Document of The World Bank FOR OFFICIAL USE ONLY Report No: 84294-RW RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM (PHASE 2) - RWANDA PROJECT (RCIPRW) GRANT NO. H426-RW September 30, 2008 TO THE REPUBLIC OF RWANDA January 29, 2014 TWICT AFR This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS APL Adaptable Program Credit/Grant IDA International Development Association IRU International Right of Use PDO Project Development Objective RCIP Regional Communications Infrastructure Program RCIPRW RCIP (Phase 2) - Rwanda Project RDB Rwanda Development Board RURA Rwanda Utilities Regulatory Authority Regional Vice President: Makhtar Diop Regional Integration Director: Colin Bruce Country Director: Diarietou Gaye Sector Director: Jose Luis Irigoyen Senior Manager/Sector Manager: Chris Allen Vein/Randeep Sudan Task Team Leader: Peter Silarszky 2 AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM (PHASE 2) - RWANDA PROJECT (RCIPRW) CONTENTS Page A. SUMMARY ........................................................................................................................... 4 B. PROJECT STATUS .............................................................................................................. 4 C. PROPOSED CHANGES ...................................................................................................... 5 3 REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM (PHASE 2) RWANDA PROJECT (RCIPRW) RESTRUCTING PAPER A. SUMMARY 1. The Regional Communications Infrastructure Program (Phase 2) - Rwanda Project (RCIPRW), Grant No. H426-RW, P106369, approved by the World Bank’s Board of Executive Directors on September 30, 2008, is part of the Regional Communications Infrastructure Program (RCIP) approved on March 29, 2007. The Project Development Objective (PDO) of RCIPRW is to contribute to lower prices for international capacity and to extend the geographic reach of broadband networks. 2. The proposed restructuring would be the first for this project and the proposed changes would include (i) an extension of the closing date by eighteen months from January 31, 2014 to July 31, 2015, and (ii) a reallocation of the proceeds of the IDA Grant H426-RW pursuant to the letter dated August 26, 2013 from the Ministry of Finance and Economic Planning of the Republic of Rwanda. The extension would allow for completion of the activities under the project and full achievement of the PDO. 3. The project development objective continues to be relevant and achievable. The proposed changes are consistent with the PDO, RCIP program principles, and the project description as originally approved. The proposed changes are also consistent with the breakdown in regional/national IDA allocations; i.e., all activities are still eligible for regional IDA funds as they have not changed in nature. B. PROJECT STATUS 4. RCIPRW has made significant progress to achieve its PDO and its disbursement rate improved significantly over the last two years. The Progress towards achievement of PDO rating is Satisfactory while Overall Implementation Progress is rated Moderately Satisfactory and Project Management is rated Moderately Satisfactory. By December 17, 2013, US$16.55 million (SDR 10.75 million) has been disbursed from the IDA grant, representing over 70 percent of the grant proceeds of SDR 15.3 million. Over 80 percent of the grant has been committed. The last Implementation Support mission was conducted in June 2013. 5. The two largest contracts for the pre-purchase of international Internet bandwidth for the Government (the primary focus of the project due to both its impact on the broadband connectivity of Rwanda to the world and the allocated budget representing almost 50% of the grant) were successfully awarded and signed in mid-2012. The tender resulted in very competitive price for the international bandwidth thanks to tender design and strong competition between the bidders. The first contract (bandwidth from Europe delivered to Rwanda through submarine cables and terrestrial fiber in Tanzania) has been 4 successfully implemented and fully disbursed and the provided capacity brought great benefits to Rwanda's population in terms of faster and more reliable Internet access and lower prices. The implementation of the second contract (bandwidth from Europe delivered to Rwanda through submarine cables and terrestrial fiber in Kenya and Uganda) was delayed due to quality of service issues on the fiber optic infrastructure in Uganda and the full bandwidth activation date had to be extended. The problems were resolved by end of August 2013 and the international bandwidth is currently being provided through Kenya and Uganda as well. However, the final payment funded from the proceeds of RCIPRW (US$2.2 million) is due one year after the full bandwidth activation according to the contract, i.e., in August 2014, which is after the original closing date and necessitates the extension of the Grant. 6. Several critical technical assistance assignments, capacity building activities, and in-house advisory and technical support have been also successfully completed in support of the Rwanda Utilities Regulatory Authority (RURA), Ministry of Youth and ICT (MYICT), and Rwanda Development Board (RDB). Advisory work on interconnection and infrastructure-sharing has been completed and the results have been implemented in regulatory decisions. This work was implemented in response to direct requests from the Government and has met the client's needs. Additional technical assistance (e.g., on mobile number portability and broadband connectivity to institutions) is underway. 7. Some work has been also undertaken in connecting district offices and establishing of Wi-Fi networks on campuses of 3 universities in order to provide access to the international bandwidth. However, the bulk of the sub-component supporting the roll-out of broadband services and supply of broadband connectivity to institutions leveraging the existing networks of private operators (according to the PAD, this was supposed to be competitively tendered, so, that operators compete on the basis of price to provide the services) was delayed by the Government which has instead decided to award all radio spectrum made available for 4G/LTE broadband networks by the analogue-to- digital TV switchover to a new operator entering the market. This will, in effect, create a monopoly for such networks for 25 years and lead ultimately to less innovation, higher prices, and inferior services. This policy effectively negates the primary drivers of all the successes achieved in the telecommunications sector in Rwanda and Africa over the last 10-15 years (i.e., market liberalization and infrastructure based competition) and is against the core principles of the RCIP program to promote further market liberalization and competition. A consultant was recently hired to assist with the detailed design of this component and is expected to complete the design by end of April 2014; the proposed extension would allow for this consulting assignment to be completed and this sub- component potentially implemented if it can be designed to be consistent with both the implications of the Government’s decision described above and RCIP core principles. However, there is a risk that this part of the grant (about US$3.5 million) might have to be cancelled eventually if the design effort is unsuccessful. The consultant has just started his work and it is premature to judge whether an appropriate design can be identified; the World Bank team is actively engaged with RDB (the implementing agency), MYICT, and the consultant on the design of the sub-component. The potential cancelation of this sub-component would have no effect on the achievement of the targets for PDO level indicators and would affect one intermediate result indicator. 5 8. This would be the first closing date extension of the project. The proposed extension meets the criteria of OP/BP 10.00, i.e., (a) the project objectives continue to be gachievable; (b) the performance of the borrower and project implementing agency is satisfactory; and (c) the World Bank and the borrower has agreed on a specific action plan that will be undertaken by the borrower to complete the project. Neither the credit nor the country is under suspension of disbursements; and there are no outstanding audit reports or audit reports that are not satisfactory to the World Bank. C. PROPOSED CHANGES 9. Reallocation of Proceeds. The reallocation of proceeds of the grant was requested by the Government of Rwanda mostly from Category (5) Unallocated (i.e., contingency) to categories used for actual disbursements which require additional funds due to higher than expected cost of some originally planned activities and/or to finance scaled up technical assistance. The proceeds of the Regional Communications Infrastructure Program (Phase 2) - Rwanda Project (RCIPRW), Grant No. H426-RW, P106369 is proposed to be reallocated as follows: % of Expenditures Allocation (SDR) Category of Expenditure Financed Current Revised Current Revise (1) Goods, works, 3,430,000 4,149,000 100 100 consultants’ services (including audits), and Training for Parts 1, 2(c), and 3 of the Project (2) Goods, works, 2,550,000 2,737,000 100 100 consultants’ services (including audits), and Training for Part 2(a) of the Project (3) Goods, works, 8,270,000 8,012,000 100 100 consultants’ services (including audits), and Training for Part 2(b) of the Project (4) Operating Costs 310,000 402,000 100 100 (5) Unallocated 740,000 0 TOTAL 15,300,000 15,300,000 10. Extension of Closing Date. The closing date for the Regional Communications Infrastructure Program (Phase 2) - Rwanda Project (RCIPRW), Grant No. H426-RW, P106369 is proposed to be extended from January 31, 2014 until July 31, 2015. The proposed extension is necessary to allow for the disbursement of the last payment of the second international Internet bandwidth contract, complete several technical assistance 6 assignments, and reach an agreement on the way forward and potentially implement the supply of broadband connectivity to institutions sub-component within the proposed extended closing date in line with the actions agreed with the Government of Rwanda. This extension will have no effect on the achievement of the original project results other than the time delay. 7