The World Bank RCIP4 - Regional Communications Infrastructure Program - APL 4 (RI) (P118213) REPORT NO.: RES46741 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF RCIP4 - REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM - APL 4 (RI) APPROVED ON SEPTEMBER 10, 2013 TO UNION OF THE COMOROS DIGITAL DEVELOPMENT AFRICA EAST Regional Vice President: Hafez M. H. Ghanem Country Director: Deborah L. Wetzel Regional Director: Boutheina Guermazi Practice Manager/Manager: Maria Isabel A. S. Neto Task Team Leader(s): Isabella Maria Linnea Hayward The World Bank RCIP4 - Regional Communications Infrastructure Program - APL 4 (RI) (P118213) I. BASIC DATA Product Information Project ID Financing Instrument P118213 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 10-Sep-2013 30-Jun-2021 Organizations Borrower Responsible Agency Cellule de réformes économiques et financières (CREF) - Ministère des Finances et du Budget,Bureau RCIP-4 (4th Union of the Comoros Phase of the Regional Communications Infrastructure Program) Project Development Objective (PDO) Original PDO The development objectives of this project, in line with the overall RCIP program, are to support the Recipient’s efforts to lower prices for international capacity and extend the geographic reach of broadband networks. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-D3820 28-Sep-2018 19-Nov-2018 19-Nov-2018 30-Jun-2021 10.00 6.18 3.99 IDA-H8780 10-Sep-2013 24-Sep-2013 19-Nov-2013 30-Jun-2021 22.00 20.17 0 The World Bank RCIP4 - Regional Communications Infrastructure Program - APL 4 (RI) (P118213) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES Proposed change 1. This restructuring paper seeks an extension of the project closing date and of the additional financing (AF, IDA Grant No. D3820 – $US 10m) by 12 months from 30 June 2021 to 30 June 2022, in response to the request made by the Government of Comoros (GoC), dated January 8, 2021. The AF grant was approved and became effective September 28 and November 19, 2018, respectively. This would be the first closing date extension request processed for the AF. No changes are being proposed for the original grant (IDA Grant No. H8780 – $US 22m), which also supports the Project. This grant, which was approved and became effective September 10 and September 24, 2013, respectively, is now fully disbursed and will therefore close by the current Project closing date of 30 June 2021. Status of the project 2. Project performance is currently rated Satisfactory for both progress toward the development objective (DO) and implementation progress (IP). As of May 2021, disbursements for the original IDA grant stood at US$ 20.17 million (100 percent of the original grant, factoring in exchange rate losses), and disbursements of the Additional Financing (AF) stood at US$ 5.9 million out of US$ 10 million (59 percent of the additional grant). The total amount of disbursements is equivalent to US$ 26.18 million, 86.4 percent of the total project financing – original and AF included. Out of the AF’s undisbursed balance of US$ 4.1 million, US$ 0.6 million is contracted and US$ 3.5 million uncommitted, but procurement for at least 25 percent of the uncommitted balance is shortly due to be concluded. 3. The project (original and AF) is composed of three main components: Component 1 (Enabling Environment), focused on the provision of legal and regulatory technical assistance (TA) to support telecoms sector liberalization; Component 2 (Connectivity), featuring supply- and demand-side investments to encourage wider access to connectivity infrastructure, including co-investment in a new international undersea cable and capacity purchase; and Component 3 (Project Management). The AF primarily scaled up financing for Component 2 (Connectivity), launching a second phase of demand-side market stimulation through a new government digitalization initiative. 4. Status of Component 1: US$ 3.3 million was allocated to this component under the original grant to help deliver TA, including policy, legal and regulatory support, as well as training that have facilitated the progressive liberalization of the telecoms sector; notably through the passage of the 2014 Communications Act, creating a platform for competition, and the launch of a new authorization regime for internet service providers (ISPs) in 2018, with five ISPs authorized so far. Related support also facilitated the issuance of a second telecoms operator license, allowing for the market entry of Telco (Telma Comoros) in 2016. This has helped drive down prices for ICT services, supported further infrastructure investments and the introduction of new services such as mobile money. TA has also been delivered on safeguards, identification of entry-points for demand stimulation and for the submarine cable project. This component was topped up with US$ 0.7 million under the AF. This funding has, for example, supported an embedded technical advisor at the Ministry of Telecoms and financed training, alongside support for the set-up of a regulatory market observatory and other regulatory workshops and services, which has allowed the project to resolve pending issues The World Bank RCIP4 - Regional Communications Infrastructure Program - APL 4 (RI) (P118213) such as interconnection between operators. While regulatory maturity has grown over time, more support for updating existing regulatory models is needed to uphold principles of competition, fair pricing, and open access that have recently been challenged. Some funding is still available to support this. The failure to privatize Comoros Telecom (CT) (the state-owned incumbent) also remains a major source of market inefficiency, which if left unaddressed could jeopardize progress achieved by the project so far. While the project was not initially intended to support the restructuring of CT (which at project approval was being handled by parallel IFC TA), there are ongoing discussions regarding the need for further financial and TA on this topic, which would build on the options study recently financed by the project. Should such need be confirmed, a follow-on restructuring may be proposed for the project to support additional TA. 5. Status of Component 2: US$ 17 million was allocated to this component under the original grant. This financing has helped support Government’s investment in a new submarine cable (through membership in the FLY-LION 3 consortium). This cable is now fully operational, contributing to great infrastructure resilience and access to international capacity, and has been commercialized by the dedicated Special Purpose Vehicle (SPV) (Comoros Cables). A new landing station for exiting cable assets, managed by the SPV, has also been constructed. The original grant also financed a first phase of demand stimulation, supplying affordable bandwidth to schools, universities, community associations, and local authorities via local ISPs, including basic IT equipment and training, through community access points and data labs. The AF extended support for demand-stimulation with US$ 8.5 million, focusing on support for digital government initiatives. To date, progress has been made on the strategic, legal, and institutional underpinning of e-government and cyber security, and on systems planning. A round of preparatory studies has been completed to support analogue reform and prepare the technical specifications needed to move towards procurement and deployment of technical systems and solutions, which is still pending (including government e-mail, e-business registry, and initial modules of an e-procurement system, and consolidated web-platform for government etc.). Support has been provided to the nascent digital agency, ANADEN, and a new tech hub has been successfully established. Basic IT equipment has also been purchased to make use of capacity due to be purchased, which is pending distribution. TA to support the transfer of the .km country code top-level domain (ccTLD) and facilitate the establishment of an Internet Exchange Point (IXP) is also being provided. 6. The project remains on track to meet its Project Development Objective (PDO) “to support the Recipient’s efforts to lower prices for international capacity and extend the geographic reach of broadband networks”. It has achieved or outperformed the targets associated to all PDO-level indicators. However, implementation of several major activities stated above will go beyond the current closing date, and there are some risks to sustainability of results. Implementation progress (IP) is currently rated as Satisfactory, based on the latest ISR from January 2021, with several procurement processes ongoing. However, implementation delays due to limited familiarity with the new e- government workstream, changes to PIU management, and COVID-19-related travel and meeting restrictions have slowed progress. With one month left till closing, US$ 4.1 million (41 percent) of the AF therefore remains undisbursed, mostly under Component 2. 7. The safeguards and financial management (FM) ratings are Satisfactory, and there are no overdue IFRs or audits, based on the latest ISR from January 2021. However, the auditor has since delivered a qualified audit opinion on the original grant (IDA Grant No. H8780), noting minor loss of assets (3 computers), which is likely to result in a downgraded rating to Moderately Satisfactory attributed to weaknesses in internal controls. An ongoing FM support and supervision mission is actively following up on this issue. The procurement rating is currently Moderately Satisfactory because of delays to commence and conclude key procurements stated above. Close support is being provided by the WB procurement specialist to accelerate progress. The World Bank RCIP4 - Regional Communications Infrastructure Program - APL 4 (RI) (P118213) Rationale for closing date extension 8. The proposed 12-month extension for the AF will allow for the completion of the activities in progress, under Component 2. With the signature of several contracts, whose tender process is due to be completed soon (e- procurement, e-mail, government web-portal), the extension of the closing date would allow the project to see these planned investments through and to launch tenders for which technical specification are now available (e-business registry, cyber emergency response team). 9. In addition, the extension of the closing date would also contribute to sustainability of the PDO and of some of the results achieved under the project, by allowing the project to continue to support policy dialogue and TA in respect to the unfished telecoms sector reform agenda, under Component 1, where more support is required in terms of enabling further regulatory reforms (sub-components 1.1) and strengthening the industry regulator and capacity of the Ministry of Telecoms (sub-component 1.2) to prepare the proposed restructuring of CT. As mentioned above, there are on-going discussions with the GoC, regarding the need for further financial and TA to explore options available for CT restructuring in more depth, including an in-depth HR audit, asset valuation etc. Should these needs be confirmed, a follow-on restructuring may be proposed for the project. 10. Finally, the extension of the project would provide a seamless bridge to a new pipeline operation tentatively planned for early FY23, which would also be able to carry forward work initiated under the present project. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-D3820 Effective 30-Jun-2021 30-Jun-2022 30-Oct-2022 31-Dec-2019, 30-Jun- IDA-H8780 Effective 30-Jun-2018 30-Jun-2021 30-Oct-2021 2021