INFORMATION INFRASTRUCTURErg.edu.rs/docs/ProfesorskaTribina/information_infrastructure.pdf · The...

INFORMATIONINFRASTRUCTURE The World Bank Group’s ExperienceA Joint Operations Evaluation Department—Operations Evaluation Group Review

Alain Barbu

Rafael Dominguez

William Melody

2001International Finance Corporation

Washington, D.C.

The World BankWashington, D.C.

W O R L D B A N K O P E R A T I O N S E V A L U A T I O N D E P A R T M E N T

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I F C O P E R A T I O N S E V A L U A T I O N G R O U P

Copyright © 2001

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v Acknowledgmentsvii Forewordxi Executive Summaryxxvii Abbreviations and Acronyms

1 1. Introduction1 Study Objectives and Rationale1 Study Scope and Methods

3 2. Overview of Bank Group Assistance by Sector3 Recent Sector Developments4 Implications for the Bank Group’s Development and Poverty Reduction Agenda4 Bank Assistance in the 1990s9 IFC Assistance Since 1993

13 3. Project and Sector Outcomes13 Efficacy of Bank Telecommunications Projects—Performance and Outcomes19 IFC Projects—Outcomes and Performance22 Main Lessons from Bank Group Project Experience23 Sector Outcomes28 Relevance of Bank Group Interventions in the 1990s

31 4. Outstanding Policy and Strategic Issues31 Rural and Universal Access32 Holistic Approach to Information Infrastructure Issues33 World Bank Group Coordination

37 5. Conclusions and Recommendations37 Successful Projects but Variable Sector Impact38 An Enhanced Focus on Institutional Reforms39 Neglected Institutional Options39 Toward an Integrated Approach to Information Infrastructure Development39 Selecting Bank Group Instruments40 Research Capacity and Application of Research Knowledge40 Recommendations

Annexes43 Annex A: IFC Evaluation Framework and Criteria

Attachment A.1: Definition of Framework TerminologyAttachment A.2: Telecommunications Project Evaluation

46 Annex B: Lessons Learned from IFC’s Telecommunications Operations48 Annex C: Management Action Record (MAR)50 Annex D: Report from the Committee on Development Effectiveness (CODE)

53 Endnotes

C O N T E N T S

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Tables7 2.1 Project Objectives Have Shifted from Physical Infrastructure toward Reform

and Privatization13 3.1 Ratings for Completed Telecommunications Projects Have Declined, but

Remain Higher than for the Larger Portfolios . . . 14 3.2 . . . But Institutional Development and Sustainability Ratings Are on an Up-

ward Trend24 3.3 Competition Is Most Likely for the Youngest Services, 199925 3.4 Low-Income Countries Lag in Teledensity

Figures5 2.1 Bank Telecommunications Projects Are Increasing in Number, Decreasing in

Funding6 2.2 The Regional Distribution of Projects and the Instruments Used Have

Changed11 2.3 IFC Annual Telecommunications Commitments and Approvals, 1986–9920 3.1 Performance Dimension Rating of FY93–96 Telecom Approvals26 3.2 Telecommunications Investments Have Accelerated in Some Developing

Countries but Lagged in Most Low-Income Countries . . . 27 3.3 . . . As Has the Percentage of Private Sector Financing33 4.1 Key Dimensions of a National Information Infrastructure Strategy

Boxes9 2.1 The Global Gateway Internet Partnership for Development16 3.1 The Impact of Peru’s Telecommunications Reform19 3.2 infoDev—An Interim Evaluation24 3.3 Resistance to Institutional Adjustment32 4.1 Rural Telecommunications Focus May Be Increasing32 4.2 Grameen Phone: Model for a New Approach to Rural

Telecommunications?38 5.1 Building Human Capital—The El Salvador Experience41 5.2 IBRD and IFC Leverage Their Comparative Advantages—The Sri Lanka

Experience

I N F O R M AT I O N I N F R A S T R U C T U R E

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ACKNOWLEDGMENTS

This report was prepared by Alain Barbu,task manager, OED; Rafael Dominguez,task manager, OEG; and William Melody,

consultant, with contributions from MargaretDavis, Anupama Dokeniya, Kurumi Fukaya,Adele Cao Han, Jean-Albert Nyssens, and Do-minique Zwinkels. William Hurlbut providededitorial support, and Soon-Wok Pak and YvetteJarencio, administrative support.

This publication was prepared by the Dis-semination and Outreach team of the Partner-

ships and Knowledge Programs Group (OEDPK),under the guidance of Elizabeth Campbell-Page(task team leader), including Caroline McEuen(editor) and Juicy Qureishi-Huq (administrativeassistant). Communications Development pro-vided graphic, layout, and editorial support.

Director-General, Operations Evaluation: Robert Picciotto

Director, Operations Evaluation Department: Gregory Ingram

Director, Operations Evaluation Group: W. E. Stevenson

Task Managers: Alain Barbu, Rafael Dominguez

FOREWORD

This joint OED/OEG study fol-lows up OED’s 1993 review of the Bank’sexperience in telecommunications. Itassesses how World Bank Group as-sistance from 1993 onward has influ-enced the development of informationinfrastructure (the mix of telecommu-nications networks, computing hard-ware and software, and servicesrequired for the efficient transmission ofinformation, together with the relatedpolicy, legal, and institutional frame-work) in developing countries.

It finds that the recommendationsof the 1993 review have generallybeen heeded with: (a) the adoptionof a “new” private-sector-led agenda(emphasizing privatization, compe-tition, and independent regulation)under Operational Policy (OP) 4.50(1995); (b) the incorporation of the“new” agenda in most recent Banklending and non-lending interven-tions; and (c) the increasing share ofIFC in total Bank Group fundingcommitments for telecommunica-tions (from 8 percent in 1986–92 to32 percent in 1993–99). It also findsthat both the Bank and the IFCtelecommunications portfolios havecontinued to perform better thanaverage but cautions that existingmeasures do not capture the bulk ofBank Group information infrastruc-ture (II) activity—the telecommuni-cations components of multisectorprojects, the estimated $2 billion peryear worth of IT components inBank projects, and the wide-ranginganalytical and advisory services andpartnerships—which for the most

PREFACIO

Este estudio conjunto del De-partamento de Evaluación de Opera-ciones (DEO) y el Grupo de Evaluaciónde Operaciones se lleva a cabo en se-guimiento del examen de la experien-cia del Banco en materia detelecomunicaciones efectuado en 1993por el DEO. Se analiza en él la mediday la forma en que la asistencia pres-tada por el Grupo del Banco Mundialdesde 1993 en adelante ha influido enel desarrollo de la infraestructura dela información (el conjunto de redes detelecomunicaciones, computadoras,programas informáticos y serviciosnecesarios para la transmisión efi-ciente de información, junto con elmarco de política, jurídico e institu-cional conexo) en los países endesarrollo.

Se llega a la conclusión de que sehan seguido en general las reco-mendaciones del examen de 1993mediante: a) la adopción de un“nuevo” programa encabezado porel sector privado (en que se hacehincapié en la privatización, la com-petencia y la reglamentación inde-pendiente) con arreglo a la políticaoperacional OP 4.50 (1995); b) la in-corporación del “nuevo” programaen las actividades crediticias y nocrediticias más recientes del Banco,y c) el aumento de la participaciónde la CFI en los compromisos de fi-nanciamiento totales del Grupo delBanco para el sector de telecomu-nicaciones (de 8% en 1986–92 a 32%en 1993–99). Se determina tambiénque las carteras de telecomunica-ciones del Banco y de la CFI han se-

AVANT-PROPOS

Cette étude conjointe de l’OEDet de l’OEG fait suite à la revue par l’OED,en 1993, de l’expérience de la Banquedans le secteur des télécommunica-tions. Elle examine la façon dont l’aidedu Groupe de la Banque Mondiale, de-puis 1993, a influencé le développementdes infrastructures d’information (c’està dire l’ensemble constitué par les ré-seaux de télécommunications, l’équi-pement en matériel informatique, leslogiciels, les services nécessaires pourune transmission efficace de l’informa-tion et le cadre stratégique, juridique etinstitutionnel du secteur) dans les paysen développement.

L’étude conclut que les recom-mandations de la revue de 1993 ontété généralement appliquées grâceaux mesures suivantes: a) l’adop-tion d’une nouvelle politique domi-née par le développement dusecteur privé (qui met l’accent sur laprivatisation, la concurrence et unpouvoir régulateur indépendant)dans le cadre de la Politique Opé-rationnelle 4.50 (1995); l’intégrationde cette nouvelle politique dans laplupart des opérations financières etnon financières de la Banque; et c)l’augmentation de la part de la SFIdans le total du financement des té-lécommunications par le Groupe dela Banque (de 8% en 1986–92 à 32%en 1993–99). L’étude constate égale-ment que la performance du porte-feuille de la Banque et de la SFI dansle secteur des télécommunicationscontinue d’être supérieure à lamoyenne, mais note que ces indica-teurs ne couvrent pas une grande

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part is not subject to system-atic performance monitoring.

At the same time, the studypoints out that, at a timewhen the information revo-lution presents developingcountries with far-reachingopportunities and risks, the

Bank Group’s ability to play a globalpolicy leadership role has beenhampered by its benign neglect ofthe sector at both the strategic andcountry management levels, as wellas a fragmented internal organiza-tion. As a result, the number of coun-tries where it has had a real impactis limited. In a majority of develop-ing countries, the sector reformagenda remains unfinished, tele-density remains far below the min-imum threshold required to join theinformation revolution, private in-vestment in most lower-incomecountries has been lagging, andconnectivity gaps have been grow-ing within countries (between urbanand rural areas and between higherand lower income groups).

The study recommends that: (a) the Bank Group restate its strat-egy in the broader information infra-structure, transcending its traditionalfocus on telecommunications, with aparticular focus on optimizing theuse of its instruments (lending andnonlending) and expert skills; and (b) gaps in the existing monitoringand evaluation systems be filled, atboth the project and global level, toprovide the necessary framework to assess the future effectiveness of therevised strategy.

guido teniendo un desem-peño mejor que el prome-dio, pero se advierte que lasmedidas actuales no captanel grueso de la actividad delGrupo del Banco en materiade infraestructura de la in-formación—los componen-

tes de telecomunicaciones de losproyectos multisectoriales, losUS$2.000 millones por año aproxi-madamente de componentes de tec-nología de la información en losproyectos del Banco, y la ampliagama de asociaciones y servicios deanálisis y de asesoramiento—queen su mayor parte no están sujetosa un seguimiento sistemático deldesempeño.

Al mismo tiempo, en el estudio seseñala que en un momento en quela revolución de la informaciónofrece a los países en desarrollograndes oportunidades y riesgos, lacapacidad del Grupo del Banco dedesempeñar un papel de liderazgoa nivel mundial en las políticas se havisto menoscabada por la falta deatención prestada al sector tanto alnivel estratégico como al nivel degestión en los países, y también poruna organización interna fragmen-tada. Como resultado de esto, el nú-mero de países en que ha tenido unimpacto real es limitado. En la ma-yoría de los países en desarrollo, elprograma de reforma del sector estáinconcluso, la teledensidad siguemuy por debajo del umbral mínimonecesario para participar en la re-volución de la información, la in-versión privada en la mayoría delos países de ingreso bajo es insufi-ciente y las deficiencias de conecti-vidad han ido en aumento dentro delos países (entre zonas urbanas y ru-rales, y entre grupos de altos y bajosingresos).

partie des activités du Groupede la Banque dans le domainedes infrastructures d’infor-mation — les composantes télécommunications des opé-rations multisectorielles, lescomposantes technologie del’information des projets de la

Banque (dont le montant total est es-timé à environ $2 milliards par an) etune multitude de travaux analytiques,de services de conseil et de partena-riats — qui pour la plupart ne sont passoumis à un suivi systématique de laperformance.

En même temps, l’étude soulignequ’à une époque où la révolution del’information offre aux pays en dé-veloppement des opportunitésconsidérables, mais comporte aussiquelques risques, la capacité duGroupe de la Banque de jouer, àl’échelle mondiale, un rôle de leadersur le plan des politiques sectoriellesest affectée par l’oubli relatif du sec-teur dans les stratégies et les opé-rations par pays, comme d’aiileurspar la fragmentation de l’organisationinterne. Le résultat est que l’inter-vention de la Banque n’a eu un vé-ritable impact que dans un nombrelimité de pays. Dans la plupart despays en développement, les ré-formes sectorielles sont restées in-achevées, la densité du réseau detélécommunications est très inférieureau seuil minimum indispensable pourparticiper aux bénéfices de la révo-lution de l’information, les investis-sements privés progressent lentementdans la plupart des pays à faible re-venu et les gaps de communications’aggravent dans ces pays (entre leszones urbaines et rurales et entreles riches et les pauvres).

L’étude conclut par les recom-mandations suivantes: a) le Groupe dela Banque doit dépasser les frontières


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En el estudio se reco-mienda: a) que el Grupo delBanco reformule su estrategiarelativa a la infraestructura dela información en sentido am-plio, más allá del foco deatención tradicional en lastelecomunicaciones, concen-

trándose especialmente en la opti-mización del uso de sus instrumentos(tanto crediticios como no crediti-cios) y sus conocimientos especiali-zados, y b) que se subsanen lasdeficiencias en los sistemas de se-guimiento y evaluación existentes,tanto al nivel de los proyectos comoal nivel global, a fin de proporcionarel marco necesario para evaluar la efi-cacia futura de la estrategia revisada.

de ses activités traditionnellesaxées sur les télécommunica-tions et réaffirmer ses objectifsstratégiques qui concernentl’ensemble des infrastructuresd’information, mettant l’accentsur l’emploi optimal de sesinstruments (financiers et non

financiers) et de ses compétences; b) les déficiences présentes des systèmes de suivi et d’évaluationdoivent être corrigées — à l’échelledes projets et de façon globale —afin de mettre en place un cadrepour l’évaluation future de l’efficacitéde la nouvelle stratégie.

F O R E WO R D

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Robert PicciottoDirector-General, Operations Evaluation

EXECUTIVE SUMMARY

With the globalization of theworld’s economy, communications isincreasingly critical to economicgrowth and development. Indeed, theconvergence of information and com-munication technologies and the ex-plosion of the Internet are said to belaunching an information revolutionwith the potential to reshape societyand commerce. The extent to whichdeveloping countries benefit from thisrevolution will largely depend on thedevelopment of their “information in-frastructure”—the increasingly inte-grated mix of telecommunicationsnetworks, computing hardware andsoftware, and value-added servicesrequired for the efficient transmissionof information, together with the re-lated policy, legal, and institutionalframeworks. While this study updatesthe 1993 OED telecommunications re-view, it also assesses how the WorldBank Group’s assistance has ad-dressed the challenge brought about bythe convergence of telecommunica-tions and information technology (IT).It stops short, however, of a detailedevaluation of IT components of Bankand IFC projects, given their sheernumber and the absence of detailedmonitoring and evaluation (M&E) data.

While recognizing the Bank’sachievements in the sector, the 1993OED telecommunications reviewquestioned the relevance of Bankinterventions through much of the1980s and early 1990s, pointing tothe “disconnect” between the appar-ent success of Bank projects (withtelecommunications standing out as

RESUMEN

Con la globalización de la eco-nomía mundial, las comunicaciones son cada vez más importantes para elcrecimiento y el desarrollo económico. De hecho, se ha dicho que la conver-gencia de las tecnologías de la infor-mación y de las comunicaciones y laexplosión de la Internet han puesto enmarcha una revolución de la informa-ción que podría alterar fundamental-mente las modalidades de la sociedady del comercio. La medida en que lospaíses en desarrollo se beneficiarán deesta revolución dependerá en buenaparte del desarrollo de su “infraes-tructura de la información”, a saber, el conjunto cada vez más integrado deredes de telecomunicaciones, equipoy programas de computadoras y ser-vicios de valor añadido conexos ne-cesarios para la transmisión eficientede la información, junto con el marcojurídico, institucional y de políticascorrespondiente. Este estudio actualizael examen del sector de telecomuni-caciones realizado en 1993 por el De-partamento de Evaluación deOperaciones (DEO), y también evalúala forma en que la asistencia del Grupodel Banco Mundial ha hecho frente aldesafío planteado por la convergenciade las telecomunicaciones y la tec-nología de la información (TI). Sin em-bargo, no pretende ser una evaluacióndetallada de los componentes de TIde los proyectos del Banco y de la CFIen razón de su gran número y de la au-sencia de datos completos para finesde seguimiento y evaluación.

Aunque se reconocían los logrosdel Banco en el sector, en el examen

RÉSUMÉ

Avec la globalisation de l’éco-nomie mondiale, le secteur des com-munications joue un rôle de plus enplus important dans la croissance et ledéveloppement économique. On dit, eneffet, que l’alliance des technologies del’information et des communications etl’explosion de l’Internet sont en train dedéclencher une révolution de l’infor-mation capable de transformer de façonfondamentale le commerce et les rela-tions sociales. La participation des paysen développement aux bénéfices decette révolution dépendra beaucoup dudéveloppement de leurs «infrastruc-tures d’information» (l’ensemble de plusen plus intégré que constituent les ré-seaux de télécommunication, les équi-pements informatiques, les logiciels etles services complémentaires néces-saires à une transmission efficace del’information), ainsi que du cadre stra-tégique, juridique et institutionnel ré-gissant le secteur. La présente étudemet à jour la revue de l’OED de 1993 surles télécommunications et évalue com-ment le Groupe de la Banque Mondialea relevé le défi de l’alliance des télé-communications et de la technologie del’information. Cependant l’étude necomprend pas l’évaluation détailléedes composantes «technologie del’information» intégrées dans des pro-jets de la Banque et de la SFI; en effetces composantes sont trop nombreuseset la Banque ne dispose pas des don-nées nécessaires en raison de l’ab-sence d’un système adéquat de suivi et d’évaluation.

La revue de l’OED de 1993 sur lestélécommunications reconnaissait

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the top-performing sector inthe Bank) and the sector’s per-sistent dismal situation in mostBank borrower countries (inaccess, demand satisfaction,and quality of service). OEDrecommended (a) adoptionand implementation of a

telecommunications sector policy re-flecting the three pillars of the “new”private sector–led sector agenda (pri-vatization, competition, and regula-tion), while filling outstanding policygaps (particularly regarding universalaccess); and (b) a more innovative useof Bank instruments, combined withgreater coordination with IFC.

On balance, these recommenda-tions have been heeded with (a)the issuance of OP 4.50 (1995); (b)the incorporation of the “new”agenda in most recent Bank lendingand nonlending interventions; (c)the significant shifts that have takenplace in staff skills; and (d) the in-creasing share of IFC in total BankGroup funding commitments fortelecommunications (from $210 mil-lion, or 8 percent of $2.6 billion,during FY86–92 to $706 million, or32 percent of $2.2 billion, duringFY93–99). However, recommenda-tions have been only partially im-plemented in two areas: (a) thepotential for synergies between IFCand the Bank has not been fullytaken advantage of (leading to therecent decision to merge the telecom-munications units of the Bank andIFC); and (b) the Bank has not suffi-ciently diversified the use of its in-struments, with more than half of itspost-1993 lending in the form of mul-tisector technical assistance (TA) loans.

The review of “old” agenda Bankprojects completed after 1993 con-firms lessons already documented inthe 1993 review concerning the in-

de las telecomunicacionesrealizado por el DEO en 1993se cuestionaba la pertinen-cia de las intervenciones delBanco en gran parte de losaños ochenta y comienzosde los años noventa, y seseñalaba la “desconexión” entre

el éxito aparente de los proyectosdel Banco (el sector de telecomuni-caciones era el más exitoso delBanco) y la persistente situación de-soladora del sector en la mayor partede los países prestatarios del Banco(en lo que respecta al acceso, satis-facción de la demanda y calidad delos servicios). El DEO recomendabaa) la aprobación y la aplicación deuna política para el sector de tele-comunicaciones que reflejara lostres pilares del “nuevo” programaencabezado por el sector privado(privatización, competencia y re-glamentación), y la eliminación delas deficiencias existentes (en parti-cular con respecto al acceso uni-versal), y b) un uso más innovadorde los instrumentos del Banco, com-binados con una mayor coordina-ción con la CFI.

En definitiva, esas recomenda-ciones han sido escuchadas con a)la emisión de la Política Operacio-nal (OP) 4.50 (1995); b) la incorpo-ración del “nuevo” programa en lamayor parte de los préstamos y ac-tividades no crediticias más recien-tes del Banco; c) el cambiosignificativo que ha habido en losconocimientos del personal, y d) lacreciente participación de la CFI enel total del financiamiento del Grupodel Banco para las telecomunica-ciones (de US$210 millones, es decir,el 8% de US$2.600 millones, en losejercicios de 1986–92 a US$706 mil-lones, o sea, 32% de US$2.200 mil-lones en los ejercicios de 1993–99).

les résultats obtenus par laBanque dans le secteur, maiscontestait la pertinence desinterventions de la Banquependant la plus grande par-tie des années 1980 et audébut des années 1990, sou-lignant la contradiction entre

le succès apparent des projets de laBanque (la performance du secteurdes télécommunications étant su-périeure à celle de tous les autressecteurs) et la situation catastro-phique du secteur dans la plupartdes pays emprunteurs (sur le plan del’accès au service, de la satisfactionde la demande et de la qualité).L’OED recommandait donc: a)l’adoption et la mise en œuvre d’unepolitique des télécommunicationsreflètant les trois principaux objec-tifs (privatisation, concurrence et ré-gulation) d’une « nouvelle » politiqueaxée sur le leadership du secteurprivé, mais corrigeant les défautsdes systèmes existants (notammentsur le plan de l’accès universel), etb) un emploi plus imaginatif desinstruments de la Banque et unemeilleure coordination avec la SFI.

Dans l’ensemble, ces recomman-dations ont été appliquées, grâce auxmesures suivantes: a) la publicationde la nouvelle Politique Opération-nelle 4.50 (en 1995); b) l’intégrationdes « nouveaux » objectifs dans laplupart des prêts et activités non fi-nancières récentes de la Banque; c)d’importants changements dans lastructure des compétences dispo-nibles, et d) l’augmentation de la partde la SFI dans le financement du sec-teur par le Groupe de la Banque (de$210 millions, soit 8 pourcent d’untotal de $2,6 milliards au cours desexercices 1986–92, à $706 millions,soit 32 pourcent d’un total de $2,2milliards au cours des exercices 1993–


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adequacy of traditional statemonopolies to develop amodern network infrastruc-ture. But it is still too early tomeasure the actual outcomes(in coverage, prices, and qual-ity of service) of reforms pro-moted by Bank projects under

the “new” agenda. These are still inthe early stages of implementationand only a handful have been eval-uated (Argentina, Mexico). Yet theevaluation of mature IFC projectsand the review of information onongoing Bank projects already con-firm a number of lessons that havebeen amply documented in the re-search literature: • Even partial competition (via the

liberalization of mobile teleph-ony) brings about increased in-vestments, lower prices, andbetter quality of service.

• Setting up a regulatory body doesnot obviate the need for a well-articulated government policy andstrategy.

• The dearth of local expertise inpoor countries is a major con-straint to effective and inde-pendent regulation.

• Transparency in licensing and tar-iff setting (particularly for inter-connection rates), as well asclarity about the role of the in-cumbent operator, is critical toattracting private investment.

• Based on Bank experience, privatemonopolies are not always betterthan public ones.While in most cases the ultimate

outcomes of the Bank’s refocused as-sistance and the IFC’s activities inspecific countries cannot be fullymeasured, results already achievedunder some recent projects—primarily in the few countries whereBank Group involvement was sub-

Sin embargo, las recomen-daciones se han puesto enpráctica sólo parcialmente endos esferas: a) no se hanaprovechado del todo las po-tenciales sinergias entre laCFI y el Banco (lo cual llevóa la decisión adoptada re-

cientemente de fusionar las unida-des de telecomunicaciones delBanco y la CFI), y b) el Banco no hadiversificado el uso de sus instru-mentos en la medida adecuada, yque más de la mitad del financia-miento concedido después de 1993ha correspondido a préstamos deasistencia técnica multisectoriales.

El examen, en el marco del “an-tiguo programa”, de los proyectosdel Banco completados después de1993 confirma las enseñanzas yadocumentadas en el examen de 1993en cuanto a la ineficiencia de los mo-nopolios estatales tradicionales paradesarrollar una moderna infraes-tructura de redes. Pero es todavíamuy pronto para medir los resulta-dos efectivos (en cuanto a cobertura,precios y calidad de servicio) de lasreformas promovidas por el Bancocon arreglo al “nuevo” programa.Esos proyectos aún están en las pri-meras etapas de ejecución y sólo sehan evaluado unos pocos (Argentinay México). Sin embargo, la evalua-ción de los proyectos de la CFI pró-ximos a terminarse y el examen dela información sobre los proyectosen marcha del Banco confirman yavarias enseñazas que se han docu-mentado ampliamente en la inves-tigación:• Que incluso la competencia par-

cial (a través de la liberalizaciónde la telefonía móvil) trae apare-jado un aumento de las inversio-nes, precios más bajos y unamejor calidad de servicio;

99). Cependant, dans deuxdomaines, les recommanda-tions n’ont été que partielle-ment exécutées: a) le Groupede la Banque n’a pas suffi-samment exploité toutes lessynergies possibles entre laBanque et la SFI (d’où la dé-

cision récente des deux institutionsd’organiser la fusion de leurs unitésde télécommunications) ; b) laBanque n’a pas assez diversifié les ins-truments employés (les prêts d’assis-tance technique multisectoriels re-présentent plus de la moitié des opé-rations de la Banque depuis 1993).

L’analyse des projets postérieursà 1993 conçus sur la base des « an-ciennes stratégies » confirme lesconclusions de la revue de 1993 surl’incapacité des monopoles publicstraditionnels de développer un ré-seau moderne. Néanmoins, il estencore trop tôt pour évaluer l’impactréel (accès, prix et qualité du service)des réformes encouragées par lesprojets inspirés par la nouvelle stra-tégie. En effet, l’exécution de cesprojets vient seulement de com-mencer et très peu d’entre eux (Ar-gentine et Mexique) ont déjà faitl’objet d’une évaluation. Cependantl’examen de certains projets plusavancés de la SFI et l’analyse desdonnées disponibles sur les projetsen cours de la Banque confirmentplusieurs conclusions des nom-breuses recherches faites sur le sujet:• Même une concurrence partielle

(par la libéralisation de la télé-phonie mobile) stimule l’inves-tissement, réduit les prix etaméliore la qualité du service.

• La mise en place d’un organismerégulateur n’est pas un substitutadéquat pour des politiques et desstratégies gouvernementales biendéfinies.

E X E C UT I V E S U M M A RY

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stantial and sustained—areencouraging (for example,significant private investmentcommitments and initial re-ductions in prices of both mo-bile and basic telephony inBolivia, Morocco, Peru, andSri Lanka). But this group of

countries is small, and the currentstate of information infrastructure(II) in the developing world is de-cidedly mixed and presents a sober-ing picture. It belies the views ofmany nonsector specialists insideand outside the Bank Group thatmost developing countries have en-tered the postreform era and thatrecent progress in technology leavesthem well positioned to gain fromthe information revolution: • While telecommunications sector

restructuring is now on the policyagenda of most developing coun-tries, countries that have started toimplement reform in earnest (thatis, beyond the relatively “easy”steps of opening up value-addedservices) are in the minority. Andsome of these countries are facingserious implementation problemsand delays (particularly with re-gard to the privatization of thebasic service provider, the func-tioning of the new regulatorybody, and the introduction of ef-fective competition).

• Quality of service has improvedand average growth in teledensity(both fixed and wireless) has re-cently accelerated in most coun-tries, largely due to the rapid riseof mobile telephony. But pene-tration rates in a majority of coun-tries remain far below 10 linesper 100 inhabitants, the level thatexperts consider the basic con-nectivity threshold to join the in-formation revolution.

• Que el establecimiento deun órgano de reglamen-tación no elimina la nece-sidad de una política y unaestrategia gubernamentalbien articulada;

• Que la escasez de perso-nal calificado local en lospaíses pobres es una limita-

ción grave para la reglamentaciónefectiva e independiente;

• Que la transparencia en la con-cesión de licencias y la fijación delas tarifas (en particular para lastasas de interconexión), así comola claridad en cuanto al papel dela empresa operadora, son fun-damentales para atraer inversio-nes privadas, y

• Que, sobre la base de la expe-riencia del Banco, los monopoliosprivados no siempre son mejoresque los públicos. Aunque en la mayoría de los casos

no es posible medir en su totalidadlos resultados definitivos de la asis-tencia reorientada del Banco y de lasactividades de la CFI en países es-pecíficos, los resultados que ya sehan obtenido en algunos proyectosrecientes, sobre todo en los nuevospaíses en los que la participacióndel Grupo del Banco ha sido consi-derable y continuada, son alenta-dores (por ejemplo, importantescompromisos de inversión privada yreducción inicial de los precios de latelefonía móvil y básica en Bolivia,Marruecos, Perú y Sri Lanka). Peroese grupo de países es pequeño y elestado actual de la infraestructura dela información en los países en de-sarrollo es muy variado e invita a lareflexión. Desmiente la opinión demuchos especialistas ajenos al sectortanto del Grupo del Banco como deotros sitios de que la mayoría de lospaíses en desarrollo han entrado en

• Le manque d’experts lo-caux dans les pays pauvresest un obstacle majeur àune régulation efficace etindépendante.

• La transparence dans l’oc-troi des permis d’exploita-tion et la fixation des tarifs

(en ce qui concerne notammentles tarifs d’interconnexion) et unedéfinition précise du rôle del’opérateur sont indispensablespour la mobilisation d’investisse-ments privés.

• L’expérience de la Banquemontre que les monopoles privésne sont pas toujours plus effi-caces que les monopoles publics.Il n’est pas encore possible de me-

surer l’impact final des nouvelles orien-tations de l’aide de la Banque et desactivités de la SFI dans un certainnombre de pays précis; mais les ré-sultats déjà obtenus dans le cadre decertains projets – surtout dans les nou-veaux pays où les interventions duGroupe de la Banque sont impor-tantes et continues – sont encoura-geants (citons par exemplel’importance des investissements pri-vés et la réduction des tarifs de la té-léphonie mobile et des services debase en Bolivie, au Maroc, au Pérouet au Sri Lanka). Néanmoins, il s’agitseulement d’un petit nombre de payset la condition présente des infra-structures d’information (II) dans letiers monde est inégale et dans l’en-semble peu satisfaisante, contraire-ment aux vues de nombreuxgénéralistes - à l’intérieur et à l’exté-rieur de la Banque - selon lesquellesla plupart des pays en développementsont au stade de l’après-réforme et –grâce aux progrès récents de la tech-nologie – sont bien placés pour bé-néficier pleinement des effets de larévolution de l’information:


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• Despite the rise in privatesector involvement in coun-tries that have opened uptheir sectors, overall invest-ment levels in lower-incomeand lower-middle-incomecountries are far from ade-quate to reach the connec-

tivity threshold anytime soon. • Existing international service rev-

enue sources of many developingcountry telecommunications net-works are under serious threatfrom cost-avoidance practicessuch as callback and use of theInternet, and from the impendingdemise of the international rev-enue settlement scheme.

• Within countries, connectivitygaps are growing between urbanand rural areas and betweenhigher- and lower-income groups.

• With very few exceptions, mostcountries have not embarkedupon—nor even recognized theneed for—a rethinking andbroadening of their telecommu-nications policy to reflect link-ages with other potentiallyII-intensive sectors (such as edu-cation, health, and tax and tradereform). Why is there such a disconnect

between an apparently responsiveBank Group approach and thesobering II picture?

First, the pace of change in theoverall sector environment (both intechnology and in market structure)has accelerated, particularly in thelate 1990s with the onset of the In-ternet. The development of broad-band access (which itself requiresminimum levels of basic connectivity)rather than mere voice connectionhas become the new goalpost and theprerequisite for developing countryaccess to the new information soci-

la etapa de postreforma yque los progresos tecnológi-cos recientes los han dejadoen condiciones de cosecharlos frutos de la revolución dela información:• Si bien la reestructuracióndel sector de telecomunica-

ciones figura actualmente en elprograma de políticas en la mayorparte de los países en desarrollo,los países que han empezado re-almente a aplicar decididamente lareforma (es decir, más allá de lospasos relativamente “fáciles” deabrir los servicios de valor aña-dido) son una minoría. Además, al-gunos de ellos están haciendofrente a problemas de aplicacióny demoras graves (en particular,con respecto a la privatización delproveedor de servicios básicos, elfuncionamiento del nuevo órganode reglamentación y la introduc-ción de una competencia eficaz).

• La calidad general del servicio hamejorado y la teledensidad media(fija e inalámbrica) ha aumentadoen la mayoría de los países, enbuena medida debido al rápidoaumento de la telefonía móvil.Sin embargo, las tasas de pen-etración en la mayoría de los pa-íses siguen muy por debajo de 10líneas por cada 100 habitantes, elnivel que los expertos consideranque es el umbral de conectividadbásico para participar en la re-volución de la información.

• Pese al aumento de la participacióndel sector privado en los paísesque han abierto sus sectores, losniveles de inversiones globales enlos países de ingreso bajo y mediano distan mucho de ser suficientes para llegar al umbral deconectividad en un futuro pró-ximo.

• La restructuration du sec-teur des télécommunica-tions fait désormais partiedes politiques de laplupart des pays endéveloppement, mais seulsquelques pays ont vérita-blement commencé à met-

tre en œuvre la réforme (au delàdes mesures relativement « faciles» que sont la libéralisation desservices auxiliaires); en outre,dans plusieurs de ces pays, lesprogrès sont lents et rencontrentde sérieux problèmes d’exécu-tion (notamment en ce quiconcerne la privatisation du four-nisseur des services de base, lefonctionnement du nouvel orga-nisme régulateur et l’introductiond’une concurrence effective).

• Dans la plupart des pays, la qua-lité du service est meilleure et ladensité moyenne du réseau (fixeet mobile) a augmenté, grâce sur-tout à la croissance rapide de latéléphonie mobile. Cependant,dans un très grand nombre depays, les taux de pénétration res-tent très inférieurs au taux de 10lignes pour 100 habitants, queles experts considèrent commele seuil minimum de connecti-vité pour une participation ef-fective aux bénéfices de larévolution de l’information.

• Malgré la croissance des activitésprivées dans les pays qui ont li-béralisé le secteur, les investisse-ments dans les pays pauvres – etdans la tranche inférieure despays à revenu intermédiaire – sonttrès inférieurs aux volumes né-cessaires pour atteindre rapide-ment les seuils minimums deconnectivité.

• Dans plusieurs pays en dévelop-pement, les recettes internationales


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ety. And the rapid conver-gence of telecommunicationsand IT, and the way they in-creasingly transform all as-pects of society, has renderedobsolete the Bank’s traditionalfocus on a narrowly definedtelecommunications sector.

Second, in the face of these newchallenges, the Bank Group slippedinto complacency for several reasons:(a) a lack of recognition outside theBank’s II community that the efficienttransfer of knowledge—whose criticalimportance the World DevelopmentReport 1998: Knowledge for Develop-ment rightly emphasized—requires afoundation of network infrastructure(that is, levels of connectivity) thatmost developing countries are stillvery far from having; (b) the mistakenperception among large sections ofmanagement and staff that openingthe sector to private investment, com-bined with the introduction of newtechnologies, would enable poorcountries to “leapfrog” into the infor-mation age with little or no need fora public sector role—a perception be-lied by developed countries’ experi-ence; (c) the apparent health of theBank Group’s declining II portfolio—explained in part by IFC’s concentra-tion on generally higher-risk, buthigher-reward, projects and the inad-equacy of the Bank Group’s per-formance monitoring systems withregard to components of multisectorprojects (now accounting for thebulk of the Bank’s telecommunica-tions lending activity and as much as$2 billion in annual IT support) andwide-ranging advisory and analyticalservices; and (d) the illusion of ac-tion created by the sponsoring ofmyriad trust-funded activities, initia-tives, partnerships, and “microevents”related to the II sector, with little co-

• Las actuales fuentes de in-gresos de los servicios in-ternacionales de las redesde telecomunicaciones demuchos países en desa-rrollo se ven gravementeamenazadas por las prácti-cas dirigidas a evitar costos,

como los servicios de devoluciónautomática de llamadas y el usode la Internet, así como por la in-minente desaparición del sistemade liquidación de los ingresos in-ternacionales.

• Dentro de los países, están au-mentando las diferencias de co-nectividad entre las zonas urbanasy las zonas rurales, y entre losgrupos de ingreso alto y bajo.

• Con muy pocas excepciones, lamayoría de los países no han ini-ciado el procedimiento de re-plantear y ampliar su política detelecomunicaciones, ni han re-conocido siquiera la necesidadde hacerlo, para que queden re-flejados los vínculos con otrossectores posiblemente intensivosen materia de infraestructura dela información (como la educa-ción, la salud, y la reforma fiscaly comercial).¿Por qué existe esta desconexión

entre un enfoque aparentementeadecuado del Grupo del Banco yeste cuadro sombrío de la infraes-tructura de la información?

En primer lugar, el ritmo de cam-bio de las condiciones generales delsector (por ejemplo, en términos detecnología y estructura del mercado)se ha acelerado, sobre todo a finesde los años noventa con el inicio dela Internet. El desarrollo del accesode banda ancha (que requiere en símismo niveles mínimos de conecti-vidad básica) en lugar de una sim-ple conexión de voz, se ha

des réseaux de télécommuni-cations sont sérieusement me-nacées par les techniques ducallback, l’emploi de l’Inter-net et le démantèlement pro-chain du système derèglement des communica-tions internationales.

• À l’intérieur des pays, les dispa-rités des taux de connectivitéentre les zones urbaines et leszones rurales et entre les popu-lations riches et pauvres sont entrain de s’aggraver.

• Sauf un tout petit nombre d’ex-ceptions, la plupart des pays –plusieurs ne sont même pasconscients du problème – n’ontpas encore entrepris les révisionset élargissements des politiquesde télécommunications qui sontnécessaire pour intégrer les rela-tions avec d’autres secteurs ca-pables d’une utilisation intensivedes infrastructures d’information(par exemple l’éducation, la santéet les réformes fiscales et com-merciales).D’où vient cette contradiction

entre la situation peu satisfaisante dusecteur des II et l’évolution appare-ment favorable des priorités duGroupe de la Banque?

Premièrement, l’évolution destechnologies et de la structure dumarché s’est accélérée, surtout de-puis la fin des années 1990 au mo-ment du lancement de l’Internet. Leremplacement des communicationsvocales par une multitude de ser-vices (qui nécessitent un seuil mi-nimum de connectivité) est devenule nouvel objectif du secteur; c’estaussi la condition nécessaire pour laparticipation des pays en dévelop-pement à la nouvelle société d’in-formation. Enfin, les méthodestraditionnelles de la Banque – la


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ordination or monitoring oftheir design, funding, and im-pact. A noteworthy excep-tion is infoDev, an innovativeBank-sponsored public-pri-vate grant program, whichproved its agility in launchinga quick and effective Y2K as-

sistance program and has the po-tential to play a more central role inthe Bank Group’s II assistance.

Third, the Bank Group’s frag-mented organization in the sector(with many units active, and some-times competing, in the provision ofII-related assistance), combined withdistorted internal incentives created bythe Bank’s budget and work plan-ning systems, has hampered the BankGroup’s ability to optimize the use ofits available instruments and expertskills. In particular, task managementarrangements and budget limitationsassociated with the widespread use ofmultisector loans by the Bank haveprevented optimal deployment of spe-cialized anchor staff. And the absenceof a clearly recognized and funded in-formatics thematic group has furthercontributed to this fragmentation in IT-specific issues. Similarly, fragmentationin the administration of Bank-managedtrust funds and internal pricing dis-tortions for advisory and analyticalservices (for example, between eco-nomic and sector work, trust-fundedtechnical assistance, and the fee-basedservices of IFC’s Corporate FinanceServices Department) have often re-sulted in poor coordination in theprovision of Bank Group advice tocountries. In turn, these constraintshave affected the design of Bank in-terventions, which too often have fo-cused primarily on inputs andprocesses (privatization transactions,hiring of legal or regulatory consult-ants) without sufficient attention to

convertido ahora en la nuevameta y el requisito previopara el acceso de los paísesen desarrollo a la nueva so-ciedad de la información.Además, la rápida conver-gencia de las telecomunica-ciones y la tecnología de la

información, y la manera en queambas están transformando cadavez más todos los aspectos de lasociedad, han dejado obsoleta laatención que el Banco ha prestadotradicionalmente a un sector de te-lecomunicaciones definido en formamuy específica.

En segundo lugar, ante estos nue-vos desafíos, el Grupo del Bancocayó en la complacencia por varias ra-zones: a) la falta de reconocimientofuera de la comunidad que se ocupade la infraestructura de la informaciónen el Banco de que la transferenciaeficiente del conocimiento, cuya im-portancia crítica se puso de relievecon razón en el Informe sobre el de-sarrollo mundial 1998/99: El conoci-miento al servicio del desarrollo,requiere como base una infraestruc-tura de redes (es decir, niveles deconectividad) que la mayoría de lospaíses en desarrollo están muy lejosde tener; b) la percepción errónea degrandes segmentos de directivos ydel personal de que la apertura delsector a la inversión privada, combi-nada con la introducción de nuevastecnologías, permitiría a los paísespobres “saltar” a la era de la infor-mación, sin ninguna o con muy pocanecesidad de participación estatal;esta percepción ha sido desmentidapor la experiencia de los países de-sarrollados; c) la aparente solidez dela decreciente cartera de proyectos deinfraestructura de la información delGrupo del Banco, que se explica enparte por la concentración de la CFI

priorité accordée au seul sec-teur des télécommunicationsau sens étroit du terme – sontdésormais dépassées, du faitde la convergence croissantedes télécommunications etdes technologies de l’infor-mation et des transformations

qu’elle implique pour tous les as-pects de la vie sociale.

Deuxièmement, en face de cesnouveaux défis, le Groupe de laBanque a relâché ses efforts pour lesraisons suivantes: a) peu nombreux,en dehors des spécialistes des in-frastructures d’information de laBanque, sont ceux qui reconnaissentqu’un transfert efficace du savoir –dont le Rapport sur le Développe-ment dans le Monde: Connaissanceau Service du Développement, de1998, soulignait à juste titre l’im-portance – doit être basé sur une in-frastructure de réseau (c’est à diredes taux de connectivité) que la plu-part des pays en développementsont encore loin de posséder; b)beaucoup d’experts et de cadres su-périeurs de la Banque s’imaginent àtort que la simple ouverture du sec-teur à l’investissement privé et l’in-troduction des nouvellestechnologies permettront aux payspauvres de sauter dans l’ère de l’in-formation, sans intervention signi-ficative du secteur public - notionque dément l’expérience passée despays développés; c) la santé appa-rente du portefeuille – en déclin –du Groupe de la Banque dans le sec-teur des infrastructures d’informa-tion s’explique en partie par laconcentration des financements dela SFI sur des projets à haut risqueet à haut rendement et par l’ineffi-cacité des systèmes de suivi duGroupe de la Banque en ce quiconcerne d’une part les composantes


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substantive policy and strate-gic issues, arguably the areawhere the Bank can add themost value. And the lack of astrong institutional frameworkfor effective coordination be-tween the Bank and IFC mayhave resulted in forgone op-

portunities. Meanwhile, high-quality,high-impact Bank Group activitieswere found to be associated withcases where these disincentives wereovercome by individual staff initia-tives or a country director’s strategicvision of II.

Finally, not until recently was theneed recognized for an integratedoperational strategy (at the global, re-gional, and country levels) that goesbeyond the general policy princi-ples in OP 4.50 and reassesses theBank Group’s role and comparativeadvantage in the new, broader II“sector.” IFC’s annual “strategies”have been more akin to detailedmarketing plans and have lacked awell-articulated policy and strategicframework. These gaps further con-tributed to the fragmentation of theBank Group’s approach to II in in-dividual countries, with critical de-cisions too often left to staff,consultants, or not addressed at allfor lack of budget resources (as ap-pears to be the case in many Bankmultisector projects). (For example,regarding what advice to give onsector structure, licensing regimes,approaches to universal service, orinterconnection pricing; how to de-cide on the respective roles of theBank and IFC; or how to establishlinkages with other sectors such ashealth and education.) A case inpoint is the persisting ambiguity ofthe Bank Group’s policy on the roleof the public sector in fostering ruralaccess, which has led staff to shy

en proyectos generalmente demayor riesgo pero de mayorrendimiento y por la defi-ciencia de los sistemas de se-guimiento del desempeño delGrupo del Banco con respectoa los componentes de pro-yectos multisectoriales (que

constituyen actualmente la mayorparte de los préstamos paratelecomunicaciones del Banco y equi-valen a un apoyo de US$2.000 mi-llones por año para la tecnología dela información), y a los variados ser-vicios de asesoramiento y otros ser-vicios no crediticios, y d) la aparienciade acción que se creó al apoyar unagran cantidad de actividades, inicia-tivas, asociaciones y “microeventos”relacionados con el sector de la in-fraestructura de la información y fi-nanciados con fondos fiduciarios, conescasa coordinación o seguimientoen cuanto a su diseño, financiamientoe impacto. Una excepción notable esinfoDev, un programa innovador pa-trocinado por el Banco con dona-ciones públicas y privadas, quedemostró su agilidad en el lanza-miento de un programa de asistenciarápido y efectivo para la transición alaño 2000 y que tiene posibilidades dedesempeñar un papel más central enla asistencia del Grupo del Banco enel ámbito de la infraestructura de lainformación.

En tercer lugar, la organizaciónparticularmente fragmentada delGrupo del Banco en el sector (alcontar con muchas unidades activas,y a veces en competencia, en laprestación de asistencia relacionadacon la infraestructura de la infor-mación), combinada con incentivosinternos distorsionados creados porlos sistemas de presupuesto y deplanificación del trabajo del Banco,ha menoscabado la capacidad del

II des projets multisectoriels(qui constituent aujourd’huil’essentiel des prêts de laBanque aux télécommunica-tions et représentent près dedeux milliards de dollarsd’appui annuel aux techno-logies de l’information), et

d’autre part les nombreuses activitésde conseil et autres interventionsnon financières du Groupe; enfind) une illusion d’activité a été crééepar le lancement d’une multituded’initiatives, de partenariats et demicrointerventions soutenues pardes fonds fiduciaires, sans coordi-nation et suivi effectif de la concep-tion, du financement et de l’impactde ces initiatives. Une importanteexception est l’infoDev, programmeoriginal de subventions publiques etprivées, appuyé par la Banque, quia démontré son agilité par le lance-ment rapide d’initiatives efficacespour faciliter le passage à l’an 2000;infoDev peut être appelé à jouer unrôle plus important dans l’aide duGroupe de la Banque au secteurdes II.

Troisièmement, l’organisation trèsfragmentée du Groupe de la Banque(de nombreuses unités interviennentdans le secteur des II et se font par-fois concurrence) et les distorsionsdans la structure des incitations in-ternes (qui résultent des systèmes deplanification et de budgétisation desactivités de la Banque) n’ont pas per-mis au Groupe d’optimiser l’emploides instruments et des compétencesdisponibles. En particulier le systèmedes chefs de projets et les contraintesbudgétaires résultant de l’emploi fré-quent des prêts multisectoriels ontrendu impossible l’utilisation opti-male des principaux spécialistes dusecteur. De la même façon, la gestiondispersée des fonds fiduciaires et les


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away from promoting inno-vative policy options or pro-posing Bank financial support(for example, to private-pub-lic partnerships) in that area,leaving a gap that IFC hasnot been able to fill for lackof sufficient investor interest.

Notwithstanding the existencewithin the Bank Group of substan-tial expertise in areas related to II, be-nign neglect of the sector at both thestrategic and country managementlevels has hampered the Bank’s abil-ity to play a policy leadership role.This is at a time when many devel-oping countries are faced with theprospect of being left out of the in-formation revolution altogether, withpotentially irreversible consequencesfor their long-term economic andsocial well-being. Indeed, in recentyears, the Bank Group missed theopportunity to reverse this trend onseveral occasions. First, in 1995,when the former Telecommunica-tions and Information Division or-ganized the highly successful firstSymposium on Information and De-velopment (with high-level repre-sentation from borrowing countriesand industry leaders) without muchoperational follow-up by the Bank’sRegional units. Second, in 1996,when the draft of a World Bank Strat-egy on Information in Develop-ment—itself largely built on theground-breaking work of a 1990Bankwide task force—was preparedbut never finalized. And third, uponthe publication of World Develop-ment Report 1998: Knowledge forDevelopment, which had the poten-tial to sensitize critical audiences tothe magnitude of the challenges pre-sented to our clients by the infor-mation revolution, but whose mainimpact so far has been the Bank’s re-

Grupo del Banco de optimi-zar el uso de los instrumen-tos disponibles y de susconocimientos de expertos.En particular, la organizaciónal nivel de los jefes de pro-yecto y las limitaciones pre-supuestarias asociadas con

el uso generalizado por el Bancode préstamos multisectoriales hanimpedido el despliegue óptimo depersonal de coordinación especiali-zado. De manera análoga, como re-sultado de la fragmentación de laadministración de los fondos fidu-ciarios gestionados por el Banco yde las distorsiones internas de losprecios de los servicios analíticos yde asesoramiento (por ejemplo,entre los estudios económicos y sec-toriales, la asistencia técnica finan-ciada con fondos fiduciarios y losservicios basados en el cobro dehonorarios que presta el Departa-mento de Cofinanciamiento y Ser-vicios de Asesoría Financiera de laCFI), a menudo la coordinación dela asesoría del Grupo del Banco a lospaíses ha sido deficiente. A su vez,esas limitaciones han afectado el di-seño de las intervenciones delBanco, que con mucha frecuencia sehan concentrado fundamentalmenteen los insumos y procesos ( tran-sacciones de privatización, contra-tación de consultores jurídicos oespecialistas en reglamentación) sinprestar suficiente atención a las cues-tiones de política y estratégicas sus-tantivas, que constituyenposiblemente la esfera en que elBanco puede añadir más valor. Esposible también que la falta de unmarco institucional sólido para unacoordinación eficaz entre el Bancoy la CFI haya llevado a la pérdida deoportunidades. Mientras tanto, seobservó que las actividades de alta

distorsions de prix entre lesdifférentes formes de conseilset de travaux analytiques (parexemple entre les études éco-nomiques et sectorielles, lesassistances techniques finan-cées par les fonds fiduciaireset l’aide rémunérée de la SFI)

ont souvent eu pour conséquenceune mauvaise coordination des acti-vités de conseil aux pays du Groupede la Banque. Ces facteurs ont ensuiteinfluencé la conception des opérationsde la Banque, trop souvent axées surles produits et les processus (opéra-tions de privatisation, recrutement deconseillers juridiques ou de consul-tants en matière de réglementation),aux dépens des problèmes fonda-mentaux de stratégies et de politiques,domaines dans lesquels la Banqueest capable d’apporter une contribu-tion particulièrement importante.Enfin, la faiblesse du cadre institu-tionnel régissant la coordination entrela Banque et la SFI peut avoir faitperdre à la SFI des opportunités d’in-tervention dans le secteur. En mêmetemps, il apparaît que certaines activi-tés du Groupe de la Banque, dont laqualité et l’impact ont été remar-quables, ont souvent été le produitd’initiatives individuelles ou d’une vi-sion stratégique du secteur par unresponsable de pays, en dépit del’obstacle que constitue un systèmed’incitations internes déficient.

Enfin, jusqu’à une date récente, lahaute direction de la Banque n’avaitpas pris conscience de la nécessitéd’une stratégie opérationnelle inté-grée (à l’échelle globale, régionaleet des pays) allant au delà des prin-cipes généraux de la Politique Opé-rationnelle 4.50 et comportant uneréévaluation du rôle et des avan-tages comparatifs du Groupe de laBanque dans le vaste secteur des in-


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cent impetus toward inward-oriented knowledge man-agement efforts.

But two very recent majorinitiatives by senior man-agement (the Global Gate-way and the IFC-SoftbankInternet venture) may sig-

nal a real breakthrough—as long astheir primary focus on content doesnot detract from the seriousness ofthe connectivity challenge evi-denced in this study. Indeed, theongoing preparation of the FY01Sector Strategy Paper (SSP) on In-formation Infrastructure, togetherwith the recent management deci-sions to merge the telecommuni-cations units of the Bank and IFCand to consolidate the managementof all Finance, Private Sector, andInfrastructure Network (FPSI) non-lending services, provides a uniqueopportunity for the Bank Group toovercome the fragmentation of re-cent years and squarely repositionII on the Bank Group’s core de-velopment agenda.

In this context, the forthcomingSSP should incorporate the follow-ing recommendations:• Policy. The forthcoming SSP

should restate the Bank Groupobjectives in the broader II sec-tor in terms of ultimate results(for example, access to informa-tion, pricing and quality of serv-ices, fiscal impact) rather thanjust means and intermediateoutcomes (private sector in-vestment, competition, or regu-lation), as OP 4.50 does. Itshould address outstandingpolicy gaps and differences inregulatory reform strategy re-garding the Bank Group’s ap-proach to sequencing sectorliberalization and privatization,


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calidad y alto impacto delGrupo del Banco estabanasociadas con casos en queestos desincentivos fueronsuperados gracias a la ini-ciativa personal de algunosfuncionarios o a la visiónestratégica acerca de la in-

fraestructura de la información deldirector a cargo de las operacionesdel Banco en un país determinado.

Por último, hasta hace muy pocotiempo no se había reconocido la ne-cesidad de tener una estrategia ope-racional integrada (al nivel mundial,regional y de los países) que fueramás allá de los principios generalesde política contenidos en la OP 4.50y reevaluara el papel y la ventajacomparativa del Grupo del Banco enel nuevo “sector” ampliado de la in-fraestructura de la información. Las“estrategias” anuales de la CFI hanconsistido más bien en planes de co-mercialización detallados y han ca-recido de una política global y bienarticulada y de un marco estratégico.Estas deficiencias contribuyeron tam-bién a la fragmentación del enfoquedel Grupo del Banco de la infraes-tructura de la información en los dis-tintos países. Muchas veces lasdecisiones críticas solían quedar enmanos del personal o de consultores,o simplemente no se encaraban porfalta de recursos presupuestarios(como parece ser el caso en muchosproyectos multisectoriales del Banco).(Por ejemplo, con respecto al aseso-ramiento que debía darse sobre laestructura del sector, los regímenes delicencia, el enfoque del servicio uni-versal o los precios de interconexión;a la manera de decidir las respectivasfunciones del Banco y de la CFI; o ala forma de establecer vínculos conotros sectores, como los de salud yeducación). Un ejemplo es la ambi-

frastructures d’information.Quant aux stratégies an-nuelles de la SFI, elles res-semblent plutôt à des plansdétaillés de marketing et nesont pas basées sur un cadrede stratégies et de politiquesclairement définies. Ces dé-

ficiences ont aggravé la dispersiondes activités du Groupe de laBanque dans les pays; en outre, desdécisions fondamentales (concernantpar exemple les conseils relatifs àl’organisation du secteur, aux sys-tèmes d’octroi des permis d’exploi-tation, au développement d’unservice universel et aux prix des in-terconnexions, la définition des rôlesrespectifs de la Banque et de la SFIou l’établissement de liens avecd’autres secteurs tels que la santé etl’éducation) ou bien étaient baséessur les préférences individuelles desexperts ou des consultants – ou,pire, n’étaient pas prises faute deressources budgétaires adéquates(notamment dans le cas des projetsmultisectoriels). Un bon exempleest l’ambiguïté permanente de lapolitique du Groupe de la Banquesur le rôle du secteur public dans ledéveloppement des services en mi-lieu rural; cette ambiguïté a décou-ragé le personnel de la Banque depromouvoir des initiatives originalesou de proposer des appuis financiers(par exemple pour des partenariatspublics et privés), créant un gapque la SFI n’a pas pu combler en rai-son du manque d’intérêt des inves-tisseurs.

Bien que le Groupe de la Banqueait une bonne expertise dans le sec-teur des II, le manque d’intérêt descadres supérieurs et des responsablesdes pays a entraîné un déclin gradueldu leadership intellectuel de laBanque – acquis pendant la période

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as well as to universal serv-ice/rural access and its link-ages with the Bank’spoverty-reduction agenda(including through inter-ventions in other sectorssuch as education andhealth).

• Institutional options. While en-suring consistency with the Sep-tember 1999 Bank Group privatesector development (PSD) strategyand drawing on lessons learnedfrom recent experience in re-forming countries, the forthcom-ing SSP should provide detailedguidance to Bank Group staff ona range of II policy and strategicoptions best suited to various cat-egories of borrowers, rather thana rigid “one-size-fits-all” reformmodel. The SSP could use thecountry segmentation frameworkproposed in a recent infoDev-financed background study. Sim-ilarly, the SSP should promote theuse of a broader range of BankGroup instruments, away fromthe excessive reliance of recentyears on multisector TA loans.

• Regional/country strategies. TheSSP should include detailed Re-gional Bank Group II strategies,building on the recent, very suc-cessful exercise carried out forthe Europe and Central Asia Re-gion (ECA) telecommunicationsstrategy. To this end, manage-ment of the newly mergedBank/IFC unit should give toppriority to carrying out a rapidcountry-level II policy and strat-egy stock-taking exercise cover-ing every country where the Bankor IFC is involved. This exerciseshould not aim at the preparationof polished country reports, butrather at providing the basic in-


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moins compliquée des mo-nopoles publics. Ce déclinintervient au moment où ungrand nombre de pays endéveloppement risquent dene pas pouvoir participer à larévolution de l’information,avec peut-être des consé-

quences irréversibles pour leur pros-périté économique et sociale à longterme. Récemment, le Groupe de laBanque a manqué plusieurs occa-sions de renverser cette tendance.Premièrement, en 1995, l’ancien dé-partement de l’Énergie, des Mines etdes Télécommunications a organisé,avec succès, le premier Symposiumsur l’Information et le Développe-ment (qui a réuni des responsablesde haut niveau des pays emprun-teurs et de l’industrie); mais ce sym-posium n’a pas été suivi d’initiativesopérationnelles importantes de lapart des unités régionales de laBanque. Deuxièmement, en 1996,un projet de Stratégie de la BanqueMondiale sur l’Information et le Dé-veloppement – basé en grande par-tie sur les travaux remarquablesd’une équipe de la Banque en 1990– a été préparé mais jamais terminé.Troisièmement, la Banque, en 1998,a publié le Rapport sur le Dévelop-pement dans le Monde: La Connais-sance au Service du Développement;ce rapport aurait pu sensibiliser despublics importants sur l’ampleur dudéfi de la révolution de l’informationpour les clients de l’institution. Mais,pour l’instant, le principal bénéfice durapport a été l’impulsion récentedonnée à la gestion du savoir à l’in-térieur de la Banque.

Néanmoins, deux importantes ini-tiatives très récentes de la haute di-rection (le Portail Universel et lelancement par la SFI d’une Banquede Logiciels) sont peut-être le signe

güedad persistente de la po-lítica del Grupo del Bancosobre el papel del sector pú-blico en el fomento del accesoen las zonas rurales, que hallevado al personal a abste-nerse de promover opcionesde política innovadoras o de

proponer apoyo financiero del Banco(por ejemplo, para la creación deasociaciones entre el sector públicoy el sector privado) en esa esfera,dejando así una laguna que la CFI noha podido llenar por falta de sufi-ciente interés de los inversionistas.

Pese a la existencia dentro delGrupo del Banco de considerablesconocimientos y especialistas en es-feras relacionadas con la infraes-tructura de la información, esta faltade atención por parte de la admi-nistración superior y de los directi-vos a cargo de las operaciones delBanco en los países ha provocadouna erosión gradual del liderazgo in-telectual del Banco en el sector, quese había ganado durante la época,sin duda más sencilla, de los mo-nopolios estatales. Actualmente, mu-chos países en desarrollo se venenfrentados a la perspectiva de que-dar totalmente excluidos de la re-volución de la información, situaciónque tendría consecuencias posible-mente irreversibles para su bienes-tar económico y social a largo plazo.En los últimos años, el Grupo delBanco perdió, en efecto, la oportu-nidad de invertir esa tendencia envarias ocasiones. En primer lugar, en1995, cuando la antigua División deTelecomunicaciones e Informaciónorganizó con gran éxito el primerSimposio sobre la información y eldesarrollo (con representación dealto nivel de los países prestatariosy del sector), sin que hubiera unadecuado seguimiento operativo por

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parte de las unidades regio-nales del Banco. En segundolugar, en 1996, cuando sepreparó pero nunca se fina-lizó el proyecto de una es-trategia del Banco Mundialsobre la información en eldesarrollo, que se elaboró en

gran medida tomando como base lalabor innovadora de un grupo de tra-bajo establecido en 1990. En tercerlugar, en oportunidad de la publi-cación del Informe sobre el desa-rrollo mundial 1998/99: Elconocimiento al servicio del desa-rrollo, documento que tenía la po-sibilidad de sensibilizar a un públicode importancia fundamental acercade la magnitud de los desafíos conque se enfrentaban los países a raízde la revolución de la información,pero cuyo principal efecto ha sidohasta el momento el impulso re-ciente por parte del Banco de ini-ciativas de orientación interna sobregestión de los conocimientos.

No obstante, hay dos grandes ini-ciativas muy recientes impulsadaspor la administración superior (elPortal mundial sobre el desarrollo yla iniciativa de la CFI y Softbank enInternet) que pueden significar unavance trascendental, en la medidaen que el principal foco de atenciónde ambas iniciativas “a saber, elcontenido’’, no reste importancia aldesafío que plantea la conectividad,según se comprueba en el presenteestudio. En efecto, la actual prepa-ración del documento de estrategiasectorial para el ejercicio de 2001sobre la infraestructura de la infor-mación, así como la reciente deci-sión de la administración de fusionarlas unidades de telecomunicacionesdel Banco y la CFI y de consolidarla gestión de todos los servicios nocrediticios de la Red sobre Finanzas,

d’un changement radical –pour autant qu’elles ne fontpas oublier la gravité du pro-blème de connectivité souli-gné par l’étude. Lapréparation en cours du do-cument de stratégie secto-rielle sur les Infrastructures

d’Information pour l’exercice 2001 etles décisions récentes d’organiser lafusion des unités de té-lécommunications de la Banque etde la SFI et de consolider la gestionde tous les services non financiers duRéseau Finance, Secteur Privé et In-frastructure sont pour le Groupe dela Banque une occasion unique delutter contre la dispersion des annéesantérieures et de placer le problèmedes infrastructures d’information aucentre des objectifs de développe-ment de la Banque.

Dans ce contexte, le futur docu-ment de stratégie sectorielle devraitcomprendre les recommandationssuivantes :• Politiques. Le document devra

réaffirmer les principaux objectifsdu Groupe de la Banque dans levaste secteur des infrastructuresd’information, qui donnent lapriorité aux résultats finaux (parexemple l’accès à l’information, leprix et la qualité des services, lesincidences budgétaires) et nonpas seulement aux moyens em-ployés et aux produits intermé-diaires (investissement privé,concurrence ou régulation),comme dans la Politique Opéra-tionnelle 4.50. Le document devraaborder le problème des défi-ciences des politiques et des dis-parités dans les stratégies deréforme du cadre réglementaire,inhérentes aux conceptions duGroupe de la Banque sur l’en-chaînement des processus de li-


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tellectual foundation for theformulation of the BankGroup’s operational strategy.Consideration should begiven to using infoDev re-sources more systematicallyto support such country-levelII policy and strategic work.

• Partnerships. The SSP should pro-pose ways to streamline the vastarray of current external partner-ships in II, based on a systematicevaluation of their relevance, im-pact, and efficiency. The exces-sive fragmentation of theirmanagement within the BankGroup should be specifically ad-dressed, possibly by formally as-signing overall strategic andcoordination responsibility to themanager of the newly mergedBank/IFC unit.

• Staffing. The SSP should includea plan to continually update staffskills to cope with the demandsof this dynamic sector and enablethe Bank to maintain policy lead-ership. The SSP would build onthe shift that has already takenplace in recent years, both in theBank and IFC, in response to thenew private sector–led agenda.Given the rapid technologicalchanges and the increasing scopeof the information infrastructuresector, this may include expand-ing beyond the telecommunica-tions sector the successful staffexchange program already inplace and setting up a well-struc-tured knowledge sharing pro-gram with leading private sectorcompanies.

• Monitoring and evaluation. TheSSP should draw on this report tosummarize lessons from recentBank Group experience. And itshould include a detailed frame-

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Sector Privado e Infraestruc-tura (FPSI), brindan unaoportunidad única para queel Grupo del Banco eliminela fragmentación observadaen los últimos años y decidavolver a colocar a la infraes-tructura de la información en

el lugar que le corresponde en suprograma básico de desarrollo.

En este contexto, en el docu-mento de estrategia sectorial de pró-xima aparición se formulan lassiguientes recomendaciones:• Políticas. El próximo documento

de estrategia sectorial debe vol-ver a exponer los objetivos quese persiguen en el sector de la in-fraestructura de la información entérminos de los resultados últi-mos (por ejemplo, acceso a la in-formación, fijación de precios ycalidad de los servicios, aspectosfiscales), y no solamente en losmedios y los resultados interme-dios (inversión privada, compe-tencia o reglamentación), comoocurre con la OP 4.50. Debe ocu-parse de las deficiencias en laspolíticas y las diferencias en la es-trategia de reforma de las regla-mentaciones que siguenexistiendo con respecto al enfo-que del Grupo del Banco acercade la secuencia de la liberaliza-ción y la privatización del sector,así como del servicio “universal”y el acceso de las zonas ruralesy sus vínculos con el programa dereducción de la pobreza(inclusive mediante intervencionesen otros sectores, como el de laeducación y la salud).

• Opciones institucionales. Altiempo que se asegura la cohe-rencia con la estrategia del Grupodel Banco sobre desarrollo delsector privado, de septiembre de

béralisation et de privatisa-tion, sur « l’universalité » duservice, sur l’accès du monderural et sur les liens avec lespolitiques de réduction de lapauvreté (notamment grâceaux interventions dansd’autres secteurs tels que

l’éducation et la santé).• Options institutionnelles. Le futur

document devra être compatibleavec la stratégie de développe-ment du secteur privé de sep-tembre 1999, mais, sur la base del’expérience récente des pays ré-formateurs, il devra aussi donnerdes directives détaillées au per-sonnel du Groupe de la Banquesur les politiques et les optionsstratégiques dans le secteur des II; au lieu de la rigidité des so-lutions standards, ces directivesdevront coller aux situations par-ticulières de différentes catégo-ries d’emprunteurs. La stratégiepourra utiliser les classe-ments de pays proposés par uneétude récente financée par info-Dev. De la même façon, le do-cument de stratégie devraencourager l’emploi d’instrumentsopérationnels diversifiés, au lieudu rôle prépondérant récemmentaccordé aux prêts d’assistancetechnique multisectoriels.

• Stratégies régionales et de pays.Le document de stratégie secto-rielle devra comprendre des stra-tégies régionales détaillées enmatière d’infrastructures d’infor-mation, sur la base de l’expé-rience réussie de la RégionEurope et Asie Centrale pour lapréparation d’une stratégie destélécommunications. À cette fin,la direction de la nouvelle unitécommune de la Banque et de laSFI devra donner la plus haute


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work for the future monitor-ing and evaluation (M&E) ofthe revised Bank Group pol-icy and strategy. To this end,current M&E processesshould be enhanced at threelevels: (a) at the project/ac-tivity level, by setting M&E

systems for interventions that cur-rently fall through the cracks(telecommunications/informat-ics/II components of multisectorBank projects and the BankGroup’s advisory and analyticalservices); (b) for IFC projects, byspecifying at appraisal the pro-ject’s expected contributions tosector and development impactobjectives and tracking theirprogress toward achievement insupervision and evaluation re-ports; and (c) at the global level,by incorporating in the SSP spe-cific, relevant indicators of BankGroup effectiveness, includingsector outcomes and develop-ment impacts.

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1999, y aprovechando lasenseñanzas obtenidas de laexperiencia reciente en paí-ses que han introducido re-formas, en el próximodocumento de estrategia sec-torial se debe proporcionarorientación precisa al per-

sonal del Grupo del Banco sobrediversas opciones estratégicas yde política en materia de infraes-tructura de la información másadecuadas para las distintas ca-tegorías de prestatarios, en lugarde un modelo de reforma rígido,igual para todos. En el docu-mento de estrategia sectorial sepodría utilizar el marco de seg-mentación de países propuestoen un reciente estudio de ante-cedentes financiado por infoDev.Del mismo modo, en el docu-mento se debe promover el usode una gama más amplia de ins-trumentos del Grupo del Banco,para no depender excesivamentede los préstamos multisectoria-les de asistencia técnica, comoha ocurrido en los últimos años.

• Estrategias a nivel regional y delos países. El documento de es-trategia sectorial debe contenerlas estrategias regionales detalla-das del Grupo del Banco en ma-teria de infraestructura de lainformación, aprovechando el exi-toso proceso realizado para la es-trategia de telecomunicaciones dela región de Europa y Asia Cen-tral. A tales efectos, los directivosde la unidad del Banco y la CFIrecientemente consolidada debe-rían asignar la primera prioridad auna evaluación rápida de las po-líticas y estrategias nacionalessobre infraestructura de la infor-mación que abarque todos lospaíses en que el Banco o la CFI

priorité à un inventaire ra-pide des politiques et desstratégies d’II au niveau despays, couvrant tous les paysoù opèrent la Banque et laSFI. Cet inventaire ne devrapas aboutir à la préparationde rapports parfaits sur

chaque pays, mais il devra établirles bases intellectuelles pour laformulation de la stratégie opé-rationnelle du Groupe de laBanque. Il conviendra d’examinerla possibilité d’utiliser systémati-quement les ressources d’info-Dev pour appuyer les analyses depolitiques et de stratégie d’II auniveau des pays.

• Personnel. Pour assurer le main-tien du leadership de la Banque,le document de stratégie devracomprendre un plan d’ajustementpermanent de l’expertise du per-sonnel de la Banque aux exi-gences d’un secteur dynamique.La stratégie sera basée sur le mo-dèle des initiatives récemmentprises par la Banque et la SFI auservice des nouveaux objectifsde développement du secteurprivé. Compte tenu de la rapi-dité des évolutions technolo-giques et de l’élargissement dusecteur des infrastructures d’in-formation, le plan pourra étendreau delà du secteur des télécom-munications le programme encours d’échanges de personnelet mettre en place un programmebien structuré de partage de l’in-formation avec d’importantes en-treprises du secteur privé.

• Suivi et évaluation. Le documentde stratégie pourra utiliser le pré-sent rapport pour un bref rappelde l’expérience récente duGroupe de la Banque. Il devracomporter un cadre précis pour


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le suivi et l’évaluation futuredes nouvelles stratégies duGroupe de la Banque. À cettefin, il conviendra de renforcersur trois plans les procéduresde suivi et d’évaluation : a) auniveau des projets et autresactivités, en établissant des

systèmes de suivi et d’évaluationportant principalement sur les in-terventions échappant actuelle-ment à ces contrôles (lescomposantes télécommunica-tions/informatique et II des projetsmultisectoriels de la Banque etles services de conseils et autresactivités non financières duGroupe de la Banque); b) en cequi concerne les projets de la SFI,en précisant, au stade de l’évalu-ation, la contribution prévisibledu projet aux objectifs dedéveloppement économique etsectoriel et en utilisant les rap-ports de supervision et d’évalua-tion pour analyser les progrèsréalisés; c) au niveau global, parl’introduction dans le documentde stratégie sectorielle d’indi-cateurs appropriés de l’efficacitédu Groupe de la Banque, y com-pris les résultats du secteur et leseffets sur le développement.


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desarrollan actividades. Enesta tarea no debería preversela preparación de informesacabados sobre los países,sino más bien el establec-imiento de una base in-telectual para la formulaciónde la estrategia operacional

del Grupo del Banco. Debe consi-derarse la posibilidad de utilizarlos recursos de infoDev de ma-nera más sistemática para apoyarla labor en materia de políticas yestrategias de infraestructura de lainformación al nivel de los países

• Dotación de personal. En el do-cumento de estrategia sectorialse debe incluir un plan de per-feccionamiento continuo de lasaptitudes del personal para podersatisfacer las necesidades de estedinámico sector y permitir que elBanco mantenga su liderazgo enmateria de políticas. Se deberíatomar como base el cambio deorientación que ya se ha produ-cido en los últimos años tantoen el Banco como en la CFI, enrespuesta al nuevo programa im-pulsado por el sector privado. Envista de los acelerados cambiostecnológicos y del aumento delámbito de acción del sector de lainfraestructura de la información,este plan puede contemplar laampliación a otros ámbitos delexitoso programa de intercam-bio de personal que existe en laactualidad en el sector de las te-lecomunicaciones, y el estable-cimiento de un programa bienestructurado de intercambio deconocimientos con importantesempresas del sector privado.

• Seguimiento y evaluación. El do-cumento de estrategia sectorialdebe basarse en el presente in-forme para resumir las ense-

ES

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ñanzas recogidas de la ex-periencia reciente del Grupodel Banco. Asimismo, debeincluir un marco detalladopara las futuras actividadesde seguimiento y evaluaciónde las políticas y la estrategiamodificadas del Grupo del

Banco. Para ello deben perfec-cionarse los actuales proced-imientos de seguimiento yevaluación, en tres niveles: a) alnivel de los proyectos y activi-dades, mediante el establec-imiento de sistemas deseguimiento y evaluación de lasintervenciones que actualmenteescapan al seguimiento (teleco-municaciones/informática/com-ponentes de infraestructura de lainformación en proyectos multi-sectoriales del Banco y serviciosanalíticos y de asesoramiento delGrupo del Banco); b) al nivel delos proyectos de la CFI, especifi-cando en la evaluación inicial losaportes previstos de los proyec-tos a los objetivos sectoriales y entérminos de desarrollo, y ha-ciendo un seguimiento de losavances en la consecución deéstos en los informes de super-visión y evaluación, y c) al nivelmundial, mediante la incorpora-ción en el documento de estra-tegia sectorial de indicadoresespecíficos pertinentes de la efi-cacia del Grupo del Banco, in-clusive resultados sectoriales y elimpacto en el desarrollo.


x x v i

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x x v i i

CAS Country Assistance StrategyCFS or CCF Corporate Finance Services Department (IFC)DECRG Development Research Group (WB)ECA Eastern Europe and Central Asia RegionEDI Electronic data interchangeEMT Energy, Mining, and Telecommunications Department (WB)EMTII Telecommunications and Informatics Division (WB)ERR Economic rate of returnESMAP Energy Sector Management Assistance ProgramESW Economic and sector workFIAS Foreign Investment Advisory ServicesFPSI Finance, Private Sector, and Information NetworkFRR Financial rate of returnGDP Gross domestic productGKP Global Knowledge PartnershipGPE Growth of productive enterpriseIAD Internal Audit DepartmentIAR/XPSR Investment Assessment Report/Expanded Project Supervision ReportICT Information and communications technologyIFC International Finance CorporationII Information infrastructureinfoDev Information for Development ProgramIT Information technologyITU International Telecommunications UnionM&E Monitoring and evaluationMIGA Multilateral Investment Guarantee AgencyMIS Management information systemsOED Operations Evaluation Department (WB)OEG Operations Evaluation Group (IFC)OP Operational PolicyPSD Private sector developmentPSR Project Status Report (WB)PSR Project Supervision Report (IFC) PTO Public telecommunications operatorQAG Quality Assurance GroupSAL Structural Adjustment LoanSECAL Sector Adjustment LoanSLT Sri Lanka TelecommunicationsSSP Sector strategy paperTA Technical assistanceTAL Technical Assistance LoanTATF Technical Assistance Trust FundsVANS Value-added network servicesVSAT Very small aperture terminalWBI World Bank InstituteWDR World Development ReportWTO World Trade Organization

ABBREVIATIONS AND ACRONYMS

1

INTRODUCTION

Study Objectives and Rationale

The telecommunications and information technology (IT) sectors ofthe world economy changed dramatically throughout the 1990s,driven by major improvements in technology, the development of new

services with potential widespread applications (for example, the Internet),industry restructuring, the shift in the composition of capital flows to de-veloping countries toward private direct investment, and major changes ingovernment policies. The convergence of technologies, services, and mar-kets in these sectors has created what can be best understood as a singleinformation infrastructure (II) sector. The rapid growth of II is expected tofurther accelerate, offering unprecedented opportunities for economic andhuman development in poor countries. The advent of e-commerce, in par-ticular, has the potential to alter fundamentally the way commerce and tradeare conducted in many countries. Government service delivery, educationand training, working, and consumption practices will all be affected.

In response to these developments, most de-veloped countries, and some developing coun-tries, have adopted “information society” policies.Many developed countries have allocated re-sources to ensure that II access will be extendedto all people. Concern is growing, however, thatmost developing countries will not be able totake advantage of II opportunities, furthering thegap between rich and poor countries.

The recent rapid changes in the II sector havebeen accompanied by significant changes in theBank Group’s activities and approach in thissector. Among the changes have been the build-up of significant International Finance Corpora-tion (IFC) and Multilateral Investment Guarantee

Agency (MIGA) portfolios; major shifts in the mixof instruments (lending and nonlending) used bythe Bank; development of new partnerships (forexample, infoDev); and staffing and organiza-tional realignments within the Bank Group. Thisstudy evaluates the effectiveness of the BankGroup’s response to the challenges of the 1990s.It was also scheduled to contribute to the prepa-ration of the Bank Group Sector Strategy Paper(SSP) for Information Infrastructure.

Study Scope and MethodsThe study was designed as more than an updateof the Operations Evaluation Department’s (OED)1993 telecommunications review1 in two major

11

respects. First, it is the first joint World BankOED–IFC Operations Evaluation Group (OEG)evaluation of both Bank and IFC activities in asector. Second, it attempts to expand the scopeof the evaluation beyond the narrow confines ofthe telecommunications sector—within the con-straints of data availability (see below)—con-sistent with the broader II focus of the SSP.However, given its limited budget and absenceof fieldwork, the study did not set out to pro-vide fundamentally new insights into the “howto” of telecommunications sector reform, a sub-ject abundantly covered in the recent literature(the report does summarize generic lessons onsector reform and illustrates them with examplesdrawn from Bank Group experience). Rather, thestudy’s primary focus, and its main value-added,is on the relevance, efficacy, and efficiency ofthe Bank Group’s assistance strategy in a sectorin which it has been an essentially marginalplayer—in financial terms at least.

On the World Bank side, the Bank Group ac-tivities reviewed for the study were the 35telecommunications projects completed andevaluated since the 1993 OED review (bothstand-alone telecommunications projects andmultisector or adjustment loans with telecom-munications or II components), the 57 projectsthat are still active, and Bank-funded sectorwork, as well as some 25 trust-funded advisoryactivities (mostly under the aegis of the PrivateSector Development Department, or PSD) un-dertaken in the II area since 1993. The studyalso draws from the findings of two inde-pendent evaluations of informatics compo-nents of Bank projects and of the Informationfor Development (infoDev) program.2 On theIFC side, the report covers an evaluation of 21telecom3 investment operations approved sinceFY934 and a review of the design and charac-teristics of the three telecommunications advi-sory assignments (managed by CorporateFinancial Services, or CFS) and the 27 tele-com-related projects financed by the Techni-cal Assistance Trust Fund (TATF) program. Nosystematic review of informatics or II compo-nents of nontelecommunications IFC opera-tions was carried out because there was no

database of such projects/components.The review did not carry out any fieldwork

and drew from the following sources: • A review of key Bank and IFC policy and strat-

egy documents (OP 4.50 and annual IFCtelecommunications strategies for FY93–00),project and activity reports (concept papers,appraisal and completion reports, as well asselected supervision reports), and previousevaluations.

• An analysis of selected internal cost data. • Interviews of Bank and IFC staff. • Telephone calls and exchanges of e-mails

with a sample of stakeholders (borrowers,private sector and other donors, and multi-lateral organizations) and IFC clients selectednonrandomly and based on ease of access.

• An analysis of evaluation and performance rat-ings (OED ratings of the 35 completed projectscovered by the study as well as performanceratings of the 21 IFC investment operations ap-proved during FY93–96, using an evaluationframework adapted from the self-evaluationsystem).5

More recent Bank projects as well as non-lending services, for which evaluations of outcomewere not yet possible or available, were reviewedfor their design characteristics and relevance. Su-pervision ratings of active Bank projects wereused primarily to assess aggregate trends and pat-terns in the current Bank telecommunicationsportfolio.6

The review of individual Bank and IFC ac-tivities was carried out using the respectiveevaluation frameworks of OED and IFC, whichtake into account differences in mandates andproject features. In addition, six countries(Brazil, Hungary, Indonesia, Jordan, Sri Lanka,and Tanzania) where both the Bank and IFChave been active were selected for joint re-views by combined OED/OEG teams. Thesecountry reviews assessed the design, imple-mentation, and impact of the Bank Group’s as-sistance as a whole. Although not based on arandomly selected, representative sample, thecountry reviews were helpful in illustratinggood as well as poor examples of Bank Groupsynergies.


2

3

OVERVIEW OF BANKGROUP ASSISTANCE BY SECTOR

Until the late 1980s, economies of scale and scope, together with thepublic utility characteristics of telecommunications, kept ownership,control, operation, and policymaking squarely in the public sector.

While public monopolies in developing countries attempted to expandtheir telecommunications networks and to fulfill social welfare objectivesthrough such instruments as cross-subsidization, high levels of inefficiencykept them from constructing more than the rudiments of a national telecom-munications system.

Recent Sector DevelopmentsThe 1993 OED review documented pressures forchange in the sector since the early 1990s. Thesepressures came from rapid technological inno-vation in the industries supplying equipment topublic telecommunications operators (PTOs),advances in the technologies of supply, and in-novations in network use that were driven pri-marily by value-added network service (VANS)suppliers. Rapid convergence of telecommuni-cations and information technology (IT), in-creasing differentiation and diversification invalue-added services, and heightened competi-tion based on continual innovation and accessto global markets have now rendered monop-oly control of telecommunications infrastructureinefficient.

In developed countries, technological inno-vations, carried out by large corporate users,

have generated most of the pressures for telecom-munications reform. Relatively high levels of net-work penetration and a mature and diversifiedmarket have resulted in reform objectives thatemphasize competition to lower prices and pro-vide a diversified portfolio of VANS to a de-manding customer base. In contrast, in developingcountries, poor network penetration, less-developed domestic capital markets, limited tech-nological expertise, and constraints on raisingresources by government departments have madeforeign private investment indispensable to ex-panding the telecommunications infrastructure.Capital-starved PTOs, burdened with inefficientmanagement and budgetary and fiscal constraints,have increasingly found themselves unable to dealwith the needs of technological advances or in-vestment in large-scale infrastructure rollout. Oneway to overcome this has been through policy

22


4

reforms to open the economy and reduce con-straints on private and foreign investment.

But liberalization and privatization, in devel-oped and developing countries alike, have ex-posed complex policy and regulatory issues.These include the form that restructuring of thePTO will take, terms of privatization, marketstructure in competitive segments, legal arrange-ments, functioning of regulatory agencies, com-patibility between political considerations ofuniversal access and employment, and economicconsiderations of efficiency, competitiveness,and innovation. Perpetual and rapid changes intechnology, network architecture, and serviceprovision raise complex issues and conflicts inthe industry that need to be resolved. Usingpolicy and regulatory decisions to do this strainsthe institutional capacity of even the most de-veloped countries.

Implications for the Bank Group’sDevelopment and Poverty Reduction AgendaThe development since the 1993 OED reviewwith the most profound implications for devel-oping countries is the growing convergence oftelecommunications and information technol-ogy, currently exemplified by the Internet rev-olution, with its attendant opportunities andrisks. Predicting the impact of this revolution onthe developing world is a perilous exercise, par-ticularly as the revolution is disrupting the ob-served historical relationships between networkdevelopment and socioeconomic parameters,making if difficult to use econometric techniques.

Nonetheless, a growing body of research pointsto three main areas in which networking can ac-celerate social and economic development: • It fosters growth through improved efficiency

and competitiveness (including by attracting for-eign investment) and better opportunities to ex-ploit low factor costs in international markets.

• It permits a more efficient delivery of social serv-ices (education, health care, public adminis-tration), particularly to the most isolated andpoorest segments of the population, such as inrural areas.

• It provides opportunities to increase socialcapital by reinforcing social cohesion, equal-

izing access to information and knowledge,fostering political participation, and enablingthe bypassing of failing domestic institutions. However, a recent study commissioned by

infoDev for the forthcoming sector strategy paper(SSP)1 offers a stark warning: many countries—the so-called latecomers, characterized by lowconnectivity rates, moderate or low literacy lev-els, and low incomes—may be unable to par-ticipate in this revolution. This will lead to anincreasing gap in social and economic well-being between the information “haves” and“have-nots” of the world.

Given the magnitude and still-evolving natureof this challenge, the Bank Group’s future rolewill have to be redefined in light of its main com-parative advantages, including: • Its access to and ability to act as a catalyst for

global experience and knowledge• Its experience, through IFC, in financing pri-

vate sector projects in developing countries • Its ability to engage borrowers on key strate-

gic and policy issues • Its ability to act as an honest broker among

often-competing donors and private industrystandards or agendas

• Its ability to deal with the cross-cuttingdimensions of the new information infra-structure sector (particularly within a Com-prehensive Development Framework)

• Its capability to mobilize substantial resourcesfor the piloting and scaling up of promisinggrassroot initiatives.

Bank Assistance in the 1990s

Policy and Strategic FrameworkThe relative telecommunications policy vacuumthat the 1993 OED review identified has been for-mally filled by OP 4.50 of May 1995. The con-tent of this policy statement is in line with therecommendations of World Development Report1994: Infrastructure for Development. Specifi-cally, OP 4.50 advocates “(a) largely private pro-vision of telecommunications services; (b) aregime of open entry and competition; and (c)Government responsibility for sector policy andregulation, reconciling commercial and socialequity objectives.” Accordingly, the OP makes

5

OV E R V I E W O F B A N K G R O U P A S S I S TA N C E BY S E C TO R

lending to state enterprises contingent on sectorreform and mandates that “the Bank, IFC, andMIGA work together in formulating joint assis-tance packages, making flexible and innovativeuse of their various instruments.” The OP, how-ever, has not yet been given operational formthrough either a global Bank strategy or a set ofregional telecommunications strategies (except fora June 1999 strategy for the Europe and CentralAsia Region). Nor does the Bank have a similarpolicy statement, or operational strategy, for ITor the II sector.

World Development Report 1998: Knowledgefor Development sowed the seeds for such abroader approach, however, and the forthcom-ing Bank Group sector strategy paper on in-formation infrastructure (FY01) is expected tofill outstanding gaps. The sector strategy paperis expected to reassess existing telecommuni-cations policies in the context of the convergenceof telecommunications and IT, take an inte-grated Bank Group approach, and operational-ize the Bank Group policy.

Telecommunications in Bank ProjectsThe 1993 OED review documented trends andpatterns in Bank telecommunications lendingthrough the 1980s and early 1990s. It found apredominance of relatively large investmentloans (on average five per year, accounting for2 to 3 percent of total Bank lending) and an in-crease in lending to the Europe and Central AsiaRegion, mostly from 1990 onward. It also notedthe gradual appearance, mostly from 1990, oflending instruments such as sector adjustmentloans and multisector loans (including techni-cal assistance loans and structural adjustmentlending) that had telecommunications compo-nents or conditionality. The OED review sawthe use of the new lending instruments—to-gether with an increased emphasis in project de-sign on broader issues of sector structure,competition, and private sector participation—as evidence that the Bank had already em-barked on the “new” telecommunications sectoragenda that was subsequently formalized inOP 4.50.

0

100

200

300

400

500

600

700

800

F i g u r e 2 . 1 B a n k Te l e c o m m u n i c a t i o n s P r o j e c t s A r e

I n c r e a s i n g i n N u m b e r, D e c r e a s i n g i n F u n d i n g

199919981997199619951994199319921991199019891988198719860

2

4

6

8

10

12

US$ million Linear (US$million)Number of projects Linear (Number of projects)

US$ million Number of projects


6

Indeed, changes in the scope and form of Bankinvolvement in the sector since 1993 have accel-erated dramatically. The number of projects is in-creasing, while the total commitments are declining(figure 2.1). Furthermore, the regional distributionof lending has changed and there has been a shifttoward multisectoral lending instruments ratherthan individual investments (figure 2.2).

The characteristics of the FY93–99 period are:• A significant increase in the total number of

approved projects involving telecommunica-tions to an average of eight per year betweenFY93 and FY99.

• A reduction of 40 percent in the estimated vol-ume of Bank funds dedicated to telecommu-nications activities. The new figure is about$210 million per year on average—excludinginformation technology components of Bankprojects—that is, less than 1 percent of totalBank lending.2

• A complete reversal in the respective shares oftelecommunications-only versus multisectorprojects, with the latter accounting for as muchas two-thirds of the total during that period.

• The predominance of technical assistance

(TA) loans compared with other instruments—half the total number of operations, mostly formultisector projects in public enterprise re-form, privatization, and regulatory reform.

• A heavy concentration of activities in theAfrica and Latin America and the CaribbeanRegions, comprising almost exclusively mul-tisector loans, which together account for 34of the 54 projects.

Project Objectives and Design The trend in the objectives and components ofthe telecommunications projects reviewed bythe study has followed the overall lending trendin infrastructure. Since 1993, Bank telecommu-nications projects have clearly shifted toward thesector reform and privatization objectives em-bodied in OP 4.50 and away from physical in-frastructure, commercialization, and capacitybuilding (table 2.1 and Annex C).

Physical objectives. Most projects through the 1980s focused on financing investment tomodernize and expand physical plant and net-works. In the 1990s, however, the content of thephysical components changed to spectrum man-

0

10

20

30

40

50

60

FY86–92 FY93–99

Sub-SaharanAfrica

Middle East andNorth Africa

Latin America andthe Caribbean

Europe andCentral Asia

East Asiaand Pacific

Africa

F i g u r e 2 . 2 T h e R e g i o n a l D i s t r i b u t i o n o f P r o j e c t s

a n d t h e I n s t r u m e n t s U s e d H a v e C h a n g e d

Number of evaluated projects

0

10

20

30

40

50

60

FY86–92 FY93–99

TelecommunicationsinvestmentTelecommunicationstechnical assistanceTelecommunicationsadjusted

Multisector technicalassistance

Multisector other

Multisector adjusted

Number of evaluated projects

Source: World Bank data.

7


agement equipment. Competition in mobiletelephone markets and the increasing demandfor mobile telephone services have intensifiedemphasis on procurement and installation ofhardware and software for radio spectrum plan-ning, management, and monitoring systems.

Agency-level institution building. In the 1980s,projects sought to strengthen the organizationand management of state-owned telecommu-nications enterprises—what the 1993 OED re-view called “institutional strengthening at theagency level.” In such projects, TA to help com-mercialize the monopoly and improve its func-tioning included training and consultancy infinancial management, or modernizing ac-counting and financial systems and procedures;commercial management, or billing and collec-tion systems; human resources management;management information systems (MIS), or im-proving project management; and auditing pro-cedures, materials management, and operationsand maintenance.

Regulatory framework. A majority of the proj-ects approved after 1993 (67 percent) had sig-nificant components to set up a sector-specificregulatory agency. Projects emphasized the im-portance of independent regulation and a legalframework to regulate the sector. Assistance tothe regulatory agency usually consisted of train-ing for regulatory staff and, sometimes, special-ized consulting services.

Privatization of the incumbent monopoly.While most projects before 1993 emphasized re-form and operational efficiency of the monop-oly enterprise, subsequent projects have includedprivate sector participation as an objective. Usu-ally this has involved partial or complete divest-ment of the assets of the state, at least as along-term goal.

Introduction of competition. Technologicaladvances have made continued monopoly con-trol of the telecommunications sector untenable.And both Bank policy and recent projects haveemphasized the entry of additional operators inthe various segments of the telecommunicationssector as an essential condition of sector re-form. Except in Latin America and the Caribbean,most projects focused on introducing competi-tion in mobile telephone operations, viewingcompetition in basic wireline service as more ofa long-term goal.

Tariffs and interconnection fees have alsobeen important to liberalization, but have beenmentioned in comparatively fewer projects.Where tariffs or interconnection have been men-tioned, it has usually been in the form of tariffstudies conducted by external consultants.

Economic and Sector Work and TrustFund–Financed Technical Assistance ActivitiesAs in its lending interventions, the Bank has rad-ically altered the focus of its telecommunications

P r o j e c t O b j e c t i v e s H a v e S h i f t e d f r o m P h y s -i c a l I n f r a s t r u c t u r e t o w a r d R e f o r m a n d P r i v a t i z a t i o n

T a b l e 2 . 1

Pre-1993 approvals Post-1993 approvalsProject objective Number Percent a Number Percenta

Physical infrastructure 33 89 23 42

Rural 5 14 7 13

Information infrastructure 0 – 4 7

Commercialization or corporatization 25 68 18 26

Capacity building 33 89 34 62

Sector reform 17 46 47 82

Universal service 0 0 0 0

Legislation or regulation 8 22 37 67

Privatization 6 16 42 76

a. Does not add to 100 percent.Source: World Bank and IFC data.


8

nonlending activities. Whereas most of the Bank’seconomic and sector work before 1993 was for-mal country or Regional sector reports and mem-oranda, none has been issued since 1993, with theexception of a 1996 discussion paper on telecom-munications reform in Mexico, a 1997 discussionpaper on telecommunications policies for Sub-Saharan Africa, and the 1999 Europe and CentralAsia Region telecommunications strategy. Instead,the Bank’s effort has consisted of research papersor “viewpoints” on generic issues of sector regu-lation and competition. In addition, a large researchproject on telecommunications reform in Africa wasrecently undertaken by the Bank’s DevelopmentResearch Group, with partial funding from the U.S.Agency for International Development.

In addition to Bank-funded nonlending serv-ices, 11 telecom-related activities totaling about$300,000 were funded in the FY94–98 periodunder the Privatization Trust Fund (administeredby the Bank’s Private Sector Development andPrivatization Group), and 14 more activities, to-taling about $2.8 million, were funded by the Pol-icy and Human Resources Development Fundbetween 1991 and 1996. However, the infor-mation available on the size and scope of theseactivities reveals that they have only partly filledthe gap in country-focused policy and strategywork. Instead, many have concentrated on sup-porting individual privatization transactions orproviding support to Bank project preparation.

Information Technology in Bank ProjectsThe latest inventory of Bank projects with ITcomponents3 identifies more than 1,000 suchprojects in the portfolio. Those components haveincluded (a) investments in communications in-frastructure and information technology; (b) tech-nical assistance in the set-up of institutionalmanagement systems, including project operationssystems (for example, for health, education, or mi-crocredit projects) and financial management sys-tems (for example, for budget formulation, billing,and the like); and (c) related training. Total fund-ing for the components is estimated to have av-eraged more than $2.0 billion per year in recentyears, 84 percent for the purchase of goods and16 percent for consulting services. Africa andLatin America and the Caribbean had the largest

shares of projects with informatics components (29percent and 20 percent, respectively) as did thetelecom, public sector management, and educa-tion sectors (respectively, 19 percent, 11 percent,and 10 percent). Few projects had a primaryfocus on IT; those that did were mostly in the areaof tax or trade reform.

infoDev infoDev is a global grant program that began inSeptember 1995 at the Bank’s initiative. Its ob-jective is to promote innovative projects that useinformation and communication technology (ICT)for economic and social development. The pro-gram is managed by the Bank, which also pro-vides contributions in kind, and it receives fundingfrom several bilateral and multilateral donors aswell as a handful of private enterprises and non-profit foundations. infoDev activities includeworkshops, assessments, demonstration projects,and feasibility studies.

As of December 31, 1999, infoDev had ap-proved a total of 113 projects (outside the Y2KInitiative) and had provided grants totaling $19.7million, pointing to a relatively small averageproject size of about $174,400. Grants can beprovided only to outside partners that have anarm’s-length relationship with the World BankGroup. The largest number of activities involvedinformation sharing and dissemination (30.7 per-cent), followed by local services (28 percent),global rule setting (17.3 percent), capacity build-ing and training (17.3 percent), advocacy (4 per-cent), and research and statistics (2.7 percent).Thirty-five percent of the projects were interre-gional or global, while 30 percent were in Africa,16 percent in Latin America and the Caribbean,9 percent in Europe and Central Asia, and only2 percent in the Middle East and North Africa. Inaddition to these activities, infoDev managed theseparately funded Y2K Initiative launched in Feb-ruary 1998, which had approved 136 grants in 74International Development Association countries,for a total of $25.6 million as of December 1999.

Other Partnerships and Initiatives in Information Infrastructure The infoDev program is the largest and mostvisible of numerous Bank-sponsored initiatives

9


and partnerships broadly related to the infor-mation infrastructure (II) sector. The most re-cent initiative is the proposed Global Gateway(box 2.1). While two initiatives—Africa Con-nectivity Initiative and Knowledge for Devel-opment—deserve special mention because oftheir dedicated staff and funding,4 many oth-ers are microactivities sponsored by variousparts of the Bank without much apparent co-ordination or monitoring of their design, fund-ing, and impact. While no complete inventorycould be found, a partial list of client-focused,knowledge-based initiatives at the World Bankpublished on the Global Knowledge Partner-ship’s (GKP) Internet site lists 42 activities,most of which were apparently inspired bythe World Development Report 1998: Knowledgefor Development and the Bank’s recent em-phasis on knowledge management.

Africa Connectivity Initiative. In collaborationwith other United Nations agencies and multi-lateral development organizations, the InternetConnectivity Initiative in the Africa Region pro-motes the development of connectivity activitiesin Sub-Saharan Africa. The initiative has organ-ized a major conference on the theme in col-laboration with the Economic Commission forAfrica and the International Development Re-search Centre; identified four pilot countries—Ghana, Malawi, Mozambique, and Senegal—foraccelerated preparation of connectivity compo-nents; and produced a handbook on connectivity.infoDev is funding two activities of the Africa

Connectivity Initiative, “ICO/21st Century forAfrica” and “Rural Telecommunications.”

Knowledge for Development Partnership. TheWorld Bank Institute (WBI) has recently initiateda forum to foster cooperative activities that pro-mote access to, and effective use of, knowledgeand information as tools of sustainable devel-opment. WBI also provides information dis-semination, partnership management andoutreach, and activity coordination for the GKP—an evolving, informal collaboration of some 50organizations, including infoDev, working topromote knowledge for development.

IFC Assistance Since 1993

Policy and Strategic FrameworkIFC promotes growth in the developing world byfinancing private sector projects and providingtechnical assistance and advice to governmentsand businesses. IFC participates in a project onlywhen it can make a special contribution thatcomplements the role of market operators. Itplays a catalytic role, stimulating and mobilizingprivate investments. By investing in viable com-mercial enterprises, IFC accepts the same risks andexpects to earn the same returns as private par-ticipants in the same risk categories. The prof-itability of IFC’s investments is important inbringing market discipline to its projects and inreducing the financial burden on its shareholders.Profitable IFC investments have been vital indemonstrating to private investors that well-

The World Bank Group has recently launched an effort tobuild a Global Development Gateway on the World Wide Webin support of worldwide poverty alleviation. The Gatewaywill be built by and serve developing country governments,the international donor community, the media, civil society,and the private sector. It will help people, agencies, and com-panies by connecting them to new ideas, funding, and op-portunities. It will exchange knowledge and information withgovernments and their partners that will promote national, re-gional, and local development. The Bank Group is preparing

a three-year business plan and budget to construct a globalgateway and help developing countries create national gate-ways in conjunction with the Comprehensive DevelopmentFramework.

The gateways will support countries in their own initiativesto use the benefits of the Internet for their development. Severalare already being implemented. The first phase (a proof of con-cept) was scheduled for launch in the first half of 2000. Majorprivate companies have been invited to contribute to planningand funding this progressive venture.

T h e G l o b a l G a t e w a y I n t e r n e t P a r t n e r s h i pf o r D e v e l o p m e n t

B o x 2 . 1


1 0

structured, careful investments can offer attractiverisk/reward opportunities.

In the telecommunications sector, IFC policy isgoverned by OP 4.50, and its projects are held tothe same financial, economic, and environmentalpolicy standards as other IFC projects. 5 IFC’stelecommunications sector strategies, which are up-dated annually, reflect IFC’s mandate to supportfinancially and economically viable projects whereprivate capital is otherwise not available on rea-sonable terms and where other investors are pre-pared to provide at least 75 percent of thefinancing. IFC’s annual telecommunications sec-tor strategies have generally been focused onidentification of opportunities and on a businessand marketing plan to support those opportuni-ties. Given their business and marketing focus, theygenerally have not articulated IFC’s developmentimpact objectives and strategic framework norhas there been a process to formally discuss themwith Bank sector management.6

Telecommunications InvestmentsIFC made its first investment in telecommuni-cations in FY70, a $4.5 million loan to help fi-nance a $180 million fixed-line expansion projectin Asia. The next investment was approved inFY86. As of end FY99, IFC’s cumulative grossinvestment commitments7 amounted to $2.2 bil-lion, of which 43 percent, or $0.92 billion, wasfor IFC’s own account and the balance of $1.3billion was for the account of participant com-mercial banks. These commitments were madefor 41 projects in 30 countries, with total proj-ect costs of $8.5 billion (figure 2.3). These trans-late to a mobilization rate8 of 9.3x comparedwith 5.6x for IFC’s total portfolio in FY99. Av-erage net investment is $23 million, while av-erage project cost is $208 million. These aresignificantly larger than IFC’s portfolio aver-ages. At end-FY99, IFC’s exposure in telecom-munications represented 8 percent of the totaldisbursed portfolio.

Other features of the telecommunicationsportfolio include the following: • Since FY70, IFC has $280 million total equity

or quasi-equity investments in 28 projects.These investments represent 30 percent of netcommitments. About three-quarters of the

equity investments are in eight countries that,in 1997, had telephone densities9 rangingfrom 2.47 (Indonesia) to 30.42 (Hungary).

• From the traditional basic networks, IFC’s in-vestments recently have been moving to themobile telephone subsector. As of end-FY99,IFC’s net investment commitments to mobiletelephone projects amounted to $298 mil-lion, or 32 percent of the total. IFC also hasinvestments in basic and mobile projectswhich, when combined with “mobile,” ac-count for 61 percent of total net investmentcommitments, or $559.3 million.

• The telecommunications portfolio is heavilyweighted by funding toward Latin Americaand the Caribbean, which accounts for $373million, or about 41 percent of net commit-ments, as of the end of FY99. However, re-cent committed approvals show a shift towardEastern Europe and Sub-Saharan Africa. Fromits peak of 66 percent in FY96, committed ap-provals on new projects in Latin America andthe Caribbean dropped to 30 percent in FY97and to none in FY98 and FY99.

• Three quarters, or $706 million, of net com-mitments are for projects approved after theTelecommunications Division was created inFY93.

• The decline in the dollar volume of commit-ments and approvals reflects the recent shiftfrom large post-privatization wireline invest-ments in the mid-1990s to relatively smallermobile telephone investments in higher-riskcountries. The drop in commitments is due tothe difficulty in concluding agreements inhigher-risk countries where the regulatoryframework is less developed.

• The decline in both number and dollaramounts of approvals in recent years is alsodue to IFC’s increased focus on difficult mar-kets, where projects are few and smaller andwhere private sector interests are limited.Given the success and demonstration effectsof early IFC and subsequent private sectortelecommunications projects, along with theoverall improved outlook for these liberalizedmarkets, private flows to these markets haveincreased. This prompted IFC to move on tonewer and riskier markets where IFC’s pres-

1 1


ence can have a larger impact in stimulatingprivate sector investments.

• By number, 63 percent of the commitmentsare in low- and lower-middle-income coun-tries. But by funding, only 40 percent of com-mitments are in these countries, reflectingthe small size of projects.

• By number, 71 percent of the commitmentsare in high- and high-medium-risk countries.10

By funding, 69 percent of commitments arein these countries.

Other IFC Activities—TelecommunicationsAdvisory services. IFC’s Corporate Finance Ser-vices Department (CFS) provides fee-based ad-visory services that facilitate private sectorparticipation in state-owned-and-operated en-terprises. It has undertaken three telecommuni-cations advisory assignments (Ecuador, Haiti,and Uganda) since its establishment in FY89 (4percent of the total CFS advisory assignmentsthrough FY99). All three assignments dealt with

privatization of the state-owned telephone com-pany. One assignment included advice on the li-censing of a second national operator. Twoassignments were undertaken in FY95 and onein FY96. No Foreign Investment Advisory Service(FIAS)11 activities were undertaken specificallyin the telecommunications sector.

Technical assistance. IFC provides TA fund-ing using grants from bilateral and multilateraldonors under the Technical Assistance TrustFunds (TATF) Program. The TA assignmentsunder the TATF program are developed andtask-managed by IFC’s operations staff. Tech-nical assistance under this program includes fea-sibility and prefeasibility studies, projectidentification studies, strengthening of the en-vironment for private sector development, ca-pacity building for private businesses andgovernment agencies, and privatization. IFCapproved 27 telecommunications sector TATFprojects from FY91 to FY99 for a total of $1.9million.

F i g u r e 2 . 3 I F C A n n u a l Te l e c o m m u n i c a t i o n s

C o m m i t m e n t s a n d A p p r o v a l s , 1 9 8 6 – 9 9

199919981997199619951994199319921991199019891988198719860

50

100

150

200

250

IFC net at commitment IFC net at approval

0

1

2

3

4

5

6

7

8

9

Number of approvalsNumber of commitments

Amount ($ millions) Number

Fiscal Year

Source: IFC data.


1 2

Among the notable features of the telecom-munications TA approvals are: • Telecommunications TA approvals in the 1990s

averaged 2.9 percent of the total TA approvals.• Sub-Saharan Africa accounted for 57 percent of

the TA projects by funding, followed by Asia (17.5percent), Latin America and the Caribbean (12percent), Europe (8.3 percent), and Central Asia,the Middle East, and North Africa (5.4 percent).This reflects IFC’s more proactive telecommu-nications strategy in high-risk countries.

• Up to 52 percent of the countries with TATFassignments are low income. Approvals inthese countries account for 72 percent offunding. By number, 81 percent of the coun-tries with TATF assignments are high andhigh-medium risk. By funding, 95 percent ofapprovals are in these countries.

• While Sub-Saharan Africa had only 2 percent ofIFC’s committed telecommunications invest-ments, more than half of TA assignments werein that Region. Latin America and the Caribbeanhad 41 percent of IFC’s telecommunications in-vestments, although it had only 12 percent ofTA assignments. This is probably due to the dif-ference in the level of reform process and lib-eralization between the two Regions.

• Telecommunications TA included such as-signments as structuring a privatization strat-egy for the state-owned telecommunicationsoperator; providing preprivatization and proj-ect preparation assistance (preparation of fea-sibility studies, organizational strategies, andmarket assessments), and reviewing the do-mestic telecommunications sector.

• Through FY99, IFC made investment com-mitments to five telecommunications projectsthat featured TATF assignments related toproject preparation.

• All four TATF assignments on regulatory re-form were connected with CFS privatizationadvisory activities.

Other IFC Activities in the InformationInfrastructure Sector Whereas its telecommunications investmentshave shifted from basic telephone to mobile tele-phone networks, IFC has made only a few non-telecommunications investments in the II sector.

As of the end of FY99, IFC’s investment com-mitments in this area amounted to only $120million, or 13 percent of the total in the sector.IFC made its first investment in this area in FY92,an $8 million investment in a project to manu-facture digital telecommunications switches. OtherIFC investments had the following components: • Upgrade of earth (satellite) station facilities to

introduce and link an electronic data inter-change (EDI) service for business-to-businesselectronic commerce; support an existing, ex-panding Internet subscriber support base; andenable the creation of private data networks.

• Establish paging systems; a nationwide satel-lite-based tiny aperture terminal (VSAT) net-work for data and occasional voice; andnationwide e-mail and fax store-and-forwardservices.

• Manufacture, launch, and operate a com-mercial satellite for domestic and regionalcommunications and TV broadcasting appli-cations. Expand a cable TV network.

Information Infrastructure Components of Nontelecommunications ProjectsAny project in any sector can have telecommu-nications and II components. For instance, gen-eral manufacturing projects can includetelecommunication and II facilities. A hospitalproject can have a telemedicine component,while an education project can include Internetinfrastructure. However, IFC does not keep aseparate database of nontelecommunicationsprojects with II components.

Investments in telecommunications and II arealso made through investment funds. IFC has fivecommitted technology and infrastructure fundsthat are likely to have significant subprojects inII. Only two of them have significant invest-ments in telecommunications and telecom-relatedbusinesses. One equity fund has a third of its ap-proved investments by value in a wide-area net-work systems integrator. The other fund hasmade nearly half of its investments in eighttelecommunications projects. IFC’s investmentcommitments in these two equity funds repre-sent 70 percent of the total investment commit-ments made by IFC in those five technologyand infrastructure funds.

1 3

Completion RatingsA closer look at the post-1993 project ratings re-veals that this deterioration may have been tem-porary. The 12 most recent projects (those

approved after 1990) received substantially bet-ter sustainability and institutional developmentratings than those approved in the late 1980s(table 3.2). This is noteworthy considering that

PROJECT AND SECTOROUTCOMES

Efficacy of Bank Telecommunications Projects—Performance and Outcomes

Telecommunications projects have generally performed better than theoverall Bank portfolio or the infrastructure portfolio, but most ratingshave declined. Table 3.1 shows OED ratings for the 35 projects com-

pleted since 1993 and ratings of projects completed before 1993. The pre-1993 population was exclusively representative of “old agenda” projectsapproved in the 1970s and early 1980s. About a fourth of the post-1993 proj-ects reviewed for this study were approved after 1990 and reflect, at leastpartly, the “new agenda.”

33

R a t i n g s f o r C o m p l e t e d Te l e c o m m u n i c a t i o n sP r o j e c t s H a v e D e c l i n e d , b u t R e m a i n H i g h e rt h a n f o r t h e L a r g e r P o r t f o l i o s . . . ( p e r c e n t )

T a b l e 3 . 1

Telecommunications Infrastructure All sectorsRating factor Pre-1993 Post-1993 Pre-1993 Post-1993 Pre-1993 Post-1993

Satisfactory outcome 90 83 82 68 76 69

Likely sustainability 88 72 61 49 55 47

Substantial institutional development impact 30 45 30 33 28 32

Satisfactory Bank performance n.a. 85 n.a. 74 n.a. 72

Satisfactory borrower performance n.a. 63 n.a. 65 n.a. 68

Source: OED data.


1 4

this latest set of projects had more ambitious in-stitutional development objectives.

Supervision RatingsAssessing ongoing projects on the basis of su-pervision self-ratings is a perilous exercise inany sector, but for telecommunications theproblem is compounded because the majorityof the active portfolio (39 of 57 projects) con-sists of multisector projects whose overall rat-ings may not reflect the performance of thetelecommunications component. The smallportfolio (18) of stand-alone telecommunica-tions projects continues to perform well abovethe Bank average, with only 7 percent rated at-risk and no problem projects (compared with19 percent and 14 percent for the Bank as awhole). However, a review of the latest Pro-ject Supervision Reports (PSRs) and an FY99 an-nual review of portfolio performance ratingfor the 39 active multisector projects involvingtelecommunications reveals some worrisomefindings:• Almost a third of the PSRs did not comment

on the telecommunications component, aclear indication of insufficient attention totelecommunications in the supervision ofmultisector projects.

• Only seven PSRs rated the telecommunicationscomponent separately (as allowed under thenew format).

• Some 18 percent of the 39 active multisectorprojects were rated as at-risk overall and 15percent as problem projects.

Institutional Development Impact andSustainability of “Old Agenda” ProjectsPhysical objectives. Most completed projectsachieved—and often exceeded—their physical

objectives for expanding networks and intro-ducing new technology. In the few instanceswhere the objectives could not be met, the causewas poor management or the weak institutionalcapacity of the public telecommunications op-eration (PTO), as in Papua New Guinea. Signif-icant project achievements included setting upof fiberoptic backbones (Pakistan); deployingdigital technology (Senegal, Togo, WesternSamoa); increasing transmission capacity throughnetwork expansion (Côte d’Ivoire, India, In-donesia, Laos, Nepal, Pakistan, Senegal); in-creasing switching capacity (Benin, Laos, Poland);improving service quality (Fiji, Pakistan); and ex-panding telecommunications services to ruralareas (Morocco, Nepal).

Agency-level institution building. When theinstitutional development objectives of projectsare aimed at capacity building in state-ownedenterprises, they were only partly successful.While management information systems (MIS),billing systems, and rationalized managementpractices were introduced, the state-owned en-terprise usually remained ineffective, under-scoring the inadequacy of existing institutionalarrangements for the sector and precipitating sec-tor reform. In Nigeria (1990 project), for exam-ple, few of the physical, institutional, and policyobjectives were met as project implementationsuffered from procurement delays due to Niger-ian Telecommunications Ltd.’s weak imple-mentation capacity, excessive governmentinterference, and rapid management turnover.In Uganda (1989), the primary physical objec-tives were met but fell substantially short oftargeted improvements in operational efficiencyand quality of service, mainly because of UgandaPosts and Telecommunications Corporation’s(now Uganda Telecom Ltd.) weak implemen-

. . . B u t I n s t i t u t i o n a l D e v e l o p m e n t a n d S u s t a i n a b i l i t y R a t i n g s A r e o n a n U p w a r d Tr e n d( p e r c e n t )

T a b l e 3 . 2

Rating factor Pre-1990 approvals Post-1990 approvals

Likely sustainability 71 75

Substantial institutional development 35 58

Source: OED data.

1 5

P R O J E C T A N D S E C TO R O UT C O M E S

tation capacity. However, most projects didachieve the objective of reorganizing the PTOon commercial lines, usually by converting it intoa state-owned corporation (Côte d’Ivoire,Guinea, Hungary, Indonesia, Morocco, Pak-istan, Senegal, Sri Lanka, Togo).

Institutional Development Impact andSustainability of “New Agenda” ProjectsProgress on key dimensions of sector reform (asembodied in OP 4.50) by a sample of Bank bor-rowers includes the following.

Privatization. The inherently difficult andcontentious nature of privatization has madeboth project documents and Bank strategy cau-tious about privatization. While almost all proj-ects after 1994 mention private sectorparticipation and restructuring of governmentagencies, privatization has only become an ex-plicit objective in the most recent projects. Inmost projects aimed at sector reform, Bank ad-visory services have helped the borrower todraw up contracts for privatizing the monopoly.Full or partial privatization was successfully com-pleted with the Bank’s help in a number ofcountries (Argentina, Bolivia, the Czech Repub-lic, Indonesia, Mexico, Peru, Sri Lanka, the Brazil-ian state of Rio Grande do Sul). And privatizationis under way in several others (Bulgaria,Cameroon, Honduras, Madagascar, Moldova,Nicaragua). But privatization has been a slowprocess and has run into political (Uruguay)and other problems: license terms were unac-ceptable to private investors (Ecuador), investorslacked confidence in the institutional environ-ment, especially given the early experience ofprivate investors (Tanzania).

Regulation. In some countries, Bank effortsto set up regulatory bodies have foundered onlack of country capacity, even when projects in-cluded training and consultant services. In Mex-ico (1990), for instance, limited publicadministration budgets, noncompetitive gov-ernment salaries, and burdensome procurementmade it difficult to upgrade the capabilities of aline ministry to meet the regulatory challengesof such a technically advanced sector. In othercountries (Bolivia, Indonesia, Panama, Peru,Sri Lanka), the regulator has become more ef-

fective. Some projects have sought to strengthenthe regulatory structure and the environmentfor private investment even after the institutionshad been established (as in Colombia and, morerecently, the Dominican Republic). But settingup an independent regulator has not necessar-ily been the solution to sector problems. Inmany instances (Guinea, Hungary, Poland) thesector has attracted private investment evenwithout a strong regulator. In other instances, set-ting up a regulatory agency has been inade-quate stimulus for sector reform. For example,Tanzania has had limited success despite havingan independent regulator (although it has at-tracted a global mobile telephone operator whoseoperations became a financial success, it hasfailed to attract private investment in the PTO).Furthermore, long-term sustainability of theregulator often remains fragile due to poor in-centive structures, overambitious regulators (Tan-zania), or undue government influence. In othercases, however, the Bank’s help was central tothe successful strengthening of regulatory ca-pacities (Bolivia).

Competition. Most recent Bank projects haveincluded assistance with drawing up licenses andcreating conditions for competition. There hasbeen a notable difference in the degree and phas-ing of competition between fixed and mobile te-lephony projects. In mobile telephony, it is morecommon to have a faster phase-in of competitionbecause companies are new, and so are man-agement, labor, and technology. Customers areless price-sensitive and are therefore able to af-ford cost-based tariffs. And the costs of build-outobligations are substantially less. For these reasons,mobile telephony was almost always opened tocompetition in the initial stages of reform, withspectacular results on coverage and prices.

Fixed telephony projects, in contrast, usuallyinvolve the acquisition, modernization, and ex-pansion of recently privatized networks. Thesenetworks usually come with an inefficient man-agement, a bloated workforce, outdated tech-nology, and non-cost-based tariffs. Faced with thechallenge of transforming an inefficient operationinto a profitable company while committing toa capital-intensive build-out investment program,project sponsors view limited exclusivity as one


1 6

way of lowering risks. Furthermore, countrieshave seen the granting of exclusive licenses asan easy way to maximize privatization proceeds.On the whole, where initial exclusivity periodswere granted, as in Argentina, Bolivia, Mexico,and Peru in the mid-1990s, they were initially keptrelatively short (or were subsequently shortenedthrough negotiation) and were offset by obliga-tions to invest in low-density, particularly ruraland low-income urban, areas. Some observers be-lieve, however, that many countries were tooeager to grant exclusive licenses without firsttruly “testing” the market (as did, for instance,Ghana, which in 1998 opened up the fixed-te-lephony segment to outright two-party compe-tition without granting even limited exclusivity toits just-privatized fixed-line operator). Alternativeapproaches were pursued in some Asian coun-tries. The Indonesia telecommunications sector,

for instance, works on a public-private principle,with private sector participation taking a varietyof forms in collaboration with the domestic car-rier, TELKOM, and the international carrier, IN-DOSAT. Private operators are allowed into thefixed-services market through joint ventures withthese companies.

Impact of reform. Many new agenda projectsare still in their initial phase of reform imple-mentation and it is still too early to measure ul-timate outcomes—with the exception of mobiletelephone penetration, which in most cases in-creased exponentially immediately after the in-troduction of competition (in El Salvador thenumber of mobile telephone lines surged from50,000 to 150,000 in less than a year). And evenin less-recent projects, detailed data on ultimateimpact—in increased penetration (by areas andincome groups), improvements in quality of

In 1993, the Peruvian government embarked on a major reformof its telecommunications sector. The program was supportedby two Bank loans: the Privatization Adjustment Loan (L3595) andthe Privatization TA Loan (L3540), both approved in FY93. Newlaws enacted in 1993 and 1994 provided for the privatization ofCPT and Entel (the two state-owned utilities) and the estab-lishment of an independent regulator, the Supervising Agencyfor Private Sector Investment in Telecommunications (OSIP-TEL). Given Peru’s limited attractiveness to private investors atthe time, the government agreed to grant the new foreign oper-ator (Telefónica of Spain) temporary exclusivity (five years, laterrenegotiated down to four years) for local, long-distance, and

international telephony, counterbalanced by strict obligationsto expand service in rural areas and to minimize tariffs under aprice cap regime.

The mobile telephone market was partially liberalized rightaway and is now fully competitive (with three current licensees,including Bell South of the United States). Following the expira-tion of the exclusivity period in 1998, new operators entered thetelephony market, with 172 companies currently active. Privateinvestment in rural areas is now promoted and partially subsidized(via an earmarked 1 percent tax on phone bills) by a dedicatedTelecommunications Investment Fund (FITEL). The results of thereform have been impressive (see table).

T h e I m p a c t o f P e r u ’ s T e l e c o m m u n i c a t i o n sR e f o r m

B o x 3 . 1

Indicator 1993 1998

Sector investments (US$ million) 28 2,099

Number of fixed lines/penetration (per 100 people) 660,000 / 2.9 1,850,000 / 7.6

Number of mobile telephone lines/penetration (per 100 people) 50,000 / 0.2 600,000 / 2.4

Number of public phones 8,000 50,000

Number of towns with phone service 1,450 3,000

Percentage of poor households with a phone 1 21

Average waiting time for connection 118 months 45 days

Connection fee (US$) 1,500 150

Source: OSIPTEL (Peru).

1 7


service, decreased prices by type of service,changes in government fiscal revenues—are notsystematically included in supervision reports,particularly for multisector projects. Availabledata on selected countries point to clearly pos-itive impacts in mobile telephone penetration(but generally concentrated in middle-to-higher-income urban groups), lower prices for mobiletelephone and international calls, and significantimprovements in the quality of fixed-telephonyservice. At the same time, significant variationsexist across countries with regard to local callpricing, penetration in low-income and ruralareas, and the fiscal impact of reform. Peru ap-pears to be one of only a few countries wherethe impact of reform has been fully monitoredand where it has been clearly positive on mostcounts (box 3.1), thus hinting at a possible bestpractice model.

Factors in Project PerformanceGlobal market pressures and borrower participationin international agreements and negotiations suchas the General Agreement on Tariffs and Trade andthe World Trade Organization were powerful in-centives for client countries to heed Bank adviceon sector reform. In particular, liberalization, whichin some countries dismantled cross-subsidies andintroduced competition in value-added networkservices (VANS), brought price decreases that in-duced large corporate users—who provide thebulk of PTOs’ revenues—to migrate to reformedmarkets that offered better opportunities. This in-creased pressure on traditional PTOs to follow thereform path themselves.

Country factors have also had a major influ-ence on the performance of projects, and largelyexplain the divergence of project outcomes.Where country commitment was strong, as in In-donesia and Sri Lanka, Bank projects have beenvery successful. Gaining support for the reformprocess from the political and bureaucratic lead-ership was key. In Sri Lanka, for example, the con-tinuity of officials within the political structure andin the bureaucracy, who have been strong sup-porters of the reform program, has been criticalto the relative success of the reform program.

Consensus among all major stakeholdersproved crucial to both the success and the sus-

tainability of reforms. In Indonesia, an importantcomponent was the organization of seminars,workshops, and studies on restructuring and re-form. Where there was resistance to liberaliza-tion, a more pragmatic and cautious approachsometimes proved successful. In the early stagesof liberalization in Sri Lanka, for instance, theBank’s pragmatism in making the original ob-jectives of the Second Telecommunications proj-ect less ambitious in anticipation of laborproblems contributed to a more successful out-come and enabled the reform process to proceed.

Bank factors that contributed to project suc-cess included staff continuity, sequencing ofsector assistance, and a long-term presence.Bank performance in Nigeria (1990 project) suf-fered from excessive staff turnover during su-pervision and the absence of a full midtermreview. In contrast, in Sri Lanka and Indonesia,continuity of task managers has helped to cre-ate good working relationships between theBank and country officials and has elicited bothcommitment and support from the borrowers.When projects have not succeeded, it has oftenbeen because the lessons of previous projectswere not heeded. In Guatemala (1984), for in-stance, concern at appraisal about GuatemalaTelephone Company’s (GUATEL) implementationcapacity was well founded but did not producesufficient skepticism regarding the setting of theproject implementation schedule. In Ecuador(1995), the Bank was slow to acknowledge thatthe loan was troubled and slow to cancel it.

Information Technology Components of BankProjectsWhile Bank lending in information technology (IT)is estimated at more than $2 billion a year, recent(1996, 1998) Internal Audit Department reviewsconcluded that the sector lacked institutionwideleadership and focus and that the Bank had notrecognized the importance of a clearly organizedinformatics practice. The reviews recommendedgreater attention to IT as a significant componentof development and a clear strategic plan to or-ganize the informatics practice within the Bank.The 1998 review also recommended integrating ITactivities more closely with other programs relatedto information infrastructure (II), such as infoDev.


1 8

Bank Performance—Process Aspects and Choice of Instruments Standard input indicators point to above-averagelevels of process efficiency in the sector: over thepast five years, lending costs for stand-alonetelecommunications projects have averaged$317,000 per project, with a supervision inten-sity of $63,000 per year (compared to overallBank averages of $350,000 and $62,000, re-spectively). This is impressive when looked atin conjunction with the above-average per-formance record of these projects. However,this does not take into account the recent relianceon multisector loans and nonlending activities.Information compiled by OED raises seriousconcerns about the use of multisector loans toaddress the sector reform objectives pursued bythe Bank since 1993:• Overall supervision ratings for multisector

projects are significantly worse than those oftelecom-only projects. And available data onthe status of sector reform in Bank borrow-ers shows that, on balance, progress has beenslower where the Bank’s involvement was lim-ited to components of multisector projects(with some noteworthy exceptions, such asBolivia and Peru).

• Bank supervision under multisector projectsappears to be below par: almost a third of themost recent PSRs for such projects do not evenmention telecommunications. Of those that do,only a few rate the telecommunications com-ponent separately. Supervision efforts forthese projects appear to focus excessively onshort-term process aspects (such as procure-ment of consultants), partly because taskmanagement is assumed by nonsector spe-cialists, leaving little time and resources forsubstantive Bank inputs on sector policy andstrategy.

• Also, Bank resources assigned to prepara-tion/appraisal of the telecommunications com-ponents of these projects, at an average of$30,000 per project,1 have been far belowthose spent on telecom-only projects (with afew noteworthy exceptions, such as in Bolivia,Ecuador, and Kenya). And Bank resourcesspent on the supervision of these compo-nents, at an average of 2.2 staff-weeks per

project in FY99, have been excessively low,both in absolute terms and compared with theaverage figure for telecom-only projects(again, with a few exceptions, such asCameroon, Ecuador, and Gabon).These findings confirm the opinion expressed

by Bank staff during interviews that de factobudget constraints on the amount of time spe-cialized staff can spend on telecommunicationscomponents of multisector projects have nega-tively affected the quality, and thus the impactof the Bank’s contribution wherever its inter-vention has been limited to this instrument. Incontrast, the more “standard” levels of lending andsupervision resources assigned to telecom-onlyprojects are associated with better-than-averageperformance. In other words, the Bank’s attemptsto foster broad sector reform “on a shoestring”may have been shortsighted. Unfortunately, Bankmanagement, particularly country managers, con-tinues to believe that the Bank can use a singlemultisector operation to both trigger and supportthe implementation of complex structural reformin several sectors at once—and do so withinstandard budget coefficients.

Assessing the cost-effectiveness of the Bank’snumerous nonlending activities in the II sectorwould require a minimum amount of data andinformation on both their cost and their impact(beyond anecdotal “evidence”), which is notcurrently available. However, their sheer num-ber and relatively small unit size, the largeamount of scarce staff time they absorb, and theapparent lack of intra-Bank coordination raise se-rious concerns about overall efficiency. Indeed,the recent external review of infoDev (box 3.2)highlights the program’s lack of focus and highratio of operating costs to grants as weaknessesto address. Considering that infoDev is widelyconsidered a highly effective program, it is doubt-ful that other Bank-sponsored or -executed non-lending activities are faring much better.

Inefficiency in the deployment of nonlendingservices has also been exacerbated by the distortedinternal “pricing” regimes that result from the va-riety of associated funding arrangements, partic-ularly the various tied and untied trust fundsadministered by different units of the Bank Group.Occasionally, this has led various parts of the Bank


1 9

Group to offer conflicting advice to a borrower(Tanzania), which seriously undermines credi-bility. Such “pricing” and organizational disin-centives were overcome whenever individualstaff took the initiative to informally coordinatetheir activities at the working level or when thecountry manager took a strategic approach tothe Bank’s involvement in the sector, based onquality rather than internal pricing criteria.

IFC Projects—Outcomes and Performance

Development Outcome The evaluation population consisted of the 21mature operations approved from FY93 to FY96.Approvals since FY97 have not reached sufficientmaturity for evaluation. The development out-come analysis was done using a modifiedIAR/XPSR evaluation framework (described inAnnex A).

The characteristics of the evaluation populationdo not closely resemble the later approvals. Theevaluation population has 18 percent of investmentcommitments by amounts in the mobile telephonesector. The later approvals have 83 percent. Theevaluation population has 47 percent of investmentcommitments by amounts in Latin America and theCaribbean Region, while only 18 percent of thelater approvals are in that Region. Up to 64 per-cent of the evaluation population’s investmentcommitments enjoyed limited exclusivity. Only21 percent of the later approvals have the samestatus. Greenfield projects account for 43 percentof the evaluation population’s investment com-

mitments versus 38 percent in the later approvals.Because of the significant differences in charac-teristics of the evaluation population from thelater approvals, the report could not use the find-ings from the evaluation population to draw sta-tistically valid inferences about the later approvals.

Fourteen of the 21 operations achieved a sat-isfactory-or-better development outcome rating.2

This is consistent with the 67 percent success-ful-or-better development outcome rating of the1996–98 Investment Assessment Report (IAR)population covering all IFC sectors. Figure 3.1shows the summary rating results for each per-formance dimension. Operations with satisfac-tory-or-better project and company businesssuccess generally had satisfactory-or-better de-velopment outcomes, consistent with the 1996–98IAR/Expanded Project Supervision Report (XPSR)pattern. The performance was better based onweighted average (by net investment commit-ments), with 81 percent of the 21 operations ob-taining a satisfactory-or-better rating comparedwith 68 percent achieved by the 1996–98IAR/XPSR population.

Project business success. Thirteen of the 21projects evaluated had satisfactory-or-better proj-ect business success. These 13 projects represent74 percent of net IFC commitments on the 21 op-erations. Major contributors to project successwere a transparent and conducive regulatoryenvironment (limited exclusivity or duopoly),faster-than-expected demand growth, and strongmanagement. Reasons for poor performance in-cluded cutthroat competition, delayed imple-

infoDev is the only II nonlending program or activity to havebeen independently evaluated. A 1998 review of the programconcluded that it had a high level of success in achieving its man-date of aiding the development of information and communica-tions technology, as well as supporting private sector andinstitutional development. It also pointed to some weaknesses,however, such as inadequate mechanisms to disseminate proj-ect experiences, complicated management procedures, insuffi-cient emphasis on social and developmental dimensions of

information and communications technology, a high ratio of ad-ministration costs to grants (35 percent), and a mismatch betweenthe magnitude of Y2K issues and the program’s limited capabil-ities. It recommended greater attention to information dissemi-nation and evaluation. The program has taken steps to remedythe shortcomings identified by the review and implement someof the recommendations. In particular, overhead costs have beenbrought down to about 15 percent, which is in line with compa-rable grant programs.

i n f o D e v — A n I n t e r i m E v a l u a t i o nB o x 3 . 2


2 0

mentation, overexpansion, high capital costs,lack of economies of scale, and interconnectionrevenue-sharing issues.

Company business success. The evaluationpopulation scored lowest in this performancedimension; only 12 out of 21 were rated satis-factory or better. These 12 projects with satis-factory-or-better company business performanceaccount for 67 percent of net IFC commitmentson the 21 operations. Most companies achieveda satisfactory-or-better rating because of the suc-cess of the projects. One operation with a satis-factory-or-better rating on project business successwas less than satisfactory on company businesssuccess.3 This is consistent with IFC’s experi-ence from the 1996–98 IAR/XPSR population,which implies that project success does not guar-antee company success.

Contribution to growth of productive privateenterprise. Sixteen of the 21 projects were ratedsatisfactory or better. These 16 projects comprise

91 percent of the net IFC commitments on the 21operations. Most of the projects were first or earlyentrants in the telecommunications sector andtheir success has inspired further private sector par-ticipation. Some projects have stimulated existingplayers and subsequent entrants to improve op-erations in order to stay competitive. Other proj-ects enabled existing private enterprises to expandtheir businesses and operate more efficiently be-cause of access to reliable telecommunications fa-cilities. Telecommunications network projectscreated downstream linkages such as mobilephone dealers and service centers, and rural com-munity-operated payphone centers.

Contribution to growth of the economy. Sev-enteen projects (representing 85 percent of net IFCcommitments on the 21 operations) out of 21 re-ceived a satisfactory-or-better rating. Most projectsprovided telecommunications services that areworth more to customers than the price theypay. The projects helped stimulate economic

Percentage of operations with rating of satisfactory or better

F i g u r e 3 . 1 P e r f o r m a n c e D i m e n s i o n R a t i n g

o f F Y 9 3 – 9 6 Te l e c o m A p p r o v a l s

0

20

40

60

80

100

120

1996–98 Investment Assessment Reports and Expanded Project Supervision Reports, weighted

Telecommunications weighted by net IFC commitment

1996–98 InvestmentAssessment Reports andExpanded Project Supervision Reports, unweighted

Telecommunicationsunweighted

Development outcome

Project business

Company business

Growth of private enterprises

Growth of the economy

Living standards

Source: IFC data.


2 1

growth by providing efficient and less-costly com-munication infrastructure. They have also re-moved the financial burden from the governmentof operating telecommunications companies.Given their generally good operating performance,these projects have provided substantial tax rev-enues to the government.

Contribution to improving living standards.The evaluated operations performed best in thiscategory. Twenty projects out of 21 were ratedsatisfactory or better. These 20 projects accountfor 97 percent of net IFC commitments on the21 operations. The projects’ contribution to liv-ing standards included job creation, skills train-ing, access to telephones, reduced waiting timefor new telephone connection, lower telephonetariffs, improved service, clearer connection,and a higher percentage of telephone calls get-ting through and completed. Nonbasic telecom-munications projects provided increased accessto timely information. In all cases, that projecteconomic rates of return inclusive of consumersurplus almost certainly exceeded their formalrates of return indicates that projects have ben-efited the economies at large more than they havebenefited the project financiers.

Results by Region The evaluation population is too small to drawany conclusion on regional trends. For instance,there are only two projects in Sub-Saharan Africaand one in Central Asia, the Middle East, and NorthAfrica. This section of the report, therefore, illus-trates IFC’s experience in the different Regions anddoes not draw conclusions on regional trends.

Evaluated operations in Sub-Saharan Africaand Central Asia, the Middle East, and NorthAfrica had a perfect satisfactory-or-better ratingon all development outcome performance di-mensions, despite the relatively high-risk ratingof the countries in these two Regions. Latin Amer-ica and the Caribbean ranked second, with sixout of seven receiving a satisfactory-or-better de-velopment outcome, although only three out ofseven of the operations had a satisfactory-or-better rating on company business success. Fourout of seven operations in Europe achieved a sat-isfactory-or-better development outcome rating.The poor-performing projects were adversely af-

fected by weak strategic partners or none at all,an unclear regulatory environment, and eco-nomic slowdown.

Asia was the worst performer: only one of fouroperations achieved a satisfactory-or-better de-velopment outcome. Regulatory and sponsor is-sues adversely affected project performance. Intwo markets, an unexpected issuance of addi-tional operating licenses put extreme pressure onthe viability of the less-than-strong existing op-erators. The sponsor’s lack of commitment andweak financial resources brought down one proj-ect. A project in a country heavily affected by theAsian crisis was able to respond effectively byscaling down project scope. Consequently, thisproject appears likely to weather the crisis.

Results by SubsectorThe report classified the projects into four sub-sectors: mobile telephone4 only, basic (fixedline), mobile and basic, and others (cable tele-vision, satellite, telecommunications peripherals,and other miscellaneous telecommunicationsservices). Because of the small size of the eval-uation population, the “basic and mobile” and“others” subsectors are underrepresented andtherefore could not be used to predict with con-fidence the results of similar operations.

The eight investment operations with “mobiletelephone only” projects scored high on all per-formance dimensions: seven out of eight had asatisfactory-or-better development outcome rating,accounting for 99 percent of net IFC investmentcommitments on the eight mobile telephone operations. Mobile telephone projects were eitherpioneers or early entrants in the sector and en-joyed fixed-term exclusivity or duopoly. The onlymobile telephone project that did not do well suf-fered from cutthroat competition that pushed mo-bile telephone tariffs in that market to one of thelowest in the world. “Basic and mobile” operationswere the second-best performing subsector withtwo out of three achieving a satisfactory-or-betterdevelopment outcome. The poor-performing proj-ect was hit by an economic slowdown that damp-ened demand and by the foreign technical partner’swithdrawal from the country.

Four out of seven of the “basic” investmentoperations achieved a satisfactory-or-better


2 2

development outcome. These four operationsaccount for 57 percent of IFC net commitmentson the seven “basic” operations. All three op-erations with less-than-satisfactory performancehad problems with, or had no strong and com-mitted, strategic partners. In one operation, thesponsors’ conflicting interests stalled the proj-ect. Another operation was a rural telephonynetwork where the original sponsor abandonedthe project after concluding that growth po-tential was limited given the small populationof the concession area. The third operationhad difficulty meeting build-out requirementsbecause of no strategic partner and weak fi-nancial resources.

Investment operations in the “other” sectorperformed the worst, with only one out of threerated satisfactory or better in development out-come. One less-than-satisfactory project overbuiltcapacity and was unable to induce a propor-tionate increase in demand due to a slowdownin the economy. The other project that did notdo well experienced significant delays in im-plementation. Demand for these peripherals ornonbasic services proved to be income-elasticand therefore more vulnerable to macroeco-nomic swings.

Performance Drivers and ObstaclesOperations that achieved a satisfactory-or-betterdevelopment outcome are closely associated withsatisfactory-or-better investment performance. Ofthe 14 operations with a satisfactory-or-better de-velopment outcome, 12 have satisfactory-or-bet-ter investment performance. IFC operations thatachieved satisfactory-or-better investment per-formance (and development outcome) generallyfeature the following characteristics.5

• Markets and marketing. The ability to respondquickly to emerging market opportunities andthreats, such as accelerating expansion capi-tal expenditures to meet a rapidly rising de-mand, introducing prepaid calling cards andother innovative payment plans to addressdeclining customer credit quality, and build-ing brand loyalty in anticipation of new or in-creased competition.

• Physical products and services. Superior net-work quality, advanced technology, compet-

itive operating efficiency, strong billing op-erations, and good customer services.

• Operating license. Pioneering/first entrant,limited exclusivity (mostly for fixed-line te-lephony) or duopoly status. Among the reasons for less than satisfactory

investment performance (and development out-come) are:• Regulatory issues. Unfavorable and nontrans-

parent regulatory environment, unbalanced rev-enue sharing with the national operator, highlicense fees, short license periods, overcrowdedmarket, subsidized state-owned competitors,and unfavorable interconnection agreements.

• Sponsor/management problems. Weak spon-sor commitment, expertise, experience, co-ordination, control and/or resources, andworking relationship with local partners; lackof management expertise.

• Macro environment. Currency depreciation,financial crisis, and economic slowdown.

Main Lessons from Bank Group ProjectExperienceIt is too early to measure the full impact of reformspromoted by Bank projects under the “new”agenda as most are in their early stages of im-plementation and only a handful have been eval-uated. Nonetheless, the evaluation of mature IFCprojects and the review of ongoing Bank projectsoffer several lessons regarding sector reform ap-proaches (lessons specific to IFC telecommuni-cations operations are presented in Annex B): • Even partial competition, through liberaliza-

tion of mobile telephony, can bring about in-creased investments, lower prices, andimproved service quality.

• Establishing a regulatory body does not ob-viate the need for a well-articulated govern-ment policy and strategy.

• Weak institutional capacity in poor countriesis a major constraint to effective regulation.Two steps are crucial to regulatory sustain-ability: (a) adequate capacity building withinthe regulatory body to ensure its effectivenessand efficiency; and (b) attention to the broaderinstitutional environment that would deter-mine the regulatory structure’s ability to func-tion with transparency, accountability, and


2 3

independence from undue political interfer-ence. Ghana demonstrates the importance ofthis: although the Bank helped in drafting leg-islation and setting up the regulator, the reg-ulator has not operated successfully.

• Transparency in licensing and tariff setting (par-ticularly for interconnection rates), as well asclarity regarding the role of the incumbent op-erator, are critical to attracting private investment. In two areas, however, Bank and IFC ex-

perience and views have occasionally diverged:(a) the degree to which, in some countries, ex-clusivity periods need to be granted initiallyin order to attract private investment; and (b)whether the privatization of the incumbentoperator should be completed and an inde-pendent regulatory body fully established be-fore opening the sector to private investment(in some countries, Poland among them, pri-vatization was undertaken relatively success-fully, even in the absence of an independentregulator).

Several lessons relate to the Bank Group’s ownperformance in the sector: • An objective assessment of government com-

mitment to reform is essential. As the Bank’sSecond Telecommunications Project in Hungarydemonstrated, when there is political will andcommitment to the reform process, even sup-porting the public PTO through investmentlending can be highly instrumental in the ac-tual reform and privatization. In contrast, whenpolitical will and institutional capabilities for re-form were lacking, reform lagged: in Tanzaniamany of the critical elements—capital restruc-turing and tariff increases—were finallyachieved only after the International Devel-opment Association threatened to suspendprocessing of the third project.

• Indonesia and Sri Lanka have demonstratedthe advantage of long-term Bank involve-ment and staff continuity. In these countries,the Bank sequenced its reform support—from physical investment, to institutionalstrengthening and corporatization of the mo-nopoly, to introduction of competition andregulation. In Papua New Guinea, Bank su-pervision was fragmented and deficient pri-marily due to an unusually high turnover of

task managers (five task managers in sixyears), leading to a lack of consistent supportto the borrower.

• The choice of Bank Group instruments—lending and nonlending—and their effectivecoordination has had a demonstrable effect onthe Bank Group’s effectiveness in the sector.

Sector OutcomesBroad sector outcomes need to be differentiatedfrom the outcomes of specific Bank Group in-terventions because: (a) Bank Group interven-tions have been limited to a relatively smallsubset of developing countries, and (b) the out-come of Bank Group projects was assessedagainst stated objectives that were sometimesnarrow in scope (such as specific geographicalareas or parts of the whole network) or focusedexclusively on means (such as initiation of theprivatization process, enactment of a law) ratherthan results. Three sector-specific trends meritparticular analysis: institutional reform in thetelecommunications sector, improvement of na-tional telecommunications systems, and devel-opment of an II capacity. The informationpresented here derives mainly from recent Bankand International Telecommunications Union(ITU) data.

Institutional Adjustment and Sector ReformPrivatization. A recent ITU report finds that 88countries have fully or partly privatized theirPTOs.7 In the majority of countries, the PTO isstill government-owned, but if the countries thathave plans to privatize do so, government-owned PTOs will become a minority by 2003.However, most poor countries have not priva-tized. The Arab states and 20 to 30 percent ofAfrican countries have not yet even accom-plished the old agenda objective of separatingpostal from telecommunications activities. EveryRegion has a significant number of countriesthat have not acted on the ownership issue. In-deed, even in Western Europe, the majority ofcountries have not yet privatized.

Regulation. The trend in regulation tends tofollow the trend in ownership. By August1999, 84 countries had established separatetelecommunications regulators. By the end of


2 4

2000, another 15 countries were expected toact. As with ownership, poor countries arelagging behind in establishing independentregulatory agencies.

Competition. Competition is most common inthe youngest services, mobile telephone andInternet (table 3.3). Internet service providers typ-ically lease telecommunications capacity to pro-vide value-added services and compete directlywith a PTO if the PTO establishes its own Internetservices. Competition in the mobile telephonesubsector has largely been driven by private in-vestment in new operators.

The ITU does not distinguish in its data be-tween developed and developing countries.Thus, the data for some regions look better thanothers because they include developed countriesthat undertook institutional adjustments sometime ago. If about 50 high-income countries areremoved from the data, then the progress per-centages for institutional adjustment decline sig-nificantly. The first countries to adopt adjustmentswere those where institutional adjustments were

easiest to implement and resistance to them wasrelatively low (see box 3.3). Thus, the institutionaladjustment process for developing countries isstill at an early stage, and for most poor coun-tries it is just beginning.

For countries that have embarked on institu-tional adjustments, continuing attention and sup-port to capacity building is required to ensuretheir long-term sustainability. There is alreadyenough evidence in some countries of rushedand failed privatizations, misguided regulationprograms, and misdirected competition policiesto demonstrate that institutional adjustment is nota one-time country injection to achieve change.The most important investments in institutionaladjustment projects are those made in localhuman capital.

Improvement of the NationalTelecommunications System In the aggregate, significant amounts of privateinvestment have been committed to nationaltelecommunications systems, and there is a gen-

C o m p e t i t i o n I s M o s t L i k e l y f o r t h e Yo u n g e s tS e r v i c e s , 1 9 9 9( p e r c e n t )

T a b l e 3 . 3

Service Countries

Local 32

Long distance 26

International 26

Leased lines 40

Cellular mobile 66

Internet 80

Source: International Telecommunications Union.

An important factor behind the resistance of some developingcountries to institutional adjustment is the decline and impend-ing collapse of the system for international revenue settlementsamong country telecommunications operators. Many develop-ing countries—for which revenue settlement payments for ter-minating international calls are the principal source of

telecommunications revenue and an important source of hardcurrency—are fearful that increased competition will jeopard-ize the financial viability of their national telecommunications sys-tems. Expert advice and assistance in how to mitigate thisshort-term fiscal impact in the transition period (such as via tar-iff rebalancing) could go a long way toward alleviating those fears.

R e s i s t a n c e t o I n s t i t u t i o n a l A d j u s t m e n tB o x 3 . 3

eral impression that in many developing coun-tries the systems have improved significantly.The principal measures of improvement in na-tional systems are increased connectivity, in-vestment in infrastructure, and improved servicequality. In all three areas, however, low-incomecountries are faring far worse than countries inhigher income categories.

Connectivity. National telecommunications sys-tems provide the connectivity essential for anykind of electronic communication or informationexchange. Although the primary purpose of the sys-tems now in place is voice communication, the IInow being developed in many countries can trans-mit any form of communication or information ex-change—voice, data, image, music, video. Thosewho do not have access to a network connectionare denied access to all services. For those who areconnected, the range of service possibilities is de-termined by the capacity and capabilities of the net-work. It may be only voice telephone; it may beall II services; or, more likely, it may be a range ofservices between these extremes.

The most commonly used indicator of telecom-munications system development in a country istotal main lines per 100 population. Table 3.4 sum-marizes ITU data for countries by income group.

Countries with main line penetration rates of50 or higher are regarded as having a universalservice coverage of at least 90 percent of house-holds and reasonable access to a telephone inall inhabited areas. Countries with penetrationrates below 5 typically do not have even mini-

mal national coverage. Most experts consider thatcountries need to reach 10 before they have afoundation for developing a national II of anyconsequence for the domestic economy.

Despite a small increase in main line penetra-tion rates between 1995 and 1998, low-incomecountries are a long way from having developednational telecommunications systems, let aloneIIs. At the present growth rate, it will take nearlya decade for those countries to reach an averagepenetration rate of 5, and about 15 years to reach10. As a significant majority of low-income coun-tries have penetration rates well below the aver-age, 35 to 40 countries will fall well behind evenat this rate of development. Moreover, the gap be-tween the low-income countries and the othercountries has risen dramatically and will likelycontinue to widen through 2000 and beyond. Theabsolute increase in penetration rates for middle-income countries is 6 times that of the low-incomecountries. Surprisingly, it is the high-income coun-tries, those that already have universal service, thathave the largest increase in main lines per 100 in-habitants of any income group. This suggests thatthe growth in second lines in households to pro-vide for continuous Internet access in many high-income countries may be faster than the growthin first lines in developing countries.

Removing the data for major urban centers af-fords a better indication of geographical cover-age. The data show lower numbers across allcountries: 83 countries have penetration ratesbelow 4 and 56 countries have rates below 1.


2 5

L o w - I n c o m e C o u n t r i e s L a g i n Te l e d e n s i t y(main te lecommunicat ion l ines per 10 0 inhabitants )T a b l e 3 . 4

1998,excluding major

Income group 1995 1998 Increase urban centers

Low-income countries (61) 1.1 1.6 0.5 1.1

Lower-middle-income countries (60) 5.4 8.2 2.8 6.6

Upper-middle-income countries (33) 12.8 16.5 3.7 13.8

High-income countries (52) 52.1 56.1 4.0 47.8

Africa 1.8 2.2 0.4 1.4

Asia 5.4 7.3 1.9 6.3

Source: International Telecommunications Union.

Investments. The trend in investment helps ex-plain why many countries have not been ableto develop national telecommunications sys-tems more rapidly. More recent (1998) ITU dataput telecommunications investments in high-income countries at $134 per capita. In contrast,in at least 95 countries, investment was lessthan $10 per capita and in at least 21 countries,it was less than $1 per capita (if nonreportingcandidate countries are included, the numberwould increase to about 45). More significantly,figure 3.2 shows that investments, as a per-centage of GDP, have increased more rapidly inmiddle-income and upper-middle-income coun-tries than in OECD countries since 1995. Thisprovides some hope that the gap with OECDcountries will gradually be closed. Meanwhile,however, investments have remained flat inlow-income countries (with the important ex-ception of China, which has spent a remarkable3.3 percent of GDP on the telecommunicationssector in the past five years).

The contrast between investment patterns ofmiddle-income and low-income countries is alsostriking when comparing recent trends in privatesector financing (figure 3.3).

This reflects the fact that, as for other infra-structure sectors, the recent increase in privatefinancing of telecommunications has been heav-ily concentrated in a few, mostly upper-middle-income, Latin American and Asian countries.

Quality of service. Notwithstanding the limitedand uneven progress achieved on overall in-vestment levels, improvements in the quality ofservice have been substantial and widespread,as illustrated by the statistics on faults per line.This improvement has been most pronouncedand sustained in countries that have carried outdeep and early sector reform (such as Hungary,Indonesia, Mexico, Peru, Sri Lanka).

Information Infrastructure DevelopmentGiven the enormous challenges of building na-tional telecommunications systems to supply


2 6

F i g u r e 3 . 2Te l e c o m m u n i c a t i o n s I n v e s t m e n t s H a v e A c c e l e r a t e d i n S o m e D e v e l o p i n g C o u n t r i e s b u t L a g g e d i n M o s t L o w - I n c o m e C o u n t r i e s . . .

Percent of GDP

Year

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

OECDUpper-middle income

Lower-middle income

Lower income (excl. China)

1991 1992 1993 1994 1995 1996 1997 1998 1999

Source: Pyramid Research.

basic services in developing countries, adding theeven more difficult challenge of establishing na-tional IIs might seem unrealistic. If high-incomecountries are undertaking investments per capitain the telecommunications sector that are 12times those of lower-middle-income countriesand 54 times those of low-income countries,there is little hope that most developing coun-tries will participate in the global informationeconomy of the next century.

The challenge—and the opportunity—lie inthe ability of II to make a national telecommu-nications system significantly more efficient,more capable, more valuable, and more prof-itable to individual users, firms, industries, andthe government. But that will not happen auto-matically, nor will it happen without careful re-search, planning, and implementation.Governments and regulators should establishan II policy and regulatory framework with aview to maximizing efficient private sector par-ticipation, supplemented as appropriate by pub-

lic-private partnerships (for example, to fosterlow-income and/or rural access).

Every country will have a program, howeverlarge or small, to improve its national telecom-munications system. By considering specific op-portunities for II improvements where benefitsgreatly exceed additional costs, these programscan move along a more productive path at everystage of development. By integrating telecom-munications system and II development into asingle program, a country can generate additionalresources that may have an accelerator affect onthe telecommunications sector and the econ-omy. If developing countries and developmentinstitutions see II development as a step in a lin-ear process that must follow telecommunica-tions system development, few poor countrieswill ever get to the II step. But if II developmentis seen as a catalyst to stimulate a more rapidbuilding of the national telecommunications sys-tems of developing countries, chances of successincrease measurably.


2 7

F i g u r e 3 . 3 . . . A s H a s t h e P e r c e n t a g e o f P r i v a t e S e c t o r

F i n a n c i n g

Percent

Lower income Middle income

Private Public

1991–94 1995–99 1991–94 1995–990

10

20

30

40

50

60

70

80

90

100

Source: Pyramid Research.

Relevance of Bank Group Interventions in the 1990sThe relevance of Bank Group interventions canbe assessed by answering four questions: • Were the stated objectives of the interventions

in line with existing Bank Group policies? • Were the interventions focused on the coun-

tries most in need of assistance? • Were the instruments used suited to the stated

objectives and to individual country circum-stances?

• Have Bank Group policies been appropriategiven the evolving sector environment? Consistency with existing policies. Detailed

analysis of the objectives and design of Bank in-terventions and IFC activities shows that they havebeen broadly consistent with the principles in OP4.50. In the few countries where Bank investmentlending for the telecommunications sector con-tinued (Indonesia, Jordan, Sri Lanka), it was ex-plicitly tied to firm government commitments onsector reform. IFC, given its private sector man-date, has focused on supporting the “privateprovision” aspect of the policy. The Bank, for itspart, has tended to emphasize competition andregulation. This difference in focus is evident inthe occasional IFC financing of projects in coun-tries with clearly suboptimal regulatory and pol-icy environments (for example, no independentregulator and the main telephone operator re-maining state-owned, as in El Salvador andUganda), while the Bank is alleged to have takenan excessively dogmatic view and blocked po-tentially beneficial IFC preprivatization loans insome cases (as in Bulgaria and Romania). Whileunderstandable, these different perspectives needto be reconciled at the country level via an agree-ment on a joint sector strategy.

Country selection. The review of sector out-comes suggests that lower-income countries were(and are) in more urgent need of assistance thanothers, given the lag in sector reform, the grow-ing gaps in investments and teledensity, andtheir lesser access to foreign private capital. Thebreakdown of Bank interventions by country in-come groups suggests that the Bank has been re-sponsive to that need: almost half of its projectshave been in lower-income countries (including15 in Sub-Saharan Africa). Reflecting investors’ in-

terest and IFC’s development agenda, IFC’s in-vestee companies are heavily concentrated (upto 63 percent) in low-income and lower-middle-income countries, although they account for only40 percent of investment volume. This also re-flects the relatively small size of investments inpoorer countries. More investments have beenmade in poorer countries in recent years(Moldova, Tanzania, Uganda, and Zambia).

Appropriateness of Bank Group instruments.The Bank’s use of lending and nonlending in-struments in the sector has relied excessively on“inefficient” multisector loans and a fragmentedapproach to advisory and nonlending services.The countries where the Bank has had the mostimpact, Indonesia and Sri Lanka, are those whereit took a long-term view of reform and sup-ported initiation and implementation with a mixof instruments, including economic and sectorwork, trust-funded activities, and investmentand technical assistance (TA) lending. The BankGroup’s organizational structure has not fos-tered a coordinated approach to the use of Bankand IFC instruments. Of particular concern, with-out clear criteria on their priority use there is po-tential for overlap (or even conflict) betweenCorporate Finance Services advisory servicesdirected to the government (including the at-tendant Technical Assistance Trust Fundsassignments) and similar advisory activities pro-vided or funded by the Bank.8 The choice ofBank Group instrument in funding the main in-cumbent operator before privatization has beenanother ambiguous area, again due to the lackof clear criteria: Bank funding has been criticizedfor risking the perpetuation of state dominanceof the sector, while IFC preprivatization loanshave been viewed by some as creating percep-tions of conflict of interest (that is, between theBank Group’s dual role as advisor and investor).To address this concern, IFC does not participatein privatization projects where it has had an ad-visory role.

Relevance of Bank Group policy and strat-egy to sector environment. Overall, the policyprinciples of OP 4.50 have remained relevantto global sector trends and needs. However,they need to be updated in two areas: the gov-ernment’s (and the Bank’s) role in fostering


2 8

access by the poor (especially in rural areas) andthe implications of convergence, particularlyof the Internet revolution (the next chapterelaborates on these two issues). Most important,these general policy principles have not beentranslated into integrated sector operationalstrategies, either at the global or Regional/coun-try level, until the very recent Eastern Europeand Central Asia Region strategy. The IFC’s an-nual “strategies” have been more akin to de-tailed marketing plans and have lacked awell-articulated development agenda and strate-gic framework. The absence of detailed strate-

gies has contributed to the fragmentation of theBank Group’s approach to II in individual coun-tries, with critical decisions too often left to staffor consultants—or worse yet, not addressed atall for lack of budget resources (as appears tobe the case in many multisector projects). (Forexample, regarding what advice to give on sec-tor structure, licensing regimes, approach to uni-versal service, or interconnection pricing; howto decide on the respective roles of the Bankand IFC; or how to establish linkages withother sectors such as health and education.)


2 9

3 1

OUTSTANDING POLICYAND STRATEGIC ISSUES

Rural and Universal Access

The Bank’s role in rural telecommunications and the linkages of thesector to the poverty-reduction agenda has been unclear. While theimportance of telecommunications to the efficient functioning of the

government and the economy is recognized, when it comes to allocatingBank resources for poverty reduction, the telecommunications sector has takena back seat to health, education, and water in the Country Assistance Strat-egy (CAS) process. The linkages of informatics and telecommunications tothe Bank’s poverty-reduction mandate have not been sufficiently well re-searched or sold to the Regional teams.

Rural components have generally been rare intelecommunications projects—only five proj-ects before 1993 had such components, al-though that situation may be changing (seebox 4.1). One reason is the ambiguity of theBank Group’s policy on the role of the publicsector in fostering rural access, which has ledstaff to avoid promoting innovative policy op-tions or proposing Bank financial support (forexample, to private-public partnerships) in thatarea. This has left a gap that IFC has not beenable to fill, apparently for lack of investor in-terest (only two such IFC investments havebeen made, and their performance has been lessthan satisfactory).

Besides the role of the public sector, therehas also been a lack of agreement within the

Bank Group as to when rural access issues arebest addressed. Some have argued that it shouldbe a two-stage process, since there is little ev-idence that pure rural telephony is commer-cially viable on a stand-alone basis in mostdeveloping countries. In their view, initial ef-forts should concentrate on sector liberalizationand competition to improve the overall effi-ciency of the country’s telecommunicationsnetwork and help reduce the build-out cost toextend coverage to the rural areas. Only in asecond stage, several years later when nu-merous private competitors are active, can asector-wide universal access charge be leviedto subsidize expansion of rural coverage. Thiswas the approach followed by Chile. Othershave argued that there is too high a risk of rural

44


3 2

access issues never being addressed if theyare not put squarely on the reform agendaright from the outset, as was done by Peru (seebox 3.1). Developing country experience istoo limited to conclusively support one or theother approach.

There have been many recent examples of pi-loting new grassroot approaches to rural telecom-munications in Africa, Latin America, and Asia(some supported by infoDev). However, theirscaling-up has proved elusive so far (althoughthe approach taken by Grameen Phone, box 4.2,appears promising). The experience of Red Cien-tífica Peruana, a local nongovernmental organ-ization aggressively pursuing the installation ofa network of infocenters throughout Peru, ex-emplifies the constructive role government canplay in providing seed money and the difficul-ties of mobilizing lots of financing from foreignprivate investors who usually give priority toheavy corporate and high-income users.

Holistic Approach to InformationInfrastructure IssuesNone of the Bank projects approved before1993 addressed broad II issues, but in an en-couraging trend, four of the newer projects do.One of these, the Information Infrastructure De-velopment Project in Indonesia, has adopted aholistic approach to II development. To meet ageneral objective of extending communicationsand information networks to facilitate sustainableregional development and economic growth,the project aims to expand the postal networkto rural regions; extend e-mail, Internet, andtourism information services; introduce newvalue-added services using existing postal andelectronic networks; develop legal and regula-tory frameworks that will enhance sustainabil-ity; and strengthen institutional capability andcapacity in relevant agencies and administra-tions. The project promotes private sector part-nerships in the provision and management of

Some recent Bank projects have rural components. A recentlyapproved Bank project in Mauritania, for example, has a com-ponent to prepare a strategy for delivering information accessand related services to rural and disadvantaged communities.The project is especially significant in its intention to identify

and test innovative institutional solutions to improve connectivityand access. It will finance consultants to study opportunities cre-ated by new technologies, exploring how new services couldbe further facilitated to improve access to remote and disad-vantaged communities.

R u r a l T e l e c o m m u n i c a t i o n s F o c u s M a y B e I n c r e a s i n g

B o x 4 . 1

In 1998 IFC approved an investment in a project to install and op-erate a nationwide digital cellular network in one of the world’spoorest and least-developed countries. The project will pro-vide capacity for 190,000 subscribers, covering 55 percent of thearea of the country.

The aim of the project is to provide connectivity and promotesmall business development in rural areas. It created a companyto sell airtime at wholesale rates to a nonprofit organization thatwill identify rural women entrepreneurs and help them estab-lish village payphones. The nonprofit organization will also

help women entrepreneurs access financing from the localsponsor (a leading microcredit bank) for the purchase of cellu-lar handsets. The village payphone program will benefit from thecompany’s access to the sponsor’s extensive microcredit banknetwork of 1,100 branches covering some 39,000 villages.

Early results of a pilot program involving about 300 villagesrevealed that the village payphone concept is feasible. Eachwoman entrepreneur can net an average of $2 a day, or $700 ayear, from the village payphone operations. This earning po-tential is more than twice the country’s annual per capita income.

G r a m e e n P h o n e : M o d e l f o r a N e w A p p r o a c ht o R u r a l T e l e c o m m u n i c a t i o n s ?

B o x 4 . 2

information networks and systems and promotesprivate sector development at the user end of thevalue chain of information services. The pro-posed Information Infrastructure Sector Devel-opment Loan in Morocco follows a similarapproach. It supports the government in ex-tending its liberalization of the telecommunica-tions sector to the information technology (IT)and postal sectors, including the financial serv-ices provided through the postal network, rec-ognizing the importance of strong synergiesamong the three sectors.

The Bank has gradually taken actions that rec-ognize the recent rapid changes in the infor-mation and communications technology (ICT)sector. IT activities have been evaluated twice inrecent years, and most of the specialized IT staffhas been incorporated into the telecommunica-tions division. infoDev has been established asa catalyst to stimulate information infrastructure(II) activities. World Development Report 1998:Knowledge for Development identifies a new role

for II in the development process. More re-cently, the Comprehensive Development Frame-work has attempted to treat development as anintegrated process. These changes in directionand priorities for the Bank’s development pro-gram all point to a potentially more influentialrole for telecommunications and II. Althoughthese developments are more relevant to the fu-ture direction of Bank activities than to pastprojects, they are useful for judging trends anddirections of the telecommunications and ITprograms.

World Bank Group CoordinationThe location of most of the Bank’s telecom-munications expertise in a central unit—theTelecommunications and Informatics Division(EMTII—now the Global Information and Com-munications Technology unit)—should, in theory,have fostered cross-fertilization of experiencesfrom different countries. However, it has alsomeant that the telecommunications sector has

O UT S TA N D I N G P O L I C Y A N D S T R AT E G I C I S S U E S

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Policy and legal issuesGovernance institutions• Rule making processes• Regulatory agencies• Impementing agencies• Financing institutions and options

Telecommunications• Competition policy• Interconnection rules• Tariff regime• Accounting rates• Universal service

Information policy• Taxation• Intellectual property rights• Content regulation• Privacy, encryption, and security

Telecommunications infrastructure• Network expansion• Market structure standards• Transmission networks• Switching• User equipment

Applications• Access issues• Tele-medicine• Education and research• Distance learning• E-governance• E-commerce• Rural services delivery• Citizen participation

Information technology industry• Hardware• Software• Export promotion• Incentives

Human resources• Technical training• Basic scientific education• Organizational learning

K e y D i m e n s i o n s o f a N a t i o n a l I n f o r m a t i o n I n f r a s t r u c t u r e S t r a t e g y

F i g u r e 4 . 1

Source: Adapted from Nirupam Bajpai and Anupama Dokeniya. Information Technology-Led Growth Policies: A Case Study of Tamil Nadu. Research Paper,

Harvard Institute for International Development, August 1999.

often been given a lower priority by country di-rectors and, consequently, in CASs. Coordinationwith the country directors has been handledthrough informal relationships between thecountry/Regional unit and the sector staff atEMTII. Where these relationships have been good,the Bank’s presence in the telecommunicationssector of that country has been significant and thecountry has benefited from sound technical ad-vice (such as in Latin America and Caribbeancountries, Sri Lanka, and Indonesia). Where co-ordination between the country/Regional unitand the sectoral unit was limited, sectoral expertshave had less opportunity to be extensively in-volved in the process of sector reform.

In IFC, coordination between the Regionsand the Telecommunications Division was alsoan issue until FY99 when the Regional depart-ments were given responsibility for setting sec-toral priorities within the countries. While it istoo early to evaluate the outcome of this arrange-ment, it clearly allows for more coordinatedIFC support in the telecommunications sector.However, competition among industry depart-ments for the attention of Regional investmentdepartments is high. There may be a bias amongRegional departments toward more familiar sec-tors that may not include telecommunications,especially given the rapid change in technologyand scope of this sector.

Organizational issues have been particularlyprevalent in the informatics sector. Most no-tably, the sector has lacked institutionwide lead-ership and focus. And the absence of a clearlyrecognized and funded informatics thematicgroup has further contributed to the Bank’s frag-mented approach to IT–specific issues.

Fragmentation in the administration of Bank-managed trust funds and internal pricing distor-tions for advisory and nonlending services (suchas between economic and sector work, trust-funded technical assistance, and Corporate Fi-nance Services Department [CFS] services) haveoften resulted in poor coordination of BankGroup advice to countries. Privatization of state-owned monopolies has been particularly con-tentious due to the differing perspectives on thisissue within the Bank Group. While most Bankprojects mention privatization of the dominant

monopoly as an important component of thereform process that the Bank loans have beenaimed at, this objective has often been part ofmore general multisector privatization projects,often administered by Private Sector Developmentunits. Perpetuation of exclusivity has occasion-ally resulted, sometimes because of insufficientinputs by telecommunications experts in projectmanagement. This happened in Armenia, for in-stance, where the government awarded 15-yearexclusivity to the privatized monopoly.

IFC’s recent support for pre-privatization proj-ects marked a departure from the traditionalBank and IFC respective fields of intervention andhas presented new challenges for coordination.As of end-FY99, IFC had approved four pre-privatization projects, three of which have beencommitted (Hungary, Latvia, and Macedonia).Two of these operations have been evaluated inthis report, and both of them achieved a satis-factory-or-better development outcome. The firstIFC pre-privatization investment was structuredin FY94, in close coordination with Bank staff,to help complete the financing of an expansionproject partly funded by a Bank loan. IFC’s keyobjectives were to help launch the first majortelecommunications privatization in Eastern Eu-rope and to give confidence to potential strate-gic investors. These objectives were met basedon the amount of interest shown by world-classtelecommunications operators and the privati-zation revenues realized by the government.

But investing in a pre-privatization project isseen by some as having the potential to create afinancial incentive for IFC to lobby for extendingexclusivity while it is in a strong position to doso—before its public partner is actually privatized.The review, however, did not find any evidenceto support such perception. In fact, in all fourpreprivatization projects supported by IFC, thebasic parameters (including exclusivity and the at-tendant build-out obligations of the project) of thelicense have been structured prior to IFC’s in-volvement. In one operation, the exclusivity pe-riod is being renegotiated in response to increasedprivate sector interest following the early suc-cess of the project and to align with current ex-clusivity periods being granted in other markets.To avoid the perceived conflict of interest in a dual


3 4

role as advisor and financier, IFC does not par-ticipate in projects where CFS is, or has been, anadvisor to the government on privatization of thestate telecommunications company. As in non-pre-privatization projects, IFC has accessed TechnicalAssistance Trust Funds to provide project prepa-ration assistance to pre-privatization projects. AllIFC pre-privatization projects have been under-taken in coordination with the Bank. IFC did notproceed with the pre-privatization proposals in in-stances where the Bank and IFC have disagreedon the rationale for IFC’s pre-privatization in-volvement.

While Bank and IFC telecommunications staffagree on the opening up of the sector to compe-tition, there have been differences of opinion onspeed and timing. IFC staff have generally sup-ported the private sector’s view that limited ex-clusivity is important in attracting huge financialcommitments from international operators to meetthe build-out requirements in pre-privatizationand in enhancing the viability of pioneering proj-ects (such as mobile phones) in countries with less-developed regulatory frameworks. This view hasnot been unanimously shared in the Bank, how-ever, since others see it as in conflict with theBank’s objectives of establishing competitiveregimes in its projects as quickly as markets willpursue. IFC’s position is that limited exclusivity tothe extent deemed necessary by private investorsto commit to build-out requirements is not in con-flict with the Bank’s objectives. Rather, it lays thegroundwork for a sustainable and healthy opencompetition. Successful projects have a strongdemonstration effect in attracting new players inthe country once the limited exclusivity has ex-pired. Failed projects could provide a negativedemonstration effect, especially in cases where theglobal strategic partners walked away from theirprojects because of a difficult enabling environ-ment. Furthermore, a limited exclusivity period can

also provide some breathing room for the gov-ernment to implement drastic tariff rebalancingmeasures before full competition sets in. Indeed,most IFC projects with expired exclusivity arenow operating against key global players in acompetitive environment. Evidence reviewed inthis study appears to confirm that short (that is,no more than 4 or 5 years) initial exclusivity pe-riods for fixed telephony operations can be ben-eficial in countries with very limited access toforeign private capital (for example, Peru in 1993).At the same time, exclusive licenses (including defacto restrictions on new entrants) are becomingrare for the wireless and international segmentsunder current business environments.

IFC staff have generally argued that the state-owned telecommunications operators should beprivatized before liberalization to offer a levelplaying field for new entrants (Annex B). How-ever, this is rarely the case and, with appropri-ate risk mitigation measures, IFC has supportedprivate telecommunications operators in under-taking projects in such markets with a less-than-desired enabling environment. For its part, Bankstaff have usually argued that privatization ofstate-owned telecommunications operators isnot a prerequisite for liberalization.

Both Bank and IFC staff agree that coordina-tion between the Bank and IFC has been infor-mal—with project task managers (on the Bankside) and investment officers (on the IFC side)consulting and providing input to their respec-tive projects (in some countries, Bank and IFCstaff have consulted each other in advising theregulators on international best practice). Themerger of Bank and IFC staff into a joint prac-tice group should resolve these coordinationissues, but may exacerbate potential conflicting-interest challenges when Bank Group staff wishto be involved in both policy advice and trans-actions in the same country.

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CONCLUSIONS AND RECOMMENDATIONS

Successful Projects but Variable Sector Impact

The trend documented in this review is similar to the one identified inthe 1993 OED telecommunications review: projects have generally suc-ceeded when measured against their physical and financial objectives,

but evidence remains inconclusive that they have had any broad impact ondeveloping countries as a whole in terms of ultimate outcomes. Most Bankand IFC investments were processed and delivered appropriately and achievedtheir physical targets and better-than-average returns. Indeed, there are someimpressive success stories. But in the aggregate, (declining) Bank Group–financed investments have made only a limited contribution to the expan-sion and improvement of developing countries’ national telecommunicationssystems, nor is there evidence that they have significantly contributed to over-all development or to the alleviation of poverty.

The magnitude of the problem of building na-tional telecommunications systems in develop-ing countries and the limited effectiveness ofloans for system expansion were key factors inthe shift in Bank Group priorities to institutionalreform and promotion of private sector invest-ment. This was justified not by failures of pastBank projects to achieve physical and financialobjectives, but rather by gradual recognitionthat the program was not helping to meet broaderBank Group objectives. This shift in priorities isjustified not only by Bank experience but alsoby external evidence. However, explicit recog-

nition of the broader objectives in designing“new agenda” projects and assessing their ef-fectiveness has not been standard Bank and IFCpractice. While the evaluation of most IFC proj-ects has shown demonstrable development im-pacts, development objectives have not been wellarticulated at entry or monitored at supervision.IFC, then, faces a risk parallel with the Bank ofachieving well-documented financial successbut being less clear on development impacts, es-pecially since not all projects are evaluated underthe Investment Assessment Report/ExpandedProject Supervision Report system. Unless such

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practices change, the Bank and IFC may continuethe pattern of successful projects with limiteddemonstrable impact on the broader objectives.

An Enhanced Focus on InstitutionalReformsIn one respect the Bank’s role as a catalyst for in-stitutional reform has been impressive, as manycountries have launched major structural reformprograms in association with Bank loans. More-over, as major institutional reform generally takesconsiderable time to be fully implemented, thelong-term effects cannot be expected to be evi-dent in the short term. But the effectiveness of long-term institutional reform will be heavily influencedby the impact of initial reforms in early adopters.

The Bank’s policy on sector reform has spec-ified an integrated package of privatization (foradditional capital and skill), competition (formarket efficiency), and regulation (for fair com-petition, reasonable prices, and universal serv-ice development). The integration of the threeelements is important not only because they re-inforce one another and provide synergy bene-fits, but also because the adoption of one elementwithout the others risks achieving little, or evencreating greater difficulties. Moreover, someforms of privatization, competition, and regula-tion are more likely to promote developmentthan others. But the Bank Group’s implementa-tion of this policy has not been entirely consis-tent for a variety of reasons. Most notable is thedivergence of views between the Bank and IFCon the priorities of the different policy elements.In practice, there seem to have been no boundson how the policy principles of OP 4.50 couldbe interpreted and implemented, in the absence

of guidelines that set best-practice targets andidentify bounds on the range of unacceptable in-stitutional reform conditions (for example, termsfor exclusive monopoly licenses). Such guidelineswould not only have improved the Bank Group’seffectiveness, they would have preempted theBank’s critics who have viewed some Bank ac-tivities as primarily in the interest of foreign cap-ital rather than domestic development.

Effective institutional reform also requires spe-cial attention to building human capital, partic-ularly knowledge and understanding to createconstituencies for reform and competence for im-plementing the new institutional structure beyondthe initial transition phase. Most Bank activitiesfor building human capital have been small andbrief, directed more toward fixing a current prob-lem by calling on external consultants than onbuilding human capital to make the new insti-tutional structures promote long-term develop-ment objectives (El Salvador is an exception; seebox 5.1). In part this has been the result of anexcessive reliance on multisector loans, whichhave proved inadequate to pursue long-termsector goals. The Bank’s more recent emphasison stand-alone telecom/information technologytechnical assistance projects with a focus onlong-term institutional strengthening (Chad, Mali,Mauritania) should help address this pitfall.

In many countries the new structures are not yetwell grounded; in some, they are precarious; andin some, they appear to be failing. If the reformsinitiated by Bank projects are to be effective overthe longer term, the Bank will need to mount a sig-nificantly expanded program for building thehuman capital necessary to implement them. Thiswill require assistance over longer periods and


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In El Salvador the Bank has been helping to develop a program fora “learning society” through its 1996 Competitiveness Enhancementtechnical assistance project. The initiative is driven by broad-based Salvadoran participation and leadership with a modest levelof input from the Bank. Six “learning circles” have been createdaround thematic areas of rural development, small and medium-

size enterprise development, education, migration, government, andmunicipal and local development. An Internet conference bring-ing together Salvadoran stakeholders and an international specialistpanel from a dozen countries was co-moderated in February 1999by the coordinator of the Salvadoran learning society initiativeand a Bank staff member advising the program.

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continuing, direct involvement of Bank staff, notjust consultants. The Bank must be seen by thecountries as a partner in the reform process, notas an external enforcer, as it is in some countries.

Neglected Institutional OptionsWorld Development Report 1994: Infrastructurefor Development identified four major options foreffecting change to improve provision and per-formance and to expand capacity: (a) public own-ership and public operation, (b) public ownershipand private operation, (c) private ownership andprivate operation, and (d) community and user pro-vision. Until the early 1990s, telecommunicationsloans focused almost exclusively on (a). Now theyfocus almost entirely on moving toward (c) through(mostly multisector) technical assistance loans, andphasing out direct loans to governments for net-work improvement. Moreover, there is little evi-dence that serious evaluation of institutional optionsis undertaken in project design. This is surprisingin that even the most developed countries, amongthem the United States and Canada, achieved uni-versal telephone service using all four options,and they are still part of the countries’ national strate-gies today. In these countries option (d) has beenimportant in extending the telecommunicationsnetwork to underdeveloped areas and maintain-ing universal service. In fact, most developed coun-tries are now experimenting with a variety ofpublic-private partnerships for building their na-tional IIs.1

It is sound policy for the Bank to stop mak-ing telecommunications loans to governmentswhere they are not effective. It is also sound pol-icy to use loans to promote sector reform when-ever this opens options that were previouslyclosed. This suggests that Bank lending to gov-ernments, particularly in the context of public-private partnerships or in combination with somekind of IFC involvement, should be seriouslyconsidered on its own merits and, based on ex-perience and country circumstances, not rejectedas a matter of principle.

Toward an Integrated Approach toInformation Infrastructure DevelopmentInformation infrastructure (II) development willrequire much more integration of activities across

the telecom, information technology, infoDev,and IFC programs. While a degree of personalcooperation between some individuals currentlyexists, there has been insufficient coordinationand no evident integration. Bringing informationtechnology into the Telecommunications Divisionhas evidently changed very little, primarily be-cause the division’s activities have been (un-necessarily) narrowly defined and not connected.

In a broad sense, the Bank should deepen itstechnical advice and lending support for the reg-ulatory framework and institutional reforms nec-essary to ensure private provision of II. IFCshould continue to leverage its private sectorexperience by catalyzing private investments inresponse to sector adjustments and, as appro-priate, to help stimulate institutional reforms. Toachieve an integrated II approach, each productgroup must widen the parameters of its work. Thetelecommunications sector must take on longer-term issues of application and implementation inthe developing countries. Information technology(IT) must take on issues of institutional reformthat set the framework for their work. It wouldmake sense to incorporate infoDev into thisgroup as fostering essential experimentation, re-search, and applications that can provide a basisfor a more demand-led II development programby the Bank Group (for example, scaling up byIFC projects of successful grassroot pilots, bethey in rural networks, value-added services, orprivate II applications in other sectors such aseducation and health). The merger of IFC’stelecommunications division and the Bank’s tele-com/information technology unit provides the po-tential for an expanded and integrated programof investment options.

Selecting Bank Group InstrumentsThe Bank Group has a wide range of instrumentsit can use in country development programs andprojects. Indeed, the 1993 OED evaluation rec-ommended that the Bank consider a broaderrange of instruments in pursuit of the new privatesector–led agenda. Overwhelmingly, recent Banklending for telecommunications has been in theform of technical assistance loans (TALs). In-creased attention to building human capital, mit-igating risks, and providing for partnerships and

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flexibility means that the full range of Bank in-struments must be employed. This will ensuregreater continuity of Bank involvement and moresubstantive inputs by specialized sector staffthroughout the period of sector restructuring.

IFC provides long-term loan and equity fi-nancing to viable private sector projects. It playsa catalytic role by investing no more than 25 per-cent of the project cost, thereby stimulating andmobilizing private investments. IFC also providestechnical assistance and advice to private busi-nesses and governments. With support from theBank, IFC made its first preprivatization investmentin the telecommunications sector in FY94. This pri-vatization project helped complete the financingof an expansion project partly funded by a Bankloan. Two other preprivatization investments havebeen subsequently committed, and both werewith the support and cooperation of the Bank.Preprivatization investments by IFC can be ap-propriate under certain circumstances, for exam-ple, in difficult markets and where IFC’s presencecan add value. While the two preprivatization in-vestments evaluated in this study achieved satis-factory-or-better development outcomes, IFCshould continue to use this instrument selectivelybecause of the increased potential for conflict ofinterest.2 Ideally, they should be used where par-allel efforts are being undertaken by the Bank atthe regulatory level and IFC at the transaction level.

Greater coordination in the use of Bank andIFC advisory activities (including the attendanttechnical assistance, or advisory assignments) isneeded to improve synergies. This should be fa-cilitated by the newly merged Bank/IFC advisoryunit. Advisory services to governments on pol-icy and regulatory reform should be carried outin full coordination with relevant Bank and IFCunits to avoid potential duplication or conflictwith similar Bank activities in the context of anintegrated country II strategy. Sri Lanka pro-vides a good illustration of how IFC and the Bankcan leverage their respective comparative ad-vantage to help foster reform (see box 5.2).

Research Capacity and Application of Research Knowledge The Bank has published numerous research anddiscussion papers examining issues and problems

associated with II development, including boththeoretical and applied issues. Yet there is little ev-idence that the benefit of this research and analy-sis finds its way into projects. For example, a 1994paper examining innovative use of competitiveprocesses and accountability standards by theChilean regulator to promote rural network de-velopment, which achieved outstanding success,has apparently had no impact so far on any proj-ect design in any country. Linkages between re-search and practice clearly need to be strengthened.

The Bank is also in a strong position to un-dertake research on such II development issuesas the scope and limits for private market de-velopment in different markets and Regions, thesignificance of externality and public good char-acteristics of II networks, and alternatives to theinternational revenue settlements system for de-veloping countries. In addition, research on best-practice II development standards, includingapplications by governments in areas such ashealth and education, could strengthen projectdesign and improve the possibilities that futureprojects will perform at a best-practice or opti-mal standard, rather than the uninspired stan-dards currently employed.

RecommendationsThe Bank Group’s two very recent major initia-tives in the II sector (the Global Gateway and theIFC–Softbank Internet venture) signal that its be-nign neglect of the sector at both the strategic andcountry management level may have ended.Thus, the ongoing preparation of the FY01 Sec-tor Strategy Paper (SSP) on Information Infra-structure, together with the recent managementdecisions to merge the telecommunications unitsof the Bank and IFC and to consolidate the man-agement of all Finance, Private Sector, and In-frastructure Network nonlending services, providea unique opportunity for the Bank Group toovercome the fragmentation of recent years andto squarely reposition II on the Bank Group’s coredevelopment agenda.

In this context, the forthcoming SSP shouldincorporate the following recommendations:• Policy. It should restate the Bank Group ob-

jectives in the broader II sector in terms ofultimate results (such as access to information,


4 0

pricing and quality of services, fiscal impact)rather than just means and/or intermediateoutcomes (private sector investment, com-petition, or regulation), as OP 4.50 currentlydoes. In particular, it should address out-standing policy gaps and differences in reg-ulatory reform strategy regarding the BankGroup’s approach to sequencing sector lib-eralization and privatization as well as to uni-versal service/rural access and its linkageswith the Bank’s poverty-reduction agenda(including through interventions in other sec-tors such as education and health).

• Institutional options. While ensuring consis-tency with the September 1999 Bank Groupprivate sector development (PSD) strategyand drawing on lessons learned from recentexperience in reforming countries, the forth-

coming SSP should provide detailed guidanceto Bank Group staff on a range of II policy andstrategic options best suited to various cate-gories of borrowers, rather than a rigid one-size-fits-all reform model—possibly using thecountry segmentation framework proposedin a recent infoDev-financed backgroundstudy. Similarly, the SSP should promote theuse of a broader range of Bank Group in-struments, away from the excessive relianceof recent years on multisector TA loans.

• Regional/country strategies. The SSP shouldinclude detailed regional Bank Group II strate-gies, building on the recent and very suc-cessful exercise carried out for the EasternEurope and Central Asia Region telecommu-nications strategy. To this end, the manage-ment of the newly merged Bank/IFC unit

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The Bank Group’s involvement in Sri Lanka’s telecommunica-tions sector dates back to 1979, when the Bank approved theFirst Telecommunications Project, which was designed to im-prove efficiency and develop the physical network of the gov-ernment telephone monopoly. The project was completed in1987 and was rated successful. In 1988, the first mobile tele-phone license was granted to a private operator. In 1991, theBank approved the Second Telecommunications Project to(a) spinoff a corporatized telecommunications operator fromthe P&T Department; (b) strengthen the institutional capabil-ities of the corporatized telecommunications operator (SriLanka Telecommunications Ltd., or SLT); (c) promote privatesector participation; and (d) improve services and increaseconnectivity. In the same year, a law was passed that estab-lished a separate dominant telephone operator (SLT) and reg-ulator (Sri Lanka Telecommunications Authority) andopened-up the market to further private sector investments. TheSecond Telecommunications Project exceeded its physical andinstitutional objectives.

In 1993, IFC invested equity in the second mobile telephonecompany in the country. The investment was in response to a for-eign telecommunications operator’s request for IFC’s participa-tion. IFC saw this as an opportunity to provide comfort to aforeign sponsor undertaking an important project that would pro-vide competition to the private monopoly, lower costs, improve

services, and widen access. IFC’s role has been completed, andin 1997 IFC, along with the original foreign sponsor, sold its in-vestment in this company to a strategic partner. Today, Sri Lankahas four mobile telephone operators and has one of the most com-petitive tariffs in the Region.

The Bank approved its third telecommunications project,Telecommunications Regulation and Public Enterprise Re-form Technical Assistance, in 1996. Among the project’s ob-jectives were furthering institutional reforms, strengtheningthe regulatory framework, and promoting private investments,operation, and competition. The 1991 Telecommunications Actwas also amended to create a more independent regulator, theTelecommunications Regulatory Commission (TRC).

In 1997, SLT was partially privatized when Japan’s NipponTelegraph and Telephone Corporation acquired 35 percent of thecompany and assumed management of its operations. SLT hasexclusivity in international long distance voice services until2002. In the domestic market, competition comes from two pri-vate fixed-line operators (Lanka Bell and Suntel) using wirelesslocal loop (WLL) technology that was licensed by TRC in 1996.

Today, Sri Lanka has one of the most liberalized telecom-munications markets in the Region. The Bank Group continuesto play a role through its policy advice on emerging regulatoryissues and IFC’s possible assistance in financing the build-outcommitments of the private fixed-line operators.

I B R D a n d I F C L e v e r a g e T h e i r C o m p a r a t i v eA d v a n t a g e s — T h e S r i L a n k a E x p e r i e n c e

B o x 5 . 2

should give top priority to carrying out arapid country-level II policy and strategy stock-taking exercise covering every country wherethe Bank or the IFC is involved. This exerciseshould not aim at preparing polished coun-try reports, but rather at providing the basicintellectual foundation for the formulation ofthe Bank Group’s operational strategy. Con-sideration should be given to using infoDevresources more systematically to support suchcountry-level II policy and strategic work.3

• Partnerships. The SSP should propose waysto streamline the vast array of current exter-nal partnerships in the II area, based on a sys-tematic evaluation of their relevance, impact,and efficiency. The excessive fragmentationof their management within the Bank Groupshould be specifically addressed, possibly byformally assigning overall strategic and coor-dination responsibility to the manager of thenewly merged Bank/IFC unit.

• Staffing. The SSP should include a plan to con-tinually update staff skills to cope with the de-mands of this dynamic sector and enable theBank to maintain policy leadership, building onthe shift that has already taken place in recentyears, both in the Bank and IFC, in responseto the new private-sector-led agenda. Given therapid technological changes and the increasing

scope of the information infrastructure sector,this may include expanding beyond thetelecommunications sector the successful staffexchange program already in place and/or set-ting up a well-structured knowledge-sharingprogram with leading private sector companies.

• Monitoring and evaluation. The SSP shoulddraw on this report to summarize lessonsfrom recent Bank Group experience. And itshould include a detailed framework for thefuture monitoring and evaluation (M&E) of therevised Bank Group policy and strategy. Tothis end, current M&E processes should be en-hanced at three levels: (a) at the project/ac-tivity level, by setting M&E systems for thoseinterventions that currently “fall through thecracks” (telecom/information technology/in-formation infrastructure components of mul-tisector Bank projects and the Bank Group’sadvisory and analytical services); (b) for IFCprojects, by specifying, at appraisal, the pro-ject’s expected contributions to specific sec-tor and development impact objectives and bytracking their progress and prospects forachievement in supervision and evaluation re-ports; and (c) at the global level, by incor-porating in the SSP specific, relevant indicatorsof Bank Group effectiveness, including sec-tor outcomes and development impacts.


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ANNEXES

The evaluation framework IFC used in this studyis a modified version of its standard InvestmentAssessment Report/Expanded Project SupervisionReport (IAR/XPSR) framework. The evaluationpopulation of 21 operations was reviewed to de-termine development outcome, with each op-eration rated as either “satisfactory” or “less thansatisfactory” on each of five performance di-mensions: project business success, companybusiness success, growth of productive privateenterprise, growth of the economy, and livingstandards (see attachment A.1). These wererecorded on an evaluation form (see attachmentA.2). A development outcome rating was thenassigned to each project based on a synthesis (notaverage) of the five performance dimensions.

Unlike the IAR/XPSR framework, the reportdid not evaluate environmental impacts becausetelecommunications is a relatively clean operationand because the Operations Evaluation Group(OEG) does not have the requisite skills or re-

sources in the context of this desk review. Envi-ronmental issues specific to telecommunicationsinclude: right-of-way acquisitions, tower site se-lection, used battery return, and microwave trans-missions. Except for the private equity fund (whichwas rated as a financial intermediary project), alltelecommunications projects in the evaluationpopulation were classified as Category B (nomajor issues) under the IFC Environmental ReviewProcedures. The study was unable to determinethe environmental compliance status of all proj-ects based on information from Annual Supervi-sion Reports/Project Supervision Reports(ASRs/PSRs). Only 10 projects (less than half)have information on environmental compliance inthe latest ASR/PSR. All 10 projects reported com-pliance with IFC/World Bank guidelines. The fourtelecommunications investment operations fromthe evaluation population that were evaluatedunder the IAR/XPSR self-evaluation frameworkwere rated satisfactory on environmental impacts.

ANNEX A: IFC EVALUATION FRAMEWORK AND CRITERIA


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Development Outcome Rating. The development outcome rating isa bottom-line, synthetic assessment of the operation’s results, basedon (but not an average of) the following five development indicators.1. Project business success. This rating considers the narrow ob-

jectives supported by IFC’s financing. The best measure of a project’sbusiness success is its financial rate of return (FRR). Lacking the datato calculate an FRR, we based this rating on assessments of the in-puts to an FRR—capital expenditures, cost overruns, capacity uti-lization, sales volumes, pricing, revenues, margins, profits, taxes,subsidies, etc. (In financial market projects this includes assessingthe intermediary project funded, taking into account project execu-tion, use of agreed approval criteria, subproject sustainability, andindustry comparisons.)

• Rates satisfactory-or-better when the inputs to an FRR convey asatisfactory FRR.

2. Company business success. This rating addresses the perform-ance of the company as a business enterprise. If the project is a smallpart of the company’s total operations or serves a new market, thecompany’s business performance and prospects may differ materi-ally from the project’s. A company’s success is evaluated on its financialcondition, operations other than the project, market responsiveness,creditworthiness, profitability, company development, management,and sponsor group compatibility.

• Rates satisfactory-or-better when the company meets at-approvalcompany expectations.

3. Growth of productive private enterprise. This rating considers,as relevant, the upstream and downstream linkages to private firms,new technology, management skills and training, degree of localentrepreneurship and competition, demonstration effects, enhanced

private ownership, capital markets development; and business prac-tices as a positive corporate role model. Included also are regulatoryimprovements such as changes in government policy and legal, tax,and accounting frameworks.

• Rates satisfactory-or-better when the project provides distinctlypositive net contributions.

4. Growth of the economy. This rating considers the project’s net eco-nomic benefits to all members of society, which is best measured byan economic rate of return (ERR). Lacking the data to calculate an ERR,we based this rating on assessments of the inputs to an ERR—thesocial benefits and costs including consumer surplus, taxes paid, ef-fects on competitors, benefits to suppliers, effects on input and out-put markets, and how competitive prices and quantities are determinedin relevant markets.

• Rates satisfactory-or-better when the net economic benefits arepositive and near to expectations.

5. Living standards. This rating is based on a project’s benefits andcosts to those who are neither owners nor financiers: customers, em-ployees, suppliers, competitors, local residents, government, andthe like. It includes contributions to widely held social objectives suchas employment generated, employee living standards, nonwage ben-efits, training, community services, health and safety, expropriationprocedures and resettlement, gender equity, and child labor.

• Rates satisfactory-or-better when there are positive net benefits tothose who neither own nor finance the project.Investment Outcome. The investment outcome rating is a synthesis

of up to two indicators (one for loan, one for equity) that address the in-vestment’s gross contribution performance. Each is evaluated and rated ac-cording to standard benchmarks that reflect corporate investment policy.

D e f i n i t i o n o f F r a m e w o r k T e r m i n o l o g yA t t a c h m e n tA . 1

A N N E X A : I F C E VA L U AT I O N F R A M E WO R K A N D C R I T E R I A

4 5

1. Country and Project Name

2. IFC Investment: Board Approval Date:Gross Commitment Net Commitment

3. Project description:

4. Outcome relative to expectations:

5. Principal business obstacles and outcome drivers:

Less than SatisfactorySatisfactory or Better

6. Development Outcome Rating(i) Project business success

(ii) Company business success

(iii) Growth of productive private enterprise

(iv) Growth of the economy

(v) Living standards

7. IFC Investment Performance

8. IFC Role and Contribution

9. Key Lessons Learned

T e l e c o m m u n i c a t i o n s P r o j e c t E v a l u a t i o nA t t a c h m e n tA . 2


4 6

The study has identified the following 13 key les-sons based on the 21 evaluated operations andon interviews with investment staff. The lessonswere drawn mostly from IFC’s experience intelephone (basic and mobile) projects and maynot necessarily provide adequate guidance to thebroader information infrastructure sector.

Regulatory Issues1. Independent regulator. A capable, privatiza-

tion-committed, and independent state telecom-munications regulator is important for successfulprivate sector participation. In situations wherethe state still operates the primary telecommu-nications company, the state regulatory functionmust be distinct and separate from the statetelecommunications operator to avoid conflict ofinterest. This is a position shared by many Bankand IFC telecommunications staff.

2. Privatization prior to liberalization. It isdifficult to have fair competition in an envi-ronment where the state-owned operator hasnot been fully privatized prior to the openingof the sector. The fact that the state telecom-munications company is not in the same sub-sector or market segment open to privateinvestments is not sufficient to completelyaddress the risk of unfair competition. A suc-cessful private sector project could attract thestate telecommunications company to estab-lish a subsidized operation to compete unfairlyagainst the private sector.

3. Limited period of exclusivity. A limitedperiod of exclusivity or duopoly is importantin attracting strong and committed privatecapital and in ensuring project viability innewly opened markets, especially in fixed te-lephony. Fixed-telephony projects usually in-volve the acquisition, modernization, and

expansion of recently privatized networks.These networks usually come with an ineffi-cient management, a bloated workforce, out-dated technology, and non-cost-based tariffs.Faced with the challenge of transforming aninefficient operation to a profitable companywhile committing to a capital-intensive build-out investment program, project sponsorsview limited exclusivity as one way of miti-gating these risks.

4. Licenses and licensing. Terms of conces-sion licenses should be on a commercialbasis, balanced, reasonable, and realistic.The licensing process should be transpar-ent. Unfair licenses or licenses granted in anontransparent manner are likely to be re-opened for further negotiations, especiallywhen a new administration takes over theregulatory body.

5. Duration of concession. Concessions with ashort life discourage large capital expendituresand restrict investment returns. They also pro-vide no incentive for future upgrading andmodernization capital expenditures.

Commercial Issues1. Interconnection. Interconnection agreements

should be balanced and based on commercialterms. Revenue sharing with the state telecom-munications operator, if not fairly structured,could be difficult to implement. It is often moreprudent to enter into an interconnection agree-ment directly with other private sector players.

2. Subscriber base and accounts receivable.The quality of accounts receivable declinesas subscriber base increases. More marginalclients are acquired as telephone affordabil-ity increases. Tariffs are often lowered to at-tract a wider market.

ANNEX B: LESSONS LEARNED FROM IFC’S TELECOMMUNICATIONSOPERATIONS

3. High profitability. High profitability does notlast. Competition finds a way to grab marketshare. Projects experiencing strong perform-ance should be prepared for a strong and ag-gressive competitive response.

4. Economies of scale. Small regional teleph-ony projects may not be viable on a stand-alonebasis due to lack of economies of scale. Ruraltelephony projects have failed because of thelack of strong market or revenue potential.

5. Flexibility in financial structure. Project fi-nancing should be structured to allow forquick response to adversities and opportuni-ties. The telecommunications sector is a rela-tively fast-moving sector, and quick strategicmoves are key to continual success.

6. Cost structure. Low-cost structure, qualityof service, and advanced technology aremore important than high tariffs in ensuringlong-term viability. Tariffs decline as com-petition intensifies. Companies with high

costs and outdated technology will find itdifficult to remain viable.

Strategic Issues1. Preprivatization investment. IFC could play

a role in state-owned telecommunicationscompanies by supporting preprivatization proj-ects. Appropriately structured and financedpreprivatization rehabilitation projects cancontribute to higher valuation of the state-owned telecommunications company, in-creased interest among major internationalplayers, and successful privatization.

2. Less-than-ideal regulatory environment.IFC’s participation and proper structuring couldenhance the viability and bankability of projectsin a less-than-ideal regulatory environment.Many of the evaluated IFC telecommunicationsoperations succeeded even in less mature reg-ulatory conditions largely through prudent riskmitigation and financial structuring.

A N N E X B : I F C L E S S O N S L E A R N E D F R O M I F C ’ S T E L E C O M M U N I C AT I O N S O P E R AT I O N S

4 7

1. Policy. The forthcoming strategy and sector paper (SSP) should restate the BankGroup objectives in the broader II sector in terms of ultimate results (for example,access to information, pricing and quality of services, fiscal impact) rather than justmeans or intermediate outcomes (private sector investment, competition, or regu-lation), as OP 4.50 currently does. In particular, it should address outstanding policygaps and differences in regulatory reform strategy, regarding the Bank Group’s ap-proach to sequencing sector liberalization and privatization as well as to universalservice/rural access and its linkages with the Bank’s poverty-reduction agenda (in-cluding via interventions in other sectors such as education, health, and the like).

2. Institutional options. While ensuring consistency with the September1999 Bank Group private sector development (PSD) strategy and drawing onlessons learned from recent experience in reforming countries, the forthcom-ing SSP should provide detailed guidance to Bank Group staff on a range of IIpolicy and strategic options best suited to various categories of borrowers, ratherthan a rigid one-size-fits-all reform mode, possibly using the country segmen-tation framework proposed in a recent infoDev-financed background study. Sim-ilarly, the SSP should promote the use of a broader range of Bank Groupinstruments, away from the excessive reliance of recent years on multisectortechnical assistance loans.

3. Regional/country strategies. The SSP should include detailed regional BankGroup information infrastructure (II) strategies, building on the recent and very suc-cessful exercise carried out for the Europe and Central Asia Region telecommuni-cations strategy. To this end, the management of the newly merged Bank/IFC unitshould give top priority to carrying out a rapid country-level II policy and strategystock-taking exercise covering every country where the Bank or IFC is involved. Thisexercise should not aim at the preparation of polished country reports, but ratherat providing the basic intellectual foundation for the formulation of the Bank Group’soperational strategy. Consideration should be given to using infoDev resourcesmore systematically to support such country-level II policy and strategic work.

4. Partnerships. The SSP should propose ways to streamline the vast array ofcurrent external partnerships in the II area, based on a systematic evaluation of


4 8

ANNEX C: MANAGEMENT ACTION RECORD (MAR)

O E D – O E G R e c o m m e n d a t i o n s

Management is in general agreement with the recommen-dations about topics to cover in the forthcoming SSP. Specif-ically, we will broaden the analysis of the InformationInfrastructure Sector with a view to identify outstanding gapsin the post-liberalization era as well as in new areas suchas e-commerce. The SSP will also review the appropriate-ness of OP 4.50.

We agree with the need to provide a framework in the SSPwithin which staff will be able to position various policy andstrategic options for individual countries. We also believe thatthe recent integration of Bank and IFC activities in the ICTsector will promote the use of World Bank Group (WBG) in-struments in a seamless way and to the best interest of ourclient countries. While flexibility is required at the countrylevel, staff will be given clear guiding principles for prepar-ing all WBG operations in the sector. Those principles/guide-lines will include, in particular: competition, privateparticipation, and a legal and regulatory framework provid-ing clarity and predictability to private investors.

Management agrees on the need to include Regional BankGroup strategies in the SSP to translate the strategic agendainto country programs and investments. This will also helpengage the Regions in the process of “owning” the SSP. Asyou suggest, we will build on the successful ECA telecom-munications strategy already prepared. However, time andbudget constraints will not allow us to do a similar com-prehensive exercise for other Bank Regions. Therefore, Man-agement proposes to keep these country strategies simpleand modifiable to keep the cost at a minimum and give theWBG flexibility to react promptly to changing country situ-ations (windows of opportunity that need to be exploited).

As part of the SSP process, we will clarify the division of laboramong the different parts of the WBG concerning ICT-related

M a n a g e m e n t R e s p o n s e

A N N E X C : M A N AG E M E N T AC T I O N R E C O R D ( M A R )

4 9

their relevance, impact, and efficiency. The excessive fragmentation of theirmanagement within the Bank Group should be specifically addressed, possiblyby formally assigning overall strategic and coordination responsibility to themanager of the newly merged Bank/IFC unit.

5. Staffing. The SSP should include a plan to continually update staff skills tocope with the demands of this dynamic sector and enable the Bank to maintainpolicy leadership, building on the shift that has already taken place in recent years,both in the Bank and IFC, in response to the new private-sector-led agenda.Given the rapid technological changes and the increasing scope of the informa-tion infrastructure sector, this may include expanding beyond the telecommuni-cations sector the successful staff exchange program already in place and/or settingup a well-structured knowledge-sharing program with leading private sectorcompanies.

6. Monitoring and evaluation. The SSP should draw on this report to sum-marize lessons from recent Bank Group experience. And it should include a de-tailed framework for the future monitoring and evaluation (M&E) of the revisedBank Group policy and strategy. To this end, current M&E processes should beenhanced at three levels: (a) at the project/activity level, by setting up M&Esystems for those interventions that currently “fall through the cracks” (telecom-munications/information technology/information infrastructure componentsof multisector Bank projects and the Bank Group’s advisory and analyticalservices); (b) for IFC projects, by specifying at appraisal the project’s expectedcontributions to specific sector and development impact objectives and track-ing their progress/prospects for achievement in supervision and evaluation re-ports; and (c) at the global level, by incorporating in the SSP specific relevantindicators of Bank Group effectiveness, including sector outcomes and devel-opment impacts.

O E D - O E G R e c o m m e n d a t i o n s

work. The goal will be to increase the impact of these part-nerships to maintain corporate oversight and keep bureau-cracy to a minimum.

The SSP will include a plan to update staff skills, subject tobudget constraints, in this fast changing sector and to main-tain the Bank policy leadership, building on the shift madea few years ago. Equally important, the SSP will estimatethe cost of this staff plan and stress the risk of skills erosionof our staff if the current internal pricing structure andbudget pressures are maintained.

We are making use of the Staff Exchange Program and,so far, have exchanged staff with companies such as Motorola,Telecom Italia, Siemens, France Telecom, and Deutsche Post.

Management concurs with the importance of measuringthe developmental impact of WBG operations in the sector.Please note that all Bank stand-alone telecommunicationsprojects approved during the period FY98–FY00 include mon-itorable indicators (usually in Annex 1 of the PAD). We wel-come the suggested development outcome framework ofAnnex A (Attachment A.1), which will help us in linking a proj-ect outcome to the broader PSD, growth, and living standardsindicators. We would like to stress, however, that this is arisky proposal since, except for a few specific indicatorslike tariffs or FDI, it is difficult to establish with certaintycausality between project outcome and developmental im-pact. For IFC transactions, the monitoring of broad develop-mental objectives may prove to be unrealistic or very difficult.Finally, we agree that the M&E system for telecommunica-tions/informatics components of multisector projects is lessthan satisfactory. As explained in other sections of the re-port, the current multisectoral approach has a budget rationale(tackling several sectors in a single project costs less) as wellas quality implications (minimal budgets allocated to thepreparation and supervision of telecommunication compo-nents of those projects).

M a n a g e m e n t R e s p o n s e


5 0

Bank Group Experience in InformationInfrastructure: A Joint OED–OEG Reviewand Draft Management Response

The Committee on Development Effectiveness meton May 24, 2000, to discuss the report The Bank’sGroup’s Experience in Information Infrastructure:A Joint OED/OEG Review (CODE2000-36) and thedraft Management Response (CODE2000–47).The review assesses the impact of the World BankGroup’s assistance in the development of infor-mation infrastructure—including telecommunica-tions networks, computing hardware and software,together with related policy, legal, and institutionalframeworks—in developing countries. It is thefirst joint OED/OEG evaluation of both the Bankand IFC assistance in a given sector. Committeemembers were asked to focus on the OED/OEGrecommendations for consideration in developinga Bank Group Sector Strategy for InformationInfrastructure.

The review noted that dramatic changes haveoccurred in the telecommunications sector sincethe last OED review in 1993 of the Bank Group’sexperience in this sector. These changes includethe Internet revolution; the adoption of far-reach-ing liberalization policies in this sector by manygovernments; dramatic shifts in the Bank Group’sportfolio from lending to public utilities to sup-port of tax reform and distance learning; and theadoption of O.P. 4.50 Telecommunications Sec-tor in 1995, making lending to state enterprisescontingent on sector reform.

The review noted favorably that Managementhad overall heeded the recommendations fromthe 1993 OED review: The OP 4.50 has focusedon a “new” agenda of privatization, regulation,and competition; Management has consolidatedthe Bank and IFC telecommunications units and

FPSI nonlending services; and both the Bank andIFC telecommunications portfolios had contin-ued to perform above average. However, the re-view also found that impact had been limited toa few countries and that there is a lack of a co-gent strategy at the country level. The reviewcalled for a stronger regional and country im-plementation focus; expanding OP 4.50 to in-clude the full range of Bank Group informationinfrastructure activities; widening the range of in-struments; improving the monitoring and eval-uation system, especially for Information andCommunication Technology (ICT) componentsof non-ICT projects; and addressing the renewalof staff skills.

The Committee was pleased to note the con-currence of Management and staff on the rec-ommendations made by OED and OEG andnoted that the review was timely given the on-going preparation of an approach paper for a sec-tor strategy for information infrastructure to bepresented to the Board in FY01. The Committeeagreed that bridging the digital divide was adevelopment priority; many Committee memberssupported IFC taking a more proactive role inthe sector. The Committee felt that the Bank, asa matter of urgency, should develop a clearstrategy to guide country policy dialogue.

Extent of the Digital DivideCommittee members held different views on theextent of the divide and how it could be bridged.Some speakers felt the assumption that develop-ing countries would automatically reap high pro-ductivity gains from investing in informationinfrastructure was ambitious, and called for amore pragmatic approach. Others noted the re-duction in real costs worldwide and increasingrates of connectivity in some developing countries.

ANNEX D: REPORT FROM THE COMMITTEE ON DEVELOPMENT EFFECTIVENESS (CODE)

Management informed the Committee that upper-and middle-income countries were acceleratingtheir investments in the telecommunications sec-tor as a share of GDP, however, the relative sharefor lower-income countries overall remained stag-nant. Management noted that the development ofthe Internet in emerging markets is key to bridg-ing the widening digital divide that threatens toleave some developing countries far behind thedeveloped world.

Quality of the PortfolioCommittee members held different views on thecauses for the disconnect between well-per-forming Bank projects and poor sector perform-ance at the country level. Some members askedif the limited impact at the country level of well-performing projects was the result of implemen-tation of a badly designed strategy or due to thelack of commitment of the necessary resources.OED noted that the stellar performance for self-standing telecommunications projects could bemisleading, since they present a small part of thetotal assistance in the sector. Management in-formed the Committee that it is in the process ofdeveloping rapid country-level strategic exercisesto provide more country-specific and customizedpolicy guidance and that it was already experi-encing structural and process efficiencies as a re-sult of restructuring and that these changes hadreceived a positive reaction from clients.

The Role of the Public SectorCommittee members held different views on theextent and the role of the public sector in the pro-vision of services and achieving universal cov-erage. It was noted that the private sector isprepared and willing to engage strongly, butawaits clear leadership from the Bank on strate-gic directions. Several members called for a flex-ible and customized approached that considereda range of public-private sector models beyondthe current trend toward private sector ownershipand operation. OED noted that the study findingshighlight that there is an appropriate role forBank Group assistance in this area in addressingrural connectivity and providing physical, policy,and institutional infrastructure to countries un-dergoing reform. Management added that regu-

latory, privatization, and reform models are beingchallenged and initiatives such as infoDev will becritical to consolidating new approaches.

OED–OEG Recommendations for an SSPCommittee members had diverse views on the ap-propriateness and scope of the OED/OEG rec-ommendations for inclusion in developing theSSP. Some speakers felt there was a “disconnect”between the analysis and the findings and the rec-ommendations. Some felt that the report walkeda thin line between evaluation and advocacy andfelt the latter emphasis could jeopardize the in-dependence of future assessments. Others dis-agreed, endorsing the relevance of the OED/OEGreport and would have welcomed even strongerrecommendations. Management noted that the“disconnect” was in part attributable to recom-mendations being forward looking and encom-passing the broader information infrastructuresector, whereas the review assessed past experi-ence. Management informed the Committee thatit is addressing some of the weaknesses identifiedin the report, such as the fragmentation of the ad-visory services, and that many of the substantiveissues would be addressed by the sector strategy.

Information Infrastructure and PovertyThe Committee noted the importance of clar-ifying the policy links between the SSP and theBank’s overall poverty reduction strategy. It alsonoted that it was important to sensitize clientcountries to the concrete benefits of investmentsin information infrastructure and the realizationof country poverty reduction and developmentgoals. OED informed the Committee that thereis a substantial body of literature linking in-frastructure to productivity and economicgrowth, and that this link was particularlystrong for telecommunications relative to otherinfrastructure sectors. Management noted, how-ever, that much more consensus building wasneeded within the Bank Group around the im-portance of information infrastructure in meet-ing country and sector poverty reduction goals.

ResourcesThe Committee emphasized the need for theBank to commit the required resources to

A N N E X D : R E P O R T F R O M C O M M I T T E E O N D E V E L O P M E N T E F F E C T I V E N E S S ( C O D E )

5 1

support the strategy and wanted to know if theBank had the skills mix and comparativeadvantage to do so. Management informed thecommittee that it had an internal training pro-gram and that staff also participated in ex-change programs. Management, however,emphasized to the Committee that in its viewthe resources for this sector were decreasing,contrary to the strategic directions of the Bank.

Next StepsThe Committee confirmed that the sector mer-its further discussion and looks forward to its sub-sequent discussion of the review when itdiscusses the approach paper for the informa-tion infrastructure sector strategy.

Jan Piercy, Chairperson


5 2

5 3

Chapter 11. “The Bank’s Experience in the Telecommuni-

cations Sector—An OED Review” (November 1993).

2. IAD’s 1996 and 1998 reviews of informatics in

Bank projects and the external evaluation of infoDev

by E. Wilson and others (November 1998).

3. Including one telecom-focused private equity

fund investment as well as investments in II-re-

lated activities such as paging, satellite-based VSAT,

cable network, and electronic data interchange

(EDI) service.

4. The year when IFC established a separate

Telecommunications Investment Division.

5. For purposes of the study, OEG rated 17 of the

21 mature investments using a modified IAR/XPSR rat-

ing framework (see Annex A). The remaining four

have been rated through the routine self-evaluation

process and reviewed by OEG.

6. As of mid-1999, no Quality Assurance Group

(QAG) review had been carried out in the telecom-

munications sector.

Chapter 21. “Will the Internet Close the Gap?” (Pyramid Re-

search, December 1999, photocopy).

2. Based on the (generous) assumption that, on av-

erage, a fifth of multisector technical assistance loans

is assigned to telecommunications activities—this as-

sumption had to be used in the absence of a detailed

inventory of the Bank funds assigned to the telecom-

munications components of these loans.

3. Included in Environmentally and Socially Sus-

tainable Development Network’s project database.

4. Indeed, both partnerships have been partially

funded/sponsored by infoDev.

5. Investment criteria for IFC’s projects are covered

by the “Operating Policies and Practices: Guidelines

for IFC Staff.”

6. Since FY99, IFC’s sector priorities and the proj-

ects’ deemed development impact objectives have

been reflected in the choice of project opportunities

being pursued.

7. Net of cancellations. Commitments refer to in-

vestments approved by IFC’s Board of Directors, for

which investment agreements have been signed by

the client and IFC.

8. Project cost divided by net IFC investment

commitments.

9. Fixed lines per 100 inhabitants.

10. Based on Institutional Investors’ country risk

rating of 0–100, where 100 is low risk. OEG uses the

following ranges in determining risk categories: high:

0–19; high-medium: 20–39; low-medium: 40-59; and

low: 60–100.

11. FIAS is a joint IFC-World Bank facility that ad-

vises governments on improving enabling environ-

ments for direct foreign investments.

Chapter 31. Using EMTTI’s costs charged to these projects,

which, in this sector, can be considered a reasonable

proxy.

2. Each operation was rated as either “satisfactory

or better” or “less than satisfactory” on five perform-

ance dimensions: project business success, company

business success, growth of productive private en-

terprise, growth of the economy, and living stan-

dards. The development outcome rating is a

bottom-line synthetic assessment of the operation’s re-

sults based on (but not an average of) these five per-

formance dimensions.

3. The company had liquidity problems due to sig-

nificant short-term borrowings incurred to finance

subsequent expansions.

4. The distinction between fixed and wireless te-

lephony is becoming increasingly less clear as these two

technologies converge. In cases where fixed lines were

inadequate, mobile phones have increasingly substituted

for fixed telephony. Some newer projects not covered

by this evaluation use wireless technology (e.g., wire-

less local loop or WLL) to provide fixed telephony.

5. Some of the performance drivers and obstacles,

such as weak sponsors and macroeconomic issues,

have been featured in the IFC publication, “Lessons

of Experience: Financing Private Infrastructure” (1996).

6. “Trends in Telecommunications Reform: Con-

vergence and Regulation” (October 1999).

7. The World Bank Private Sector Development

Strategy, September 10, 1999, includes management’s

view of ineffective coordination of advisory services.

Chapter 51. The U.S. industry estimates that the current level

of effective annual subsidy to high-cost areas and poor

people is more than $10 billion. And the United

States, Sweden, and other developed countries have

ENDNOTES

announced major government-funded programs to as-

sist in extending II access to schools, hospitals, com-

munity centers, and rural areas.

2. The potential for conflict of interest arising from

the integration under single units of investment and

advisory work in selected sectors (including telecom-

munications) has been recognized by Bank Group

management and is currently being addressed. See

“World Bank Group Private Sector Development Strat-

egy: Questions and Answers,” November 29, 1999

(IFC/SecM99-74).

3. Within the constraints of infoDev’s current

statutes: in contrast with ESMAP, a similar partnership

established in the 1980s for the energy sector, infoDev

can only support activities that are proposed by out-

side organizations.


5 4

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