Second Telecommunications Rehabilitation Project
     Report No: ; Type: Report/Evaluation Memorandum ; Country: Uganda; Region: Africa; Sector: Telecommunications & Informatics; Major Sector:
                                               Telecommunications & Informatics; ProjectID: P002920


The Uganda Second Telecommunications Rehabilitation Project, supported by Credit
1991-UG for US$52.3 million equivalent, was approved in FY89 The credit was closed in FY96, two years behind
schedule, and US$1.2 million was canceled. The Implementation Completion by the Africa Regional Office.

The project was part of IDA'S support to Uganda for rebuilding its economy after the 1985-86 civil disturbances,
which destroyed large parts the country's communications infrastructure and severely weakened the sector's
institutions. Its objectives were (i) to rehabilitate and modestly expand the telecommunications facilities of the
Government-owned Uganda Posts and Telecommunications Corporation (UPTC); and (ii)
to restore and strengthen UPTC.

Accordingly, the main project components were (a) the rehabilitation of the network and subscriber facilities in and
between the main cities and provincial towns; (b) the provision of essential materials and equipment for installation,
maintenance, and transportation; and (c) technical assistance to adjust UPTC's structure and strengthen the planning,
operation, and financial management abilities of its telecommunications wing.

The project met its primary physical objectives but fell substantially short of targeted improvements in operational
efficiency and quality of service, which were, in hindsight, too ambitious given UPTC's weak implementation
capacity. A feud between the Board and the management of UPTC, which lasted three years, was the main cause of a
two-year delay in the completion of the project's physical components and of the lack of institutional progress.

At completion, the economic rate of return (estimated to be 14 percent at appraisal) was re-estimated at 18 percent as
costs were somewhat lower than estimated at appraisal and because project facilities were commissioned late and
therefore their capacity fully used in a much shorter time than anticipated. The Government and UPTC complied with
most important credit covenants. The main exception was that accounts receivable remained high. Large and repeated
tariff increases have led to a continuous improvement in the financial performance of UPTC's telecommunications
operations but estimates of its financial viability are unreliable, absent an adequate assets valuation.

OED rates project outcome as satisfactory and institutional development impact as modest.
Sustainability is rated as likely in view of the prospects for continued efficiency improvements in the context of the
ongoing sector restructuring which envisages privatization of the telecommunications operations. Bank performance
is rated as satisfactory. These ratings are consistent with those in the ICR. A key conclusion drawn by the ICR is that
IDA, which was intensely involved in seeking a solution to the long impasse between the Board and management of
UPTC, might have contributed more efficiently to achieving this goal by taking more forceful action. disbursements
from the credit. This would have put stronger pressure on the Government to resolve the impasse. Also, a main lesson
is that adequate local implementation capacity is critical for sector investment lending by the Bank to be successful.

The quality of the ICR is exemplary. It is comprehensive, perceptive and defines indicators which will allow a close
monitoring of future sector performance.

No audit is planned.