Document of The World Bank FOR OFFICIAL USE ONLY Report No: T7763-TG TECHNICAL ANNEX ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 20.1 MILLION (US$ 30 MILLION EQUIVALENT) TO THE REPUBLIC OF TOGO FOR THE WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM - TOGO PROJECT IN SUPPORT OF THE SECOND PHASE (APL 2) OF A US$300 MILLION EQUIVALENT WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM May 02, 2013 ICT Sector Unit Africa Region 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. CURRENCY EQUIVALENTS (Exchange Rate Effective March 31, 2013) Currency Unit = SDR SDR 0.67 = US$1 US$ 1,50 = SDR 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS $ United States dollar, all dollars are US dollars unless otherwise indicated ACE Africa Coast to Europe Submarine Cable ADSL Asymmetric Digital Subscriber Line AICD Africa Infrastructure Country Diagnostic AIE Agence de l’Informatique de l’Etat National IT Agency ANSR Agence Nationale du Spectre des Radio-fréquences National Radio-frequency Spectrum Agency APL Adaptable Program Loan ARAP Abbreviated Resettlement Action Plan ARCE Autorité de Régulation des Communications Electroniques Regulatory Authority for Electronic Communications ART&P Autorité de Régulation des Télécommunications et de la Poste Regulatory Authority for Post and Telecommunications BPO Business Process Outsourcing CAPEX Capital Expenditure CARCIP Caribbean Regional Communications Infrastructure Program CAS Country Assistance Strategy CCMP Comité de Contrôle des Marchés Publics Internal public procurement control committee CDMA Code Division Multiple Access CERT Computer Emergency Response Team CFA Communauté Financière Africaine Africa Financial Community CPMP Comité de Pilotage des Marchés Publics Public Procurement Steering Committee CQS Consultant’s Qualification i DA Designated Account DNCMP Direction Nationale de Contrôle des Marchés Publics National Department of Public Procurement Control DSL Digital Subscriber Line ECOWAS Economic Community of West African States ESIA Environmental and Social Impact Assessment ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan FM Financial Management FY Fiscal Year Gbit/s Gigabit per second GDP Gross Domestic Product GEF Global Environment facility GFDRR Global facility for Disaster Reduction and Recovery GoT Government of Togo GSM Global System for Mobile Communications HIPC Heavily Indebted Poor Countries IBRD International Bank for Reconstruction and Development IC Individual Consultant ICB International Competitive Bidding ICT Information and Communication Technology IDA International Development Association IFC International Finance Corporation IFR Intermediate Financial Reports IMF International Monetary Fund IP Internet Protocol IPR Independent Procurement Review IRR Internal Rate of Return IRU Indefeasible Right of Use ISA International Standards on Audit ISP Internet Service Provider IT Information Technology ITES IT Enabled Services ITU International Telecommunication Union IXP Internet Exchange Point Kbit/s Kilobit per second LCB Least Cost Bidding LCS Least Cost Selection LDCF Least Developed Countries Fund M&E Monitoring and Evaluation Mbit/s Megabit per Second ii MDGs Millennium Development Goals MDRI Multilateral debt Relief Initiative MEO Medium Earth Orbit MIGA Multilateral Investment Guarantee Agency MIS Management Information System MoF Ministry of Finance MPT Ministry of Post and Telecommunications NCB National Competitive Bidding NICI National Information Communications Infrastructure NPV Net Present Value OP Operational Manual PCN Project Concept Note PDO Project Development Objectives PEMFAR Public Expenditure Management and Financial Accountability Review PIM Project Implementation Manuel PIU Project Implementation Unit POM Project Operation Manual PPA Project Preparation Advance PPF Project Preparation Facility PPIAF Public-Private Infrastructure Advisory Facility PPP Public-Private Partnership PPR Post Procurement Review PSD Private Sector Development QCBS Quality and Cost Based Selection RAP Resettlement Action Plan RCIP Regional Communications Infrastructure Program RFP Request for Proposal RIAS Regional Integration Assistance Strategy for Sub-Saharan Africa RRP Resettlement and Rehabilitation Plan SAT-3 South Atlantic Three Cable SOE Statement of Expenditures SPV Special Purpose Vehicle SSS Single Source Selection SYSCOHADA Système Comptable OHADA TA Technical Assistance ToR Terms of Reference UEMOA Union Economique et Monétaire Ouest Africaine West Africa Economic and Monetary Union UNDP United Nations Development Program VoIP Voice Over Internet Protocol VPN Virtual Private Network iii WACS West Africa Cable System ARCIP West Africa Regional Communications Infrastructure Project WBG World Bank Group WiFi Wireless Fidelity WiMax Worldwide Interoperability for Microwave Access Regional Vice President Makhtar Diop Regional Integration Director: Colin Bruce Country Director: Madani M. Tall Sector Director: Jose Luis Irigoyen Senior Manager: Chris Allen Vein Sector Manager: Randeep Sudan Task Team Leader for WARCIP 2 and Boutheina Guermazi WARCIP Togo: iv TOGO WARCIP Togo TABLE OF CONTENTS Page I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context ............................................................................................................. 1 B. Sectoral and Institutional Context .................................................................................. 2 C. Higher Level Objectives to which the project Contributes ............................................ 5 II. PROJECT DEVELOPMENT OBJECTIVES (PDO) ....................................................7 A. PDO ................................................................................................................................ 7 B. Project Beneficiaries....................................................................................................... 7 C. PDO Level Results Indicators ........................................................................................ 8 III. PROJECT DESCRIPTION ..............................................................................................8 A. Project Components ....................................................................................................... 8 B. Project Financing ............................................................................................................ 9 C. Program Objective and Phases ..................................................................................... 10 D. Lessons Learned and Reflected in the Project Design ................................................. 11 IV. IMPLEMENTATION .....................................................................................................12 A. Institutional and Implementation Arrangements .......................................................... 12 B. Results Monitoring and Evaluation .............................................................................. 13 C. Sustainability ................................................................................................................ 13 V. KEY RISKS AND MITIGATION MEASURES ..........................................................14 A. Risk Ratings Summary Table ....................................................................................... 14 B. Overall Risk Rating Explanation .................................................................................. 14 VI. Appraisal summary .........................................................................................................14 A. Economic and financial Analysis ................................................................................. 14 B. Technical ...................................................................................................................... 15 C. Financial Management ................................................................................................. 16 D. Procurement.................................................................................................................. 17 E. Social and Environment ............................................................................................... 17 F. Effectiveness conditions and Covenants .......................................................................19 v Annex 1: Results Framework and Monitoring.........................................................................23 Annex 2: Detailed Project Description......................................................................................25 Annex 3: Implementation Arrangements.................................................................................28 Annex 4-Operational Risk Assessment Framework (ORAF) ...............................................46 Annex 5: Implementation Support Plan..................................................................................50 Annex 6: Economic and Financial Analysis.............................................................................53 vi I. STRATEGIC CONTEXT A. Country Context 1. Located in the Gulf of Guinea between Benin and Ghana, Togo is one of the smaller countries in Africa. Also bounded by Burkina Faso to the north, Togo is a small country with an estimated surface area of 56 600 square km and a population of 6.5 million with an annual population growth of about 2.84%. Togo is one of the poorest countries in the world, with a per capita GDP of US$570 in 2011 (according to the World Bank's Atlas methodology), and a ranking of 139 out of 169 countries in the 2010 UNDP Human Development Index. 2. The main economic activities are mining, agriculture, sea port activities and re- exporting. Agriculture employs two-thirds of the population and accounts for about 45% of gross domestic product (GDP). The secondary sector, including phosphates, cement manufacturing, construction and energy employs about 12% of the population and accounts for about 22% of GDP. Services, dominated by commerce and transport, employ about 21% of the population and generate about 33% of GDP. The most important exports are cement and clinker which go entirely to West African regional markets where demand remains strong, followed by cotton, both processed and marketed by public enterprises. Togo also produces cash crops, mainly coffee and cocoa, and has a considerable agricultural potential. 3. Economic growth accelerated slightly in 2011. Togo’s economic growth, which was estimated at 3.7% for 2010, rose to 3.9% in 2011, thanks to satisfactory rainfall, improved power supply and an increase in the port activity. It is expected to reach 5.2% in 2012, spurred, among other things, by new investments in infrastructure and higher government spending, and thanks to lower debt-servicing costs following debt relief, and continuing structural reforms. The recovery in the cotton sector, the buoyant activity at the Port of Lomé (especially the increase in transit trade), and the public works launched by the government also contribute to this growth performance. In December 2010, Togo successfully reached the completion point under the Enhanced HIPC Initiative, and also qualified for additional debt relief under the Multilateral Debt Relief Initiative (MDRI). 4. Togo has achieved considerable progress during the past three years, but significant institutional and economic challenges remain. The rise in oil and food prices, the severe flooding in 2008 and 2010, and the global recession in 2009 adversely impacted Togo’s economy. With regard to the Millennium Development Goals, progress has been achieved toward reaching the goals of universal primary education and the combat of HIV/AIDS. However, Togo is unlikely to meet six of the eight goals by the 2015 deadline. The country’s business environment remains difficult, as highlighted by the World Bank’s “Doing Business 2012� report, which ranks Togo 162nd (out of 183 countries). 1 B. Sectoral and Institutional Context 5. Togo’s telecommunication sector has significant untapped potential. With a mobile phone penetration in 2012 of 53.93%, and a growth rate of around 13.5 per cent, Togo’s mobile telephony sector is not living up to its potential. Togo's mobile market continues to be run under a duopoly regime with Togo Cellular, the mobile unit of fixed-line incumbent operator Togo Telecom, and Etisalat-owned Moov. Togo Cellular has a subscriber base of around 1.6 million at the end of December 2012, and a market share of 51%. Second-ranked Moov had around 1.5 million subscribers at the end of December 2012, a market share of 49%. Togo Cellulaire enjoys 87 per cent of the volume (dialled-out minutes) and 79 per cent of turnover. Currently there are only about 76,678 mobile 3G subscribers, all on Togo Cellular (MOOV has yet to provide 3G services). 6. Togo's fixed voice and data/Internet market is dominated by state-owned incumbent operator Togo Telecom. The operator offers ADSL broadband and CDMA-based narrowband services to corporate and residential users. There were 240,512 fixed-line connections in Togo at the end of December 2011, a penetration rate of 3.8%. Togo Telecom launched its CDMA-based wireless local loop service under the brand Illico in 2006. The service's good coverage and low prices have made it especially popular in rural areas. The service also allows users to use e-mail and access Internet pages at low speeds on their mobile phones. There were 5,081 ADSL and 171,174 Illico subscribers at the end of 2011. There is only one private Internet provider – Cafe Informatique – which provides WIFI connectivity, mainly to corporate clients. 7. The number of Internet subscribers remains very limited in Togo and growth in the Internet industry is still slow and highly constrained by limited access and high cost to end users. Togo had around 371,000 regular Internet users and 77,826 broadband subscriptions, with internet and broadband penetration rates of 6% and 0.6% respectively. This is expected to increase significantly over the next few years as a result of the recent connection to the West Africa Cable System (WACS) submarine cable, which now lands in Lomé, the extension of the Togo Telecom's national fibre backbone and introduction of 3G services in the market. Currently, Togolese consumers pay higher rates for Internet services than consumers in neighbouring countries. As of June 30, 2012, business users and private citizens have to pay US$160 per month for fixed broadband Internet access, while consumers in Senegal and Ghana pay only US$29 and US$64 respectively. The cost of dedicated 2 Mbps link is as high as 2,348 US$/month. The high cost of broadband Internet access prevents Togo from reaping the benefits of the ICT revolution. High cost can be attributed to several factors such as (i) the high cost of international bandwidth, especially before Togo Telecom was able to secure Togo’s first connection to a submarine cable; (ii) the lack of an Internet Exchange Point (IXP) to reduce the cost of local Internet traffic; (iii) a monopoly structure for access to international capacity; and (v) limited regulatory activity to promote more competition or fair and equitable access to bandwidth. These constraints are currently being tackled by WARCIP project. 2 8. The connectivity status of Togo has improved dramatically in the last few years thanks to investments by Togo Telecom, but fixed access remains solely owned and managed by Togo Telecom. Togo is now connected to WACS submarine cable with a landing station in Lomé. The 14, 500 km WACS cable has an ultimate capacity of 5.12Tbps. The cable became operational in Togo in May 11, 2012. It links countries in Southern Africa, West Africa and Europe, providing direct access to other global submarine cables. Specifically the WACS system links South Africa to the UK with landings in Namibia, Angola, the Democratic Republic of Congo, Republic of Congo, Cameroon, Nigeria, Ghana, Cote d’Ivoire, Cape Verde, the Canary Islands and Portugal. The network cost approximately CFA325 billion (USD634 million) for the twelve countries participating in the rollout, of which Togo contributed CFA13 billion (USD25.4 million), excluding charges for delivery and distribution of its bandwidth locally. As the only financier of the cable landing in Togo, Togo Telecom has exclusive rights to the landing station and to WACS capacity. In addition Togo Telecom has rolled-out a national backbone up to the country's borders, ensuring the connectivity of Togo with Benin, Burkina Faso and Ghana, and creating additional access to other submarine cables via neighbouring countries (ACE, SAT-3, Glo-1 and Main One). The fibre-optic network across Togo is expected to create a high capacity, reliable backhaul system, helping to connect landlocked countries in West Africa to international submarine cable systems through Togo Telecom's cable landing station. However, although Togo Telecom's investment in WACS and its national backbone has created a reliable and potentially cost-effective national and international infrastructure, as a monopoly, Togo Telecom has no incentive lower prices, and the benefits of the investment for the country will not be fully realised unless the capacity is available to all operators on an equal basis. 9. The GoT is now starting to implement a comprehensive ICT sector reform process. The Government adopted a Sectoral Strategy on Promoting Information and Communication Technologies (ICT) 2011-2015 in May 2011. This strategy lays down an ambitious vision for the sector focusing on free market forces and strengthening the legal and regulatory framework. The strategy intends to develop the telecom infrastructure (which includes investments in international and regional/national connectivity) and to stimulate reliance on ICT. The stated objective is to increase the fixed and mobile phone penetration rates to 60 per cent by 2015 and the Internet penetration rate to 15 per cent, from less than 1 per cent today. The strategy is based on a holistic approach around four pillars: (1) Strengthen legal and regulatory framework and regulation; (2) promotion of free market competition; (3) Develop infrastructure; and (4) Improve and stimulate usage of ICT. 10. A New Legal framework was approved on December 17, 2012. The Electronic Communications Law (Law No. 2012-018), modified by Law No. 2013-003 of February 19, 2013, repeals the outdated Law No. 98-005 and constitutes an important development in the sector, reflecting latest technological and market developments, as well as ECOWAS Directives and UEMOA additional Acts. The main objectives of the new law are to strengthen competition, stimulate investment, increase access and improve regulation of the sector. The new law creates a new converged regulator, the Autorité de régulation des communications éléctroniques, (ARCE), which replaces ART&P as the sector regulator, and a new agency for the regulation of 3 radio spectrum, the Agence Nationale du Spectres des Radio Frequences (ANSR). The Government is working on developing secondary legislation and drafting decrees for the implementation of the new law.1 11. Government has adopted several reform priorities aimed at increasing competition and levelling the playing field between different sector players. These reforms are unfolding through policy and regulatory decisions and include (i) lowering the price of mobile communications and bring it closer to regional benchmarks2, (ii) opening up the mobile sector to more competition through issuing MVNO licenses3, (iii) moving to full competition in the Internet sector with a plan to issue additional ISP licenses4 and (iv) starting the process of restructuring of Togo Telecom5, (v) ensuring fair and equal access to the WACS submarine cable capacity and (vii) lifting restrictions on building fiber optic transport infrastructure by licensed operators6, and (viii) putting in place regulatory mechanisms to ensure fair competition and limit market dominance in the sector. The different priorities are at different implementation phases. Once fully implemented, these reforms are expected to have far reaching impacts on the sector.7 The reforms are initiated by the Government and supported by the Bank through multiple instruments including budget support operation, technical Assistance and trust fund resources. 12. WARCIP Togo Project will focus on sectoral efficiency and improving the reach of broadband networks at lower cost. The project proposes a mix of interventions covering investment focused on improving connectivity through (a) establishment of a neutral carrier hotel and national / regional IXP, where a market and a national / regional hub for capacity could be established to provide an alternative to Togo Telecom, which would improve terms of access to international capacity and lower costs through increased competition and (b) supply of bulk international bandwidth capacity to ensure that international capacity is available to the country at the lowest cost and highest quality, WARCIP Togo will provide resources for the launch of a competitive tender to purchase high capacity bandwidth from neighbouring coastal countries to be delivered at the neutral carrier hotel in the capital. By doing so, Togo will benefit from similar conditions of access to connectivity (diversity of choice, low prices) as other countries in the ECOWAS region. The project will also focus on creating an enabling environment through technical assistance to strengthen the legal, regulatory and institutional framework to ensure open access, create PPP frameworks and improve regulatory environment to increase competition in the sector and improve overall sector efficiency. 1 The list of decrees currently under preparation with support of an international law firm includes, among others, decrees for the establishment of ARCE and ANSR, decrees for open access to submarine cable capacity, infrastructure sharing, interconnection and colocation, spectrum management and national roaming. 2 The prices have fallen by 30% between 2011 and 2013, from US$ 0.23/minute for on net calls to US$ 0.17/minute. Dropping the prices to regional average was one of the telecom prior actions for the DPO operation. 3 The MVNO process was launched in September 2012. A shortlist of potential operators has been established 4 The ISP licensing process is expected to start following the study recently launched by the Ministry. 5 The procurement process for hiring auditors and for launching a study on strategic repositioning of Togo telecom reached shortlisting stage. 6 The Government is currently negotiating standard 3 G licenses for TogoCell and Moov which will include the authorization to operate their own international gateway and lifts earlier restrictions to build fiber infrastructure. 7 The different reforms priorities are at different implementation stages and have been linked to triggers in budget support operation. 4 13. With a strong regional rationale, the WARCIP Togo project will contribute to the creation of the ECOWAS regional telecommunications market, contributing further to regional integration and economic growth. Like the other phases of the WARCIP program, WARCIP Togo has a strong regional rationale. The implementation of the Adaptable Program Loan (APL 2) would better integrate Togo within the region, allowing increased regional trade as well as improving Togo’s opportunity to become more competitive internationally. Togo has a particularly important geographic position in West Africa, enjoying a central position for distributing capacity to its landlocked neighbours. Also, through its access to the WACS cable system, the addition of Togo to the WARCIP program brings additional redundancy, creating more competition between cable systems in the region (so far all previous WARCIP Phases focused on the ACE cable8). If priced competitively, Togo’s facilities would provide important alternative international routes in the region - for Burkina Faso in particular, but also potentially as a backup route for Benin and Niger. While these countries all have other neighbours from which to obtain international capacity, most of them will be likely route at least 20-30% of their traffic via Togo to maintain their restoration links. In addition, the proposed carrier hotel will create incentives for cross-border connections and local hosting, which will provide domestic backup and secure alternate international routes via Ghana and Benin (which have 6 different submarine cable landings between them). Aside from improving reliability, this also provides competitive alternative routes to WACS, ensuring that domestic prices for international capacity are kept low. This will give Togo a highly reliable and much more affordable ICT infrastructure, which will also see demand from across the nation's borders. Connectivity financed under the WARCIP program will thus contribute to a fully redundant regional network, allowing landlocked countries to access alternative and competitive routes to submarine landing stations in coastal countries9. This will lead to lower wholesale costs for connectivity throughout the region, which will create the necessary environment for lower retail prices for consumers and businesses. C. Higher Level Objectives to which the project Contributes 14. WARCIP Togo project is aligned with the 2nd Interim Strategy Note (ISN) for the period FY12-FY13. The overall objective of the proposed ISN is to support Togo’s program of recovery from its long period of instability to promote growth and reduce poverty and will focus on three main objectives: (a) Deepening the economic recovery process and promoting sustainable development; (b) Supporting economic governance and transparency; and (c) Addressing urgent poverty reduction and social needs. The operation will support objective (a) of the ISN by improved access to and quality of productive infrastructure. It will also contribute to objective (b) by improving through ICT the delivery of public services in similar conditions of costs and quality throughout the country. Through purchase of capacity on fiber-based 8 The ACE submarine cable is connecting Europe with 13 countries along the West African coast (Mauritania, Senegal, Gambia, Guinea, Sierra Leone, Liberia, Côte d'Ivoire, Ghana, Benin, Nigeria, Equatorial Guinea, Gabon, São Tomé). 9 The lack of regional/national competitive fiber infrastructure compared to the extent of supply and competition in submarine cables is demonstrated by the fact that capacity from an African submarine landing station to Europe (costing $100- $300/Mbps/month) is usually cheaper than the in-country national backbone capacity ($500-2000/Mbps/month). This trend is accentuated considerably for landlocked countries, which have to pay for terrestrial transit across their neighbors to get to the coast. 5 transmission networks to connect targeted users (e.g. schools, universities, hospitals, and other priority groups) with discounted capacity prices, the operation will support objective (c) of the ISN. 15. WARCIP Togo is fully aligned with the World Bank Partnering for Africa’s Regional Integration: Progress Report on the Regional Integration Assistance Strategy for Sub- Saharan Africa (RIAS) dated March 21, 2011 and the new WBG ICT strategy. The updated RIAS seeks to create economies of scale, facilitate intra-regional trade and exports, and connect landlocked countries to regional and global trade routes by reducing barriers to movement of goods and services between countries. It recognizes the key role ICTs can play in regional integration and increasing competitiveness of African economies. The project is also fully in line with the new World Bank Africa Strategy, Africa’s Future and the World Bank’s support to it, dated March 2011. By facilitating cheaper access to the Internet and supporting the development of national and regional communications infrastructure, the project would promote competitiveness and sustainable employment (Pillar 1: Competitiveness and Employment) of the Africa strategy. It would also focus on partnerships by leveraging private sector investments in shared infrastructure. 16. Improving connectivity in Togo is expected to accelerate the realization of an integrated regional ICT market. The AICD10 report highlights the importance of regional integration, in particular for the smaller countries in the region which could each independently spend between 5-30 per cent of their GDP on addressing infrastructure gaps, in contrast with 1 per cent of regional GDP. Integrating and sharing physical infrastructure could allow countries to gain economy of scale, harness regional public goods and enable deeper economic growth. A regional approach to addressing the combined effects of the three level connectivity gaps could reduce the cost for each of the countries involved, and result in positive effects on prices and capacity, increased availability of end-to-end high-capacity bandwidth at competitive rates and hence broadband provisioning within the region. 17. An integrated ICT market would stimulate economic growth and enhance trade. The region’s prosperity depends on how well it is integrated into the global economy. Information and Communication Technologies (ICT), particularly high-speed Internet, is playing an increasingly central role in this - enhancing trade, facilitating cross-border payments, increasing productivity and improving the quality of public service delivery – all key components of economic growth and poverty reduction. A number of ECOWAS countries are at the initial stages of positioning themselves as preferred destinations for Information Technologies (IT) and IT Enabled Services (ITES) in the region. 18. Intensification of broadband networks will stimulate investment and economic growth. The contribution of broadband networks to economic growth is much more pronounced than that of narrowband networks. Studies have confirmed that for every 10 percentage-point increase in high-speed internet connections, there is an increase in economic growth of 1.3 percentage points.11 New businesses in the ICT and IT enabled services sectors are supported by improved access to high-speed internet. More generally, the remarkable contribution of ICT to economic 10 AICD - ECOWAS’ Infrastructure: A Regional Perspective, July 2010. 11Word Bank - Information and Communications for Development 2009: Extending Reach and Increasing Impact. 6 growth has been demonstrated in many studies. For example, a recent cross-country analysis found that the growth effect of ICT can be significantly stronger in developing countries than in developed countries. The contribution of ICT to one of the key pre-requisites for attracting investment - improved governance, accountability and transparency - is also increasingly apparent. II. PROJECT DEVELOPMENT OBJECTIVES (PDO) A. PDO 19. The PDO for WARCIP Togo is to increase the geographical reach of broadband networks and to reduce costs of communications services in the territory of the Republic of Togo12. 20. The project has three main components with the ultimate aim being to enhance Togo’s economic integration in the region- The project proposes an integrated approach focusing on (i) improving connectivity; and (ii) creating an enabling environment, dealing with improving sectoral efficiency and institutional strengthening to remove existing bottlenecks for private sector participation in ICT infrastructure development. B. Project Beneficiaries 21. Direct beneficiaries of the project include people who are connected to the communications network in the Republic of Togo. These include telecommunication and internet services users, schools, hospitals, banks, corporations, government and public administrations, to be measured as the number of active fixed and mobile subscribers 13. Indirect beneficiaries potentially include all of the country’s population, since increased communications capabilities at affordable rates for some of the population are expected to eventually have externalities for all. 12 This is the same PDO as the WARCIP Program and applies to all countries joining the program. In the specific case of Togo improving broadband access will be through financing a carrier hotel and purchasing international bulk bandwidth) to ensure competition for international connectivity and reduce costs. 13 Internet subscribers not accounted for separately, to avoid double counting. 7 C. PDO Level Results Indicators Project Development Core Outcome Indicators Base line By the closing date Objectives (PDO) Sector 2011 (2017) Indicators* PDO for WARCIP Togo is N International Communications 2.5 6 to increase the geographical (Internet, Telecoms, and Data) reach of broadband bandwidth per person (total networks and to reduce population) in Kbits per second costs of communications Y Access to Internet Services (number of 0.9% 8.7% services in the territory of Subscribers per 100 people) the Republic of Togo. Y Access to Telephone services (fixed 48.9% 75% mainlines plus cellular phones per 100 people) Average price of international communications using the proxy: N Average monthly price of international 2348 200 capacity link (E1 or 2Mbps) from the capital city to Europe in US$ Y Project beneficiaries in million 3.35 6.00 30 40 Number of direct project beneficiaries, of which Female % * Results Platform, CT: Telecommunications, Core Sector Indicators and Definitions, May 25, 2010 III. PROJECT DESCRIPTION 22. WARCIP Togo will be executed over a five-year period with a total IDA financing of US$ 30 million. It will include a set of well-defined project activities grouped under three broad components (see Annex 2 for detailed breakdown of the main proposed project components). A. Project Components 23. Component 1- Supporting Connectivity (US$ 16 million). The Component will have financing and support for 2 main activities: (i) establishing a carrier hotel and national / regional IXP where a bandwidth market and a national / regional hub for capacity could be established in order to improve terms of access to international capacity at lower costs, and any resettlement costs associated to this; and (ii) purchase of bulk international bandwidth capacity to ensure that international (and national) capacity is available to the country at the lowest cost and highest quality. WARCIP Togo will provide resources for the launch of a competitive tender to purchase high capacity bandwidth from neighbouring coastal countries to be delivered at the carrier hotel. By doing so, Togo will benefit from similar conditions of access to connectivity (diversity of choice, low prices) as other countries in the ECOWAS region. 8 24. Component 2 - Creating an Enabling Environment for Connectivity (US$ 11.5 million). This component will focus on (i) the transactional design and operating model for ownership of the carrier hotel as well as its management using PPP arrangements, and support for the competitive tender for the international bandwidth; (ii) development of open access principles to create an enabling environment for improved connectivity, specifically through support to the regulator to develop regulatory instruments for open access to capacity and to ensure that the benefits of lower prices trickle down to end users on the retail level; (iii) policy and regulatory support to improve sectoral efficiency, including price regulation and market competition, in application of the new ICT policy; and (iv) institutional strengthening to the Ministry, to the regulatory authority and to the SPV. A detailed list of activities is provided in Annex 2. 25. Component 3: Project Implementation, Communications and M&E (US$ 2.5 million). This component will provide support needed to strengthen the capacity of the Government to implement the connectivity project, including setting up a Project Implementation Unit (PIU) located within the Line Ministry and covering office equipment, operating costs, trainings . The component will also cover the cost audits, communications, monitoring and evaluation (M&E), and environmental and social studies, including their implementation and/or the monitoring of their implementation. B. Project Financing 26. Lending Instrument- Lending will be via an APL. The lending instrument is an APL. WARCIP-Togo is an investment operation under the second phase of the regional WARCIP program14. The project will be financed with an IDA credit with a maturity of 40 years including a grace period of 10 years. 27. Breakdown of Regional and National IDA allocations. Activities under the proposed project meet the regionality criteria and therefore are eligible for regional IDA funding. The table below provides a summary of project cost per component. 14 APLs are being replaced by Series of projects under OP.10.0, effective April 08, 2013. 9 Project Cost and Financing Table Component 1 : Improving Connectivity $ 16,000,000 Carrier Hotel / regional datacenter 6,000,000 Supply of international bandwidth to create a market a the carrier hotel 10,000,000 Component 2- Creating an enabling environment for the sector $11, 500,000 Feasibility study, technical specification and support to set up the carrier hotel 1,200,000 /datacentre under PPP arrangement and for the supply of the international bandwidth Study for strategies for improving broadband in Togo 250,000 Open Access regime (Carrier Hotel and capacity) 250,000 Regulatory regime to address market dominance 500,000 Price regulation ( interconnection and backbone access) 500,000 Fiscal study 150,000 Support to regulatory authority and ANSR 1,200,000 Legal and regulatory framework for e-society. 1,000,000 Creation of AIE-Togo 900,000 Design and implementation of specialized regional training on ICT 900,000 Support for issuing new licenses in the sector 500,000 Feasibility study for technology Park 500,000 Implementation support for broadband strategy 2,000,000 Capacity building for Ministry and regulatory authority 800,000 Support for Togo Telecom 500,000 Support for development of additional regulatory priorities 350,000 Component 3: Implementation support $ 2, 500,000 PIU set up and operating cost 1,250,000 Communications, M&E, environmental studies, audit 750,000 Support for the operationalization of the PPP 150,000 Contingencies 350,000 Total 30, 000,000 C. Program Objective and Phases 28. The proposed operation comes under the second phase of the APL for WARCIP, which was approved on January 20, 2011. WARCIP is a World Bank regional APL instrument that seeks to contribute to increasing the geographical reach of broadband networks and reducing costs of communications services in West Africa. As indicated in the WARCIP Appraisal Document, countries join different phases of the program based on their readiness. Triggers include (i) government commitment to liberalization and open access principles, (ii) existence of a PPP framework (or willingness to formulate one as part of preparatory activities), and (iii) 10 government commitment to increased sector competition as evidenced by pro-competitive policy and regulatory frameworks. The GoT shows a strong commitment to opening the telecommunications market to competition and implementing sector reforms. 29. The GoT has expressed interest to join WARCIP and demonstrates readiness to meet the Program’s triggers for PPPs and open access: The GoT made a request to join WARCIP in July 2011 and received a Project Preparation Advance (PPA) to conduct preparatory activities related to establishing a PPP framework and open access regime for the carrier hotel and to put in place an open access regime. In addition, the GoT has committed to improve sector efficiency through a number of on-going reforms including launching the process for licensing new ISPs15, a process for issuing MVNO licenses and restructuring Togo Telecom, and include dominance based regulatory framework to ensure fair competition in the market. The GoT has also committed to adopt PPP and open access principles to ensure fair and open access to this critical asset for the sector. The reform agenda is being carried out with support of the budget support operation and Technical Assistance support through non lending TA and complementary trust fund resources. D. Lessons Learned and Reflected in the Project Design 30. Country commitment to the proposed project is important. The proposed project draws on lessons learned from previous and on-going World Bank-financed projects in ICT and from on-going efforts in countries in similar situations as Togo. Broad global experience in ICT project implementation indicates that ICT project success is primarily contingent on strong country commitment to implementation. The proposed project design has been guided by the telecommunications sector national policy. GoT’s request to include specific regulatory activity support as part of the project design reflects its commitment to pursue the reform of the ICT sector and accelerate the implementation of its National Information and Communications Infrastructure (NICI) strategy. 31. Technical assistance needed to support implementation of project activities. Experience in several countries has shown that significant capacity is needed for negotiations with the private sector to establish PPP arrangements. Given the low capacity of the institutions involved in project implementation, the project provides financing for extensive technical assistance to allow for detailed design of the PPP agreements and other technical activities under the project, with significant involvement financed by the PPA. The technical assistance will also provide support, where needed, for the formulation of the bidding documentation and technical specifications in relevant project components. Regulatory capacity is necessary to enable fair competition as problems can and will develop over time. Building such capacity takes time. At the same time, Togo could benefit from the extensive experience of other countries in this area. The proposed project focuses on building this capacity in the regulatory authority by using in- house training, study tours, twinning arrangements and creating opportunities for peer-to-peer learning from more advanced regulators and the sharing of experiences. 15 The process is delayed. The regulatory authority prepared the bidding documents but process was not launched waiting for additional reviews from experienced consultants. 11 32. The project also builds also on specific lessons learned in the preparation of the several sequences of the first phase of WARCIP, APL 1A, APL 1B, APL 1C, as well as from the follow on phases of CAB, APL 2 and APL 4, and from CARCIP in another region. The Bank has developed a substantial experience in coordinating and financing similar ICT projects in the world in general, and Africa in particular. In the East and Southern Africa, the World Bank has approved a US$424 million Regional Communications Infrastructure Program (RCIP) covering about 25 countries. The World Bank Group (WBG) also recently approved a US$215 million Central Africa Backbone Program which will leverage existing fiber and provide improved connectivity to the region. The Caribbean Infrastructure Program (CARCIP) is a US$98 million facility approved in May 2012. These experiences are being leveraged in the preparation of WARCIP Togo. 33. The project is benefitting from the WBG’s experience in PPPs: The World Bank has had extensive experience in supporting Governments to structure PPPs for international, regional and national connectivity. In general, it has been observed that international connectivity projects, often led by private consortia, have attracted significant private capital, have been completed relatively faster, and tended to more successful in structuring partnerships between the public and private sectors that involve equity ownership of both parties, through SPVs, with operation left to the private sector. Challenges in structuring PPPs have included: (i) inadequate trust and cooperative relationships between government and private sector and between competitors – the WBG has been instrumental in mediating and developing transparent governance frameworks, (ii) inability of governments to provide effective regulations, and therefore any solution that depends solely on the regulator is likely to fail – the WBG has supported the development of robust transaction agreements which include clear rules of engagement, (iii) high cost of quality expert advisory services for design, management of tenders and negotiation of contracts, and countries’ reluctance to invest their limited resources on such expertise and (iv) WBG support systems not ideally suited for PPPs (procurement, legal, disbursement) – increasing efforts have been made to improve Bank support but more needs to be done. Specific experience from earlier ACE related projects, as well as from WARCIP Burkina Faso has been instrumental in shaping this operation by focusing on securing private sector interest during early project preparation stage to increase buy in and commitment from the private sector. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 34. The project will be implemented under the aegis of the Ministry of Posts and Telecommunications (MPT) for Togo. A separate PIU is being established under the PPA. The core PIUs staff will consist of a project coordinator, procurement specialist, financial specialist, a technical expert and an office assistant16. The PIU core team will be strengthened by hiring an M&E specialist and contracting with an environmental and social safeguards consultant who will work closely with Agence Nationale de la Gestion Environnemtale (ANGE) to ensure safeguard compliance of project components. 16 A recruitment firm was hired under the PPA to assist the Ministry with the recruitment process of the PIU members. Negotiations are on-going with the shortlisted candidates. 12 35. The PIU will be assisted by a project team called “focal Unit forum�, composed of representatives from the Ministry of Posts and Telecommunications (MPT), the Ministry of Finance (MoF), Ministry of Public Works, the Regulatory Authority and from representatives of telecom operators. The focal units are not consultants hired under the project but rather staff of their respective institutions and therefore not eligible for funding under the project. B. Results Monitoring and Evaluation 36. The PIU will monitor and evaluate the project. The PIU will bear the primary responsibility for project M&E of both project progress and project outcomes, and, as such, will establish standard formats and guidelines for data collection and reporting, and will organize training sessions for project stakeholders in their use. The PIU will submit to the Ministry the M&E a semester report that will include the updated Results Framework and the Action Table, listing the corrective actions to be implemented with deadlines and persons responsible clearly identified. The report will be sent to the Bank for information. 37. The views of direct beneficiaries will be brought into the monitoring and evaluation process. Comprehensive M&E reporting will be needed to monitor the results and performance of the proposed project. It will involve mainly the direct beneficiaries of project activities, but will be extended to other beneficiaries such as telecommunications operators and private ICT firms, which ultimately are the main beneficiaries of the proposed project’s outcomes. The PIU will review and validate the reports on performance indicators and recommend corrective actions if necessary. There will be focal units as to who will be responsible for providing relevant information and monitoring progress, using relevant performance indicators. C. Sustainability 38. Improved access and lower prices will be sustained. Improved service coverage and quality at more competitive prices for international, regional and national connectivity and for data services will be sustained as it will create opportunities for advanced applications, using more bandwidth and creating more traffic. 39. Legal and regulatory reform is expected to have a sustainable impact. Predictability and transparency of the legal and regulatory framework that is conducive to private sector participation and competition will increase the demand for affordable quality ICT services, including advanced applications. Given that a number of private operators already exist in the market and that there is potential for additional players beyond the current wireless sector, it is likely that the regulatory authority will have sufficient resources and capacity through license and regulatory fees to become a self-funded institution and sustain the required regulatory capacity to supervise sector development. 40. Local capacity will be strengthened through training and technical assistance. The project will make significant investments in capacity-building efforts through training and technical assistance to build technical expertise, social capital and knowledge. With the focus on building sustainable capacity in key institutions such MPT and theregulatory authority, the benefits of the project are expected to last far beyond program completion. As such, capacity will 13 support the creation of ICT policy and regulatory know-how to guide sector growth and transformational applications in the future. V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table Risk Rating Stakeholder Risk H Implementing Agency Risk - Capacity S - Governance S Project Risk - Design S - Social and Environmental S - Program and Donor L - Delivery Monitoring and Sustainability S L - Low, M - Moderate, S – Substantial, H – High B. Overall Risk Rating Explanation 41. The overall risk for preparation is rated S (substantial). The risk rating is based on country risks, difficulties of establishing a PPP framework. While there are a number of risks involved (see above), actions contemplated under the PPA as well as under the enabling environment component of the project for these risks to be contained and appropriate mitigation measures to be put in place. The overall risk for implementation is rated S (Substantial). The PPP model, although used in other countries participating in WARCIP, will be new to the telecom sector in Togo. Risks of delays by cautious stakeholders may affect the project’s execution. There are also risks linked to the timely implementation of infrastructure and to the risks linked to weak implementation capacity. The risks will be evaluated regularly during project implementation and updated accordingly. VI. APPRAISAL SUMMARY A. Economic and financial Analysis 42. Open and non-discriminatory access to the carrier hotel is needed to meet existing and future demand for reliable and affordable capacity. Togo is currently dependent on a single submarine cable – WACS - for its international capacity requirements. Currently this capacity is owned and managed exclusively by Togo Telecom without open access principles. A PPP framework to allow additional capacity to be available at the carrier hotel will create an access to this capacity on open and non-discriminatory terms is key for the development of the broadband market in Togo. 14 43. The datacenter carrier hotel (and IXP) will create improved connectivity by allowing the different operators to have alternative and additional access beyond WACS. Carriers with international infrastructure would all connect with the Carrier Hotel to provide services to other operators/large users and also to ensure the security and redundancy of their own links by having a single point from which to cross-connect. The presence of the Carrier Hotel would also attract other international operators (as well as content providers) to land their fibre infrastructure and data servers there, as the most cost effective place to meet, peer, and trade capacity. This passive infrastructure reduces the cost for the local operators to connect to international infrastructure by just having one place to connect with, and creates a more fluid open market for capacity, because local operators and users can switch between suppliers in seconds, (or change the volume of capacity obtained from each of their suppliers) simply through a configuration change on the router or changing a cross-connect cable on the fibre switchboard. This will pave the way for successful development of regional and local content and applications. 44. Depending on the revenue model and capacity pricing adopted, the investment in the Carrier Hotel in Togo will breakeven by 2017-2019 after which the project will be cash-flow positive if wholesale pricing levels are maintained. The investment will see Togo breakeven by 2017-2019, depending on the wholesale price adopted, with an NPV to 2023 of US$8.49 million and an IRR of 26.6%, (assuming an average wholesale bandwidth sale price of US$200/Mbps/month, declining to US$100 in year 5), and an NPV US$ 958,628 and an of IRR of 16.32%, assuming US$100/Mbps/month, declining to US$50, wholesale price. For Togo, pricing capacity for traffic in the US$100-150/Mbps/month range is likely to be sustainable and would stimulate use. This also takes into account bandwidth pricing trends in other regions such as East Africa. The final breakeven year will depend on actual capacity uptake and the wholesale price of bandwidth. After 2019 at the latest, the project would be cash-flow positive and substantial revenues would be made if these wholesale pricing levels are maintained. 45. The project will increase access to Internet, create jobs, improve education opportunities and public administration and increase government revenues. The project will bring significant benefits to Togo in a number of ways including (i) increased public access to Internet services (ii) a broad range of social benefits through increased labor productivity, employment creation, learning opportunities for youth, participation by women in the labor market, and improved public administration (iii) greater fiscal returns due to new sources of revenue for the GoT. It must be noted, however, that the economic and financial benefits of a technical assistance component is generally difficult to quantify because of the inadequacy of data available at the outset. B. Technical 46. The proposed project recognizes that infrastructure and policy environment bottlenecks need to be dismantled to ensure better communications access. Technical design of the project reflects lessons learned in the ICT sector and international best practices. For most developing countries, a major obstacle to the uptake of ICT remains the lack of adequate access to ICT infrastructure. A lack of investment in ICT infrastructure and access networks, coupled with inefficient provision of services, are the most important factors undermining the development of networked economies. The main lesson derived is that success is mainly market 15 driven. Creating a predictable legal and policy environment leading to effective competition in the sector is key to improving investor confidence and restoring trust in the ICT sector. The focus of the proposed project is to create a PPP framework for international connectivity. The project will establish an enabling institutional and regulatory environment to help attract and sustain investment in the telecommunications sector. 47. Legal Due diligence- Regulatory Issues. The main issue is ensuring “open access� (fair and transparent pricing) to the bandwidth capacity arriving at the carrier hotel at the domestic level. This is primarily a domestic regulatory issue. A review of the sector regulatory framework, including licensing conditions, will be conducted at the national level. Significant reforms are on-going in Togo. With the adoption of the new communications act, earlier legal restrictions for building infrastructure by competing operators have been lifted. The new 3G licenses under negotiations with the mobile operators give the right to the operators to operate their own gateway and to build their own infrastructure. Additional support under the project will be given to the Government to have a capacity pricing mechanism to ensure open access and detailed support to enforce open access will be included in the project , based on needs assessment and additional due diligence conducted under the PPA. C. Financial Management 48. The project team has assessed the financial management capacity of the Project Implementation Unit being established within the Ministry of Posts and Telecommunications (MPT) of Togo. The financial management assessment was carried out in accordance with the Financial Management Manual issued by the Financial Management Board on March 1, 2010. The objective of the assessment was to determine whether the Ministry had acceptable financial management capacity. Arrangements are acceptable if they are capable of recording accurately all transactions and balances, supporting the preparation of regular and reliable financial statements, safeguarding the Project’s assets, and are subject to auditing arrangements acceptable to the Bank. These arrangements should be in place when project implementation starts and be maintained as such during project implementation. 49. The conclusion of the financial management assessment is that financial management arrangements for the Project are being established in order to satisfy the World Bank’s minimum requirements under OP/BP10.02, after which they will be adequate to provide, with reasonable assurance, accurate and timely information on the status of the Project as required by the Bank. The main areas of focus which are being financed with the project preparation advance are: (i) the recruitment by effectiveness of an FM specialist with qualifications and experiences satisfactory to the Bank17, (ii) the preparation, before negotiations of an FM manual for the project18, and (iii) the set-up of accounting software, three months after effectiveness. The overall fiduciary risk rating for the project is assessed as Substantial and is expected to be moderate once the mitigation measures are implemented. 17 The procurement process for the recruitment of the FM specialist is on-going. 18 A draft Manual has been prepared before negotiations. The final draft is expected by June 30, 2013. 16 D. Procurement 50. A procurement assessment has been carried out on November 23, 2011 ; the main risks identified are the lack of procurement capacity and the lack of procurement manual. The MPT will carry-out procurement activities of the project through a PIU wish will be establish under the MPT. This PIU is the process of being established and will be staffed by a Project Coordinator, a Procurement Officer, a FM Specialist and an M&E Specialist. The procurement activities will be implemented using the national procurement institutional framework which is in line with UEMOA Guidelines. The MPT has a Procurement unit (CPMP) and an internal procurement control committee (CCMP). The National Department of Public Procurement control (DNCMP) will have to exert an external procurement control for contract above the CCMP accreditation thresholds. The project procurement risk has been rated as substantial. E. Social and Environment 51. The carrier hotel to be financed under the project is not expected to have significant environmental impact. The physical components of this project will mostly be limited to building IXP/Carrier Hotel/Datacenter and limited terrestrial fiber optic links to connect the carrier hotel to the networks of the operators, if needed. The terrestrial fiber optic links are expected to follow roads already in place and the IXP/Carrier Hotel/Datacenter to be built on a site to be finalized among three possible sites. The proposed project is rated as a Category B. 52. The proposed project is expected to have positive social benefits. The main social impacts of the proposed project are the increased possibility of better access to ICT services for the population and improved GoT service delivery. The project will contribute to (i) enabling ICT to become a driver for sustainable economic growth; (ii) enabling the GoT to use ICT to improve services; (iii) improving access and quality of ICT services for the general population, businesses, and the GoT; and (iv) reducing isolation and enhance economic activities. 53. Possible negative environmental and social impacts from the physical components are limited. These could include soil erosion; soil and water pollution; loss of vegetation; the disturbance on socio-economic activities and livelihoods located on the way noise; dust; risk of accident and the generation of waste; risks of land acquisitions, possible destruction of crops. The Environmental Safeguards Policies triggered are Environmental Assessment (OP/BP 4.01), Natural Habitats (OP/BP 4.04), Physical Cultural Resources (OP/BP 4.11) and Involuntary Resettlement (OP/BP 4.12). 54. As the exact nature and location of investments may not be determined up front, the GoT prepared and consulted upon an Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (RPF). The ESMF outlines: (i) mitigation measures of impacts of the fiber laying and building the carrier hotel including environmental guidelines for contractors and guidelines applicable to health, safety and environment; (ii) measures in case of archaeological discovery; (iii) institutional strengthening measures (strengthening environmental expertise of the WARCIP PIU); (iv)strengthening technical measures (provision for the implementation of environmental impact assessments ; monitoring and evaluation of WARCIP); (v) information for stakeholders involved in the implementation of the project and public awareness; (vi) a program of surveillance and monitoring; (vii) 17 institutional responsibilities for environmental monitoring; (viii) the institutional arrangements for implementing the ESMF; (ix) the recommendations for implementation; (x) the timing for the implementation of measures and the costs of environmental and social measures. Based on the outcomes of the screening process, the requirement to carry out an Environmental and Social Impact Assessment (ESIA) that includes an Environmental and Social Management Plan (ESMP) will be undertaken during project implementation in parallel with subcomponent technical feasibility studies. 55. The proposed project is not expected to pose risks of damaging existing community cultural property: The terrestrial fiber optic links will be built with the right-way of existing roads and the IXP/Carrier Hotel/Datacenter will be built on an existing technical site; therefore it is not expected to pose risks of damaging existing community cultural property. Nevertheless, proposed Project activities will be screened for their potential impacts on cultural property and chance find procedures will be applied and appropriate mitigation measures for both the identification and protection of cultural property. The ESMF has provided the systematic steps to be followed once these properties are discovered during project implementation. 56. The proposed activities under this operation should not cross natural parks or reserves. However, the project includes special arrangements to avoid sensitive sites (wetlands and critical natural habitats). If the works will result in any pressures on natural ecosystems, fauna and flora, the ESMF has recommended steps to be followed during ESIA preparation in addition to avoid these sites with the project design (to follow existing roads/railways as much as possible). 57. The need for involuntary resettlement resulting from land acquisition in specific subcomponents areas will only be known during project implementation when site-specific plans are available. The prepared RPF includes guidance for preparing socio-economic surveys, a census of people and assets, and appropriate eligibility and entitlement frameworks. Therefore, Project subcomponents will be screened for application of the resettlement policy and any subcomponents involving involuntary resettlement or land acquisition will only be approved (and disbursed against) after preparation of a Resettlement Action Plan (RAP) acceptable to the Bank. The RPF has considered procedures for identifying eligible project-affected individuals, calculating and delivering compensation, and determining mechanisms for land dispute grievance redress as well as mechanisms for adequately monitoring and evaluating the level of compliance. 58. Total cost of activities is estimated at US$ 406,000. While Credit funds will not finance land acquisition, proceeds will be available to finance other resettlement costs. The ESMF and RPF were reviewed and cleared by the Bank on March 18, 2013, and disclosed in the country and at the Infoshop on March 19 and March 20, respectively. 18 F. Effectiveness conditions and Covenants: 59. Effectiveness conditions: The Recipient shall have established the PIU under terms of reference and with staff in numbers and with qualifications satisfactory to the Association. As part of such staffing, there shall be in place for the PIU: (i) the Project coordinator; and (ii) a financial management specialist and a procurement specialist, all of them under terms of reference and with qualifications and experience satisfactory to the Association. 60. Disbursement conditions: No withdrawal shall be made: 1) Under Category (1) (works for the establishment of the neutral Carrier Hotel and the Internet Exchange Point under Part 1 (a) of the Project), until and unless: i. (A) the Association shall have approved the ESIA, ESMP, and/or the RAP, as the case may be, and the same documents have been consulted upon and disclosed as approved by the Association; and (B) the Recipient shall have verified, through its own staff, outside experts, or existing environmental/social institutions, that the activities under Parts 1 (a) of the Project meet the environmental and social requirements of appropriate national and local authorities and that they are consistent with the Association’s applicable environmental and social assessment and safeguard policies and comply with the environmental and social review procedures set forth in the Project Implementation Manual; ii. (A) the SPV and the PPP have been duly created, registered and made operational in the territory of the Recipient, including through the appointment of their managers and the adoption of their by-laws, in form and substance satisfactory to the Association; and (B) there shall be furnished to the Association an opinion satisfactory to the Association of counsel acceptable to the Association showing that the SPV and the PPP have been duly created, registered and made operational in the territory of the Recipient and are legally authorized to operate in accordance with the laws of the Recipient; iii. (A) the Main Contractual Agreement, in form and substance satisfactory to the Association, has been entered into between the Recipient and the SPV; and (B) there shall be furnished to the Association an opinion satisfactory to the Association of counsel acceptable to the Association showing that the Main Contractual Agreement has been duly authorized or ratified on behalf of the Recipient and the SPV, and executed and delivered on their behalf, and is legally binding upon the Recipient and the SPV in accordance with their terms; and 19 iv. (A) the PPP Agreement, in form and substance satisfactory to the Association, has been entered between the SPV and the PPP; and (B) there shall be furnished to the Association an opinion satisfactory to the Association of counsel acceptable to the Association showing that the PPP Agreement has been duly authorized or ratified on behalf of the SPV and of the PPP, and executed and delivered on their behalf, and is legally binding upon the SPV and the PPP in accordance with its terms. 2) Under Category (2) (for payment of Lease of Capacity, the expenditures to be incurred by the GoT under Part 1 (b) of the Project to secure access to international bandwidth) until and unless: (A) the Capacity Purchase Contract, in form and substance satisfactory to the Association, has been entered into between the SPV or the PPP, as the case may be, and the supplier selected for the delivery of high capacity bandwidth under Part 1 (b) of the Project; and (B) there shall be furnished to the Association an opinion satisfactory to the Association of counsel acceptable to the Association showing that the Capacity Purchase Contract has been duly authorized on behalf of the SPV or the PPP, as the case may be, and the supplier, and executed and delivered on their behalf, and is legally binding upon the SPV or the PPP, as the case may be, and the supplier in accordance with its terms. 61. Legal covenants 1) The Recipient shall: (i) not later than three (3) months after the Effective Date, acquire and install in the PIU accounting software suitable for the purposes of the Project; and (ii) not later than four (4) months after the Effective Date, employ an external auditor for the PIU under terms of reference satisfactory and with qualifications and experience satisfactory to the Association. 2) To facilitate the carrying out of Part 1 of the Project, the Recipient shall have in place a suitable contractual framework to ensure the Financing is used for the intended purposes. To that end, the Recipient shall conclude a contractual agreement (“Main Contractual Agreement�) with the SPV hereby the Recipient shall transfer to the SPV: (A) on a non-reimbursable basis, the proceeds of the Financing allocated from time to time to Category (1) to finance the Carrier Hotel and Internet Exchange Point to be established under Part 1 (a) of the Project and to be implemented by the PIU; and (B) the ownership of the Carrier Hotel and Internet Exchange Point to be established under Part 1 (a) of the Project. 3) In order to ensure the Carrier Hotel and the Internet Exchange Point to be established under Part 1 (a) of the Project are operated with due diligence and efficiency and are managed in a manner suitable to ensure services are delivered according to Open Access principles and in a manner satisfactory to the Association, the Recipient shall cause the SPV to enter into a PPP agreement (“PPP Agreement�) with the PPP whereby the SPV shall transfer to the PPP the proceeds of the Financing allocated from time to time to Categories (2) and (3) and assign to the PPP responsibility for the management and operation of the Carrier Hotel and the Internet Exchange Point to be established under Part 1 (a) of the Project. 4) For the purposes of securing access to international bandwidth under Part 1 (b) of the Project, either by IRU or through refill of capacity from other neighboring countries, the Recipient shall cause the SPV or the PPP, as the case may be, to execute a capacity purchase contract (“Capacity 20 Purchase Contract�), in form and substance satisfactory to the Association and in accordance with the PPP principles, with a suitable supplier of international bandwidth. 5) The Recipient shall: i. take all measures required on its behalf to carry out, and to ensure that the SPV and/or the PPP, as the case may be, carry out, the ESIA, ESMP, and/or the RAP, as the case may be, in accordance with the provisions of the ESMF and the RPF; and ii. ensure that the relevant mitigation and monitoring provisions of the ESIA, ESMP, and/or RAP, as the case may be, are appropriately implemented and that adequate information on how any potential negative impact under Part 1 (a) of the Project has been minimized is suitably included in the Project Reports to be prepared pursuant to the provisions of Section II.A.1 of this Schedule. 6) For the purposes of the Training to be provided under the Project, the Recipient shall: (a) furnish to the Association for its approval, not later than November 30 of each year, a training program including an explanation of how such training is consistent and conducive to the objectives of the Project and whether it offers the best price/quality ratio, as well as the schedule for its implementation; (b) select the trainees in accordance with a transparent process and criteria satisfactory to the Association; and (c) furnish to the Association a report of such scope and detail as the Association shall reasonably request, on the results of each training and the benefits to be derived therefrom. 7) The Recipient, through the PIU, shall: i. maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with the Monitoring and Evaluation Indicators, the carrying out of the Project and the achievement of the objectives thereof; ii. prepare, under terms of reference satisfactory to the Association, and furnish to the Association, on or about thirty-five (35) months after the Effective Date, a report integrating the results of the monitoring and evaluation activities and setting out the measures recommended to ensure the efficient carrying out of the Project and achievement of the objectives thereof during the period following such date; and iii. review with the Association, on or about thirty-seen (37) months after the Effective Date, or such later date as the Association shall request, the report referred to in the preceding paragraph (b), and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objective thereof, based on the conclusions and recommendations of the said report and the Association’s views on the matter. 21 8) The Recipient, through its MPT, shall ensure overall coordination, implementation and supervision of the Project is carried out by the Project Implementation Unit with due diligence and efficiency. To this end, the Recipient shall maintain the Project Implementation Unit throughout Project implementation under terms of reference satisfactory to the Association and with staff and resources adequate to enable it to carry out its responsibilities under the Project. 9) The Recipient shall, not later than three (3) months after the Effective Date, employ a monitoring and evaluation specialist, and a telecommunications specialist for the PIU under terms of reference and with qualifications and experience satisfactory to the Association. 10) Starting with Fiscal Year 2014 and each succeeding Fiscal Year throughout Project completion, the Recipient, through its MPT, shall take all action required to obtain the inclusion of a line item in its budget for the expenses necessary to support the MPT in the carrying out the Project. 22 . Annex 1: Results Framework and Monitoring Country: Africa . Project Name: WARCIP APL 2- Togo Results Framework . Project Development Objectives . PDO Statement The project development objective for WARCIP Togo is to increase the geographical reach of broadband networks and to reduce the costs of communications services in the territory of the Republic of Togo. . Project Development Objective Indicators Cumulative Target Values Data Source/ Responsibility for Baseline Methodology Data Collection Indicator Name Core Unit of Measure YR1 YR2 YR3 YR4 End Target Frequency (2011) Volume of international traffic: International Communications Kbits per second per 2.5 3.5 4 4.5 5 6 6 months Operators ART &P /PIU (Internet, Telecoms, and Data) person bandwidth per person19 Access to Internet Services (number Ratio 0.9 1.3 2 2.8 3.8 8.7 6 months operators ART&P/ PIU of subscribers per 100 people) Access to Telephone Services (fixed mainlines plus cellular phones per Ratio 48.9 55 58 60 70 75 6 months operators ART&P /PIU 100 people) Average monthly price of wholesale Amount (USD) per international E1 capacity link from 2348 2000 1500 1000 500 200 yearly operators ART&P /PIU month 2 Mbps capital city to Europe Number (million) Direct project beneficiaries of which 3.35 3.6 3.8 4.2 4.8 6 Annual Survey ART&P/PIU (% female Female (%). 30 30 32 35 38 40 Beneficiaries) . 19 Person are defined as paying users of Internet services 23 Intermediate Results Indicators Cumulative Target Values Data Source/ Responsibility for Baseline Methodology Data Collection Indicator Name Core Unit of Measure YR1 YR2 YR3 YR4 End Target Frequency (2011) Intermediate Result (Component 1) - Supporting Connectivity : Increased access to ICT services ATRPT-PIU Additional Cross-border Mid term Number 0 0 0 2 2 2 PPP ART&P and PIU interconnections built20 review Access for all operators to international infrastructure: Number of operators and service providers getting capacity from the Regional Percentage of total 0 0 100 100 100 100 Yearly Operators ART&P and PIU infrastructure deployed (as a percentage of total) Intermediate Result (Component 2) - Creating an Enabling Environment for Connectivity Increase of number of players in the Number 4 5 7 8 8 8 Yearly Operators ART&P and PIU sector21 Retail Price of Internet Services (per USD) per Mbit/s per 149 140 130 125 120 110 Yearly Operators ART&P and PIU Mbit/s per Month, in US$) Month, in US$) composite score: 1- Impact on Telecom sector of World low impact to 5-high 0.00 1.00 2.00 2.00 3.00 3.00 6 months stakeholders PIU Bank Technical Assistance 22 impact) 20 This indicator measures the number of cross-border interconnections built as a result of the project. This indicator measures the progress towards a fully redundant regional network 21 This indicator is a proxy for open access. It measures the progress of unfettered and non-discriminatory access at reasonable price for all operators 22 This is qualitative composite indicator. It rates (a) making the regulatory framework more effective at delivering sector performance, (b) improving the capacity of the regulatory institution to deliver on its mandate, (c) increasing the level of competition in the ICT, (d) improving the ICT policy environment in the country and reforming state-owned assets in the ICT sector as a result of the project technical assistance. 24 Annex 2: Detailed Project Description Country: Africa Project Name: WARCIP APL2 - Togo 1. Similarly to the previously approved WARCIP APL phases, WARCIP Togo will have three components (i) Infrastructure component to improve connectivity; ii) Technical Assistance component to create enabling environment; and (iii) Implementation support. Component 1- Supporting Connectivity (US$ 16 million) 2. The connectivity component will focus on financing and support for (i) establishing a carrier hotel and a national/regional Internet Exchange Point; and (ii) Supply of Bandwidth (International Capacity Purchase) to create a market for connectivity at the carrier hotel. a. Establishment of a carrier hotel 3. IDA funding will be used to establish a neutral 'carrier hotel' in Lomé. Carriers with international infrastructure would all connect with the Carrier Hotel to provide services to other operators/users and also to ensure the security and redundancy of their own links by having a single point from which to cross-connect. The presence of the Carrier Hotel would also attract other international operators (as well as content and application providers) to land their fiber infrastructure and data servers there, as the most cost effective place to meet, peer, and trade capacity. This would also be the ideal location for establishing the Internet Exchange Point (IXP). 4. In essence the facility would be what is also commonly known in the industry as a “Carrier Neutral Data Centre’ which reduces the cost for the local operators to connect to international infrastructure by just having one place to connect with, and creates a more fluid open market for capacity, because local operators and users can switch between suppliers in seconds, (or change the volume of capacity obtained from each of their suppliers) simply through a configuration change on the router or changing a cross-connect cable on the fibre switchboard. Local and offshore operators and content providers such as Google/Akamai would normally lease capacity/access hosting facilities at the Carrier Hotel. In this respect the Carrier Hotel would essentially be passive infrastructure with multiplex and switching equipment aimed at guaranteeing fair and unfettered physical access on transparent and equal terms. The IXP and data centre aspects would simply add additional provisions for a layer 2 switch, rack-space, air- conditioning and redundant/backup power. 5. This facility will be established as a Government owned SPV. The management of the carrier hotel and the capacity that will be purchased under component 1 (b) will be through a PPP contract. Both the SPV and the PPP arrangements are being prepared under the PPA. Resettlement costs will be financed as necessary. 25 b. Supply of Bandwidth (International capacity Purchase) to create a market at the carrier hotel 6. Providing an opportunity for Togo to have competitive access to a submarine cable capacity via one or more of the country’s neighbouring landing stations could substantially reduce the cost of international connectivity, increase capacity and provide more effective redundancy. The high cost of international connectivity is very much a core concern for operators in Togo currently relying exclusively on Togo telecom for international connectivity through WACS cable. The purchase of capacity will take the form of IRUs that will be purchased following an open tendering process.. The operators will negotiate their own backhauling arrangements to channel the purchased capacity to the carrier Hotel or build their own fibers if licensed to do so in Togo. Running the process for capacity purchase will benefit from technical assistance support under component 2 to ensure fair and competitive process. Component 2 - Creating an enabling environment for connectivity (US$ 11.5 million) 7. This component will focus on (i) the design and operating model for ownership and management the carrier hotel and purchase international bandwidth, (ii) related open access principles and regulatory reforms to create an enabling environment for improved connectivity, (iii) support for policy priorities in implementation of the sector policy, including improving sector efficiency, price regulation and market competition, and (iv) institutional strengthening for regulator and policy maker. 8. Finalizing the transactional design and contractual arrangements for the SPV for the ownership of carrier hotel, the PPP for the management of the infrastructure and supply of international bandwidth: Under the PPA, consultants are in the process of being hired to finalize the feasibility study for the carrier hotel and to support the Government to create to finalize ownership and management structure for the infrastructure. 9. Addressing policy, market and regulatory bottlenecks to maximize the benefits of the proposed connectivity agenda. Specifically, this activity will provide support to the regulator to develop regulatory instruments for open access, including support for drafting IRU agreements, and the wholesale regime for capacity pricing and other instruments to ensure open and non- discriminatory access to the carrier hotel. Support will also be given to the regulator to ensure that the benefits of connectivity translate into lower retail prices to end users. 10. Supporting policy priorities in application of the ICT strategy; the project will support a number of activities including a taxation study, creation of legal and regulatory framework for e- society, study on broadband strategy, demand stimulation and implementation of application pilots, support for the creation on the ICT agency and development of a program for ICT training. 11. Institutional strengthening: Institutional strengthening will be offered to (i) the regulatory authority to enhance its capacity in regulating the ICT sector in areas related, among others, to open access, regulatory instruments for dominance, and price regulation to acquire information systems and equipment needed to strengthen its oversight on the sector (ii) National Agency for 26 spectrum management to support its establishment and build its capacity on spectrum management, (iii) the MPT’s policy making functions; and (iv) SPV and PP through hiring and building capacity of engineers to kick start the activities of the carrier hotel Component 3: Project Implementation (US$ 2.5 m) 12. This activity will provide support needed to strengthen the capacity of the Government to implement the connectivity project, including setting up the Project Implementation Unit (PIU) and hiring dedicated staff to work on the project, hiring experienced Procurement and Financial Management specialists and a Project Coordinator. The component will also cover support to the SPV and PPP for the carrier hotel, through hiring a small team (2 engineers and project manager) for the SPV and for the PPP. The component will cover office equipment including vehicles, incremental operating costs, audits, communications and environmental and social studies and implementation of recommendations of the environmental studies. 27 Annex 3: Implementation Arrangements Country: Africa Project Name: WARCIP APL2 - Togo I. Project administration mechanisms 1. The proposed project will be implemented under the aegis of the MPT. Implementation arrangements as shown in the graph below involve using 5 Focal Units. The PIU will be headed by the Project Coordinator who will report directly to the Minister. The PIU will be composed of (i) a project coordinator, (ii) a Procurement specialist, (iii) an FM specialist, (iv) an M&E Specialist, (v) a Telecom Expert and (vi) Support staff. 2. Hiring of the PIU members and technical staff are underway under the PPA. A recruitment firm is handling the process. The Recipient shall, not later than three months after the Effective Date, employ the, monitoring and evaluation specialist, and telecommunications specialist under terms of reference and with qualifications and experience satisfactory to the Association. The PIU core team will be strengthened by contracting an environmental and social safeguards consultant who will work closely with Agence Nationale de la Gestion Environnemtale (ANGE) to ensure all Project activities comply with safeguard requirements as stipulated in the ESMF and RPF. 3. The PIU will serve as the Credit administrator of the project and will handle all administrative matters in accordance with the PIM. It will also ensure financial management and handle project disbursements, and include the preparation and submission of replenishment requests to IDA. The Unit will also be responsible for (i) maintaining a Management Information System (MIS) for tracking progress in all project subcomponents, both in terms of financial performance and meeting implementation targets and monitor the performance of all contractors under the project; (ii) preparing annual work programs and budgets, and if necessary, reviewing, in consultation with IDA, the reallocation of resources across the various components of the project as lessons emerge as to patterns of demand and development impact. Development of the PIM and establishment of the MIS will be financed under the PPA. 4. The PIU will be assisted by a task team composed of five focal units. The focal units will be appointed by the Minister upon recommendation of different agencies/departments as follows:  Focal Unit recommended by the Minister on issues related to policy matters;  Focal Unit designated by the regulatory authority on regulatory issues.  Focal Unit from Ministry of Finance for public participation in PPP  Focal Unit from the Ministry of Public works for follow up on construction of the carrier hotel  Focal Unit from representatives of telecommunications operators 28 5. Dedicated teams will be assigned for large activities. In the case of the carrier Hotel, the project will assist the Government to hire a team of three consultants to work closely with the consultants for the carrier hotel and will be associated with every step of the process from conception to construction to gain technical knowledge. The team could be considered for recruitment by the Government or the SPV after their contract under the project comes to an end. 29 II. Financial Management, Disbursements and Procurement A. Financial Management Fiduciary Risks and Mitigation Measures 6. The FM risk assessment and mitigations measures are summarized in the table below: Risk Conditionality Residual Risk Rating Risk Mitigation Measures Risk Rating Inherent Risks: S S Country: Weak governance and anti- S S corruption institutions. Entity Level The Ministry of Posts and A qualified and experienced FM FMS to be recruited prior the Telecommunications has specialist will be recruited under project being effective no previous experience in S the PPA. M managing IDA projects Project level Misunderstanding of POM to be developed with Draft of Project Operation responsibility as the project S appropriate trainings. manual including FM aspects M involves several have been prepared by stakeholders. negotiations Control Risks: S M Budgeting Delays in budget S Support of the FM specialist preparation process of the M project Accounting Lack of qualified FM A qualified FMS will be recruited Accounting software to be specialist and appropriate S and adequate accounting software acquired not later than three M accounting system will be acquired with the PPA. (3) months after effectiveness Internal Audit M M External Audit Project audit reports might An independent qualified external Appointment of the external be submitted with delay auditor will be recruited auditor not later than four (4) and inacceptable quality. S months after effectiveness M Funds Flow M M Reporting Delay and difficulties in Support of the FM specialist Agreement on IFR formats preparation of acceptable S and contents at negotiation M IFRs and financial statements Overall Risk S M H: High S: Substantial M: Moderate L: Low 30 Strengths and Weaknesses 7. The main strength is the existing of a PPF which will finance (i) the creating of the PIU, (ii) the drafting of the Project implementation Manual including acceptable Financial and Accounting Manual, (iii) and the set-up of computerized accounting system. It is important that the PIU be fully established with a good draft of the operational manual in place, before effectiveness, since any delay can have an adverse impact on implementation. Time Bound Action Plan to Address the Weaknesses 8. The action plan below indicates the actions to be taken for the project to strengthen the ministry financial management system. No. Activity/Action Target Responsibility Completion 1. Appointment of a FM specialist with Prior to Project experience and qualifications effectiveness Implementation Unit satisfactory to the Bank 2. Prepare Project implementation First draft ready Project Manual including acceptable by negotiations Implementation Unit Financial and Accounting Manual 3 Set up a computerized accounting Not later than Project system to fit project needs and generate three (3) months Implementation Unit useful information and financial after effectiveness statements 4 Prepare TOR for the external auditor During appraisal Project that is satisfactory to IDA. and agreed on at Implementation Unit Negotiations 5 Appointment of the external auditor Not later than (4) Project preparation acceptable to IDA months after committee / effectiveness Commission d’audit des auditeurs des entreprises publiques 31 Detail of financial management arrangements 9. The Project Implementation Unit will handle the overall responsibility of FM aspects of the project included (i) managing the designated account, (ii) preparing withdrawal applications and reporting to be submitted to the World Bank. Funds Flow and Disbursement arrangements Designated account 10. One designated Account will be opened at a commercial bank acceptable to IDA. The ceiling of the DA has been set to CFAF 500 million based on the disbursement forecast for the first four months. The project coordinator and the FM specialist will be the signatories of the designated account. Disbursement methods and processes 11. Disbursements under the project would be transaction based. In addition making advances to the Designated Account, other disbursement methods (reimbursement, direct payment and special commitment) will be available for use under the project, for example, direct, reimbursement, and special commitment methods. Further instructions on disbursement and details on the operations of the Withdrawal Applications and Direct Payments will be outlined in the disbursement letter. 32 12. The table below sets out the expenditure categories to be financed out of the Credit proceeds: Disbursement table Percentage of Amount of the Credit Expenditures to be Category Allocated (expressed in Financed (inclusive of US$m.) Taxes) Works under Part 1 (a) of the Project 3.0 100% Lease of Capacity under Part 1 (b) of 10.0 100% the Project Goods, consultants’ services, non- 3.0 100% consulting services, Operation and Maintenance Costs, Recurrent Costs and Resettlement Costs under Part 1 of the Project Goods, consultants’ services, non- 11.0 100% consulting services, Training, and Operational Costs under Parts 2 and 3 of the Project Refund of Preparation Advance No. Q 3.0 Amount payable 798 pursuant to Section 2.07 of the General Conditions Total Amount 30.0 Flow of funds 13. Funds will flow from the Credit Account through the Designated Account. The Direction du Financement, du Contrôle de l’Exécution et du Plan (DFCEP) would be the assigned representative of the Recipient for the mobilization of IDA funds. Withdrawal Application requests will be prepared by the FM specialist, signed by a designated signatory or signatories (the signature authorization letter is signed by the Minister of Finance), and sent to the Bank for processing. The signatories will have to the option to submit electronic applications available on the Bank’s Client Connection website. 33 Flow of Funds (See the illustration below) Credit Account (Funds) DP WA (Washington) at the World Bank WA / DP Designated Account Suppliers / Consultants (reputable commercial Accounts DFCEP bank) managed by the PIU Beneficiaries / Suppliers / Consultants Funds Reports, Goods etc DFCEP Direction du Financement, du Contrôle de l’Exécution et du Plan DP Direct Payment WA Withdrawal Application 34 Reporting and Auditing arrangements 14. Quarterly Interim Un-audited Financial Reports (IFRs) will be prepared by the FM specialist. IFRs included specific information on IDA financing will be submitted to the Bank within 45 days following the end of each quarter. 15. The PIU will produce Annual Financial Statements for the Project which will comply with the local accounting standards (SYSCOHADA). Audit arrangements External audit 16. The supreme audit institution (Cour des Comptes) which is supposed to audit all public funds is being established and has a limited capacity in terms of staffing and experience of auditing project financial statements. In view of this, an external independent and qualified private sector auditor acceptable to the World Bank will be recruited under the supervision of the steering committee put in place by Togo ministry of finance for public company external audit. 17. The Auditor will express an opinion on the Annual Financial Statements, and perform his audit in compliance with International Standards on Auditing (ISAs). He will be required to prepare a Management Letter detailing his observations and comments, providing recommendations for improvements in the accounting system and the internal control environment. The audit report on the annual project financial statements and activities of the DA will be submitted to IDA within six months after the end of each project fiscal year. FM implementation Support 18. The project will be supervised on a risk-based approach. Supervision will focus on the status of financial management system to verify whether the system continues to operate well and provide support where needed. It will comprise inter alia, the review of audit reports and IFRs, advice to task team on all FM issues, review of annual audited financial statements and management letters. Based on the current risk assessment which is Moderate, there will be one on-site visit supervision per year during the implementation and a review of transactions will be performed on this occasion. 35 Implementation Support Plan Based on the outcome of the FM risk assessment, the Frequency following implementation support plan is proposed. The objective of the implementation support plan is to ensure the project maintains a satisfactory financial management system throughout the project’s life. FM Activity Desk reviews Interim financial reports review Quarterly Audit report review of the program Annually Review of other relevant information such as interim internal Continuous as they become available control systems reports. On site visits Review of overall operation of the FM system One time by year (Implementation Support Mission) Monitoring of actions taken on issues highlighted in audit reports, As needed auditors’ management letters, internal audit and other reports Transaction reviews (if needed) As needed Capacity building support FM training sessions During implementation and as and when needed. B. Procurement 19. Capacity Assessment, Risk and Mitigation Measures: A procurement capacity assessment of the MPT has been conducted during project preparation on November 23, 2011. The potential risks identified are the lack of experience and skills in relation to the Bank’s procurement procedures and the lack of a procurement manual. The procurement unit established under the MPT is new and bears no qualified procurement staff. The mitigation measures agreed upon are therefore to: (a) recruit a Procurement Officer; (b) Organized procurement training for staffs of MPT involved in the project procurement process; (c) use procurement consultant to assist the MPT for complex/specialized procurement; (d) nominate a project Procurement Officer within the Ministry’s Procurement Committee, and (e) prepare project procurement manual as part of Project Implementation Manual. Taking into consideration the lack of capacity of the existing procurement unit (CPMP) and internal procurement control committee (CCMP), the overall project procurement risk has been rated as substantial. 20. Guidelines: Procurement and employment of consultants under the proposed project will be carried out in accordance with: (i) the Bank “ Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers� dated January 2011; (ii) Bank’s “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers� � dated January 2011; (iii) the Bank “Guidelines on Preventing and Combating Fraud and Corruption in 36 Projects Financed by IBRD Loans and IDA Credits and Grants�, dated October 15, 2006 and revised in January 2011 (“Anti-Corruption Guidelines�) and (iv) the provisions of the Financing Agreement. 21. Procurement Documents: Procurement will be carried out using the Bank’s Standard Bidding Documents or Standard Request for Proposal (RFP) for all International Competition Bidding (ICB) for goods and for the selection of consultants, respectively. For National Competitive Bidding (NCB), the Recipient should submit a sample form of bidding documents to the Bank for prior review and will continue to use this type of document throughout the project once this has been agreed upon. The Sample Form of Evaluation Reports published by the Bank will be used. In addition, no community preference will be applicable under NCB. 22. Frequency of Procurement Reviews and Supervision: The Bank’s prior and post reviews will be carried out on the basis of thresholds indicated in the table below. The Bank will conduct bi-annual supervision missions and annual Post Procurement Reviews (PPR); the ratio of post reviews will be at least one out of five contracts. The Bank could also conduct an Independent Procurement Review (IPR) at any time until two years after the closing date of the project. 37 Procurement and Selection Review Thresholds Prior review Procurement/selection threshold Comments methods (US$) 1. Works and Goods ICB  Works ≥ 5,000,000 Method can be applied for any amount, but is  Goods ≥ 500,000 mandatory for contracts above the prior review thresholds LCB ≥ 300,000 Review of all contracts NCB subject to the N/A Review of the first two contracts independently of modification requiring that no amount. The method is applicable only for contracts community preference will be less than US$5,000,000 for works and less than applicable US$500,000 for goods Shopping N/A Review of the first two contracts independently of amount. Method applicable for contracts less than US$50,000 for works and goods Direct Contracting All amounts Review of all contracts 2. Consulting Services Review of the first two contracts independently of QCBS ≥ 300,000 amount Review of the first two contracts independently of LCS ≥ 200,000 amount Selection under a Fixed Review of the first two contracts independently of ≥ 200,000 Budget (FBS) amount Review of the first two contracts independently of CQS (for contracts ≤ ≥ 50,000 amount. Method applicable for contracts less than $US100,000) US$100,000 Review of the first two contracts and other contracts Individual Consultants (IC) ≥ 50,000 chosen on a case-by-case basis, independently of amount. Single Source Selection (SSS) All amounts Review of all contracts. 3. Training and Workshops On basis of detailed and approved annual plan (with Training and workshops ≥ 10,000 indication of venue, number of participants, duration, detailed budget, etc.) 23. All training, terms of reference of contracts estimated to more than US$10,000, and all amendments of contracts raising the initial contract value by more than 15 percent of the original amount or above the prior review thresholds will be subject to IDA prior review. All contracts not submitted to the prior review will be submitted to IDA post review in accordance with the provisions of paragraph 4 of Annex 1 of the Bank’s Consultant Selection Guidelines and Bank’s procurement Guidelines. 38 24. Procurement Plan: All procurement activities will be carried out in accordance with approved original or updated procurement plans. The Procurement Plans will be updated at least annually or as required to reflect the actual project implementation needs and capacity improvements. All procurement plans should be published at the national level and in the Bank website according to the Guidelines. The Government and the Bank have agreed upon the Project procurement plan covering the first eighteen (18) months of the Project. Tables (a) and (b) below represent the summary of this procurement plan a) Summary of goods and non-consulting services 1 2 3 4 5 6 7 8 9 Ref. Contract Estimated Procurement Pre- Domestic Review Expected Comments No. (Description) Cost US$ Method qualification Preference by Bid- (yes/no) (yes/no) Bank Opening (Prior Date / Post) Acquisition of 1 Vehicle (4WD) 50,000.00 CF Yes 3/20/14 Carrier Hotel building and setting up - Material/equipment acquisition and 2 installation 5,000,000.00 ICB Yes 3/20/13 Office equipment 3 NCB and furniture 80,000.00 Yes 3/5/13 4 Software setting 30,000.00 NCB Yes 12/21/13 5 FM software Rehabilitation of 6 NCB PIU’ s office 125,000.00 No 2/22/13 Internet and phone 7 connectivity for the SHOPPING PIU 35,000.00 No 12/5/12 8 Office supplies 10,000.00 SHOPPING Non Office and IT 9 equipment for the AIE 200,000 NCB Yes Office furniture for 10 AIE 50 000 SHOPPING Yes 39 (b) Summary of Consulting Assignments 1 2 3 4 5 6 7 Ref Description of Assignment Estimated Selection Review by Expected Comments Cost US$ Method Bank Proposals (Prior / Submission Post) Date Feasibility study and 1 implementation support support 700,000 QCBS Yes 24/07/13 to set up the carrier hotel Setting up PPP framework for 2 SPV and support for bandwidth 500,000 QCBS Yes 07/08/13 purchase Hiring carrier Hotel local team 3 150,000 IC Yes 30/08/13 ( 3 members) Contract amendment Recruitment firm for M&E for the same 4 specialist and team and local 5,000 SSS recruitment firm team for carrier hotel hired for the PIU staff 5 Broadband strategy 250,000.00 QCBS Yes 02/02/14 Legal and regulatory framework 6 500,000.00 QCBS Yes 20/10/13 for an open-access regime Regulatory Regime for 7 500,000.00 QCBS Yes 10/13/13 Dominance study 8 Price Regulation study 300,000.00 QCBS Yes 20/10/13 9 Fiscal study 150,000.00 QCBS Yes 3/11/13 Legal, Regulatory and Institutional Framework for the 10 400,000.00 QCBS Yes 24/11/13 e-Society, including the creation of a CERT Design and Implementation of 11 300,000.00 QCBS Yes 29/10/13 specialized training on ICT Consultant to support for issuing 12 500,000.00 QCBS Yes 12/11/13 new licenses in the sector Feasibility study for Technology 13 500,000.00 QCBS Yes 07/09/13 Park Consultant for implementation 14 500,000.00 QCBS Yes 22/11/13 support of broadband pilots Possibility to hire consultant who 15 ESMP- RAP studies 70,000.00 SSS Yes 17/10/13 developed the ESMF-RPF Could also be hired Monitoring and Evaluation 16 100,000.00 IC Yes 29/12/13 by the recruitment Consultant firm Hiring of a Communication 17 100,000.00 CQS Yes 05/01/14 Agency 18 Project Audit 60,000.00 LCS Yes 31/07/13 19 Setting up ANSR 250,000.00 QCBS Yes 25/08/13 20 Creation of AIE-Togo 200,000.00 QCBS Yes 19/01/14 21 Regulation Support 250,000.00 QCBS YES 9/16/14 Follow up of implementation for 22 70,000.00 CQS Yes 8/10/12 ESMP Strategic advisors for ministry IC 2/10/13 ( 2) 40 (c) Summary of Capacity building activities 1 2 3 4 5 6 Ref Activity Description Estimated Review by Estimated Start Date Comments Cost US$ Bank Duration (Prior / Post) 1 Launching of WARCIP-Togo August (Workshop) 12,000.00 Yes 3 days 2013 2 WARCIP-Togo Activities planning (Workshop) 10,000.00 Yes 2 days Sept 2013 3 Studies validation workshop (2 years) 20,000.00 Yes 4 Based on pre- MPT Staff Training (2 years) approved training 200,000.00 Yes plan 5 Based on pre- ART&P staff training ( 2 years) 200 000 Yes approved training plan 6 Based on pre- PIU training (2 years) 75,000 Yes approved training plan 7 Yes Procurement training 30,000 Yes 25. Anti-Corruption Action Plan: The following measures will be carried out to mitigate corruption risk:  Publication of Advertisements and Contracts: All publications of advertisements and contract awards, will be done in accordance with the Guidelines requirements and published through client connection system, on external websites, i.e. UNDB and dgMarket websites;  Debarred Firms: Appropriate attention will be given to the need to ensure that debarred firms or individuals are not given opportunities to compete for Bank- financed contracts; and  Complaints: All complaints by bidders will be diligently addressed and monitored in consultation with the Bank. 26. Procurement Filing. Procurement documents must be maintained in the project files and archived in a safe place for at least two years after the closing date of the project. The Public Procurement Committee of the relevant Ministry of the project, through the Procurement Officers, will be responsible for the filing of procurement documents. C. Environmental and Social safeguards 27. The establishment of carrier hotel is not expected to have significant negative environmental impact. The proposed project is rated as a Category B. The potential environmental and social impacts are likely to be small-scale and site-specific and thus easily remediable and reversible. 41 The Environmental Safeguards Policies triggered are Environmental Assessment (OP/BP 4.01), Natural Habitats (OP/BP 4.04), Physical Cultural Resources (OP/BP 4.11) and Involuntary Resettlement (OP/BP 4.12). As the exact nature and location of investments may not be determined up front, the GoT prepared and consulted upon an Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (RPF). 28. The proposed project is expected to have positive social benefits. The main social impacts of the proposed project are the increased possibility of better access to ICT services for the population and improved GoT service delivery. The project will contribute to (i) enabling ICT to become a driver for sustainable economic growth; (ii) enabling the GoT to use ICT to improve services; (iii) improving access and quality of ICT services for the general population, businesses, and the GoT; and (iv)reducing isolation and enhance economic activities in rural areas. 29. The Project will have limited negative environmental and social impacts. These are linked building the carrier Hotel that could lead to: soil erosion (in dune areas); soil and water pollution; loss of vegetation (tree felling); the disruption of life (waste from work), of socio-economic activities and livelihoods located on the way (workshops, garages, shops, etc.); disturbance of traffic; noise; dust; risk of accident and the generation of waste; but also the risk of vandalism and social frustration when local workforce is not used as well as risks of accidents during the works. A summary of the risks is available in the table below. The ESMF outlines: (i) mitigation of impacts, (ii) collaboration between WARCIP PIU and Agence Nationale de Gestion de l’Environnement ANGE (iii) strengthening PIU team by hiring environmental and social specialists (iv) information to stakeholders involved in the implementation of the project and public awareness; (v) a program of surveillance and monitoring; (vi) Institutional responsibilities for environmental monitoring; (vii) the institutional arrangements for implementing the ESMF, (ix) the recommendations for implementation; (x) the timing for the implementation of measures and the Costs of environmental and social measures. Based on the outcomes of the screening process, the requirement to carry out an Environmental and Social Impact Assessment (ESIA) that includes an Environmental and Social Management Plan (ESMP) will be undertaken during project implementation in parallel with technical feasibility studies of Project subcomponents. 30. The Project impacts on cultural property are limited. The terrestrial fiber optic links will be built with the right-way of existing roads or railways and the IXP/Carrier Hotel/Datacenter will be built on an existing technical site; therefore it is not expected to pose risks of damaging existing community cultural property. Nevertheless, proposed subcomponents will be screened for their potential impacts on cultural property and chance find procedures will be applied and appropriate mitigation measures for both the identification and protection of cultural property. The ESMF has provided the systematic steps to be followed once these properties are discovered during project implementation. 31. The Project design has considered avoiding any impacts to natural habitat. The proposed activities under this operation should not cross natural parks or reserves. However, the project includes special arrangements for sensitive sites (wetlands and critical natural habitats). If the works will result any pressures on natural ecosystems, fauna and flora, the ESMF has recommended step to be followed during ESIA preparation in addition to avoiding these sites. 42 32. The Project design has considered avoiding any displacement of persons. The need for involuntary resettlement resulting from land acquisition in specific subcomponents area will only be known during project implementation when site-specific plans are available. The prepared RPF includes guidance for preparing socio-economic surveys, a census of people and assets, and appropriate eligibility and entitlement frameworks. Therefore, subcomponents will be screened for application of the involuntary resettlement policy (OP 4.12) and any subcomponents involving involuntary resettlement or land acquisition will only be approved (and disbursed against) after preparation of a Resettlement Action Plan (RAP) acceptable to the Bank. The RPF has considered procedures for identifying eligible project-affected individuals, calculating and delivering compensation, and determining mechanisms for land dispute grievance redress as well as mechanisms for adequately monitoring and evaluating the level of compliance. 33. For Togo, the total cost of activities is estimated at US$ 406,000. While Credit funds will not finance land acquisition, the Credit may finance certain eligible Resettlement Costs to compensate for the temporary or permanent disruption of the living environment, socio-economic activities and livelihoods. The ESMF and RPF were reviewed and cleared by the Bank on March 18, 2013 and disclosed in the in country and at the Infoshop on March 19 and March 20, respectively. 34. Institutional arrangements for implementation and monitoring: WARCIP Togo PIU will be strengthened by hiring an environmental and social safeguards consultant (part time) who will work closely with Agence Nationale de la Gestion Environnementale (ANGE). This environmental and social focal point (SEFP) responsible for following up on safeguards concerns to ensure that all subcomponents identified for operation financing have included consistent and coherent environmental and social measures and are responsible for applying the safeguard screening and mitigation requirements to each subproject. Both the Environmental and Social Management and the Monitoring specialists of the project will be ensured by consulting firms (preparation of technical files) and control firms (monitoring of work) to be recruited by the National Coordination of the WARCIP Project, under the supervision of ANGE that will be supported under the project for this purpose. These firms should have environmental and social experts to effectively cover these aspects during (i) the preparation of technical documents and (ii) the monitoring of the works. 43 Table : Summary of environmental and social risks as included in the ESMP Project Phase N° Impact Description Severity of the impact 1 Destruction of the natural vegetation Medium 3 Extinction of the fauna and some of the wildlife habitat Low PREPARATION 4 Obstruction of the soil with plants debris and waste Medium SITES 5 Air pollution due to dust Medium 6 Manifestation of respiratory/breathing problems among workers and High the local residents. 7 Destruction of trees and crops in rural areas Medium 1 Deterioration of the soil structure/waterproofing and compaction of Medium the soil 2 Alteration of the borrowing sites topography for the backfilling High CONSTRUCTION PHASE equipment 3 Harm to health and security of the employees and residents High 4 Habitations pollution due to dust Medium 5 Obstruction of the soil surface with various kind of waste Medium 6 Land tenure conflicts related to the cable and carrier hotel servitude High 7 Damages to archaeological and cultural sites High 8 Demolition of fences and paved terraces of houses and other High infrastructure 9 Slowing down of certain economic activities High 10 Closing of some passageways to the local population Medium 11 Conflict of interest between the workers and the population Medium regarding the use of the water 1 Land subsidence at the piping/canalization High OPERATIONA 2 Air pollution due to greenhouse gas emissions and dust Medium L PHASE 3 Temporary job losses High 4 Odor and damage to the health and physical integrity of the Medium employees and of the community. 1 Extinction of the fauna and the wildlife habitat Medium CANCELLATION DISMANTLING 2 Alteration of the soil structure and debris obstruction Medium CLOSING OR 3 Obstruction of the soil with waste from dismantled Medium PROJECT materials/equipment. OR 4 Some permanent job losses High 5 Damage to the health and physical integrity of the employees High Source : SECDE/SOTED-AFRIQUE, janvier 2013. 44 D. Monitoring and Evaluation 35. An M&E system will be set up within the PIU to keep track of and evaluate implementation progress of the proposed IDA project within the broader context of the institutional framework for the telecommunications sector. Although increased geographical reach and reduction of costs at the country level remains the hallmark of success of an enabling environment, the project’s M&E system will seek first to measure results that are closely associated with project activities. Hence, the first order of indicators that the M&E system will look at shall include lower indicators related to quality, quantity, and time. Ultimately, improvement of laws and decrees by the project activities will have positive ripple effects on the whole sector and on service delivery. 36. The views of direct beneficiaries will be brought into the monitoring and evaluation process. Comprehensive M&E reporting will be needed to monitor the results and performance of the project. It will involve mainly the direct beneficiaries of project activities, but will be extended to other beneficiaries such as telecommunications operators and private ICT firms, which ultimately are the main beneficiaries of the project’s outcomes. The PIUs will review and validate the reports on performance indicators and recommend corrective action if necessary. E. Role of Partners 37. The World Bank is the main development partner working on the ICT sector in Togo. Other partners include the African Development Bank, ITU and ECOWAS. The Ministry is discussing with the African Development Bank possible financing for the construction and/or strengthening of national connectivity and for e-government applications. The ITU and ECOWAS are providing significant support in the areas of capacity building for the regulatory Authority. The project main actors will coordinate with the development partners involved in the sector to ensure complementarity of the different interventions. 45 Annex 4-Operational Risk Assessment Framework (ORAF) Country: Africa Project Name: WARCIP APL2 – Togo Stage: Board Project Stakeholder Risks Rating H Description : Risk Management: Early indication shows strong commitment to PPP in Togo. However  Use PPA resources to provide technical assistance and conduct consultation to agree on a PPP structure there is a risk of private sector main stakeholders may not always have that will make it attractive for private investment. the same immediate interests as the Government and may resist an  Use PPA to demonstrate strategic and economic incentives for Togo Telecom to willingly participate in attempt to foster facility sharing at industry level. the proposed infrastructure. Potential "veto" by 100% public owned incumbent over the proposed  Very strong commitment from Government on PPP agenda. purchase of capacity and proposed competition for international Work on mitigation measures to deal with resistance of Togo telecom by working in parallel on improving connectivity sector efficiency. Reform activities related to (i) opening the sector to new players through ISPs, MVNO, etc, (ii) removing constraints for operators to deploy alternative fiber infrastructure to Togo Telecom and (iii) development of a neutral carrier hotel will create needed mitigation to ensure success of the project. Resp: Client Stage: Preparation Due Date :06/23/2013 Status: Ongoing and Implementation 46 Implementing Agency Risks (including fiduciary) Capacity Rating: S Description : Risk Management : Capacity of the implementing agency is low. In addition, the project (a) The Bank will fund targeted TA and capacity building activities as part of the operation throughout the includes complex schemes such as PPP which are new to the agencies project implementation. and sometimes the sector. (b) The option of using existent PIUs was discussed with the clients and a strong preference was expressed for a dedicated PIU. This will allow a better ownership of the project by the FM and procurement assessments of implementing agencies have been implementing agencies and will ensure technical support needed from the line Ministry. The core PIUs staff conducted as part of project preparations. will consist of a project coordinator, procurement specialist, financial specialist, accountant and an office assistant. (c)Technical specialists will also be hired for implementation of the project. In addition national technical teams will be hired for the carrier hotel to work closely with the international consultant during the feasibility phase as well as during project implementation to build implementation capacity for running the carrier hotel early on. The local team could be considered for hiring as full time staff of the SPV at a later stage to ensure continuity. Resp: Stage: Due Date : Status: (a) Client (a) Preparation + (a) Ongoing (a) Not yet due (b) Client Implementation (b) Ongoing (b) Not yet due (b) Preparation (c) Not yet due Not yet due (c) Bank Preparation + Implementation Governance Rating: S Description : Risk Management : Not always satisfactory adherence to the public procurement laws and (a) The Bank will fund targeted capacity building activities as part of the regulations, particularly with regards to an open and competitive program throughout the project implementation. process. (b) Set up of a robust M&E system will allow for a thorough and comprehensive monitoring of the project performance. Resp: Stage: Due Date : Status: (a) Bank (a) Preparation + (a) Ongoing (a) Not yet due (b) PIU Implementation (b) 11/30/2013 (b) Not yet due Preparation 47 Project Risks Design Rating: S Description : The project proposes to create competition on international connectivity in Togo that could be resisted by Togo Telecom to protect their investment in WACS cable. The cable was financed by Togo Telecom and enjoyed by them as a monopoly. The creation of the carrier hotel Risk Management : could also be resisted by Togo Telecom as it creates an alternative for PPA will provide extensive support for PPP negotiations, which are expected to be well advanced by international access which will erode the monopoly rents enjoyed by effectiveness. In addition reforms are included as triggers in budget support operation. Complementary TA is Togo Telecom for many years. The project includes significant reforms ongoing to support the government with the reforms. for the sector that are likely to be resisted by Togo Telecom which has a vested interest in the status quo. The sector strategy 2011-2015 shows a clear commitment by the Government to create enabling conditions for private sector investments. Resp: Client Stage: Preparation Due Date : 11/15/14 Status: on going Social & Environmental Rating: S Description : Risk Management : The exact path of the carrier hotel and links is not known yet. Negative The exact location of the neutral carrier hotels / national and regional IXP environmental and social impacts of the project could be the soil and (“virtual landing�) is not yet available. An Environmental and Social Management Framework (ESMF) and water pollution; loss of vegetation; generation of wastes from works, Resettlement Policy Framework (RPFs) have been prepared and consulted upon for each country prior to disturbance/loss of socio-economic activities and livelihoods located on Project appraisal. These documents have been publicly disclosed in the country as well as in the Bank the; disturbance of traffic; noise; dust; risks of land acquisitions, possible InfoShop. destruction of crops. The potential environmental and social impacts are Once the final paths / sites are chosen and the specific civil works identified, likely to be small-scale and site-specific and thus easily remediable and an Environmental and Social Assessment including an ESMP, and a RAP, as and when necessary, will also be reversible. prepared. The PIU will be strengthened by hiring an environmental and social safeguards consultant (part time) who will work closely with Agence Nationale de la Gestion Environnementale (ANGE). During and throughout the project supervision, the World Bank task team will assess the appropriate implementation of the environmental and social mitigation measures and subsequently recommend additional strengthening measures as needed. Resp: Client Stage: Preparation Due Date :09/30/2013 Status: ESMF- RPFcompleted ESMP/RAP Not yet due Program & Donor Rating: L Description : Risk Management : PDO achievement is not dependent on other projects and activities. There is a possible complementary intervention by the African Resp: Donors Stage: Preparation Due Date :09/30/2013 Status:Not yet development Bank. The scope is yet to be finalized. due 48 Delivery Monitoring & Sustainability Rating: S Description : Risk Management : There is no existing PIU within the sector Ministry. (a) institutional capacity building will be provided throughout the project implementation phase to the PIU being set up for the project Key data collections and sharing, particularly from operators, may be (b) Training and TA will be made available for monitoring and evaluation for difficult as the market is highly competitive. the sector Ministry and for the PIU. The system will be designed in such a way as not to affect the operators’ competiveness. Setting up of a PPP with local operators and ISPs for the missing links (c) Use PPA to discuss with private sector and agree on a PPP structure that will shall ensure effective operation and maintenance of the infrastructure make it attractive for private investment. (missing links and carrier hotels). Resp: Stage: (a) Client (a) Preparation Status: Not yet (b) Preparation Due Date :09/30/2013 (b) Client due (c) PIUs (c) Preparation Overall Risk Following Review Implementation Risk Rating: Comments: Comments: 49 Annex 5: Implementation Support Plan Country: Africa Project Name: WARCIP APL2 - Togo 1. Resources under the PPA are expected to ensure that the policy, regulatory, environmental and social safeguards, as well as requisite capacity are in place before Board. The PPA is also expected to ensure that the Government has the requisite Transaction, Legal and Regulatory experts to ensure open access, effective structuring of PPPs to own and manage communications infrastructure. 2. The strategic partnerships and collaboration, combined with active client engagement and upfront preparatory work, are expected to facilitate achievement of the PDO. Furthermore the team has conducted preliminary assessments of the institutions expected to execute the Program to ensure that they meet the minimum requirements of the World Bank’s fiduciary obligations. 3. The main focus in terms of support to implementation Time Focus Skills Needed Resource Partner Role Estimate First 6 Transaction/Legal Procurement, $2m months Advisory Work FM, Program Coordinators Experienced Transaction and Legal Teams 12-36 months Studies to improve $7 m sector efficiency Project Strengthening of Regulatory and $2 m duration regulatory and policy ICT specialists capacity Implementation Support Plan 4. The Bank team members will be based either in Washington DC or in the Africa region, and will be available to provide timely, efficient and effective implementation support to the client. Formal supervision and field visits will be carried out semi-annually initially, with possibility for annual visits in later years of the project. Detailed inputs from the Bank team are outlined below:  Technical inputs. Technical telecommunications and regulatory related inputs are required to review bid documents to ensure fair competition through proper technical specifications and fair assessment of the technical aspects of bids. ICT Policy Specialists and regulatory specialists will provide technical support and conduct supervision visits whenever needed. The team will liaise with the legal department to support with the review on PPP instruments, licenses and corporate/contractual documents developed under the project. 50  Fiduciary requirements and inputs. Training will be provided by the Bank’s financial management specialist and procurement specialist before the commencement of project implementation as needed. The team will also help identify capacity building needs to strengthen its financial management capacity and to improve procurement management efficiency. Both the financial management and the procurement specialist will be based in the region to provide timely support. Formal supervision of financial management will be carried out semi-annually or annually, while procurement supervision will be carried out on a timely basis as required by the client.  Safeguards. Inputs from an environment specialist and a social specialist will be required, though the project’s social and environmental impacts are limited and client capacity is generally adequate. No field visits are likely to be required, but this will be confirmed - the social and environmental specialists will be available on a need basis.  Operation. The Task Team will also provide day to day supervision of all operational aspects, as well as coordination with the client and among Bank team members. 5. The main focus of implementation support is summarized below. Partner Time Focus Resource Estimate Role Project Team leadership, technical and duration procurement review of the bidding ICT policy and regulatory documents and Institutional Specialists arrangement and project supervision 15 SWs coordination Procurement specialist(s) Procurement training 2 SWs FM specialist FM training and supervision 2 SWs Social specialist 0.5 SWs Environmental and Social Issues Environmental specialist(s) 0.5 SWs Note: SW – Staff-Week 51 6. Staff skill mix required is summarized below. ` Skills Needed Number of Staff Weeks Number of Trips Comments Task team leader 12 SWs annually Fields trips as DC based required. Procurement 5 SWs annually Country office based Social specialist 2 SWs annually Country office based Environment specialist 2 SWs annually Fields trips as Country required. office based Financial management 2 SWs annually Country specialist office based Legal support 2 SW Fields trips as DC based required Technical support 3 SW Fields trips as DC and required country office based 52 Annex 6: Economic and Financial Analysis Country: Africa Project Name: WARCIP APL2 - Togo 1. Open and non-discriminatory access to international capacity is needed to meet existing and future demand for reliable and affordable capacity. Togo is currently dependent on a single submarine cable – WACS - for its international capacity requirements. Currently this capacity is owned and managed exclusively by Togo Telecom without open access principles. A PPP framework to allow other operators to have access to capacity on open and non- discriminatory terms is key for the development of the broadband market in Togo. 2. Creation of a PPP for construction of a carrier hotel/IXP is the most cost-effective long- term solution for addressing Togo's future communication infrastructure needs . Through Togo Telecom's investment in WACS, its national backbone and cross border connections, the country has a potentially cost-effective national and international infrastructure in place, however as a monopoly, Togo Telecom has no incentive lower prices and the benefits of the investment for the country will not be fully realised unless capacity is available to all operators on an open access basis. In addition, if priced competitively, the carrier hotel facilities would provide important alternative international routes in the region - for landlocked Burkina Faso in particular, but also potentially as a backup route for Benin and Niger. Once capacity is made available at competitive prices the capacity in use is expected to increase dramatically due to the much lower pricing that can be achieved. High capacity international connectivity will mitigate the existing technological marginalization of Togo and bridge the digital divide by expediting broadband rollout, e-Government and e-Services, new media and ICT development in urban and rural Togo, for the benefit of the public. Specific steps would need to be taken, however, in particular to establish a clear regulatory regime for the landing point, in order to ensure that Togo fully benefits from the potential connectivity that the cable offers. 3. Benefits of Carrier Hotel investment: lower costs and improved reliability in accessing national and international online services. For Togo, the key ICT infrastructure need is to ensure the presence of infrastructure that can provide the whole population with low cost reliable connectivity, both internationally and domestically. In addition the proposed carrier hotel will create the incentive for cross-border connections and local hosting which will provide domestic backup and secure alternate international routes via Ghana and Benin, which have 6 different submarine cable landings between them. Aside from improving reliability, this also provides competitive alternative routes to WACS, ensuring that domestic prices for international capacity are kept low. This will give Togo a highly reliable and much more affordable service which will also see demand from across the nation's borders. If capacity is reliable and reasonably priced, Burkina Faso and Niger are likely to purchase capacity. While these countries all have other neighbours from which to obtain international capacity, most of them will be likely route at least 20-30% of their traffic via Togo to maintain their restoration links. Given that world-wide, demand for affordable bandwidth continues to exceed supply, and that Burkina Faso, Niger and Benin are also likely to require alternate sources of international capacity that could be delivered via Togo, there is very little likelihood of the capacity made available being under-used, as long as the national backbone and Carrier Hotel/IXP can deliver the wholesale bandwidth at a competitive price and where it is needed. 53 4. Carrier Hotels use well-proven technologies and business models, and involve no appreciable technology and little economic risk. The Carrier Hotel and IXP would be designed according to the latest standards. Therefore the project provides a smooth upgrade path for increasing the capacity available to the same levels as elsewhere in the world. Establishing the PPP and enabling policy and regulatory environment could lead to some initial delays, but given the high priority that government is giving to ICT development, it is expected that every effort will be made to ensure the Carrier Hotel/IXP is operational as soon as possible. 5. The proposed project recognizes that infrastructure and policy environment bottlenecks need to be dismantled to ensure better communications access. Technical design of the project reflects lessons learned in the ICT sector and international best practices . For most developing countries, a major obstacle to the uptake of ICT remains the lack of adequate access to ICT infrastructure. A lack of investment in ICT infrastructure and access networks, coupled with inefficient provision of services, are the most important factors undermining the development of networked economies. The main lesson derived is that success is mainly market driven. Creating a predictable legal and policy environment leading to effective competition in the sector is key to improving investor confidence and restoring trust in the ICT sector. The focus of the proposed project is to create a PPP framework for international connectivity. The project will establish an enabling institutional and regulatory environment to help attract and sustain investment in the telecommunications sector in granting open access to connectivity for existing and future competitors of Togo Telecom. 6. Fiber cable has an advantage over alternatives in terms of price and quality of service. Satellite is not an option, as it is more expensive than cross-border capacity purchase, and satellite also suffers from lower quality of service than fiber. While it is possible to circumvent these problems to some extent through use of sophisticated traffic shaping devices at each end of the link, this creates additional capital and human resource costs for the user. A new type of satellite service that is based on 'medium earth orbit' satellites (MEOs), which provides lower levels of latency due to their greater proximity to earth, could meet needs for improved international connectivity. However, the only proposed service of this type, called 03B, has yet to launch any satellites and is still much more costly when compared to the fiber options, so it was also eliminated from further consideration as a national solution, although in the future in some remote areas it may have value for providing localised connectivity where there is no fiber. 7. Assumptions of financial analysis. Financial comparisons of the options were made using the following assumptions:  Capacity purchase of 1 STM-16 to Europe from a neighbouring country on a 15-year IRU basis.  Carrier Hotel and IXP establishment will cost USD $4.98 million23  Annual operating and maintenance costs: 3% of CAPEX for IRU and 6% for carrier hotel  A discount rate of 15% on financing  Study Period: 10 years, commencing in 2013 23 The cost covers the building plus the equipment 54  Revenues from the project begin in 2014  For international traffic, operators competing with Togo Telecom will purchase 5% of the international capacity required in 2014, rising to 25% over the study period. Countries in the region (Niger, Benin and Burkina Faso) purchase 10% of their capacity needs from Togo, rising to 20% over the study period) for security/restoration purposes.  Annual broadband subscriber growth is 50% in year one, declining to 10% over the study period24  A wholesale capacity price of $100 to 200/Mbps/month dropping to USD $100-50/Mbps/month over the study period. Associated rack space rental revenues are based on market prices in the region.  An average international traffic per subscriber rising from 25Kbps to 60Kbps over the study period. 8. Depending on the revenue model and capacity pricing adopted the investment capacity and the Carrier Hotel in Togo will breakeven between 2017 and 2019, after which the project will be cash-flow positive if wholesale pricing levels are maintained. The investment will see Togo breakeven by 2019, depending on the wholesale price adopted, with an NPV to 2023 of US$8.49 million and an IRR of 26.57%, (assuming an average wholesale bandwidth sale price of US$200/Mbps/month, declining to US$100 in year 5), and an NPV of US$958 600 with an of IRR of 16.32%, assuming US$100/Mbps/month initially, declining to US$50 wholesale price in year 5. For Togo, pricing capacity for traffic in the US$100-200/Mbps/month range is likely to be sustainable and would stimulate use. This also takes into account bandwidth pricing trends in other regions such as East Africa. The final break-even year will depend on actual capacity uptake and the wholesale price of bandwidth. After 2019 at the latest, the project would be cash-flow positive and substantial revenues would be made if these wholesale pricing levels are maintained. 9. Previous experience with fiber cables shows a rapid increase in demand when price of bandwidth decreases and availability increases. Lowering the cost of access has a strong impact on the amount of bandwidth sold. This can be modelled using a price elasticity curve. SAT-3 pricing, for which the most data is available, has show a clear relationship between volume and tariffs. The chart below compares the price of access on SAT-3 (per E1 half-circuit to Sessimbra, Portugal) against the volume of international bandwidth sold. This shows the effect that price decreases between 2004 and 2006 had on the volume of bandwidth sold in each of four countries where comparable data was available. The increase in international bandwidth demand increases because broadband services first become more viable for operators to deploy, and secondly because as retail prices decrease, the service becomes increasingly affordable and penetration increases. Réunion is included here as a particularly clear case which shows that when price was US$20,466 per Mb the volume was just 4 Mbps, but when it decreased to US$1,967 volume increased to 180 Mbps. This increase comes about because of the multiplier 24 This is probably conservative given the pentup demand and the trends elsewhere in more mature markets which are still growing at 70% or more. For example in Morocco, the total number of internet subscribers increased by 70% year-on-year to end 2011, reaching 3.2m (10% of the population). Internet access via 3G represented 81% of the market, with the remaining 19% from ADSL connections. 55 effects: monthly prices for broadband decrease, in turn improving affordability and increasing uptake of services. Although pricing information has not been tracked in Kenya, the chart further below also reinforces this picture, showing the extremely rapid growth in international capacity used following the arrival of competing submarine cables in Mombasa which reduced the wholesale price of capacity by a factor of over 10. Figure 10.1: Bandwidth Price Elasticity Price Elasticity On Sat-3 Ghana Nigeria 45,000 Reunion South Africa Nigeria PE South Africa PE 40,000 Ghana PE Reunion PE Price (US$ per month) 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - - 1,000 2,000 3,000 4,000 5,000 Volum e (Mbps) Figure 10.2: Kenya Bandwidth Increases Following Submarine Cables Arrival Kenya International Bandwidth (Mbps) 60000 50000 40000 30000 20000 10000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 10. The Carrier Hotel (and IXP) will create improved connectivity by allowing the different operators to have alternative and additional access beyond WACS. Carriers with international infrastructure are expected to connect with the Carrier Hotel to provide services to other operators/large users and also to ensure the security and redundancy of their own links by having a single point from which to cross-connect. The presence of the Carrier Hotel would also attract other international operators (as well as content providers) to land their fibre infrastructure and data servers there, as the most cost effective place to meet, peer, and trade capacity. This passive infrastructure reduces the cost for the local operators to connect to international infrastructure by just having one place to connect with, and creates a more fluid open market for 56 capacity, because customers can switch between suppliers in seconds, (or change the volume of capacity obtained from each of their suppliers) simply through a configuration change on the router or changing a cross-connect cable on the fibre switchboard. 11. The predicted international bandwidth demand for Togo is expected to be over 42Gbps by 2023, but this assumes a competitively priced and pervasive national fibre backbone, an enabling policy and regulatory environment for new market players and the availability of sufficient radio spectrum. To be able to serve the public outside Lome effectively it will be necessary to ensure that all operators can interconnect their base stations with competitively priced fibre and that new operators are allowed to enter the market to compete with Togo Telecom. In addition, given world-wide trends in broadband adoption levels, and particularly the potential created by the explosion of wireless broadband25 (3G/4G/LTE/WiMax/WiFi), the traffic estimates used in the analysis are relatively conservative, especially toward the end of the analysis period, by which time it is expected that almost every mobile phone user would have access to broadband on their handset26 and the majority of residences will have a wireless or ADSL triple-play set-top box (voice telephony, Internet and IP-TV). However, this also requires the availability of sufficient radio spectrum in the needed wavebands, otherwise the operators may not be encouraged to introduce low cost services in the near future. The most desirable wavebands are currently used by analog TV and until migration to digital TV takes place, efficient use of spectrum will be likely to depend on the use of the latest radio protocols (IEEE 802.22) which uses white spaces in the TV frequency spectrum27 to bring broadband access to hard-to-reach, low population density areas, typical of rural environments. 25 3G data service uptake from the consumer has been massive and unprecedented in other developing countries where competitively priced services have become available, and in most of these countries the majority of Internet access now takes place via the mobile networks. 26 New 3G capable smartphones are now being sold in Africa for $75-100 (without contract or network locking), andpricesareexpectedtocomedownmuchfurtheroverthenext10years. 27 The IEEE 802.22 WRAN standard is aimed at using cognitive radio (CR) techniques to allow sharing of geographically unused spectrum allocated to the Television Broadcast Service, on a non-interfering basis. 57 Bandwidth demand forecast for Togo International Estimated Internat Bps/ total Estimate Basis Bandwidth number of Penetration Population ional Kbps/ populatio (Mbps) Subscribers Subscriber n Current Status in Togo (end 2011) 1,200 35,683 0.6% 6,366,984 34 0.2 Senegal comparison (2011) 8,500 281,000 2.22% 12,643,799 30 0.7 2023 Forecast for total Togo International traffic 42,466 707,772 8.7% 8,179,996 60 5.2 Bandwidth Requirement Estimates Based on (cross check): Low Broadband Definition (256Kbps), Low Penetration Scenario (10%) 6,701 818,000 10.00 8,179,996 205 1 Low Broadband Definition (256Kbps), Low-Medium Penetration Scenario (20%) 11,727 1,635,999 20.00 8,179,996 179 1 Medium Broadband Definition (1Mbps), Low Penetration Scenario (10%) 26,176 818,000 10.00 8,179,996 800 3 Medium Broadband Definition (1Mbps), Low-Medium Penetration Scenario (20%) 45,808 1,635,999 20.00 8,179,996 700 6 Optimal Broadband Definition (20Mbps) Low Penetration Scenario (10%) 523,520 818,000 10.00 8,179,996 16000 64 Medium Broadband Definition (1Mbps), Medium Penetration Scenario (40%) 65,440 3,271,998 40.00 8,179,996 500 8 Optimal Broadband Definition (20Mbps) Medium Penetration Scenario (40%) 1,722,104 3,271,998 40.00 8,179,996 10000 211 12. Capacity requirements have the potential to continue to advance rapidly as prices drop, access device affordability improves, ICT literacy increases and more relevant local applications are developed. Due to pent up demand, extrapolating trends in current broadband subscriber growth will tend to under-estimate the future broadband user-base, and there are similar considerations regarding extrapolating capacity requirements per user. Globally, the last 10 years has seen massive increases in end-user bandwidth demand resulting from the popularity of social networks, image and video sites such as FaceBook and YouTube. Fortunately these bandwidth demands have kept pace with technology developments, which are now seeing domestic broadband services delivering 100Mbps and even 1Gbps in some advanced countries. If Togo is to have the opportunity catch up, at least partially with these developments over the next decade, then we can expect a relatively high level of growth in bandwidth use, perhaps similar to Kenya where international traffic grew by over 25 times between 2008 and 2011. To reflect this, the Togo analysis is based on an initial 25Kbps per subscriber of international capacity rising to 60Kbps. Similarly, a 50% average annual subscriber growth is expected in the years immediately following the availability of increased low cost capacity, to reach about 10% 58 average penetration by 202328. Consumer demand for high bandwidth multimedia services delivery far overshadows business traffic, but the additional capacity required, especially for mining, shipping, import/export services could generate significant Internet traffic. The government's priorities to support human resource development, e-education and other advanced use of ICTs as part of its ICT strategy are also expected to help grow bandwidth demand. 13. Fast Internet has been shown to boost the productivity of firms as well as generate employment opportunities. New growth theory suggests that long-run economic growth emanates from the spill over arising from innovation and investment in new technologies. Fast Internet access can be considered one important new technology, and broadband is increasingly recognized to promote productivity and boost aggregate economic growth. Studies have shown that firms using broadband (defined by the ITU as connection speeds above 256 Kbps) were on average 10% more productive than firms using dial-up internet access. Faster internet speeds are also causally related to increased employment opportunities with analysis showing that for every one percentage point increase in broadband penetration within a region, employment increases by 0.2-0% per year for the private, non-farm economy (Crandall et al, 2007). Indeed, studies show a clear positive relationship between employment and broadband penetration in the manufacturing and service industries, with business growth shown to be particularly significant for larger businesses and for IT intensive sector (Lehr et al, 2006). The results of these studies support the expectation that broadband penetration enhances economic activity. Increased broadband speeds and less expensive data access have the potential to promote economic activities in Togo, supporting the growth and productivity of businesses and gradual transfer of employment from agricultural to service industries and expansion of the region’s nascent ICT sector. 14. The project's delivery of increased access to Internet, will also have other positive impacts, such as better education opportunities, improved public administration and increased government revenues. The project will bring significant benefits to Togo in a number of other ways including (i) increased public access to Internet services (ii) a broad range of social benefits through increased labor productivity, learning opportunities for youth, participation by women in the labor market, and improved public administration (iii) greater fiscal returns due to new sources of revenue for the GoT. It must be noted, however, that the economic and financial benefits of a technical assistance component are generally difficult to quantify because of the inadequacy of data available at the outset. 28 A 10% penetration rate for broadband may seem low given the expected uptake in wireless smartphones over the coming years, but as observed by operators in North Africa and Europe, smartphone bandwidth-use is virtually insignificant compared to high-speed broadband usage of desktops, laptops and triple/double-play set- top boxes connected to either the fixed networks, or mobile networks using wireless modems. Thus the 10% population penetration figure may be more closely equated to a 50-70% household penetration level. Similarly the 60Kbps/user of international capacity requirement may appear small, but is verified by operator field data in more advanced economies, and is explained by: a) as markets mature a more significant amount of traffic is local rather than international, b) high bandwidth international traffic is cached locally (such as YouTube), c) 60Kbps is the multiplexed capacity permanently allocated per subscriber, and since the user is not online 24hrs a day, this is the user's actual utilisation averaged over an entire day. 59 IBRD 33497 o To Ouagadougou 1°E BURKINA FASO Diapaga TO GO o To SELECTED CITIES AND TOWNS 11°N 11°N To o PREFECTURE CAPITALS Navrongo Mandouri Dapaong TÔNE REGION CAPITALS Too Natitingou NATIONAL CAPITAL Oti RIVERS AVA N N A S AV MAIN ROADS OTI Mango RAILROADS Ko PREFECTURE BOUNDARIES u m ongou REGION BOUNDARIES KEREN INTERNATIONAL BOUNDARIES 10°N Kanté Kanté DOUFELGOU Kpagouda o To Niamtougou BINAH This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Yendi endi Gué Guérin Guérin KARA To o Kokoro shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any Ka Kouka ra Kara KOZAH endorsement or acceptance of such boundaries. To o BASSAR amale Tamale ASSOLI Bafilo o To Parakou GHANA Bassar TCHAOUDJO Tchamba Tchamba To o 9°N Parakou 9°N Sokondé Sokondé . Fazao Mts o n BENIN Mo CENTRAL Sotouboua YA L A N YA SOTOUBOUA Blitta To o NIGERIA Bimbila A ni e OGOU 8°N Elavagnon 8°N o To Savé Sav Anjé Anjé WAWA AMOU WAWA Badou Atakpamé Atakpamé Amlamé Amlamé Lake Amou PLATEAU Volta To o Yendi endi Apé Ap éyémé Apéyémé To o Kétou tou KLOTO HAHO 7°N 7°N Mont Agou Notsé Notsé Kpalime (986 m) Agou Si o To o YOTO Accra ZIO Tabligbo Tabligbo MARITIME LAC TOGO K éve Kéve VO To o Lagos Tsévi vié é Tsévié Vogan Vogan S Aného 0 20 40 60 Kilometers LOMÉ 6°N GOLFE 0 10 20 30 40 50 Miles To o Accra Bight of Benin 0° 1°E 2°E 3°E NOVEMBER 2004