South Asia Subregional Economic Cooperation (SASEC ... · H. Performance of Consultants, Contractors, and Suppliers 14 I. Overall Assessment 15 IV. ISSUES, LESSONS, AND RECOMMENDATIONS

Completion Report

Project Number: 40054-013 Loan Number: 2397 Grant Numbers: 0098 and 0099 Technical Assistance Number: 6433 June 2019

South Asia Subregional Economic Cooperation

Information Highway Project This document is being disclosed to the public in accordance with ADB's Access to Information Policy.

CURRENCY EQUIVALENTS

Bangladesh Currency Unit – taka (Tk)

At Appraisal At Project Completion 20 November 2007 15 February 2015

Tk1.00 = $0.0146 $0.0128 $1.00 = Tk68.59 Tk77.855

Bhutan

Currency Unit – ngultrum (Nu) At Appraisal At Project Completion 20 November 2007 19 April 2019

Nu1.00 = $0.0254 $0.01446 $1.00 = Nu39.34 Nu69.1685

India

Currency Unit – Indian Rupee/s (₹) At Appraisal At Project Completion 20 November 2007 31 December 2017

₹1.00 = $0.0254 $0.0157 $1.00 = ₹39.76 ₹63.84

Nepal

Currency Unit – Nepalese rupee (NRe/NRs) At Appraisal At Project Completion 20 November 2007 31 March 2017

NRe1.00 = $0.0159 $0.0159 $1.00 = NRs62.944 NRs62.944

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund BCC – Bangladesh Computer Council BSNL – Bharat Sanchar Nigam Limited BTCL – Bangladesh Telecommunications Company Ltd CEC – community e-center CLS DMF DrukREN

– – –

cable landing station design and monitoring framework Druk Research & Education Network

EIRR – economic internal rate of return ICT – information and communication technology ICTWG – Information and Communication Technology Working Group ISP – internet service provider MDG MOIC

– –

Millennium Development Goal Ministry of Information and Communication (Bhutan)

MOSICT

–

Ministry of Science and Information and Communication Technology (Bangladesh)

MOU – memorandum of understanding NGO NOC

– –

nongovernment organization network operation center

PMC – project management consultant PMU – project management unit RTC – research and training center RTN – research and training network SAARC – South Asian Association for Regional Cooperation SASEC – South Asia Subregional Economic Cooperation TA – technical assistance VSAT – very small aperture terminal

WEIGHTS AND MEASURES

km – kilometer MB – megabyte

NOTES

(i) The fiscal year (FY) of the governments of Bhutan and Bangladesh and their

agencies ends on 30 June, e.g., FY2018 ends on 30 June 2018. The fiscal year of the Government of Nepal and its agencies ends on 15 July, e.g., FY2018 ends on 15 July 2018.

(ii) In this report, "$" refers to United States dollars.

Vice-President Shixin Chen, Operations 1 Director General Hun Kim, South Asia Department (SARD) Director Ravi Peri, Transport and Communications Division, SARD Team leader Satomi Sakaguchi, Transport Specialist, SARD Team members Soon Chan Hong, Senior Economist, SARD

Kavita Srinivas Iyengar, Senior Regional Cooperation Officer, SARD Md. Humayun Kabir, Associate Project Officer (Transport), SARD Theresa Mora, Project Analyst, SARD Shigehiko Muramoto, Head, Project Administration Unit, SARD Tshewang Norbu, Portfolio Management Specialist, SARD Shiva Prasad Paudel, Associate Project Officer (Infrastructure), SARD Maria Lualhati Rueda, Project Analyst, SARD Magnolia San Diego, Operations Assistant, SARD Rachana Shrestha, Senior Public Management Officer, SARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

BASIC DATA i

MAP xiii

I. PROJECT DESCRIPTION 1

II. DESIGN AND IMPLEMENTATION 2

A. Project Design and Formulation 2

B. Project Outputs 3

C. Project Costs and Financing 6

D. Disbursements 7

E. Project Schedule 8

F. Implementation Arrangements 9

G. Technical Assistance 10

H. Consultant Recruitment and Procurement 10

I. Gender Equity 11

J. Safeguards 11

K. Monitoring and Reporting 11

L. Conditions and Covenants 11

III. EVALUATION OF PERFORMANCE 12

A. Relevance 12

B. Effectiveness 12

C. Efficiency 13

D. Sustainability 13

E. Development Impact 13

F. Performance of the Borrower and the Executing Agency 14

G. Performance of the Asian Development Bank 14

H. Performance of Consultants, Contractors, and Suppliers 14

I. Overall Assessment 15

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 15

A. Issues and Lessons 15

B. Recommendations 16

APPENDIXES

1. Design and Monitoring Framework 17 2. Project Cost at Appraisal and Actual 22 3. Project Cost by Financier 23 4. Disbursement of ADB Loan and Grant Proceeds 25 5. Contract Awards of ADB Loan and Grant Proceeds 28 6. Chronology of Main Events 31 7. Status of Compliance with Loan and Grant Covenants 36 8. Economic and Financial Analysis 70 9. Technical Assistance Completion Report 78 10. Procurement Packages 81

Page

BASIC DATA: BANGLADESH

A. Loan Identification 1. Country 2. Loan number and financing source 3. Project title 4. Borrower 5. Executing agency 6. Amount of loan 7. Financing modality

Bangladesh 2397: Concessional ordinary capital resources South Asia Subregional Economic Cooperation Information Highway Project People’s Republic of Bangladesh Ministry of Science and Information and Communication Technology SDR1,949,000 Project loan

B. Loan Data

1. Appraisal – Date started – Date completed

2. Loan negotiations – Date started – Date completed

3. Date of Board approval

4. Date of loan agreement

5. Date of loan effectiveness – In loan agreement – Actual – Number of extensions

6. Project completion date – In loan agreement – Actual

7. Loan closing date – In loan agreement – Actual – Number of extensions

8. Terms of loan – Interest rate

– Maturity (number of years) – Grace period (number of years)

9. Terms of relending (if any) – Interest rate – Maturity (number of years) – Grace period (number of years) – Second-step borrower

13 September 2007 21 September 2007 27 November 2007 27 November 2007 17 December 2007 15 March 2009 13 June 2009 2 July 2009 1 31 December 2009 31 December 2014 30 June 2010 15 February 2015 2 1% per annum during the grace period and 1.5% per annum thereafter 32 8 Not applicable

ii

10. Disbursements

a. Dates Initial Disbursement

20 April 2011

Final Disbursement

15 October 2014

Time Interval

42 months

Effective Date

2 July 2009

Actual Closing Date

15 February 2015

Time Interval

68 months

b. Amounts (SDR’000)

Category or subloan

Original allocation

(1)

Increased during

implementation (2)

Canceled during

implementation (3)

Last revised

allocation (4=1+2+3)

Amount disbursed

(5)

Undisbursed balance

(6 = 4 – 5)

01 System development, supply & installation

1,553 (320) 1,233 1,233 0

02A Consulting Services- Regional

130 (130) - - 0

02B Consulting Services- National

191 (104) 87 87 0

03 Administrative Support

50 (4) 46 46 0

04 Interest During Construction

25 (15) 10 10 0

Total 1,949 (573) 1,376 1,376 0

Equivalent $’000

2,989 (984) 2,116 2,116 0

C. Project Data

1. Project Cost ($ ‘000)

Cost Appraisal Estimate Actuala

Foreign exchange cost 3,100 514 Local currency cost 1,100 2,402 Total 4,200 2,916

a Actual cost financed by the borrower is included in the local currency cost because a breakdown of the actual cost financed by the borrower in foreign exchange cost and local currency cost was not made available.

iii

2. Financing Plan ($’000) Cost Appraisal Estimate Actual

Implementation Costs Borrower-financed 1,100 800 ADB-financed 3,060 2,096 Other external financing 0 0

Total 4,160 2,896

IDC Costs Borrower-financed 0 0 ADB-financed 40 20 Other external financing 0 0

Total 4,200 2,916

ADB = Asian Development Bank, IDC = interest during construction.

3. Cost Breakdown by Project Component ($ ‘000)

Component Appraisal Estimate Actuala

ADB Borrower

A. Base Cost SASEC regional network 2,520 915

798

SASEC village network 620 981 Project management consultant 550 135 Administrative support 80 70

Subtotal (A) 3,770 2,101 B. Contingencies Physical 370 0

Price 20 0 Subtotal (B) 390 0

C. Interest During Construction 40 20 0Total 4,200 2,121 798

ADB = , SASEC = .

a Actual cost financed by the borrower is separately shown from the cost financed by ADB because a breakdown of the actual cost financed by the borrower in the detailed expenditure categories was not made available.

4. Project Schedule

Item Appraisal Estimate Actual

Date of Contract with Consultants March 2008 25 May 2011 Completion of Engineering Designs September 2008 2 Aug 2012 Civil Works Contract Date of Award (RN Network) n/a 27 Mar 2013

Date of Award (VN Network) n/a 25 Aug 2013 Completion of Work n/a 30 Jun 2014 Equipment and Supplies Dates First Procurement October 2008 20 Jun 2011 Last Procurement n/a 28 Apr 2014 Agreements Multilateral Agreement March 2008 2 July 2009 Service Agency December 2008 9 March 2010 Bilateral Interconnection March 2009 26 April 2012 Peering December 2009 Not complete

n/a = not applicable, RN = regional network, VN = village network.

iv

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 31 December 2007 to 31 May 2008 Satisfactory Satisfactory From 1 June 2008 to 30 June 2009 Satisfactory Unsatisfactory From 1 July 2009 to 31 December 2009 Satisfactory Satisfactory From 1 January 2010 to 31 December 2010 Satisfactory Satisfactory From Q1 2011 to Q2 2012 On Track From Q3 2011 to Q1 2012 Actual Problem From Q2 to Q3 2012 On Track Q4 2012 Potential Problem Q1 2013 Actual Problem From Q2 to Q3 2013 Potential Problem From Q4 2013 to Q1 2015 On Track

Q = quarter.

Note: ADB performance ratings changed on 1 January 2011 to one rating.

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Members

Loan Inception 30 Aug–3 Sep 2009 4 16 a, b, c, d Loan Review 1 10–11 Nov 2010 3 6 a, c Loan Review 2/TA Inception 7–8 Mar 2010 2 4 a, e, f Loan Review 3 9–12 May 2010 2 8 a, c Loan and TA Review 4 27–28 Feb 2011 1 2 a Loan Review 5 6–7 Jun 2011 3 9 a, g, h Loan and TA Review 6 20 May 2012 2 2 a, d Loan and TA Review 7 10–22 Apr 2013 3 12 a, d, e Loan and TA Review 8 25–28 Aug 2013 3 12 a, e Project completion review 31 Mar–5 Apr 2019 1 6 c

a = mission leader, b = transport specialist, c = ICT specialist staff consultant, d = project analyst, e = TA consultant, f = economic officer, g = director, h = portfolio management specialist, TA = technical assistance.

v

BASIC DATA: BHUTAN

A. Grant Identification 1. Country 2. Grant number and financing source 3. Project title 4. Recipient 5. Executing agency 6. Amount of grant 7. Financing modality

Bhutan 0098: Asian Development Fund South Asia Subregional Economic Cooperation Information Highway Project Kingdom of Bhutan Ministry of Information and Communication $4,700,000 Project grant

B. Grant Data

1. Appraisal – Date started – Date completed

2. Grant negotiations

– Date started – Date completed 3. Date of Board approval 4. Date of grant agreement 5. Date of grant effectiveness – In grant agreement – Actual – Number of extensions 6. Project completion date – Appraisal – Actual 7. Closing date – In grant agreement – Actual – Number of extensions 8. Terms of loan – Interest rate – Maturity (number of years) – Grace period (number of years) 9. Terms of relending (if any) – Interest rate – Maturity (number of years) – Grace period (number of years) – Second-step borrower

13 September 2007 21 September 2007 9 October 2007 9 October 2007 17 December 2007 15 December 2008 15 Mar 2009 2 July 2009 1 31 December 2009 31 December 2017 30 June 2010 19 April 2019 4 Not applicable Not applicable

vi

10. Disbursements a. Dates Initial Disbursement

21 Jan 2010

Final Disbursement 8 March 2019

Time Interval 110 months

Effective Date

2 July 2009 Actual Closing Date

19 April 2019 Time Interval 118 months

b. Amount ($ ’000)

Category or sub category

Original allocation

(1)

Increased during

implementation (2)

Canceled during

implementation (3)

Last revised

allocation (4=1+2-3)

Amount disbursed

(5)

Undisbursed balance

(6=4-5)

01 System Development, Supply & Installation

4,080 4,080 3,804 276

02A Consulting Services- Regional

207 (207) 0 0 0

02B Consulting Services- National

303 88.4 391 406 (15)


80 (25) 55 89 (34)

04 Equipment 0 6.5 7 57 (50) 05 Training 0 61.5 62 220 (158) 06 Vehicle 0 25.0 25 22 3 07 Unallocated 30 50.6 81 0 81

Total 4,700 232.0 (232) 4,701 4,598 103

C. Project Data



Foreign exchange cost 4,700 2,798 Local currency cost 1,150 3,005 Total 5,850 5,803

a Actual cost financed by the recipient is included in the local currency cost because a breakdown of the actual cost financed by the recipient in foreign exchange cost and local currency cost was not made available.

2. Financing Plan ($ ‘000) Cost Appraisal Estimate Actual

Implementation Costs Recipient-financed 1,200 1,200 ADB-financed 4,700 4,598 Other external financing 0 0

Total 5,900 5,798

IDC Costs Borrower-financed 0 0 ADB-financed 0 0 Other external financing 0 0

Total 5,900 5,798



vii


ADB Recipient

A. Base Cost SASEC regional network 3,920 3,128

1,200

SASEC village network 750 676Project management consultant 550 406Equipment - 57Training - 220Administrative support 80 111

Subtotal (A) 5,300 4,598B. Contingencies Physical 520 0

Price 30 0Subtotal (B) 550 0

C. Interest During Construction 0 0 0Total 5,850 4,598 1,200

ADB = Asian Development Bank, SASEC = South Asia Subregional Economic Cooperation. a Actual cost financed by the recipient is separately shown from the cost financed by ADB because a breakdown of the

actual cost financed by the recipient in the detailed expenditure categories was not made available.

4. Project Schedule


Date of contract with consultants March 2008 6 September 2010 Completion of engineering designs September 2008 17 June 2013 Civil works contract Date of award (RN Network) n/a 1 November 2012

Date of award (VN Network) n/a 25 July 2013 Completion of work n/a 19 May 2011 Equipment and Supplies Dates First procurement October 2008 23 January 2013 Last procurement n/a Agreements Multilateral agreement March 2008 2 July 2009 Service agency December 2008 2 September 2011 Bilateral interconnection March 2009 26 April 2012 Peering December 2009 Not completed

n/a = not applicable, RN = regional network, VN = village network.



Ratings

Implementation Progress Performance Indicator

From December to May 2008 Satisfactory Satisfactory From June 2008 to June 2009 Satisfactory Unsatisfactory From July 2009 to December 2010 Satisfactory Satisfactory From Q1 2011 to Q2 2012 On Track From Q3 2011 to Q1 2012 Actual Problem From Q2 to Q3 2012 On Track Q4 2012 Potential Problem Q1 2013 Actual Problem From Q2 to Q3 2013 Potential Problem From Q4 2013 to Q1 2015 On Track Q2 2015 Potential Problem From Q2 2015 to Q4 2018 On Track

Q = quarter.


viii


Name of Mission

Date

No. of Persons

No. of Person-

Days


Consultation mission 14–15 May 2009 2 4 a, b Project inception mission 24–27 Aug 2009 2 8 a, c Project review and TA inception mission

1–4 Mar 2010 2 8 a, d

Project review mission 20–24 Sep 2010 2 10 a, c Project review mission 4–5 Aug 2011 1 2 a Project midterm review mission 12–20 Feb 2014 1 9 a Project completion mission 8–13 Mar 2019 2 10 a,c

a = mission leader, b = transport specialist, c = ICT specialist staff consultant, d = TA consultant, TA = technical assistance.

ix

BASIC DATA: NEPAL

A. Grant Identification 1. Country 2. Grant number and financing source 3. Project title 4. Recipient 5. Executing agency

6. Amount of grant 7. Financing modality

Nepal 0099: Asian Development Fund South Asia Subregional Economic Cooperation Information Highway Project Kingdom of Nepal Ministry of Information and Communication $9,000,000 Project grant

B. Grant Data 1. Appraisal – Date started – Date completed

2. Grant negotiations – Date started – Date completed 3. Date of Board approval 4. Date of grant agreement 5. Date of grant effectiveness – In grant agreement – Actual – Number of extensions 6. Project completion date – In grant agreement – Actual 7. Closing Date – In grant agreement – Actual – Number of extensions 8. Terms of loan – Interest rate – Maturity (number of years) – Grace period (number of years) 9. Terms of relending (if any) – Interest rate – Maturity (number of years) – Grace period (number of years) – Second-step borrower

13 September 2007 21 September 2007 9 October 2007 9 October 2007 17 December 2007 9 February 2009 10 May 2009 2 July 2009 1 31 December 2009 31 March 2017 30 June 2010 05 October 2017 7 Not applicable Not applicable

x

10. Disbursements a. Dates Initial Disbursement

17 December 2010

Final Disbursement 31July 2017


Effective Date 2 July 2009

Actual Closing Date 5 October 2017


b. Amount ($ ’000)

Category or Sub Category

Original Allocation

(1)

Increased during

Implementation (2)

Canceled during

Implementation (3)

Last Revised

Allocation (4=1+2-3)

Amount Disbursed

(5)

Undisbursed Balance (6=4-5)

01 System Development, Supply & Installation

8,320 (4,358) 3,962 3,148 814

02A Consulting Services-Regional

207 126 333 302 31

02B Consulting Services-National

303 217 520 504 15


80 54 134 127 7

04 Equipment 30 30 27 3 05 Vehicle 21 21 18 3 06 Un Allocated 90 (90)

Total 9,000 448 (4,448) 5,000 4,127 873

C. Project Data



Foreign Exchange Cost 9,000 1,960

Local Currency Cost 2,200 3,074

Total 11,200 5,034 a Actual cost financed by the recipient is included in the local currency cost because a breakdown of the actual cost

financed by the recipient in foreign exchange cost and local currency cost was not made available.

2. Financing Plan ($ ‘000)

Cost Appraisal Estimate Actual

Implementation Costs Recipient Financed 9,000 907 ADB Financed 2,200 4,127 Other External Financing 0 0

Total 11,200 5,034

IDC Costs Borrower Financed 0 0 ADB Financed 0 0 Other External Financing 0 0

Total 11,200 5,034


xi



ADB Recipient

A. Base Cost SASEC Regional Network 8,780

3,148

907

SASEC Village Network 750 Project Management Consultant 550 807Administrative Support 80 173

Subtotal (A) 10,160 4,128B. Contingencies Physical 1,010 0

Price 50 0Subtotal (B) 1,060 0

C. Interest During Construction 0 0 0Total 11,220 4,128 907

ADB = Asian Development Bank, SASEC = South Asia Subregional Economic Cooperation. a Actual cost financed by the recipient is separately shown from the cost financed by ADB because a breakdown of the

actual cost financed by the recipient in the detailed expenditure categories was not made available.

4. Project Schedule


Date of Contract with Consultants March 2008 29 November 2010 Completion of Engineering Designs September 2008 17 June 2013 Civil Works Contract Date of Award (RN Network) n/a n/a

Date of Award (VN Network) n/a n/a Completion of Works n/a n/a

Equipment and Supplies Dates First Procurement Q4 2010 23 January 2013 Last Procurement n/a n/a Agreements Multilateral Agreement March 2008 2 July 2009 Service Agency December 2008 31 October 2009 Bilateral Interconnection March 2009 26 April 2012 Peering December 2009 Not completed

n/a = not applicable, Q = quarter.



Ratings

Implementation Progress Performance Indicator

From December 2007 to May 2008 Satisfactory Satisfactory From June 2008 to June 2009 Satisfactory Unsatisfactory From July 2009 to December 2010 Satisfactory Satisfactory From Q1 2011 to Q2 2012 On Track From Q3 2011 to Q1 2012 Actual Problem From Q2 to Q3 2012 On Track Q4 2012 Potential Problem Q1 2013 Actual Problem From Q2 to Q3 2013 Potential Problem From Q4 2013 to Q1 2015 On Track Q2 2015 Potential Problem From Q3 2015 to Q4 2018 On Track

Q= quarter.


xii


Name of Mission

Date

No. of Persons

No. of Person-

Days


Consultation Mission 18–19 May 2009 2 4 a, b Project Inception Mission 18–21 Aug 2009 2 8 a, b TA Inception and Project Review Mission 27–28 Feb 2010 2 4 a, c Project Review Mission 3–4 Jun 2010 1 2 a Project Review Mission 2–4 Nov 2010 1 3 a Project Review Mission 10–11 Aug 2011 2 4 a, d First Regional Workshop 29–30 Sep 2011 1 2 a Project Review Mission 7–8 Aug 2012 2 4 a, c Review Mission 22 Sep–7 Nov 2013 2 94 a, c Project Review Mission 26 May–6 Jun 2014 2 24 a, c Project Review Mission 9–26 Jun 2014 2 36 a, c Project Review Mission 11–13 Sep 2014 2 6 a, c Project Review Mission 9–23 Feb 2015 3 45 a, c, e Project Review Mission 11–20 Sep 2016 1 20 a Project Completion Review Mission 4–8 Mar 2019 1 5 c

a = mission leader, b = ICT specialist staff consultant, c = project analyst, d = economic officer, e = portfolio management specialist, TA = technical assistance.

I. PROJECT DESCRIPTION

1. Information and communication technology (ICT) can provide access to social services, such as education and health, by overcoming geographical barriers, thereby creating more economic and social opportunities for the poor living in remote areas. In early 2000, South Asia was lagging far behind other parts of Asia in making full use of ICT for their economic and social development.1 The Asian Development Bank (ADB), under the South Asia Subregional Economic Cooperation (SASEC) program covering Bangladesh, Bhutan, India, and Nepal, envisaged that the country-level efforts related to ICT could be more effective if well coordinated on a regional level. The SASEC ICT Working Group (ICTWG), established in 2003, identified three urgent areas for improvement in ICT: (i) cross-border connectivity, (ii) rural access to information, and (iii) human resource capacity. In 2005, the ICTWG developed, with ADB’s assistance, a SASEC ICT development master plan, which laid down the strategy, framework, and priorities for regional cooperation in ICT.2 To address these needs, the SASEC countries agreed, at the third ICTWG meeting in Dhaka in September 2006, to develop the concept of the SASEC information highway, which would deliver and facilitate modern broadband information, communication, and knowledge services within and across borders to governments, businesses, research institutes, and rural and remote communities. 2. To help realize the SASEC information highway, ADB approved grants of $4.7 million to Bhutan and $9.0 million to Nepal, and a loan of $3.1 million to Bangladesh from Special Funds Resources on 17 December 2007 for the SASEC Information Highway Project.3 The governments of four SASEC countries including India were to finance up to 30% of the total project cost.4 ADB also approved regional technical assistance (TA) of $4.4 million to implement one component of the project.5 3. The project aimed to enhance the benefits of ICT and regional cooperation for inclusive growth and poverty reduction by increasing the supply of affordable broadband, skilled ICT manpower, and local content and e-applications, with a special focus on the needs of the poor. The envisaged outcome was for ICT to be more accessible, affordable, inclusive, sustainable, and useful to remote and rural communities, entrepreneurs, and research and training institutes in SASEC countries. This was to be achieved through three outputs, namely the SASEC regional network, the village network, and the research and training network. The project was innovative, being the first ADB-assisted regional ICT development project as well as the first regional project in South Asia. Its attempt to facilitate the flow and integration of information, content, goods and services, knowledge, and ideas among the SASEC countries aimed to lay the foundation for future projects of this nature.

1 Data from Word Development Indicators, World Bank. 2 ADB. 2005. Technical Assistance Report: Technical Assistance for the South Asia Subregional Economic Cooperation

Information and Communication Technology Development Master Plan. Manila. 3 ADB. 2007. Report and Recommendations of the President to the Board of Directors: Proposed Asian Development

Fund Grant, Loan, and Technical Assistance Grant for the South Asia Subregional Economic Cooperation Information Highway Project. Manila.

4 As designed, India was not provided with financial support. 5 ADB. 2007. Technical Assistance for South Asia Subregional Economic Cooperation Regional Information and

Communication Technology Research and Training Network (financed by the Regional Cooperation and Integration Fund). Manila.

2

II. DESIGN AND IMPLEMENTATION

A. Project Design and Formulation

4. The project design and formulation at appraisal were aligned with ADB’s regional and country strategies and respective national development priorities. ADB’s South Asia Regional Cooperation Strategy and Program (2006–2008) stated improving connectivity as one of the five key operational objectives.1 The project formulation was also consistent with the SASEC program, which aimed to promote economic cooperation in six sectors including ICT.2 The project design sought to address three key areas for improvement in the sector in the four countries, namely, (i) cross-border connectivity, (ii) rural access to information, and (iii) human resource capacity, identified by the SASEC ICTWG in 2005 (para. 1). 5. Bhutan published its ICT development policy and strategy in 2001, which identified projects and initiatives for ICT development in the country.3 Bangladesh finalized the National Information and Communication Technology (ICT) Policy in 2002.4 The ICT sector was declared a priority sector, and various promotional initiatives were implemented, such as a waiver of all taxes and duties on imports of computer hardware and software and building a submarine cable link connecting the country with the global network. Nepal, in its Ninth Five-Year Plan (1997–2002), stressed the contributory role of ICT in the country’s economic development.5 6. The project design remains aligned with ADB’s current regional strategy and sector framework as well as the governments’ development priorities. In its operational plan for 2016–2025, SASEC includes the use of ICT in high-priority projects.6 The Strategy 2030 also points to the impacts of ICT in strengthening the delivery of public services, enhancing food safety, and improving education and training.7 Bangladesh’s Vision 2021 emphasizes that the ICT sector is a priority area for its government.8 Bhutan recognizes an ICT-enabled, knowledge society as a foundation for the country’s Gross National Happiness.9 The main goals of Nepal’s Department of Information and Technology (DIT) include providing information technology access to all, but specifically to the digitally deprived people in remote villages, and using information technology for employment and revenue generation.10 India has been promoting the “Digital India” initiatives as a flagship program of its government for transforming the country into a digitally empowered society and knowledge economy.11 7. ADB provided regional project preparatory technical assistance (TA) to prepare specific investment projects for under the project.12 At appraisal, the project recognized a significant

1 ADB. 2005. Regional Cooperation Strategy and Program South Asia (2006–2008). Manila. 2 SASEC Secretariat. 2001. South Asia Subregional Economic Cooperation Program. Manila. 3 Royal Government of Bhutan. 2004. Bhutan Information and Communication Technology Policy and Strategies

(BIPS). Thimphu. 4 Bangladesh Computer Council, Ministry of Science and Informationa & Communication Technology. National

Information and Communication Technology (ICT) Policy. Dhaka. 5 National Planning Commission, Government of Nepal. 1997. Ninth Plan (1997–2002). Kathumandu. 6 ADB. 2016. South Asia Subregional Economic Cooperation Operational Plan 2016–2025. Manila. 7 ADB. 2018. Strategy 2030 Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and Pacific. Manila. 8 Center for Policy Dialogue. 2007. Bangaldesh Vision 2021. Dhaka. 9 The Royal Government of Bhutan. 2015. Revised Bhutan ICT Roadmap. Thimphu. 10 Deparment of Information Technology, Ministry of Communication and Information Technology. 2017. Objectives.

Kathuamndu. https://doit.gov.np/en/page/objectives (accessed on 17 May 2019). 11 Ministry of Electronics and Information Technology. About Digital India. Introduction.

https://digitalindia.gov.in/content/introduction (accessed on 17 May 2019). 12 ADB 2006. Technical Assistance for Preparing the South Asia Subregional Economic Cooperation Information

Highway Project (financed by the Government of the Republic of Korea). Manila.

3

divergence in the development and objectives of the ICT sector across the four countries. It also identified that Nepal and Bhutan, two land-locked countries, would likely make significant savings through a shift from expensive satellite links to cable landing stations (CLS). This would be made possible by establishing a new affordable internet network through the project. The project also envisaged, as another economic benefit, the incremental revenues to be earned by India and Bangladesh from payments by Nepal and Bhutan for CLS connection. For the envisaged regional internet connection to function and bring the desired benefits, it was crucial to have workable institutional arrangements to operate and maintain the network, especially the network hub in Shiliguri, India. 8. However, this institutional set-up was finalized only in April 2012, when the bilateral agreements between the service agencies were signed. Under the agreements, Bharat Sanchar Nigam Limited (BSNL), the government-owned telecommunications company and the service agency for India, was to design technical specifications for the interconnection and provide the necessary equipment and facilities to operate and maintain the Network Operation Center (NOC) in Shiliguri through its own funds. The prolonged process in determining the operation and maintenance structure of the major infrastructure to be established through the project, despite the assumption to the contrary in the design and monitoring framework (DMF), severely affected the subsequent implementation, and probably contributed to the major delays. The project’s implementation was outpaced by the rapid advancement in the ICT sector in the region, in terms of both technology and private sector-led arrangements for expanding cross-border internet connections, which resulted in the diminished role of government in the sector. In Bhutan, the executing agency reacted to this shift in the sector by initiating a minor change in project scope (para. 13).

9. Other issues with the project’s design include inadequate consideration of the time required to conclude a series of agreements essential for implementation (paras. 33, 58 and 60), the lack of project management and a mechanism for regional coordination (para. 59), and a disconnection between project outputs and outcomes and their performance indicators and targets (para. 62). B. Project Outputs

1. SASEC Regional Network

10. At appraisal, it was envisaged that the SASEC regional network would consist of (i) the extensive existing broadband network owned by telecommunication service providers in each country, to be interconnected under the project; (ii) a new fiber-optic network to be built in Bangladesh, Bhutan, and Nepal: about 55 kilometers (km) from Panchagarh to Banglabandha in Bangladesh; a 140 km alternative to the existing fiber-optic route from Thimpu to Phuentsholing in Bhutan; and a 433 km alternative fiber-optic route from Hetauda to Biratnagar in Nepal; and (iii) four access gateways at Dhaka in Bangladesh, Thimphu in Bhutan, Siliguri in India, and Kathmandu in Nepal; these were to be linked to seven border-connectivity townships at Panchargarh in Bangladesh, Phuentsholing in Bhutan, Siliguri, Jogbani, Fulbari, and Jaigaon in India, and Biratnagar in Nepal, for connectivity to the other countries. 11. The regional network was expected to (i) provide a scalable data-peering network among SASEC countries, (ii) provide SASEC countries with access to good-quality landed-port internet access from India and Bangladesh, (iii) provide cross-border data-peering access to reduce expensive international transit peering, (iv) help generate traffic flows and applications throughout

4

the region as well as in-country, and (v) make broadband services more accessible to rural and remote communities via wireless connectivity to community e-centers (CECs). 12. In Bangladesh, an agreement between the Ministry of Science and Information and Communication Technology (MOSICT) and the service agency, Bangladesh Telecommunications Ltd (BTCL), was signed in March 2010 and a new fiber-optic cable of 56 km from Panchagarh to Banglabandh was completed in June 2014. 13 An access gateway in Dhaka and border connectivity with CLS at Panchargarh were completed by the end of 2014. 13. In Bhutan, by April 2012, all the fiber-optic cable routes included in the project design were already built. Therefore, the executing agency, the Ministry of Information and Communication (MOIC), chose to procure necessary equipment, instead of the fiber cable itself, to be installed to the existing cable links between Thimphu and Phuentsholing, as well as Thimphu and Gelephu. Together with the access gateway established in Thimphu, and two border gateways with CLSs in Phuentsholing and Gelephu, the regional network component in Bhutan was handed over to the service agency, Bhutan Telecom, for operation and maintenance (O&M) upon completion in July 2014, in accordance with the service agency agreement. However, although internet service providers (ISPs) in Bhutan were solicited for utilization of the regional network, none of them showed interest as it was not commercially attractive. This prompted MOIC to highlight the weak linkages between the project and its stated economic objectives, and request ADB for approval to use the regional network for research and education purposes.14 Thus, the regional network in Bhutan was redefined as the Druk Research & Education Network (DrukREN), which expanded the fiber-optic network to 23 higher education institutions and hospitals in the country and provided them with internet connection to connect to similar institutions in SASEC. 14. In Nepal, a 170 km fiber-optic cable was laid from Dhulikhel to Dhalkebar via Sindhulimadi. The access gateway in Kathmandu and border-connectivity with CLSs at Biratnagar and Birgunj were completed. The final acceptance certificate was issued by Ministry of Information and Communications to the contractor for the regional network component on 6 October 2017. 15. In India, BSNL was the incumbent carrier with most of the required links to the SASEC neighbors. Although no new investment was envisaged within India at appraisal, during the initial stage, it was agreed that BSNL would provide technical specifications of the NOC and the outline of the bilateral agreements between the service agencies to facilitate the inter-connection arrangements. It was also agreed that BSNL would build a new 5-km fiber-optic cable route to the border with Bangladesh and procure the necessary equipment and other infrastructure at the NOC for O&M at their own expense. Testing for connectivity and data transfer occurred between October and December 2017 at the NOC. While it proved positive at the time, the connection and data transfer at the NOC never functioned on a permanent basis.15 Although SASEC countries today have achieved regional internet connectivity, at completion, it could not be confirmed if the regional network infrastructure was being utilized for this cross-border connection by any telecom companies.

2. SASEC Village Network

16. At appraisal, the SASEC village network component was envisaged to (i) establish 110 CECs in the SASEC countries (30 in Bhutan, 30 in Nepal, 25 in Bangladesh, and 25 in India), 13 Executing Agency’s project completion report, Information & Communication Technology (ICT) Division, Ministry of

Posts, Telecommunications & Information Technology, Government of People’s Republic of Bangladesh, June 2014. 14 Letters from MOIC to ADB on 8 September 2014 and letter from ADB to MOIC on 10 September 2014. 15 Letters from BSNL to ADB on 8 May 2019.

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linked to the regional network through the rural wireless broadband network; (ii) develop a portal service (voice, chatting, video conferencing, e-mail, community bulletin, etc.) and a knowledge database management system; and (iii) reach in-country agreements for ownership transfer and operation between the executing agencies and CEC operators. Villages, once connected to the SASEC village network, would be able to generate and maintain information that SASEC rural communities, via CECs, could interact with and add to, using the SASEC regional network as the delivery mechanism. The portal would improve access to local content and information through the use of multimedia and facilitate indigenous knowledge management within and among the communities. 17. Bangladesh established 30 CECs (embedded in Upazila Information and Service Centers in the Upazila Parishad complexes), 5 more than originally planned, which were made operational in 2014. All CECs are connected to the Bangladesh Computer Council (BCC) through a VPN established by BTCL using fiber optic links. At completion, 25 CECs were operational, providing access to internet browsing, printing, photocopying, scanning, e-services including online application processing for a few government services, e-ticketing, and online banking to the rural communities. BCC’s ICT division, BTCL, and Upazila Nirbahi Officers have been actively supporting and coordinating activities and contributing to the CECs’ sustainability.16 18. Nepal established 29 CECs, with 1 cancelled for not being able to obtain land for construction of the building. The planned handover to the service agency, Nepal Telecom, upon completion of all CECs, expected by March 2017, could not be confirmed.17 At completion, only five CECs in Nepal were operational and have recorded enrollments for courses in 2018. 19. In Bhutan, equipment was procured for 30 CECs instead of constructing CEC buildings, since existing buildings were utilized. The project management unit (PMU) decided to use the surplus proceeds to provide connectivity to an additional 160 CECs and 20 district administration offices by extending the existing optical fiber infrastructure. All 190 CECs and 20 district administration offices were equipped to connect to the internet, enabling delivery of benefits on a larger scale, including the government’s G2C (Government to Citizen) applications in rural areas. Bhutan Postal Corporation Limited, which was identified as the service agency for the operation and management of CECs, was later taken over by Bhutan Development Bank Limited (BDBL).18 At completion, all the CECs established under the project in Bhutan were operational, although their revenues were not covering the operating costs. 20. India selected 25 CECs from the existing CECs in West Bengal, Assam, and Tripura states to be included in the SASEC village network component.19 At completion, 15 of the 25 CECs were providing the content designed under the project and access to the village network portal. 21. The SASEC village network portals were developed by the regional TA consultants, providing access to distance learning courses developed under the project. An e-payment application was developed, which allows students with internet access to pay online course fees. The portals provide Village Bazaar as an e-commerce solution showcasing a variety of rural

16 A Upazila Nirbahi Officer is a Government of Bangladesh officer at the subdistrict level. 17 ADB (South Asia Department). 2016. Review Mission to Nepal: Grant 0099-NEP: SASEC Information Highway. Aide

Memoire. 11–15 September 2016 (internal). 18 Contract to Manage and Operate Community Centers in Bhutan was signed on 11 June 2014 between the

Government of Bhutan and Bhutan Postal Corporation Limited and subsequently the contract was transferred to Bhutan Development Bank Limited by Cabinet Order to Ministry of Finance by letter dated 23rd April 2015.

19 ADB (SouthAsia Department). 2010. Review Mission to India: SASEC Information Highway Project. Aide-Mémoire. 22–23 February 2010 (internal).

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products and services sold by respective rural communities with internet access. However, at completion, Royal University of Bhutan (RUB) confirmed that the research and training center servers had been shut down and the portal was not functioning. In Bangladesh, the portal was functional with an active membership, while in Nepal and India the portals were also functional, but with no details available on active membership.

3. SASEC Research and Training Network

22. Under this component (SASECRTN), the following outputs were envisaged: (i) a research and training center (RTC) in SASEC countries, (ii) broadband connectivity to link RTCs to the regional network, (iii) a business linkage challenge fund to encourage rural entrepreneur investments in ICT-enabled business development, (iv) the establishment of an online and offline research and training program in e-business development and IT professional development, and (v) awareness building and training to the communities and governments. 23. At completion, RTCs were established at Kathmandu University in Nepal, the Centre for Development of Advanced Computing in India, RUB in Bhutan, and BCC in Bangladesh, and all were connected to the regional network infrastructure within their country through broadband. They developed the applications to be provided at the CECs in each country and across the SASEC countries through the regional network. Thirty-one English distance learning courses, covering agriculture, computers and telecommunications, business, and tourism, were made available. There were translations for eight of these courses in Nepali, eight in Bangla (Bangladesh), seven in Dzongkha (Bhutan), and eight in Bangla (India). The project also provided technical training to the CECs and awareness building training to the communities to disseminate information about the CECs and the benefits they offered. The business linkage challenge fund was removed from the project scope in consideration of the efficient and effective use of the TA proceeds. 24. In Bhutan, SASECRTN was expanded as DrukREN by leveraging the already completed SASEC regional network within the country as well as other resources to interconnect all the research and education institutes in the country. While the regional network connected nine colleges under RUB and six hospitals, DrukREN extended it to 23 colleges, 12 higher education institutions, and 11 hospitals in the country. DrukREN is a member of the Trans Eurasia Information Network, supported since 2009 by the European Union to connect the research education networks of countries in Asia Pacific. Nepal is also connected to the Trans Eurasia Information Network. Kathmandu University’s Telemedicine pilot system was installed at five hospitals: two in Nepal (September 2015), two in Bhutan (April 2016), and one in India (October 2017), although their operational status could not be verified at completion. 25. At completion, the RTCs were not exchanging content with each other because, despite the establishment of the SASECRTN, the broadband connectivity was only functioning within respective countries, not across SASEC. The RTC in Bhutan was closed in March 2018, and RTCs in Nepal and India are not providing the required technical support to the village network portals due to the lack of resources. The courses being developed were not periodically updated and lacked relevance to the rural population, resulting in decreasing enrollment at the CECs since roll-out by the RTN consultant. C. Project Costs and Financing

26. At appraisal, the total cost of the project was estimated at $24 million. ADB was to finance 70% of the project cost amounting $16.8 million through a loan and two grants. The Government

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of India was to finance its component of the project, which was $2.7 million, from its own funds, while the governments of the other SASEC countries were to finance $4.5 million, totaling $7.2 million or 30%. The governments of Bhutan and Nepal were to finance only the taxes, duties, and contingencies, while the Government of Bangladesh was to finance some of the base cost as well. In addition to financing the infrastructure component, ADB also approved $4.4 million for technical assistance for the regional network component, covering all four countries. 27. Upon requests from the executing agencies during implementation, ADB reallocated the amounts in the loan and grants to meet the specific needs of the project. For example, in Bhutan, ADB approved a minor change in scope (paras. 13 and 24). At completion, ADB had financed $10.8 million out of the total project cost of $15.0 million, with $0.8 million being financed by the Government of Bangladesh, $0.9 million by the Government of Nepal, $1.2 million by the Government of Bhutan, and $1.3 million (₹83.1 million) by the Government of India. 28. At the closing of accounts, ADB cancelled the following: (i) $870,000 that remained undisbursed from the loan to Bangladesh due to the lower bid prices and the foreign exchange fluctuations; (ii) $4.0 million from the grant to Nepal due to substantially low bid prices of the works contract ($4.0 million against an estimated amount of $8.0 million);20 (iii) an undisbursed balance of $872,550 from the grant to Nepal;21 and (iv) an undisbursed balance of $388,000 from the grant to Bhutan, primarily due to the change in the scope of the regional network (para. 13). Detailed project costs at appraisal and at completion are presented in Appendix 2 and the breakdown of financing by ADB and respective governments is presented in Appendix 3. D. Disbursements

29. At the time of closure of the loan to Bangladesh, $2.11 million (SDR1.37 million), including $0.015 million (SDR0.009 million) for interest during construction, had been disbursed. Considering foreign exchange, the total amount actually disbursed was 32% lower than the loan amount ($3.1 million) at appraisal (para. 28). The initial disbursement was made on 20 April 2011 and the final one on 20 August 2014. The initial disbursement was delayed by about 22 months from the loan effective date due mainly to a delay in recruiting the project management consultant.22 30. For the grant to Bhutan, an imprest account was established by the Ministry of Finance, as envisaged at appraisal. The MOIC maintained a separate letter of credit account with the Bank of Bhutan for operations. The initial disbursement was made on 21 January 2010 and the final one on 8 March 2019. Disbursement was slow, accounting for only 27% of total disbursements by the end of 2012. About 70% of total disbursements occurred from 2013 to 2016. During implementation, ADB returned withdrawal applications submitted by MOIC that did not contain appropriate supporting documents. 31. For the grant to Nepal, ADB made the initial disbursement on 17 December 2010 and the final one on 31 July 2017. The Government of Nepal did not set up an imprest account for project disbursements; however, it was able to allocate funds for implementation and only sought reimbursement of the letter of credit payments. Upon request from Ministry of Information and Communications, ADB amended the grant agreement on 19 January 2010 to enable individual payments to be reimbursed under the statement of expenditure procedure in accordance with

20 ADB Grant 0099:NEP Aide Memoire for review mission from 22 September–07 November 2013. 21 ADB, letter to Ministry of Finance, dated 4 October 2017, Informing of Closure of the Grant 0099 Account. 22 The consulting service contract was signed by the executing agency with international consultants on 25 May 2011.

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ADB's Loan Disbursement Handbook (as amended from time to time). About 80% of the grant disbursements occurred in 2013. Details of the annual disbursements are presented in Appendix 4. E. Project Schedule

32. At appraisal, the project was to be completed in 25 months by 31 December 2009 and closed by 30 June 2010. The loan and grants became effective on 2 July 2009. Following requests by the borrower, ADB extended the closing date of the loan to Bangladesh twice, from the original 30 June 2010 to 15 December 2014, with project implementation taking 54 months. In Bhutan, the grant closing date was extended 4 times until finally closing on 31 December 2017 (90 months). In addition, the grant winding-up period was extended once, from 20 April to 31 October 2018. In Nepal, the grant closing date was extended seven times before closing on 31 March 2017 (81 months). The project component in India was considered completed after 84 months by the end of 2017, although the regional network was not operating permanently. 33. The project experienced inordinate delays in all countries, many of which were due to the prolonged initial process for agreeing on the overall implementation arrangements, governed by three layers of multilateral, bilateral, and in-country agreements. The specific delays were in signing (i) the multilateral agreement for the overall framework of cooperation with respect to implementation of the project;23 (ii) the agreements between the executing agencies and the in-country service agencies;24 (iii) six bilateral interconnection agreements to set the terms and conditions of interconnection;25 (iv) in-country memoranda of understanding (MOUs) between the executing agencies and the RTCs;26 (v) RTN partnership agreements for village network portal development and distance learning courses; 27 (vi) service agreements for the fund flow mechanism between RTCs and the TA consultant; and (vii) service level agreements between CECs and RTCs prior to rolling out the distance learning courses and the village network portal.28 34. Other delays related to (i) the selection and fielding of the project management consultants (PMCs);29 (ii) the preparation of the design and bidding documents for the regional and village

23 The agreement was signed by the executing agencies of all four countries at the SASEC ICT working group meeting

on 2 July 2009, held in Bangkok, Thailand. 24 For Bangladesh, the MOU was signed on 9 March 2010 between MOSICT and BTCL; For Bhutan, the contract

agreement was signed on 2 September 2011 between MOIC and Bhutan Telecom; For Nepal, the MOU was signed on 11 November 2011 between the Ministry of Communication and Technology and Nepal Doorsanchar Company Limited (known as Nepal Telecom); Government of India in September 2010 has designated BSNL to be the service agency.

25 Six bilateral interconnection agreements signed between all four countries were signed on 26 April 2012 at ADB Headquarters in Manila, Philippines.

26 MOUs between the executing agency and RTC were signed on 12 September 2012 for Bangladesh, 24 June 2012 for Bhutan, 12 March 2013 for Nepal, and 12 November 2013 for India.

27 The RTN partnership agreement among RTN partners was signed by BCC, Bangladesh on 2 September 2015; Independent University, Bangladesh, Bangladesh on 17 October 2015; Royal University of Bhutan, Bhutan on 28 December 2015; Kathmandu University, Nepal on 23 September 2015; and Centre for Development of Advanced Computing, India on 25 August 2016.

28 RETA 6433 Final report: Chapter 5 and Table 6 indicate that signing of in-country service level agreements between CECs and the respective RTC were completed in Bangladesh by 18 April 2016, in Bhutan by 14 January 2016, Nepal by end of August 2017, and in India by end of November 2016.

29 The consulting services contract between the executing agency and PMU was signed in Bangladesh on 25 May 2011; in Bhutan on 6 Sep 2010; and in Nepal on 15 Nov 2010.

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networks, and the signing of works contracts in the project countries;30 (iii) the procurement of multiple works contracts for system development, supply, and installation of equipment for the regional and village networks;31 (iv) the securing of border crossing approval from the agencies concerned for connectivity between Bangladesh and India;32 (v) approvals by the executing agencies coupled with the poor performance of contractors and consultants;33 (vi) political unrest in 2013 in Bangladesh; (vii) major earthquakes in Nepal in April and May 2015; (viii) hartals and general strikes in Bangladesh and Nepal; (ix) a blockade at Nepal’s border with India and a shortage of fuel;34 (x) the securing of permission from the Department of Roads in Nepal to lay the underground optical fiber involving digging the right of way and some part of the newly constructed road;35 (xi) poor workmanship, repetition of works by contractors, and a lack of supervision in Nepal;36 and (xii) executing agency approval for contract variations and making payments to contractors and consultants.37 F. Implementation Arrangements

35. The implementation framework at appraisal included arrangements for (i) the establishment and operation of networks, and (ii) project management. For establishing the regional network, an implementation and operational framework, in the form of multilateral and bilateral agreements, was reached among and between SASEC countries. As designed at appraisal, all SASEC countries selected a service agency that was an eligible service provider in their respective country, responsible for operating the SASEC regional network jointly with the service agencies in other countries. For in-country implementation of the regional network, MOUs were signed between the respective executing and service agencies. The operation of the village network was to be franchised to private entrepreneurs among rural ISPs or nongovernment organizations, selected by local communities. For the SASECRTN, service agencies in each country were selected from capable ICT research institutes to design and conduct research and provide training for ICT professional development. At appraisal, it was envisaged that 12 in-country service agency agreements would be signed, each one by the executing agency and service agency for each of the three project networks. 36. Based on the original project design, a steering committee, consisting of the secretaries of the executing agencies, was formed to jointly supervise and monitor overall project implementation. It was to provide guidance to the PMUs in coordinating joint activities and clear draft agreements for signing. Subsequently, the committee also followed up on progress in implementation at the six workshops conducted during the project. Each PMU, established under each executing agency, was headed by a project director (joint secretary), an administrative staff, and a representative of the service agency. The PMU was responsible for the day-to-day implementation in coordination with their country’s PMC. The PMCs were recruited and 30 The first major works contract between the executing agency and contractor in Bangladesh was signed on 27 March

2013 for the regional network, and 22 August 2013 for the village network; in Bhutan it was on 7 September 2012; in Nepal on 23 January 2013.

31 At completion, the Bhutan component had 25 goods packages, 1 consultancy service package, and 27 packages for equipment supply; Bangladesh had 17 goods and supply packages and 1 consultancy service package.

32 Ministry of Home Affairs, India granted approval to BSNL to lay the optical fiber cable along the Indo-Bangladesh border, first on 21st October 2014 and then had to do so again on 7th January 2015 due to changes in staff in the organizations.

33 ADB Grant 0099-NEP SASEC IHP Aide-mémoire of review mission to Nepal 9–26 June 2014. 34 ADB’s approval of extension of closing date for Grant 0099:NEP, by 9 months from 1 January 2016 to 30 September

2016. 35 ADB Grant 0099-NEP SASEC IHP Aide-mémoire of review mission to Nepal 22 September–7 November 2013. 36 ADB Grant 0099-NEP SASEC IHP Field Trip Report of ADB mission, 11–13 September 2014 and Aide-mémoire for

Review Mission 9-23 February 2015. 37 ADB Grant 0099-NEP SASEC IHP Aide-mémoire of review mission to Nepal 11–15 September 2016.

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supervised by the PMU. During implementation, there were several changes in the staff of the PMUs and executing agencies. 37. For efficient and effective monitoring, ADB delegated the responsibility for oversight and monitoring of project activities in Nepal and Bangladesh to the respective resident missions. The implementation in Bhutan was monitored from ADB headquarters while the TA was monitored by the Bangladesh Resident Mission. 38. The project’s implementation could have benefited from a more hands-on and flexible institutional arrangement for monitoring and oversight at the regional level. This could have been incorporated in the project’s design to ensure overall coordination between the four countries across the three components. However, the PMC was separately recruited by, and attached to, each executing agency, while the TA consultant primarily covered the SASECRTN component. Also, the project did not include oversight and project monitoring activities within India since the country did not receive any funds from ADB. Absence of these arrangements could have led to a much longer time being required initially to finalize the detailed implementation arrangements, and, at a later stage, to difficulties in agreeing the scope of participation by BSNL. 39. At appraisal, RTCs and CECs were envisaged to be provided with financial support for sustainability. But, during implementation, in Bangladesh and Nepal, the service level agreements between RTCs and service agencies to ensure the supply of internet and adequate bandwidth connecting the CECs and RTCs to the regional and village networks were not signed. This was because of the absence of a commercial review from RTN and delays in the transfer of the related project infrastructure from the executing agencies to the service agencies.38 As a result, the CEC and RTC operations did not have financial support for sustainability. G. Technical Assistance

40. The attached TA of $4.40 million, financed from ADB’s Regional Cooperation and Integration Fund, supported the building of human capacity in engineering technologies as well as business management and development technologies required to operate, manage, and use the regional and village networks. 39 The overall objective of the TA was to support the development of improved human resources, regional knowledge, and innovation and business driven local entrepreneurs for ICT in the SASEC subregion. The TA developed research and training programs for communities, businesses, and government and community-driven innovations in ICT use. The TA agreement was signed on 17 December 2007 and the TA was closed on 31 December 2017, having been extended in line with the extended implementation of the SASECRTN component. The TA was rated less than successful. The TA completion report is attached as Appendix 9. H. Consultant Recruitment and Procurement

41. Consultant Recruitment. Recruitment of international PMCs on a quality and cost basis was carried out in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). It was envisaged at appraisal that 30 person-months of international consultants and 100 person-months of national consultants in Bangladesh, Bhutan, and Nepal, would be recruited. In Bangladesh, the PMC did not mobilize any international staff and used only

38 Caelis International. 2017. SASEC IH Research and Training Network Final Report. British Columbia. 39 ADB. 2007. Technical Assistance for SASEC Regional Information and Communication Technology Research and

Training Network. Manila (TA6433-REG, for $4.40 million, approved on 17 December 2007).

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64 person-months of input from national consultants prior to being terminated in May 2013 with ADB approval. Supervision and quality assurance for the remaining works required for the regional network were conducted by BTCL. In Bhutan, the PMC assisted the MOIC in implementing the project until the end of its contract in December 2014. Subsequently, with ADB’s approval, MOIC assigned its own staff to fulfill the PMC’s role until completion. In Nepal, because of the delays in implementation, the PMC exceeded its inputs in the original contract by over 15%. The Ministry of Communication and Technology did not submit any proposals for variations in the PMC’s contract for retroactive approval to the Government of Nepal as required. To ensure quality assurance and supervision of the work, ADB approved the hiring of individual consultants directly by the Ministry. The inputs of the individual consultants also exceeded the limits and the Ministry could not get the necessary cabinet approval for extension of the consultants’ contracts. Thus, ADB approved funding support from another technical assistance “Nepal: Enhancing Portfolio performance.” 42. Procurement. Procurement of civil works, goods and services was in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time).40 Although only two packages were planned for procurement for the loan and each grant at appraisal, the number of packages for procurement significantly increased from that envisaged at appraisal (footnote 38 and Appendix 10). Procurement of all works, goods, and equipment met with some delays, mostly due to the restructuring of the procurement packages and the poor quality of the bidding documents (para. 34). I. Gender Equity

43. The project was classified as having no gender element. J. Safeguards

44. The project was categorized B for environmental safeguards and C for both involuntary resettlement and indigenous peoples. The project complied with the Environmental Policy of ADB (2002) as well as respective national laws and regulations. No issues related to environmental and social impacts due to the project were reported to ADB and none were noted in back-to-office reports and aide-mémoires for review missions. K. Monitoring and Reporting

45. During implementation, the executing agencies did not submit all the regular monthly and quarterly progress reports because of the unavailability of the PMC for the full duration of the project, delays in implementation, and changes in staffing at respective executing agencies. However, all the executing agencies reported on progress during the review missions and consulted ADB where necessary. The executing agencies in Bangladesh and Bhutan submitted the project completion report. L. Conditions and Covenants

46. All countries have fully or partially complied with the conditions associated with the loan and grant agreements. As warranted by the loan and grant covenants, the project accounts in each country were audited annually, and audit reports for most of the years until completion were

40 ADB approved necessary changes to procurement methods at appraisal to assist with Project implementation.

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submitted to ADB, though much later than stipulated in the agreements, except for fiscal year-end (FYE) 2015 for the loan to Bangladesh.41 ADB sought responses from the executing agencies on various comments and observations recorded in the audit reports, and was generally satisfied with their responses. The status of compliance with loan and grant covenants is in Appendix 7.

III. EVALUATION OF PERFORMANCE

A. Relevance

47. The project is rated relevant at appraisal and completion. The project’s formulation was aligned with the governments’ development objectives, ADB’s development strategy for regional cooperation in general, and the ICT subsector in particular, both at appraisal (para. 4) and completion (para. 6). While the project’s design was relevant at appraisal, the very rapid changes in the ICT sector globally and in SASEC countries during implementation was beyond the control of the project. The number of fixed broadband subscriptions increased five times and mobile cellular subscriptions three times in South Asia from 2007 to 2012. 42 During that period, Bangladesh and Bhutan both recorded an annual growth rate of 69% in broadband subscriptions, and in Nepal it was 84%. The annual growth rate in mobile subscriptions was 23% in Bangladesh, 30% in Bhutan, and 38% in India. The project was not designed to fully adapt to these rapid advances, as exemplified by the implementation arrangements (paras. 8, 9 and 35) and the flaws in the DMF (para. 9 and Appendix 1), and this was compounded by the significant delay in implementation. Moreover, the project design was not guided by detailed demand analyses and instead assumed that all the internet data traffic that was exchanged through very small aperture terminals (VSAT) at the time would switch entirely to the regional network. Further, for the RTN, the needs of the potential users were not adequately reflected in the design of the courses (para. 58).43 This could be attributed to the project’s modality whereby the RTN component was scoped out of the rest of the project in the form of a TA project, limiting coordination with the village network. Nonetheless, the innovative and pioneering nature of the project, which aimed at facilitating the integration of information, knowledge, and ideas across SASEC, should be highly commended. The objectives of the project remain relevant since the provision of stable, affordable and inclusive internet connection, especially in the most remote and rural areas has not been achieved fully in the SASEC countries and remains a key for inclusive development. The innovative and transformative nature of the project is highly aligned with ADB’s Strategy 2030, which emphasizes promoting innovative technologies and integrated solutions for building the potential for ADB’s value addition (para. 6).44 B. Effectiveness

48. The project is rated less than effective. The output targets of all three components at appraisal were substantially achieved. However, the regional network did not achieve a permanent, functional regional internet connectivity. It is therefore difficult to assess the project’s contribution to the outcomes, and hence its effectiveness, since the achievement of the outcomes was dependent on the successful implementation of the regional network. Although ICT has dramatically expanded its reach in all SASEC countries (para. 47 and Appendix 1), these changes happened before the regional network component was completed and functional (albeit

41 The EA for Loan 2397 – BAN, MoIC, informed to ADB that it could not submit the audit report for FYE 2015 because

its project implementation unit was already dissolved by July 2014. 42 World Bank, Data Source: World Development Indicators for South Asia. 43 The project did not overlap with any other development partner. 44 The design limitations and non-revisions in scope and targets which resulted in not meeting the outputs and outcome

indicators were factored in rating the project’s effectiveness.

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momentarily) in late 2017. Nevertheless, the project saw some positive developments in individual countries, especially in Bhutan, which has expanded the reach of CECs to 210 communities, making the services available on the internet more accessible to the country’s rural and remote areas. The country has also strategically leveraged the regional network infrastructure within the country to establish the DrukREN network. C. Efficiency

49. The project is rated inefficient. It experienced substantial delays, taking far longer to complete than envisaged at appraisal. In fact, it took more than two times longer than expected in Bangladesh, more than three times in Nepal, and up to four times in Bhutan. These delays were caused mainly by the prolonged process in agreeing on the implementation arrangements at the beginning of the project (para. 33). Other causes include slow procurement, delays in securing the necessary government permissions in Bangladesh and India, and poor workmanship of the contractor in Nepal (para. 34). These delays have contributed to the project’s inability to achieve the intended outcomes despite largely accomplishing the outputs. 50. As a consequence of such significant delays, the SASEC regional network did not become a permanent channel for commercial internet. As a result, broadband access to the internet neither improved nor became more affordable to the poor. Thus, no quantifiable economic benefits are attributable to the project’s regional network (paras. 15, 52, and Appendixes 1 and 9). At completion, the recalculated economic internal rate of return (EIRR) is 5.74%.45 D. Sustainability

51. The project is rated unlikely sustainable, as it did not achieve institutional arrangements to ensure sustainability at completion. 46 The service level agreements with the service agencies for O&M of the regional network, including the Siliguri peering, were not followed. Apart from Bhutan, a formal contract to manage and operate CECs was not signed. In Bangladesh, CECs are operated on a private entrepreneurship modality and some of them are struggling to maintain uninterrupted internet and power supply, lacking support from the service agency. Most of the equipment installed in the project has reached the end of its estimated life (5 to 7 years) and requires repairs or replacement. Except in Bhutan, there is no known effort by the government to provide future support to the project. Also, in-country service level agreements between RTCs and the service agencies to ensure internet supply to RTCs were only signed in Bhutan. Further, activities essential for making CEC operations sustainable did not happen in any country. Such activities include updating the content of the distance learning courses; adding courses on village network portals to meet users’ needs; updating the software and hardware for equipment and applications; implementing a business and marketing plan for continued CEC operations; and exchanging data and information between the SASEC countries in relation to e-commerce, e-services, and e-training. E. Development Impact

52. The project’s development impact is rated less than satisfactory. The envisaged accessible, affordable, inclusive, sustainable network useful to remote and rural communities was not fully operational. It was not able to connect the regional network infrastructure within individual

45 The guidelines of ADB’s Independent Evaluation Department state that a 6% EIRR or lower may be used as the

basis for an inefficient rating. 46 No financial analysis was conducted at appraisal. The data on any revenues generated by CECs was not available

for assessment and the CECs in operation in Nepal and Bhutan receive support to meetoperational expenses.

14

countries to each other and did not provide the continued benefits from access to services. The project did not enhance regional flow, sharing and integration of information, content, services, knowledge, and ideas in the SASEC subregion. Furthermore, the mechanism for assessing the project’s impact was not adequately spelled out in the DMF. All the parameters of the project’s impact were to be assessed 3 to 5 years after completion, and the parameters for assessment were not fully realistic. 53. Nevertheless, the project has helped to provide some access to services and training in remote and rural areas of the SASEC countries, especially in Bhutan where 180 more CECs were established in mostly rural parts of the country. While those CECs are no longer offering the training courses developed through the project, they provide online banking and G2C services that were hitherto unavailable in those areas. F. Performance of the Borrower and the Executing Agency

54. The performance of the borrowers and executing agencies is rated satisfactory. The government agencies worked closely with ADB in meeting the project outputs and provided adequate counterpart funding. They complied with most of the covenants, albeit with delays. ADB had to return some incorrectly submitted withdrawal applications, and so payments to contractors and consultants were delayed. In Nepal, the Ministry of Communication and Technology has unresolved disputes with the contractor and is currently involved in arbitration. The executing agencies in Bangladesh and Nepal did not develop the project performance monitoring indicators and baseline data to be prepared by the PMU within three months from effectiveness of the loan and grant. Nonetheless, the initiatives and efforts of the individual executing agencies, especially MOIC in Bhutan, led to some additional positive impact not anticipated in the original design. G. Performance of the Asian Development Bank

55. ADB’s performance is rated less than satisfactory. The project design and formulation at appraisal had several serious deficiencies including the absence of workable institutional arrangements for operating and maintaining the regional network, the lack of a continuous coordination mechanism for project activities across the countries, inadequate considerations for complexities, and the short lead time for procurement. They resulted in significant delays and under achievement of the outputs. Also, ADB did not fully understand the bilateral arrangements between the participating countries and their service agencies. Nor did ADB respond to the rapid advancement in the SASEC countries’ ICT sector, such as Bhutan’s abandonment of VSAT for internet connection in 2016, by making changes to the design, institutional arrangements, or performance targets in the DMF. Such changes would have resulted in more effective and efficient use of the loan and grants. However, ADB extended its assistance to the SASEC countries in implementing the first ever regional ICT project and provided extensive support for coordination among the various stakeholders including the executing agencies, PMCs, service agencies, and RTCs through meetings, workshops, and missions from HQ and resident missions. H. Performance of Consultants, Contractors, and Suppliers

56. The performance of the consultants and contractors was less than satisfactory and caused delays in design, procurement, and implementation of the project. The PMC in Bangladesh did not mobilize any international staff listed in the contract. The contractor in Nepal had to repeat the trenching activity for optical fiber and reconstruction works for a few CECs because it started the works before obtaining design approval, contributing to delays and additional costs. The needs assessment, content for training materials, and the marketing and business operation plans

15

prepared by the TA consultant had significant gaps, leading to development of distance learning courses that did not ensure user enrollment. The consultants and contractors did not submit all the progress reports required by the contracts.

I. Overall Assessment

57. The project is rated unsuccessful based on the assessment of its relevance, effectiveness, efficiency, and sustainability.

Table 1: Overall Rating

Criteria Assessment

Relevance Relevant

Effectiveness Less than effective

Efficiency Inefficient

Sustainability Unlikely sustainable

Overall Assessment Unsuccessful

Development Impact Less than satisfactory

Borrower and executing agency Satisfactory

Performance of ADB Less than satisfactory

Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS

A. Issues and Lessons

58. Project design. The project suffered significant delays in implementation due to its inadequate design. Regional projects by nature involve a far larger number of stakeholders, which in turn makes implementation arrangements more complex, as exemplified by the series of legal agreements that had to be entered into before the project even started its physical activities. While the DMF included as an assumption that the project depends on the proper implementation of multilateral/bilateral agreements among SASEC countries, the project was not able to address the delays in making such implementation arrangements and the related issues during implementation. Besides, ICT projects are very time sensitive due to rapid advancement in technology, equipment, and applications. Moreover, the sector is driven by the private sector, which is generally seen as more efficient and adaptable to rapid technological changes than the public sector. By the time of the project’s physical completion in late 2017, Bhutan and Nepal had already abandoned VSAT for commercial internet connection and formed bilateral connection agreements outside the project. This could have affected the project’s relevance significantly at that point. Also, although the design of the regional network was based on virtual protocol network (VPN) through Siliguri NOC, Bhutan and Nepal were already connected by internet through India, an arrangement outside the project involving the private sector. However, by 2014, no ISP in Bhutan had showed interest in using the regional network, maybe because of the inadequacy of the project’s design. For projects involving many stakeholders, maximum consideration should be given in the project design to efficient and streamlined implementation arrangements. Also, in the design of projects in highly time-sensitive sectors, an institutional set-up is needed that will help to expedite implementation schedules, provide flexibility in adapting to market changes, and engage private sector stakeholders who are generally more active in such sectors.

16

59. Project management at the regional level. The project also suffered start-up delays because of the complexities in the regional interlinking of the project components. This task at the regional level was included under the scope of the TA consultant, but with little emphasis and inadequate resource allocation. Although more than one executing agency expressed its concerns during implementation over the limited coordination between the TA consultant’s activities and other two components, they were not fully addressed. Regional projects, wherein overall project outputs are achieved through the interconnecting outputs of individual countries, should provide for an overarching, hands-on, and flexible mechanism to ensure timely execution of project activities within all the countries as well as coordination across countries. 60. Project readiness. The project lacked readiness since the multilateral, bilateral, and in-country agreements setting up the overall implementation framework were signed 3 years into the project’s implementation. Also, no procurement activities commenced upon approval. In a highly time-sensitive sector such as ICT, high project readiness could help prevent start-up delays and enforce the commitment of the executing agencies. The issue of limited project readiness was compounded by the fact that all the executing agencies were implementing an ADB project for the first time and thus were challenged in smoothly complying with all the requirements associated with receiving ADB assistance. B. Recommendations

61. Covenants. Some covenants were deemed to be not applicable to the project. (i) Loan to Bangladesh: Schedule 3, para. 6 (Retroactive Financing);

(ii) Grants to Bhutan and Nepal: Article V, page 6 (Suspension and Cancellation); and

(iii) Loan and grants: Schedule 5, para. 20 for the loan and Schedule 4, para 20 for the

grants (Gender).

62. Monitoring indicators. Project monitoring plans need to be appropriately designed and strictly implemented, and for this purpose, DMFs need to be carefully designed. The project’s DMF had deficiencies in that its performance targets and indicators were not fully realistic or relevant to the project’s outcomes and outputs. In addition, the timing for assessing the achievement of the DMF targets was not fully appropriate, as for some targets it was set for 5 years after completion. These deficiencies prevented the DMF from functioning as the effective monitoring tool. 63. Further action or follow-up. ADB should explore how the regional network infrastructure could be used by the SASEC countries for regional internet connection, provided it is still within its product life. Also, ADB should request the respective governments to use the village network and SASECRTN facilities in meeting the specific needs of the local communities. However, in so doing, ADB needs to ensure that adequate institutional arrangements are in place for sustainable O&M of the infrastructure for the village, regional, and research and training networks. 64. Timing of the project performance evaluation report. ADB should undertake the project performance evaluation report as soon as practically possible so that the infrastructure built under the project does not become completely obsolete in the rapidly changing sector environment.

Appendix 1 17

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Targets/Indicators Project Achievements a Impact Enhanced regional flow, sharing, and integration of information, content, services, knowledge, and ideas in the SASC subregion

20% improvement in the livelihood and well-being of rural communities in selected pilot districts in all SASEC countries, within 5 years after project completion

Substantially achieved. Access to communication services to rural population has improved in all the SASEC countries. In Bhutan all the 205 Gewogs, all 75 districts in Nepal and all the Union councils in Bangladesh have access to more than 100 government to citizen services in respective country.b

10% yearly decrease in the cost and increase in the quality of data communication between the SASEC countries, for 5 years after project completion

Substantially achieved. Internet speeds in Bhutan increased from 99.26KBps to 3.42MBps between the fourth quarter of 2007 and first quarter of 2017. In Nepal, it increased from 432.69KBps in second quarter of 2009 to 3.36MBps in first quarter of 2017. In Bangladesh, it increased from 193.91KBps in first quarter of 2008 to 4.17MBps in first quarter of 2017.c

10% increase in the ICT composite index of e-readiness for all SASEC countries, within 5 years after project completion

Substantially achieved. ICT development index for Bhutan was 1.48 in 2007 and 3.69 in 2017 (+2.49%); for Nepal, 1.27 in 2007 and 2.88 in 2017 (2.26%); for Bangladesh, 1.34 in 2007 and 2.53 in 2017 (+1.88%).d

10% increase in ICT-enabled regional activities, such as regional e-trade, e-tourism, and e-training, within 5 years after project completion

Substantially achieved. The E-Government Development Index Rank for Bhutan was 152 in 2010 ans 126 in 2018; Bangladesh ranked 134 in 2010 and 115 in 2018; Nepal’s rank was 153 in 2010 and 117 in 2018.e

Quantification of above indicators attributable to the Project was not measurable.

Outcome ICT made more accessible, affordable, inclusive, sustainable, and useful to remote and rural communities, entrepreneurs, and research and training institutes in all SASEC countries

Exchange of social capital

between SASEC

country villages through the SASEC regional network and village network, within 3 years after project completion

Achievement unknown. Exchange of social capital between SASEC country villages attributable to the project could not be identified due to the incomplete implementation of the SASEC regional network and the unclarity about its utilization for regional internet connection.

18 Appendix 1

Design Summary Performance Targets/Indicators Project Achievements a 10% increase in regional and country websites, e-business, and applications, within 3 years after project completion

Substantially achieved. The number of secure internet servers hosted in all SASEC countries has significantly increased. Bangladesh had 30 secure internet servers in 2010 and 18,712 in 2018 (+62,373%). In 2010, Bhutan had only 1 secure internet server and 134 in 2018 (+13,400%). Nepal had 24 servers in 2010 and 5,126 in 2018 (21,358%). Similarly, India had 2,061 servers in 2010 and 254,032 in 2018 (+12,325%).f Actual increase in the secured internet servers attributable to the project, however, is not measurable due to the incomplete implementation of the SASEC regional network and the unclarity about its utilization for regional internet connection.

Establishment of the SASEC education and research collaborative network linking universities and rural communities in the SASEC countries, within 3 years after project completion

Achieved. Through Trans Eurasia Information Network (TEIN), which is supported by the European Union to connect research and education networks of countries in the Asia Pacific and is in existence since 2001, Bhutan, Bangladesh, Nepal, India and several other Asian countries are connected to each other. The project is considered to have partially contributed to SASEC countries’ participation in TEIN through helping establishment of the RTCs. ADB approved SASEC regional network component in Bhutan to be redefined as DrukREN which was connected to TEIN and interconnects 23 research and education institutions and 11 hospitals in Bhutan with high speed internet.

10% increase in tele-density (both in terms of individual household and shared-facility tele-centers) and reduction in communication cost in remote and rural areas, within 2 years after project completion.

Substantially achieved. The fixed broadband subscriptions per 100 users in Bhutan was 0.47 in 2009 and 2.06 in 2017 (+438%); in Bangladesh it was 0.21 in 2009 and 4.43 in 2017 (+2,109%); in Nepal it was 0.06 in 2009 and 0.77 in 2016 (+1,283%); in India it was 0.63 in 2009 and 1.33 in 2017 (+211%)5. The Mobile cellular subscriptions per 100 users in Bhutan was 47.44 in 2009 and 90.46 in 2017 (+190%); in Bangladesh it was 34.13 in 2009 and 88.12 in 2017 (+258%); in Nepal it was 20.93 in 2009 and 123.17 in 2017 (+588%); in India it was 43.24 in 2009 and 87.28 in 2017 (+201%). 5 However, increase in the tele-density attributable to the project is not measurable due to the incomplete implementation of the SASEC regional network and the unclarity about its utilization for regional internet connection.

Appendix 1 19

Design Summary Performance Targets/Indicators Project Achievements a

Financially and technically sustainable operation of the SASEC regional network, village network, research and training network by service agencies, universities, and private operators, within 2 years after project completion.

Achievement unknown. Financially and technically sustainable operation of the regional network was not confirmed due to the unclarity about its utilization for regional internet connection. CECs have faced financial challenges for sustainable operations. The online distance learning courses developed in the project were not updated and several of the courses were outdated and unattractive to the users.

Outputs SASEC regional network

Fiber-optic network, existing or to be built, connecting the SASEC countries: (i) a new cable installation of about 55 km from Panchagarh to Banglabandha in Bangladesh; (ii) a 140 km alternative fiber optic route from Thimpu to Phuentsholing in Bhutan; and (iii) a 433 km alternative fiberoptic route from Hetauda to Biratnagar in Nepal

Achieved. A new 56 km of fiber optic network from Panchagarh to Banglabandh (Bangladesh), 170 km of fiber optic network from Dhulikhel to Dhalkebar via Sindhulimadi (Nepal), Network connectivity equipment for the Thimphu to Phuentsholing and Thimphu to Gelephu links as well as repeaters along both routes in Bhutan were completed under the RN component of the Project.

4 access gateways established at (i) Thimpu in Bhutan, (ii) Dhaka in Bangladesh, (iii) Siliguri in India, and (iv) Kathmandu in Nepal

Achieved. 4 access gateways in Dhaka in Bangladesh, Kathmandu in Nepal, Thimphu in Bhutan and Siliguri in India were completed.

9 border townships established at (i) Panchagahr and Banglabandha in Bangladesh; (ii) Phuentsholing in Bhutan; (iii) Siliguri, Jogbani, Fulbari, and Jaigaon in India; and (iv) Biratnagar in Nepal

Achieved. 9 border connectivity town ship with cable landing station were established at Panchargarh in Bangladesh, Phuentsholing and Gelephu in Bhutan, Biratnagar and Birganj in Nepal, and Siliguri, Jogbari, Fulbari, and Jaigaon in India.

11 multilateral, bilateral, and in-country agreements signed: (i) a multilateral regional cooperative network agreement signed by the EAs in all SASEC countries; (ii) six bilateral network agreements, each one signed by the service agencies in two countries; and (iii) four in-country agreements for network transfer and operation, each one signed by the EA and the service agency in each country

Partially achieved. 11 multilateral, bilateral, and in-country agreements to assist in project implementation were signed between July 2009, and April 2012. The ownership of the network was not transferred by EAs to Service agencies in any SASEC country due to the reluctance of the Service Agencies in the view of the perceived financial burden of maintaining the SASEC regional network infrastructure.

20 Appendix 1

Design Summary Performance Targets/Indicators Project Achievements a SASEC village Network

110 community e-centers (CECs) established in all SASEC countries: (i) 60 CECs in Bhutan and Nepal (30 CECs comprising 6 hub CECs and 5 spoke CECs from each hub CEC in each country); and (ii) 50 CECs in Bangladesh and India (25 CECs comprising 5 hub CECs and 5 spoke CECs from each hub CEC in each country). Rural wireless broadband connectivity established to link CECs to the SASEC regional network

Achieved. The project established 89 CECs (29 CECs in Nepal, 30 each in Bangladesh and Bhutan), provided equipment for connectivity to additional 160 CECs and 20 District centers in Bhutan. India has assigned 25 CECs from existing community service centers as approved by ADB during implementation. Since the completion and functioning of the SASEC regional network could not be validated, rural wireless broadband connectivity to link CECs to the regional network is not thought to have been established.

A village portal and knowledge database system built and operated for voice, chatting, video conference, e-mail, community bulletin, etc., services

Achieved. Village portal developed for each of the SASEC country has enabled the distance learning courses, access to knowledge database, applications for e-payment access, village bazaar application for e-commerce.

In-country agreements for ownership transfer and operation signed by the EA and selected CEC operators in each country

Not achieved. The agreements for ownership transfer by the EA and the selected CEC operators were not signed in any SASEC countries due to changes in operation and maintenance structure of the CECs in each country and the consequent inviability of the originally envisaged operation models of the CECs.

SASEC research and training network

A university-based research and training center (RTC) established in each SASEC country

Achieved. RTCs were established at Kathmandu University in Nepal, Centre for Development of Advanced Computing in India, Royal University of Bhutan in Bhutan, and Bangladesh Computer Council Limited in Bangladesh.

Broadband connectivity established to link RTCs to the SASEC regional network

Not achieved. Broadband connectivity was not established to link RTCs to the SASEC regional network in the respective country due to non-achievement of data exchange capacity at the Network Operation Center in Shiliguri, India.

A business linkage challenge fund established to encourage rural entrepreneur investments in ICT-enabled business development

Not achieved. Business linkage challenge fund was not established because of its removal from the project scope in 2012 for streamlining the budget of the TA 6433: REG.

Appendix 1 21

Design Summary Performance Targets/Indicators Project Achievements a Online and off-line research and training programs in e-business development and IT professional development, provided through RTCs and CECs

Achieved. A total 31 English distance learning courses in agriculture, computers and telecommunications, business, tourism, etc., with translations for 8 in Nepali, 8 in Bangla (Bangladesh), 7 in Dzongkha and 8 in Bangla (India) were made available in the respective country portals hosted at the RTCs and accessed at the CECs.

Awareness building and training to be provided to the communities and governments affected by the Project during project implementation

Achieved. Awareness building and training to communities was provided during project implementation under the TA 6433 - REG.

ADB = Asian Development Bank, CEC = community e-centers, EA = executing agency, RTC = research and training center, EC = South Asia Subregional Economic Cooperation, TEIN = Trans Eurasia Information Network a Some of the performance targets/indicators were considered to have limited linkage to the project outcome and outputs while recent data for such targets/indicators

from reliable sources are not available. In such cases, relevant proxy data from most recent years in which such data are available, are collected.) b Development plans of respective SASEC countries (Foot notes 5, 6, 7 and 8 on Page 2 of this document) c Source: www.tradingeconomies.com d Measuring the Information Society-2010, Chapter 2, Table 2.2: ICT Development Index (IDI), 2008 and 2007; International Telecommunications Union and

https://www.itu.int/net4/ITU-D/idi/2017/ e United Nations e-Government Survey 2010 and 2018, United Nations f Data from World Bank Development Indicators, World Bank.

22 Appendix 2

Table A2: PROJECT COST AT APPRAISAL AND ACTUAL ($ ‘000)

Bangladesh Bhutan India Nepal TOTAL

Category Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual

A. Base Cost

01 SASEC Regional Network

2.520.00

2,899.00

3,920.00

5,798.00

1,320.00 - 8,780.00

5,035.00

16,540.00

13,732.00

02 SASEC Village Network

620.00 750.00 630.00 - 750.00 9,500.00

03 Project Management Consultant

550.00 550.00 450.00 - 550.00 2,100.00


80.00 80.00 80.00 - 80.00 320.00

Sub Total (A) 3,770.00 5,300.00 2,480.00 - 10,160.00 21,710.00

B. Contingencies

01 Physical 370.00 520.00 240.00 - 1,010.00 2,140.00

02 Price 20.00 30.00 10.00 - 50.00 110.00

Sub Total (B) 390.00 550.00 250.00 - 1,060.00 2,250.00

C. Interest During Construction 40.00 20.09 0.00 0.00 0.00 - 0.00 0.00 40.00 20.09

Sub Total (C) 40.00 20.09 0.00 0.00 0.00 - 0.00 0.00 40.00 20.09

Total (A+B+C) 4.200.00 2,919.09 5,850.00 5,798.00 2,730.00 1,304.77 11,220.00 5,035.00 24,000.00 15,056.86

a. Local currency component was not estimated at appraisal. b. Actual project cost is shown in a breakdown of Implementation Costs and Interest During Construction because a breakdown of the actual cost financed by the

borrower and the recipients in the detailed expenditure categories was not made available. Please refer to the Basic Data for a breakdown of the actual cost financed by ADB in the detailed expenditure categories.

c. Breakdown of actual cost into Base Cost, Contingencies and Interest During Construction for India were not made available. Source: Asian Development Bank

Appendix 3 23

PROJECT COST BY FINANCIER

Table A3.1: Project Cost at Appraisal by Financier

($ '000) ADB Bangladesh Nepal Bhutan India

Total Item Amount

% Cost Category

Amount % Cost

Category A m o u n t

% Cost Category

A m o u n t % Cost


% Cost Category


12,970 77.20 590 53.64 1,150 51.80 510 44.35 1,320 48.35 16,540


1,840 10.95 80 7.27 100 4.50 100 8.70 630 23.08 2,750


1,530 9.11 40 3.64 40 1.80 40 3.48 450 16.48 2,100


240 1.43 0 0.00 0 0.00 0 0.00 80 2.93 320


40 0.24 0 0.00 0 0.00 0 0.00 0 0.00 40

06 Unallocated 180 1.07 390 35.45 930 41.89 500 43.48 250 9.16 2,250

Total 16,800 100.00 1,100 100.00 2,220 100.00 1,150 100.00 2,730 100.00 24,000


24 Appendix 3

Table A3.1: Project Cost at Completion by Financier ($ '000)

ADB Bangladesh Nepal Bhutan India Total

Item Amount % Cost

Category Amount

% Cost Category

A m o u n t % Cost


% Cost Category

Amount

% Cost Category


7,190.75 52.36

800.00 5.82 907.01 6.60 1,200.00 8.74

- -

13,733.02


1,656.39 12.06 - -


1,348.38 9.82 - -


286.53 2..09 - -

05 Equipment 83.68 0.61

06 Training 238.30 1.74

07 Vehicle 21.98 0.16


20.09 100.00 0.00 0.00 0.00 - 0.00 - - - 20.09

Total 10,846.10 72.02 800.00 5.31 907.01 6.02 1,200.00 7.96 1,304.77 8.66 15,057.88

a. No EA recorded their actual cost in accordance with the primary investment category. Therefore, the total of the actual cost for implementation except for Interest during construction is shown.


Appendix 4 25

DISBURSEMENT OF ADB LOAN AND GRANT PROCEEDS

Table A4.1: Annual and Cumulative Disbursement of L2397-BAN Proceeds

Annual Disbursement Cumulative Disbursement

Year

Appraisal Amount

($’000)

Actual

Amount

($’000)

% of

Total

Amount

($’000)

% of

Total

2010 - 0.00 0.00 0.00 0.00

2011 66.50 30.83 1.46 30.83 1.46

2012 114.50 73.54 3.48 104.37 4.93

2013 1,084.50 478.72 22.62 583.09 27.55

2014 1,734.50 1,533.11 72.45 2,116.20 100.00

2015 - 0.00 0.00 2,116.20 100.00

2016 - 0.00 0.00 2,116.20 100.00

2017 - 0.00 0.00 2,116.20 100.00

2018 - 0.00 0.00 2,116.20 100.00

Total 3,000.00 2,116.20 100.00 2,116.20 100.00


Figure A4.1: Appraisal vs Actual Cumulative Disbursement of L2397-BAN Proceeds

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00

2010 2011 2012 2013 2014 2015 2016 2017 2018 TOTAL

L2397-BAN: Cumulative Disbursements

26 Appendix 4

Table A4.2: Annual and Cumulative Disbursement of ADB G0098-BHU Proceeds


Year Appraisal Amount

($’000)

Actual

Amount

($’000)

% of

Total

Amount

($’000)

% of

Total

2009 400.00 0.00 0.00 0.00 0.00

2010 2,300.00 40.72 0.88 40.72 0.88

2011 2,000.00 124.34 2.70 165.06 3.58

2012 - 756.62 16.41 921.68 19.98

2013 - 436.38 9.46 1,358.06 29.45

2014 - 1,041.31 22.58 2,399.37 52.03

2015 - 375.06 8.13 2,774.43 60.16

2016 - 1,438.74 31.20 4,213.17 91.35

2017 - 332.25 7.20 4,545.42 98.56

2018 - 66.51 1.44 4,611.93 100.00

Total 4.700.00 4,611.93 100.00 4,611.93 100.00


Figure A4.2: Appraisal vs Actual Cumulative Disbursement of ADB G0098-BHU Proceeds

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

4,000.00

4,500.00

5,000.00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 TOTAL

G0098-BHU: Cumulative Disbursements

Appendix 4 27

Table A4.3: Annual and Cumulative Disbursement of G0099-NEP Proceeds



($’000)

Actual

Amount

($’000)

% of

Total

Amount

($’000)

% of

Total

2009 - 0.00 0.00 0.00 0.00

2010 1,200.00 42.38 1.03 42.38 1.03

2011 4,600.00 231.41 5.61 273.79 6.63

2012 3,200.00 120.21 2.91 394.00 9.55

2013 433.04 10.49 827.04 20.04

2014 1,401.27 33.95 2,228.31 53.99

2015 - 1,346.32 32.62 3,574.63 86.61

2016 - 163.03 3.95 3,737.66 90.56

2017 - 389.78 9.44 4,127.44 100.00

2018 - 0.00 0.00 4,127.44 100.00

Total 9,000.00 4,127.44 100.00 4,127.44 100.00

Source: Asian Development Bank

Figure A4.3: Appraisal vs Actual Cumulative Disbursement of G0099-NEP Proceeds

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

4,000.00

4,500.00

2010 2011 2012 2013 2014 2015 2016 2017 TOTAL

G0099-NEP: Cumulative Disbursements

28 Appendix 5

CONTRACT AWARDS OF ADB LOAN AND GRANT PROCEEDS

Table A5.1: Annual and Cumulative Contract Awards of L2397-BAN Proceeds

Annual Contract Awards Cumulative Contract Awards


($million)

Actual

Amount

($million)

% of

Total

Amount

($million)

% of

Total

2009 - 0.000 0.000 0.00 0.00

2010 - 0.000 0.000 0.00 0.00

2011 0.2260 0.261 8.617 0.261 8.617

2012 1.0080 0.008 0.264 0.270 8.881

2013 1.0625 2.655 87.653 2.924 96.534

2014 0.7035 0.105 3.466 3.029 100.000

2015 - 0.000 0.00 3.029 100.000

2016 - 0.000 0.00 3.029 100.000

2017 - 0.000 0.00 3.029 100.000

2018 - 0.000 0.00 3.029 100.000

Total 3.000 3.029 100.00 3.029 100.000


Figure A5.1: Appraisal vs Actual Cumulative Contract Awards of L2397-BAN Proceeds

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total

Amount ($'000)

Appendix 5 29

Table A5.2: Annual and Cumulative Contract Awards of G0098-BHU Proceeds



($ million)

Actual

Amount

($million)

% of

Total

Amount

($million)

% of

Total

2008 - 0.109 2.324 0.109 2.324

2009 0.303 0.000 0.000 0.109 2.324

2010 4.670 0.447 9.531 0.556 11.855

2011 - 0.399 8.507 0.955 20.362

2012 - 0.319 6.802 1.274 27.164

2013 - 1.360 28.955 2.632 56.119

2014 - 0.200 4.264 2.832 60.384

2015 - 1.430 30.490 4.262 90.874

2016 - 0.302 6.439 4.564 97.313

2017 - 0.126 2.687 4.690 100.000

2018 - 0.00 0.000 4.690 100.000

Total 4.973 4.690 100.000 4.690 100.000


Figure A5.2: Appraisal vs Actual Cumulative Contract Awards of G0098-BHU Proceeds

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

4,000.00

4,500.00

5,000.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total

Amount ($'000)

30 Appendix 5

Table A5.3: Annual and Cumulative Contract Awards of G0099-NEP Proceeds



($million)

Actual

Amount

($million)

% of

Total

Amount

($million)

% of

Total

2009 0.676 0.000 0.000 0.000 0.000

2010 9.530 0.939 17.157 0.939 17.157

2011 - 0.036 0.658 0.975 17.815

2012 - 0.086 1.571 1.061 19.386

2013 - 4.386 80.139 5.447 99.525

2014 - 0.000 0.000 5.447 99.525

2015 - 0.000 0.000 5.447 99.525

2016 - 0.000 0.000 5.447 99.525

2017 - 0.026 0.475 5.473 100.000

2018 - 0.000 0.000 5.473 100.000

Total 10.206 5.473 100.000 5.473 100.000


Figure A5.3: Appraisal vs Actual Cumulative Contract Awards of G0099-NEP Proceeds

-

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total

Amount ($'000)

Appendix 6 31

CHRONOLOGY OF MAIN EVENTS

Date Main Event

2006

1 December Approval of PPTA 6358-REG: Preparing the South Asia

Subregional Economic Cooperation (SASEC) Information Highway Project

2007

30 July–1 August ADB Fact Finding Mission

3 September ADB Management Review Meeting

13–21 September ADB Appraisal Mission 27 September Bangladesh Loan Negotiation Mission

5 October ADB Second Management Review Meeting

8 October to 27 November Loan and Grant Negotiation

17 December 2007 ADB Board of Directors Approval for the Project

17 December 2007 Consultancy services agreement signed for Technical Assistance for SASEC Regional Information and Communication Technology Research and Training Network. (TA 6433-REG)

2008

15 December Signing of Grant Agreement for Grant 0098-BHU

17 December Signing of Grant Agreement for Loan 2397- BAN

2009

9 February Signing of Grant Agreement for Grant 0099- NEP

15 March ADB approval for extension of loan effectiveness for Loan 2397-BAN

15 March ADB approval for extension of grant effectiveness for Grant 0098-BHU

15 March ADB approval for extension of grant effectiveness for Grant 0099-NEP

31 March Closing of PPTA 6358-REG: Preparing the SASEC Information Highway Project

26 April–19 May ADB Consultation Mission for - Loan 2397-BAN (26–28 April) - TA 6433-REG (30 April–1 May) in India - Grant 0098-BHU (14–15 May) - Grant 0099-NEP (18–19 May)

32 Appendix 6

Date Main Event 2 July Signing of the agreement between the SASEC countries, setting

out the overall framework and guidelines for implementation and operation of the facilities, was signed during the 5th SASEC Working Group meeting

Effectiveness for Loan 2397-BAN; Grant 0098 BHU and Grant 0099-NEP

18 August–25 September ADB Inception Mission for - Grant 0099-NEP (18–21 August) - Grant 0098-BHU (24–27 August) - Loan 2397-BAN (30 August–3 September) - In India (24–25 September)

5 October ADB approval of the first extension of loan closing date for Loan 2397-BAN

31 December Original Project completion date for Loan 2397-BAN; Grant 0098-BHU; Grant 0099-NEP;

2010 8 January ADB approval of the first extension of 24 months for Grant 0098-

BHU

18–19 February ADB review mission for TA 6343-REG in India

22 February–8 March ADB Inception mission for TA 6433-REG in - India (22–23 February) - Nepal (27–28 February) concurrently with review mission

for Grant 0099-NEP - Bhutan (1–4 March) concurrently with review mission for

Grant 0098-BHU - Bangladesh (7–8 March) concurrently with review mission

for Loan 2397-BAN

9 March Signing of the in-country service agency agreement between Ministry of Science and Information and Communication Technology of Bangladesh and BTCL

30 June Original closing date for Grant 0098-BHU; Grant 0099-NEP; and Loan 2397-BAN;

9 September ADB waiver of the submission of Audited Project Accounts for FY 2008 and 2009 for Loan 2397 - BAN

20 September–11 November

ADB Review Mission for - Grant 0098-BHU (20–24 September) - In India (27–30 September) for the First Regional Working

Meeting of the Project in Siliguri, India - Grant 0099–NEP (2–4 November) - Loan 2397–BAN (10–11 November)

Appendix 6 33

Date Main Event 2011 19–21 January

Sixth SASEC ICTWG and Project Steering Committee meeting conducted by ADB in Manila, Philippines

27 February–9 March ADB Review Mission for TA 6433-REG in - Bangladesh (27–28 February) concurrently with review

mission for Loan 2397-BAN - India (8–9 March)

6–13 April ADB Review Mission for Grant 0098-BHU

25 May Signing of the Project Management Consultancy Services Contract for Loan 2397-BAN

6–7 June ADB Review mission for Loan 2397-BAN

1 August Signing of the Consulting Services Contract for TA 6433-REG

4–11 August ADB Review Mission for - Grant 0098-BHU (4–5 August) - Loan 2397-BAN (10–11 August) - In India (9 August) - Grant 0099-NEP (10–11 August)

29–30 September ADB Review Mission for Loan 2397-BAN; First SASEC Research and Training Network (RTN) Regional Workshop conducted in Kathmandu, Nepal

16 December Delegation by Director General, SARD, ADB, of approval of minor changes to sector/country directors for loans and grants

2012 6 Jan 2012 Delegation by Director, SATC, ADB of administration of Loan

2397-BAN to Bangladesh Resident Mission effective 9 Jan 2012

20–26 January ADB Consultation Mission

19–21 March ADB Consultation Mission for Loan 2397-BAN

25–27 April Bilateral Interconnection Agreement meeting in Manila; Signing of the bilateral interconnection agreements among the selected service agencies in four countries for the Regional Network Component.

21 June ADB approval for the second extension of 30 months for Grant 0098-BHU; and Grant 0099-NEP

24 June ADB approval for the second extension of Loan 2397-BAN

ADB approval for first extension by 27 months of TA 6433-REG

2013

10–11 April ADB Review Mission for TA 6433-REG

34 Appendix 6

Date Main Event 14–22 April ADB Review Mission for Loan 2397-BAN

21–24 August ADB Review Mission for TA 6433-REG

25–28 August ADB Review Mission for Loan 2397-BAN

11–12 November Second SASEC RTN Regional Workshop conducted in Ghaziabad, India

2014 13 February ADB’s letter to Ministry of Finance indicating cancellation of

$0.227 million from loan proceeds for Loan 2397-BAN

12–16 February ADB Review Mission for Loan 2397-BAN

25 February ADB approval of the change in procurement method for Loan 2397 - BAN for a few small contracts from international shopping to direct contracting

9–22 March ADB Review Mission for Loan 2397-BAN and TA 6433-REG

21 March ADB approval of the third extension of 24 months for Grant 0098-BHU and Grant 0099-NEP

9–13 June ADB Review Mission for Loan 2397-BAN

9–26 June ADB Review Mission for Grant 0099-NEP

11–13 September ADB Review Mission for Loan 2397-BAN

13–14 October Third SASEC RTN Regional Workshop conducted in Kathmandu, Nepal

2015

15 February Actual Closing Date of Loan 2397-BAN

9–23 February ADB Review Mission for Grant 0099-NEP

9–14 February ADB Review Mission for Loan 2397-BAN

1–2 September Fourth SASEC RTN Regional Workshop conducted in Paro, Bhutan

15–18 September ADB Review Mission for Loan 2397-BAN

2016 22–26 March ADB Review Mission for Loan 2397-BAN

Appendix 6 35

Date Main Event 5–6 May Fifth SASEC RTN Regional Workshop conducted in Kathmandu,

Nepal

11–20 September ADB Review Mission for Grant 0099-NEP

14 October ADB approval of the fifth extension by 3 months for Grant 0099-NEP

25 October ADB approved fourth extension by 12 months for Grant 0098-BHU

15–16 December Sixth SASEC RTN Regional Workshop conducted in Bangkok, Thailand

2017 19 January ADB approval of the sixth extension by 3 months for Grant 0099-

NEP

31 March Actual Closing Date of Grant 0099-–NEP.

5 September ADB’s response to Ministry of Information and Communications of Nepal on disapproval of the payment for Grant Withdrawal Application no. 43 for liquidated damages

10 October 2017 Successful testing of peering for the Regional Network at NOC with Nepal and Bhutan in Siliguri, India

2018 29 March Report by MOIC, Bhutan to ADB on mischarging expenditures of

the Grant 0098 against National Broadband Masterplan project funded by Government of India

2019

8 to 20 March ADB’s Project Completion Review Mission

19 April Actual Closing Date of Grant 0098-BHU.

36 Appendix 7

STATUS OF COMPLIANCE WITH LOAN AND GRANT COVENANTS

BANGLADESH

Covenant Reference in

Loan Agreement

Status of Compliance

General Covenants

Section 2.04. The Borrower shall repay the principal amount of the Loan withdrawn from the Loan Account in accordance with the amortization schedule set forth in Schedule 2 to this Loan Agreement.

Article II, Page 5

Complied with: The repayment of the principle amount has been conducted in accordance with the amortization schedule.

Section 3.01. The Borrower shall cause the proceeds of the Loan to be applied to the financing of expenditures on the Project in accordance with the provisions of this Loan Agreement.

Article III, Page 5

Complied with: The Borrower caused the proceeds of the Loan to be applied to the financing of the expenditures in accordance with the provisions of the Loan Agreement.

Section 3.02. The Goods, Works, and consulting services to be financed out of the proceeds of the Loan and the allocation of amounts of the Loan among different categories of such Goods, Works, and consulting services shall be in accordance with the provisions of Schedule 3 to this Loan Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and ADB.

Article III, Page 5

Complied with: Financing of the contracts and the allocation of amounts of the Loan among different categories were done in accordance with the provisions of Schedule 3.

Section 3.03. Except as ADB may otherwise agree, all Goods, Works, and consulting services to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 5 to this Loan Agreement.

Article III, Page 5

Complied with: All the procurement was done in accordance with the provisions of Schedule 5.

Section 3.04. Withdrawals from the Loan Account in respect of Goods, Works, and consulting services shall be made only on account of expenditures relating to (a) Goods which are produced in and supplied from and consulting services which are supplied from such member countries of ADB as shall have been specified by ADB from time to time as eligible sources for procurement, and (b) Goods, Works, and consulting services which meet such other eligibility requirements as shall have been specified by ADB from time to time.

Article III, Page 5

Complied with: Withdrawals from the Loan Account were made only on account of expenditures relating to (a) and (b).

Section 3.05. The Loan Closing Date for the purposes of Section 8.02 of the Loan Regulations shall be 30 June 2010 or such other date as may from time to time be agreed between the Borrower and ADB.

Article III, Page 5

Complied with: The Loan Closing Date was extended to 15 February 2015 based on the agreement

Appendix 7 37


Loan Agreement


between the Borrower and ADB.

Particular Covenants

Section 4.01. In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement.

Article IV, Page 6

Complied with: The Borrower performed all obligations in Schedule 5.

Accounts and Audits Section 4.02. (a) The Borrower shall (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of this Loan Agreement as well as on the use of the procedures for statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Article IV, Page 6

Partially complied with: All APFS for FY 2011 to 2014 were submitted. APFS for FY 2015 was not submitted. Despite ADB’s repeated requests for submission, ADB lead by BRM made maximum efforts in ensuring submission through a series of high-level meetings with MOSICT. Nevertheless, MOSICT was unable to submit it on the ground that the PIU had been dissolved already by July 2015 and therefore there was no entity for preparing the said APFS. APFS for FY 2008 to 2010 were waived due to limited to no financial activities. APFS all received unqualified opinion. No significant audit comments were found.

Without prejudice to the generality of Section 4.02 of this Loan Agreement, Bangladesh shall ensure that a separate accounting system for Project expenditures is maintained in accordance with sound accounting principles. All Project accounts, including financial statements, statements of expenditures and account records, shall be audited annually as part of the regular audit accounts and financial statements by an independent and external audit firm. The consolidated audit reports (in English) shall be submitted to ADB in accordance with the requirements and within the deadlines stated in Section 4.02(a) of this Loan

Schedule 5 Para 21

Complied with: A separate account was established by MOSICT for the project.

38 Appendix 7


Loan Agreement


Agreement. The audit opinion shall include: (a) an assessment of the adequacy of accounting and internal controls systems with respect to Project expenditures and other financial transactions, and to ensure safe custody of Project financed assets; (b) a determination as to whether Bangladesh and the Project Executing Agency have maintained adequate documentation for all financial transactions, specifically including the SOE procedures; and (c) confirmation of compliance with this Loan Agreement's financial covenants and ADB requirements for Project financial management. ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project.

Section 4.03. The Borrower shall enable ADB's representatives to inspect the Project, the Goods and Works financed out of the proceeds of the Loan, and any relevant records and documents.

Article IV, Page 6

Complied with: ADB’s representatives reviewed and inspected the project from time to time during implementation

Percentage of ADB Financing Except as ADB may otherwise agree, the items of the Categories listed in the Table shall be financed out of the proceeds of the Loan on the basis of the percentages set forth in the Table.

Schedule 3 Para 2

Complied with: The items of the Categories listed in the Table was done on the basis of the percentages set forth in the Table.

Reallocation Notwithstanding the allocation of Loan proceeds set forth in the Table,(a) if the amount of the Loan allocated to any Category appears to be insufficient to finance all agreed expenditures in that Category, ADB may, by notice to the Recipient, reallocate to such Category, to the extent required to meet the estimated shortfall, amounts of the Loan which have been allocated to another Category but, in the opinion of ADB, are not needed to meet other expenditures and if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made; and (b) if the amount of the Loan then allocated to any Category appears to exceed all agreed expenditures in that Category, ADB may, by notice to the Recipient, reallocate such excess amount to any other Category.

Schedule 3 Para 4

Complied with: Reallocation was done appropriately.

Imprest Account: Statement of Expenditures (a) Except as ADB may otherwise agree, Bangladesh shall establish immediately after the Effective Date, an imprest account at Bangladesh Bank. The imprest account shall be established, managed, replenished and liquidated in accordance with ADB's Loan Disbursement Handbook and detailed arrangements agreed upon between Bangladesh and ADB. The currency of the imprest account shall be Taka. The initial amount to be deposited into the imprest account shall not exceed the lower of (i) the estimated expenditure to be financed from the imprest account for the first six months of Project implementation, or the equivalent of ten (10) percent of the Loan

Schedule 3 Para 5

Complied with: An Imprest Account has been set up at Bangladesh Bank.

Appendix 7 39


Loan Agreement


amount. (b) The statement of expenditures (SOE) procedure may be used for reimbursement of eligible expenditures, in accordance with ADB's Loan Disbursement Handbook dated January 2007, as amended from time to time, and detailed arrangements agreed upon between Bangladesh and ADB. Any individual payment to be reimbursed under the SOE procedure shall not exceed $10,000. Retroactive Financing Withdrawals from the Loan Account may be made for reimbursement of reasonable expenditures incurred under the Project before the Effective Date, but not earlier than 12 months before the date of this Loan Agreement in connection with the items to be retroactively financed, subject to a maximum amount equivalent to 20 percent of the Loan amount.

Schedule 3 Para 6

Not applicable: The Borrower did not avail of retroactive financing.

Procurement for Goods and Works Except as ADB may otherwise agree, Goods and Works shall only be procured on the basis of International Competitive Bidding. The methods of procurement are subject to, among other things, the detailed arrangements and threshold values set forth in the Procurement Plan. Bangladesh may only modify the methods of procurement or threshold values with the prior agreement of ADB, and modifications must be set out in updates to the Procurement Plan. Domestic Preference. Bangladesh may grant a margin of preference in the evaluation of bids under international competitive bidding in accordance with paragraphs 2.55(a) and 2.56 of the Procurement Guidelines for domestically manufactured Goods and paragraphs 2.55(b) and 2.56 of the Procurement Guidelines for domestic Works.

Schedule 4 Para 3 and

Para 4

Complied with: A total of 18 contracts, procurement was on basis of International Competitive Bidding procedures for two, four contracts were procured by National Competitive Bidding procedures, five by Single Source Selection procedure and six shopping/purchase order contracts Single source selection process of bidding during implementation was adopted with ADB’s approval on 25 February 2014 to ensure compatibility with BTCL’s network equipment.

Conditions for Award of Contract Unless otherwise agreed with ADB, Bangladesh shall ensure that the contract for network design and installation of the Fibre Optic Network is not awarded until Bilateral Interconnection Agreements have been signed with each of the other SASEC countries Regional Network Service Agencies.

Schedule 4, Para 5

Complied with: The Bilateral Interconnection Agreement was signed in April 2012 and the Contract for Design and Installation for Regional Network was signed on 27 March 2013 for Regional Network.

Selection of Consulting Services Quality- and Cost-Based Selection. Except as ADB may otherwise agree, quality- and cost-based selection shall apply for selecting and engaging consulting services.

Schedule 4, Para 6 and

Para 7

Complied with: Procurement of consulting services was done on the Quality –

40 Appendix 7


Loan Agreement


ADB shall undertake the selection of, and contract negotiations with, the International Project Management Consultants; and Bangladesh, in collaboration with the other SASEC countries, shall engage the International Project Management Consultants on a joint basis

and Cost- Based selection.

Industrial or Intellectual Property Rights (a) Bangladesh shall ensure that all Goods and Works procured (including without limitation all computer hardware, software and systems, whether separately procured or incorporated within other goods and services procured) do not violate or infringe any industrial property or intellectual property right or claim of any third party. (b) Bangladesh shall ensure that all contracts for the procurement of Goods and Works contain appropriate representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph (a) of this paragraph. Bangladesh shall ensure that all ADB-financed contracts with consultants contain appropriate representations, warranties and, if appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party.

Schedule 4, Para 8 (a),

(b) and Para 9

Complied with: MOSICT took necessary steps to include appropriate language in all the Goods, Works and Services Contracts.

ADB’s Review of Procurement Decisions All contracts procured under international competitive bidding procedures and contracts for consulting services shall be subject to prior review by ADB, unless otherwise agreed between Bangladesh and ADB and set forth in the Procurement Plan.

Schedule 4, Para 10

Complied with: All procurement under international competitive bidding procedure was reviewed in prior by ADB.

Project Executing Agency MOSICT as the Project Executing Agency shall be responsible for the overall coordination of the Project in Bangladesh and for coordination of the joint subregional efforts.

Schedule 5 Para 1

Complied with: MOSICT performed the overall coordination activities of the Project in Bangladesh and for coordination of the joint subregional efforts.

Project Steering Committee Bangladesh shall take all reasonable measures to ensure that the Project Steering Committee (PSC), established by the SASEC countries: (a) is mandated to undertake the joint supervision and monitoring of the overall Project implementation, including (i) providing overall guidance for the SASEC PMUs to ensure proper coordination of joint subregional activities, and timely and effective performance of the Project, (ii) supervising strategic planning and review and approving modifications and changes to Project implementation as needed, (iii) approving relevant Project documentation and agreements and facilitating their execution, (iv) ensuring sharing between SASEC countries, of Project outputs, materials, and studies generated under the SASEC Research and Training Network; and (v) resolving any disputes between the SASEC countries and the Project

Schedule 5 Para 2

Complied with: Secretary of MOSICT was appointed as member of the Project Steering Committee. Secretary participated in joint supervision, monitoring of overall project implementation. Secretary participated in meetings, discussions relating to project implementation and the minutes of such meetings were submitted to ADB.

Appendix 7 41


Loan Agreement


management consultants, regarding Project Implementation issues; (b) (i) meets, including by telephone or video conferencing, at least every six months or more often if necessary, (ii) has Secretariat support as agreed between SASEC countries, and (iii) submits the minutes of each meeting to ADB for information; and Appoints the Secretary of MOSICT as member.

Project Management Unit and Management Consultants Bangladesh shall cause MOSICT to: (a) establish the PMU to be headed by the Project Director who shall be at joint secretary level; and (b) ensure that: (i) appropriate staff are assigned to the PMU, including a technical expert (the Project Manager), and at least one administrative staff to provide technical expertise and administrative support in areas of accounting, contract administration, disbursement, planning and procurement, and (ii) adequate office space and facilities, transport, and secretarial support are provided to the PMU as needed; and (c) ensure that a representative of the Regional Network Service Agency is assigned to work on a full time basis, directly with the PMU.

Schedule 5 Para 3

Complied with: Bangladesh caused MOSICT to ensure (a) to (c).

The PMU shall be responsible for day-to-day implementation of the Project in Bangladesh and shall work in coordination with the Country Management Consultants to: (a) coordinate national and village activities; (b) handle the bidding processes; (c) recruit consultants, supervise and monitor the outputs and managing contracts; (d) monitor Project progress; (e) prepare withdrawal applications and Project progress reports and the Project completion report for Bangladesh related activities; (f) maintain Project accounts, prepare the statements of expenditure, complete Loan financial records for auditing and have them audited by an external auditor acceptable to ADB; (g) monitor the socioeconomic impacts of the Project and serve as a liaison point between the Project villages, MOSICT, and ADB; and (h) report the progress of Project implementation to the PSC and ADB on a monthly basis.

Schedule 5 Para 4

Complied with: The PIU, in coordination with the Country Management Consultants fulfilled the responsibilities (a) to (h).

Bangladesh authorizes ADB to undertake the selection of, and contract negotiations with, the International Project Management Consultants in consultation with MOSICT. Bangladesh, in collaboration with the other SASEC countries, shall contract the International Project Management Consultants on a joint basis to assist in Project implementation at the subregional level. Bangladesh shall engage the Country Management Consultants comprising a Bangladesh country team consisting of three subteams: (a) a SASEC Regional Network team; (b) a Village Network/Research and Training Network team, with both subteams comprising a team leader, a design engineer, a procurement specialist, and a network engineer; and (c) a country joint team comprising a social development specialist, an environment specialist, and a quality assurance specialist. The management consultants shall be employed to: (i) design all networks to be procured under the Project; (ii) prepare bid documents; (iii) assist the PMU in tendering (prequalification,

Schedule 5 Para 5

Partially Complied with: The contract was signed with the project management consultant - BETS Spectrum JV. However, International staff were not mobilized by the consultant. The project management activities were carried out by the Service Agency staff. Reasons for non-mobilization of international staff was not estbalished by any record of contract management nor

42 Appendix 7


Loan Agreement


evaluation of proposals, etc.); and (iv) assist the PMU to supervise contractors.

through discussions during the PCR mission.

Policy Dialogue Bangladesh shall keep ADB informed of, and the Bangladesh and ADB shall from time to time exchange views on sector issues, policy reforms and any additional reforms arising during implementation of the Project and TA Project that may be considered necessary or desirable. Bangladesh shall promptly discuss with ADB problems and constraints encountered during implementation of the Project and the TA Project, and appropriate measures to overcome or mitigate such problems and constraints.


Para 7

Complied with: Bangladesh conducted necessary policy dialogue with ADB during the course of implementation.

Implementation Issues Component One - SASEC Regional Network-Fiber Optic Network Bangladesh shall ensure that: (a) the following criteria are used to select the Regional Network Service Agency: (i) availability of national fiber optic network with reliable and expandable capacity; (ii) availability of existing right of way; (iii) availability of optical fiber route that favors location of wireless sites to link rural CeC networks; (iv) availability of support for next generation technology of network; and (b) the selection is based on technical and financial capability to deliver the desired solution within and across, the borders of Bangladesh. Within 9 months after Loan Effectiveness, Bangladesh shall have entered into a service agency agreement with the Regional Network Services Agency (the Regional Network Services Agency Agreement) which: (a) governs the obligations of the Regional Network Services Agency to keep, manage, and operate the national Fiber Optic Network and equipment as designed, built, and installed by the Project and serve the requirements of the SASEC Regional Network; and (b) requires the Regional Network Services Agency to contribute an agreed portion of the revenue accrued from operating the SASEC Regional Network to the Resource Pool. Bangladesh shall ensure that the contributions and investments of the Resource Pool are used to support the financial sustainability of the SASEC Village Network in Bangladesh, and the SASEC Research and Training Network


Para 9

Partially complied with: MOSICT and BTCL signed the service agency agreement for SASEC Regional Network on 9 March 2010, 12 months after the original Loan Effectiveness. The delay was caused by the start-up delay in signing the multilateral agreement.

Land Acquisition and Resettlement Bangladesh shall cause MOSICT to ensure that: (a) the Fiber Optic Network and related equipment will be co-located with existing facilities whenever required, and (b) in the event of (i) any unanticipated or unforeseen involuntary resettlement, (ii) private land acquisition; or (iii) resettlement activities during Project implementation, the Project will be implemented in accordance with ADB's Policy on Involuntary Resettlement (1995) and the Policy on Indigenous Peoples (1998), and in accordance with all applicable laws and regulations in Bangladesh. In the event of discrepancies between the

Schedule 5 Para 10

Complied with: All the network and related equipment was within the existing facilities. There was no requirement of land, and hence no resettlement

Appendix 7 43


Loan Agreement


Bangladesh's laws and regulations and ADB's Policy, ADB's Policy shall prevail.

Bilateral Interconnection Agreements Within 12 months after Loan Effectiveness, Bangladesh shall have taken all reasonable measures to cause its Regional Network Service Agency, to have entered into Bilateral Interconnection Agreements, with each of the Regional Network Service Agencies of the other SASEC countries, which: (a) set the terms and conditions for interconnection of, and exchange of digital traffic between, their respective in-country networks including technical specifications of networks and maintenance; and (b) detail the mechanism for revenue and cost sharing.

Schedule 5 Para 11

Partially Complied with: Bilateral Interconnection Agreement was signed in April 2012 after 33 months from loan effectiveness, due to the delays in reaching consensus on the details of the (a) and (b) in the covenant among the SASEC countries.

Component Two - SASEC Village Network Bangladesh shall cause MOSICT to ensure that: (a) the operation of the SASEC Village Network and CeCs is franchised to private entrepreneurs such as rural internet service providers or non-government organizations that are involved in similar CeC operations using the most suitable modality, such as by auction or leasing; and (b) where appropriate, the potential Village Service Agencies, in the course of the bidding processes, will be required to indicate the necessity of social subsidy in circumstances where the CeCs they bid for, are assessed as financially non-viable; and (c) MOSICT selects each Village Service Agency based on a selection process in which the Village Service Agency has offered the highest price or required the lowest subsidy to operate and maintain the relevant contract package of CeCs and the operation of SASEC Village Network.

Schedule 5 Para 12

Complied with: Bangladesh caused MOSICT to complete the franchising of CECs in April 2014 in accordance with (a) to (c).

Agreements with Village Service Agency Within 12 months after Loan Effectiveness, Bangladesh shall cause MOSICT to enter into agreements between MOSICT and each selected Village Service Agency which prescribes: (a) the obligations of the Village Service Agency to manage and operate the SASEC Village Network; (b) the social responsibility of Village Service Agency by specifying minimum services they should provide for the communities particularly for the poor and women; (c) the formula for determining any financial assistance that MOSICT needs to extend to ensure the financial sustainability of the relevant CeC operations; and (d) the terms and conditions for use of, including the selection criteria for users of, the Resource Pool.

Schedule 5 Para 13

Complied with: Bangladesh caused MOSICT to enter into the agreements between MOSICT and the Village Network Service Agency.

Component Three – SASEC Research and Training Network Within 12 months after Loan Effectiveness, Bangladesh shall cause MOSICT to select and enter into an agreement between MOSICT and the RTN Service Agency which prescribes: (a) the obligations of the RTN Service Agency to manage and operate the SASEC Research and Training Network; and (b) the terms and conditions for use of the Content Development and

Schedule 5 Para 14

Partially complied with: The agreement was signed on 12 April 2012 after 33 months from loan effectiveness. The delay was caused by the reluctance of the Service Agency in

44 Appendix 7


Loan Agreement


Incubation Support, including the selection criteria for users; and (c) the research and training center operations.

signing in consideration of potential financial burden of maintaining the RTN.

Other Issues Environmental Protection Bangladesh shall ensure that: (a) the Project will be implemented by taking into consideration the ADB’s Environment Policy (2002), and the Government Protection Act, 1997; (b) the construction of data center will be carried out by taking into account the recommendations from the initial environmental examination and by strictly following the conditions attached in the building permit; and (c) any unexpected environmental impact will be addressed following consultations with ADB.

Schedule 5 Para 15

Complied with: Bangladesh ensured compliance with all the requirements in relation to environmental protection. No unexpected environmental impact was reported during the course of implementation.

Labor Laws Bangladesh shall cause MOSICT to ensure that: (a) all civil works, system development and installation contractors: (i) comply with all applicable labor laws, (ii) do not employ child labor for construction and maintenance activities, (iii) do not differentiate wages between men and women particularly for work of equal value, (iv) encourage employment of the local poor who meet the job and efficiency requirements, particularly women, and (v) provide timely payment of wages on at least a monthly basis and safe working conditions to all workers; (b) all contracts will include specific clauses on the undertakings described in (a) above; and (c) the PMU strictly monitors compliance during Project implementation.

Schedule 5 Para 16

Complied with: MOSICT ensured that all the applicable labour laws were complied with during the course of implementation.

Good Governance and Anticorruption Consistent with ADB’s and Bangladesh’s commitment to good governance, accountability and transparency, Bangladesh shall ensure that: (a) the Loan funds are utilized effectively and efficiently to implement the Project and to achieve the Project objectives and necessary measures are undertaken to create and sustain a corruption-free environment; (b) Bangladesh’s laws on anticorruption, and ADB’s Policy on Anticorruption, 1998 as amended to date, are strictly enforced and are being complied with during Project implementation, and that relevant provisions of ADB’s policy on Anticorruption, are included in all bidding documents for the Project; (c) Bangladesh’s agencies facilitate ADB’s exercise of its right to investigate any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project; (d) the MOSICT conducts periodic inspections on the Project contractors’ activities related to fund withdrawals and settlements; and (e) ensure that all contracts financed by ADB in connection with the Project include provisions specifying the right of ADB to audit and examine the records and accounts of MOSICT and all contractors, suppliers, consultants, and other service providers as they relate to the Project.

Schedule 5 Para 17

Complied with Bangladesh ensured all of the items (a) to (e).

Mid-term Review Bangladesh and ADB will jointly undertake a mid-term review of the Project about 12 months after Loan Effectiveness, to assess progress, issues and constraints and identify any necessary

Schedule 5 Para 18

Not Complied with: The project did not have a designated mid-

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remedial action and adjustments in Project design, the Project implementation schedule and/or implementation arrangements.

term review owing to the significant delays.

Counterpart Support Bangladesh shall also ensure that: (a) necessary support from relevant government agencies is forthcoming in a timely manner so that all necessary authorizations and support is given so that the Project can be implemented, in a timely manner and in coordination with other ICT activities; and (b) throughout implementation of the Project and without limiting the generality of Section 6.05 of the Loan Regulations, adequate budgetary allocations for the required counterpart funds are made, approved, and released in a timely manner to ensure efficient and timely implementation of the Project during each year of Project implementation and that necessary budgetary allocations are provided to meet the recurrent costs under the Project for the operation and maintenance of the Project facilities both during and after Project completion.

Schedule 5 Para 19

Complied with: Bangladesh ensured both (a) and (b).

Gender Bangladesh shall ensure that: (a) the gender strategy approved under the Project is implemented in a timely manner and that adequate resources are allocated for this purpose; (b) all necessary authorizations are provided in a timely manner for Project activities which acknowledge and address the fact that risks and protective factors differ according to gender and that the gender norms that affect ICT applications will be addressed; (c) targets and design features outlined in the gender strategy are incorporated across Project activities including the PPM Indicators; and (d) equal employment and access to opportunities, including training, is provided for men and women during Project implementation.

Schedule 5 Para 20

Not applicable: The project was classified to have “No Gender element” at appraisal

Progress Reports Without limiting the generality of Section 6.04 of the Loan Regulations, Bangladesh, during the implementation period of the Project, shall submit to ADB, through the PMU, quarterly progress reports on the Project summarizing: (a) progress made against established targets; (b) delays and problems encountered, and actions taken to resolve issues; (c) compliance with covenants in this Agreement; (d) proposed program of activities for the next six months; (e) expected progress during the succeeding period; and (f) a Project completion report within three months after completion of the Project.

Schedule 5 Para 22

Partially Complied with: Copies of Monthly, Quarterly Progress reports were submitted with delays. Work plan for succeeding six months was not submitted for all the duration of the project. Reasons for non-submission were not established by any record or through discussion during the PCR mission.

Project Performance Monitoring and Evaluation Bangladesh, through the PMU shall: (a) monitor and evaluate Project impacts in accordance with the Project Performance Monitoring (PPM) and Evaluation system, acceptable to ADB; (b) discuss and agree with ADB and in conjunction with the Management consultants, the PPM indicators and baseline data to be prepared by the PMU, within three months of Loan

Schedule 5 Para 23

Not complied with: There is no baseline data collected in the project and no report was submitted with the indicators by the PMC/MOSICT. Reasons for not

46 Appendix 7


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Effectiveness; and (c) ensure that the PPM indicators are monitored and compared during Project implementation and at Project completion. The PMU shall ensure timely and effective data collection systems are in place and that information collected is analyzed and used to refine activities through the course of Project implementation, with results being reported to the PSC, ADB, and management consultants periodically. Without limiting the generality of the above, the PPM Indicators and baseline data shall, to the extent possible, make full use of gender and ethnicity disaggregated data and information and shall be applied in a flexible manner.

conducting project performance monitoring and evaluation were not established by any written record or through discussions during the PCR mission.

ADB = Asian Development Bank, APFS = audited project financial statement, FY = financial year, BRM = Bangladesh Resident Mission, MOSICT = Ministry of Science and Information and Communication Technology (Bangladesh), PIU = project implementation unit, BTCL = Bangladesh Telecommunications Company Ltd, SASEC = South Asia Subregional Economic Cooperation, PCR = project completion report, PMC = project management consultant.

Appendix 7 47

BHUTAN


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General Covenants

Section 2.01. ADB agrees to make available to Bhutan from ADB's Special Funds resources on terms and conditions set forth in this Agreement an amount of four million seven hundred thousand Dollars ($4,700,000).

Article II, Page 4

Complied with: The funds were availed on the terms and conditions set forth in the Grant Agreement,

Section 3.01. Bhutan shall cause the proceeds of the Grant to be applied to the financing of expenditures on the Project in accordance with the provisions of this Grant Agreement.

Article III, Page 5

Complied with: Bhutan caused the proceeds of the Grant to be applied to the financing of expenditures in accordance with the provisions of the Grant Agreement.

Section 3.02. The goods and services and other items of expenditure to be financed out of the proceeds of the Grant and the allocation of amounts of the Grant among different categories of such goods and services and other items of expenditure shall be in accordance with the provisions of Schedule 2 to this Grant Agreement, as such Schedule may be amended from time to time by agreement between Bhutan and ADB.

Article III, Page 5

Complied with: Financing and the allocation of amounts of the Grant among different categories were in accordance with the provisions of Schedule 2.

Section 3.03. Except as ADB may otherwise agree, all goods and services to be financed out of the proceeds of the Grant shall be procured in accordance with the provisions of Schedule 3 and Schedule 4 to this Grant Agreement.

Article III, Page 5

Complied with: Procurement was conducted in accordance with the provisions of Schedules 3 and 4.

Section 3.04. Withdrawals from the Grant Account in respect of goods and services shall be made only on account of expenditures relating to (a) goods which are produced in and supplied from and services which are supplied from such member countries of ADB as shall have been specified by ADB from time to time as eligible sources for procurement, and (b) goods and services which meet such other eligibility requirements as shall have been specified by ADB from time to time..

Article III, Page 5

Complied with: Withdrawals were made only on account of expenditures relating to (a) and (b).

Section 3.05. The Grant Closing Date for the purposes of Section 8.02 of the Grant Regulations shall be 30 June 2010 or such other date as may from time to time be agreed between Bhutan and ADB.

Article III, Page 5

Complied with: ADB and Bhutan mutually agreed on a loan extension six times with final closing date as 31 October 2018.

Particular Covenants Section 4.01. In the carrying out of the Project and operation of the Project facilities, Bhutan shall perform, or cause to be performed, all obligations set forth in Schedule 4 to this Grant Agreement

Article IV, Page 5

Complied with: Bhutan performed all obligations set forth in Schedule 4.

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Accounts and Audits Section 4.02. (a) Bhutan shall: (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Grant proceeds and compliance with the financial covenants of this Grant Agreement as well as on the use of the procedures for statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Article IV, Page 5, Page

6

Partially Complied with: All APFS were submitted though with delays. APFS for FY 2010, 2015 to 2017 were submitted within the deadline. APFS for FY 2011 to 2014 were submitted with delays of 3 months, 4.7 months, 2.8 months, and 2.7 months due to the MOIC’s unfamiliarity with the ADB requirements for the APFS. APFS for FY 2018 was submitted with 2.5 months delay for unknown reasons. APFS for FY 2008 and 2009 were waived due to limited to no financial activities. All APFS received unqualified opinion and no significant comments.

Section 4.02 (b) Bhutan shall enable ADB, upon ADB's request, to discuss the financial statements for the Project and its financial affairs related to the Project from time to time with the auditors appointed by Bhutan pursuant to Section 4.02(a) hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of Bhutan unless Bhutan shall otherwise agree.

Article IV, Page 6

Complied with: Bhutan enabled ADB to discuss the financial statements of the project and its financial affairs related to the project with the auditors appointed pursuant to Section 4.02 (a).

Without prejudice to the generality of Section 4.02 of this Grant Agreement, Bhutan shall ensure that a separate accounting system for Project expenditures is maintained in accordance with sound accounting principles. All Project accounts, including financial statements, statements of expenditures and account records, shall be audited annually as part of the regular audit accounts and financial statements by an independent and external auditor. The consolidated audit reports (in English) shall be submitted to ADB in accordance with the requirements and within the deadlines stated in Section 4.02(a) of this Grant Agreement. The audit opinion shall include: (a) an assessment

Schedule 5

Para 21

Complied with: MOIC provided clarifications to ADB on comments in the Audit reports.

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of the adequacy of accounting and internal controls systems with respect to Project expenditures and other financial transactions, and to ensure safe custody of Project financed assets; (b) a determination as to whether Bhutan and the Project Executing Agency have maintained adequate documentation for all financial transactions, specifically including the SOE procedures; and (c) confirmation of compliance with this Grant Agreement's financial covenants and ADB requirements for Project financial management. ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project.

Section 4.03. Bhutan shall enable ADB's representatives to inspect the Project, the Goods and Works financed out of the proceeds of the Grant, and any relevant records and documents.

Article IV, Page 6

Complied with: ADB conducted missions to visit the project for review and inspection.

Suspension and Cancellation Section 5.01. The following is specified as an additional event for suspension of the right of Bhutan to make withdrawals from the Grant Account for the purposes of Section 8.01(k) of the Grant Regulations or cancellation of the Grant pursuant to Section 8.02 of the Grant Regulations: the Project Executing Agency shall have failed to perform any of its obligations under the Multilateral Cooperation Agreement or failed to enforce the terms of the Regional Network Service Agency Agreement which in the reasonable opinion of ADB will or may adversely affect the carrying out of the Project or the operation of the Project facilities.

Article V, Page 6

Not applicable

Effectiveness Section 6.01. The following is specified as an additional condition to the effectiveness of this Grant Agreement for the purposes of Section 9.01(e) of the Grant Regulations: Bhutan shall have signed or acceded to the Multilateral Cooperation Agreement and taken all such action as is necessary to ratify or otherwise make it effective in its own territory.

Article VI, Page 6

Complied with: The additional condition specified in the Grant Regulations was followed in relation to effectuation of the Grant.

Section 6.02. A date ninety (90) days after the date of this Grant Agreement is specified for the effectiveness of the Grant Agreement for the purposes of Section 9.04 of the Grant Regulations.

Article VI, Page 6

Complied with: The Grant effectiveness was extended once to 2 July 2009

Percentage of ADB Financing Except as ADB may otherwise agree, the items of the Categories listed in the Table shall be financed out of the proceeds of the Grant on the basis of the percentages set forth in the Table.

Schedule 2 Para 2

Complied with: Financing was done on the basis of the percentages set forth in the Table.

Reallocation Notwithstanding the allocation of Grant proceeds set forth in the Table, (a) if the amount of the Grant allocated to any Category appears to be insufficient to finance all agreed expenditures in that Category, ADB may, by notice to the Recipient, reallocate to such Category, to the extent required to meet the estimated shortfall, amounts of the Grant which have been allocated to

Schedule 2 Para 3

Complied with: Allocation was done in accordance with the provisions set forth in the Grant Agreement.

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another Category but, in the opinion of ADB, are not needed to meet other expenditures and if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made; and (b) if the amount of the Grant then allocated to any Category appears to exceed all agreed expenditures in that Category, ADB may, by notice to the Recipient, reallocate such excess amount to any other Category. Statement of Expenditures The statement of expenditures (SOE) procedure may be used for reimbursement of eligible expenditures, in accordance with ADB's Loan Disbursement Handbook dated January 2007, as amended from time to time, and detailed arrangements agreed upon between Bhutan and ADB. Any individual payment to be reimbursed under the SOE procedure shall not exceed $10,000.

Schedule 2 Para 4

Complied with: The SOE procedure was used in accordance with ADB’s Loan Disbursement Handbook (January 2007).

Procurement for Goods and Works Except as ADB may otherwise agree, Goods and Works shall only be procured on the basis of International Competitive Bidding. The methods of procurement are subject to, among other things, the detailed arrangements and threshold values set forth in the Procurement Plan. Bhutan may only modify the methods of procurement or threshold values with the prior agreement of ADB, and modifications must be set out in updates to the Procurement Plan. Domestic Preference. Bhutan may grant a margin of preference in the evaluation of bids under international competitive bidding in accordance with paragraphs 2.55(a) and 2.56 of the Procurement Guidelines for domestically manufactured Goods and paragraphs 2.55(b) and 2.56 of the Procurement Guidelines for domestic Works.


Para 4

Complied with: Procurement of Goods & Services was carried out using international competitive bidding, national competitive bidding, and shopping for 25 goods packages, 1 consultancy service packages, and 27 equipment packages.

Conditions for Award of Contract Unless otherwise agreed with ADB, Bhutan shall ensure that the contract for network design and installation of the Fibre Optic Network is not awarded until Bilateral Interconnection Agreements have been signed with each of the other SASEC countries Regional Network Service Agencies.

Schedule 3, Para 5

Complied with: The bilateral Interconnection agreement was signed on 26 April 2012 and Contract for Network Design, Installation and Supply of Equipment was signed on 7 September 2012.

Selection of Consulting Services Quality- and Cost-Based Selection. Except as ADB may otherwise agree, quality- and cost-based selection shall apply for selecting and engaging consulting services.

Schedule 3, Para 6

Complied with: Selection of consulting services was done through Quality – and Cost- Based selection.

Industrial or Intellectual Property Rights (a) Bhutan shall ensure that all Goods and Works procured (including without limitation all computer hardware, software and systems, whether separately procured or incorporated within other goods and services procured) do not violate or


(b) and Para 8

Complied with: MOIC took necessary steps to include appropriate language in

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infringe any industrial property or intellectual property right or claim of any third party. (b) Bhutan shall ensure that all contracts for the procurement of Goods and Works contain appropriate representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph (a) of this paragraph. Bhutan shall ensure that all ADB-financed contracts with consultants contain appropriate representations, warranties and, if appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party.

all the Goods, Works and Services Contracts

ADB’s Review of Procurement Decisions All contracts procured under international competitive bidding procedures and contracts for consulting services shall be subject to prior review by ADB, unless otherwise agreed between Bhutan and ADB and set forth in the Procurement Plan.

Schedule 3, Para 9

Complied with: All procurement conducted under international competitive bidding was reviewed in prior by ADB.

Project Executing Agency MoIC as the Project Executing Agency shall be responsible for the overall coordination of the Project in Bhutan and for coordination of the joint subregional efforts.

Schedule 4 Para 1

Complied with: MOIC performed all the coordination responsibilities as the Executing Agency.

Project Steering Committee Bhutan shall take all reasonable measures to ensure that the Project Steering Committee (PSC), established by the SASEC countries: (a) is mandated to undertake the joint supervision and monitoring of the overall Project implementation, including (i) providing overall guidance for the SASEC PMUs to ensure proper coordination of joint subregional activities, and timely and effective performance of the Project, (ii) supervising strategic planning and review and approving modifications and changes to Project implementation as needed, (iii) approving relevant Project documentation and agreements and facilitating their execution, (iv) ensuring sharing between SASEC countries, of Project outputs, materials, and studies generated under the SASEC Research and Training Network; and (v) resolving any disputes between the SASEC countries and the Project management consultants, regarding Project Implementation issues; (b) (i) meets, including by telephone or video conferencing, at least every six months or more often if necessary, (ii) has Secretariat support as agreed between SASEC countries, and (iii) submits the minutes of each meeting to ADB for information; and Appoints the Secretary of MoIC as member.

Schedule 4 Para 2

Complied with. Secretary of MOIC was appointed as member of the project Steering Committee and participated in joint supervision, monitoring of overall project implementation. Secretary participated in meetings, discussions relating to project implementation and the minutes of such meetings were submitted to ADB.

Project Management Unit and Management Consultants Bhutan shall cause MoIC to: (a) establish the PMU to be headed by the Project Director who shall be at director level; and (b) ensure that: (i) appropriate staff are assigned to the PMU, including a technical expert (the Project Manager), and at least

Schedule 4 Para 3

Complied with: Bhutan caused MOIC to ensure (a) to (c).

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one administrative staff to provide technical expertise and administrative support in areas of accounting, contract administration, disbursement, planning and procurement, and (ii) adequate office space and facilities, transport, and secretarial support are provided to the PMU as needed; and (c) ensure that a representative of the Regional Network Service Agency is assigned to work on a full time basis, directly with the PMU. The PMU shall be responsible for day-to-day implementation of the Project in Bhutan and shall work in coordination with the Country management consultants to: (a) coordinate national and village activities; (b) handle the bidding processes; (c) recruit consultants, supervise and monitor the outputs and managing contracts; (d) monitor Project progress; (e) prepare withdrawal applications and Project progress reports and the Project completion report for Bhutan related activities; (f) maintain Project accounts, prepare the statements of expenditure, complete Grant financial records for auditing and have them audited by an external auditor acceptable to ADB; (g) monitor the socioeconomic impacts of the Project and serve as a liaison point between the Project villages, MoIC, and ADB; and (h) report the progress of Project implementation to the PSC and ADB on a monthly basis.

Schedule 4 Para 4

Complied with: The PIU performed the responsibilities of day-to-day implementation activities of the project.

Bhutan: (a) authorizes ADB to undertake the selection of, and contract negotiations with, the International Project Management Consultants; and (b) in collaboration with the other SASEC countries, shall contract the International Project Management Consultants to assist the SASEC countries to implement the Project at the subregional level. Bhutan shall engage the Country Management Consultants comprising a country team consisting of three subteams: (a) a SASEC Regional Network team (b) a Village Network/Research and Training Network team, with both subteams comprising a team leader, a design engineer, a procurement specialist, and a network engineer; and (c) a country joint team comprising a social development specialist, an environment specialist, and a quality assurance specialist. The Management consultants shall be employed to: (a) design all networks to be procured under the Project; (b) prepare bid documents; (c) assist the PMU in tendering (prequalification, evaluation of proposals, etc.); and (d) assist the PMU to supervise contractors.

Schedule 4 Para 5

Complied with: The contract was signed with the project management consultant on 6 September 2010.

Policy Dialogue Bhutan shall keep ADB informed of, and the Bhutan and ADB shall from time to time exchange views on, sector issues, policy reforms and any additional reforms arising during the implementation of the Project and TA Project, that may be considered necessary or desirable. Bhutan shall promptly discuss with ADB problems and constraints encountered during implementation of the Project and the TA Project, and appropriate measures to overcome or mitigate such problems and constraints.


Para 7

Complied with: Bhutan kept ADB informed of sectors issues, policy reforms and any additional reforms and exchanged views on them with ADB. Bhutan also promptly discussed with ADB issues related to implementation of the project.

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Implementation Issues Component One - SASEC Regional Network-Fiber Optic Network Bhutan shall ensure that: (a) the following criteria are used to select the Regional Network Service Agency: (i) availability of national fiber optic network with reliable and expandable capacity; (ii) availability of existing right of way; (iii) availability of optical fiber route that favors location of wireless sites to link rural CeC networks; (iv) availability of support for next generation technology of network; (b) the Regional Network Service Agency is selected through an open tender (where there are multiple eligible candidates) or a closed tender (where there are less than two eligible candidates); and (c) the tender is based on technical and financial capability to deliver the desired solution within and across the borders of Bhutan . Within nine months after Grant Effectiveness, Bhutan shall have entered into a service agency agreement with the Regional Network Service Agency which: (a) governs the obligations of the Regional Network Service Agency to keep, manage, and operate the national Fiber Optic Network and equipment as designed, built, and installed by the Project and serve the requirements of the SASEC Regional Network; and (b) requires the Regional Network Service Agency to contribute a certain portion of the revenue accrued from operating the SASEC Regional Network to the Resource Pool. Bhutan shall ensure that the contributions and investments of the Resource Pool are used to support the financial sustainability of the SASEC Village Network in Bhutan, and the SASEC Research and Training Network


Para 9

Partially Complied with: MOIC signed the agreement with the service agency on 2 September 2011 which is 30 months after original Grant effectiveness. The delay was caused by reluctance of the service agency in signing considering the perceived financial burden of maintaining and operating the Regional Network.

Land Acquisition and Resettlement Bhutan shall also cause MoIC to ensure that: (a) the Fiber Optic Network and related equipment will be co-located with existing facilities whenever required; and (b) in the event of: (i) any unanticipated or unforeseen involuntary resettlement, (ii) private land acquisition; or (iii) resettlement activities during Project implementation, the Project will be implemented in accordance with ADB’s Policy on Involuntary Resettlement (1995), Policy on Indigenous Peoples (1998), and in accordance with all applicable laws and regulations in Bhutan. In the event of discrepancies between the Bhutan’s laws and regulations and ADB’s Policy, ADB’s Policy shall prevail.

Schedule 4 Para 10

Complied with: There was no land acquisition, resettlement in the project. All the network, and related equipment were within existing facilities.

Bilateral Interconnection Agreements Within 12 months after Grant Effectiveness, Bhutan shall have taken all reasonable measures to cause its Regional Network Service Agency, to have entered into Bilateral Interconnection Agreements with each of the Regional Network Service Agencies of the other SASEC countries, which: (a) set the terms and conditions for interconnection of, and exchange of digital traffic between, their respective in-country networks including technical specifications of networks and maintenance, and (b) detail the mechanism for revenue and cost sharing

Schedule 4 Para 11

Partially Complied with: Bilateral Interconnection Agreement was signed on 26 April 2012 after 37 months from original Loan effectiveness on 14 Mar 2009 due to the delays in reaching consensus on the

54 Appendix 7


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details of the (a) and (b) in the covenant among the SASEC countries.

Component Two - SASEC Village Network Bhutan shall cause MoIC to ensure that: (a) the operation of the SASEC Village Network and CeCs is franchised to private entrepreneurs such as rural ISPs or NGOs that are involved in similar CeC operations using the most suitable modality, such as by auction or leasing; and (b) where appropriate, the potential Village Service Agencies, in the course of bidding processes, will be required to indicate the necessity of social subsidy in circumstances where the CeCs they bid for, are assessed as financially non-viable; and (c) MoIC selects each Village Service Agency based on a selection process in which the Village Service Agency has offered the highest price or required the lowest subsidy to operate and maintain the relevant contract package of CeCs and the operation of the SASEC Village Network..

Schedule 4 Para 12

Complied with: Operation and management of the Village Network was originally assigned to Bhutan Postal Corporation Limited, which was subsequently taken up by Bhutan Development Bank Limited.

Agreements with Village Service Agency Within 12 months after Grant Effectiveness, Bhutan shall cause MoIC to enter into agreements between MoIC and selected Village Service Agencies which prescribes: (a) the obligations of the Village Service Agency to manage and operate the SASEC Village Network; (b) the social responsibility of Village Service Agencies by specifying minimum services they should provide for the communities particularly for the poor and women; (c) the formula for determining any financial assistance that MoIC needs to provide to ensure the financial sustainability of CEC operation; and (d) the terms and conditions for use of, including the selection criteria for users of, the Resource Pool

Schedule 4 Para 13

Partially Complied with: Contract to manage and operate CECs in Bhutan was signed on 11 June 2014 between Government of Bhutan and Bhutan Postal Corporation Limited after 63 months of Grant effectiveness. The delay was caused by the start-up delays in signing of the multilateral and bilateral agreements.

Component Three – SASEC Research and Training Network Within 12 months after Grant Effectiveness, Bhutan shall cause MoIC to enter into an agreement between MOIC and each RTN Service Agency which prescribes: (a) the obligations of the RTN Service Agency to manage and operate the SASEC Research and Training Network; and (b) the terms and conditions for use of, (i) the Content Development Incubation Support including the selection criteria for users; and (ii) the research and training center operations.

Schedule 4 Para 14

Partially Complied with: MOU between MOIC and Royal University of Bhutan, was signed on 24 June 2012 after 27 months from Grant effectiveness.

Other Issues Environmental Protection Bhutan shall ensure that: (a) the Project will be implemented by taking into consideration the ADB’s Environment Policy (2002), and the Bhutan’s Environment Assessment Act 2000, as amended from time to time; (b) the construction of data center will be carried out by taking into account the recommendations from the initial environmental examination and by strictly following the conditions attached in the building permit; and (c)

Schedule 4 Para 15

Complied with: Bhutan ensured compliance with all the requirements in relation to environmental protection. No unexpected environmental impact was reported during the

Appendix 7 55


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any unexpected environmental impact will be addressed following consultations with ADB..

course of implementation.

Labor Laws Bhutan shall cause MoIC to ensure that: (a) all civil works and system development and installation contractors: (i) comply with all applicable labor laws, (ii) do not employ child labor for construction and maintenance activities, (iii) do not differentiate wages between men and women particularly for work of equal value, (iv) encourage employment of the local poor who meet the job and efficiency requirements, particularly women, and (v) provide timely payment of wages on at least a monthly basis and safe working conditions to all workers; (b) contracts include specific clauses on the undertakings described in (a) above, and (c) the PMU strictly monitors compliance during Project implementation

Schedule 4 Para 16

Complied with: MOIC ensured that all the applicable labour laws were complied with during the course of implementation.

Good Governance and Anticorruption Consistent with ADB’s and Bhutan’s commitment to good governance, accountability and transparency, Bhutan shall ensure that: (a) the Grant funds are utilized effectively and efficiently to implement the Project and to achieve the Project objectives and necessary measures are undertaken to create and sustain a corruption-free environment; (b) Bhutan’s laws on anticorruption, and ADB’s Policy on Anticorruption, 1998 as amended to date, are strictly enforced and are being complied with during Project implementation, and that relevant provisions of ADB’s policy on Anticorruption, are included in all bidding documents for the Project; (c) Bhutan’s agencies facilitate ADB’s exercise of its right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project; (d) the MoIC conducts periodic inspections on the Project contractors’ activities related to fund withdrawals and settlements; and (e) ensure that all contracts financed by ADB in connection with the Project include provisions specifying the right of ADB to audit and examine the records and accounts of the EA and all contractors, suppliers, consultants, and other service providers as they relate to the Project

Schedule 4 Para 17

Complied with: Bhutan ensured (a) to (e).

Mid-term Review Bhutan and ADB will jointly undertake a mid-term review of the Project about 12 months after Grant Effectiveness, to assess progress, issues and constraints and identify any necessary remedial action and adjustments in Project design, the Project implementation schedule and/or implementation arrangements.

Schedule 4 Para 18

Complied with: The mid-term review was conducted between 12 to 20 February 2014.

Counterpart Support Bhutan shall also ensure that: (a) necessary support from relevant government agencies is forthcoming in a timely manner so that all necessary authorizations and support is given so that the Project can be implemented in a timely manner and in coordination with other ICT activities; and (b) throughout implementation of the Project and without limiting the generality of Section 6.05 of the Grant Regulations, adequate budgetary allocations for the required counterpart funds are made, approved, and released in a timely manner to ensure efficient

Schedule 4 Para 19

Complied with: Bhutan ensured that necessary counterpart support be provided.

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and timely implementation of the Project during each year of Project implementation and that necessary budgetary allocations are provided to meet the recurrent costs under the Project for the operation and maintenance of the Project facilities both during and after Project completion. Gender Bhutan shall ensure that: (a) the gender strategy approved under the Project is implemented in a timely manner and that adequate resources are allocated for this purpose; (b) all necessary authorizations are provided in a timely manner for Project activities which acknowledge and address the fact that risks and protective factors differ according to gender and that the gender norms that affect ICT applications will be addressed; (c) targets and design features outlined in the gender strategy are incorporated across Project activities including the PPM Indicators; and (d) equal employment and access to opportunities, including training, is provided for men and women during Project implementation.

Schedule 4 Para 20

Not applicable: The project was classified to have “No Gender element” at appraisal.

Accounts and Audits Without prejudice to the generality of Section 4.02 of this Grant Agreement, Bhutan shall ensure that a separate accounting system for Project expenditures is maintained in accordance with sound accounting principles. All Project accounts, including financial statements, statements of expenditures and account records, shall be audited annually as part of the regular audit accounts and financial statements by an independent and external auditor. The consolidated audit reports (in English) shall be submitted to ADB in accordance with the requirements and within the deadlines stated in Section 4.02(a) of this Grant Agreement. The audit opinion shall include: (a) an assessment of the adequacy of accounting and internal controls systems with respect to Project expenditures and other financial transactions, and to ensure safe custody of Project financed assets; (b) a determination as to whether Bhutan and the Project Executing Agency have maintained adequate documentation for all financial transactions, specifically including the SOE procedures; and (c) confirmation of compliance with this Grant Agreement's financial covenants and ADB requirements for Project financial management. ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project.

Schedule 4 Para 21

Partially complied with: All APFS from FY 2010 to FYE 2018 were submitted. APFS for FY 2011 to 2014 were submitted with delays of 3 months, 4.7 months, 2.8 months, and 2.7 months respectively due to the MOIC’s unfamiliarity with the ADB requirements for the APFS. APFS for FY 2018 was submitted with 2.5 months delay for unknown reasons. APFS for FY 2008 and 2009 were waived due to limited to no financial activities. All APFS received unqualified opinion and no significant comments.

Progress Reports Without limiting the generality of Section 6.04 of the Grant Regulations, Bhutan, during the implementation period of the Project, shall submit to ADB, through the PMU, quarterly progress reports on the Project summarizing: (a) progress made against established targets; (b) delays and problems encountered, and actions taken to resolve issues; (c)

Schedule 4 Para 22

Partially complied with: All the progress reports were submitted. Project Completion Report was submitted by MOIC in December 2018. April 2019

Appendix 7 57


Grant Agreement


compliance with covenants in this Agreement; (d) proposed program of activities for the next six months; (e) expected progress during the succeeding period; and (f) a Project completion report within three months after completion of the Project. Project Performance Monitoring and Evaluation Bhutan, through the PMU shall: (a) monitor and evaluate Project impacts in accordance with the Project Performance Monitoring (PPM) and Evaluation System acceptable to ADB; (b) discuss and agree with ADB and in conjunction with the Management consultants, the PPM Indicators and baseline data to be prepared by the PMU, within three months of Grant Effectiveness; and (c) ensure that the PPM indicators are monitored and compared during Project implementation and at Project completion. The PMU shall ensure timely and effective data collection systems are in place and that information collected is analyzed and used to refine activities through the course of Project implementation, with results being reported to the PSC, ADB, and Management consultants periodically. Without limiting the generality of the above, the PPM Indicators and baseline data shall, to the extent possible, make full use of gender and ethnicity disaggregated data and information and shall be applied in a flexible manner.

Schedule 4 Para 23

Complied with: Bhutan through the PIU ensured that the activities in (a) to (b) in relation to the performance monitoring and evaluation were conducted.

ADB = Asian Development Bank, APFS = audited project financial statement, FY = financial year, MOIC = Ministry of Information and Communication (Bhutan), SASEC = South Asia Subregional Economic Cooperation, PIU = project implementation unit, TA = technical assistance, ISP = internet service provider, NGO = nongovernment organization, CEC = community e-center, MOU = memorandum of understanding, ICT = information and communication technology, PCR = project completion report.

58 Appendix 7

NEPAL

Covenant Reference in Grant

Agreement Status of Compliance

General Covenants

Section 2.01. ADB agrees to make available to Nepal from ADB's Special Funds resources on terms and conditions set forth in this Agreement an amount of nine million seven hundred thousand Dollars ($9,000,000).

Article II, Page 4

Complied with: The funds were availed in accordance with the terms and conditions in the Grant Agreement.

Section 3.01. Nepal shall cause the proceeds of the Grant to be applied to the financing of expenditures on the Project in accordance with the provisions of this Grant Agreement.

Article III, Page 5

Complied with: Nepal caused the proceeds of the Grant to be applied to the financing of expenditures in accordance with the provisions of the Grant Agreement.

Section 3.02. The goods and services and other items of expenditure to be financed out of the proceeds of the Grant and the allocation of amounts of the Grant among different categories of such goods and services and other items of expenditure shall be in accordance with the provisions of Schedule 2 to this Grant Agreement, as such Schedule may be amended from time to time by agreement between Nepal and ADB.

Article III, Page 5

Complied with: Financing of expenditures and the allocation of the Grant among different categories were done in accordance with the provisions of Schedule 2 of the Grant Agreement.

Section 3.03. Except as ADB may otherwise agree, all goods and services to be financed out of the proceeds of the Grant shall be procured in accordance with the provisions of Schedule 3 and Schedule 4 to this Grant Agreement.

Article III, Page 5

Complied with: Procurement was conducted in accordance with the provisions of Schedule 3 and Schedule 4 of the Grant Agreement.

Section 3.04. Withdrawals from the Grant Account in respect of goods and services shall be made only on account of expenditures relating to (a) goods which are produced in and supplied from and services which are supplied from such member countries of ADB as shall have been specified by ADB from time to time as eligible sources for procurement, and (b) goods and services which meet such other eligibility requirements as shall have been specified by ADB from time to time..

Article III, Page 5

Complied with: Withdrawals from the Grant Account were done only on the account of expenditure relating to (a) and (b).

Section 3.05. The Grant Closing Date for the purposes of Section 8.02 of the Grant Regulations shall be 30 June 2010 or such other date as may from time to time be agreed between Nepal and ADB.

Article III, Page 5

Complied with: ADB and Nepal have mutually agreed for a loan extension on 6 occasions (first on June 2010; second on 21 June 2012; third on 1 January 2015; fourth on 19 January 2016; fifth in 14 October 2016; and sixth on 19 January 2017), with final closing date as 5 October 2017.

Appendix 7 59



Particular Covenants

Section 4.01. In the carrying out of the Project and operation of the Project facilities, Nepal shall perform, or cause to be performed, all obligations set forth in Schedule 4 to this Grant Agreement

Article IV, Page 5

Complied with: Nepal performed all obligations in Schedule 4 in implementing the project.

Accounts and Audits Section 4.02. (a) Nepal shall: (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Grant proceeds and compliance with the financial covenants of this Grant Agreement as well as on the use of the procedures for statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Article IV, Page 5, Page 6

Partially complied with: All APFS from FY2010 to 2016 are submitted. APFS for 2018 and 2011 were submitted with delays of 2.9 months and 9 months respectively. The delay for FY 2011 is understood to be due to unfamiliarity of the Ministry of Information and Communications with the ADB requirements while reasons for the delay for FYE] 2018 is not established by any record or through discussions during the PCR mission. APFS for FY 2008 and 2009 were waived due to limited to no financial activities. All APFS received unqualified opinion and no significant audit opinion was found in any of the APFS.

Section 4.02 (b) Nepal shall enable ADB, upon ADB's request, to discuss the financial statements for the Project and its financial affairs related to the Project from time to time with the auditors appointed by Nepal pursuant to Section 4.02(a) hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of Nepal unless Nepal shall otherwise agree.

Article IV, Page 6

Complied with: Not directly discussed with the auditors but clarifications sought from Ministry of Information and Communications and copied to office of auditor general, every time ADB received APFS for respective FYs.

60 Appendix 7



Without prejudice to the generality of Section 4.02 of this Grant Agreement, Nepal shall ensure that a separate accounting system for Project expenditures is maintained in accordance with sound accounting principles. All Project accounts, including financial statements, statements of expenditures and account records, shall be audited annually as part of the regular audit accounts and financial statements by an independent and external auditor. The consolidated audit reports (in English) shall be submitted to ADB in accordance with the requirements and within the deadlines stated in Section 4.02(a) of this Grant Agreement. The audit opinion shall include: (a) an assessment of the adequacy of accounting and internal controls systems with respect to Project expenditures and other financial transactions, and to ensure safe custody of Project financed assets; (b) a determination as to whether Nepal and the Project Executing Agency have maintained adequate documentation for all financial transactions, specifically including the SOE procedures; and (c) confirmation of compliance with this Grant Agreement's financial covenants and ADB requirements for Project financial management. ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project.

Schedule 4

Para 22

Complied with: Ministry of Information and Communications provided clarifications to ADB on comments in the Audit reports.

Section 4.03. Nepal shall enable ADB's representatives to inspect the Project, the Goods and Works financed out of the proceeds of the Grant, and any relevant records and documents.

Article IV, Page 6

Complied with: ADB conducted missions time to time to visit the project for review and inspection.

Suspension and Cancellation Section 5.01. The following is specified as an additional event for suspension of the right of Nepal to make withdrawals from the Grant Account for the purposes of Section 8.01(k) of the Grant Regulations or cancellation of the Grant pursuant to Section 8.02 of the Grant Regulations: the Project Executing Agency shall have failed to perform any of its obligations under the Multilateral Cooperation Agreement or failed to enforce the terms of the Regional Network Service Agency Agreement which in the reasonable opinion of ADB will or may adversely affect the carrying out of the Project or the operation of the Project facilities.

Article V, Page 6

Not applicable

Effectiveness Section 6.01. The following is specified as an additional condition to the effectiveness of this Grant Agreement for the purposes of Section 9.01(e) of the Grant Regulations: Nepal shall have signed or acceded to the Multilateral Cooperation Agreement and taken all such action as is necessary to ratify or otherwise make it effective in its own territory.

Article VI, Page 6

Complied with: Nepal signed the Multilateral Cooperation Agreement on 2 July 2009 and took all necessary actions to effectuate the Grant Agreement.

Section 6.02. A date ninety (90) days after the date of this Grant Agreement is specified for the effectiveness of the Grant Agreement for the purposes of Section 9.04 of the Grant Regulations.

Article VI, Page 6

Partially complied with: Nepal signed the Multilateral Cooperation Agreement on 2 July.

Appendix 7 61



2009 and took all necessary actions to effectuate the Grant Agreement, approximately 8 months after the date of Grant Agreement.

Percentage of ADB Financing Except as ADB may otherwise agree, the items of the Categories listed in the Table shall be financed out of the proceeds of the Grant on the basis of the percentages set forth in the Table.

Schedule 2 Para 2

Complied with: The items of the Categories were financed on the basis of the percentages set forth in the Table.

Reallocation Notwithstanding the allocation of Grant proceeds set forth in the Table, (a) if the amount of the Grant allocated to any Category appears to be insufficient to finance all agreed expenditures in that Category, ADB may, by notice to the Recipient, reallocate to such Category, to the extent required to meet the estimated shortfall, amounts of the Grant which have been allocated to another Category but, in the opinion of ADB, are not needed to meet other expenditures and if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made; and (b) if the amount of the Grant then allocated to any Category appears to exceed all agreed expenditures in that Category, ADB may, by notice to the Recipient, reallocate such excess amount to any other Category.

Schedule 2 Para 3

Complied with: Reallocations were processed on the EA’s request in May 2013, June 2014, March 2015, and April 2017.

Statement of Expenditures The statement of expenditures (SOE) procedure may be used for reimbursement of eligible expenditures, in accordance with ADB's Loan Disbursement Handbook dated January 2007, as amended from time to time, and detailed arrangements agreed upon between Nepal and ADB. Any individual payment to be reimbursed under the SOE procedure shall not exceed $10,000.

Schedule 2 Para 4

Complied with: SOE procedure was used with threshold of $10,000.

Procurement for Goods and Works Except as ADB may otherwise agree, Goods and Works shall only be procured on the basis of International Competitive Bidding. The methods of procurement are subject to, among other things, the detailed arrangements and threshold values set forth in the Procurement Plan. Nepal may only modify the methods of procurement or threshold values with the prior agreement of ADB, and modifications must be set out in updates to the Procurement Plan. Domestic Preference. Nepal may grant a margin of preference in the evaluation of bids under international competitive bidding in accordance with paragraphs 2.55(a) and 2.56 of the Procurement Guidelines for domestically manufactured Goods and paragraphs 2.55(b) and 2.56 of the Procurement Guidelines for domestic Works.


Para 4

Complied with: ICB method of procurement was followed as indicated in the procurement plan with provision of Domestic Preference.

62 Appendix 7



Conditions for Award of Contract Unless otherwise agreed with ADB, Nepal shall ensure that the contract for network design and installation of the Fiber Optic Network is not awarded until Bilateral Interconnection Agreements have been signed with each of the other SASEC countries Regional Network Service Agencies.

Schedule 3, Para 5

Complied with. Contract was awarded in Jan 2013 and bilateral interconnection agreements were signed on 26 April 2012.

Selection of Consulting Services Quality- and Cost-Based Selection. Except as ADB may otherwise agree, quality- and cost-based selection shall apply for selecting and engaging consulting services. ADB shall undertake the selection of, and contract negotiations with the International Project Management Consultants on a joint basis.

Schedule 3, Para 6 and

Para 7

Complied with: The recruitment was conducted through Quality and Cost Based Selection.

Industrial or Intellectual Property Rights (a) Nepal shall ensure that all Goods and Works procured (including without limitation all computer hardware, software and systems, whether separately procured or incorporated within other goods and services procured) do not violate or infringe any industrial property or intellectual property right or claim of any third party. (b) Nepal shall ensure that all contracts for the procurement of Goods and Works contain appropriate representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph (a) of this paragraph. Nepal shall ensure that all ADB-financed contracts with consultants contain appropriate representations, warranties and, if appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party.


(b) and Para 9

Complied with: Ministry of Information and Communications took necessary steps to include appropriate language in all the Goods, Works and Services Contracts.

ADB’s Review of Procurement Decisions All contracts procured under international competitive bidding procedures and contracts for consulting services shall be subject to prior review by ADB, unless otherwise agreed between Nepal and ADB and set forth in the Procurement Plan.

Schedule 3, Para 10

Complied with: Prior review by ADB was conducted for all the procurement through international competitive bidding.

Project Executing Agency MoIC as the Project Executing Agency shall be responsible for the overall coordination of the Project in Nepal and for coordination of the joint subregional efforts.

Schedule 4 Para 1

Complied with: Ministry of Information and Communications performed the coordination responsibilities as the Executing Agency.

Project Steering Committee Nepal shall take all reasonable measures to ensure that the Project Steering Committee (PSC), established by the SASEC countries: (a) is mandated to undertake the joint supervision and monitoring of the overall Project implementation, including (i) providing overall guidance for the SASEC PMUs to ensure proper coordination of joint subregional activities, and timely

Schedule 4 Para 2

Partially Complied with: Secretary of MoIC Ministry of Information and Communications was appointed as member of the Project Steering Committee.

Appendix 7 63



and effective performance of the Project, (ii) supervising strategic planning and review and approving modifications and changes to Project implementation as needed, (iii) approving relevant Project documentation and agreements and facilitating their execution, (iv) ensuring sharing between SASEC countries, of Project outputs, materials, and studies generated under the SASEC Research and Training Network; and (v) resolving any disputes between the SASEC countries and the Project management consultants, regarding Project Implementation issues; (b) (i) meets, including by telephone or video conferencing, at least every six months or more often if necessary, (ii) has Secretariat support as agreed between SASEC countries, and (iii) submits the minutes of each meeting to ADB for information; and (c) appoints the Secretary of MoIC as member.

Secretary participated in joint supervision, monitoring of overall project implementation. Secretary participated in meetings, discussions relating to project implementation and the minutes of such meetings were submitted to ADB.

Project Management Unit and Management Consultants Nepal shall cause MoIC to: (a) establish the PMU to be headed by the Project Director who shall be at director level; and (b) ensure that: (i) appropriate staff are assigned to the PMU, including a technical expert (the Project Manager), and at least one administrative staff to provide technical expertise and administrative support in areas of accounting, contract administration, disbursement, planning and procurement, and (ii) adequate office space and facilities, transport, and secretarial support are provided to the PMU as needed; and (c) ensure that a representative of the Regional Network Service Agency is assigned to work on a full time basis, directly with the PMU.

Schedule 4 Para 3

Partially complied with: The project manager was not a technical expert due to constraints of expertise of the available human resources within Ministry of Information and Communications .

The PMU shall be responsible for day-to-day implementation of the Project in Nepal and shall work in coordination with the Country management consultants to: (a) coordinate national and village activities; (b) handle the bidding processes; (c) recruit consultants, supervise and monitor the outputs and managing contracts; (d) monitor Project progress; (e) prepare withdrawal applications and Project progress reports and the Project completion report for Nepal related activities; (f) maintain Project accounts, prepare the statements of expenditure, complete Grant financial records for auditing and have them audited by an external auditor acceptable to ADB; (g) monitor the socioeconomic impacts of the Project and serve as a liaison point between the Project villages, MoIC, and ADB; and (h) report the progress of Project implementation to the PSC and ADB on a monthly basis.

Schedule 4 Para 4

Complied with: The PMU fulfilled the responsibilities associated with the day-to-day implementation of the project.

Nepal: (a) authorizes ADB to undertake the selection of, and contract negotiations with, the International Project Management Consultants; and (b) in collaboration with the other SASEC countries, shall contract the International Project Management Consultants to assist the SASEC countries to implement the Project at the subregional level. Nepal shall engage the Country Management Consultants comprising a Nepal country team consisting of three subteams: (a) a SASEC Regional Network team (b) a Village

Schedule 4 Para 5

Complied with: The contract was signed with the project management consultant – on 15 November 2010.

64 Appendix 7



Network/Research and Training Network team, with both subteams comprising a team leader, a design engineer, a procurement specialist, and a network engineer; and (c) a country joint team comprising a social development specialist, an environment specialist, and a quality assurance specialist. The Management consultants shall be employed to: (a) design all networks to be procured under the Project; (b) prepare bid documents; (c) assist the PMU in tendering (prequalification, evaluation of proposals, etc.); and (d) assist the PMU to supervise contractors. Policy Dialogue Nepal shall keep ADB informed of, and the Nepal and ADB shall from time to time exchange views on, sector issues, policy reforms and any additional reforms arising during the implementation of the Project and TA Project, that may be considered necessary or desirable. Nepal shall promptly discuss with ADB problems and constraints encountered during implementation of the Project and the TA Project, and appropriate measures to overcome or mitigate such problems and constraints.


Para 7

Complied with: ADB and Ministry of Information and Communications, Nepal Telecom along with the contractor and the PMC used to have regular meetings amongst themselves, and with MOF as well on a quarterly basis.

Implementation Issues Component One - SASEC Regional Network-Fiber Optic Network Nepal shall ensure that: (a) the following criteria are used to select the Regional Network Service Agency: (i) availability of national fiber optic network with reliable and expandable capacity; (ii) availability of existing right of way; (iii) availability of optical fiber route that favors location of wireless sites to link rural CeC networks; (iv) availability of support for next generation technology of network; (b) the Regional Network Service Agency is selected through an open tender (where there are multiple eligible candidates) or a closed tender (where there are less than two eligible candidates); and (c) the tender is based on technical and financial capability to deliver the desired solution within and across the borders of Bhutan. Within nine months after Grant Effectiveness, Nepal shall have entered into a service agency agreement with the Regional Network Service Agency which: (a) governs the obligations of the Regional Network Service Agency to keep, manage, and operate the national Fiber Optic Network and equipment as designed, built, and installed by the Project and serve the requirements of the SASEC Regional Network; and (b) requires the Regional Network Service Agency to contribute a certain portion of the revenue accrued from operating the SASEC Regional Network to the Resource Pool. Nepal shall ensure that the contributions and investments of the Resource Pool are used to support the financial sustainability of the SASEC Village Network in Bhutan, and the SASEC Research and Training Network


Para 9

Partially complied with: Nepal Telecom was appointed as the Service Agency as it was the only telecom company in Nepal. However, Ministry of Information and Communications did not formerly enter into a service agency agreement with Nepal Telecom because of the latter’s reluctancy in signing the agreement due to the perceived financial burden of operating and maintaining the Regional Network.

Appendix 7 65



Land Acquisition and Resettlement Nepal shall also cause MoIC to ensure that: (a) the Fiber Optic Network and related equipment will be co-located with existing facilities whenever required; and (b) in the event of: (i) any unanticipated or unforeseen involuntary resettlement, (ii) private land acquisition; or (iii) resettlement activities during Project implementation, the Project will be implemented in accordance with ADB’s Policy on Involuntary Resettlement (1995), Policy on Indigenous Peoples (1998), and in accordance with all applicable laws and regulations in Bhutan. In the event of discrepancies between the Nepal’s laws and regulations and ADB’s Policy, ADB’s Policy shall prevail.

Schedule 4 Para 10

Complied with: All the network and related equipment were within existing facilities, and therefore no land acquisition was required.

Bilateral Interconnection Agreements Within 12 months after Grant Effectiveness, Nepal shall have taken all reasonable measures to cause its Regional Network Service Agency, to have entered into Bilateral Interconnection Agreements with each of the Regional Network Service Agencies of the other SASEC countries, which: (a) set the terms and conditions for interconnection of, and exchange of digital traffic between, their respective in-country networks including technical specifications of networks and maintenance, and (b) detail the mechanism for revenue and cost sharing

Schedule 4 Para 11

Partially Complied with: The Bilateral Interconnection Agreements were signed on 27 April 2012. The delay was due to the start-up delays in signing of the multilateral agreement.

Component Two - SASEC Village Network Nepal shall cause MoIC to ensure that: (a) the operation of the SASEC Village Network and CeCs is franchised to private entrepreneurs such as rural ISPs or NGOs that are involved in similar CeC operations using the most suitable modality, such as by auction or leasing; and (b) where appropriate, the potential Village Service Agencies, in the course of bidding processes, will be required to indicate the necessity of social subsidy in circumstances where the CeCs they bid for, are assessed as financially non-viable; and (c) MoIC selects each Village Service Agency based on a selection process in which the Village Service Agency has offered the highest price or required the lowest subsidy to operate and maintain the relevant contract package of CeCs and the operation of the SASEC Village Network..

Schedule 4 Para 12

Partially complied with: Ministry of Information and Communications identified the management committees of local secondary schools as agents for operation of the CECs. However, the status of compliance with the (b) and (c) were not verified by any written record or through discussions during the PCR mission.

Agreements with Village Service Agency Within 12 months after Grant Effectiveness, Nepal shall cause MoIC to enter into agreements between MoIC and selected Village Service Agencies which prescribes: (a) the obligations of the Village Service Agency to manage and operate the SASEC Village Network; (b) the social responsibility of Village Service Agencies by specifying minimum services they should provide for the communities particularly for the poor and women; (c) the formula for determining any financial assistance that MoIC needs to provide to ensure the financial sustainability of CeC operation; and (d) the terms and conditions for use of, including the selection criteria for users of, the Resource Pool

Schedule 4 Para 13

Partially complied with: Ministry of Information and Communications handed over operation and maintenance of CECs to management committees of local secondary schools although the details of such handing-over were not verified.

Component Three – SASEC Research and Training Network

Schedule 4 Para 14

Complied with:

66 Appendix 7



Within 12 months after Grant Effectiveness, Nepal shall cause MoIC to enter into an agreement between MoIC and each RTN Service Agency which prescribes: (a) the obligations of the RTN Service Agency to manage and operate the SASEC Research and Training Network; and (b) the terms and conditions for use of, (i) the Content Development Incubation Support including the selection criteria for users; and (ii) the research and training center operations.

Ministry of Information and Communications entered into a partnership agreement with Kathmandu University.

Other Issues Environmental Protection Nepal shall ensure that: (a) the Project will be implemented by taking into consideration the ADB’s Environment Policy (2002), and the Nepal’s Environment Assessment Act 2000, as amended from time to time; (b) the construction of data center will be carried out by taking into account the recommendations from the initial environmental examination and by strictly following the conditions attached in the building permit; and (c) any unexpected environmental impact will be addressed following consultations with ADB..

Schedule 4 Para 15

Complied with: An Environmental Management Plan was prepared and implemented. No unexpected environmental impact was reported during the course of the implementation.

Labor Laws Nepal shall cause MoIC to ensure that: (a) all civil works and system development and installation contractors: (i) comply with all applicable labor laws, (ii) do not employ child labor for construction and maintenance activities, (iii) do not differentiate wages between men and women particularly for work of equal value, (iv) encourage employment of the local poor who meet the job and efficiency requirements, particularly women, and (v) provide timely payment of wages on at least a monthly basis and safe working conditions to all workers; (b) contracts include specific clauses on the undertakings described in (a) above, and (c) the PMU strictly monitors compliance during Project implementation

Schedule 4 Para 16

Complied with: Nepal caused Ministry of Information and Communications to ensure compliance with the related labour lows.

Good Governance and Anticorruption Consistent with ADB’s and Nepal’s commitment to good governance, accountability and transparency, Nepal shall ensure that: (a) the Grant funds are utilized effectively and efficiently to implement the Project and to achieve the Project objectives and necessary measures are undertaken to create and sustain a corruption-free environment; (b) Nepal’s laws on anticorruption, and ADB’s Policy on Anticorruption, 1998 as amended to date, are strictly enforced and are being complied with during Project implementation, and that relevant provisions of ADB’s policy on Anticorruption, are included in all bidding documents for the Project; (c) Nepal’s agencies facilitate ADB’s exercise of its right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project; (d) the MoIC conducts periodic inspections on the Project contractors’ activities related to fund withdrawals and settlements; and (e) ensure that all contracts financed by ADB in connection with the Project include provisions specifying the right of ADB to audit and examine the records and accounts of the EA and all

Schedule 4 Para 17

Complied with: Nepal ensured the (a) to (e).

Appendix 7 67



contractors, suppliers, consultants, and other service providers as they relate to the Project Mid-term Review Nepal and ADB will jointly undertake a mid-term review of the Project about 12 months after Grant Effectiveness, to assess progress, issues and constraints and identify any necessary remedial action and adjustments in Project design, the Project implementation schedule and/or implementation arrangements.

Schedule 4 Para 18

Partially Complied with: No official Mid-term review was conducted due to the significant delays in the project. However, a series of review missions were conducted to facilitate the implementation.

Counterpart Support Nepal shall also ensure that: (a) necessary support from relevant government agencies is forthcoming in a timely manner so that all necessary authorizations and support is given so that the Project can be implemented in a timely manner and in coordination with other ICT activities; and (b) throughout implementation of the Project and without limiting the generality of Section 6.05 of the Grant Regulations, adequate budgetary allocations for the required counterpart funds are made, approved, and released in a timely manner to ensure efficient and timely implementation of the Project during each year of Project implementation and that necessary budgetary allocations are provided to meet the recurrent costs under the Project for the operation and maintenance of the Project facilities both during and after Project completion.

Schedule 4 Para 19

Complied with: Nepal ensured provision of necessary counterpart support.

Gender Nepal shall ensure that: (a) the gender strategy approved under the Project is implemented in a timely manner and that adequate resources are allocated for this purpose; (b) all necessary authorizations are provided in a timely manner for Project activities which acknowledge and address the fact that risks and protective factors differ according to gender and that the gender norms that affect ICT applications will be addressed; (c) targets and design features outlined in the gender strategy are incorporated across Project activities including the PPM Indicators; and (d) equal employment and access to opportunities, including training, is provided for men and women during Project implementation.

Schedule 4 Para 20

Not applicable: The project was categorized as No Gender Element (NGE), and thus no gender strategy was prepared.

Ethnic Minorities Nepal shall ensure the ethnic minority development framework approved under the Project, is fully considered and applied to all Project activities and that PMU monitors and reviews the implementation of specific measures, and addresses any problems in a prompt manner or where no resolution is forthcoming or is delayed, the PMU shall raise the issue to senior officials for guidance

Schedule 4 Para 21

Not applicable: No ethnic minority development framework was developed.

Accounts and Audits Without prejudice to the generality of Section 4.02 of this Grant Agreement, Nepal shall ensure that a separate accounting system for Project expenditures is maintained in accordance with sound accounting principles. All Project accounts, including financial statements, statements of expenditures and

Schedule 4 Para 22

Partially complied with: All APFS from FY 2010 to 2016 are submitted. APFS for FY 2018 and 2011 were submitted with

68 Appendix 7



account records, shall be audited annually as part of the regular audit accounts and financial statements by an independent and external audit firm. The consolidated audit reports (in English) shall be submitted to ADB in accordance with the requirements and within the deadlines stated in Section 4.02(a) of this Grant Agreement. The audit opinion shall include: (a) an assessment of the adequacy of accounting and internal controls systems with respect to Project expenditures and other financial transactions, and to ensure safe custody of Project financed assets; (b) a determination as to whether Nepal and the Project Executing Agency have maintained adequate documentation for all financial transactions, specifically including the SOE procedures; and (c) confirmation of compliance with this Grant Agreement's financial covenants and ADB requirements for Project financial management. ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project.

delays of 2.9 months and 9 months respectively. The delay for FYE 2011 is understood to be due to unfamiliarity of Ministry of Information and Communications with the ADB requirements while reasons for the delay for FY 2018 is not established by any record or through discussions during the PCR mission. APFS for FY 2008 and 2009 were waived due to limited to no financial activities. All APFS received unqualified opinion and no significant audit opinion was found in any of the APFS.

Progress Reports Without limiting the generality of Section 6.04 of the Grant Regulations, Nepal during the implementation period of the Project, shall submit to ADB, through the PMU, quarterly progress reports on the Project summarizing: (a) progress made against established targets; (b) delays and problems encountered, and actions taken to resolve issues; (c) compliance with covenants in this Agreement; (d) proposed program of activities for the next six months; (e) expected progress during the succeeding period; and (f) a Project completion report within three months after completion of the Project.

Schedule 4 Para 23

Partially complied with: Ministry of Information and Communications submitted monthly progress reports with the PMC’s support while PMC was engaged. However, a Project Completion Report was not submitted, reasons for which were not established.

Project Performance Monitoring and Evaluation Nepal, through the PMU shall: (a) monitor and evaluate Project impacts in accordance with the Project Performance Monitoring (PPM) and Evaluation System acceptable to ADB; (b) discuss and agree with ADB and in conjunction with the Management consultants, the PPM Indicators and baseline data to be prepared by the PMU, within three months of Grant Effectiveness; and (c) ensure that the PPM indicators are monitored and compared during Project implementation and at Project completion. The PMU shall ensure timely and effective data collection systems are in place and that information collected is analyzed and used to refine activities through the course of Project implementation, with results being reported to the PSC, ADB, and Management consultants periodically. Without limiting the generality of the above, the PPM Indicators and baseline data shall, to the

Schedule 4 Para 24

Not complied with: No project performance monitoring and evaluation activities by Ministry of Information and Communications were known to have happened, causes for which were not established.

Appendix 7 69



extent possible, make full use of gender and ethnicity disaggregated data and information and shall be applied in a flexible manner. ADB = Asian Development Bank, APFS = audited project financial statement, FY = financial year, ICB = international competitive bidding, SASEC = South Asia Subregional Economic Cooperation, PMU = project management unit, TA = technical assistance, PMC = project management consultant, CEC = community e-center, PCR = project completion report, EA = executing agency, ICT = information and communication technology,

70 Appendix 8

ECONOMIC AND FINANCIAL ANALYSIS

A. Introduction 1. The South Asia Subregional Economic Cooperation (SASEC) Information Highway Project comprises three components: (i) a SASEC Regional Network (SASECRN) with fiber-optic and data interchange capacity, directly connecting the four SASEC countries; (ii) a SASEC Village Network (SASECVN) expanding broadband ICT access to 110 rural communities in the SASEC countries and directly connecting the communities for local networking and information sourcing; and (iii) a SASEC Research and Training Network (SASECRTN) building technical and business skills in ICT, particularly in developing local content and e-applications (such as e-government, e-learning, tele-medicine, e-remittance, e-commerce) for the needs of the poor.

2. The SASECRN was expected to replace microwave facilities, providing efficient access, with redundancy, to submarine cables for Bhutan and Nepal, which would lower internet connecting costs and increased service reliability and competition, thereby promoting an efficient use of network services (e.g., reducing latency and enhancing local peering). At appraisal, specific outputs of the SASECRN component relevant to the economic analysis were (i) a new fiber optic cable connecting the SASEC countries, (ii) four access gateways in each of the SASEC countries, and (iii) seven border townships (two in Bangladesh, one in Bhutan and Nepal, and four in India). SASECVN was to expand ICT accessibility and ICT-enabled service in remote rural areas through establishment of networks serving village communities in the countries. The SASECVN component’s outputs expected at appraisal and relevant to the economic analysis included (i) 110 community e-centers (CECs) (30 each in Bhutan and Nepal, 25 each in Bangladesh and India), (ii) rural wireless broadband connectivity to link CECs to the RN, and (iii) a village portal and knowledge database system. The integration of SASECRN and SASECVN was to ensure improvement of the rural communities’ accessibility to information and economic opportunities and thereby maximize the project benefits. 3. The economic analysis at appraisal assumed that the project would be implemented in 2 years, and the analysis period was the following 15 years of full operation. The residual values were assumed to be 10% of their acquisition costs. 2007 prices were used for the analysis and all cost elements were valued at border prices, using a world price numeraire, with all taxes and duties excluded. A standard conversion factor of 0.9% was applied to non-tradable items and labors. 4. However, the project took nearly a decade until completion, in December 2017. Thus, the economic analysis at completion covers the following 15 years of full operation applying 2019 prices. 5. The economic analysis at completion follows mostly the framework and the assumptions used in the economic analysis at appraisal in order to ensure comparability of these two analyses. However, the economic analysis at appraisal is found to contain significant inadequacy in terms of reasonableness of assumptions, sufficiency of data, as well as demand analysis, which have limited the current economic analysis. Therefore, where such inadequacies are thought to seriously affect viability of the economic analysis at completion, alternative assumptions and proxy data are introduced to the extent practically possible without compensating the comparability.

Appendix 8 71

B. Project Costs 6. In the economic analysis at appraisal, the following three costs were considered: (i) landed cost of internet capacity; (ii) in-country haulage cost to the access gateway; and (iii) cross-border haulage to the access gateway. The operation and maintenance costs for the optical fiber that was to be installed under the SASECRN component were assessed at 2% of its installation cost, and operation and maintenance costs for computer equipment at 3% for the first three years and then increasing by 100 basis points each for three years as the equipment ages. However, the original economic analysis did not clearly explain the relationship between these three types of costs and the financial costs of the project. The operation and maintenance costs for optical fiber were estimated as 2% of its installation cost, and operation and maintenance costs for computer equipment at 3% for the first 3 years and then increasing by 100 basis points each for 3 years as the equipment ages. However, the rationale for such estimated operation and maintenance costs were not found in the original economic analysis. 7. Since the figures of the costs disaggregated into the three categories envisaged at appraisal are not available upon completion of the project, the economic analysis at completion considers the economic costs as converted from the actual amount of financial costs, which are shown by financier in Table A8.1 .

Table A8.1: Project Costs at Completion

($’000)

Asian

Development Bank

Government of

Bangladesha

Government of Bhutan a

Government of Nepal a

Government of Indiab

Total

Project Cost

10,846.10 800.00 1,200.00 907.01 1,304.77 15,054.91

a Inclusive of taxes, duties and contingencies. b Inclusive of one year operation and maintenance costs. Source: Asian Development Bank.

8. In the economic analysis at completion, the annual operation and maintenance costs for both the optical fiber and operation and maintenance costs for other equipment are estimated as 2% of its installation cost, largely following the assumptions of the original economic analysis. The fiber optic cable is presumed to have service life exceeding the economic analysis period. Other equipment such as routers, switches, computers, peering equipment are presumed to have service life ranging from 5 to 9 years, after which they require replacement for a few parts or the entire equipment. Thus, a periodic maintenance cost of 5% of the cost is introduced in the analysis at completion while no residual value for the equipment is considered in the analysis. Detailed breakdown of costs from the governments was not made available. Therefore, for the purpose of the current economic analysis, the taxes and duties are assumed to be 25% of the cost financed by the respective governments and are excluded from this analysis. At completion, the information on project-related imports and tradeable and/or non-tradeable items was not available since information on the disaggregated costs by expenditure items was not made available by the Governments. Thus, for keeping the analysis consistent with the approach at appraisal, the standard conversion factor used in the original analysis is also adopted in the current analysis. Similarly, in the current analysis, all cost elements are also valued at border prices, using world

72 Appendix 8

price numeraire with all taxes, duties, interest during construction and administrative support costs excluded. C. Project Benefits

a. SASEC Regional Network

9. The envisaged economic benefits of this component at appraisal were (i) savings in the

cost connecting internet service in Bhutan and Nepal, and (ii) incremental revenues that were

expected to be paid by Nepal and Bhutan for such connection with the cable landing stations

(CLS) (accrued to India and Bangladesh). With the realization of the SASECRN, it was expected

that Nepal and Bhutan would have a superior option of bigger internet access capacity from CLS,

through connection to the cable landing stations (CLS) in Bangladesh and India through access

gateways, and then terrestrial links, compared to connection through satellites on which these

two countries had relied on. Accessing internet using satellite, in particular very small aperture

terminals, that were used by these two countries, were understood to be twice expensive than

terrestrial links in the original analysis. Economic analysis at appraisal assumed that the Project

would enable the two countries to purchase internet access capacity at least three times bigger:

620 megabytes for Nepal and 155 megabytes for Bhutan. Also, since the CLS were located in

Bangladesh and India, it was expected that revenues were generated to be paid by Nepal and

Bhutan to Bangladesh and India for connection through the CLS.

10. At completion, the economic benefits expected at appraisal were not confirmed to have

realized although almost all the outputs were achieved. This was primarily because of a non-

functional Network Operating Center (NOC) at Siliguri in India, which resulted in SASECRN not

providing cross-border data exchange. Although Bhutan in 2016 and Nepal in 2017 discontinued

use of the satellite for communication, before the completion of the SASECRN component in

December 2017, these countries had had already made separate arrangements for access to

Internet through the service providers like Airtel, Bharat Sanchar Nigam Limited in India outside

the project. 52 Probably in this backdrop, no ISP in Bhutan showed interest in utilizing the

SASECRN infrastructure for commercial purpose when solicited by the EA in 2014. As a result,

no economic benefits of savings in the cost of connecting to internet service in Bhutan and Nepal

nor incremental revenues that were to be accrued to India and Bangladesh paid by Nepal and

Bhutan for connection to internet through the CLS of SASECRN established in the latter two

countries, were measurable for the purpose of economic analysis at completion.

b. SASEC Village Network

11. In the economic analysis at appraisal, the 89 new CECs (29 CECs in Nepal, 30 each in Bangladesh and Bhutan), and the existing 160 CECs and 20 District centers in Bhutan that were assisted by the project, as well as the existing 25 CECs in India nominated for participating in the Project, were expected to generate two types of economic benefit: (i) agricultural productivity

52 Satellites in both Nepal and Bhutan is currently used only for communication during natural disaster period when

other communication by landline, mobile telephone and internet are disrupted.

Appendix 8 73

increase, and (ii) CEC employment creation. Those CECs were all designed to be connected to the SASECRN through which internet would become more accessible to rural and remote populations in SASEC. 12. However, upon completion, the connectivity of the CECs to SASECRN was not established due to the non-functioning status of the Siliguri NOCs. Moreover, of the total CECs established in the project, only 25 CECs in Bangladesh, 15 CECs in India, 5 CECs in Nepal and 190 CECs in Bhutan are functional. The CECs that are currently in operation in Bhutan and India are operating on a non-profit making basis with subsidies provided by the respective Governments to meet expenses relating to internet, electricity, employee salaries etc. The CECs in Nepal are managed and operated by local committees and those in Bangladesh by private entrepreneurs. Majority of the CECs in Nepal and Bangladesh are found to generate revenue only sufficient to meet operational expenditure with no profits. 13. Agriculture productivity increase. The economic analysis at appraisal pointed out that ICT can deliver useful information and/or data to farmers such as crop care, animal husbandry, fertilizer and feedstock inputs, drought mitigation, pest control, irrigation, weather forecasting, seed sourcing and market demand and prices, which could trigger a variety of more sophisticated agricultural activities by the farmers utilizing such information. Thus, the analysis assumed, that the project would bring significant economic benefits through ICT agricultural enabled applications, by delivering seasonable weather information in a timely manner and improving the yield of certain crops, particularly rice. 14. However, the economic analysis carried out at appraisal did not provide a detailed discussion on how the benefit of increased agricultural yield was to be eventually generated from the project. Specifically, the analysis did not give strong evidence for backing advance information made available through the internet could encourage farmers to take activities that were related to increased yield. Further, although the analysis assessed the mean acreage per community was at 5 acres, and considered as the economic benefits the additional yield per annum of one fold of the current yields averagely experienced in the SASEC countries, basis for such estimations and the assumptions for the increased yield were not provided. 15. Nevertherless, the economic analysis at completion maintained the basic assumptions of the original economic analysis about the increased agricultural productivity as a result of better access to internet for the purpose of ensuring comparability between the two analyses. This approach towards the economic analysis at completion is also informed of abundance in researches showing information and communication technology (ICT) and digital tools are fundamentally transforming the operating environment for agricultural knowledge and information systems promote and exploit rapidly expanding access to information, advice, consultation, and data53 . For example, several case studies confirm ICT assists such transmission of proper information at the right time which not only saves farmers from potential losses but also increase the crop productivity and profits.54 It has been demonstrated that enhancing the ability of farming communities to connect with knowledge banks, networks and institutions via ICTs has improved

53 ICT in Agriculture Connecting Smallholders to Knowledge, Networks, and Institutions – eSourcebook, Updated

Edition, 2017. International Bank for Reconstruction and Development / The World Bank 54 Success Stories on Information and Communication Technologies for Agriculture and Rual Development, Food and

Agriculture Organization of United Nations Regional Office for Asia and Pacific Bangkok, 2015; 54 Information and Communication Technologies for Sustainable Agriculture – Indicators from Asia and the Pacific, Food and Agriculture Organization of United Nations Regional Office for Asia and Pacific Bangkok, 2013

74 Appendix 8

their productivity, profitability, food security and employment opportunities substantially. 55 However, again, where the economic analysis at appraisal was judged nevertheless to have clear gaps and inadequacies in important assumptions, details and information essential for conducting the current economic analysis, new assumptions, information and proxy data are introduced as much as practically possible to fill in the gaps and make the current analysis viable without reducing the comparability significantly. 16. As the original economic analysis, the economic analysis at completion acknowledges that rice is the major crop in the SASEC countries. The average rice yield from 2009 to 2016 is presented in Table A8.2 below.

Table A8.2: Average Rice Crop Yield (tons per hectare)

2009 2010 2011 2012 2013 2014 2015 2016

Bhutan 2.80 3.14 3.24 3.69 3.70 3.76 3.81 3.96

Nepal 2.91 2.72 2.98 3.31 3.17 3.39 3.36 3.15

Bangladesh 4.24 4.34 4.39 4.42 4.53 4.62 4.51 4.62

India 3.24 3.36 3.59 3.69 3.61 3.56 3.61 3.70

Average 3.30 3.39 3.55 3.78 3.75 3.83 3.82 3.86

Source: World Rice Statistics; Food and Agriculture Organization of United Nations; http://ricestat.irri.org:8080/wrs

17. The annual average growth of the rice crop yield between 2009 and 2016 was 2.27%. This growth is expected to continue through the analysis period in the four SASEC countries without the project. The review of the data for other countries in Asia indicate that Turkey records an average yield of about 8 per tons hectare and the People’s Republic of China about 7 tons per hectare. With improved agricultural processes, seeds, improved irrigation systems, access to agricultural research and weather information the yield in SASEC countries also has significant potential for increased yields. For the purpose of this economic analysis, it is assumed that SASEC countries will achieve two-thirds of the yields in the People’s Republic of China by end of the analysis period. 18. The prices for rice in each of the four SASEC countries were obtained from the agricultural statistics of the respective countries. The annual average wholesale price in 2016 for medium variety rice per quintal in Bangladesh is 4,197.28 Taka. The annual average price in 2016 for rice per kilogram in Bhutan is 55 Bhutanese Ngultrum. The price in 2015-16 for medium variety rice per kilogram in Nepal is 63 Nepal Rupees. The price for common variety of rice per quintal in India currently is about 2,700 Indian rupees. For analysis purposes, average price for common rice variety is considered to be about $450 per ton. 19. The patterns of farming is also considered in the current economic analysis. The review of World Rice Statistics from Food and Agriculture Organization of United Nations indicates that proportion of total arable land to the total land area in Nepal is 15%, Bangladesh 60%, India above

55 E-Agriculture Strategy Guide- Piloted in Asia – Pacific countries, Food and Agriculture Organization of the United

Nations and International Telecommunications Union, Bangkok, 2016

Appendix 8 75

50% and Bhutan little over 3%.56 Also, a farmer is considered to be able to produce one crop per year in the project area, that is, rice. With increased access to the agriculture information and data on weather through the use of the CECs, the farmer will be able to implement crop care measures to improve yield and also consider other alternative crops after the harvest of the first crop. The benefit due to alternative crop yields is assumed to be same as the increase in agricultural productivity per community. 20. The current economic analysis also considers other factors that could affect agricultural productivity. For example, the increase in agricultural productivity also depends on patterns of terrain and consequently possible irrigation scheme. The terrain in the area served by the CECs is relatively flat in India and Bangladesh while it is mountainous in Bhutan and Nepal. To discount for irrigation schemes applicable to the terrains specific to each country, for benefit estimation in the current economic analysis, the increase in agricultural productivity was assumed to be realized only over 2% of area served by the respective CECs in Nepal and Bhutan and 5% of area served by the respective CECs in India and Bangladesh. 21. Without detailed information available for patterns of use of the CECs, the extent to which CECs are made accessible is unclear and therefore discounted in the current analysis. In the current analysis, it is assumed that only the farmers within 1km distance from each CEC would visit the CEC and utilize the information through assessing the internet. 22. As in the economic analysis at appraisal, other indirect benefits that are likely to be accrued over time post completion, such as increased incomes and economic activities resulting from improved access to information and markets, are deemed not quantifiable and hence not considered in the analysis at completion.

23. CECs employment creation. At appraisal, the CECs were expected to provide three areas of possible employment opportunity, namely (i) unemployed people can use the internet access to discover job opportunities; (ii) job seekers could become employed in new jobs; and (iii) they are up-skilled via the distance learning courses provided by the project and deployed by the CECs. 24. In the current economic analysis, the extent to which the CECs are utilized by the unemployed and job-seekers compared to other modes for finding job opportunities are reassessed. All the four SASEC countries have made significant progress in mobile communication during the prolonged project’s implementation period. The mobile cellular subscriptions per 100 users in South Asia increased from 22.25 in 2007 to 86.60 in 2017 according to the data from World Bank Development Indicators. Even in the project area which includes remote and rural pockets in Bhutan and Nepal, internet access through mobile phones has become widely available. Due to its convenience compared to visiting a CEC, internet on mobile phone is considered to have become a more prevailing mode of looking for job opportunities. Therefore, in this economic analysis at completion, the first and second benefits envisaged in the analysis at appraisal were assumed insignificant and not considered, and only the third benefit, upskilling through the project, was considered. The upskilling is only considered in Bangladesh and India where the training portals are active at the CECs. On the other hand, since the people employed by the CECs also benefit from the new employment opportunity for taking care of operations at the CEC, such increased employment opportunity of the CEC

56 International Rice Research Institute. 2018. World Rice Statistics Online Query Facility.

http://ricestat.irri.org:8080/wrsv3/entrypoint.htm (Accessed on May 23, 2019).

76 Appendix 8

employees is also considered as a valid project related benefit in the economic analysis at completion. The number of persons employed in Nepal and Bhutan is one person per CEC while it is two persons per CEC in Bangladesh and India. 25. In the analysis at completion, basis for income figures to be considered in the economic analysis is also strengthened from the assumptions in the original economic analysis. Data from International Labor Organization (www.ilo.org/ilostat) on minimum monthly wage of an unskilled staff, indicates the average of the minimum monthly wage per month of an unskilled staff for four SASEC countries in 2008 was $46 per month and in 2013 the average was $64 per month. The annual growth rate of average minimum monthly wage during 2009 and 2013 was little lower than 7%. The average minimum monthly wage was expected to continue at the same rate to current period and estimated as $95 per month for the CEC employers. For current analysis, the incremental change in earnings of an up-skilled worker (being employed at minimum monthly wage) is considered as one-third of monthly wage. D. Economic Internal Rate of Return & Sensitivity Analysis 26. The economic analysis at appraisal reported an economic internal rate of return (EIRR) of 34.3%. The sensitivity analysis was conducted for the following cases: (i) when no indirect benefits are included; (ii) when the project benefits are reduced by 20%; (iii) when the project cost increases by 20%; and (iv) when the above cases (ii) and (iii) are combined. For all the cases, the EIRR recorded well above the discount rate of 12%, ranging from 31.9% (case (i)), and 22.7%(case (iv). 27. The economic analysis at completion was conducted using the discount rate of 12%. The EIRR of the project is estimated as 5.74% and ENPV at ($2,095.91). The economic cost and benefits streams are presented in Table A8.3. A sensitivity analysis was carried out to investigate the robustness of the economic viability of the project to changes in cost and benefit. The sensitivity of the EIRR was tested for the cases– (i) when the project indirect benefits are increased by 10%, (ii) when the project costs decrease by 10%, (iii) when cases (i) and (ii) combined and (iv) excluding both the costs and associated benefits in relation to India. The results of the sensitivity analysis are presented in Table A8.4. 28. Failure in establishing a permanent cross border internet connectivity across the four SASEC countries, unused internet bandwidth for commercial purposes, rapid advancement of the technologies in the ICT sector, led to non-realization of any measurable economic benefits due to the project’s major component, SASECRN, as envisaged at appraisal. The sensitivity analysis indicates that the project, if implemented without delays which led to increased costs and reduced benefits, would have been economically viable as envisaged at appraisal.

Table A8.3: Project Cost and Benefits Stream ($000)

Year Capital investment

O&M @ 2% cost of investment Total cost

Indirect benefits Total benefit

Benefit - cost

2010 71.03

71.03

0.00 (71.03)

2011 338.31

338.31

0.00 (338.31)

2012 831.13

831.13

0.00 (831.13)

2013 1450.27

1450.27

0.00 (1450.27)

Appendix 8 77

Year Capital investment

O&M @ 2% cost of investment Total cost

Indirect benefits Total benefit

Benefit - cost

2014 3965.31

3965.31

0.00 (3965.31)

2015 1647.15 133.1 1780.27 515.80 515.80 (1264.47)

2016 1544.91 166.1 1710.97 753.47 753.47 (957.51)

2017 792.92 197.0 989.88 1003.65 1003.65 13.77

2018 56.85 212.8 269.67 968.50 968.50 698.83

2019

214.0 213.96 1622.55 1622.55 1408.59

2020

214.0 213.96 1622.55 1622.55 1408.59

2021 534.9 214.0 748.85 1622.55 1622.55 873.69

2022

214.0 213.96 1622.55 1622.55 1408.59

2023

214.0 213.96 1622.55 1622.55 1408.59

2024

214.0 213.96 1622.55 1622.55 1408.59

2025

214.0 213.96 1622.55 1622.55 1408.59

2026

214.0 213.96 1622.55 1622.55 1408.59

2027

214.0 213.96 1622.55 1622.55 1408.59

2028 534.9 214.0 748.85 1622.55 1622.55 873.69

2029

214.0 213.96 1622.55 1622.55 1408.59

EIRR (%) 5.74%

ENPV (@9%) ($2,095.91)

EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank.

Table A8.4: Sensitivity Analysis

Case EIRR (%) NPV ($’000)

Indirect benefits increase by 10% 5.74 (2095.91)

Project costs decrease by 10% 7.35 (1612.82)

Project costs decrease by 10% and Indirect benefits increase by 10%

7.52 (1403.23)

Project costs decrease by 10% and Indirect benefits increase by 10%

9.16 (920.13)

EIRR = economic internal rate of return, ENPV = economic net present value. Source: Asian Development Bank.

78 Appendix 9

TECHNICAL ASSISTANCE COMPLETION REPORT

TA, Country, and Name: Amount Approved: $4,400,000

TA 6433-REG: South Asia Subregional Economic Cooperation Regional Information and Communication Technology Research and Training Network (piggy – backed)

Revised Amount: n/a

Executing Agency: Asian Development Bank (ADB)

Source of Funding: ADB’s Regional Cooperation and Integration fund

Amount Undisbursed: $ 521,487

Amount Utilized: $3,878,513

TA Approval Date: 17 December 2007

TA Signing Date: 17 December 2007

Fielding of First Consultant: 1 August 2011

TA Completion Date Original: 31 December 2011

Actual: 31 December 2017

Account Closing Date Original: 31 December 2011

Actual: 30 June 2018

Description:

ADB included this technical assistance (TA) under the SASEC Information Highway Project to build technical and business skills in developing local ICT content and e-applications particularly for the poor. The TA was to develop four dimensions of the SASEC Research and Training Network (RTN) component: (i) incorporating regional and community priorities on, and needs for information and communication technology (ICT) skill and business development into the core activities of the selected institutes; (ii) establishing partnerships, linkages, and interactions with the regional communities and businesses and the research and training network; (iii) enhancing the subregional knowledge pool and resources for the capacity development of ICT professionals and entrepreneurs for long-term sustainable operation; and (iv) promoting research and development on e-business, e-applications, and e-services to be delivered through the regional network and village network for the greater benefit of the community and business creation.

Expected Impact, Outcome, and Outputs:

The expected impact of the TA was to improve human resources, regional knowledge, and innovation and business driven by local entrepreneurs for ICT in the SASEC subregion. The expected outcome of the TA was high-quality research and training programs for communities, businesses and government, community-driven innovations in ICT use through interactive communications, research and training. The TA’s outputs were (i) research and training centers (RTCs) in four ICT research and training institutes connected with others through the SASEC regional network; (ii) a series of research and training programs developed and implemented, and (iii) entrepreneurship and development support provided through an ICT innovation development fund.

Delivery of Inputs and Conduct of Activities: The contract for US$564,657 was signed on 1 August 2011 with the international consulting firm. The inception of the TA started with the needs assessment and preparation of the strategic and operational plans. The RTCs were identified in consultation with the implementing agencies. Distance learning courses and web applications were divided among the four RTCs with the TA team leader’s guidance and oversight to their development. In November 2012, ADB increased the scope of the TA to the effect of tasking the TA with coordinating, managing and overseeing progress of all activities and outputs in the RTN plan. This change was, essentially, for ADB to address the lack of a coordination mechanism of the project at a regional level. By 2015, all the four servers at the RTCs were functional with the courses hosted on the portal. The quality of the outputs was ensured through five review missions apart from 6 regional workshops as well as frequent consultations with the consultant. The performance of the TA consultants is rated less than satisfactory. The performance of the ADB as the executing agency of the TA is rated less than satisfactory.

Appendix 9 79

TA’s administration responsibility was delegated from ADB headquarters to Bangladesh Resident Mission on 1 June 2012. The TA was extended seven times, mainly due to delays: (i) in initiating RTN activities, (ii) caused by the earthquake and political disturbances in Nepal, and (iii) in ensuring regional connectivity in Siliguri and connectivity to Community e-Centers (CECs). The consulting contract had sixteen variations for change of scope, replacement of staff, reallocation of resources, adding resources, and was completed by 31 Dec 2017 with a total cost at $3.03 million. Evaluation of Outputs and Achievement of Outcome: At completion, the RTCs were established with the necessary equipment to connect to regional and village network portals at Bangladesh Computer Council (BCC), Royal University of Bhutan in Bhutan, Centre for Development of Advanced Computing (CDAC) in India, and Kathmandu University in Nepal. The RTN portals were developed in each country making each RTC capable to deliver local content needed by CECs and rural communities. Training and capacity building sessions were undertaken for the developers at the RTCs in the areas of multimedia video course and web applications development. A total of six regional workshops were organized from 2011 to 2016, six national workshops between 2011 and 2014, and thirty-four rural workshops in Bhutan and twenty-four rural workshops in Nepal in 2016. As a result, estimated 220 CEC operators, and 4,500 rural people received training. Several applications were developed at the respective RTCs, including (i) telemedicine (by Kathmandu University); (ii) e-commerce (CDAC); (iii) language localization techniques (CDAC); (iv) e-payments and microfinance (by Kathmandu University); (v) mobile phone interface and text-to-speech (RUB); (vi) visual content library (BCC); (vii) village network management information system (BCC); and (viii) distance learning (DL) courses were developed in English language and translated in respective local languages of the VN communities. DL courses rely on video streaming techniques for higher retention and comprehension. However, the RTCs were not connected to the RN due to incomplete implementation of the latter. Moreover, although a total of 31 English distance learning courses were developed, several courses did not attract users due to the contents not meeting the needs of the targeted users, lack of translation into local languages, lack of updating, which all point to potentially inadequate needs assessment in the beginning, and limited marketing efforts. This has affected sustainability, with the RTC in Bhutan closed in March 2018. The ICT innovation development fund was removed from the scope for efficient utilization of the TA proceeds. Finally, the TA was not successful in coordinating with the implementing agencies of the respective countries to ensure timely completion the overall RTN component.

Overall Assessment and Rating: The TA is relevant at both appraisal and completion. The TA’s envisaged impact and outcome were aligned with the SASEC’s and ADB’s regional strategy at both appraisal and completion. The TA is rated less than effective because the outputs were only partially achieved. The TA is rated less than efficient, with the available budget not fully utilized, even over the extended implementation period, for achieving all the project outputs. The TA is rated less than likely sustainable because only a very small portion of the project impact is expected to be sustained beyond completion. For example, no new courses were developed after the TA concluded, nor was the content of old courses updated, leading to significant reduction in enrollments in Nepal, although its RCT is still active, from 602 in 2016 to 75 in 2018 and in Bhutan, whose RTC was closed in early 2018 due to low subscription, from 606 (2016) to 44 (2018). The portals and the RTCs in India and Bangladesh are active and providing technical support, but not to a degree that could contribute to ensuring the sustainability of the CECs. Overall, the TA is rated less than successful.

Major Lessons: The TA, despite various and many stakeholders and the collaborative and interdependent nature of its activities, lacked clear and detailed implementation arrangements at the commencement, contributing to the subsequent implementation delays. Also, inadequacies of a needs and readiness assessment were unnoticed, and consequently most of the distance courses developed did not address the main needs of the potential users, contributing to the low subscription rates and led to the sustainability issue. Recommendations and Follow-Up Actions For future regional TAs wherein its outcome is realized at a regional level and its outputs aligned across the participating countries, sufficient resources should be allocated for providing regional coordination.

80 Appendix 9

Also, ADB should explore encouraging the SASEC governments to provide assistance to operation of the RTCs and CECs for improving their sustainability.

Prepared by: Satomi Sakaguchi Designation and Division: Transport Specialist, SATC

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Appendix 10 81

PROCUREMENT PACKAGES

Table A10.1 Procurement Packages for Loan 2397-BAN ($)

No. Contract Contract Amount Procurement Method

1 Consulting service (national) 252,009 QCBS 2 Administrative/Implementation support 8,977 Shopping 3 Administrative/Implementation support 4,323 Shopping 4 Administrative/Implementation support 4,091 Shopping 5 System development, supply and installation 1,308,997 ICB 6 Administrative/Implementation support 30,192 NCB 7 System development, supply and installation 1,301,300 ICB 8 Administrative/Implementation support 5,279 NCB 9 Administrative/Implementation support 12,338 NCB 10 System development, supply and installation 2,674 ICB 11 System development, supply and installation 11,959 NCB 12 System development, supply and installation 4,987 NCB 13 System development, supply and installation 32,059 NCB 14 Administrative/Implementation support 1,209 Direct Contracting 15 System development, supply and installation 15,877 NCB 16 System development, supply and installation 8,168 NCB 17 System development, supply and installation 10,309 ICB 18 Administrative/Implementation support 5,115 NCB

ICB = international competitive bidding, NCB = national competitive bidding, QCBS = quality and cost-based selection. Source: Asian Development Bank.

Table A10.2 Procurement Packages for Grant 0098-BHU ($)


1 Vehicle 21,982.29 Shopping 2 Replenishment of imprest account 8,342.69 Others 3 Project management consultancy services 406,234.06 QCBS (80:20), STP 4 Membership fee for TEIN 3/Travels for

training for imprest account replenishment 4,063.98 Others

5 Replenishment of imprest account administrative expenses (utilities, stationaries, maintenance of vehicle, advertisement)

1,886.90 Others

6 Procurement of office furniture for PMC office

5,857.00 Shopping

7 Procurement of computer and accessories Village Network

67,108.69 Shopping

8 Procurement of office equipment and accessories Village Network

69,621.68 Shopping

9 Furniture and accessories for Village Network

36,252.51 Shopping

10 Procurement of fire extinguishers (30 numbers) for 30 CECs (Village Network)

1,583.10 Shopping

11 Belgian carpets and fitting charges, window curtains and curtain rings

3,709.72 Shopping

12 Office machines, furniture and computer items for PMU/PMC office

4,630.20 Shopping

82 Appendix 10

13 Liquidation of imprest, various administrative support expense for office stationaries, maintenance of vehicle, bank, telephone and postage utilities, furniture. March to May 2011

3,850.75 Others

14 Hotel accommodation of Prof. Himanen for the ICT seminar for ICT staff

2,962.00 Others

15 Computer notebook for PMU office 822.62 Shopping 17 Supply of tools and testing equipment for

Regional Network package A – Optical spectrum analyzer, advanced network tester (OFC peering network)

77,583.67 Others

18 Package B – tools and testing equipment (optical held power meter, mini ODR, splicing machine, fiber optic tool kit, ethernet tester) for Regional Network

46,818.39 IC/NCB

19 OFC peering network – supply of goods and services

67,267.04 ICB/NCB

20 Various ADM support expenses for office supplies, maintenance of vehicles, telephone, and postage, utilities, ADS, hospitality and entertainment

309.92 ICB/NCB

21 Supply and installation of 3 outdoor wall mount fiber optic distribution PTS for OFC peering network for Regional Network

8,741.76 Others

22 Village Network – Supply installation and configuration of equipment and fiber accessories

226,257.13 ICB/NCB

23 Fiber UPC – FC to UPC – SC patch cord for Village Network

3,559.21 ICB/NCB

24 Equipment and accessories, installation, related service and commissioning of SASEC regional network on Bhutan side

1,240,521.58 ICB/NCB

25 Various administration expense (July 2011 – June 2012)

0.00 ICB/NCB

26 ADSS Extension work to the Dzong (Village Network)

44,045.12 Others

27 ADSS Extension work for 77 CECs (Village Network)

29,735.92 Shopping

28 ADSS Extension work for 77 CECs (Village Network)

52,279.33 Shopping

29 Power supply upgrade for Regional Network server room for NMS and DITT server room

7,947.79 Shopping

30 Supply and installation of ADSS extension work to 54 CECs (Village Network)

22,467.04 Shopping

31 Supply, installation and configuration of equipment and fiber accessories for 54 CECs

79,341.35 Shopping

32 Replenishment of imprest account administrative support – utilities, office supply

35,414.05 NCB

33 Replenishment of imprest account (training WA 0027)

59,074.50 Others

34 Supply of equipment and accessories, installation, and commissioning of DRUK research and education network

1,427,690.89 Others

Appendix 10 83

35 Supply, installation and configuration of network equipment for CECs and supply of space

34,058.26 ICB

36 Supply of equipment and accessories, installation, configuration and commissioning of MOIC LAN

80,374.58 Others

37 ADSS and aerial optical fiber extension work to new NUBI CC, ILCS college at Trongsa, JNE college in Dewathang, 5 CECs and CNR college at Lobesa

47,809.99 Others

38 ADSS extension to hospitals/BHUs 29,447.66 Others 39 Liquidation/replenishment of imprest account

– administrative support: Utilities, office supplies (July 2014 to September 2016)

7,501.53 Others

40 Liquidation/replenishment of imprest account training expenses from July 2014 to September 2016

68,759.60 Others

41 Supply of equipment and accessories, installation and commissioning of DrukRen last mile connectivity to hospitals/BHUs

101,806.18 Others

42 Liquidation and replenishment of imprest account training expenses from September 2016 to January 2017

8,806.63 Others

43 Liquidation and replenishment of imprest account – administrative support (September 2016 to January 2017)

11,375.53 Others

44 Procurement of spares for Village Network 608.95 Others 45 Liquidation and replenishment of imprest

account training expense from February to June 2017

4,740.86 Direct Purchase

46 Liquidation and replenishment of imprest account administrative support (February to June 2017)

7,511.65 Others

47 Procurement of LED TV to monitor DrukRen backbone network

928.74 Others

48 Various (July 2017 to June 2018) 51,093.50 Others 49 Various (July 2017 to June 2018) 67,151.37 Direct Purchase 50 Various (July 2017 to June 2018) 7,416.35 Others

CEC = community e-center, ICB = international competitive bidding, ICT = information and communication technology, MOIC = Ministry of Information and Communication, NCB = national competitive bidding, OFC = optical fiber cable, QCBS = quality and cost-based selection, STP = simplified technical proposal, WA = withdrawal application. Source: Asian Development Bank

Table A10.3 Procurement Packages for Grant 0099-NEP

($)


1 Consulting (Individual) 866,214 Individual Consultant Selection 2 Consulting (Regional) 302,382 QCBS (80:20), STP 3 Vehicle 1,326,549 Shopping 4 Equipment 895,200 Shopping 5 Admin Support 826,246 Others 6 Equipment 662000 Shopping 7 Admin Support 420,826 Others 8 Admin Support 726,186 Others 9 Admin Support 1,392,825 Others

84 Appendix 10

10 Admin Support 743,999 Others 11 Admin Support 7,443,215 Others 12 Equipment 622,100 Direct Purchase 13 System Development 157,688,098 ICB 14 Consulting (National Individual) 48,090,873 Individual Consultant Selection

ICB = international competitive bidding, QCBS = quality and cost-based selection, STP = simplified technical proposal. Source: Asian Development Bank

Documents

South Asia Subregional Economic Cooperation (SASEC ... · H. Performance of Consultants, Contractors, and Suppliers 14 I. Overall Assessment 15 IV. ISSUES, LESSONS, AND RECOMMENDATIONS