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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 23.2 MILLION (US$ 35 MILLION EQUIVALENT) TO THE REPUBLIC OF BENIN Report No: BJ FOR THE WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM - BENIN PROJECT IN SUPPORT OF THE THIRD SERIES UNDER THE FIRST PHASE (APL 1C) OF A US$300 MILLION EQUIVALENT WEST AFRICA REGIONAL COMMUNICATIONS INFRASTRUCTURE PROGRAM ICT Sector Unit Africa Region June 21, 2012 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.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective May31, 2012) Currency Unit = SDR = US$1 US$ = SDR 1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS $ ACE AICD APL ARAP ARCEP ATRPT BMH BPO BTSA CAA CAS CIGOP CMA CQS DA DSL ECOWAN ECOWAS ESIA ESMP United States dollar, all dollars are US dollars unless otherwise indicated Africa Coast to Europe Submarine Cable Africa Infrastructure Country Diagnostic Adaptable Program Loan Abbreviated Resettlement Action Plan Autorité de Régulation des Communications Electroniques et de la Poste Regulatory Authority of Post and Electronic Communications Autorité Transitoire de Régulation de la Poste et des Télécommunications Transitional Regulatory Authority for Post and Telecommunications Beach Man Hole Business Process Outsourcing Benin Telecoms Caisse Autonome d'amortissement Autonomous Reserve Fund Country Assistance Strategy Competitiveness and Integrated Growth Opportunity Project Construction and Maintenance Agreement Consultant s Qualification Designated Account Digital Subscriber Line ECOWAS Regional Backbone and E-Governance Project Economic Community of West African States Environmental and Social Impact Assessment Environmental and Social Management Plan ii

3 FM Gbit/s GDP GoB GSM IBRD IC ICB ICT IDA IFC IFR IP IPR IRR IRU ISA IsDB ISP IT ITES ITU IXP Kbit/s LCS Mbit/s MCICT MDGs M&E MEO MIGA MIS MoF NCB NICI NPV PCN PDO PIM PIU PPA PPF PPP PPR PSD Financial Management Gigabit per second Gross Domestic Product Government of Benin Global System for Mobile Communications International Bank for Reconstruction and Development Individual Consultant International Competitive Bidding Information and Communication Technology International Development Association International Finance Corporation Intermediate Financial reports Internet Protocol Independent Procurement Review Internal Rate of Return Indefeasible Right of Use International Standards on Auditing Islamic Development Bank Internet Service Provider Information Technology IT Enabled Services International Telecommunication Union Internet Exchange Point Kilobit per second Least Cost Selection Megabit per second Ministry of Communications and Information and Communications Technologies Millennium Development Goals Monitoring and Evaluation Medium Earth Orbit Multilateral Investment Guarantee Agency Management Information System Ministry of Finance National Competitive Bidding National Information Communications Infrastructure Net Present Value Project Concept Note Project Development Objectives Project Implementation Manuel Project Implementation Unit Project Preparation Advance Project Preparation Facility Public-Private Partnership Post Procurement Review Private Sector Development iii

4 QCBS RAP RCIP RFCS RFP RIAS RRP SAT-3 SOE SPV SSS ToR VoIP VPN WASC WARCIP WBG UNCLOS UNDP Quality and Cost Based Selection Resettlement Action Plan Regional Communications Infrastructure Program Ready for Commercial Service Request for Proposal Regional Integration Assistance Strategy for Sub-Saharan Africa Resettlement and Rehabilitation Plan South Atlantic Three cable Statement of Expenditures Special Purpose Vehicle Single Source Selection Terms of Reference Voice Over Internet Protocol Virtual Private Network West African Submarine Cable West Africa Regional Communications Infrastructure Project World Bank Group United Nations Convention on the Law of the Sea United Nations Development Programme iv

5 Regional Vice President Acting Regional Integration Director: Country Director: Sector Director: Acting Sector Manager: Task Team Leaders for WARCIP Program: Task Team Leader for WARCIP-Benin: Makhtar Diop Elizabeth Lule Madani M. Tall Jose Luis Irigoyen Samia Melhem Mavis Ampah and Boutheina Guermazi Boutheina Guermazi v

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7 BENIN WARCIP Benin 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)...6 A. PDO... 6 Project Beneficiaries... 7 PDO Level Results Indicators... 7 III. PROJECT DESCRIPTION...7 A. Project Components... 7 B. Project Financing C. Program Objective and Phases D. Lessons Learned and Reflected in the Project Design IV. IMPLEMENTATION...13 A. Institutional and Implementation Arrangements B. Results Monitoring and Evaluation C. Sustainability V. KEY RISKS AND MITIGATION MEASURES...15 A. Risk Ratings Summary Table B. Overall Risk Rating Explanation VI. APPRAISAL SUMMARY...16 A. Economic and Financial Analyses B. Technical C. Financial Management D. Procurement E. Social and Environment vi

8 F. Effectiveness conditions and Covenants: Annex 1: Results Framework and Monitoring...22 Annex 2: Detailed Project Description...24 Annex 3: Implementation Arrangements...29 I. Project administration mechanisms...29 II. Financial Management, Disbursements and Procurement...31 III. Environmental and Social safeguards...39 IV. Monitoring and Evaluation...42 V. Role of Partners...43 Annex 4: Operational Risk Assessment Framework (ORAF)...44 Annex 5: Implementation Support Plan...50 Annex 6: Economic and Financial Analysis...53 Annex 7: Progress of the WARCIP Program...62 vii

9 ... PAD DATA SHEET Africa WARCIP APL 1C - Benin (P130184) PROJECT APPRAISAL DOCUMENT AFRICA TWICT Basic Information Date: 21-June-2012 Sectors: Telecommunications (50%), General information and communications sector (50%) Country Director: Madani M. Tall Themes: Regional integration (40%), Regulation and Sector Samia Melhem/Jose competition policy (20%), Infrastructure Manager/Director: Luis Irigoyen services for private sector development (40%) Project ID: P EA Category: Lending Instrument: Team Leader(s): Joint IFC: No Adaptable Program Loan Boutheina Guermazi B - Partial Assessment Borrower: Ministry of Communications and Information and Communications Technologies. Project Implementation Period: Expected Effectiveness Date: Start Date: 12-Nov-2012 Expected Closing Date: 10-June Jul-2012 End Date: 10-March-2017 viii

10 . [ ] Loan [ ] Grant [ ] Other [X ] Credit [ ] Guarantee For Loans/Credits/Others Total Project Cost (US$M): Total Bank Financing (US$M):. Financing Source Project Financing Data(US$M) Amount(US$M) BORROWER/RECIPIENT 0.00 International Development Association (IDA) Total Expected Disbursements (in USD Million) Fiscal Year Annual Cumulative Project Development Objective(s) The project development objectives for WARCIP 1-C are to contribute to increase the geographical reach of broadband networks and to reduce the costs of communications services in the territory of the recipient.. Components Component Name Cost (USD Millions) Supporting Connectivity Enabling environment for improved connectivity 3.25 Implementation support Policy Compliance Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] ix

11 . Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation?. x Yes [ X ] No [ ] Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 Natural Habitats OP/BP 4.04 Forests OP/BP 4.36 Pest Management OP/BP 4.09 Physical Cultural Resources OP/BP 4.11 Indigenous Peoples OP/BP 4.10 Involuntary Resettlement OP/BP 4.12 Safety of Dams OP/BP 4.37 Projects on International Waterways OP/BP 7.50 Projects in Disputed Areas OP/BP Legal Covenants Name Recurrent Due Date Frequenc y To facilitate the carrying out of the international connectivity component of the Project, the Republic of Benin ( Recipient ) shall take all action required: (i) to ensure the proceeds of the Credit allocated from time to time to finance the Consortium Fee are transferred in an efficient and timely manner to the SPV; and (ii) to have in place a suitable legal framework to ensure the Credit is used for the intended purposes. To that end, the Recipient shall conclude a contractual arrangement ( Contractual Arrangement ) with the SPV whereby the Recipient shall, inter alia, transfer the proceeds of the Credit allocated for the Consortium Fee to the SPV, on a nonreimbursable basis, in consideration of the undertaking by the SPV that such amount shall be transferred by the SPV to the ACE Consortium for the purposes of payment of the membership and participation of the SPV in the ACE Consortium. Yes X X X X X X X X X X Ongoing The Recipient shall cause the SPV to take all action necessary Yes Ongoing

12 on its behalf: (i) to carry out the ARAP with due diligence and efficiency and at all times provide the funds necessary therefor; (ii) to adequately monitor and evaluate the carrying out of the activities provided in the ARAP in the carrying out of the infrastructure partially financed through the Consortium Fee; and (iii) to maintain the Recipient and the Association suitably informed of the progress in the implementation of the ARAP through the information to be prepared and furnished to the Recipient pursuant to the provisions of the Contractual Arrangement. The Recipient shall cause the SPV to take all action necessary on its behalf: (ii) to carry out the ESMP with due diligence and efficiency; (ii) to ensure that the relevant mitigation and monitoring provisions of the ESMP are appropriately included in the works, goods and services contracts to be concluded for the infrastructure partially financed through the Consortium Fee and that they are implemented in the carrying out of said infrastructure; and (iii) to maintain the Recipient and the Association suitably informed of the progress in the implementation of the ESMP through the information to be prepared and furnished to the Recipient pursuant to the provisions of the Contractual Arrangement. Yes Ongoing The Recipient, through its MCICT, shall ensure overall coordination, implementation and supervision of the Project is carried out by the PIU with due diligence and efficiency. To this end, the Recipient shall recruit for the PIU, not later than three months after the Effectiveness Date, a procurement assistant and a telecommunications engineer, all under terms of reference and with qualifications and experience satisfactory to the Association. Yes Three Months after Effectiveness The Recipient shall: (a) prepare, under terms of reference satisfactory to the Association, and furnish to the Association, on or about November 24, 2014, a report integrating the results of the monitoring and evaluation activities under the Project; and (b) review with the Association, on or about January 12, 2015, or such later date as the Association shall request, the said report and, thereafter, take all measures required to ensure the Yes November 24, 2014, and January 12, 2015, respectively xi

13 efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Association s views on the matter. Conditions Name: Effectiveness conditions Type Bank Staff (a) The SPV has been fully established and operational, in form and substance satisfactory to the Association, in the territory of the Recipient, including through the appointment of its director general and the adoption of its shareholders agreement and its by-laws. (b) The execution and delivery of the Construction and Maintenance Agreement, on behalf of BTSA, in form and substance satisfactory to the Association and containing no prohibition of divestiture of the Recipient s shareholding, has been duly authorized or ratified by all necessary governmental or corporate action. (c) With BTSA s acquiescence, the ACE Consortium has transferred to the SPV all the rights and obligations of BTSA in the Construction and Maintenance Agreement and has fully substituted BTSA with the SPV as the member of the ACE Consortium. (d) The Contractual Arrangement, in form and substance satisfactory to the Association, has been entered into between the Recipient and the SPV. (e) The Recipient shall have adopted the Project Implementation Manual in form and substance satisfactory to the Association. The Additional Legal Matters consist of the following: (a) The SPV has been duly established and made operational in the territory of the Recipient and is legally authorized to operate as a private law company in accordance with the laws of the Recipient. (b) On behalf of BTSA, that the Construction and Maintenance Agreement has been duly authorized or ratified by, and executed and delivered on its behalf, and is legally binding upon it in accordance with its terms. (c) The Contractual Arrangement 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 its terms. Team Composition Name Title Specialization Unit Boutheina Guermazi Senior Regulatory Specialist xii Team Lead TWICT Claudia M. Pardiñas Ocaña Senior Counsel Senior Counsel LEGAF

14 . Michele Ralisoa Noro Doyle Gallegos Senior Program Assistant Lead ICT Policy Specialist Senior Program Assistant TWICT Lead ICT Policy Specialist TWICT Rita Dambita Consultant Consultant TWICT Marc Jean Yves Lixi Aissatou Diallo Laurent Besancon Africa Eshogba Olojoba Mavis Ampah Alain Hinkati Senior Operations Officer Senior Finance Officer Lead Regulatory Specialist Senior Environmental Specialist Senior ICT policy Specialist Financial Management Specialist Senior Operations Officer TWICT Senior Finance Officer Lead Regulatory Specialist Senior Environmental Specialist CTRLA TWICT AFTEN Sr. ICT policy Specialist TWICT Financial Management Specialist AFTFM Mathias Gogohounga Consultant Procurement AFTPC Erica Monique Daniel E T Temporary E T Temporary TWICT Michel Rogy E T Consultant E T Consultant TWICT Melissa Mirinda Pascaline Gbaguidi Non Bank Staff Temporary Temporary AFMBJ Name Title Office Phone City. Locations Country First Administrative Division Location Planned Actual Comments xiii

15 I. STRATEGIC CONTEXT A. Country Context 1. With a per capita income of US$780, Benin ranks in the lower income group of countries. Following fundamental political change in 1989, the country has enjoyed relative political stability, and democracy has been strengthened. Despite a long period of positive growth, the economy has shown little structural change, with vulnerability to natural disasters (extensive flooding in 2010) and narrow economic base (cotton and transit/re-export trade). The global economic slowdown led in 2009/2010 to a slowing of Benin s gross domestic product (GDP) growth (to 2.7 percent in 2009 and 2.6 percent in 2010). This is marginally below the regional average and contributed to modest increases in per capita incomes and some improvements in human development in spite of a relatively high population growth (3.2 percent p.a.). The economy relies heavily on the agricultural sector, cotton in particular, and on re-export and transit trade with Nigeria and other neighboring countries. The agricultural sector accounts for about 32 percent of GDP and provides nearly 70 percent of employment, while cotton is the major primary export commodity representing typically 25 to 40 percent of total exports. Re-export trade with Nigeria alone accounts for some percent of GDP. 2. A regional telecommunications market is key for effective regional integration and growth. Between 1995 and 2005, infrastructure improvements are estimated to have boosted West Africa s growth by about one percentage point per capita per year. This positive contribution to growth was almost entirely attributed to the Information and Communication Technology (ICT) revolution while it is believed that a deficient power infrastructure held back economic growth by about 0.1 percentage point per capita per year. 3. The Benin Project comes under the third series of the First Phase (APL 1) of the West Africa Regional Communications Infrastructure Program (WARCIP), thus constituting APL 1C of WARCIP. The Program was approved by the Board on January 20, WARCIP is a US$ 300 million regional APL instrument that seeks to contribute to increasing the geographical reach of broadband networks and reducing costs of communications services in West Africa. While Benin was slated to be included in the third phase (APL 3) of the Program, the country has expressed its readiness (and meets the triggers) to be included in this first phase to take advantage of the ACE opportunity similarly to other countries included in APL 1 A, dealing with Liberia and Sierra Leone 1, and APL B supporting Guinea, The Gambia and Burkina Faso. 4. WARCIP Benin has a Strong Regional Rationale: The implementation of the Adaptable Program Loan (APL) 1C would better integrate Benin within the region, allowing increased regional trade as well as improving Benin s opportunity to become more competitive internationally. An important component of the GoB s economic development strategy is to ensure the country is in a position to become a digital hub for the region, and enhanced regional connectivity is a key component of this strategy. In this respect Benin has a particularly 1 APL 1 A was approved by The Board on January 20, 2011 for a commitment of US$ 56 million. APL 1B was approved in June 21, 2011 for a commitment of US$ 92 million 1

16 important geographic position in West Africa, with Cotonou enjoying a central position for distributing capacity to its neighbors Burkina Faso, Niger, Nigeria and Togo 2. B. Sectoral and Institutional Context 5. There is competition in the mobile and internet sectors, however Benin Telecom (BTSA) is currently the only public provider of national fiber capacity, although mobile operators have built their own microwave backbones. Since late last year (2011), the infrastructure of all these licensed public operators can now be leased to ISPs, and it is expected that legislation will be passed to uphold their rights to build fiber infrastructure where necessary, and it is envisaged that Benin Telecom will become the wholesale fiber infrastructure provider of choice, given its extensive existing backbone network. As with other countries in the region, thanks to competitive market structure with five licensed Global Systems for Mobile Communication (GSM) operators, mobile uptake has seen strong growth, reaching 79 percent penetration in Fixed line penetration has languished at around 0.26 percent penetration, and internet penetration is also one of the lowest in the region at about 1.8 percent of the population. 6. The number of broadband Internet digital subscriber line (DSL) subscribers remains very limited in Benin and growth in the Internet industry is still slow and highly constrained by cost, availability and low penetration of fixed lines. Broadband remains a service for use by industry, government, and a privileged few at home, with a household broadband penetration of less than 0.25 percent in The high cost of broadband Internet access prevents Benin from reaping the benefits of the ICT revolution. 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. This can be attributed to several factors such as (i) the high cost of international bandwidth, especially of the South Atlantic Three Cable (SAT-3)/ West African Submarine Cable (WASC) system; (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 until ; (iv) high level of theft of fiber and (v) limited regulatory activity to promote more competition or fair and equitable access to bandwidth. These constraints are currently being tackled under e-benin project approved on March 25, The GoB is now starting to implement a comprehensive reform process. The vision of the Government for the sector as included in the 2008 Sector Development Policy is to convert Benin into the Digital Capital of Africa, taking advantage of the country s privileged location and its access to international connectivity. This vision is an ambitious one for Benin given current constraints in the sector, such as uneven access to communications infrastructure, high prices of services and a nascent legal regulatory and institutional framework 4. The Government is now starting to implement a comprehensive reform process with support of e-benin Project. Under this project, several activities aiming at creating an enabling environment for the sector 2 It is just over 100km to Lagos by road from the capital, Cotonou, and 150km to Togo's capital, Lome. For the landlocked country of Niger to the north, Benin is the most direct route to the sea for both international telecommunication capacity, and for international exports and imports. There are extensive port facilities in Cotonou, and from Niger's capital, Niamey, the distance is about 1000km. 3 Opening the sector effectively to competition was included in the licenses for service providers as signed in Other constraints include high cost of terminals, high illiteracy rate and limited availability of electricity. 2

17 are in the process of being launched or are ongoing. These include (i) development of a broadband strategy, (ii) support to the regulator to develop regulatory tools, (iii) setting up an IXP and, (iv) related activity to build capacity of policy makers and regulator in the area 5. All major Technical Assistance activities are at advanced procurement stage under e-benin. It is expected that by end of 2013, the studies will be completed. The restructuring of BTSA is also high on the government's agenda, and the national backbone network is now planned to be upgraded to interconnect the 77 communes, which will also have public access facilities. 8. Further sector reforms are unfolding through regulatory decisions. The top five Internet access providers have recently been licensed and the roll out of third generation (3G) services has just started following the award of the first 3G license in early MTN has been awarded a technology-neutral universal license, permitting it to deploy mobile services via 3G Wi-Fi or voice over IP (VoIP). It is expected that MTN competitors such as Glo Mobile and Moov will also be clamoring for similar licenses for competitive reasons. This will spur the growth of broadband connectivity considerably. In addition, the Government is considering restructuring Benin Telecoms into a wholesale carrier. The government is also looking at creating a Public-Private Partnership (PPP) framework, with support from the United Nations Development Programme (UNDP) initially and with proposed follow up support from the World Bank Benin is currently dependent on a single submarine cable - SAT-3 - for its international capacity requirements. Therefore additional routes to the global backbone are needed to meet existing and future demand for reliable and affordable capacity. Currently Benin Telecoms only uses about 2Gbits of capacity on SAT-3, which it provides to its own Internet and voice customers, and to the mobile operators and ISPs, as well as providing some capacity to Burkina Faso, Niger and Nigeria. Benin Telecom s total available capacity on SAT-3 is about 10Gbits 7. Fuelled by mobile broadband deployment and the expected price cuts on wholesale international capacity from $25000/Mbits/month to less than $200/Mbits/month, Benin s requirement for international capacity is projected to grow to more than 50Gbits over the next 10 years. Combined with disruption from inevitable cable cuts that can last for weeks while repairs are made, Benin will need access to adequate capacity on both cables, and available capacity will likely be fully utilized before This pattern of rapid increases in bandwidth use are expected to follow trends shown elsewhere on the continent such as in Kenya following the arrival of competitively priced international capacity. 5 The e-benin project is a Technical Assistance project without investment in Infrastructure. WARCIP Benin will complement this project by focusing on creating competition for access to international connectivity. 6 This will be through PPIAF support (application in early stages of preparation). The PPP law and related institutional framework will not be ready before the establishment of the SPV for the ACE landing. This operation will be managed by the existing company law, OHADA legal framework and will be guided by a number of PPP precedents in other sectors in Benin. 7 The large unused capacity is the result of the high prices charged - the price has been too high for many years which resulted in the low levels of consumption observed. This is all about moving from a high margin-low volume environment to a high-volume low-margin environment - the elasticity of demand with pricing is already shown in the examples from SAFE/SAT-3 in Annex 6. 3

18 10. The Africa Coast to Europe (ACE) cable represents a unique opportunity for Benin to meet existing and future demand for reliable and affordable capacity. BTSA, the incumbent government-owned operator, expressed interest to participate in the ACE cable during its early preparation but did not sign the Construction and Maintenance Agreement (CMA) on June 05, 2010 as the other members of the ACE consortium did. As BTSA was going through a privatization process and investment in new infrastructure was not possible, it negotiated with ACE the possibility to join the Consortium at a later stage. The CMA included the option for Benin to request admission as party to the Consortium after the effective date of the Agreement but no later than the Ready for Commercial Service (RFCS) date, planned for October During the last Management Committee meeting that took place in Dubai on January 7-10, 2012, BTSA made an official request to join the Consortium. The Management Committee accepted this request. As per article 35.7 of the CMA, the decision of the Management Committee to admit Benin under this paragraph is binding on all parties 8. However, because the cable laying activities have already passed Benin, this would necessitate some additional costs to bring the cable laying boat back to Cotonou. The boat will lay the additional cable to connect to the branching unit that has been left in anticipation of Benin s participation in the project. As a result, Benin s investment costs will be US$5 million higher than for the countries which participated initially WARCIP- Benin Project will address the key issues of limited and non competitive access to existing submarine cable in Benin. Benin is interested in obtaining support from the Bank to (i) finance its access to ACE similarly to the support given under WARCIP for Liberia, Sierra Leone, Gambia and Guinea and (ii) strengthen the regulatory framework to ensure improved access and lower prices of connectivity. These activities will have a strong regional impact. With two landlocked countries as neighbors Burkina Faso and Niger having Benin as the shortest route to the coast, Benin is in a position to supply international capacity to both, and to provide terrestrial transit facilities from Nigeria to the rest of West Africa. Benin is also well positioned to provide capacity to the carrier hotel 10 in Togo and possibly Mali, complementing support provided by the Bank under WARCIP 1B for Burkina and WARCIP 2 for Mali and Togo. 12. The World Bank has approved a Project Preparation Advance (PPA) to help Benin capitalize on the ACE opportunity. A PPA for US$3 million was granted to Benin to conduct limited initial Project implementation and urgent project preparatory activities to ensure 8 The actual landing date in Cotonou is not yet confirmed by ACE and will be negotiated between SPV and ACE after the signature of the CMA. It is expected that the landing will only happen after a first payment is made to ACE. This first payment is included under the PPA for 2.8 million. 9 In a Management letter issued by ACE to Benin Telecom in May 11, 2012 this cost was estimated at US$ subject to confirmation from supplier. 10 Carrier hotel, also called a collocation center is a secure physical site or building where data communications media converge and are interconnected. It is common for numerous telecommunications operators and service providers to share the facilities of a single carrier hotel. Co-location allows multiple customers to locate network, server, and storage gear and connect them to a variety of telecommunications and network service providers (ensuring neutrality towards any operator or service provider) with a minimum of cost and complexity. A carrier hotel provides collocation, offering various services to customers ranging from modest-sized racks to dedicated rooms or groups of rooms (offering herewith the appropriate environment to set up data centers). 4

19 improved international connectivity for Benin. Similarly to the approach taken for other ACE related projects, PPA resources will be used to cover the first installment to the ACE consortium for US$2.8 million. The remaining US$200,000 will be used to complement activities already started under the e-benin project for the establishment of the Special Purpose Vehicle (SPV) 11,for technical studies for redundancy between ACE and SAT-3, for studies related to capacity pricing, and for developing the Project Implementation Manual (PIM), disclosure and consultation on the Environmental and Social Management Plan (ESMP) and the Abbreviated Resettlement Action Plan (ARAP) for the project and covering the cost of management of the PPA by e-benin Project Implementation Unit (PIU). C. Higher Level Objectives to which the project Contributes 13. By improving connectivity, the project will support the GoB in achieving its vision and leveraging the sector as a key driver of growth, competitiveness, and improved governance. An improved and well-functioning ICT sector will play a key role in reinforcing the country s objectives of diversifying economic growth and increasing competitiveness, and in accelerating private sector-led growth. These goals are compatible with the Government s strategic plans to facilitate Benin s development into an emerging economy. Specifically, the proposed project supports two key pillars of the Bank s Country Assistance Strategy (CAS) for FY It supports directly pillar 1- Strengthening competitiveness and accelerating private sector-led growth (CAS outcome 1). The project also supports pillar 2 dealing with growthinducing infrastructure. 14. WARCIP Benin 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, 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 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. 15. Improving connectivity in Benin could accelerate the realization of an integrated regional ICT market. The AICD 12 report highlights the importance of regional integration, in particular for the smaller countries in the region which could each independently spend between 5-30 percent of their GDP on addressing infrastructure gaps, in contrast with 1 percent 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 11 An SPV composed of BTSA, private operators, Internet service providers and the government will be created to own, manage and maintain the landing station and related capacity from ACE cable. 12 AICD - ECOWAS Infrastructure: A Regional Perspective, July

20 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. 16. 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. 17. 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. 13 New businesses in the ICT and IT enable services sectors are supported by improved access to high-speed internet. More generally, the remarkable contribution of ICT to economic 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. II. PROJECT DEVELOPMENT OBJECTIVES (PDO) A. PDO 18. The PDO for WARCIP 1-C are to contribute to increase the geographical reach of broadband networks and to reduce the costs of communications services in the territory of the recipient The project has three main components with the ultimate aim being to enhance Benin s economic integration. The project proposes an integrated approach focusing on (i) the connection of Benin to global broadband fiber optics infrastructure, and (ii) creating an enabling environment, dealing with transactional issues related to the ACE cable and institutional strengthening to remove existing bottlenecks for private sector participation in both national and regional infrastructure development. 13 Word Bank - Information and Communications for Development 2009: Extending Reach and Increasing Impact. 14 This is the same PDO as the WARCIP Program and applies to all countries joining the program. In the specific case of Benin improving broadband access will be through financing a new cable (ACE) to ensure redundancy and reduce costs. 6

21 Project Beneficiaries 20. Direct beneficiaries of the project include people who are connected to the communications network in the Republic of Benin (including telecommunication services and internet users, schools, hospitals, banks, corporations, government and public administrations), to be measured as the number of active fixed and mobile subscribers 15. Indirect beneficiaries potentially include all of the country s population, since increased communications capabilities at affordable rates for some of the population may eventually have externalities for all. PDO Level Results Indicators Project Development Objectives (PDO) PDO for WARCIP 1-C are to contribute to increase the geographical reach of broadband networks and to reduce the costs of communications services in the territory of the recipient Core Outcome Indicators Sector Indicators* N International Communications (Internet, Telecoms, and Data) bandwidth per person in kbits per second Y Access to Internet Services per 100 inhabitants Y Access to Telephone services per 100 inhabitant Base line 2011 By the closing date N Average price of international communications using the proxy: Average monthly price of international capacity link (E1 or 2Mbps) from the capital city to Europe in US$ Y Project beneficiaries in million Number of direct project 40% beneficiaries of which Female % * Results Platform, CT: Telecommunications, Core Sector Indicators and Definitions, May 25, % III. PROJECT DESCRIPTION A. Project Components Component 1- Supporting Connectivity (US$30.5 million): 21. International connectivity. This component will finance the cost of the ACE membership and participation fee while the Government creates a PPP framework to own and manage the landing station. The Project will initially pre-finance the infrastructure and the private operators will pay the government back based on a payment schedule to be agreed. Given Benin s late adhesion to ACE, the membership fee is expected to cover the Branch Landing cost of US$25 million and the extra cost incurred by suppliers as a result of Benin's 15 Internet subscribers not accounted to avoid double counting 7

22 late signature of the CMA. Discussions with ACE indicate that the extra cost corresponds to boat operations (mobilization, transit and testing of connections to existent stations), the installation of new cards in the adjacent terminal stations, and commissioning tests. This additional cost amounts to US$5 million on top of the US$25 million for the Branch Landing GoB payment for ACE will be made on behalf of the SPV and partly reimbursed by the SPV s private participants before the project ends. Early project preparation reveals a strong interest from the private sector--both mobile operators and ISPs to participate in the SPV. The final shareholding will be defined with support of the PPP advisor. It is also expected that, similarly to Gambia and Guinea operations, the Government will cover the full cost of the ACE landing and will negotiate a payment plan with the private shareholders of the SPV. The initial shareholding approach includes participation from Benin Telecom (30%), private operators (51%). The remaining GoB s shares (19%) not subscribed by the private participants will be made available to new participants under a divestment plan. Original shareholders of the SPV could also be offered the opportunity to increase their shares and acquire additional capacity. Support is provided under the PPA for the establishment of the SPV. The GoB also considers using a part of its shares to provide capacity for operators in the neighboring countries. The final details of the shareholder structure will be included in the shareholder agreement under preparation Regional Connectivity through strengthening the regional links with neighboring countries. The project will support the Government to develop a feasibility study for connection between Benin and neighboring countries to commercialize excess capacity from ACE to less connected neighbors. The GoB is likely to complement International Development Association (IDA) resources for the purpose of creating redundancy links with neighboring countries. It is expected that the GoB will complement IDA resources for the purpose of additional regional broadband infrastructure by investing the proceeds from the sale of GoB shares in the SPV. The Islamic Development Bank (IsDB) is interested to finance those regional links as part of the ongoing ECOWAS Regional Backbone and E-Governance Project (ECOWAN). It is worth noting that the Benin Landing station is treated as an aggregate landing where Orange Niger is expected to get its capacity to ACE from Benin to Niger. Both Benin Telecom and Orange Niger are expected to conduct commercial negotiations to agree on fair and reasonable commercial terms for the use of the landing station and backhaul facilities from the Cotonou landing station to Benin-Niger border on fair and reasonable commercial terms. 18 Technical Assistance support is available through the project to support elaborate the contractual arrangements related to backhauling and facilitate discussions with donors to strengthen the links between Cotonou and Niger 19.Connectivity will also be strengthened through the IXP being funded by e-benin Project and expected to be operational by mid This additional cost applies only to Benin Branching Unit and will not have implications on the other members. 17 Direct payment to ACE will be handled by the PIU. 18 Letter from MC#9 to Benin Telecom , in project files 19 This support is included under component 2 of the project and could be initiated upon the request of BTSA 8

23 Component 2 - Creating an Enabling Environment for Connectivity (US$3.25 million). 24. This component will focus on (i) the transaction design and operating model for ownership and management of international, regional and national infrastructure using PPP frameworks including finalizing all legal documents related to the new SPV, discussion of transfer of CMA signatory rights and obligation from Benin Telecom to the new SPV and support to develop all legal and contractual instruments for connectivity with neighboring countries (ii) development of open access principles to create an enabling environment for improved connectivity 20 specifically through support to the regulator regulator to develop regulatory instruments for open access, including support for licensing the new SPV, and the wholesale regime for capacity pricing and other instruments to ensure open and non discriminatory access to ACE capacity and to ensure that the benefits of lower prices trickle down to end users on the retail level, and (iii) and Institutional strengthening to BTSA, to the SPV as well as to the Ministry and the regulatory authority. Component 3: Project Implementation (US$1.25 million). 25. This activity will provide support needed to strengthen the capacity of the Government to implement the connectivity project, including incremental cost for the e-benin PIU which will implement this project (cost of additional year of implementation as e-benin is expected to close one year before WARCIP- Benin, cost for an additional procurement assistant and an additional technical expert for the PIU). The component will also cover incremental operating costs, audits, communications, monitoring and evaluation (M&E), and environmental and social studies, including their implementation and/or the monitoring of their implementation. 20 Open access is broadly defined as an equal opportunity for operators to have unfettered access to given infrastructure or services under similar terms and conditions 9

24 B. Project Financing 26. Lending Instrument- Lending will be via an APL. The lending instrument is an APL. WARCIP-Benin is part of APL 1C of the regional WARCIP program. 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 21. Project Cost and Financing Table Activities Total (US$ million) Component 1: Improving Connectivity 30.5 Financing Participation in ACE 30.1 Regional Connectivity 0.4 Component 2: Enabling Environment for improved connectivity Finalizing PPP documents Open access Technical Redundancy study Training and capacity building Repositioning of Benin Telecom Support to divestiture of Government shares to operators in neighboring countries Initial Support to SPV ( lawyer, business management and initial set up, rehabilitation offices) Regulatory strengthening for regulatory authority Support to Ministry Component 3: Project implementation, communications, and M&E PIU set up, operating expenses Communications, M&E, environmental studies, audit Contingency Total Involvement of the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) in the operation has been considered. Some private operators or ISPs in Benin may approach IFC and/or MIGA for financing and/or for the provision of political risk insurance. 10

25 C. Program Objective and Phases 28. The proposed operation is the third phase of APL 1 of WARCIP that was approved on January 20, 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 22. 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) government commitment to increased sector competition as evidenced by pro-competitive policy and regulatory frameworks. Benin shows a strong commitment to opening the telecommunications market to competition and implementing sector reforms. 29. Benin meets the readiness triggers for joining WARCIP. Concerning triggers 1 and 3 related to sector reforms, liberalization and competition; the Government is currently engaged in significant sector reforms to implement its strategy in the sector through the e-benin project, an IDA project approved on March Reforms consist of the establishment of a permanent sector regulator, adoption of a new communications law, strengthening of regulatory capacity, adoption of a universal access policy and a broadband strategy, and the development of regulatory tools to improve broadband access (including a licensing framework, price regulation, and facility sharing regulations). These reforms are currently ongoing and expected to be adopted by The country is also actively pursuing the objective to significantly improve international, regional, and national connectivity in the coming years. The sector is already competitive with no legal monopoly on any segments of the market. In addition, the new licenses issued to the ISPs earlier this year guarantee their right to get their capacity from multiple sources and not exclusively through Benin Telecom. The Government is also quite advanced in meeting trigger 2 related to a PPP framework or willingness to formulate one as part of preparatory activities. In fact, commitment to a PPP framework and open access was endorsed by the country in the funding request for the WARCIP Project (letter included in project files) and communicated to the ACE consortium during the ACE Management Committee meeting in January 2012 (included in project files). This commitment has started to materialize already through the creation of a multi-stakeholder committee with participation of public and private operators to facilitate discussions about the creation a SPV to own and manage the landing station in Cotonou and the recruitment by the Government of a PPP advisor and a business plan consultant for the SPV, as well as through advanced dialogue between the Ministry of Communications and the private operators about their proposed shares in the SPV and their rights and obligations as shareholders in it. The WARCIP Benin project would provide additional support to Benin to implement the PPP and open access principles during project preparation, complementing ongoing support through the e-benin project. 22 APL 1-A was approved by the Board in January 2011 and focused on Liberia and Sierra Leone (coastal countries) whilst APL 1-B (approved in June 2011) focused on The Gambia and Guinea (coastal countries) as well as on Burkina Faso (landlocked country). 11

26 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 ongoing World Bank-financed projects in ICT and from ongoing efforts in countries in similar situations as Benin. Broad global experience in ICT project implementation indicates that an 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. GoB actively sought support from the Bank to cover the remaining payments to connect to the ACE cable, as neither the incumbent nor the GoB is in a position to cover the full cost without concessional financing. GoB 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 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, Benin 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. 32. There is a need for limited catalytic public funding for infrastructure to improve access to ICT. For most developing countries, a major obstacle to the adoption 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. Catalytic public funding for infrastructure development is justified in infrastructure market segments that fail to attract private investment. In this project, there were initial discussions about providing IDA funding for the total cost of international connectivity to ACE by providing funding to Benin Telecom. This approach was rejected in favor of seeking contribution from private operators and focusing efforts on project preparation to create a PPP framework. Emerging international best practice (e.g. Kenya, Tanzania, Rwanda and Uganda) indicates the best management structures for high capacity broadband backbone networks are on an "open" basis and under PPPs. Integrating the private sector brings access to private capital, reduced public sector operational risk, faster project deliveries, project management skills, entrepreneurship and innovation. 33. The project builds also on specific lessons learned in preparation of phase of WARCIP APL 1A and APL 1B as well as from CAB APL 2 and APL 4 and from CARCIP. The Bank has developed a good experience in coordinating and financing similar ICT projects in the 12

27 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 project which will leverage existing fiber and provide improved connectivity to the region. The Caribbean Infrastructure Program (CARCIP) is a US$98 million program submitted for Board approval. These experiences are being leveraged in the preparation of WARCIP Benin. Specific lessons include payment mechanisms for membership fees for the ACE submarine cable, safeguard issues related to landing stations, formulation of tailored PPP arrangements and open access principles and collaboration with Development Partners. Additional lessons related to implementation difficulties and limited capacity on FM, procurement and M&E functions witnessed in previous WARCIP phases have been taken into account in the design of WARCIP Benin. The use of an existent PIU with proven implementation capacity will allow a strong implementation of the project. 34. 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 submarine cable international connectivity projects, often led by private consortia, have attracted significant private capital, 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 (iv) WBG support systems not ideally suited for PPPs (procurement, legal, disbursement) Increasing efforts to improve Bank support but more needs to be done, and (v) Bank preparation and supervision budgets (primarily regional integration unit funding source) minimal and decreasing. Specific experience from earlier ACE related projects have 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 35. The project will be implemented by the existing e-benin PIU and supported by a focal point forum. E-Benin PIU was established in 2010 under the aegis of the Ministry of Communications and Information and Communications Technologies (MCICT). The PIU s procurement and financial management (FM) capacity are considered satisfactory to IDA, and its performance under the e-benin project is considered satisfactory. The additional workload under the WARCIP Benin project will be modest, given that most of the project s funds will be disbursed early on after effectiveness (US$30 million under direct disbursement to ACE). 13

28 Considering the complementarity of both operations, having one PIU manage both projects will facilitate coordination and free up limited resources. The PIU will be assisted by a project team called focal point forum, composed of representatives from Ministries of Telecommunications and of Finance (MoF), regulatory Authority, (Autorite Transitoire de Regulation de la Poste et des Telecommunications ATRPT) Benin Telecom and the private sector representing the SPV. The focal points 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 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 points 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 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 as the Ministry of Communications and 14

29 Information and Communications Technologies (MCICT), and the ATRPT, the benefits of the project are expected to last far beyond program completion. As such, capacity will 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 Rating Stakeholder Risk M Project Risk Operating Environment Risk - Design S - Country M - Social and Environmental M - Sector and Multi-Sector M - Program and Donor L - Delivery Monitoring and Implementing Agency Risk M Sustainability - Capacity L - Other (Optional) - Governance S - Other (Optional) - Fraud and Corruption (sub-category of S Governance) Overall Preparation Risk S Overall Implementation Risk M L - Low, M - Moderate, S Substantial, H High 15

30 B. Overall Risk Rating Explanation 41. The overall risk for preparation is rated S (substantial) based on country risks, difficulties of establishing a PPP framework and late acceptance of BTSA in the consortium. 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 e-benin project will allow for these risks to be contained and appropriate mitigation measures to be put in place. The overall risk for implementation is rated M (Moderate). The PPP model, although used in other countries participating in WARCIP, will be new to the telecom sector in Benin. Risks of delays by cautious stakeholders may affect the project s execution. However, operators are interested to replicate approach used in SPV for Gambia, Liberia and Guinea where shareholding in SPV is linked to direct access to capacity and to management of landing station. This model has been tested already in other countries participating in earlier phases of WARCIP. VI. APPRAISAL SUMMARY A. Economic and Financial Analyses 42. Additional routes to the global backbone are needed to meet existing and future demand for reliable and affordable capacity. Benin is currently dependent on a single submarine cable - SAT-3 - for its international capacity requirements. Therefore additional routes to the global backbone are needed to meet existing and future demand for reliable and affordable capacity. The two options for this are via terrestrial links to the landing stations of neighboring countries, and/or via an additional submarine cable and landing station in Benin. A terrestrial route by itself would result in dependence on a neighboring country as well as the extra cost of transit to the foreign landing station. In addition operators in Benin would simply be wholesale purchasers of capacity on existing submarine cables from other local operators with excess capacity, most probably on the West African Submarine Cable (WASC) or MainOne in Nigeria. 43. The investment in ACE for Benin will breakeven between 2017 and 2018, after which substantial revenues would be made if wholesale pricing levels are maintained. Connecting to ACE will see Benin breakeven before 2017 and 2018, depending on the wholesale price adopted, with an NPV to 2022 of US$90.5 million and an IRR of 44.5%, (assuming an average bandwidth sale price of US$80/Mbps/month), and an NPV US$62.3 million and an IRR of 38.4%, assuming US$60/Mbps/month wholesale price. For Benin, pricing capacity on ACE for traffic with Europe in the US$60-80/Mbps/month range is likely to be sustainable and would stimulate use 23. 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 projects would be cash-flow positive and substantial revenues would be made if these wholesale pricing levels are maintained It can be noted that the investment in the cable is a sunk cost that provides an initial fixed 5.9Gbps of bandwidth, so downstream prices can be reduced as much as possible to maximize use of this available capacity 24 Detailed information is available on Annex 6 16

31 44. 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 Benin 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 GoB. 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 45. 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 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. 46. The ACE consortium is deemed to be technically qualified and structured according to best practice in the industry. The team s assessment is that the ACE consortium is being structured in a manner consistent with international good practices in the industry, and is led by major industry players. Given the experience of key consortium members in designing, commissioning and operating submarine cables, the implementation risk is minimal. As with all cables, there is, however, a risk of breaks in the operational system. C. Financial Management 47. Financial management assessment has been carried out in accordance with the Financial Management Manual for World Bank Investment Lending Projects issued by the FM Sector Board on March 1, The objective of the assessment was to determine whether the implementing agency, the MCICT of Benin has acceptable financial management capacity for the project. The PIU of an ongoing IDA project under the aegis of the ministry (P e-benin) has been assigned the implementation of the new project activities. E-Benin is performing satisfactorily with two well experienced FM staff (a FM specialist and an accountant) using an adequate multi-projects accounting software. The project is complying with FM requirements such as timely submission of quarterly Interim Unaudited Financial Reports and annual audit reports 25 ; the latest external audit opinion was unqualified and there are currently no open accountability issues. The FM arrangements for WARCIP Benin will be 25 The audit reports and IFRs are current under ebenin project. 17

32 based on the existing arrangements under the e-benin project. With the existing project preparation advance, the multi-projects accounting software will be customized to fit the needs of the new project and a project financial, accounting and administrative manual will be finalized FM arrangements for the project satisfy the World Bank s minimum requirements under OP/BP10.02, and are adequate to ensure, with reasonable assurance, that the project funds will be used for intended purposes in an efficient and economical way, and to provide accurate and timely information on the status of the Project as required by the Bank. The overall fiduciary risk rating for the project is assessed as Moderate. D. Procurement 49. IDA funding for component 1 (a) on international connectivity does not go towards a procurable item subject to compliance with World Bank procurement guidelines. This is because such funding is for membership fees (paid in different installments) against a set of rights including use of a certain amount of capacity at preferred rates and a share of ownership of an indivisible cable infrastructure asset. 50. For other project components (component 1b, components 2 and 3), IDA procurement guidelines will apply and procurement activities will be carried out by the PIU. This PIU is already staffed by a Project Coordinator, a Procurement Specialist, a FM Specialist, an M&E Specialist and an accountant. 51. A procurement assessment has been carried out. An assessment of the capacity of the e- Benin PIU to implement procurement actions for the project has been carried out on March 21st, The assessment reviewed the organizational structure for implementing the project and found it satisfactory. The Procurement risk of the project is Moderate. Risks have been identified and mitigation measures agreed as detailed in Annex 3. E. Social and Environment 52. Environmental: The proposed project is rated as a Category B. Connection to the ACE cable is not expected to have significant environmental impact. 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). The implementation of the ACE project involves a sea relatively rich in marine biodiversity with the presence of several fish species and marine habitats and benthic species, including a whale breeding area during the months of August to October which may be disturbed by the project activities. The project may also affect physical cultural resources on land. While the main cables are to be placed in non-territorial, deep sea locations, OP/BP 7.50, Projects on International Waterways, does not apply. The types of waterways covered under the policy do not contemplate an open sea. For purposes of the policy, international waterways 26 Updating the Financial management manual is not treated as a legal covenant because the Project builds on good existing FM system already in place with the Implementing Agency. 18

33 include semi-enclosed coastal waters, closed seas, national rivers flowing into those waters, and transboundary groundwater The Environment impacts are likely to be short term and reversible. The Government Counterparts have prepared an Environment and Social Management Plan (ESMP) for the proposed project and in every case, mitigation measures have been designed to reduce the negative impacts. The ESMP has proposed practical methods of mitigating the impact during construction and operation (for example by not undertaking works during critical birthing/nesting times for whales and turtles, minimizing disruptions to natural cycles, and managing waste/spills), and it has been reviewed by the Bank and found satisfactory. The ESMP also includes guidance for avoiding cultural sites and managing any chance finds. An assessment of Implementing Agency s capacity concluded that it has adequate capacity to carry out the activities necessary to comply with the Bank s safeguards requirements. Due diligence was conducted to identify any potential environmental and social liabilities and found that GOB has acceptable environmental, health and safety policies in place with no potential environmental and social liabilities. The due diligence also found GOB is in compliance with relevant national environmental and social regulations and policies and other potential corporate reputational risks, and also confirmed that the proposed project will rapidly eliminate any bottlenecks in the development of global ICT system in the country. 54. The negative social impacts of the proposed project are in general manageable. No Indigenous Peoples, as defined by OP/BP 4.10, are present in, or are collectively attached to, the project areas. The project triggers OP/BP 4.12 on Involuntary Resettlement due to the potential impacts on people in the proposed project area. The route for the cable was chosen to minimize impacts on people. A total of 10 properties involving 6 project-affected people (PAPs), as well as some businesses and institutions, are affected by the project. The potential impacts of the land acquisition are relatively modest and can be summarized as follows: land acquisition at the landing station site which crosses public property; some damage to/demolition of public property (to accommodate ramps for Benin Telecom); loss or degradation of private property (kiosks, shops, house fronts, etc.); temporary loss of commercial revenue and crafts (including some SMEs and income-generating activities for local women); and temporary disruption of quality of life and businesses due to construction and/or temporary relocation. 55. With assistance from the e-benin PIU, the Ministry of Communications and Information Technologies, the implementing agency for the project, has prepared an Abbreviated Resettlement and Compensation Plan. This plan outlines the mechanisms in place to address compensation when needed. This includes cash compensation for lost property, temporary loss of business, and costs of moving kiosks. A grievance redress system is put in place to address any issues that may arise. Consultations took place with potentially affected people in Cotonou and their views have been integrated. An Abbreviated RAP (ARAP) has been prepared, consulted upon, and disclosed in-country and at the InfoShop on May 15, It should be noted that the definition of international waterways under the policy is at variance with the definitions under the rules established by the Institut de Droit and the International Law Association, as well as the United Nations Convention on the Law of the Non-Navigational Uses of International Waters Watercourses. 19

34 F. Effectiveness conditions and Covenants: 56. Effectiveness conditions (a) (b) (c) (d) (e) The SPV has been fully established and operational, in form and substance satisfactory to the Association, in the territory of the Recipient, including through the appointment of its director general and the adoption of its shareholders agreement and its by-laws. The execution and delivery of the Construction and Maintenance Agreement, on behalf of BTSA, in form and substance satisfactory to the Association and containing no prohibition of divestiture of the Recipient s shareholding, has been duly authorized or ratified by all necessary governmental or corporate action With BTSA s acquiescence, the ACE Consortium has transferred to the SPV all the rights and obligations of BTSA in the Construction and Maintenance Agreement and has fully substituted BTSA with the SPV as the member of the ACE Consortium. The Contractual Arrangement, in form and substance satisfactory to the Association, has been entered into between the Recipient and the SPV. The Recipient shall have adopted the Project Implementation Manual in form and substance satisfactory to the Association. 57. Legal covenants (a) (b) (c) To facilitate the carrying out of the international connectivity component of the Project, the Republic of Benin ( Recipient ) shall take all action required: (i) to ensure the proceeds of the Credit allocated from time to time to finance the Consortium Fee are transferred in an efficient and timely manner to the SPV; and (ii) to have in place a suitable legal framework to ensure the Credit is used for the intended purposes. To that end, the Recipient shall conclude a contractual arrangement ( Contractual Arrangement ) with the SPV whereby the Recipient shall, inter alia, transfer the proceeds of the Credit allocated for the Consortium Fee to the SPV, on a non-reimbursable basis, in consideration of the undertaking by the SPV that such amount shall be transferred by the SPV to the ACE Consortium for the purposes of payment of the membership and participation of the SPV in the ACE Consortium. The Recipient shall cause the SPV to take all action necessary on its behalf: (i) to carry out the ARAP with due diligence and efficiency and at all times provide the funds necessary therefor; (ii) to adequately monitor and evaluate the carrying out of the activities provided in the ARAP in the carrying out of the infrastructure partially financed through the Consortium Fee; and (iii) to maintain the Recipient and the Association suitably informed of the progress in the implementation of the ARAP through the information to be prepared and furnished to the Recipient pursuant to the provisions of the Contractual Arrangement. The Recipient shall cause the SPV to take all action necessary on its behalf: (ii) to carry out the ESMP with due diligence and efficiency; (ii) to ensure that the relevant mitigation and monitoring provisions of the ESMP are appropriately included in the works, goods and services contracts to be concluded for the infrastructure partially financed through the Consortium Fee and that they are implemented in the carrying out of said infrastructure; and (iii) to maintain the Recipient and the Association suitably informed of the progress 20

35 (d) (e) in the implementation of the ESMP through the information to be prepared and furnished to the Recipient pursuant to the provisions of the Contractual Arrangement. The Recipient, through its MCICT, shall ensure overall coordination, implementation and supervision of the Project is carried out by the PIU with due diligence and efficiency. To this end, the Recipient shall recruit for the PIU, not later than three months after the Effectiveness Date, a procurement assistant and a telecommunications engineer, all under terms of reference and with qualifications and experience satisfactory to the Association. The Recipient shall: (i) prepare, under terms of reference satisfactory to the Association, and furnish to the Association, on or about November 24, 2014, a report integrating the results of the monitoring and evaluation activities under the Project; and (ii) review with the Association, on or about January 12, 2015, or such later date as the Association shall request, the said report and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Association s views on the matter. 21

36 Annex 1: Results Framework and Monitoring Annex 1: Results Framework and Monitoring.. Country: Africa Project Name: WARCIP APL 1C - Benin (P130184) Results Framework. Project Development Objectives. PDO Statement The project development objectives for WARCIP 1-C are to contribute to increase geographical reach of broadband networks and to reduce the costs of communications services in the territory of the recipient. Project Development Objective Indicators Indicator Name Core Unit of Measure Volume of international traffic: International Communications (Internet, Telecoms, and Data) bandwidth per person Access to Internet Services (number of subscribers per 100 people) Access to Telephone Services (fixed mainlines plus cellular phones per 100 people) average monthly price of wholesale international E1 capacity link from capital city to Europe Direct project beneficiaries Kbits per second per person Baseline (2011) Cumulative Target Values Data Source/ Responsibility for YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection months Operators ATRPT and PIU ratio months operators ATRPT and PIU ratio months operators ATRPT and PIU Amount(USD) per month 2 Mbps Number (% female Beneficiaries) yearly operators ATRPT and PIU Annual Survey ATRPT-PIU 22

37 Female Percentage. Intermediate Results Indicators Indicator Name Core Unit of Measure Volume of available international capacity: International Communications (Internet, Voice) bandwidth Retail Price of Internet Services (per Mbit/s per Month, in US$) Impact on Telecom sector of World Bank Technical Assistance ( Average monthly price of wholesale international E1 capacity link from Landing station to Niamey Baseline (2011) Cumulative Target Values Data Source/ Responsibility for YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection Gbit/s yearly SPV ATRPT-PIU USD) per Mbit/s per Month, in US$) composite score: 1- low impact to 5-high impact) (USD)/Month/ 2 mbps yearly operators ATRPT-PIU months stakeholders PIU yearly operators ATRPT and PIU. 23

38 Annex 2: Detailed Project Description WARCIP-BENIN 1. Similarly to the previously approved APL 1A and B, WARCIP 1C Benin Project 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$30.5 million) 2. The connectivity component will focus primarily on supporting Benin to have access to the ACE submarine cable. A small regional connectivity component is also added to look at strengthening links with neighboring countries. A. International connectivity: US$30.1 million 3. Benin has a submarine landing station already SAT-3 but pricing and lack of redundancy mean that the country needs a second, higher capacity international link, to improve reliability and to service anticipated increased demand from the growing number of operators in the recently liberalized market. The two options for this are via terrestrial links to the landing stations of neighboring countries, and/or via an additional submarine cable and landing station in Benin. A terrestrial route by itself would result in dependence on a neighboring country as well as the extra cost of installing transit to the foreign landing station. 4. The opportunity to participate as a landing party in the ACE submarine cable offers Benin the chance to obtain direct access to international capacity at substantially lower prices than it would otherwise be able to obtain under the terrestrial link option, whereby operators in Benin would be wholesale purchasers of capacity on existing submarine cables from other local operators with excess capacity, most probably on WACS or MainOne in Nigeria. Given that worldwide, demand for affordable bandwidth continues to exceed supply, and that Burkina Faso and Niger also require alternate sources of international capacity that could be delivered most directly via Benin, there is a strong case for the added capacity, as long as the national backbones and cross-border links can be strengthened to deliver the wholesale bandwidth where it is needed at a competitive price. 5. Providing new and much needed international connectivity to Benin via ACE will substantially reduce the cost of international connectivity, increase capacity and provide more effective redundancy. The ACE submarine cable is expected to connect Europe with 12 countries along the West African coast (Mauritania, Senegal, Gambia, Guinea, Sierra Leone, Liberia, Côte d'ivoire, Ghana, Nigeria, Equatorial Guinea, Gabon, Sao Tomé), of which 6 have already mobilized World Bank financing to join ACE (Liberia and Sierra Leone under WARCIP 1A approved by the Board on January 20, 2011), STP under APL2 of CAB program on January 12th, 2011, The Gambia and Guinea under WARCIP 1-B approved by the Board on June 21, 2011) and Gabon under APL 4 of CAB, approved on March 25, The ACE consortium agreed also to install a Branching Unit off the coast of Tenerife, Benin and Cameroon. The submarine cable has been laid in international and territorial waters between June and December 2011, starting with the segment France/Senegal, followed by Senegal/Ivory Coast and finally Ivory Coast/STP. In each country, a landing station has been built close to the shore to connect 24

39 the submarine cable with terrestrial networks. It is expected that the ACE submarine cable will be ready for service in September/October 2012 for the initial landing parties. 6. Given Benin s late adhesion to ACE, the membership fee is expected to cover the Branch Landing cost of US$25 million and the extra cost incurred by suppliers as a result of Benin's late signature of the CMA. Discussions with ACE indicate that the extra cost corresponds to boat operations (mobilization, transit and testing with other stations), the installation of new cards in the adjacent terminal stations, and commissioning tests. This roughly amounts to US$5 million on top of the US$25 million for the Branch Landing. It is important to note that ACE will not charge Benin a risk premium for its late entry. 7. As a party to the CMA to ACE, Benin will obtain a fixed ownership percentage and an allocated capacity (based on kilometers and branch capacity) at a fixed price. At this point in time, it is estimated that for a single landing station, each country will obtain approximately 2.8 percent of the capacity at a cost of approximately US$30 million. Figure 2.1: Overview of the ACE submarine cable Source: ACE 25

40 8. According to the ACE CMA, consortium fees of US$25 million are to be paid in 8 installments between July 2010 and June In the case of Benin- given late adhesion- the agreed payment milestone will include (i) an initial payment of US$2.8 million under the PPA to be made by end of June and (ii) payment of the remaining balance in 1 or 2 installments after effectiveness. 9. During the Dubai Management Meeting of ACE, Benin Telecom made its official request to join ACE as an initial partner to be substituted by the SPV currently under creation. ACE consortium is currently working on the amendment of the CMA to include BTSA as a landing party and include the SPV from Benin to facilitate the substitution. The amendment was sent to BTSA on May 31, 2012 and is expected to be signed by all parties by end of June Benin Landing station will be an aggregated station serving both Benin SPV and Orange Niger. Discussions are ongoing between BTSA and Orange Niger on technical and commercial arrangements for use of landing station and backhaul facilities. 10. As with previous WARCIP ACE related projects in Liberia, Sierra Leone, The Gambia and Guinea, the Bank will finance the cost of the ACE membership fee while the government creates a PPP framework to own and manage the landing station. The government would initially prefinance the infrastructure and the private operators would pay the government back based on a payment schedule to be agreed. 11. Early project preparation reveals a strong interest from the private sector--both mobile operators and ISPs to participate in the SPV. The final shareholding will be defined with support of the PPP advisor. It is also expected that, similarly to Gambia and Guinea operations, the Government will cover the full cost of the ACE landing and will negotiate a payment plan with the private shareholder of the SPV. Possible use of proceeds from private participants will be agreed with Government during project preparation. The remaining GoB shares will be made available to other parties under a divestment plan. The initial shareholding structure includes participation from BTSA (30 percent), Private operators (51 percent) and Government (19 percent). 12. The GoB intends to divest its remaining shares to operators in neighboring countries. This divestment approach will be supported by the project. BTSA is also interested to service neighboring countries using the same business model developed to provide SAT 3 capacity to the operators in neighboring countries. B. Regional connectivity ( US$0.4 million) 13. The GoB is interested in taking advantage of the additional capacity from ACE to strengthen the position of Benin as a regional connectivity hub, providing access to neighboring countries. The Government is contemplating different approaches for this cross border collaboration including (i) inviting governments/operators to be initial shareholder of the SPV, (ii) inviting interested parties to acquire Government shares in SPV during a divestiture approach to be facilitated by the project, (iii) concluding IRUs arrangements with interested operators. 14. In order to create more demand for the capacity and ensure better connection to its neighbors, GoB intends to use part of the funding under this component to undertake a detailed feasibility study to strengthen terrestrial connectivity with Niger as well as with Northern Nigeria, Togo 26

41 and Burkina Faso. The study will identify finding needs as well as business plan for financing and managing the link with possible financing from other partners. The IsDB has already expressed a strong interest to finance the link as part of its ECOWAN project and to work with the Bank on PPP arrangements and open access principles or the cross border link(s). Other donors could also be invited to participate in co financing the regional links. 15. In the case of Benin, regional connectivity component will also benefit from the roll out of backbone infrastructure to link 77 communes being funded by a CMC grant as well as from the Internet exchange point being funded under e-benin project. The IXP includes the hosting of shared time-servers, local Domain Name Servers and caching servers. A fully functional Internet Exchange will help Benin to exchange traffic locally, and avoid paying high bandwidth prices. Component 2 - Creating an enabling environment for connectivity (US$3.250 million): 16. This component will focus on (i) the transaction design and operating model for ownership and management of international, regional and national infrastructure using PPP frameworks, (ii) related open access principles to create an enabling environment for improved connectivity28 and (iii) strengthening of policymaking and regulatory functions in Benin. The funding requirements for this component will not be significant as a number of activities are already included under the enabling environment component of the e-benin Project. WARCIP Benin will complement this support with particular attention on the following: (i) (ii) Finalizing the transactional design for the SPV: Under the e-benin project consultants have been hired to develop the business plan for the ACE landing, taking into account that ACE will be the second cable in the country, and to develop the PPP framework for the landing station. Support under the project will focus on finalizing all legal documents related to the new SPV, discussion of transfer of CMA signatory rights and obligation from Benin Telecom to the new SPV, and support to develop all legal and contractual instruments for the SPV. Under this activity, support will be provided to facilitate negotiations with operators in landlocked countries and development of IRU agreements or any other legal documents to secure access to capacity by neighboring countries. This component will also support the Government with divestiture of its shares to operators in neighboring countries. 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 licensing the new SPV, and the wholesale regime for capacity pricing and other instruments to ensure open and non discriminatory access to ACE capacity and regional links. Support will also be given to the regulator to ensure that the benefits of connectivity translate into lower retail prices to end users. The project will also provide technical and regulatory support to ensure redundancy between ACE and SAT-3. The project will also provide support to the Government to reposition Benin Telecom in the market. 28 Open access is broadly defined as an equal opportunity for operators to have unfettered access to given infrastructure or services under similar terms and conditions 27

42 (iii) Institutional strengthening: Institutional strengthening support will be offered to (i) BTSA to support repositioning BTSA as a carrier s carrier, (ii) Regulatory Authority to strengthen its capacity in regulating the sector including support with issuing additional 3G licenses, (iii) the Ministry of Communications and Information Technologies to support its policy making function, looking in particular at human capacity in ICT sectors and positioning Benin as an outsourcing destination taking advantage of the capacity that will be available from ACE. This activity could also support the Ministry in the use of proceeds from divestment and (iv) initial support to the SPV. Initial support to the SPV will include the rehabilitation of its offices and the financing of other immediate costs related to its set up as well as to hire a local legal expert to help with the legal paperwork related to the SPV. The project will also support the SPV to identify a Management entity for the landing station on behalf of the SPV shareholders. Component 3: Project Implementation (US$1.25 million) 17. This activity will provide support needed to strengthen the capacity of the Government to implement the connectivity project, including incremental cost for the e-benin PIU which will implement this project (cost of additional year of implementation as e-benin is expected to close one year before WARCIP- Benin, cost for an additional procurement assistant and an additional technical expert for the PIU). Communications and M&E support. The M&E staff for e-benin PIU will provide support to M&E activities for WARCIP Benin. More specifically, the person responsible for M&E will liaise with all the project s stakeholders (through designated focal points) to gather relevant information and data regularly. Additional activities would include conducting the surveys to ensure a good monitoring and evaluation of the project. The project will also cover the costs related to communications strategy for the project and implementation of the strategy to reach out to the public and increase awareness of the project. 18. This activity includes funding and disclosure of environmental studies prior to appraisal of the project. Specifically an ESMP and an ARAP. It also includes activities related to monitoring and implementation of the said instruments. 28

43 Annex 3: Implementation Arrangements I. Project administration mechanisms 1. The proposed project will be implemented under the aegis of the MCICT. Implementation arrangements involve using e-benin PIU. The PIU will be supported by five Focal Points. The PIU will be headed by the e-benin Project Coordinator who will report directly to the Chief of Staff of the MCICT. Figure 3.1: Implementation arrangements Chief of STaff MCICT Project Implementation Unit ATRPT Focal Point CAA Focal Point DGCEP Focal Point BTSA Focal Point Private sector Focal Point 2. The PIU will be composed of A project coordinator A procurement specialist and procurement assistant A FM specialist An accountant An M&E Specialist A telecom engineer Support staff 29

44 All PIU members have already been hired under e-benin. The project will hire the procurement assistant and a telecom engineer not later than three months after the effective date of the Financing Agreement. 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 PPF. 4. The PIU will be assisted by a task team composed of five focal points. The focal points will be appointed by the Minister upon recommendation of different agencies/departments as follows: o Focal point recommended by the Minister on issues related to policy matters; o Focal point designated by the regulatory authority on regulatory issues. o Focal point from CAA for public participation in PPP o Focal point from BTSA for issues related to support to BTSA o Focal point from private sector in the SPV 5. The focal point will be responsible for initiating activities related to their respective components, including developing Terms of Reference (ToR) and draft procurement documents, and will be the focal points for monitoring progress of their components and for collecting and updating indicators for the components they manage. 30

45 II. Financial Management, Disbursements and Procurement A. Financial Management Budgeting 6. The budgeting process and monitoring will be clearly defined in the FM Manual. The budget will be adopted by the project before the beginning of each calendar year and the execution will be monitored on a quarterly basis. Annual draft budgets will be submitted to the Bank s non objection before adoption and implementation. Funds Flow and Disbursement arrangements 7. The Caisse Autonome d'amortissement (CAA) is the assigned representative of the Recipient for the mobilization of IDA funds. Withdrawal Application requests will be prepared by the project financial management 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. This procedure applies to all Bank financed projects in Benin. The authorized signatory letter should include the Recipient s authorization to use electronic submission of applications using edisbursements accessible via the Bank s Client Connection website. 8. Funds will flow from the Credit Account through a Designated Account (DA) to be opened at the Central Bank of Benin (BCEAO). The ceiling for the DA will be set to CFAF 500 million which represents the equivalent of four months of the project cash flow need expected to be paid from the DA. The funds would be further advanced to an Operational Account to be opened in a reputable commercial bank. The accounts are set up to fund eligible expenditures based on the approved annual activity plans. 9. The table below sets out the expenditure categories to be financed out of the credit proceeds. Category 1 (1) Consortium Fees under Part 1.1 of the Project 2 (2) Goods, works, consultants services, training and Operational Costs under Parts 1.2, 2 and 3 of the Project Amount of the Credit Allocated (expressed in US$) Amounts of the Credit Allocated (Expressed in SDR) Percentage of Expenditures to be Financed (inclusive of Taxes) 27,300,000 18,100, % 4,700,000 3,100, % (3) Refund of Preparation Advance No. Q810-BJ TOTAL AMOUNT 35,000,000 23,200,000 3,000,000 2,000,000 Amount payable pursuant to Section 2.07 of the General Conditions 31

46 Disbursement methods and processes 10. Disbursements under the project would be transactions based after an initial advance, equivalent to four months cash forecast for expenditures expected to be paid from the DA, is made. Various other disbursement methods will be available for use under the project, i.e., direct payment, reimbursement and special commitment methods. Disbursements under component 1.1 will be made using the direct payment method similar to the mechanism followed under all other ACE-related Bank-financed projects. Further instructions on the withdrawal of proceeds will be outlined in the disbursement letter. The project will submit on a monthly basis a Bank statement and a reconciliation of the DA, together with the withdrawal applications. All supporting documentation for Statement of Expenditures (SOEs) will be retained at the PIU and must be made available for periodic review by Bank missions and external auditors. The project includes the possibility of retroactive financing for both disbursement categories an aggregate amount not to exceed SDR 2,500,000 (US$ 3,750,000 equivalent) for payments made prior by the Recipient on or after January 1, 2012 but prior to the date of the FA, including as necessary to finance the first installment of the Consortium Fee. Reporting and accounting 11. Quarterly Interim Un-audited Financial Reports (IFRs) would be prepared by the project FM Specialist. The project will submit copies of the IFRs to the Bank within 45 days following the end the quarter. 12. Financial Statements for the project will comply with the accounting standards (SYSCOHADA). SYSCOHADA is the assigned accounting system in West African Francophone countries. Project accounts will be maintained on a cash basis, supported with appropriate records and procedures to track commitments and to safeguard assets. Audit arrangements 13. The supreme audit institution SAI (Chambre des Comptes) which is supposed to audit all public funds has a limited capacity in terms of staffing and experience of auditing project financial statements. In view of this, it was agreed that external independent and qualified private sector auditor will be recruited to carry out the audit of the project s financial statements under the supervision of the supreme audit institution. The contract of the external auditor operating under the e-benin project will be amended to include the WARCIP activities. 14. 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. 15. Internal audit functions will be handled by MCICT s internal audit department, in conformity with the 2006 decree regulating internal audit. Internal controls will be organized through the FM manual and will include the appropriate segregation of duties and responsibilities. FM implementation Support 32

47 16. 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. Implementation Support Plan Based on the outcome of the FM risk assessment, the 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 Audit report review of the program Review of other relevant information such as interim internal control systems reports. On site visits Review of overall operation of the FM system Monitoring of actions taken on issues highlighted in audit reports, auditors management letters, internal audit and other reports Transaction reviews (if needed) Capacity building support FM training sessions Frequency Quarterly Annually Continuous as they become available One time by year (Implementation Support Mission) As needed As needed During implementation and as and when needed. B. Procurement a. General 17. Procurement for Parts 1b, 2 and 3 of the proposed project will be carried out in accordance with the Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers dated January 2011; and Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers dated January The general description of various items under different expenditure category is described below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 33

48 18. The procurement will be carried out using the Bank s Standard Bidding Documents or Standard RFP respectively for all ICB for goods and recruitment of consultants. For National Competitive Bidding (NCB), the Borrower could submit a sample form of bidding documents to the Bank prior review and will use this type of document throughout the project once agreed upon. The Sample Form of Evaluation Reports developed by the Bank, will be used. 19. Procurement of Works: Works procured under this project would include small civil works forthe rehabilitation of the SPV s office. No high value contract on civil works is expected to be financed under this project. 20. Procurement of Goods: Goods procured under this project would include and are not limited to: o Telecommunication equipment and accessories, vehicles, Internet connectivity, office furniture, office equipment (Office Space for WARCIP PIU and the SPV) o Most of the contracts are of small value and therefore International Competitive Bidding (ICB) method is very limited. Contracts estimated to cost less than US$300,000 equivalent may be procured through NCB. Contracts estimated to cost less than US$50,000 equivalent may be procured through shopping procedures as per paragraph 3.5 of the Procurement Guidelines. 21. Procurement of non-consulting services: Expenses related to office maintenance for the WARCIP PIU and equipment maintenance, will be procured under contracts of small value obtaining price quotations from suppliers or contractors. 22. Selection of Consultants: Consulting services will include but are not limited to (i) selection of an Advisor to optimize the governance, ownership and financing issues related to the operation of the landing station and provision of networks and services emanating from the ACE Cable, ii) Selection of an Investment Bank to support implementation of ownership and management of landing station including implementation of divestiture strategy for Government shareholding, iii) Legal and regulatory due diligence, safeguards for open access, iv) feasibility study for regional links, v) technical study for redundancy, vi) environmental Studies, vii) repositioning Benin Telecom, viii) recruitment of procurement assistant and telecom engineer for the PIU, ix) preparation of the Project s operation manual, x) financial audits. 23. Consultant firms will be selected through the following methods: (a) Quality and Cost Based Selection (QCBS); (b) selection based on the Consultant s Qualification (CQS) for contracts which amount are less than US$100,000 equivalent; (c) Least Cost Selection (LCS); and (d) Single Source Selection (SSS). Individual Consultant (IC) will be hired in accordance with section V of Consultants Guidelines. Short lists of consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 24. Operational Costs: these costs may include office furniture, office maintenance, equipment maintenance and cost related to the project coordination needs; they are either goods or services and they may be procured using the procedures similar to those stipulated in paragraph 3.5 of the Procurement Guidelines (shopping), which shall be described in the Project operational manual. 25. Training (including courses, workshops,, and technical assistance): These activities will be carried out based on approved annual plan. Prior to initiating the process, the project shall provided for IDA review and approval, a detailed plan with nature of activities, number of participants, 34

49 duration, staff months, timing, estimated cost and selection. After the training, the beneficiaries will be requested to submit a brief report indicating what skill have been acquired and how these skills will contribute to enhance his performance and contribute to the attainment of the project objective. b. Assessment of the agency s capacity to implement procurement 26. IDA funding for component 1 (a) on international connectivity does not go towards a procurable item subject to compliance with World Bank procurement guidelines. This is because such funding is for membership fees (paid in different installments) against a set of rights including use of a certain amount of capacity at preferred rates and a share of ownership of an indivisible cable infrastructure asset. 27. For other project components (1 b, components 2 and 3), IDA procurement guidelines will apply and Procurement activities will be carried out by the PIU of e-benin Project. An assessment of the capacity of the PIU to implement procurement actions for the project has been carried out. The PIU has experience of implementation of project financed by World Bank (P11370 ongoing project). The PIU is staffed by a Project Coordinator, a Procurement Specialist, a FM Specialist, a M&E specialist and an accountant. The procurement specialist is qualified and has both the technical expertise and the experience necessary to carry out the procurement activities envisaged under the project and has been recruited on a competitive basis. The additional work for WARCIP will make the procurement specialist work overtime. A procurement Assistant will be hired for two years to help the procurement officer. Risks and Mitigation measures: 28. In view of (i) the experience of the PIU in carrying out procurement activities for e-benin Project and (ii) the qualified Procurement Officer, the overall project procurement risk has been rated moderate. The following measures were agreed to mitigate the remaining risks plan. Table 1: Project Preparation Action Plan Task Completion Intermediate milestones Responsibility 1. Submit to the Bank the first s 18 Draft shared with IDA in month procurement plan Before negotiations April 2012 PIU 2. Recruit a Procurement Assistant for TORS approved in May Before effectiveness two years 2012 PIU 3. Prepare the procurement section of Selection of consultant by Before effectiveness operational manual July 2012 PIU 4. Prepare procurement section of Selection of consultant by Before effectiveness project s procedures Manual July 2012 PIU a. Procurement Plan 29. The Borrower, has developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan was reviewed by the Bank and approved during appraisal on May The procurement plan will be made available in the Project s database at the office of the PIU and at the Bank s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 35

50 b. Frequency of Procurement Supervision 30. Bank s prior and post reviews will be carried out on basis of review thresholds indicated in the following table. The Bank will conduct six-monthly supervision mission and annual Post Procurement Review (PPR); the ratio of post review is at least 1 to 5 contracts. The Bank could also conduct an Independent Procurement Review (IPR) at any time until two years of the closing date of the project. Table 2 : Procurement and selection review thresholds Procurement/Selection methods 1. Goods and non-consulting services Prior Review Threshold (US$) Comments ICB NCB Shopping Direct Contracting 2. Consulting services QCBS 200,000 LCS 200,000 CQS (for contracts $US100,000) IC SSS 3. Trainings Training (including courses, workshops and other technical assistance) Review of the first two contracts independently of amount N/A Review of the first two contracts independently of amount N/A Review of the first two contracts independently of amount All contracts All contracts 50, ,000 With review of the first two contracts independently of amount With review of the first two contracts independently of amount With review of the first two contracts independently of amount With review of the first two contracts and other contracts choose on case by case basis independently of amount All contracts Review of all contracts 5,000 On basis of detailed and approved annual plan (with indication of venue, number of participants, duration and exhaustive budget, etc.) 31. All trainings, terms of reference of contracts estimated to cost more than US$5,000, and all amendments of contracts raising the initial contract value by more than 15 percent of 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. 36

51 Details of the Procurement Arrangement List of contract Packages for Goods and non-consulting services Ref. No. Contract (Description) Estimate d Cost US$ Procuremen t Method Prequalificatio n (yes/no) Comments PROJECT IMPLEMENTATION, COMMUNICATIONS AND M & E 1 Vehicle (Station Wagon 4WD) for the PIU 2 Office Equipment and Furniture for PIU 3 Office Furniture for the SPV 4 Office Equipment for the SPV 5 IT Equipment for the SPV Office 5 Internet & Telecommunicatio n Connectivity for the SPV 6 Office Supplies for the PIU Domestic Preferenc e (yes/no) Revie w by Bank (Prior / Post) 70, NCB NO NO Prior Review 20, Shopping NO NO Prior Review 30, Shopping NO NO Prior Review 30, Shopping NO NO Post Review 30, Shopping NO NO Post Review 35, Shopping NO NO Post Review 2, Shopping NO NO Prior Review Expected Bid- Opening Date 11/24/ /18/ /19/ /05/ /05/ /5/ /20/201 2 Additional equipment for the technical expert and the procuremen t assistant Works Ref. No. Contract Description Procurement Method Comments Estimated Cost US$ Prequalification (yes/no) PROJECT IMPLEMENTATION, COMMUNICATIONS AND M & E Domestic Preference (yes/no) Review by Bank (Prior / Post) Expected Bid- Opening Date 1 Rehabilitatio n of the SPV office 200, NCB NO Prior Review 11/24/

52 Consultancy Assignments with Selection Methods and Time Schedule Ref Description of Assignment Estimated CostUS$ Selection Method Comments SUPPORTING CONNECTIVITY 1 Feasibility study for improved connectivity to neighboring countries Review by Bank (Prior / Post) 500, QCBS Prior Review ENABLING ENVIRONMENT 1 Open Access Study 500, QCBS Prior Review 2 Technical Study on PPP 200, QCBS Prior Review 3 Legal Advisor for the SPV (4yrs) 150, IC Post Review 4 Study for the Repositioning of BT 500, QCBS Prior S.A. Review 5 Support for the Divestiture of 350, QCBS Prior Government shares in the SPV Review 6 Support to identify management 200, QCBS Prior approaches for SPV options Review 7 Technical Study for the 50, IC Prior Redundancy Review 8 Legal Advisor to finalize PPP 75, IC Prior Contractual Agreement Review PROJECT IMPLEMENTATION, COMMUNICATIONS AND M & E 1 External Auditor (exercise 2012 & 12, Direct Prior 2013) Contracting Review 2 Update of the Project 10, Direct Prior Administration, Accounting and Contracting Review Financial Management Manual 3 Project Implementation Manual (Individual Consultant) 4 Telecom Engineer, One Assistant SPM 5 Update of the M&E Software 4, Direct Contracting 10, Direct Contracting Prior Review 15,000.00` IC Prior Review Prior Review Expected Proposals Submission Date 1/9/2013 2/8/2013 1/24/ /24/2012 3/11/2013 3/26/2013 3/26/2013 7/29/2012 Under the PPA 7/29/2012 Under the PPA 7/10/2012 6/9/2012 Under the PPA 6/9/2012 Under the PPA 8/13/2012 Under the PPA 6/24/2012 Under the PPA 38

53 Implementing Agency Capacity Building Activities with Time Schedule Ref Activity Description Estimated CostUS$ Review by Bank (Prior / Estimated Duration Start Date Comments 1 Study tours for Cable Redundancy and discussion with neighboring countries Post) 40, Prior Review 2 WARCIP Benin project s Launch 12, Prior Review 3 Workshop WARCIP Benin 10, Prior Activities Planning Review 4 Workshop : M&E Planning 10, Prior Update Review 5 Training: Submarine Cable 40, Prior Maintenance and Exploitation Review 6 Participation to ACE meeting 10, Prior Review 7 Workshop: Landing of the Sub- Marine Cable 10, Prior Review 5 days Nov Ministries, PIU, BTSA 97 participants) 2 trips 3 days Oct Ministries, PIU, 2 days Oct Ministries, PIU 2 days Nov Ministries, PIU 5 days Dec. Five ACE members days Mai 2012 Under the PPA Ministries, PIU, BTSA (7 participants) for 1 trip 1 day Mai 2012 Under the PPA - Communication to the Ministries, Members of Parliament, PIU and BTSA 32. 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. III. Environmental and Social safeguards 33. The proposed project is rated as a Category B. Connection to the ACE cable is not expected to have significant environmental impact. The Environmental and Social 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). The implementation of the ACE project involves a sea relatively rich in marine biodiversity with the presence of several fish species and marine habitats and benthic species including a whale breeding area during the months of (August to October) which may be disturbed by the project activities. 39

54 34. The physical cable system will comprise two fiber pairs that provide two separate bidirectional paths (i.e., one fiber in each pair carries signals in the outbound direction and the other fiber in the return or inbound direction). The cable system is likely to have a submerged or wet plant part, and a dry plant part which interfaces at proposed Landing Stations. Safeguards for Deep Sea 29 Activities 35. Deep ocean fiber optic cables are no larger than mm diameter about the size of a domestic garden hose- and are laid mainly upon the surface of the ocean floor ( surface laid ). Sections of the cable (including both wet and dry plants) lie within the territorial waters of the landing parties while remaining sections lie in the exclusive economic zones of such states. All states concerned are parties to the 1982 United Nations Convention on the Law of the Sea (UNCLOS), and have declared exclusive economic zones of 200 miles. In the exclusive economic zones, states have no sovereign rights but can enforce laws on pollution, taxation, customs and immigration (see figure 3.2, below). Within their territorial waters, on the other hand, countries have sovereign rights. Foreign nations have the freedom of laying submarine pipes and cables in the exclusive economic zones. Figure 3.2 Designated ocean zones according to UNCLOS. 29 "Deep Sea", as used here, describes areas beyond which cable burial is not required (mainly because threats to the cable from trawling activities are nonexisting). This starts usually after 1000/ 1500 meters depth. 40