The World Bank PG: Rural Communications Project (P107782) REPORT NO.: RES28025 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PNG: RURAL COMMUNICATIONS PROJECT APPROVED ON JULY 22, 2010 TO INDEPENDENT STATE OF PAPUA NEW GUINEA TRANSPORT & ICT GLOBAL PRACTICE EAST ASIA AND PACIFIC REGION Regional Vice President: Victoria Kwakwa Country Director: Michel Kerf Senior Global Practice Director: Jose Luis Irigoyen Practice Manager/Manager: Jane Lesley Treadwell Task Team Leader: Natasha Beschorner, Junko Narimatsu The World Bank PG: Rural Communications Project (P107782) ABBREVIATIONS AND ACRONYMS $ All dollars are in United States dollars unless otherwise indicated CSTB Central Supply and Tenders Board DCIT Department of Communication and Information Technology FM Financial Management ICT Information and Communication Technologies IDA International Development Association IFR Interim Financial Report ISR Implementation Status and Results Report (ISR) NICTA National Information and Communications Technology Authority PNG Papua New Guinea UA Universal Access UAS Universal Access Scheme The World Bank PG: Rural Communications Project (P107782) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P107782 Specific Investment Loan Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 22-Jul-2010 31-Aug-2017 Organizations Borrower Responsible Agency Department of Treasury,National ICT Authority Independent State of Papua New Guinea (NICTA),Department of Communication and Information Project Development Objective (PDO) Original PDO The objective of the project is to improve access to telecommunications infrastructure and services in rural and remote areas of PNG. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-47910 22-Jul-2010 09-Aug-2010 07-Mar-2011 31-Aug-2017 15.00 9.36 4.66 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? Yes The World Bank PG: Rural Communications Project (P107782) Explanation Project audits for 2016 and entity audits for 2015 and 2016 are outstanding. Has the waiver(s) been endorsed or approved by Bank Management? Yes Explanation The waiver was approved by GGO and WFA managers. Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. PROJECT STATUS 1. The Board approved the Project on July 22, 2010 for a total of SDR 10 million (US$15 million equivalent), and it became effective on March 7, 2011. The Project Development Objective (PDO) is to improve access to telecommunications infrastructure and services in rural and remote areas of Papua New Guinea. The Project includes financing for two major universal access and service (UAS) demonstration Projects to provide telecommunications and mobile broadband Internet service to rural and remote areas of the country, and technical assistance (TA) programs to support regulatory and policy development for the ICT sector. 2. Implementation progress was extremely slow in the first three years largely due to very poor Project management and weak fiduciary capacity of the original implementing agency. As a result, the Project was downgraded to Moderately Unsatisfactory in both progress toward achievement of PDO and implementation progress (IP) in January 2013. As part of a level 2 restructuring that was approved by the RVP in August 2014, the project was transferred from the Department of Communication and Information Technology (DCIT) to the National ICT Authority (NICTA), and a procurement advisor was hired to accelerate procurement. The restructuring also extended the project by 2 years to August 31, 2017 and updated the project design to reflect latest developments in the ICT sector. Coupled with the Bank team’s intensified support, implementation progress improved substantially, and the Project was upgraded to Moderately Satisfactory (MS) in both achievement progress toward achievement of PDO and IP in November 2014. 3. All project funds are committed, of which 66 percent has been disbursed to date. Disbursements are expected to increase to 75 percent by September 2017 upon completion of the mobile Internet network upgrade by Digicel PNG, and subsequent verification by the technical audit consultants. 4. In May 2017, the Project was upgraded to Satisfactory in its progress towards achievement of the PDO. All four PDO indicators have been surpassed and 3 out of 6 intermediate outcome indicators have been achieved. Under the first UAS demonstration project, mobile base stations were installed in 59 remote sites, and contributed to providing basic voice services to over 500,000 Papua New Guineans who were previously unserved by any form of telecommunications services. Coupled with aggressive rollouts by the private sector, telecommunications coverage has increased from 20 percent in 2009 to 95 percent by 2017. The second UAS demonstration project The World Bank PG: Rural Communications Project (P107782) for mobile network expansion was launched in late 2016, and to date has completed installation in 69 remote sites recording over 160,000 new 3G Internet subscribers who previously did not have Internet access. B. RATIONALE FOR RESTRUCTURING 1. In accordance with a letter dated June 29, 2017 received from the Department of Treasury (DoT) on behalf of the Independent State of Papua New Guinea, this Restructuring Paper proposes to introduce: (i) a level 2 restructuring to extend the Project Closing Date for an additional 12 months to August 31, 2018; and (ii) adjustments in the results framework, as detailed in section II. There are no changes to the PDO. Requests related to the minor adjustment to the indicators are indicated in a letter from NICTA dated May 26, 2017, and was agreed as part of a formal correspondence between NICTA and DoT on June 1, 2017. Despite the agreement, DoT inadvertently overlooked the inclusion in the request letter. Therefore, the correspondence is attached as a supplementary document. 2. The extension is requested as a result of very long delays that were caused by matters beyond the implementing entity’s control, largely due to lengthy review and approval processes within the Central Supply and Tenders Board (CSTB) and the State Solicitor’s Office, and allow sufficient time to complete all planned activities under the Project. The delayed activities include three critical contracts which comprise close to 20 percent of the total credit amount, and which just became effective in March 2017. These are: an additional contract for the UAS demonstration for mobile network upgrade for 61 remote locations ($1 million, output based, expected completion in August 2017-to be extended based on progress), a comprehensive program of regulatory TA for NICTA ($845K, current closing December 14th, 2017) and a detailed policy advisory TA for DCI ($715K, current closing November 30th, 2017). The two TA contracts were expected to be continued under NICTA funds if the project were not to be extended. Upon approval of the project extension the contracts will be extended until March 2018 to ensure robust implementation while leaving contingency. 3. Justification for supporting the Government's request include: a. the need to ensure that the UAS demonstration project that explicitly target underserved and unserved rural communities can be implemented in time; b. the need to ensure robust regulatory and policy advisory assistance is provided to NICTA and DCIT in light of the rapidly changing market conditions in the ICT sector; c. the assessment of the work plan prepared by NICTA as realistic and achievable within the extension period while leaving some contingency; and d. confirmation that the relevant Operational Policy (OP) 10.00 conditions have been met, namely that: (i) “the Closing Date is not extended for Projects subject to suspension of disbursements, except for items exempted from suspension; and (ii) Exceptional approval to restructure notwithstanding overdue audits has been received in accordance with OPCS instructions IPF Implementation Support to Project Completion (attached as supplementary documentation) e. the request for extension also complied with OP/BP10.00 paragraph 47 to the extent that i) the Project Development Objectives remain achievable; ii) the performance of the Recipient remains satisfactory; and iii) the Bank and the Recipient agreed on actions that will be undertaken by the Recipient to complete the Project. II. DESCRIPTION OF PROPOSED CHANGES A. CLOSING DATE EXTENSION The World Bank PG: Rural Communications Project (P107782) 1. The Government of Papua New Guinea has requested a second extension of the Project Closing Date for an additional 12 months from August 31, 2017 to August 31, 2018. B. ADJUSTMENTS IN THE RESULTS FRAMEWORK 1. This Restructuring Paper also proposes adjustments in the results framework to reflect updated project activities and realities of data that NICTA has been able to collect to date from the telecom operators. Coupled with the proposed adjustments and a specific provision to strengthen M&E as part of the recently approved TA, M&E ratings are expected to improve from the current MU in the next ISR. Minor clean-up will also be made in the operations portal. 2. The revised indicators are annexed to the amendment letter, and will supersede those monitoring indicators stipulated in the supplemental letter regarding monitoring indicators dated August 9, 2010, and they also will be Annexed to the Project’s Operations Manual. Details of the proposed changes/corrections are as follows: a. Removal of the word “in provinces targeted by the Project” from the PDO indicator “Mobile cellular telephone subscriptions in provinces targeted by the Project (number of subscribers per 100 inhabitants)”; and intermediate outcome indicator “Percentage of population coverage [of telecommunications services] in provinces targeted by the Project”. Justification for these changes are as follows: i. NICTA has not been able to collect, from the telecom operators, historic and current telecommunications subscription data disaggregated at provincial levels. This has been due to both capacity issues within NICTA and to data provision challenges from the operators. Values recorded to date have been at the national level, as recorded in past aide-memoires and ISRs. ii. In response, NICTA included a specific provision to strengthen M&E as part of the recently approved TA, however positive outcomes are not expected to materialize before the project closing. iii. Since the UAS demonstration projects have targeted all provinces except for the National Capital District (Port Moresby), which has had close to 100 percent mobile and Internet coverage, the removal does not invalidate the Project’s attributions to the PDO. iv. Finally, the end target for the subject PDO indicator will be corrected from 11 percent to 60 percent, given that the original value was intended only for two provinces (Chimbu, East Sepik). The project was restructured accordingly in 2013, but the end targets were inadvertently not revised at the time. b. Correction in the operations portal for the intermediate outcome indicator “Increased percentage of district centers with public Internet access point” to read “Percentage of 89 district centers with Internet access.” This modification was approved in the 2014 restructuring to respond to a shift in project activities, however, due to an inadvertent error it was not reflected in the portal. NICTA confirmed that 92 percent (82 out of 89 District Centers) have some form of mobile broadband coverage, and this information has been reflected in the portal. The data will also be updated in the next ISR. C. Procurement. Procurement ratings were rated MU in the May 2017 ISR due to the substantial delays that occurred, as mentioned in the rationale for restructuring. All procurement has now completed and ratings are expected to improve in the next ISR. No changes to the procurement thresholds are being made as part of the proposed restructuring. The World Bank PG: Rural Communications Project (P107782) D. Financial Management. FM performance of the Project has recently been upgraded to Moderately Satisfactory. All outstanding FM issues are being proactively addressed by NICTA and the Bank team. An exceptional approval to proceed with the extension has been approved, dated July 27, 2017, notwithstanding outstanding audited financial statements of the project and the implementing entity for 2016. E. Disbursements. An updated disbursement schedule has been prepared taking into consideration the proposed 12-month extension of the Closing Date. There is no reallocation of funds. F. Safeguards. Safeguards issues are being managed satisfactorily by NICTA. The proposed restructuring does not affect the safeguards category or trigger any new safeguards policies. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. I. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Loan Closing Date(s) ✔ Change in Disbursement Estimates ✔ Change in Implementation Schedule ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ The World Bank PG: Rural Communications Project (P107782) Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Direct Project Beneficiaries Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 192838.00 36900.00 No Change Date 17-Jun-2010 02-May-2017 31-Aug-2017 Indirect project beneficiaries Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 1421727.00 265000.00 No Change Date 17-Jun-2010 02-May-2017 31-Aug-2017 of which female Unit of Measure: Number Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 0.00 710863.00 132500.00 No Change Date 17-Jun-2010 02-May-2017 31-Aug-2017 Mobile cellular telephone subscriptions (number of subscribers per 100 inhabitants) Unit of Measure: Number Indicator Type: Custom The World Bank PG: Rural Communications Project (P107782) Baseline Actual (Current) End Target Action Value 31.00 65.00 60.00 Revised Date 31-Dec-2009 02-May-2017 31-Aug-2015 Increase in Internet usage in rural district centers (annual increase in users) Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 50.00 30.00 No Change Date 17-Jun-2010 02-May-2017 31-Aug-2013 Intermediate Indicators IO_IND_TABLE The average distance to the closest telephone in the provices targeted by the Project Unit of Measure: Kilometers Indicator Type: Custom Baseline Actual (Current) End Target Action Value 80.00 1.00 5.00 No Change Date 17-Jun-2010 02-May-2017 31-Aug-2017 Percentage of 89 district centers with Internet access Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 92.00 70.00 Revised Date 17-Jun-2010 02-May-2017 31-Aug-2017 Impact on Telecom sector of World Bank Technical Assistance (composite score: 1- low impact to 5-high impact) Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 2.00 5.00 No Change Date 17-Jun-2010 02-May-2017 31-Aug-2017 UAS fund operational Unit of Measure: Yes/No The World Bank PG: Rural Communications Project (P107782) Indicator Type: Custom Baseline Actual (Current) End Target Action Value No No Yes No Change Date 17-Jun-2010 02-May-2017 09-Mar-2012 Successful Demonstration Projects undertaken by UAS Secretariat Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 1.00 1.00 No Change Date 17-Jun-2010 02-May-2017 31-Aug-2017 Percentage of population coverage of telecommunications services Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 20.00 95.00 70.00 Revised Date 17-Jun-2010 02-May-2017 31-Aug-2017 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-47910 Effective 31-Aug-2015 31-Aug-2017 31-Aug-2018 31-Dec-2018 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2011 56,808.66 56,808.66 2012 123,906.93 123,906.93 The World Bank PG: Rural Communications Project (P107782) 2013 210,222.95 210,222.95 2014 571,080.86 571,080.86 2015 2,982,411.65 2,982,411.65 2016 4,272,484.55 4,272,484.55 2017 5,962,706.35 7,962,706.35 2018 968,778.08 100,000.00 Note to Task Teams: End of system generated content, document is editable from here.