is equipped with a 1,500 line CB exchange originally recovered from Rangoon. It is in poor condition due to the fact that it is well beyond its expected life. Two other small central battery exchanges of a similar age exist in Moulmein and Maymyo. All other exchanges are of the magneto local battery type. ANNEX 3 Page 2 of 5 pages 6. In Rangoon the subscribers' distribution networks make use of paper insulated and lead-sheathed cables in conduits, armoured ones laid directly in the ground, self-supporting aerial cables and open wires together with distribution cabinets and pillars. In other cities, there is much greater dependence on open wires and pole lines and the fault incidence is high particularly during the wet season. Open wires on pole routes are the usual methods to supply subscribers' lines in rural areas. 7. Details of the types of exchanges,capacities, and working lines are as follows: Switch No. of Total Sr. Board DELs on Telephones No. Name of Exchange Type Quantity Capacity 31/12/73 31/12/73 RANGOON 17,000 15,479 20,541 city 1 Maungtawlay Autom. ARF 9,000 8,993 12,471 2 Hanthawaddy it 3,000 2,633 3,125 3 Tamwe It 3,000 2,260 2,782 4 Insein it 1,000 630 989 5 Mayangon 1t ,3000 963 1,174 District 340 222 3 1 Hmawbi Magneto/LB 1 50 41 75 2 Kayan , 1 20 22 22 3 Thongwa , 1 20 12 12 4 Hlegu , 1 20 17 79 5 Seikkyri , 2 30 22 33 6 Syriam n 1 100 56 58 7 Taikkyi , 1 50 23 23 8 Twante , 1 40 22 26 9 Kungyangon , 1 10 7 7 Prome Sub-division 745 483 530 1 Prome Magneto/LB 5 300 228 253 2 Gyobingauk ,, 1 20 16 16 3 Letpadan If 1 50 30 33 4 Minhla It 1 50 18 20 5 Nattalin if 1 20 15 16 6 Okpo ,, 1 20 10 10 7 Paungde n 1 50 29 31 8 Padaung it 1 20 19 19 9 Paukkhaung n 1 20 10 10 10 Shwedaung it 1 20 17 22 11 Tharawaddy n 1 100 53 59 12 Thegon , 1 20 11 12 13 Zigon , 1 25 19 21 14 Monyo 1 10 8 8 ANNEX 3 Page 3 of 5 pages Switch No. of Total Sr. Board DELs on Telephones No. Name of Exchange Type Quantity Capacity 31/12/73 31/12/73 Toungoo Sub-division 560 478 59 1 Toungoo Magneto/LB 3 150 155 200 2 Nyaunglebin " 2 80 50 69 3 Pegu 41 250 220 259 14 Pyu 1 140 29 37 5 Shwegyin , 1 20 13 114 6 Yedashe 1 10 7 7 7 Thandaung 1 10 4 4 Bassein Sub-division 1,220 845 964 1 3assein Magneto/LB 4 300 264 338 2 3ogale 1 20 18 19 3 Dedaye 1 20 12 12 4 Ingapu 1 20 8 9 5 JDanubyu 1 20 19 19 6 Henzada 1? 2 150 112 126 7 Kyaiklat ,, 1 50 26 26 8 Kyaunggon It 1 10 11 12 9 Kyronpyaw It 1 20 18 18 10 Le,myethna 1 10 8 8 11 Maubin II 1 100 65 74 12 Moulmeingyun ., 1 20 15 15 13 Wyanaung 1 100 32 34 14 Myaungnya 1 100 73 78 15 Ngathainggyaung .t 1 10 7 8 16 Pyapon . 1/2 70 58 62 17 Wakama , 1 50 29 30 18 Yandoon 1 50 37 39 19 Yegyi 1 40 15 18 20 Zalun fT 1 20 13 14 21 Kyankin ,, 1 10 5 5 Moulmein Sub-division 1,180 868 1,015 1 Moulmein CB 2 550 428 520 2 Vyaikhto Magneto/LB 1 20 17 19 3 4udon it 1 50 19 21 4 Thanbyuzayet t 1 20 16 19 5 Thaton it 1 100 69 78 6 Ye n 1 20 19 21 7 Belin Ft 1 20 11 11 8 Tavoy n 2 150 118 123 9 Mergui it 1 100 72 74 10 Paan 1t I 100 68 96 11 Kawkareik 1 50 3 1 33 ANNEX 3 Page 4 of 5 pages Switch No. of Total Sr. Board DELs on Telephones No. Name of Exchange Type Qu.antity Capacity 31/1 2/73 31/1 2/73 M4ANhDALAY City 1 Mandalay CB 15 1,500 1, 206 1,498 2 Amarapura Magneto/LB 1 50 34 35 3 Pathheiri n1 20 9 13 District 1, 200 749 891 1 Maymiyo CB 1 300 142 166 2 Yritnge Magneto/LB 1 20 1 14 3 Kyau.kse II 1 60 60 84 4 Meikiitila n 2 200 141 206 5 Thazi 1 50 26 26 6 ?y awbwe 1 50 29 29 7 Yamethin 1 50 43 46 8 Pyi.nmana 1 100 76 85 9 Mahlaing n4 1 40 1il 15 10 -gan i2 200 129 138 11 Mogok 2 20 13 15 12 Lewe n 1 20 5 5 13 Kyaukpadaung 1 50 37 3 7 14 Wuidwin 1 20 11 12 15 5 Momeik 2 20 11 13 Sagaing Sub-division 1,340 856 1,004 1 Sagaing Magneto/LB 2 200 1 23 149 2 myimnu it 1 50 16 19 3 Monywa ,, 2 200 157 166 4 5hiwebo 1 100 8)4 122 5 Kawlin n 1 50 20 21 6 Katha 1 100 53 62 7 Kalewa rr 1 20 19 21 8 Kalemyo ,. 1 50 36 39 9 iMawlaik 1 50 18 19 10 Waintho 1 10 10 10 11 Ye-U 1 20 16 18 12 Ngazun n 1 10 8 8 13 Aytvaung , 1 10 8 8 14 M,Vitkyina 2 200 114 169 15 Mc ga.mg , 1 50 16 19 16 mohnyin I, 1 20 13 13 17 3namo ,, 1 5o 47 48 18 Kaka n 1 50 45 45 19 Falam 1 50 28 28 20 Mindat 1 50 20 20 ANNEX 3 Page 5 of 5 pages Switch No. of Total Sr. Board DELs on Telephones No. Name of Exchange Type Qu.antity Capacity 31/12/73 31/12/73 Magwe Sub-division 670 668 1 Magwe Magneto/LB 2 1 50 133 172 2 fYenanchaung ,, 1 80 77 85 3 Chauk it 1 50 53 56 4 Minbu n 1 70 55 72 5 Taunigdwingyi 1 50 43 46 6 Thayet 1 60 56 64 7 Aunglan ,t 1 40 39 39 8 Pakokku n 1 80 69 77 9 1Na-tuauk 10 8 8 10 Minla i1 10 10 10 11 w-othit, 1 10 8 8 12 Nyazungoo 1 60 28 31 Tauiggyi Sub-division 1,025 792 898 1 TauiLggyi Magneto/LB 3 300 293 364 2 Shwenyaung it 1 50 19 23 3 Kalaw 1 50 29 33 1 4 Aungban 1 50 23 28 5 Lciile; 1 45 ) 42 43 . Kengt.ung 1 70 4.38 49 I .Kyaulae, 1 , 00 5? 59 8 Hsipaw 1 50 32 32 9 Lashio 2 150 1o6 122 10 Kutkai 1 20 16 18 11 Naunghikio 1 20 15 12 Narsanig 1 20 13 13 13 Namtu 1 10 10 10 14 Lo -kaw 1 90 85 8 Arakan Division 470 377 429 I Akyab Magneto/L B 3 250 235 276 ' 2 K.yaukpyu ?, 1 80 52 5 3 Sandoway 2 70 59 64 4 BuI tkidaung 1 20 9 10 5 Maungdaw 1 50 22 22 C.AND TOTAL: 27,320 22,970 29,411 __ , . - BURMA POSTS AND TkLECOMEBIIICATIONIS CORPORATION An..al _rogras lExpenditure s (thoosando of kyate) FY 75 Fy 76 F Y77 FY 78 79 FY 80 FY-75-80 Local Foreign Total Loca Fortgn Tal Lal ForeIgn Total Local Foreig Ttl Loa Foreign Total Local Foreign Total Local Foreign Total THE PROJECT Local Telepbene Facilities Exchange EquIpment 156 .156 2,854 83,639 11,493 1,714 11,284 12,998 1,116 3,949 5,065 - 5,684 24,028 29,712 Distribution Networko 2,245 3,589 5,834 5,907 8,674 14,581 2,165 2,699 4,864 10,317 14,962 25,279 S,bscriber Apparatus 42 125 167 269 i,4i4 2,683 187 760 947 22 187 209 520 2,486 3,006 Ta-ork Line Facilities SMitching Equipment 313 1,2o6 1,519 1,163 9,650 10,313 31 1,206 1,287 1,557 12,062 13,619 Radio acd Multiplex Equipment 2,315 6,874 9,139 4,538 27,269 31,807 1,427 7,063 8,496 204 1,589 1,793 8,484 42,801 51,285 Ope- Wire Carrier rqoipment 2i6 337 553 557 2,698 3,255 393 337 730 1,166 3,372 4,538 Teingraph and Telex Sxi1chiag Bqoipmenc. 36 14o 176 184 1,26S 1,449 __ 222 1,ho5 1,625 Te-minal Unila (Tele. nt4ero) !,3 i67 210- 162 1,192 1,352 80 307 387 283 1,666 1,949 Buildings 3,716 3,716 9,635 - 9,635 7,761 - 7,761 21,112 - 21,112 Miscellaneous Vehiclls, Cocctr-otion Mc.hinen, Miocellaneone Equ-pment Iteon 13 ___ 13 1,888 200 2.088 867 1,243 2,110 143 i60 303 _ 2,911 1,623 4.514 Sub-Tota] 3,729 156 3,885 10,587 21,277 40,864 23,121 64,639 87,809 5,592 16,487 22,079 226 1,776 2,002 52,254 104,385 156,639 Prct Cootingencie 280 11 291 2,675 3,343 6,o01 4,803 15,894 20,697 1,550 5,451 7,001 54 626 680 9,362 25,325 34,687 Phymical Contingeoci n - 1 1 73 282 355 - - 186 721 907 52 200 252 31 121 152 --342 1,325 -43,67 TOTAL PROJECT ,2q09 168 4,j77 12,335 24,302 47,237 28,109 8i, 3o4 103,413 7,194 22,138 29,332 311 2,523 2,B3h 61,958 131,035 192,993 BPIC', ONGOIIIG WORKF Lucal Teleplone Facilities 279 686 965 668 2,243 2,916 565 1,782 2,347 534 1,781 2,315 2,o46 6,497 8,543 Truck Faoilitieo 68 532 600 112 Si5 927 28 180 208 - - - 228 1,527 1,735 Telegraphs 34 36 130 95 323 ullS 101 298 399 92 310 402 322 1,027 1,349 Replacement Works 226 667 t93 312 1,289 1,601 127 1,077 1,264 243 1,077 1,325 973 4,ilo 5,083 Miocelle-eous 22 - 22 117: - 117 124 - 124 63 - 63 326 - 326 TOTAL OGOING0 WORKS 629 1,931 2,610 1,324 4,675 5,979 1,005 3,337 4,342 937 3,168 4,105 3,875 13,161 17,036 S11:SEQ;RNT DEYILOFOIkST 220GAWI Local Telephone F-ollitie- 3,267 7,471 10,138 22,3o4 29,883 52,687 26,071 37,354 63,425 Tk Facilitics 384 343 1,227 1,758 9,913 11,671 2,142 10,756 12,893 Telex and Telegalph - - - 331 311 642 331 311 642 ContiagecCies 1,038 2,494 3,532 8,991 15,040 24,031 10,029 17,534 27,563 T0T7L SUBSEQUENT P51031AM 4,689 io,3o3 15,497 33,884 55,147 89,031 38,573 65,955 104,528 s TOTAL OVERALL PROGRAM 429 1,981 2,610 5,313 4,443 10,196 23,342 Ž0,239 51,579 29,044 84,472 113,513 11,333 32,946 4,323 34,195 57,670 91,365 104,4D6 210,151 314,557 0 Local -oote incl,de 1$O cootoms on imported equipment. April 28, 1975 ANNEX 5 Page 1 of 2 pages BURMA POSTS AND TELECOMMUNICATIONS CORPORATION APPRAISAL OF THE FIRST TELECOMMUNICATIONS DEVELOPMENT PROJECT Project Works 1. Local Telephone Facilities Estimated In- Service Dates Capacity (a) Local Exchanges: Rangoon Maungtanlay December 1976 1,000 Line Units it February 1978 2,600 Mayangon ) 2,000 Thingangyun) November 1977 1,000l Mingaladon ) 600 Other Cities Moulmein, Bassein, Prome April 1978 2,600 Mandalay, Meiktila, Magwe, Pegu September 1978 4L,800 Akyab, Taunggyi, Toungoo) Lashio, Myitkyina ) February 1979 2,4OO Total 17,000 (b) Distribution Network, Cables, Cabinets, Terminals, etc., and Subscriber Apparatus: Rangoon Maungtanlay December 1976 cabinets,tenidns, etc. it January 1978 2,600 DELs Mayangon, Thingangyun, Mingaladon November 1977 3,600 " Other Cities Moulmein, Bassein, Prome April 1978 2,600 Mandalay, Meiktila, Magwe, Pegu September 1978 4,800 Akyab, Taunggyi, Lashio, Myitkyina February 1979 2,400 Total 16,000 2. Long Distance Facilities (a) Microwave System and Spur Radio Rangoon-Mandalay November 1978 480 Channels Rangoon-Moulmein November 1978 180 Rangoon-Bassein February 1978 120 Akyab-Prome September 1978 60 Moulmein-Tavoy December 1978 12 ANN EX Page 2 of 2 pages Estimated In- Service Dates Capacity (b) Open Wire Carrier Systems December 1978 213 Channels (c) Automatic Trunk Exchanges: Rangoon September 1978 800 Terminations Mandalay September 1978 600 (d) Ten Manual Trunk Exchanges: Rangoon February 1978) Moulmein, Bassein, Prome April 1978) 21 positions Mandalay, Magwe, Pegu, Meiktila September 1978) Akyab, Taunggyi, Lashio, Myitkyina February 1979) Toungoo 3. Telex and Telegraph Switching February 1978 120 Line Units Subscriber Units and Gentex Office February 1979 80 it 4. Miscellaneous Various Construction vehicles and specialized (December 1976 - December 1977) machines (e.g. borer for roadway crossings) for distribution networks; telegraph and telephone office equip- ment (e.g. rotary directory files and for infoxmation services). February 28, 1975 ANNEX 6 BURMA POSTS AND TELECOMMUNICATIONS CORPORATION APPRAISAL OF THE FIRST TELECOMMUNICATIONS DEVEIOPMENT PROJECT Estimated Schedule of Disbursement IBRD Fiscal Year Cumulative Disbursement and Quarter at Ehd of Quarter (US.$ 'OOO) 1975/76 March 31, 1976 27 June 30, 1976 27 1976/77 September 30, 1976 27 December 31, 1976 27 March 31, 1977 h,019 June 30, 1977 5,322 1977/78 September 30, 1977 7,928 December 31, 1977 11,838 March 31, 1978 17,052 June 30, 1978 17,407 1978/79 September 30, 1978 18,116 December 31, 1978 19,181 March 31, 1979 20,600 June 30, 1979 20,600 1979/80 September 30, 1979 20,600 December 31, 1979 21,000 February 28, 1975 ANNEX 7 Page 1 of 2 pages BURMA POSTS AND TELECOMMUNICATIONS CORPORATION APPRAISAL OF THE FIRST TELECOMMUNICATIONS DEVEIOPMENT PROJECT The Impact of the Project on Business Enterprises Introduction 1. The Bank's 1973 Economic Report has recognized that "inadequate transportation and telecommunications constitute increasingly constraining bottlenecks to the growth of output". The nature of the problems being caused by the telecommunication services deficiencies and the impact the project will have on individual business enterprises is reviewed in this annex. 2. The data for the annex was obtained from interviews of the senior management of public corporations with different types of large scale oper- ations of consequence for the Burmese economy to reveal more clearly the impact and need for telecommunication services. While no effort at quantifi- cation of these benefits has been made, the size and nature of the operations and the obvious usefulness of telecommunications clearly demonstrates the savings in operational costs, in capital investment and in inventories as well as increased efficiency and assurance of dependability are much larger than the small investments in providing telecommunications services. The Corporations were: (1) Agricultural Mechanization Corporation (AMC) (2) Trade Corporation 1 (TCl) (3) Industrial Planning Corporation (IPC) (4) Myanma Oil Corporation (MOC) (5) Movement Control Committee (MCC) (6) Inland Water Transport Corporation (IWTC) (7) Road Transport Corporation (RTC) (8) Tourism Corporation (TC20) (9) Burma Broadcasting Service (BBS). 3. Attachment 1 to this annex summarizes the functions of the Corporations and the size of their operations, identifies the officers inter- viewed, and records the main specific points made in each interview. Conclusions from the Interviews 4. The managers interviewed were unanimous in asserting that general operation of their enterprises was seriously impeded by the present poor and ANNE.X 7 Page 2 of 2 pages deteriorating state of the telecommunications service. Waiting times on successful trunk calls and the number of calls which cannot be connected at all are increasing (see Attachment 2). They were sure that the improved services envisaged through the project would bring significant improvement in efficiency and effectiveness in their fields. 5. The summary of the interviews in the attachment shows quite clearly that the managers of these important corporations see lack of good telecom- munications inhibiting them in the areas of resource utilization; knowledge of market requirements; coordination of activities; provision of raw material to industry; purchasing and collection of agricultural and industrial products; maintenance of agricultural machinery, motor vehicles, boats, etc., and industrial machinery; and distribution of commodities. The attachment also shows the considerable size of operations of these entities confirming that the benefits from any improvement in efficiency will be substantial. 6. The interviews covered only a sample of the enterprises in Burma but it is obvious that the difficulties identified and the gains to be made from the project would apply in similar measure to all enterprises and services whether government or private and whether large or small. 7. The interview with the Burma Broadcasting Service identifies a substantial benefit which will be obtained as a by-product of the project. It will facilitate wide coverage of Burma, with radio broadcasts for which good reception will be obtained with cheap receivers. February 28, 1975 ANIJEX 7 ATTACHMENT 1 Page 1 of 13 pages 1. AGRICULTURE MECHANIZATION CORPORATION (AMC) Functions and Scope of Operations 1.1 AMC is responsible for the management of government-owned tractors and irrigation pumps which entails planning, procurement and distribution including leasing to cooperatives; training of farmers and workers; main- tenance; and procurement and distribution of spare parts and fuel. 1.2 The organization has two divisions with headquarters in Rangoon and Mandalay each responsible for stations spread over Burma. The table shows the scale of their operations. 68/69 69/70 70/71 Tractor stations 88 88 88 Number of tractors 6,615 6,216 6,365 Agriculture tractors AMC 3,958 3,241 3,391 (Cooperatives) (52) (1,555) (2,055) Average field hour per tractor (hour) 313 313 326 Average acre ploughed by tractor (acre) 175 186 202 Official Interviewed 1.3 Managing Director. Main Information Obtained 1.4 (i) At present only 56 of the 88 tractor stations have telephone facilities and trunk calls are generally subject to long delays even in places with telephone facilities. Problems caused thereby are: (a) Scheduling of tractors according to farmers' plans is difficult. (b) Ordering of spare parts and fuel and obtaining of help for repair tasks beyond the local staff have to be arranged by messenger, telegraphs or mails in many cases. This is slow and costly in the form of lost production. For example, it often takes one day by a messenger from a village cooperative to reach the nearest tractor station. Location of parts or diversion of mechanics available in one place to Where they are needed is difficult if not impossible to arrange in most cases. Twenty percent of tractors ATTACHMENT 1 Page 2 of 13 pages are not functioning properly because of lack of spare parts. (c) Spare parts inventories are difficult to maintain at efficient levels due to the need to maintain parts at most locations. (ii) Purchasing and distribution of fuel requires close contact with Myanma Oil Corporation. Lack of telecommunications causes- a good deal of waste effort by management of both organizations. (iii) It is proposed to reorganize the Corporation into ten divisions with headquarters at Rangoon, Mandalay, Bassein, Akyab, Sagaing, Magwe, Pegu, Shan, Karen and Moulmein and run the field operations from these stations. Success of this step will depend on adequate telecommunications to permit efficient coordination and control. ATTACHMENT 1 Page 3 of 13 pages 2. TRADE CORPORATION 1 (TCl) Functions and Scope of Operations 2.1 TCI is the official trader for paddy and rice in Burma. It purchases paddy directly from farmers and distributes rice to consumers. It is responsible for establishing tl' purchasing and selling prices. 1974/75 Paddy Purchase by TOl (In thousand) Market value baskets (million K) No. of depots Kachum 2,300 20.70 32 Karen 350 3.15 64 Sagaing 9,700 87.30 150 Tenasserim 500 4.50 17 Pegu 42,500 382.50 170 Magwe 1.900 17.10 76 Mandalay 3,5600 32.40 80 Mon 6,300 56.70 48 Arakan 5,700 51.30 53 Rangoon 17,000 153.00 80 Shan 70 .63 15 Irrawaddy 56,000 504.00 210 (basket approx. equal to 46 pounds) 145,920 1,313.28 945 Source - Working People's Daily - December 1974. Official Interviewed 2.2 Managing Director. Main Information Obtained 2.3 (i) At present most communication depends on messengers and letters. It will not be possible to achieve real efficiency in planning, purchasing and distribution until efficient telecommunications are available. (ii) During the purchasing period (late November and December) headquarters need immediate reporting from the 900 buying centers to efficiently coordinate and control purchases. (iii) Efficient distribution requires reliable and timely data on consumer needs throughout Burma. (iv) Avoidance of damage and other losses requires immediate reporting of rains, infestation, etc. for remedial actions to be organized. ATTACHMENT 1 Page h of 13 pages 3. INDUSTRIAL PLANNING CORPORATION (IPC) Functiom and Scope of Operations 3.1 IPC is coordinating 12 industrial corporations under the Ministry of Industry. They are: Textile, Food, Ceramic,' Pharamaceuticals, Chemicals, Metal, Paper, Petro-Chemical, Heavy, Electric Power and General Industries Corporations. IPC is responsible for project planning; technologi.cal planning; production planning; man power planning; material planning; economic planning and general acdinistration. In particular, (a) procurement of raw material and (b) distribution of final goods are its important function. Major industries are located along the Irrawaddy from Rangoon to Mandalay. IPC is planning and coordinating the Irrawaddy west bank development plan for the mobilization of surplus labor in the area and the utilization of natural resources, such as natural gas for power and for fertilizer production. Officials Interviewed 3.2 Managing Director; Assistant Director, Foreign Relations; and Director, Project Planning. Main Infomziation Obtained 3.3 (i) For production planning, daily reports from factories are very important. Coordination of raw material procurement for these industries depends on having accurate and up-to-date information from each factory and this requires periodic reporting and close management liaison. (ii) Corporations will be operated on commercial basis in the future. They will have more autonomy and be allowed to make a profit. To make the system work, efficient management is necessary and ready communications between the units and with IPC will be needed. (iii) Transportation of products depends on IWTC. Efficient arrange- ments for boats through IWTC requires good communication between IWTC and industries. (iv) Developing the Irrawaddy west bank needs good communications between newly developed areas and administrative centers. Communications traffic is expected to increase. Furthermore, availability of good telecom- munications will expand the areas which can be considered in planning for industrial development. (v) Efficient production planning and efficient distribution of products require constant information on market requirements. (vi) Maintenance of continuous production requires availability of all the inputs at each of the factories and requires urgent communications to signal and remove shortages caused by disruptions to suppliers. ATTACHITAIIT 1 Page 5 of 13 pages 4. MYANMA OIL CORPORATION (MOC) Operation and Scope of Operations 4.1 MOC is responsible for: exploration for new oil resources; refining; and distribution of final oil products (gasoline and diesel oil) to the whole country. Exploration of oil fields is going on in two areas. One area is along the Irrawaddy, from Lepangdow (north of Pagan) down to Myanaung, where at present 30,000 barrels of oil is produced daily. The other area is the offshore exploration near Akyab. Seismic exploration is being conducted in these areas. Table 1 - Onshore Oil Production Production Known Field 20barrel/da Lepangdow 10.0 Chauk 1.3 Yenangyuang 3.6 Mann 12.0 Prome 1.5 Myanaung 2.0 30.h Reserve - not known Table 2 - Oil Production (1,000 barrels) 61/62 3,638.3 64/65 3,171.6 68/69 4,973.3 69/70 4,878.3 70/71 5,166.7 Officials Intervieved 4.2 Director, Senior. Geophysicist. Information 4.3 (i) Exploration in remote areas requires frequent contact with headquarters concerning material and provisions required for explorations and for updated reports to headquarters etc. At present, all communications have to rely on HF radio contact, which is more expensive, poorer in transmission quality and less reliable than standard public telecommunications facilities. (li) Efficient distribution of oil products requires considerable iaproyeuent of teleconrinications. It is vital to have accurate, up-to-date information available on the needs of retailers and on the availability of supply and transportation. ATTACHMINT 1 Page 6 of 13 pages (iii) Organization of transport f'rom Lhe wells to the refineries at Chauk and Rangoon and for distribution of the products throughout Bunma requires close liaison with the transportation corporations. A great deal of management effort could be saved and improved results could be obtained with good telecommunications. ATTACHMENT 1 Page 7 of 13 pages 5. MOVEMENT CONTROL COMMITTEE (MCC) Functions and Scope of Operations 5.1 MCC is coordinating the movement of essential commodities, rice, timber, sugar, oil, and coal, in entire Burma. It controls both private and government productions and arranges transportation using Road Transport, Inland Water Transport, and Railways Corporation. Official Interviewed 5.2 Director of the Committee. Main Information Obtained 5.3 (i) Requests for transportation of commodities are sent to MCC, where they coordinate among Road Transport, Inland Water Transport, and Railways. These requests are now mostly placed by mail and naturally there is a delay in responding to the requests; it is impossible to avoid cases where the consumers do not get commodities and manufacturers cannot ship goods efficiently. The problems will not be solved until good telecommunications are available. (ii) Township and Division Committees send monthly reports on what they requested, what they sent (particularly agricultural commodities) and what they received. Good telecommunications are necessary to clarify reports, to respond to emergencies and to efficiently coordinate operations. (iii) Coordinating transportation requires efficient telecomMrni- cation. Shipment is often not arranged in time through lack of information, unshipped goods pile up at one station while the consumers elsewhere wait for the same goods. With good telephone facilities, the turnover of carriers will be improved and distribution system will work efficiently. ATTACHMENT 1 Page 8 of 13 pages 6. INL4ND WATER TRANSPORT CORPORATION (IWTC) Functions and Scope of Operations 6.1 IWTC operates on Burma's major navigable water. It provides regular passenger and cargo services, on the Irrawaddy, the Chindwin, the Delta, the Arakan and Moulmein. It carries- 100% of oil produced in Burma; every year about 300 million gallons (1 million tons) of oil produced in M±nbu, Myanaung and Yenaunchang is transported to Chauk and Rangoon (Syriam) refineries. Then refined oil products are shipped to Prome, Mandalay and Bassein by IWTC. It also carries two thirds of cement (2/3 of 200 thousand tons a year) produced in Thayet to Mandalay and Rangoon. About 300 thousand tons of rice is shipped to Rangoon every year from the lower Irrawaddy-Delta area then part is reshipped to upper Burma, via Prome and Mandalay on the Irrawaddy. Table 1 - Freight Carried by IWC Ton (1.000) 68/69 69/70 70/71 71/72 72/73 Rice 201 197 280 315 114 Cement 109 121 132 148 175 Petroleum 782 826 906 1,060 1,091 Ton miles (1,000) Rice 37,285 46,407 61,644 71,272 19,943 Cement 22,683 25,996 30,181 32,437 38,473 Petroleum 153,546 143,928 162,575 225,000 249,642 Table 2 - Transportation by IWTC (In thousand) 68 69 70 71 72 Passenger - miles 264,026 210,930 225,541 230,381 213,969 Freight ton miles 342,406 334,157 396,650 411,900 375,544 ATTACHMENT 1 Page 9 of 13 pages Table 3 - Transportation of Oil Products (Provenance/destination) Tonnage (1,000) Crude Oil 71 72 73 (6 months) Yenaunchang/Chauk 164.9 156.2 69.4 Myanaung/Syriam 227.6 141.2 41.5 Minbu/Chauk 93.3 101.2 66.0 Minbu/Syriam 197.0 313.0 145.2 Petroleum Chauk/Tiayet 51.3 54.8 17.8 Syriam/Prome 29.3 22.8 6.3 Syriam/Mandalay 28.2 20.2 5.6 Chauk/Mandalay 125.5 132.2 56.8 Syriam/Bassein 13.2 18.9 7.9 Official Interviewed 6.2 Director, Planning. Information 6.3 (i) IWTC is controlling the movement of their boats from their headquarters in Rangoon through key stations such as Prome, Mandalay and Bassein. For its daily operation, waiting time for telephone service is intolerably long. They cannot utilize their vessels efficiently when it takes two to three hours to call even key and important stations such as Prome and Mandalay; others take a much longer wait. For example, very often it is not possible to divert a boat for an unscheduled stop to pick up extra cargo, because of the poor telecommunications. (ii) When boats fail or other emergencies occur, immediate infor- mation is required for management to make alternative arrangements and notify shippers and customers, to arrange for repair parts and to take any other steps to minimize damage and losses. (iii) General operations of the Corporation are hampered by the very limited and delayed telephone service. ATTACF]M2NJT 1 Page 10 of 13 pages 7. ROAD TRANSPORT CORPORATION (RTC) Functions and Scope of Operations 7.1 RTC is responsible for transportation of both passenger a freight. In 1974 for freight transportation, there were 23 branch stations opcrating a total 2,427 trucks. RTC covers the country from Myitkina, Lashio to Bassein and Moulmein with its major operations being along Rangoon - Tourrseo - Meiktida - Mandalay and Rangoon - Magwe - Kyankpadauny - Mandalay road system. Operation along this route accounted for 56.9% of the total operation of RTC in 1973/74. The Rangoon - Maglwe - Mandalay route covers the Irrawaddy east bank where major industrial plants are located. Table 1 - Frei ht ton-milesge by RTC (in thousand) 1970/71 80,oO5 1971/72 80,784 1972/73 84, 112 1973/7h1 32,777 Table 2 - RTC - Freight Tonnage of Major Products (in thousands tons, six months of 1973/74) Rice 91.2 Paddy 18.0 Sugarcane 56.4 Sugar 12.8 Timber 9.1 Oil 41.2 Road Metal 7.5 Others 409.7 645 .9 / Data for six months only. ATTACAMENT 1 Page 11 of 13 pages Table 3 - RTC - Branch Stations and Ton-mileage of Freight (six months of 1973/74) Ton-mileage No. of Conveyed Utilization ratio Freight Revenues Trucks (Thousand) Ton-mile/truck (K Thousand) South Okkalapa 203 2,463 12.1 2,017 Kamayut 159 1,367 8.7 1,737 Rangoon 230 6,484 28.2 3,275 Lashio 79 834 10.5 778 Kalay 100 190 1.9 642 Tounggyi 445 2,345 5.2 5,616 Myitkyina 137 680 4.9 499 Mandalay 299 2,794 9.3 2,162 Moulmein 85 1,009 11.9 776 Kamaung 10 9 0.9 NA Toumgoo 115 2,763 24.0 984 Akyab 19 94 4.9 227 Minhla 122 2,891 23.7 1,287 Pakokko 75 559 7.4 454 Kyaukpy 8 13 1.6 NA Sandoway 17 25 1.5 146 Meiktila 72 2,840 39.4 1,901 Thaton 16 240 16.0 NA Bassein 45 456 10.1 209 Magwe 79 2,506 31.7 1,133 Shwebo 50 585 11.7 748 Kyaukpadaung 46 1,274 27.7 NA Padaung 16 344 21.5 569 Total 2,427 32,t777 Official Interviewed 7.2 Director, Planning. Information 7.3 (i) RTC is running an operation for which good, prompt co=muni- cation is vital for efficiency. Trucks are not fully utilized at the moment because of lack of efficient telecommunications. Vehicles often return to the base empty while there are cargoes waiting on the road to be picked up for immediate shipnent. Only efficient telecommunication will enable RTC to closely control their trucks and achieve high utilization. (ii) Maintenance service is impeded because of inefficient tele- communication, (a) when trucks need repair on the road, sending for a repair team is often delayed because no telephone service is available at hand, (b) station management have to use messengers a great deal in carrying out their tasks with considerable waste of time and effort. For example, at Rangoon station, where 230 trucks are stationed, unnecessary errands amount to 30-40 a day because of lack of telecommunication. ATTACHMENT 1 Page 12 of 13 pages 8. TOURISM CORPORATION (TC20) Functions and Scope of Operation 8.1 TC20 is responsible for tourism promotion and planning, and for hotel accommodations throughout Burma. Table 1 Number of Tourists 1969/70 1970/71 1971/72 1972/73 October-December 768 2,282 3,575 4,035 January-March 1,238 2,883 3,744 4,664 April-June 2,021 2,431 2,h00 2,878 July-September 22826 2,699 3,390 4o084 Total 6,853 10,295 13,051 15,661 Table 2 Amount of Foreign Currencies Exchanged By Tourists (Kyat in thousand) 1969/70 3,855 1970/71 6,156 1971/72 10,408 1972/73 10,934 Officials Interviewed 8.2 Managing Director, Director Planning. Main Information Obtained 8.3 . (i) Tourism in Burma has great potential as an earner of foreign exchange. To encourage tourism the Government has extended tourist visas from three to seven days and has increased the tourist foreign exchange import allowance to US$500 equivalent. TC20 is promoting and developing Pagan, Mandalay, Tounggyi (Inle lake) and Ngapali (seaside resort), but improved telecommunications is vital for success because (a) travel and accommodations arrangement are difficult to arrange and more difficult to rearrange without good telecommunications; (b) tourists are reluctant to go to places without adequate telecommunications to help ensure certainty of accommodation and their well-being. (ii) At present,facilities are completely inadequate. For example, Pagan is reached by only one trunk line. ATTACHMENT 1 Page 13 of 13 pages 9. BURMA BROADCASTING SERVICE (BBS) Functions and Scope of Operations 9.1 BBS is the sole broadcasting corporation in Burma. It operates only from Rangoon with two medium wave transmitters (50 kw) and three short wave transmitters. Major program from BBS is for peasants, workers and the youth. Officials Interviewed 9.2 Managing Director, Program Director. Main Information Obtained 9.3 (i) With the cooperation of other ministries, such as Agriculture and Education, BBS is broadcasting-educational programs to peasants, farmers, workers and the youth. (ii) In particular, programs to farmers are coordinated by Peasant Program Comuittee which consists of specialists from government agencies related to agriculture. The Committee decides what should be broadcast in order to promote agriculture production. The program typically deals with information on use Of fertilizer, pesticide; use of agricultural machine such as irrigation pumps, tractors; discussion on new developments such as high yielding plant varieties. Response from farmers to the program is high and BBS is receiving 3,000 letters a month asking questions about improved farming methods. In return, BBS, after consulting the specialists from agri- cultural departments, broadcasts answers and suggestions back to farmers. (iii) However, medium wave radio from Rangoon does not reach many people (no more than 100 mile radius) and most of the population receiving the program are depending on shortwave radio. The shortwave broadcasting has the following disadvantage compared with medium wave; (a) it is less reliable and less clear; (b) shortwave radio receivers are more expensive; and (c) the region which can be reached is limited (less than 30% of the population is reached effectively at present). (iv) BBS is planning a project to expand this service. The project intends to set up four medium wave stations at Prome, Magwe, Toungoun and Yamethin (10 kw transmitter each) and a powerful 100 kw transmitter at Mandalay. The cost for the project is small (about US$2 million). (v) The present telecommuication proJect will provide a microwave system from Rangoon - Prome - Magwe - Mandalay, so that with small additional cost (US$50,000) lines can be provided to relay programs from Rangoon to the transmitting stations of the BBS project. (vi) The benefit from the BBS project will be very large. Farmers can use cheaper receivers (about 1/3 of shortwave receiver) which will save considerable costs because of the large number of receivers - about one million in a few years - involved. The quality of reception will be far better. Seventy to 75% of the population will be reached. ANNEX 7 ATTACHMENT 2 RANGOON CONGESTION 1. Figure 1 summarizes the performance of the trunk service to and from Rangoon since 1963 by showing the average number of effective calls per month over these years and the average number which could not be connected and were abandoned (ineffective calls). 2. Because of growing demand compared with almost fixed capacity of telecommunications facility outside Rangoon, the number of ineffective calls are growing constantly. For incoming calls, in addition to growing demand, the Rangoon system itself became overburdened and in recent years P&T has been compelled to bar a part of subscribers (up to 20%) trunk service during heavy traffic hours, thus ineffective calls have drastically increased since 1969 (see Chart 9658) Besides, system failures have been common, due to the outdated equipment in the trunk network and in local networks outside of Rangoon, and lack of adequate spare parts. The poor performance has dis- couraged subscribers from using the telephone service in spite of their growing need. Demand has thus been suppressed,' especially in recent years. 3. The ratio of ineffective calls to effective calls for both incoming and outgoIzg calls is increasing. This clearly indicates the overall deter- ioration of the system due to obsolete facilities. 4,. If the present system is left without any further rehabilitation, in a few years, this sector may not be able to offer even the level of less than adequate service for keeping the acdinistrative structure together. Any continuation of the present stagnation could very adversely affect the working of economic sectors (transport, inaustry) and of essential economic services (distribution). RANGOON TELEPHONE SYSTEM Trunk Calls Efetive| . 50,000 40,000 incomingi I I I outgoir3 I 9wO 000t<, 8,000 7000A s t 1963~~~~~ 196 I96 196 16I98 16 90 17 92 1 Iod \I 3.000 r-A____ 7,000 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 World Bank-9658 ANNEX 8 BURMA POSTS AND TELECCJOUNICATIONS CORPORATION APPRAISAL OF THE FIRST TELECOMMUNICATIONS DEVELOPMENT PROJECT Demand for Telephone Connections 1. The Burma telecommunications entity has maintained over the years a list of customers waiting for service in the 13 largest cities only. This record does not represent all of the unsatisfied demand in those places since potential customers have not only been deterred by the long waiting time but also have been actively dissuaded from applying. 2. In order to show the conservative nature of the network exnansion proposed in the project, this record of waiting applicants only in the 13 towns was used to represent the unsatisfied demand for telephone service in all Burma in assessing the historical demand for telephone service (subscribers served plus waiting applicants). Chart No. 9505 records the resulting figures and shows an extrapolation of them by an exponential curve of best fit as an estimate of future demand. It wil1 be seen that even this conservative estimate gives a level of demand exceeding the network capacity available at the end of the project (end FY79) by about 8,000 DELs. 3. Also shown on the chart is another projection which is considered more realistic, though still conservatire. It is based on the experience of many countries that have passed through the current level of development im Burma and assumes that demand for ser7ice doubles within five years (14% annual growth of demand). On this basis unsatisfied demand at the end of the project (end FY79) would be far larger - about 28,000 DELs. 4. But the real need for telecomunication services is much greater than the levels being discussed here. Generally, the Bunmese population has no experience of what good quality telecommmnications would do. for the enter- prises and social activities in which they take part. History in other countries shows that demand will rise as these possibilities are demonstrated to them with system improvement. Another demand generating factor is that the utility of the system grows with size. Figure 9657 shows how systems in the more developed countries have grown over the years in response to this growing demand for service. It will be seen that most of the developed nations were more developed telephone-wise in 1900 than Burma is today as measured by the number of main stations per 100 of population; a time when economic and business management were far simpler than they are today. March 3, 1975 DEMAND FOR DIRECT TELEPHONE EXCHANGE LINES 10 8 ~ ~ _ _ _ _ I ____ MORE LIKELY 6 GROWTH OF DEMAND 5 ~~~~~ ~~_ __ . 5 EXTRAPOLATION -. - -- 4 OF DEPRESSED _ -. DEMAND NUMBER OF DELS - - , 3 RECORDE -D DEMAND ______________l___ (X10o) (DEPRESSED) PROPOSED PROVISION 1966 67 68 69 70 71 72 73 74 75 76 77 78 79 80 World Bank-9505 DEVELOPMENT OF TELEPHONE DENSITY, 1900-1974 Main statons per 100 inhabitants Dr Semi-log scale 50 _-- Sweden 40 __ . _._ __ _ ____ u 4--.-.Suisse 30 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~New Zealand 30 __- _.* _-_ __ . _ _ , _ Danemark .* .l,~~~*' Jpan Au -./-Aastral la 20 -_________ _____ -____ ,a#. *,~~~~~~~~~~~~~~~~~~ ....- ~~~Pays-Bas 20 * i.4-United Kingdoar 06t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ / .n/4 - / C.C.l.TT. 2145~~~ 'a 109 ___. _ . _ = ____F______. ________. _____.___ . = _ _ _ __ _ _._ uFrance .orl uanEspana 9 ~Argentina 6 5~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~., 0.69____ ___ __ 0.6 8____ _____________ _____ 0.1 ~~~~~~~~~~~~~~~~C.C.IT.T. 2145 .09 Burn_____ 1900 1910 1920 1930 1940 1950 1960 1970 1974 World Bank-9657 ANNEX 9 Page 1 of 2 pages BURMA POSTS AND TELBCOMMUNICATIONS CORPORATION APPRAISAL OF THE FIRST TELBCOMMUNICATIONS DEVELOIMENT PROJECT Rate of Return Net Benefits and Rate of Return 1. Capital expenditures related to the project are based on 1975 prices and exclude taxes, duties and price contingency allowances. The cost and benefit streams are as follows: Fiscal Capital Operating Net Year Expenditure Costs Revenues Benefits (in thousands of K's) 1976 3,886 270 438 (3,718) 1977 35,691 906 1,430 (35,167) 1978 84,556 1,965 3,894 (82,627) 1979 14,306 4,198 11,620 ( 6,884) 1980 284 6,257 30,999 24,458 1981 (1,559) 6,831 39,431 34,159 1982-84 (1,559) 6,831 46,174 40,902 1985-98 - 6,831 46,174 39,343 1999 (14,028) 6,831 46,174 53,371 The rate of return on the project, defined as the discounted rate which equal- izes the streams of net benefit as shown above is 21.55%. Benefit Period 2. The period of benefits of the project extends from FY76, when the first disbursement will be made, to FY99 when, on average, the plant provided under the project will have completed its useful life in accordance with the present composite depreciable life of 23.5 years. Theft of Line Wire 3. A negative investment of K 1,559 thousand has been included for the five year period FY80-84 to reflect, conservatively, the savings in the cost of line wire replacement resulting from the establishment of a microwave network and, thereby, the reduction of the theft of line wire. ANNEX 9 Page 2 of 2 pages Residual Value 4. The residual value of the capital improvements under this project has been estimated to be 10% of the original cost value. This residual value is expected to be available during FY99, the final year of the com- posite life of the plant provided under the project. Shadow Pricing 5. The foreign exchange component of all capital expenditures and operating material costs can be shadow-priced based on an exchange rate of K 10.00 to US$1.00 rather than the current official exchange rate of K 6.24 to US$1.00. The resulting rate of return will be 15.05%. Sensitivity Alysis 6 A sensitivity analysis was performed which produced the following results: Rate of Returm Revenue decrease of 10% 19.25 Expense increase of 10% 21.15 Capital expenditure increase of 10% 19.85 Two year delay in completion of project 17.75 Unfavorable combination of conditions including: (i) 10% revenue decrease (ii) 10% operating expense increase (iii) 10% construction cost increase (iv) Two year delay in completion of project 14.55 April 22, 1975 EXISTING ORGANIZATION - BURMA POSTS & TELECOMMUNICATIONS CORPORATION | MANAGING | DIRI :TOR STORES DEPT. ACCOUNTS DEPT. ||MANAGING DECO'S T. POTA DE-P'"T.~ l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~P ATO ENIE IN Cl0 C T-O. U. BURMA RANGOON RAN_UN MANDALAY NETWVORK C.T.O. L. BURMA ARAKEN MANOALAY RANGOON ~STATE OSEAS & ~CARRIER l M IC ROWAV E l C AR RDIVISION Wo-d k 6U. BURMA L. 8URMA | World Book-BEOB ANNEX 10 BURMA POSTS AND TELECONMUNICATIONS CORPORATIONI APPRAISAL OF THE FIRST TELECOMMUNICATIONS DEVEWFMENT PROJECT Representative Tariffs at November 30, 1974 K US$ 1. Telephone Monthly rental- Private subscribers 20.00 3.21 Government subscribers 37.50 6.01 Internal extension 8.00 1.28 Local call charge - private subscribers .10 .02 Installation charge - private subscribers 60.00 9.62 Deposit - private subscribers 100.00 16.03 Trunk call charges (per 3 minutes) up to 10 airline miles .50 .08 10 to 25 airline miles 1.00 .16 25 to 50 airline miles 2.00 .32 over 50 airline miles 3.00 .48 2. Telegrams First 16 words in Burmese or first 8 words in English .60 .10 Each additional word .10 .02 Surcharge on each telegram Ordinary .25 .04 Express .50 .08 March 3, 1975 ANNEX 11 Page 1 of 2 pages. BURMA POSTS AID TELECOVIUNICATIONS CORPORATION TgLECOMMUNICATIONS BRANCH Statement of Financial Position (millions of Burmese Kyats) Actual Forecast Sept. 30 March 31 As of: 1973 1974 1975 1976 1977 1976 1979 190C 190T Fixed Assets Plant in service 1050o 105.6 108.2 114.2 131.1 193.4 277.9 332.9 447.9 Less: Accumalated depreciation 62.6 64.5 69.0 73.7 78.9 85.8 95.8 108.8 125.4 Net plant in service -72.1 117. 39, -b0C-5 52.2 107,6 172-.l 22'4.1 322.5 Plant under construction - - - 4.2 38.9 90.1 50.4 87.3 71.7 Total Fixed Assets 142.14 4 3, -7 91.1 1977 232.5 M7 39i - Current Assets Cash and consolidated ifnd 17.6 17.2 31.4 31.2 13.2 10.1 9.1 6.9 6.8 Subscriber accounts receivable 15.1 16.3 13.8 12.9 12.7 12.9 14.2 17.0 19.5 Materials and gupplies 9.0 8.7 8.9 9.8 10.0 10.5 11.0 11.5 12.1 Other current assets 3.8 3.7 .2 .2 .2 .3 .3 .4 .4 Total Current Assets 45 459 - 353 7 36.1 33.8 -3UTh -3 -T- 78 Total Assets 87.9 87.0 93.5 98.8 127.2 231.5 267.1 347.2 1433.0 LISB LITIES . quity Capital-beginning of period 67.3 73.2 75.7 82.4 88.3 92.8 96.5 99.5 110.3 Current year's income 5.9 2.5 6.7 5.9 4.5 3.7 3.0 10.8 15.2 Total E:quity 73.2 7 Sw9 -7SC5 *Y75 ITZ77 IU3 Long-term Debt Rr_oposedIDA credit - _ _ .2 25.1 106.4 128.5 128.3 125.4 Local financing - - - - - 20.0 20.0 26.0 34.o Fbture financing - - - - - - 10.8 66.o 126.3 Total Long-term Debt -- 7 -:I M7 159.3 2 2857 Other Liabilities Customer deposits 2.7 2.7 2.7 2.8 3.0 3.1 3.5 4.1 4.8 Provident fund 1.0 1.0 1.1 1.1 1.1 1.1 1.2 1.2 1.2 Total Other Liabilities 3.7 3.7 -B 3.9 4.1 -7.2 7- 47 3 -_. _-_ Current Liabilities Income Tax 10.7 7.1 6.8 5.9 4.6 3.8 3.0 10.7 15.2 Other .3 65 .5 .6 .6 .6 .6 .6 Total Current Liabilities 11.0 7. 6.4 T_ -E --7C -TM 4 T78 Total Liabilities 87.9 87.0 93.5 98.8 127.2 231.5 267.1 347_ 433.0 Debt-equity ratio 21/79 57/43 62/38 67/33 69/31 February 12, 1975 ANNEX m. Page 2 of 2 pages BTRMA POSTS AND TELONIMUNICATIONS CORPORATION APPRAISAL OF THE FIRST TMECOINICATIONS DFIT)MET PROJECT Notes and Assumptions on the Statement of Financial Position 1. Plant under construction - value at end of each fiscal year was detesmined on basis of engineering estimates of plant not commissioned at that date. 2. Subscribers accounts receivable - estimated values at year end initially refleet reductions relating to settlement of government accounts followed by increases relating to increased subscribers and billing amounts. 3. Material and supplies - estimated values reflect increases relating to growth of values of plant in service giving consideration to the write-off of obsolete material presently included in inventory values. 4. Customer deposits - estimated values reflect growth in number of non-government subscribers. '. Provident fund - estimated values reflect increased number of employees and increased salary levels. ANNEX 12 _URA POSTS AND TELECOMMUNICATIONS CORPFOATION TELECOITMINICATIONS BRkNCK Statement of Sources and Applications of Fnunds (millions of Burmese Kyats) For Fiscal Year Pnded March 31: 1975 ]1976 1977 1978 1979 1980 1981 Sources of Funds Internal Generation Net income before interest 6.7 5.9 5.6 9.9 14.6 26.6 36.1 Depreciation 4.5 4.7 5.2 6.9 10.0 13.0 16.6 Total Internal Generation ___2 1 -10. in__ in__ _ Borrowings Proposed IDA Credit - .2 24.9 81.3 22.1 2.5 - Local cost financing - - - 20.0 - 6.o 8.0 Future foreign exchange financing - - - - 10.8 55.2 60.3 Total Porrowings - - . 77 0 32.9 63.7 h___ Customers Deposits - .1 .2 .1 .4 .6 .7 Provident Fund Contribution .1 - - - .1 Total Sources 11.3 10.9 35.9 118.2 580o 103.9 121.7 tpplications of Funds Construction 2.6 10.2 51.6 113.5 44.8 91.9 99.L Debt Service Amortization Proposed IDA Credit - - - - - 2.7 2.9 Total Amortization - _ _ _ 2.7 2.9 Interest Proposed IDA Credit - - 1.1 5.6 9.9 11.1 10.9 Local cost financing - - - .6 1.2 1.4 1.8 Future foreign exchange financing - - - - .5 3.3 8.2 Total Interest - 6.2 3 8 Total Debt Service - 7TT 7I Increase (Decrease) in Working Cap al Cash 14.2 (.2) (18.0) (3.1) (1.0) (2.2) (.1) Other than cash (5.5) .9 1.2 1.6 2.6 (4.3) (1 4) Total Increase (Decrease) in TWorking Capital _T7 .7 (163Y T T;77 Q____ Total Applications 11.3 10.9 35.9 118.2 58.0 103.9 121.7 Debt Service Coverage - - 9.8 2.7 2.1 2.1 2.2 February 12, 1975 ANNEX 13 Page of 6 pages BURMA POSTS AND TELECOMV1=CATIONS CORPOPATION TELECOWr9UNICATIONS BRANCH Income Statement (millions of Burmese Kyats) Actual Forecast September 30 March 31 For the Fiscal PeriDd: 1971 1972 1973 1974j l975 =97 7 977 1978 3.79 1980 19o1 Operating Revenues Telephorne 19.3 18.8 19.2 9.3 20.0 20.3 22.1 24.3 29.0 40.2 49.9 Telegraph 8.4 9.7 9.6 2.7 9.0 9.1 9.2 9.3 9.3 12.1 15.7 Telex .6 1.1 1.1 .7 1.2 1.4 1.5 1.7 1.9 3.3 5.0 Other .9 1.0 2.3 .6 1.5 1.5 1.6 1.5 1.6 1.7 1.8 Proposed tariff increase - - _ - _ 4 8 9 1 IL 9 Total Operatinig Revenues 29.2 30.6 32.2 13.3 31.7 32.8 34.4 42.2 17 75.0 X Operating Expenses Operational costs 8.3 8.9 8.7 3.9 9.9 12.3 14.6 16.8 17.9 19.1 20.3 Maintenance and repairs 1.2 1.2 1.3 .6 1.1 1.2 1.4 1.6 1.8 2.0 2.3 Deoreciation - - 3.6 1.8 4.5 4.7 5.2 6.9 10.0 13.0 16.6 Administrative Cos.s 1.0 1.0 2.0 2.1 2.7 2.8 3.0 3.2 3.4 3.6 3.8 Total Operating Expenses 10.5 11.1 15.6 8.4 18.2 21.0 24.2 28.5 3.1 37.7 I1.0 Net Operating Income Before Taxes 18.7 19.5 16.6 4.9 13.5 11.8 10.2 13.7 17.6 37.3 51.3 Income Taxes - - 10.7 2.4 6.8 5.9 4.6 3 o 3.0 10.7 15,2 Net Operating Income 18.7 19.5 5.9 2.5 6.7 5.9 5.6 9.9 14.6 26.6 36-1 Interest Expense - - - 1.1 6.2 11 .6 15.8 20 .9 Net Income 18.7 19.5 5.9 2.5 6.7 . 4.5 .7 10 1 = = = =M= -L 3 1AI Average Net Plant in Service NA NA NA 41.8 40.2 39.9 46.3 79.9 144.9 203.1 273.3 Annual Rate of Return NA NA NA 12.0 16.7 14.8 12.1 12.4 1041 13.1 13.2 Operating Ratio Before Income Tax % NA NA 48 63 57 64 70 68 65 50 46 1/ Fiscal year revised to April-March from October-September. The fiscal period 1974 was a six months period from October 1, 1973 to March 31, 1974. February 12, 1975 BURMA POSTS AND TELECOMMUNICATIONS CORPORATION TELECCMMUNICATIONS BRANCH Telephone Revenues (millions of Burmese Kyats) Year Ended Six Months Sept. 30 Ended Mar. 30 Year Ending March 31 For the Fiscal Period 1973 1977 1979 1980 1981 Rental - 9.748 10.259 7.639 8.673 10.362 13.073 16.583 9.514 4.774 - - - - - - - Installation charges ) - - .038 .071 .141 .197 .413 .607 .703 Local call charges 1.821 .884 1.805 1.805 5.438 6.276 7.287 9.338 11.489 Long distance charges 7.692 3.528 8.160 8.405 8.657 8.917 10.734 16.959 20.864 International call charges .159 .090 .220 .227 .234 .241 .248 .255 .263 TOTAL 19.186 9.276 19.971 20.767 22.109 24.304 29.044 40.232 49.902 February 10, 1975 0 w oq POSTS AND TELECOlMJlNICATIONS COR POHATIOOE TELECOTJNIICAIIONBS BRP2I Ht Estimated Expense Detail (rillions of Burmese Kyats) Six Mon ths Year Ended Ended Sept.30 March 31 Year Endirig March 31 For the Fiscal Period: 1973 1974 1975 197b 1977 1978 1979 1980 1981 Operational Costs Direct labor 7.754 3.044 7 .29 9.340 11.372 13.264 18.o61 14.933 15.902 Variable costs Power .303 o67 .,67 .372 .378 .3.7 .412' .437 .459 Travelling allowance .169 .105 .24+ .390 . 347 .394 .433 .L77 .525 Total variable .,72 .6 11 . 6 72 .725 .791 , .50 g 1l4 Fixed costs Establishmen . - .457 1.4Ž-, 1.684 1.925 2.152 2.309 2.482 2.672 Transport charges .117 .047 .16 L .173 .135 .Il8 .212 .27 .213 Other fixed charges .301 .113 .36? .389 .412 .8437 .403 .499 .5 20 Total fixed .717 T677 1.969 2.246 2.522 2.787 2.94 3.200 3.35 Total Operational Costs 8.644 3.833 9.7.72 !2.255 ll. 619 1r,842 17.895 19 052 20.321 M4airntenance and Repairs Direct p-urchses Iriland - .o84 .8, .91 _ .15 2 , 6 2 0 .3 Overseas - .282 .51 . 597 .637 .7J6, 847 3 .120 Total direct purchases - . 3__ .634 .729 .89 .964 1.109 I1 2-m5 1,467 Outside labor charges - _ .133 ,153 _22A .233 76. Indirect materials - .126 .02L0 022 .025 .029 ,0 j9 __3 _7 Operational maintenance Buildings .296 - .200 .2'16 .233 ,252 .272 .2,4 .318 Vehicles, office equipment, fsrniture 1.029 ,075 060 .O65 .07v .076 .082o "'A 5 Total operation maintenance 1,325 .075 Tn7 T57T 730.3 . 2 . 375 - 103 Administrative maintenance Buildings .035 .040 .045 .050 055 crn o065 Office equipment, fujrniture, vehicles .031 .02 .013 .015 o016 .018 . C Total administrative maintenance - - .W5 oo6 .071 .O8 077O7 Total Maintenance and Repairs 1.325 .567 1: ,3 1.237 1.401 1.588 1.799 2. 'O,34 Administrative Costs Pay and allowances 3.418 1.255 1.93 1.9L1 1.934 2.07, 2.156 9 2' 29332 Indirect charges Printing and stationery .373 .105 .585 .616 .6B4 .759 .842 .995 1.0'58 Others . 242 .732 .21 292 .327 .367 .911 .' 60 .65 *T 37 .90 1.011 . 126 1 . 295 1 "-5 Total Administrative Cost 2.033 2.092 2.659 2.825 3.005 3.199 3-109 3 3-7 5 33 inuary' 37, 1?75. Id ANNEX 13 a f 6 pages BURMA POSTS AND TELECONNUNICATIONS CORPORATTOIN APPRAISAL OF THE FIRST TELECOMMUNICATIONS DEVELOPMENT PROJECT Notes and Assuimptions on Income Statement Revenues Telephone Rental - Projected on basis of increased DELs with average rental per DEL stimulated 3% per year beginning with FY78. Reflects revision of government billing practice in FY77 reducing govern- ment rental charge and billing government customers for a local call charge at the level of tariffs used for private customers. Installation charge - Projected on the basis of increased DELs with average charge per DEL stimulated 3% per year beginning with FY78. Local call charge - Projected on the basis of increased DELs. Reflects revision of government billing practices in FY77 when the regular local call charge is to be initiated for all govern- ment calls. Average charge per DEL estimated to be K 210 in FY77; K 220 in FY78 and 79; and K 230 in FY80 and 81. Long distance charges - Projected on basis of ITU traffic study which estimated traffic in erlangs (units Ir measuring traffic) for FY79. This traffic data was converted to billable minutes and then to revenues. Subsequent years' revenues were then estimated based on increased DELs with average charge per DEL stimulated 3% per year beginning with FY78. Telegraph - Projected on the basis of very small annual increases until 1980 when telegraph revenmes were stimulated 30% reflecting the proposed project and the number of machine locations being increased from 10 to 30. Telex - Projected on the basis of very small annual increases until 1980 when national telex and gentex are introduced. Revenues stimulated 75% in 1980 and 50% in 1981. ANNEX 13 Page 5 of 6 pages Proposed Tariff Increases 1978 and subsequent years - A revenue increase is projected at 86% on local call charge revenue. 1979 and subsequent years - An additional revenue increase is projected based on the following stepped long distance tariff. Airline miles Three minute charge 0-50 K 1.50 51-100 K 3.00 101-200 K 4.50 201-400 K 6.00 over-400 K 7.50 Operational Costs Direct Labor 1975-78 - Projected on the basis of planned increases in staff and a 3% annual increase in wages in accordance with past exper- ience and current budget instructions. 1979-81 - Projected on the basis of a 6% increase per year. Variable Costs - Travelling Allowances 1975-78 - Projected at experienced cost per employee. 1979-81 - Projected at 10% increase per annum. Fixed costs - establishment - Projected by use of same method as used for direct labor. Fixed costs - transport - Projected on the basis of an increase of 7% per year. Fixed costs - other - Projected on the basis of an increase of 6% per year. Maintenance and Repairs Direct purchase - Projected on the basis of an increase of 15% per year. Outside labor - Projected on the basis of an increase of 15% per year. ANNEX 13 Page 6 of 6 pages Indirect materials - Projected on the basis of an increase of 15% per year. Operational maintenance - Projected on the basis of an increase of 8% per year. Administration maintenance - Projected on the basis of an increase of K 5,000 per year for buildings and 10% for other than buildings. Depreciation - Calculated at an anticipated composite rate of 4.25%. Administrative Costs Pay and allowances - Projected on the basis of an increase of 4% per year. Indirect - printing and stationery - Projected on the basis of an increase of 11% per year. Other - Projected on the basis of an increase of 12% per year. Inflation No factors for inflation has been specifically reflected in the projections of future expenses as the Government of Burma presently does not recognize inflation as a factor in future cost and, in fact, avidly pursues policies to prevent and limit its occurence. However the comparatively high increase percentage utilized for many expense projections were designed, with the acceptance of P&T's management, to include a factor for inflation. As a result of the Government policy, wage increases have been limited to 3% per annum while expenses, such as material purchases, contract labor, maintenance expenditure, printing and stationery, have been increased at rates of from 10 to 15% per annum. March 4, 1975 BUJ A POSTS AND TELECOMKUNICATIONS CORPORATION TELECOMMUNICATIONS BRANCH Performance Indicators (at March 31) Actual Forecast 1974 1975 1976 1977 1975 17 19B0 ****3*****Project Period*** *c** Exchange capacity - Lutomatic 17,000 17,000 17,000 18,000 24,200 34,000 44,800 Manual 10,320 10,500 10,700 11,000 11,200 7,200 7,200 Total 27,320 27,500 27,700 29,C00 35,400 41,200 52,000 Number of DEL's 23,042 23,643 24,774 27,016 30,042 36,200 45,000 EIchange fill 84% 86% 89% 93% 85% 88% 87% Number of telephones 29,494 30,250 31,500 34,500 38,000 46,500 57,500 Number of trunk circuits 329 329 329 329 329 680 750 Telephone revenue per DEL In Burmese K's NA 857 859 853 1,041 1,144 i,426 In equivalent US$ NA 137 138 137 167 183 229 Operation ratio (before income taxes) % 63 57 64 70 68 65 50 Rate of return (after income taxes) % 12.-0 16.7 14.8 12.1 12.4 10.1 13.1 Operating costs per DKt (Ks) NA 780 867 935 999 999 929 February 11, 1975 -H -I0000'0000 01 i ; 0 E E 960 0 - bI INDIIA - A V, 1 ,, I4N I N D I A ks~ ~ ~.,-.- To. 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