Presentation

Infrastructure and Privatization Inter-Ministerial Committee Progress Report # 1

Beirut, Lebanon May 15, 2007

This document is confidential and is intended solely for the use and information of the client to whom it is addressed.

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The objective of this first Infrastructure & Privatization IMC meeting is to share with your Excellencies the GR PCO structure and progress to-date, resolve pending issues, and agree on the prioritization of initiatives Meeting Objectives

 Brief your Excellencies on GR PCO structure and implementation progress to-date  Outline issues and challenges  Agree on a prioritization methodology for Paris III initiatives (a preliminary draft of the prioritized initiatives will also be shared with you)  Appoint Secretary to the IMC and agree on his role

Note: GR PCO stands for Government Reform Program Coordination Office

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GR PCO Structure The Inter-Ministerial Committees (IMCs) are chaired by the Prime Minister, and will focus initially on Paris III related activities – The GR PCO will liaise with, and support all stakeholders High Level Structure of the Oversight Committee Parliament Council of Ministers The PCO will also support (as needed) the MoF in its interaction with Donors Prime Minister Quarterly Progress Reporting on Paris III Initiatives Periodic Reporting

Prime Minister’s Office

GR PCO

  Committees chaired by the Prime Minister IMC Secretary appointed during IMC first meeting

Reporting Consolidation Social IMC Economic & Fiscal IMC Infrastructure & Privatization IMC Technical Support

“Natural Owners”

M & S Unit

“Natural Owners”

M & S Unit

“Natural Owners” Ministerial Initiatives Teams Cross Ministerial Initiatives Teams Ministerial Initiatives Teams Cross Ministerial Initiatives Teams

Note: M&S Unit = Monitoring & Support unit reporting to “Natural Owners” (Ministers/ Institutions Head) to be set-up as needed

Ministerial Initiatives Teams

M & S Unit

Cross Ministerial Initiatives Teams 2

GR PCO Structure Reports will be prepared by Ministries/Government Entities and the GR PCO to monitor progress against Paris III commitments on a monthly, quarterly and annual basis Monthly Report

(not published)

GR PCO Reporting Types and Frequency Description

 Brief progress report (2-3 pages) from each Ministry/ Government Entity, including latest progress on KPIs (for those which are monitored frequently) and overview of major developments

(informal document)

 Submitted by the M&S Unit to IMCs and the GR PCO in order to ensure constant follow-up of progress and the detection of possible problems

Audience

 GR PCO  IMCs  Prime Minister (if interested)

Frequency

 Monthly

Quarterly Report

(not published)  A formalized performance report, developed by IMCs Secretariat jointly with each Ministry/ Government Entity  Submitted by IMCs to the PM and the GR PCO in order to ensure constant follow-up of progress and the detection of possible problems  GR PCO  Prime Minister  Council of Ministers  Quarterly

GR PCO Annual Report

(published)  Report developed by GR PCO every year, summarizing progress against Paris III objectives  Summarized version of Bi-Annual Performance Report (not published)  General Public  Annually 3

GR PCO Structure During the first stage, the GR PCO will help Natural Owners prepare detailed programs charters, workplans, and milestones, which will take the form of a commitment document for Natural Owners Programs Planning Stage



Support

Natural Owners, through their M&S Units, in

initiative identification, charters, milestones and KPIs development

 Train M&S Units on GR PCO processes  Escalate issues to the respective level as appropriate  Consolidate reports  Responsible for the implementation of Paris III Commitments 

Sign the Paris III Commitment Document (PCD)

with the respective IMC scope of work, timeline, milestones, and KPIs “Natural Owners” Ministerial Initiatives Teams

M & S Units

Cross Ministerial Initiatives Teams

GR PCO



Prepare

in conjunction with ministerial and cross ministerial teams

detailed action plans

for their Natural Owner  Develop KPIs and milestones  Prepare regular reports on progress in implementation 

Support M&S Units in preparing action plans

and milestones  Report progress to “Natural Owners”/ IMCs (in the case of cross ministerial initiatives) according to established mechanisms  Implement initiatives and manage external parties deliverables  Raise issues and risks to the attention of “Natural Owners” 4

Progress To-date To-date, the team introduced the GR PCO structure to several Ministries/ Government Institutions, refined the list of Paris III initiatives, initiated the development of detailed workplans… Progress To-date 1 Meetings with Natural Owners

 Introductory meetings held with all initially identified Natural Owners  Technical meetings held with M&S Units  Regular follow-ups with M&S Units

2 Review and Update of Paris III Initiatives 3 Development of Detailed Workplans 4 Development of GR PCO Toolkit

 Review and analysis of Paris III initiatives  Grouping of initiatives into programs  Preliminary allocation of Paris III initiatives to Natural Owners  Elimination of redundancies and gaps among allocated Paris III initiatives  Initiation of the development of detailed work plans, that will be grouped into program charters, resulting in a Commitment Document  Development of a detailed toolkit to train Natural Owners and M&S staff on GR PCO structure, processes and tools  Development of commitment document template

… and completed the GR PCO toolkit (to be mainly utilized by the M&S units and GR PCO team)

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The team conducted introductory meetings with Ministers and Heads of Government Entities, and started the second round of technical meetings with Monitoring Support Units staff (M&S) where available Meetings with Natural Owners and M&S Units Natural Owner

Minister of Telecommunications Ministry of Energy and Water EDL President HCP Secretary General CDR President

Meeting Date

16 March 2007 14 May 2007 12 March 2007 9 March 2007 12 March 2007  Technical meetings were conducted with Natural Owners to discuss their

understanding of own commitments

under Paris III  Most Natural Owners were

positive

on GR PCO implementation

Monitoring and Support Unit

Ministry of Telecommunications M&S EDL M&S HCP M&S

Meeting Date

30 March 2007; 18 April 2007; 24 April 2007 20 March 2007; 13 April 2007; 20 April 2007; 30 April 2007 22 March 2007; 13 April 2007; 20 April 2007; 27 April 2007; 7 May 2007  Most M&S Unit members are

committed

to the GR PCO implementation process  Most M&S Units members came

prepared

with the initiatives plans submitted to Paris III  Some M&S Units lack the required human resources capacity needed for the process (e.g., MoEW, EDL) 6

Progress To-date The Infrastructure and Privatization IMC has up to 4 Natural Owners with a total number of up to 10 programs… List of Infrastructure and Privatization IMC Programs Ministry of Telecom

1. Establish the Telecom Regulatory Authority 2. Corporatize Liban Telecom

HCP

1. Privatize mobile telecom 2. Privatize other public entities

Ministry of Energy / EDL

1. Corporatize, restructure and privatize EDL 2. Improve power sector efficiency 3. Rehabilitate and strengthen the capacity of the power sector

Engagement Not Finalized to-date

CDR

1.

Restructure CDR’s capacity to undertake reconstruction & development capital investments 2. Contribute in social development projects 3. Contribute in developing the infrastructure and rationalizing expenditure 7

Progress To-date … And 74 initiatives, representing 23% of the total number of Paris III initiatives Distribution of Initiatives As Extracted from Paris III Document

Energy/ EDL Telecom 5 HCP CDR Social Affairs Health 28 1 4 7 Education OMSAR 2 6 6 2 Labor/ NSSF BDL 5 Economy & Trade 8 51 Finance

IMC

Social Economic Infrastructure

TOTAL # of Initiatives

19 66 17

102 % of Total Initiatives

18% 65% 17%

100% Distribution of Initiatives After Discussion and Reallocation to Natural Owners

Energy/ EDL 28 HCP CDR Social Affairs 17 9 16 35 Health Telecom 14 Justice 18 OMSAR BDL 7 7 Economy & Trade 24 66 32 Education 45 Labor/ NSSF Finance

IMC

Social Economic Infrastructure

TOTAL # of Initiatives

128 122 74

324 % of Total Initiatives

39% 38% 23%

100%

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Issues and Challenges From the initial round of meetings, some issues emerged mainly related to initiatives ownership, sector strategy and staffing Issues Facing Infrastructure & Privatization IMC Natural Owner Ministry of Telecom (MoT) Ministry of Energy and Water / EDL (MoEW/ EDL)



Initiatives Ownership Issues Natural Owner/ M&S Engagement Issues

Need to appoint LT BoD or alternative governance structure

Sector Strategy Issues Staffing Issues

 Need to finalize decision on whether to opt for mobile assets privatization or issuance of new “Greenfield” licenses  No consensus on approach for power sector reform:

In-house reform vs. corporatization with Quick Wins

 A power sector reform plan is currently being developed to be submitted to the World Bank  MoEW/ EDL requires recruitment of M&S staff

Higher Council for Privatization (HCP)

 Potential overlap with TRA on six initiatives  Potential overlap with MoEW and MoT on privatization initiatives  Strategy relating to privatization of other public entities (e.g., airport, ports, tobacco) still under development 9

Prioritization of Initiatives Current initiatives can be prioritized according to several criteria including the extent to which they could translate into “quick-wins” and have a noticeable impact on the concerned sector reform Initiatives Prioritization Criteria Short-term Impact

 Should have a noticeable impact before November 2007  The impact should affect a large part of the population  The impact on the concerned sector reform should be easily communicated to the public

Absence of legislative barriers Budget availability / Ongoing activity

 Can be implemented without the need for legislation enactment  Requires long preparations (more than 5 months) before being submitted to the Parliament  Could be implemented with alternatives to legislation  Already progressing and requires minimal budget  Budget already allocated through other sources 10

Prioritization of Initiatives Ministry of Telecom – Short-term Paris III Programs and Initiatives List of Programs and Initiatives Sector Reform Programs and Initiatives

1. Establish the Telecom Regulatory Authority 1a. Create the Telecom Regulatory Authority and appoint its board 2. Corporatize Liban Telecom 2a. Appoint Liban Telecom Board of Directors or Alternative Governance Structure 2b. Setup Program Management Office (PMO) 2c. Set-up provisional opening balance, and prepare asset transfer 2d. Capitalize Liban Telecom by transferring budget

Stakeholders MoT

, CoM

MoT

, CoM

MoT

, Liban Telecom Board

MoT

, Liban Telecom Board

MoT

, Liban Telecom Board, MoF

Preliminary Timeline

Q1 2007 Q2 2007 Q2 2007 Q3 2007 Q3 2007

Comments

  Completed TRA lacks resources 11

Prioritization of Initiatives Ministry of Energy and Water / EDL – Short-term Paris III Programs and Initiatives List of Programs and Initiatives Sector Reform Programs and Initiatives

1. Corporatize, restructure and privatize EDL

Stakeholders

1b. Appoint qualified advisors to the Ministry of Energy and Water and EDL: - Advisory team at MoEW to support on strategic planning and evaluation of electricity policy reforms - Consultancy team at EDL to perform operational, financial, accounting, legal and contract management activities, including coordinating and assisting the HCP and its advisory team in the corporatization and privatization of EDL 1d. Complete the auditing of EDL financial statements from 2002 to 2006

MoEW/EDL

, CDR, MoF, World Bank

MoEW/EDL Preliminary Timeline

Q2 2007 – Q3 2007

Comments

   Terms of reference prepared and endorsed Committee in CDR will evaluate the applications Final decision by April 2007 Q2 2007 – Q2 2008   International auditor appointed Start auditing the most recent financial statements, then go back to 2002 1f. Retain consultants to assist the HCP with the corporatization, restructuring and privatization of EDL 2. Improve power sector efficiency

HCP

, MoEW/EDL, CDR, MoF, World Bank 2a. Complete the establishment of a National Control Center to audit volumes and performance 2c. Negotiate additional bilateral contracts for fuel oil to reduce high premiums 2h. Award contracts for the supervision of the KEPCo operations and maintenance contracts 2k. Reduce illegal network connections and enforce bill collection through support from security forces and the Justice department

MoEW/EDL

, CDR

MoEW MoEW/EDL MoEW/EDL

, Ministry of Interior, MoJ Q2 2007 Q2 2007 – Q2 2008 Q2 2007 – Q4 2007 Q2 2007 (End of June 2007) Q2 2007 – Q4 2008  Contract signed by CDR with AREVA 12

Prioritization of Initiatives Ministry of Energy and Water / EDL – Short-term Paris III Programs and Initiatives … (Cont’d) List of Programs and Initiatives Sector Reform Programs and Initiatives

3. Rehabilitate and strengthen the capacity of the power sector 3a. Hire consultants for the electricity sector generation and transmission Master Plan, to review least-cost investment needs and supply options 3d. Complete the expansion and rehabilitation of the 220KV transmission network

MoEW Stakeholders MoEW/EDL Preliminary Timeline Comments

Q2 2007 Q1 2007 – Q2 2008  Need 11 months to complete (according to EDL)  Two remaining lines: – Aramoun-Bsaleem (Issue in Mansourieh) – Bsaleem-Maameltein (Issue in Ghineh) 13

Prioritization of Initiatives Higher Council for Privatization – Short-term Paris III Programs and Initiatives List of Programs and Initiatives Sector Reform Programs and Initiatives

1. Privatize mobile telecom 1a. Perform financial due diligence (reconstruct cash flows for 2004-2006) 1b. Conduct a technical due diligence of the two networks (technical review, asset confirmation, KPIs, IM sections) 1c. Perform legal due diligence

Stakeholders HCP

, MoT

HCP

, MoT

HCP

, MoT

Preliminary Timeline

Q2 2007 Q2 2007 Q2 2007

Comments

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Next Steps In its first meeting, each IMC should appoint a Secretary, which will provide administrative support to the IMC Functions of the IMC Secretary

 Provide overall administrative support  Prepare agenda and circulate it before the meeting  Receive contribution of the IMC members and compile them  Distribute documentation to IMC members before the meeting  Prepare and distribute minutes of meetings 15

Next Steps Overall, four IMC meetings need to take place to finalize programs, timelines, KPIs and funding, with steady-state implementation progress reporting starting in August IMC Engagement Schedule – First Six Months Meeting Objectives Dates First Round of IMC Meetings Second Round of IMC Meetings Third Round of IMC Meetings Steady-State Implementation Progress Reporting

   Appoint Secretary to the IMC and agree on his/her role Review progress, and resolve escalated issues Endorse

initiative and program allocation

, and resolve overlaps      Follow up on 1 st round of IMC meetings Endorse cross ministerial initiative teams Review and discuss

program charters, plans and milestones

Start filtering funding / TA requirements Resolve escalated issues    Approve natural Owners

funding/ TA requests

Endorse program charters including action plans, KPIs and milestones Sign

Paris III Commitment Documents

Owners with Natural    1 st Infrastructure and Privatization IMC: 15 May 2007 2 nd Infrastructure and Privatization IMC: 20 June 2007 3 rd Infrastructure and Privatization IMC: 16 July 2007     Follow up on 3 nd round of IMC meetings Resolve issues arising out of funding requests and other items Review monthly progress of implementation Start

steady-state implementation

progress reporting  4 th Infrastructure and Privatization IMC: 20 August 2007 16

Next Steps Going forward, Natural Owners should finalize and prioritize their list of initiatives, and follow up on the development of Program Charters with their respective M&S Units Actions Required

 Review and finalize programs and initiatives ownership: Appoint Board of Director or “Alternative Governance Structure” for Liban Telecom in order to proceed with the corporatization exercise Reach consensus on a common approach to the “Reform of the Power Sector” Decide whether HCP, TRA or MoT should own initiatives for the privatization of mobile telecom Decide whether HCP or MoEW/EDL should own initiatives for the restructuring, corporatization and privatization of EDL  Review and agree on short term initiatives prioritization  Identify the need for, and assign specific ministerial or inter-ministerial initiative teams  Follow-up on progress in development of Program Charters with M&S Units 17