beirut, lebanon may 15, 2007

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

Beirut, LebanonMay 15, 2007

Infrastructure and Privatization Inter-Ministerial Committee Progress Report # 1

Presentation

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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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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

“Natural Owners”

M & S Unit

Prime Minister’s OfficePrime Minister’s Office

Prime Minister

Social IMCEconomic & Fiscal

IMC

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


M & S Unit


M & S Unit

ParliamentParliament

Quarterly Progress Reporting on Paris III Initiatives

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

Council of Ministers

Infrastructure & Privatization IMC

GR PCO

Technical Support

Reporting Consolidation

Periodic Reporting

The PCO will also support (as needed) the MoF in its interaction

with Donors

The PCO will also support (as needed) the MoF in its interaction

with Donors

Ministerial Initiatives Teams

Cross Ministerial Initiatives Teams





GR PCO Structure

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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

MonthlyReport

(not published)

MonthlyReport

(not published)

DescriptionDescription Audience Audience FrequencyFrequency

MonthlyGR PCO IMCsPrime Minister

(if interested)

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

GR PCO Annual Report

(published)

GR PCO Annual Report

(published)

Annually General PublicReport developed by GR PCO every year, summarizing progress against Paris III objectives

Summarized version of Bi-Annual Performance Report (not published)

GR PCO Reporting Types and Frequency

QuarterlyReport

(not published)

QuarterlyReport

(not published)

QuarterlyGR PCOPrime MinisterCouncil of

Ministers

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 Structure

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Programs Planning Stage

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


M & S Units

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”

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

GR PCO

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

Ministerial Initiatives

Teams

Cross Ministerial Initiatives

Teams

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

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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

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 Detailed

Workplans

Development of Detailed

Workplans

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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

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

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

Meetings with Natural OwnersMeetings with

Natural Owners

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Review and analysis of Paris III initiatives Grouping of initiatives into programs Preliminary allocation of Paris III initiatives to Natural Owners

Review and analysis of Paris III initiatives Grouping of initiatives into programs Preliminary allocation of Paris III initiatives to Natural Owners

Review and Update of Paris

III Initiatives

Review and Update of Paris

III Initiatives

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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

Development of a detailed toolkit to train Natural Owners and M&S staff on GR PCO structure, processes and tools

Development of commitment document templateDevelopment of GR PCO ToolkitDevelopment of GR PCO Toolkit

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Progress To-date

… 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

Monitoring and Support Unit Meeting Date

Ministry of Telecommunications M&S30 March 2007; 18 April 2007;

24 April 2007

EDL M&S20 March 2007; 13 April 2007;20 April 2007; 30 April 2007

HCP M&S22 March 2007; 13 April 2007;20 April 2007; 27 April 2007;

7 May 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

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

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)

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)

Natural Owner Meeting Date

Minister of Telecommunications 16 March 2007

Ministry of Energy and Water 14 May 2007

EDL President 12 March 2007

HCP Secretary General 9 March 2007

CDR President 12 March 2007

Progress To-date

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List of Infrastructure and Privatization IMC Programs

Progress To-date

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

Ministry of Telecom

1.Establish the Telecom Regulatory Authority

2.Corporatize Liban Telecom

HCP

1.Privatize mobile telecom

2.Privatize other public entities

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

Engagement Not Finalized to-dateEngagement Not Finalized to-date

The Infrastructure and Privatization IMC has up to 4 Natural Owners with a total number of up to 10 programs…

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… And 74 initiatives, representing 23% of the total number of Paris III initiatives

Progress To-date

Finance

Labor/NSSF

Education

Health

Social Affairs

CDRHCPEnergy/

EDL

Telecom

OMSAR

BDL

Economy & Trade

6

2

6

74128

5

2

5

8

51

18

45

32

3516917

28

14

77

24

66

Finance

Labor/NSSF

Education

Health

Social AffairsCDR

HCP

Energy/EDL

Telecom

OMSARBDL

Economy & Trade

Justice

IMC # of Initiatives % of Total Initiatives

Social 19 18%

Economic 66 65%

Infrastructure 17 17%

TOTAL 102 100%

Distribution of InitiativesAs Extracted from Paris III Document

Distribution of InitiativesAfter Discussion and Reallocation to Natural Owners

IMC # of Initiatives % of Total Initiatives

Social 128 39%

Economic 122 38%

Infrastructure 74 23%

TOTAL 324 100%

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From the initial round of meetings, some issues emerged mainly related to initiatives ownership, sector strategy and staffing

Issues and Challenges

Issues Facing Infrastructure & Privatization IMC

Natural Owner

Initiatives Ownership Issues

Natural Owner/ M&S Engagement

IssuesSector Strategy Issues Staffing Issues

Ministry of Telecom

(MoT)

Need to appoint LT BoD or alternative governance structure

Need to finalize decision on whether to opt for mobile assets privatization or issuance of new “Greenfield” licenses

Ministry of Energy and Water / EDL

(MoEW/ EDL)

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

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Initiatives Prioritization Criteria

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

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

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

Short-term ImpactShort-term Impact

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

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

Absence of legislative barriers

Absence of legislative barriers

Already progressing and requires minimal budget Budget already allocated through other sources

Already progressing and requires minimal budget Budget already allocated through other sources

Budget availability / Ongoing activity

Budget availability / Ongoing activity

Prioritization of Initiatives

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List of Programs and Initiatives

Ministry of Telecom – Short-term Paris III Programs and InitiativesPrioritization of Initiatives

Sector Reform Programs and Initiatives Stakeholders Preliminary Timeline Comments

1.Establish the Telecom Regulatory Authority

1a.Create the Telecom Regulatory Authority and appoint its board

MoT, CoM Q1 2007 Completed TRA lacks resources

2.Corporatize Liban Telecom

2a.Appoint Liban Telecom Board of Directors or Alternative Governance Structure

MoT, CoM Q2 2007

2b.Setup Program Management Office (PMO) MoT, Liban Telecom Board Q2 2007

2c. Set-up provisional opening balance, and prepare asset transfer

MoT, Liban Telecom Board Q3 2007

2d.Capitalize Liban Telecom by transferring budget MoT, Liban Telecom Board, MoF

Q3 2007

PRELIMINARY

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Ministry of Energy and Water / EDL – Short-term Paris III Programs and Initiatives



1.Corporatize, restructure and privatize EDL

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

MoEW/EDL, CDR, MoF, World Bank

Q2 2007 – Q3 2007 Terms of reference prepared and endorsed

Committee in CDR will evaluate the applications

Final decision by April 2007

1d.Complete the auditing of EDL financial statements from 2002 to 2006

MoEW/EDL 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

HCP, MoEW/EDL, CDR, MoF, World Bank

Q2 2007

2. Improve power sector efficiency

2a.Complete the establishment of a National Control Center to audit volumes and performance

MoEW/EDL, CDR Q2 2007 – Q2 2008 Contract signed by CDR with AREVA

2c.Negotiate additional bilateral contracts for fuel oil to reduce high premiums

MoEW Q2 2007 – Q4 2007

2h.Award contracts for the supervision of the KEPCo operations and maintenance contracts

MoEW/EDL Q2 2007 (End of June 2007)

2k.Reduce illegal network connections and enforce bill collection through support from security forces and the Justice department

MoEW/EDL, Ministry of Interior, MoJ

Q2 2007 – Q4 2008

PRELIMINARY

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



3.Rehabilitate and strengthen the capacity of the power sector3a.Hire consultants for the electricity sector

generation and transmission Master Plan, to review least-cost investment needs and supply options

MoEW/EDL Q2 2007 Need 11 months to complete (according to EDL)

3d.Complete the expansion and rehabilitation of the 220KV transmission network

MoEW Q1 2007 – Q2 2008 Two remaining lines:– Aramoun-Bsaleem (Issue in

Mansourieh)– Bsaleem-Maameltein (Issue in

Ghineh)

PRELIMINARY

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Higher Council for Privatization – Short-term Paris III Programs and Initiatives



1.Privatize mobile telecom

1a.Perform financial due diligence (reconstruct cash flows for 2004-2006)

HCP, MoT Q2 2007

1b.Conduct a technical due diligence of the two networks (technical review, asset confirmation, KPIs, IM sections)

HCP, MoT Q2 2007

1c.Perform legal due diligence HCP, MoT Q2 2007

PRELIMINARY

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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

Next Steps

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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

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

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

1st Infrastructure and Privatization IMC: 15 May 2007

1st Infrastructure and Privatization IMC: 15 May 2007

Follow up on 1st 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

Follow up on 1st 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

2nd Infrastructure and Privatization IMC: 20 June 2007

2nd Infrastructure and Privatization IMC: 20 June 2007

Approve natural Owners funding/ TA requests Endorse program charters including action plans, KPIs

and milestones Sign Paris III Commitment Documents with Natural

Owners

Approve natural Owners funding/ TA requests Endorse program charters including action plans, KPIs

and milestones Sign Paris III Commitment Documents with Natural

Owners

3rd Infrastructure and Privatization IMC: 16 July 2007

3rd Infrastructure and Privatization IMC: 16 July 2007

Follow up on 3nd 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

Follow up on 3nd 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

4th Infrastructure and Privatization IMC: 20 August 2007

4th Infrastructure and Privatization IMC: 20 August 2007

First Round of

IMC Meetings

First Round of

IMC Meetings

Meeting Objectives Dates

Second Round of

IMC Meetings

Second Round of

IMC Meetings

Third Round of

IMC Meetings

Third Round of

IMC Meetings

Steady-State Implementation

Progress Reporting

Steady-State Implementation

Progress Reporting

Next Steps

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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

Next Steps