Completion Report

Project Number: 34276 Loan Number: 1882 December 2011

Maldives: Information Technology Development Project

CURRENCY EQUIVALENTS

Currency Unit – rufiyaa (Rf)

At Appraisal At Project Completion (20 November 2001) (31 December 2009)

Rf1.00 = $0.0781 $0.0781 $1.00 = Rf12.80 Rf12.80

Although the rufiyaa exchange rate is determined under a managed float system, it has been fixed at Rf12.80 per dollar since 25 July 2001 under a de facto fixed exchange rate policy.

ABBREVIATIONS

ADB – Asian Development Bank EIRR – economic internal rate of return GDP – gross domestic product GEM – Government E-Letter Management System GNM – Government Network of Maldives ICB – international competitive bidding ICT – information and communication technology IEE – initial environmental examination IT – information technology MCST – Ministry of Communication, Science and Technology MOFT – Ministry of Finance and Treasury MOTC – Ministry of Transport and Communications NCC – National Computer Center NCIT – National Centre for Information Technology O&M – operation and maintenance PCR – project completion review PMU – project management unit PSC – project steering committee SDR – special drawing rights TA – technical assistance

NOTES

(i) In this report, “$” refers to US dollars.

Vice-President X. Zhao, Operations 1 Director General S. Rahman, South Asia Department (SARD) Director S. Widowati, Transport and Communications Division, SARD Team leader S. Lim, Transport Specialist, SARD Team members S. Belbase, IST Specialist, Office of Information Systems and

Technology T. Prado, Associate Project Analyst, 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 Page

BASIC DATA MAP

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 3 D. Disbursements 4 E. Project Schedule 4 F. Implementation Arrangements 5 G. Conditions and Covenants 6 H. Consultant Recruitment and Procurement 6 I. Performance of Consultants and Contractors 7 J. Performance of the Borrower and the Executing Agency 9 K. Performance of the Asian Development Bank 9

III. EVALUATION OF PERFORMANCE 10

A. Relevance 10 B. Effectiveness in Achieving Outcome 10 C. Efficiency in Achieving Outcomes and Outputs 10 D. Preliminary Assessment of Sustainability 11 E. Impact 11

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 11

A. Overall Assessment 11 B. Lessons 11 C. Recommendations 12

APPENDIXES 1. Project Framework 14 2. Key Features of the National Center for Information Technology 17 3. Key Features of the Maldives Telecommunication Sector Reform 18 4. Project Cost and Financing Plan 19 5. Disbursement of ADB Loan Proceeds 20 6. Comparison of Appraisal and Actual Implementation Schedule 21 7. Status of Compliance with Major Loan Covenants 22 8. Summary of Contract Packages 25 9. Technical Review Summary 26 10. Summary of Network Equipment 30 11. Economic Reevaluation 32

BASIC DATA

A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

Maldives 1882 Information Technology Development Project Republic of the Maldives Ministry of Finance and Treasury SDR7,509,000 1291

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. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

17 Sep 2001 27 Sep 2001 15 Nov 2001 15 Nov 2001 17 Dec 2001 26 Apr 2002 26 Jul 2002 25 Jul 2002 None 30 Jun 2005 31 Dec 2009 3 1% per annum during the grace period and 1.5% per annum thereafter 32 8

8. Disbursements a. Dates Initial Disbursement

07 Apr 2003

Final Disbursement

08 Apr 2010

Time Interval

84 months

Effective Date

25 Jul 2002

Original Closing Date

30 Jun 2005

Time Interval

35 months

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b. Amount (SDR)

Category Original

Allocation Last Revised

Allocation Amount

Disbursed Amount

Canceled Networking 3,794,000 3,794,000 3,460,585 333,415 Applications 1,778,000 1,778,000 2,413,058 (635,058) Internet kiosks 158,000 158,000 177,642 (19,642) Consultancy 925,000 925,000 617,941 307,059 HR development program 79,000 79,000 12,728 66,272 Interest charge 103,000 103,000 103,000 0 Unallocated 672,000 672,000 0 672,000 Total (SDR) 7,509,000 7,509,000 6,784,954 724,046

Total ($ Equivalent) 9,500,000 10,320,000 HR = human resources. Note: The undisbursed balance of SDR724,046 was cancelled after the last disbursement transaction effective on 8 April 2010.

10. Local Costs (Financed) - Amount ($) 160,728 - Percent of Local Costs 6.38% - Percent of Total Cost 1.26%

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 9.70 10.21 Local Currency Cost 2.30 2.52 Total 12.00 12.73

2. Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 2.50 2.41 ADB Financed 9.37 10.16 Other External Financing 0.00 Total 11.87 12.57 Financial Charges Borrower Financed 0.00 ADB Financed 0.13 0.16 Other External Financing 0.00 Total 0.13 0.16

ADB = Asian Development Bank Note: Financial charges include interest during construction only.

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3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual 1. Networking 5.50 5.85 2. Applications 2.50 3.98 3. National Computer Center building 0.90 0.65 4. Government network kiosks 0.40 0.49 5. Consulting services 1.30 0.93 6. Project administration 0.40 0.68

Total Base Cost 10.90 12.57 7. Contingencies 1.10 8. Interest during construction 0.13 0.16

Total 12.00 12.73 Note: The capacity building component was not used during the execution of the project. 4. Project Schedule

Item Appraisal Estimate Actual Networking Bidding and contracting Q1–Q4 2002 Q3 2003–Q1 2004 Installation and commissioning Q1 2003–Q3 2004 Q1 2005–Q4 2009 Application Bidding and contracting Q4 2003 Q3 2003–Q2 2005 Installation and commissioning Q1 2003–Q3 2004 Q2 2005–Q4 2009 NCIT (NCC) Building Bidding and contracting Q4 2001–Q1 2002 Installation and commissioning Q2 2002–Q1 2003 Q4 2005 Internet Kiosks Bidding and contracting Q1 2003 Q2–Q4 2008 Installation and commissioning Q3 2003–Q4 2004 Q4 2008–Q4 2009 Consulting Services Project design and bid preparation Q1–Q3 2002 Q1 2003–Q4 2004 Oversee consultants Q2–Q4 2002 Q2 2005–Q4 2009 Application experts Q3 2002–Q4 2003 Q1–Q3 2009 External audit of project accounts 2002–2004 2005–2009

NCC = National Computer Center, NCIT = National Center for Information Technology, Q = quarter. 5. Project Performance Report Ratings Implementation Period

Ratings

Development Objectives Implementation Progress

From 1 Jan 2002 to 31 Dec 2002 Satisfactory Satisfactory From 1 Jan 2003 to 31 Dec 2003 Satisfactory Satisfactory From 1 Jan 2004 to 31 Dec 2004 Satisfactory Satisfactory From 1 Jan 2005 to 31 Dec 2005 Satisfactory Satisfactory From 1 Jan 2006 to 31 Dec 2006 Satisfactory Partly satisfactory From 1 Jan 2007 to 31 Dec 2007 Satisfactory Partly satisfactory From 1 Jan 2008 to 31 Dec 2008 Satisfactory Partly satisfactory From 1 Jan 2009 to 31 Dec 2009 Satisfactory Partly satisfactory From 1 Jan 2010 to 30 Apr 2010 Satisfactory Partly satisfactory

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D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-

Days

Specialization of Members

Fact-finding 17–26 Apr 2001 9 10 f, I, i, s, e, h, j Appraisal 17–27 Sep 2001 6 11 f, c Loan inception 24–28 Aug 2003 2 5 t, u Loan review 1 13–20 Mar 2006 1 8 t Loan review 2 15–18 May 2006 2 4 t Loan review 3 22–23 Nov 2006 2 2 t, p Loan review 4 26–28 Jun 2007 1 3 t Loan review 5 12–14 Feb 2008 2 3 t, u Special loan administration 1 14–15 May 2008 2 2 t Midterm review 5–6 Aug 2008 2 2 i, t Special loan administration 2 15–17 Dec 2008 1 3 t Loan review 6 8–9 Jul 2009 3 2 t, v Loan consultation 30–31 Mar 2010 2 2 t, i Project completion review 26 Apr–2 May 2011 4 24 t, i, v, f c = counsel, e = environment specialist, f = financial specialist, h = financial analyst, i = IT engineer, j = sector reform specialist, l = legal specialist, p = procurement specialist, s = social specialist, t = transport specialist, u = administration staff, v = project analyst.

E

E

E

E

E

E

E

E

E

E

E

E

E

E

E

E

E

E

EE

E

E

Arabian Sea

Bay ofBengal

Laccadive Sea

I N D I A N O C E A N

Ariyaddu Channel

Wataru Channel

Kudahuvadu Channel

Veimandu C

hannel

One and Half Degree Channel

Equatorial Channel

More

sby C

hannel

Gailandhoo Channel

Alifushi

Thulusdhoo

Keyodhoo

Nilandhoo

Gadhdhoo

Dhidhdhoo

Nolhivaranfaru

Funadhoo

Manadhoo

Eydhafushi

Naifaru

Un'goofaaru

Felidhoo

Magoodhoo

Mahibadhoo

Rasdhoo

Muli

Kudahuvadhoo

Veymandoo

Hithadhoo

Vilin'gili

Thinadhoo

Foahmulah

Hithadhoo

MALDIVES

MALÉ

Male

SRILANKA

INDIA

ADDUATHOLHU(Seenu Atoll)

THILADHUNMATHEE UTHURUBURI(Haa Alifu Atoll)

MILADHUNMADULU UTHURUBURI(Shaviyani Atoll)

MILADHUNMADULU DHEKUNUBURI(Noonu Atoll)

THILADHUNMATHEE DHEKUNUBURI(Haa Dhaalu Atoll)

MAALHOSMADULU UTHURUBURI(Raa Atoll)

FAADHIPPOLHU(Lhaviyani Atoll)

MAALHOSMADULU DHEKUNUBURI(Baa Atoll)

MALÉ ATHOLHU(Kaafu Atoll)

FELIDHUATHOLHU(Vaavu Atoll)

NILANDHEATHOLHU UTHURUMURI (Faafu Atoll)

ARI ATHOLHU UTHURUBURI(Alifu Alifu Atoll)

ARI ATHOLHU DHEKUNUBURI(Alifu Dhaalu Atoll)

NILANDHEAATHOLHU DHEKUNBURI(Dhaalu Atoll)

MULAKATHOLHU(Meemu Atoll)

KOLHUMADULU(Thaa Atoll)

HADHDHUNMATHI(Laamu Atoll)

HUVADHU ATHOLHU UTHURUBURI(Gaafu Alifu Atoll)

HUVADHU ATHOLHU DHEKUNUBURI(Gaafu Dhaalu Atoll) FOAMULAKU

(Gnaviyani Atoll)

UPPER NORTH REGION

NORTH REGION

NORTH CENTRAL REGION

SOUTH CENTRAL REGION

UPPER SOUTH REGION

SOUTH REGION

CENTRAL REGION

National Capital

Atoll Capital

eGOV Ready

eGOV Active

GNM Islands

GNM Active Islands

Service Kiosk

Information Technology

Atoll Administrative Boundary

Regional Boundary

Boundaries are not necessarily authoritative.

MALDIVES

INFORMATION TECHNOLOGYDEVELOPMENT PROJECT

(as completed)

0 50 100

Kilometers

N

11-1714 HR

1 00'No

1 00'No

10 00'No

10 00'No

80 00'Eo

80 00'Eo

72 00'Eo

72 00'Eo

74 00'Eo

74 00'Eo

72 00'Eo

72 00'Eo

6 00'No6 00'No

1 00'No1 00'No

This map was produced by the cartography unit of the Asian Development Bank. The boundaries, colors, denominations, and any other information shown on this map do not imply, on the part of the Asian Development Bank, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information.

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I. PROJECT DESCRIPTION 1. The Asian Development Bank (ADB) approved a loan of SDR7,509,000 ($9.5 million equivalent) from its Special Funds resources to the Republic of the Maldives on 17 Dec 2001 for the Information Technology Development Project.1

The project was to improve the efficiency, transparency, and accountability of public sector management by networking government agencies and electronically providing information and services for the country.

2. At appraisal, the project was designed to include (i) networking of government agencies in Malé by installation of a fiber optic cable, and connecting 20 atolls by carrier service for government agencies to share their information and for the public to access government information electronically; (ii) enabling electronic delivery of public services, including the provision of applications for national citizen identification, public health services, and registration for vessels, vehicles, and aircraft; (iii) establishment of the National Computer Center (NCC), to centrally coordinate information and communication technology (ICT) policies, standards, and practices for government work; (iv) building of internet kiosks, to provide the public with better access to government information and services; and (v) implementation of telecommunications sector reform, to enable the public to access the internet at an affordable price.2

3. The benefits of establishing a government network are wide-ranging, and include improved efficiency, transparency, and accountability of government activities, accelerated decentralization of government work, improved access of citizens to the internet, and positive impacts on the poorer sections of the population. All citizens benefit from these improvements, which result in more efficient management of the nation’s resources. 4. The total project cost was estimated to be $12.0 million equivalent, of which $9.7 million (81%) was the foreign exchange cost and $2.3 million (19%) was the local currency cost. The Ministry of Finance and Treasury (MOFT) was the executing agency for the project, and the Ministry of Communication, Science and Technology (MCST)—later renamed the Ministry of Transport and Communications (MOTC)—was the implementing agency. A project management unit (PMU) was established under the MOTC to have overall operational responsibility for project management. It was planned that the project would be implemented in 3 years, and completed by 31 December 2004; however, the actual closing date was 31 December 2009.

II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 5. At appraisal, ADB’s strategic development objectives in the Maldives focused on (i) regional development including the provision of basic infrastructure and capacity building; (ii) creating an enabling environment for private sector development, including reform of the financial sector and the legal system; and (iii) developing an information and communication network in the atolls. 3

1 ADB. 2002. Loan Agreement (Special Operations) between the Republic of the Maldives and ADB on Information

Technology Development Project. Manila.

ADB’s strategy for the telecommunication sector was to establish a national telecommunication sector policy that would spell out the principles for a sector regulatory regime and for restructuring of the telecommunication market.

2 ADB. 2001. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of the Maldives for the Information Technology Development Project. Manila.

3 ADB. 2001. Maldives Country Strategy and Program Update (2002–2004). Manila.

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6. The telecommunication infrastructure and services in the Maldives expanded rapidly in the 1990’s. However, improving practical access, and reducing the relatively high cost of local and long distance telephone use, cellular mobile expense, and internet access remained key concerns. In the 1990’s, no statutory legislation was in force to regulate the telecommunication sector. Taking into account these conditions and the national development priorities of the Maldives, the government decided to move toward a more open, competitive environment in the telecommunication sector. In 1999, the government conducted a study entitled Government Network of Maldives (GNM) under the initiative of the MCST and with the support of the United Nations Development Programme (UNDP). In 2000, the government requested ADB to provide a loan for a project based on the GNM study, as a successor to the technical assistance (TA) for the Science and Technology Master Plan. 4 Subsequently, the Information Technology Development Project was included in ADB’s Country Assistance Plan for the Maldives for 2001, and a project preparatory TA was approved by ADB in December 2000 to redesign the project and to conduct a feasibility study.5

7. At appraisal and at completion, it was found that the project was highly relevant to the government’s objectives and policies, as well as to ADB’s country strategy, even though the project was substantially delayed and some application systems anticipated at appraisal, such as national citizen identification, public health services, and registration for vessels and aircraft, were not well developed or operational. At completion, a network of interlinking government agencies had been constructed; some applications had been developed and were operational; and the sector reform programs had been implemented. Overall, the design and formulation of the project was adequate and the implementation results fulfilled the government’s development objectives and ADB’s country strategy. The project framework is in Appendix 1. B. Project Outputs

1. Networking 8. The networking component of the project was completed successfully as planned at appraisal. At completion, the GNM—a fiber optic network interlinking government agencies in Malé and other islands—had been established. In Malé, 106 government offices are linked by this network, of which 79 are directly connected via fiber optic cable and 27 via ADSL. 9. In accordance with the original project design, a network connecting 20 outer atolls had been established at completion, with active connectivity to four of them via microwave technology provided by a local mobile operator. The four atolls also provide connectivity and backhaul traffic from 21 governments offices located in other islands. The remaining 16 atolls are already equipped with the necessary network and communication infrastructure and can be provided with active connectivity as soon as the applications are ready to be rolled out to those atolls. 10. Also in accordance with the original project design, a data center was established within the National Center for Information Technology (NCIT) building, comprising the necessary network, systems, database, and application infrastructure for interlinking all government agencies throughout the Maldives and for delivering public services.

4 ADB. 2000. Technical Assistance to Maldives to Prepare the Science and Technology Masterplan. Manila. 5 ADB. 2000. Technical Assistance to Maldives for the Information Technology Development. Manila.

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2. Applications 11. At appraisal, several applications enabling electronic delivery of public services were planned to be developed under the project. At completion, some applications had been developed and were operational over the network, including (i) an enterprise architecture and framework for developing E-government services; (ii) necessary servers, databases, and storage supporting this framework, hosted within the data center at NCIT; (iii) a web portal for individual citizens, businesses, and government agencies that offers a range of services; (iv) the Government E-Letter Management System (GEM) for exchanging documents between government agencies; and (v) Transport Online for processing driver’s licenses. However, some application systems anticipated at appraisal were not well developed or are not operational (see paragraph 40).

3. National Computer Center 12. The National Computer Center (NCC)—later renamed the National Center for Information Technology—was established in 2003, as the main government agency for the development, promotion, and propagation of information technology in the Maldives. The NCIT building was completed in December 2005 and is now in full operation. The building is occupied by about 30 NCIT employees and hosts the core data center for ICT operations, the application development and maintenance center, and training facilities. This building was mostly financed by the government. A description of the key features of the NCIT is in Appendix 2, illustrating key NCIT functions and responsibilities that were made possible by the project.

4. Internet Kiosks 13. As the original project design envisaged, 20 internet kiosks had been setup in 20 atolls by project completion. Four atolls are connected to the main computer systems at NCIT in Malé through microwave networks provided by the local mobile operator. Internet kiosks are installed at public locations. The bandwidth for these links is 128 kilobytes per second (Kbps) but can be scaled up to 2 megabytes per second (Mbps) in the future. The 16 remaining atolls have the necessary network infrastructure to become operational following the deployment of applications to those sites.

5. Telecommunication Sector Reform 14. All aspects of the telecommunication sector reform planned under the project were completed, 6

including (i) restructuring of the existing regulatory body in such a way as to separate policy-making and regulating functions; (ii) establishment of an independent regulatory body; (iii) enactment of a telecommunication law that supports the reform measures; (iv) opening up of the non-basic and value-added markets to competition; and (v) tariff restructuring for internet services. A description of the key features of the Maldives telecommunication sector reform is in Appendix 3.

C. Project Costs 15. The total project cost at completion was $12.73 million, about $0.72 million (6.1%) higher than the $12.00 million estimated at appraisal. The cost of the applications at completion was $3.98 million, about 59.0% higher than the $2.50 million estimated at appraisal. The higher cost 6 Back to office report, ADB midterm review mission, 5–6 August 2008.

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of the applications was mainly due to replacement of the contractor and delays in implementation. The cost of the internet kiosks increased by 22.1% due to materials price inflation. Meanwhile, the costs significantly decreased for constructing the NCIT building (27.6%) and consulting services (29.4%), due to the government’s efforts to self-finance the NCIT construction, and minimize consulting services. Appendix 4 compares in detail the project costs at appraisal and at completion. 16. Under the financing plan envisaged at appraisal, ADB was to provide a loan of SDR7,509,000 ($9.5 million equivalent) to finance 79.2% of the project costs, comprising 95.9% of foreign exchange costs and 8.7% of local currency costs. The remaining costs were to be financed by the government. At completion, the ADB loan of SDR6,784,594 ($10.32 million equivalent) was used to cover 81.1% of the project costs, comprising 99.5% of the foreign exchange costs and 6.4% of local currency costs. The government financed the remaining 18.9% ($2.41 million equivalent) of the project costs. At completion, $158,665 interest of the ADB loan was capitalized. The appraisal and actual financing plans are in Appendix 4. D. Disbursements 17. The ADB loan was approved on 17 December 2001 and became effective on 25 July 2002. The disbursements for the loan were very slow at the beginning with the first disbursement made on 7 April 2003, due to a delay in employing consultants to prepare bidding documents and the NCIT’s lack of familiarity with ADB procedures. The original ADB loan closing date of 30 June 2005 was extended three times, to 31 December 2009. 18. ADB loan disbursement gradually caught up and was on schedule by 2007. At the midterm review, reallocation of the ADB loan was proposed according to actual needs and implementation progress; however, ADB did not receive a formal request from the government for reallocation of the loan. Upon loan closing, SDR6,784,954 ($10.32 million equivalent) of the loan had been disbursed. The undisbursed balance of SDR724,046 was cancelled after the last disbursement transaction, effective on 8 April 2010. The loan disbursement for the project is in Appendix 5. E. Project Schedule 19. The project was planned to be implemented during January 2002–December 2004. However, project implementation experienced substantial delays, with an overall deviation of 5 years from the proposed schedule at appraisal. This was primarily a result of unrealistic planning at appraisal, lack of familiarity with ADB procedures by the MOTC, the complexity of the project, natural disasters, and geographic disparity. Delays occurred at all stages of the implementation, including planning, design, procurement, deployment, construction, installation, and commissioning. 20. The ADB inception mission for the project, found that consultants for bid document preparation were employed 7 months after loan effectiveness and that the bid document preparation work was further delayed by 3 months.7

7 Back to office report, ADB inception review mission, 24–28 August 2003.

The mission requested the PMU to find ways to accelerate the delayed schedule and advised that the PMU might submit an official request to ADB to extend the schedule. However, further implementation delays occurred for a number of reasons, including (i) weak stakeholder participation and technical specifications development; (ii) inadequate bid document preparation; (iii) slow bid evaluation, approvals, and

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contracting; (iv) the complexities of information systems development and installation; (v) complexities arising from the geography of the country; and (vi) lack of local information technology (IT) industry support in construction, installation, commissioning, and operation and maintenance (O&M). The Asian Tsunami of 2004 also significantly affected project progress and completion. During implementation, the contractor for the application component was replaced due to non-performance, also causing delays. 21. In the later stages of the project, the human resource programs were slow in planning and implementation, which caused additional delay. Considering such significant delays in implementation, the project was rated “at risk”.8

ADB missions to the project, fully aware of such delays, provided advice to the MOFT and MOTC, and held regular meetings with the consultants and contractors.

22. Despite such delays, the ADB missions found that the project was still relevant, 9 physical works were substantially completed, 10 and the project was likely to achieve its objective.11

Eventually, the project was completed by the loan closing date on 31 December 2009, 5 years later than anticipated at appraisal. A comparison of appraisal and actual project implementation schedules is in Appendix 6.

F. Implementation Arrangements 23. The project was implemented in accordance with the institutional arrangements at appraisal. The MOFT acted as the executing agency and the MOTC the implementing agency. During implementation, a project steering committee (PSC), chaired by the MOTC, was established to direct the project and assist with interagency coordination of activities. The PSC included high-level officials from key ministries, including the MOTC, MOFT, Planning and National Development, Atolls Administration, Public Service Division of the President’s Office, and Department of External Resources. 24. The NCIT acted as the PMU. Its responsibility for project implementation extended to (i) preparing specifications for bid documents for provision of networking and applications, components of which include institutional development and public awareness campaigning; (ii) assessing the financial viability of establishing government network kiosks in selected outer islands in consultation with island development committees; (iii) preparing specifications for bid documents for setting up the government network kiosks; (iv) evaluating bids for government network kiosks; and (v) supervising kiosk construction and installation. The head of the NCIT was designated project director of the PMU. 25. To assist project implementation, supervision and oversee consultants were recruited. The supervision consultants were mainly responsible for developing technical details and specifications required for bidding documents. The oversee consultants mainly provided expertise in managing the project and overseeing the implementation of the network and application projects by contractors. Due to the limited capacity of IT personnel at the MOTC to handle the testing of software deliverables from contractors, the MOTC asked ADB to grant permission to hire ICT experts to assist during the application testing period, which ADB subsequently approved.

8 Back to office report, ADB special loan administration mission, 15–17 December 2008 9 Back to office report, ADB review mission, 12–14 February 2008 10 Back to office report, ADB review mission, 6–9 July 2009 11 Back to office report, ADB midterm review mission, 5-–6 August 2008

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G. Conditions and Covenants 26. The project complied with most of the loan conditions and covenants; of the 8 major loan covenants, 7 were complied with and 1 partially complied with. The covenants on performance evaluation were not well complied with because no monitoring reports were provided by the MOFT and MOTC. Evaluation of sector performance was carried out during ADB’s midterm review mission. 27. Most of the sector reforms in the loan agreement were complied with, including (i) the issuing of the Maldives Telecommunication Regulation 2003 on 4 September 2003; (ii) the establishment of the Telecommunications Authority of Maldives, an independent body, on 4 September 2003; and (iii) the licensing of the second internet service provider (ISP) in May 2003, which was operational by the end of that year. 28. The organizational framework for project implementation was arranged as agreed, including forming a steering committee, establishing the NCIT, and recruiting consultants. The NCIT served as PMU for the project. A fund of $2.05 million was provided by the government for project implementation. The NCIT has about 30 staff and was awarded ISO9001 certification in 2008. The NCIT building was constructed under the project, and is well equipped with network facilities and sufficient working space for its staff. Details on the status of compliance with major loan covenants and conditions are listed in Appendix 7. H. Consultant Recruitment and Procurement 29. Consulting services contracts. The project financed (i) supervision consultants, (ii) oversee consultants, and (iii) IT experts. Consultant recruitment was carried out as envisaged at appraisal and conformed to ADB’s Guidelines on the Use of Consultants (2002, as amended from time to time). Quality and cost based selection were used for selecting the supervision and oversee consultants. The supervision consultants,12 were recruited as planned and the contract was awarded on 26 November 2002. However, the recruitment for the oversee consultant was much delayed and the contract was awarded on 7 April 2005.13

In addition, two individual IT experts were recruited at a later stage to assist in application testing. Individual consultant selection was applied in selecting consultants. The contracts were awarded on 25 March 2009.

30. Networking and application contracts. International competitive bidding (ICB) procedure was used for procurement of the networking contractor. A two-stage: two-envelope bidding process was employed, on a turnkey basis, for the networking component. ICB procedure was also used for the procurement of application contractors. The application component was bid for twice, both times on a turnkey basis, and employed the two-stage: two-envelope procedure in the first instance, and single-stage: two-envelope procedure in the second. 31. The procedural complexities and, in particular, time and scheduling requirements for the two-stage: two-envelope bidding process, and ADB approval processes, were a challenge for the PMU in meeting the initial project schedule. In addition, the technical complexities of the networking and application bids also provided challenges in bid evaluation and contracting. This was especially significant in the procurement process of the application component. Eventually,

12 B3 Consulting Service, 130 Boulevard Camelinat 92240, Malakoff, France. 13 TATA Infotech, Manish Commercial Center 216A, Mumbai, India.

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the contract for the networking component was issued on 28 February 2005.14 The contract for the application component was first awarded on 16 June 2005.15 However, no progress was made in the implementation of the contract, and a notice of corrective actions and notice of slow progress was issued to the contractor by the MOTC, under the guidance of the oversee consultants. Despite several attempts by the MOTC to resolve the issues, with the support of the oversee consultants and in consultation with ADB, the contractor failed to comply and eventually the contract was terminated in 2006. Subsequently, the application component was reopened for bidding and a new contract was awarded on 5 December 2006, with a 2 year implementation schedule.16

32. Internet kiosks contracts. National competitive bidding was used for the internet kiosks component. The contract for supply and installation was awarded on 25 December 2008. The contract packages are summarized in Appendix 8. I. Performance of Consultants and Contractors

1. Supervision and Oversee Consultants 33. The performance of the consultants was rated satisfactory. The supervision consultants were instrumental in engaging stakeholders in development of the technical details and specifications required for the bidding documents. In addition, the consultants provided clarification of requirements during the bidding process, and supported evaluation of bids for the networking and application components of the project. 34. The oversee consultants provided expertise in managing the project and overseeing the implementation of the network and application turnkey contracts. Oversee consultancy services were mostly used in technical document reviews, testing performance, quality assurance, general project management, and conflict resolution. These services were provided onsite and offsite as needed. No delays or major problems were faced between the MOTC and the oversee consultants. However, due to technical complexities in the application component, and subsequent delays and other issues with the contractors, the oversee consultancy service was extended until the end of December 2009. Two IT experts supported the testing and implementation of the e-government service platform and e-government applications. 35. At completion, 67 person-months of consulting services had been provided to the project, including 33 person-months for the oversee consultants, 24 person-months for supervision consultants, and 10 person-months for IT experts.

2. Contractor for the Networking Component 36. The performance of the contractor for the networking component was rated satisfactory. They were contracted to design and implement the Government Network of Maldives (GNM), consisting primarily of an optic fiber network connecting government agencies in Malé, and a satellite network connecting government agencies and other stakeholders in 20 atoll capitals across the country. The GNM is operational and enables the provision of electronic services and communication using a number of key government software applications, such as the Government E-Letter Management System and the Public Accounting System. A number of

14 ST Electronics (Info-Comm Systems), 52 Cuppage Road No. 09-08, Start Hub Center, Singapore. 15 SAGRIC International, Level 2, 70 Hindmarsh Square, Adelaide, Australia. 16 NCS, 5 Ang Mo Kio Street 62, NCS Hub, Singapore.

8

inter-related issues challenged implementation of the GNM. These were related to the contractor not taking into account the geographic challenges of the country, but also the lack of competence and experience of the local IT industry. 37. Substandard technical documentation, primarily resulting from local subcontractors work, was another issue faced under this component. This was remedied with the guidance of the oversee consultants. The Asian Tsunami of 2004 required work on this component to be suspended. When work resumed, the local working conditions had drastically changed, seriously challenging the contractor’s work. This also led to rebidding for the O&M part of this contract. The contractor worked with the MOTC and the oversee consultants to resolve these challenges.

3. Contractor for the Applications Component 38. The performance of the contractor for the applications component was rated unsatisfactory. The contractor was recruited to design and deploy e-government application infrastructure and key software applications and electronic services. The first contractor failed to meet the milestone of designing the system architecture, which led the MOTC to issue of a notice of corrective actions and a notice of slow progress to the contractor. Issues with the contractor included: (i) the design submitted was incomplete; (ii) quality documents, relating to the work program, quality assurance, and monthly progress reports were not submitted; and (iii) the contractor did not field its staff in the Maldives despite the MOTC’s request to send its staff to work closely with the NCIT and MOTC. 39. Despite several attempts by the MOTC, with support of the oversee consultants and in consultation with ADB, to resolve the issues of non-compliance and no-progress, the contractor failed to comply, and the contract was terminated in 2006. The second contractor was evaluated as having the capacity, resources, and skills necessary to deliver the project on-schedule, and as per the standards defined in the contract agreement. However, the personnel assigned by the second contractor (especially in the project management area) focused less on delivering the project as per the contract, and more on reducing the scope of delivery. As a result, major delays and disagreements arose between the MOTC and the contractor in 2007–2008. Despite several attempts to resolve these issues by the MOTC, with advice from the oversee consultants, little progress was made.

40. Eventually, an ADB mission was fielded on 16 December 2008 to the Maldives; the MOTC, oversee consultant, and ADB met with the contractor, in a meeting chaired by the Minister of State for Civil Aviation and Communication. During this meeting, the MOTC and the contractor came to an understanding on the disputed matters and signed minutes of the meeting detailing this understanding, including a revised schedule for the contract. Based on the revised project schedule, the contractor was required to complete all remaining works by the end of June 2009. Subsequently, the major deliverables of the application component were delivered by the contractor and were put into operation. These included the Government E-Letter Management System and the e-government portals. However, major issues with these deliverables were discovered when the systems were introduced to the government, including software bugs and non-compliance with software specifications for the applications. During the project completion review (PCR) mission, the NCIT raised complaints against the contractor, and provided the improper codes to illustrate the problems in the application.

9

J. Performance of the Borrower and the Executing Agency 41. The performance of the borrower and the executing agency was satisfactory. The borrower was the Government of the Maldives and the executing agency was the MOFT. The NCIT served as the PMU. During implementation, the government provided counterpart funds and all necessary support in a timely manner. The NCIT was responsible for day-to-day project management and facilitated the success of project implementation. The NCIT was adequately staffed, proactive, and speedy in resolving implementation issues. Project implementation complied with most of the loan conditions and covenants. The NCIT, with assistance from the oversee consultants, prepared the project progress reports. An external auditor audited the financial statements for the project were audited, and the audit reports were submitted to ADB as required.17

However, project implementation was significantly delayed and some applications anticipated at appraisal are still not functional. Considering that the project was the first of such IT projects in the country, the government and the NCIT performed creditably.

K. Performance of the Asian Development Bank 42. Overall, the performance of ADB was satisfactory. The project was administered and supervised from ADB headquarters. ADB provided substantial guidance to the government, the MOFT, and the MOTC, in the implementation of the project, in preparing documents and evaluation reports related to procurement, in engagement of consultants, and on technical issues.18

During implementation, ADB carried out 11 review missions, including the midterm review mission in 2008. ADB review missions participated in joint coordination and review meetings, together with the MOFT, the NCIT, and all contractors and consultants. ADB was closely involved in identifying potential problems and critical activities, and in resolving issues related to the implementation of the project, especially on implementation delays. ADB extended the loan three times, to accommodate the revised project schedule. The role of the ADB missions in advising on contract administration and technical issues was recognized by the MOFT and the MOTC.

17 ADB. 2011. Review of Auditor’s Report and Audited Project Accounts. Manila. 18 An IT technical expert was involved in the ADB missions.

10

III. EVALUATION OF PERFORMANCE A. Relevance 43. At appraisal and completion, the project was rated highly relevant and consistent with the government’s development strategy and ADB’s country partnership strategy (CPS). Under the project, the intended objectives of promoting regional development, creating a conducive environment for private sector development, and developing an information and communication network in the atolls, have been highly relevant. The outputs and outcomes also prove that the project was important, timely, and effective in assisting telecommunication sector development in the Maldives. B. Effectiveness in Achieving Outcome 44. The project was highly effective in achieving its outcome. Most of the objectives stated in the project framework were achieved (Appendix 1). At appraisal, it was found that all telecommunication services were provided solely by a joint venture company. 19

The telecommunication sector had no statutory legislation. The cost of international calls was much higher than those in developed countries and in many developing countries; the government had no ICT network, and file sharing among government agencies was limited and paper-based; application development was hindered; and government agencies exchanged little information. The PCR mission found that the telecommunication sector had completely changed, which was substantially the result of the project. A technical review of the project outputs is summarized in Appendix 9 and a summary list of network equipment is in Appendix 10.

C. Efficiency in Achieving Outcomes and Outputs 45. The project is rated as efficient for achieving its outcomes and outputs. Using methodology similar to that applied at appraisal and the updated data, the PCR mission reevaluated the economic internal rate of return (EIRR). The economic reevaluation was carried out by comparing the economic costs and benefits of “with” and “without” project cases. Both capital costs and O&M costs, in economic terms, were considered in the calculation. The economic benefits considered in the reevaluation include (i) staff time cost savings, (ii) transport cost savings, (iii) paper cost savings, and (iv) other non-quantifiable benefits. The reevaluated EIRR for the project was 16.5%, as compared with 25% at appraisal. The decreased EIRR was mainly caused by much higher capital costs and longer implementation, as well as the failure to deliver some applications. However, the recalculated EIRR is higher than the ADB recommended discount rate of 12%, and the project can be considered economically viable. The EIRR was also subjected to a sensitivity analysis to test different scenarios. The sensitivity analysis shows that the project continues to be economically viable for all scenarios. In the worst case, with a combination of both 20% maintenance cost increase and 20% benefit reduction, the EIRR would still be 13.6%. Appendix 11 presents the economic reevaluation.

19 Dhiraagu, a joint venture company formed by the government and Cable and Wireless Corporation of the United

Kingdom in 1988.

11

D. Preliminary Assessment of Sustainability 46. The sustainability of the project is rated likely: (i) a general sector development foundation has been established, but detailed sector reform policies need to be implemented; (ii) the institutional framework has been constructed with clear responsibilities, but human resource development still remains a key challenge to the Maldives; (iii) the physical infrastructure of the government network is in place, but is not fully used; (iv) some applications developed under the project are not functional, and need to be revised or redeveloped and rolled out; and (v) system O&M should be provided with an adequate budget. E. Impact 47. At appraisal, the initial environmental examination (IEE) was carried out to look into the issues of physical resources, ecological resources, human and economic development, and quality of life. The IEE also included screenings of potential environmental impacts. The IEE concluded that (i) the project does not have significant negative environmental impacts; (ii) the need for an environmental impact assessment does not arise; and (iii) monitoring and mitigation measures for the limited impacts identified will be sufficient. During project implementation, no issues were reported to ADB related to environmental and sociocultural impacts.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 48. Overall, the project is rated successful. The project realized its main objectives of improving the efficiency, transparency, and accountability of public sector management by networking government agencies and electronically providing information and services for the country. A general sector development foundation has been established: (i) the institutional framework for telecommunication sector development has been constructed with clear responsibilities; (ii) the physical infrastructure of the government network has been constructed and some applications are operating; (iii) the NCIT building is fully functioning; and (iv) some internet kiosks have been installed and are operating in public locations. These developments prove that the project’s impact, outcome, and outputs—as anticipated at appraisal—have been achieved. The recalculated EIRR is higher than the ADB recommended discount rate of 12% and the project can be considered to be economically viable. B. Lessons 49. Project design. The project was the first of its kind for ADB in the ICT sector and in the Maldives. ICT projects are very different from transport projects, in design, implementation, and operation. ICT projects need to have a physical infrastructure for connectivity, software applications for the connectivity to be functional, and a regulatory regime to support the connectivity and applications. The project suffered delays, especially in the initial phase, due to the complexity of the project components and the MOFT’s lack of experience in ADB procurement procedures in the ICT sector. 50. Local information and communication technology environment. Project design should adequately consider the local situation, including sector development status, regulatory framework, and local capacity for implementing the project and absorbing the new technology. The implementation should be conducted jointly by external consultants and local experts to avoid transitional issues. Unlike transport projects, the completion of an ICT project, especially

12

of turnkey projects, only means half the project is finished and many follow-up issues in operation, maintenance, and sustainability need to be attended to. Therefore, the design and formulation of an ICT project should consider not only implementation, but also the operation phase. 51. Sustainability. Projects with adequate counterpart funds (capital and operational) can encourage government ownership and improve sustainability. The project plan should incorporate a strong operational and sustainable model. Some of the factors leading to unsatisfactory sustainability in ICT projects include an inadequate financial and business plan, and a lack of trained personnel, ownership, and support from public leaders. 52. Project management. Adapting to a formal project management framework approach and a central repository for tasks, processes, guidelines, and templates can help a great deal with the efficient implementation, monitoring, and evaluation of a project. This can have positive impacts on the overall efficiency of the organization, as well as reporting. 53. Technical expertise. To expedite project implementation and avoid project delays, the gap between technical and management expertise should be bridged by frequent consultations and diverse team compositions. For example, ADB missions should include IT and procurement experts, who may provide adequate and timely guidance on technical matters and ADB procurement. The government’s supervision and oversee consultants should facilitate mutual understanding and trust between the contractors and government, and provide adequate problem solving. C. Recommendations

1. Project Related 54. Future monitoring. The project monitoring program was not well designed and implemented. Such ICT projects have many impacts, including on sector performance, private sector participation, government efficiency, socioeconomic conditions, women, poverty reduction, etc. ADB should design and carry out a monitoring program, especially looking into those issues. The monitoring program should be implemented about 5 years after project completion, by which time, the full benefits of the project will be apparent. 55. Further action or follow-up. The NCIT is facing budgetary constraints in using the network and in strengthening applications developed under the project. For example, only 4 out of the 20 connected atolls have active connectivity, due to a lack of operating budget. The NCIT is planning to develop new applications to further expand delivery of government services to citizens through ICT. Continuous and adequate financial support from the government is critical to keep the project sustainable. ADB should design and formulate small programs to support the NCIT’s plan for maximizing the benefits of the project. The physical infrastructure of connectivity has been established, ADB’s future support for the ICT sector in the Maldives can be concentrated on e-governance to take advantage of this. 56. Timing of the project performance evaluation report. The project performance evaluation report (PPER) should be prepared in 2013 or later. By then, the development of the sector, the maintenance of the network and applications, the benefits attained, and the impacts of the project could be better assessed.

13

2. General 57. Technology is fast changing in the ICT sector. Public sector network infrastructure development may still warrant ADB’s assistance if the connectivity is to remote communities where the private sector may not be interested. If potential projects are identified and a government requests assistance, the design and implementation of an ICT project should take into consideration the following: (i) Understanding the interdependencies among outputs is critical to timely completion. Many ICT initiatives target multiple objectives within a single project. This may be a comprehensive approach but it can also result in a more complex and lengthy project. Typical ICT projects include sector reforms, infrastructure building, applications development, deployment, and capacity building. Combining all of the outputs in one project will create dependencies among the outputs, and the sequential delivery can take a significant amount of time. An ICT project plan needs to either be simplified or have proper mechanisms to address complexity. (ii) A multiphase design and implementation method may well suit complex ICT projects with multiple outputs. The phased approach will not only keep the project on course with its objectives, but will also provide periodic monitoring and evaluation for correcting any deviations or failures early on. The periodic check and balance of expected outcomes, and proper documentation will also expedite the project completion review process. (iii) ICT procurements are challenging due to the complex combination of hardware, software, infrastructure, customization, maintenance, support, and interdependencies. Understanding the relationship between the various components is critical to acquiring the best solution and vendors, and providing proper training and guidance to executing agencies. Recruiting capable consultants with experience in the ICT sector is essential. (iv) To ensure readiness, sustainability, and success in ADB’s public sector ICT projects, ADB should first undertake research and development activities, including the development of technology strategies, feasibility studies, readiness assessments, field studies, and prototyping. This research must be conducted before they materialize into formal business cases and are funded for full development and deployment. For an innovative ICT project, small-scale pilot projects would be useful to provide strategic guidance and tactical support in project design, planning, implementation, and monitoring and evaluation.

14 Appendix 1

PROJECT FRAMEWORK Design Summary Project Targets Monitoring

Mechanisms Assumptions and

Risks Results

Sector Goals Improvement of telecommunication services by lowering tariffs

Internet tariff reduced to an internationally comparable rate

Compilation of statistics

Internet usage costs per 1,000 MB have been reduced from about Rf1,650 in 2007 to about Rf200 in 2011.

Purpose Improvement of efficiency, transparency, and accountability of public sector management

Increase in the number of accesses to government portals by 10% per annum for 5 years after the completion of the project Increase in the ratio of government services delivered online compared with over-the-counter by 10% per annum for 5 years after the completion of the project Increase in the ratio of intergovernment agency work carried out online by 10% per annum for 5 years after the completion of the project Government employment growth at 1.5% for 5 years after completion of the project, and at 1% thereafter

Compilation of statistics Asian Development Bank (ADB) missions to assess implementation of the project and the sector reform program

Submission of a draft telecommunication law to Parliament within 18 months of loan effectiveness Establishment of an independent regulatory body prior to the loan closing date Opening up of the internet service market to competition within 2 years of loan effectiveness

Results to be measured 5 years after project completion. (See appendix 2 and 3 for details on reforms established) Currently, 3,000 government staff are registered for the Government E-Letter Management System. All government officials, (about 10,000) in the Maldives will be connected to the system in the next 3 years.

Outputs Government network and applications

Linking government agencies in Malé (including Viligili and Hulhule islands) and 20 atoll offices by the

ADB missions to monitor implementation of the project completion review

Appointment of management and staff for NCIT within 18 months of loan effectiveness

20 atoll offices connected.

Appendix 1 15

Design Summary Project Targets Monitoring Mechanisms

Assumptions and Risks Results

National Computer Center (NCC), later renamed the National Center for Information Technology (NCIT) Internet kiosks Sector reform program

end of 2004 Setting up NCIT and appointing staff within 6 months of loan effectiveness Establishing 2 internet kiosks in Malé, and 20 internet kiosks in the atolls by the end of 2004 Submitting a draft telecommunication law to parliament within 18 months of loan effectiveness and establishing an independent regulatory body prior to the loan closing date

Adequate budget allocation for NCIT and the project management unit (PMU) Adequate budget allocation for operation and maintenance of project facilities Adequate staffing for NCIT and PMU Adequate counterpart funds provided in a timely manner by the government

NCIT established with staff appointed. 20 internets kiosks established Maldives Telecommunication Regulation issued in 2003 Maldives Telecoms Policy for 2006–2010 issued in 2006

Inputs Equipment and materials Civil works Consultants Administration expenditures Financing plan

Equipment and materials: $8.4 million Civil works: $0.9 million Consultants: $1.3 million Salaries and others: $0.4 million ADB loan of $9.5 million, and government financing of $2.5 million

ADB review mission to monitor implementation of the project agreement with cofinanciers Audited project accounts Project progress reports

Adequate number of review missions Consultants and contractors are competent Qualified counterpart staff are available

At completion, the total inputs ($ million): Networking: $5.85 Applications: $3.98 NCIT building: $0.65 Internet kiosks: $0.49 Consulting: $0.92 Administration: $0.68

Appendix 2 16

KEY FEATURES OF THE NATIONAL CENTRE FOR INFORMATION TECHNOLOGY

1. National Centre for Information Technology (NCIT) of Maldives was established on the 25th of March 2003 by Government of Maldives as the main government agency for the development, promotion and propagation of Information Technology (IT) in the Maldives. NCIT has been mandated to have the following responsibilities:

(i) To establish, operate, maintain and develop the Government Computer Network

(ii) To advise the Ministry on the National IT Strategy to fully harness and exploit IT for economic and social development and to plan, co-ordinate and implement the programmes and projects to achieve the IT Policy of the government

(iii) To implement E-government by co-coordinating and developing Information Systems Plans of the Government for greater productivity, wider public access to information and faster delivery of services

(iv) To carry out reviews and studies in technology and policy, in cooperation with industry and other Government agencies, to accelerate the development of the local IT and allied industries;

(v) To establish guidelines, benchmarks and standards necessary for Maldives at that time and to disseminate the information to the public

(vi) To review and approve proposed information systems plans of government agencies and parastatals

(vii) To provide IT consultancy to Government agencies and the private sector Conduct a periodic information systems survey in the Government to foster a well coordinated and integrated Information Systems

(viii) To advice and assist Government ministries and agencies concerned in the review and design of IT education and training curricula to ensure to develop the human resource in IT for the Maldives

(ix) To develop and carry out awareness programs to improve wider public awareness and understanding of the national IT vision, plan projects and activities

2. Currently, NCIT has about 30 staffs working in 5 divisions, including:

(i) E-government Operation Division (ii) E-government Development Division (iii) Strategy Research Division (iv) E-government Application Division (v) Administration Division

Source: http://www.ncit.gov.mv/page.php/38/Mandate.htm

17 Appendix 3

KEY FEATURES OF THE MALDIVES TELECOMMUNICATION SECTOR REFORM

1. The Maldives Telecommunication Regulation 2003 was issued through a presidential decree providing ample powers to the regulatory authority and guidance to the industry. The Maldives Telecommunication Policy for 2006–2010 was issued in 2006 by the Minister of Transport and Communication, which was designed to virtually reduce geographical separation by reducing the disparity in services rendered throughout the country, thus achieving a “one island nation”. 2. The regulatory body for the telecommunications industry was restructured by establishing a separate entity in 2003. The Regulator Telecommunications Authority of the Maldives took the role of regulating and developing the sector. The Ministry of Transport and Communications (MOTC) became the policy maker. In the meantime, competition was introduced to the cellular mobile services market in February 2004 with licensing of the second mobile operator. 3. ADB’s midterm review mission in 2008 did an evaluation of the telecommunication sector’s performance. The evaluation showed that internet usage costs per 1,000 MB had reduced from about Rf1,650 in 2001 to about Rf200 in 2007. Over the same period, the average international call charge came down by 85%. During 2001–2006, the average postpaid mobile call rate was reduced by 66%, and the average prepaid rate was reduced by 80%. The costs of using the mobile service had effectively become zero. Some of the price reductions were caused by board technology development. However, without the telecommunication sector reform, the cost savings from technology development were likely to be captured as monopoly rent rather than benefiting consumers. The affordability of telecommunication services had been improved by increased competition in the market and the introduction of an appropriate regulatory regime. As a result, the significant telecommunication service price reductions over the project implementation period could be taken as proof that the project had achieved its sector goal of performance improvement. Source: T. Nishimura. 2008. Back to office report of Midterm Review Mission, 5–6 August 2008. Manila.

Appendix 4 18

PROJECT COST AND FINANCING PLAN

Table A4.1: Project Costs

($ million)

ForeignExchange

LocalCurrency Total Foreign

ExchangeLocal

Currency Total

1. Networking 4.70 0.80 5.50 5.00 0.85 5.852. Applications 2.30 0.30 2.50 3.66 0.32 3.983. NCC building 0.40 0.50 0.90 0.29 0.36 0.654. Internet kiosks 0.20 0.20 0.40 0.25 0.24 0.495. Consulting services 1.20 1.30 0.86 0.07 0.936. Project administration 0.40 0.40 0.68 0.68

Subtotal (A) 8.80 2.10 10.90 10.05 2.52 12.57

1. Physical 0.40 0.10 0.502. Price 0.50 0.10 0.60

Subtotal (B) 0.80 0.10 1.00

0.10 0.10 0.16 0.16

Total 9.70 2.30 12.00 10.21 2.52 12.73

Item

At Appraisal Actual

A. Base Cost

B. Contingencies

C. Interest During Construction

Source: Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of Maldives for the Information Technology Development Project, ADB loan financial information system, National Center for Information Technology.

Table A4.2: Financing Plan ($ million)

ForeignExchange

LocalCurrency Total % Foreign

ExchangeLocal

Currency Total %

ADB 9.30 0.20 9.50 79.2 10.16 0.16 10.32 81.1Government 0.40 2.10 2.50 20.8 0.05 2.36 2.41 18.9

Total 9.70 2.30 12.00 100.0 10.21 2.52 12.73 100.080.8% 19.2% 100.0% 80.2% 19.8% 100.0%

Appraisal Actual

Source

Source: Report and Recommendation of the President to the Board of Directors on a Proposed Loan to

the Republic of Maldives for the Information Technology Development Project, ADB loan financial information system, and National Center for Information Technology.

Appendix 5 19

DISBURSEMENT OF ADB LOAN PROCEEDS Table A5: Annual and Cumulative Disbursement of ADB Loan Proceeds

($ million)

ADB = Asian Development Bank. Source: Asian Development Bank.

Figure 5.1: Annual Disbursement of ADB Loan Proceeds ($ million)

-

0.50

1.00

1.50

2.00

2.50

2003 2004 2005 2006 2007 2008 2009 2010

Figure 5.2: Cumulative Disbursement of ADB Loan Proceeds ($ million)

-

2.00

4.00

6.00

8.00

10.00

12.00

2003 2004 2005 2006 2007 2008 2009 2010

Actual % of Total Amount % of Total 2003 0.28 2.72 0.28 2.72 2004 0.06 0.57 0.34 3.29 2005 1.47 14.28 1.81 17.58 2006 1.47 14.22 3.28 31.80 2007 2.18 21.15 5.47 52.96 2008 1.29 12.46 6.75 65.42 2009 1.53 14.84 8.28 80.25 2010 2.04 19.75 10.32 100.00 Total 10.32 100.00 10.32

Year Disbursed Cumulative

20

App

endi

x 6

COMPARISION OF APPRAISAL AND ACTUAL IMPLEMENTATION SCHEDULE

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Networking

Bidding and contracting

Installation and commissioning

ApplicationsBidding and contracting

Installation and commissioning

NCIT (NCC) BuildingBidding and contracting

Installation and commissioning

Internet KiosksBidding and contracting

Installation and commissioning

Consulting ServicesProject design and bid preparation

Oversee consultants

Application experts

External audit of project accounts

At appraisal Actual

2008 20092001 2002Item

2003 2004 2005 2006 2007

NCC = National Computer Center, NCIT = National Center for Information Technology.

Source: National Center for Information Technology

21 Appendix 7

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Project Specific Covenants Reference in Loan/Project Agreement

Status of Compliance

Sector

1. The Government will draft the Telecommunications Act and consider the comments of stakeholders in the review process, within one year of loan effectiveness.

Schedule 6, para. 10 (i)

Complied with.

2. The Government will submit the draft Act to Parliament for approval within 18 months of loan effectiveness.

Schedule 6, para. 10 (ii)

Complied with. Maldives Telecommunication Regulation 2003 issued by a Presidential Decree on 4 September 2003.

3. The Government will establish an independent regulatory body, including management, staffing, budget, facilities, etc,. with appropriate mandate and authority as stipulated in the Act, prior to the loan closing date.

Schedule 6, para. 10 (iii)

Complied with. An independent body has been established in the name of Telecommunications Authority of Maldives (4 September 2003).

4. The Government will ensure opening up of the Internet service market to competition within two years of loan effectiveness to bring changes to affordable levels in line with international best practices.

Schedule 6, para. 10 (iv)

Complied with. The second ISP was licensed in May 2003 and became operational end of 2003. New ISP now providing service (May 2003).

Financial

5. The Government will: (i) provide the PMU and NCC with adequate budgetary resources for their effective operations during and after project implementation.

(ii) provide appropriate counterpart funds, facilities, services, land and other resources which are required, in addition to the process of the Loan, for the carrying out of the Project and for the operation and maintenance of the Project facilities, promptly as needed.

Schedule 6, para. 5 Section 4.02

Complied with. At completion, total $2.05 million was provided to the Project by the Government. Sufficient fund is available to NCIT for basic operations, including operation and maintenance of the Project facilities.

Performance Evaluation

6. NCC shall be responsible for maintaining data and evaluating project benefits. PMU shall undertake performance monitoring and evaluation in conjunction with the Bank review missions.

Schedule 6, para 8, 9

Partially complied with. In conjunction with ADB’s midterm review mission, evaluation on sector performance was carried out, including sector reform and internet prices. However, no report was provided by the EA and IA to include benefit monitoring and evaluation.

22 Appendix 7

22 A

ppendix 6

Project Specific Covenants Reference in Loan/Project Agreement

Status of Compliance

Others

7. MOFT shall be the Project Executing Agency and shall be responsible for overall coordination, including approval and coordination of all disbursements. MCST shall be the implementing agency, and shall be responsible for the Project management and implementation through its PMU, including carrying out selection of consultants and coordination of participation ministries. 8. PSC, chaired by MCST, shall direct the Project and assist with interagency coordination of activities. The composition of PSC shall include high level officials from MCST, MOFT, Ministry of Planning and National Development, Ministry of Atolls Administration, President’s Office, and Department of External resources. MCST shall provide the secretarial services for PSC. PSC shall meet, as required, to ensure efficient and effective project implementation. 9. MCST shall appoint project director for PMU, PMU shall have overall operational responsibility for project management. PMU shall be responsible for (i) preparing specifications for bidding documents for provision of networking and applications, of which components will include institutional development and awareness campaign; (ii) assessing financial viability of establishing government network kiosks in selected outer islands in consultation with islands development committees; (iii) preparing specifications for bidding documents for setting up the government network kiosks; (iv) bids evaluation for government network kiosks; and (v) supervision of kiosk construction/installation. PMU shall also monitor social and environmental impacts of the Project during its implementation. 10. Established, Staffed, and Operating PMU/PIU The Government will: (i) cause NCC to be established, including appointment of management and the required staff, within six months of loan effectiveness.

(ii) ensure that the PMU and NCC are at all times staffed with the appropriate number of suitably qualified personnel and have suitable office accommodation.

Schedule 6, para. 1 Schedule 6, para. 2 Schedule 6, para. 3 Schedule 6, para. 4 Schedule 6, para. 5

Complied with. MCST was later on renamed as MOTC but the functions remain the same. Complied with. Complied with. NCIT became the PMU who take charge of all the responsibilities as required in the loan covenants. Complied with. NCIT was established on the 25th of March 2003 and played as the PMU for the Project. Currently, NCIT has about 30 staffs and also awarded ISO9001 in 2008. The NCIT building was constructed under the Project, which is well equipped with required equipment and provide sufficient working space to its staffs.

Appendix 7 23

Project Specific Covenants Reference in Loan/Project Agreement

Status of Compliance

11. NCC shall be responsible for the operation and maintenance of the Project facilities for the government network, portals, and Internal kiosk built in NCC’s premise. Other concerned ministries shall be responsible for the operation and maintenance of Internet kiosks in the atolls and applications for provision of government services. The Borrower shall fund operation and maintenance costs for project facilities through budgetary allocations. The Borrower shall consider contracting out of operation and maintenance of internet kiosks built in the outer islands to a private sector contractor, a community-based organization, or a public-private joint venture.

Schedule 6, para. 6

Complied with. NCIT has became the main government agency for development, promotion and propagation of IT in the Maldives, and therefore responsible for the operation and maintenance of the project facilities. In addition, the connectivity operation and maintenance has been contracting to the private sector.

12. Fielding of Consultants (i) In the carrying out of the project, the Borrower shall cause competent and qualified consultants and contractors, acceptable to the Borrower and the Bank, to be employed to an extent and upon terms and conditions satisfactory to the Borrower and the Bank.

Article IV, Section 4.03

Complied with. Supervision Consultants and Oversee Consultants were recruited to assist the Project implementation. In addition, two IT experts were also recruited to assist in software testing.

(ii) After the conclusion of negotiations but before signing of the contract, the contract as negotiated shall be furnished to ADB for approval. Promptly after the consultant’s contract is signed, ADB shall be furnished with three copies of the signed contract. If any substantial amendment of the contract is proposed after its execution, the proposed changes shall be submitted to ADB for prior approval.

Schedule 5, para. 3 (b)

Complied with.

SUMMARY OF CONTRACT PACKAGES

ICB = international competitive bidding, ICS = individual consultant selection, NCB = national competitive bidding, No. = Procurement Contract Summary Sheet (PCSS) number, QCBS = quality- and cost-based selection. Source: National Center for Information Technology, and ADB financing information system.

Date Currency Amount $ Equivalent ADB Finance 1 Networking 0003 ST Electronics ICB 28/02/05 $ 5,341,156 5,845,871 5,235,462 2 Applications 0004 SAGRIC Inter ICB 16/06/05 $ 2,891,314 335,965 335,965

0005 NCS ICB 05/12/06 $ 3,367,513 3,639,984 3,385,879 3 NCC building Rf 8,813,981 651,819 4 Internet kiosks 0006 FOCUS Computers NCB 25/12/08 Rf 6,273,792 488,233 273,095 5 Consulting services

Supervision consultant 0001 B3 Consultants QCBS 26/11/02 € 432,302 380,043 380,043 Oversee consultant 0002 TATA Infotech QCBS 07/04/05 $ 279,345 530,565 530,565 IT expert (1) 0007 Zaidhul Khaleel ICS 25/03/09 Rf 59,500 IT expert (2) 0008 Pradeep Nellikkappillil ICS 25/03/09 $ 21,000 19,900 19,900

Total 11,892,379 10,160,909

Actual Contractor/Consultant Mode Contract No.

Original Contract

24

App

endi

x 8

Appendix 8

24

25 Appendix 9

TECHNICAL REVIEW SUMMARY A. Overview 1. The ADB project completion review mission acknowledges the technological, human capacity, procurement, financial, and geographical challenges faced by the project, and commends the implementing agency (the Ministry of Transport and Communications) for its ability to overcome the constraints and bring the project to closure. The management and technical teams at the National Center for Information Technology (NCIT) also show full confidence in the sustainability of the project, and its capacity to achieve its objective of improving the efficiency, transparency, and accountability of public sector management. This report provides a summary of the findings of the review mission, and makes recommendations on the overall sustainability of the project. B. Findings 2. The project had five main components: (i) government network, (ii) applications, (iii) National Computer Center (NCC) – renamed the National Centre for Information Technology (NCIT), (iv) internet kiosks, and (v) sector reform program.

1. Government Network

3. The network project was completed successfully with the following outcomes:

(i) Establishment of a data center. This data center in the NCIT building comprises the network, systems, database, and application infrastructure for interlinking all government agencies throughout the Maldives and for delivering public services over it. The data center houses more than 60 appliances including network switches, routers, hubs, servers, databases, storage, etc. The network topology is based on a tiered architecture for future scalability and with separate zones for external and internal communications.

(ii) Design and deployment of the Government Network of Maldives. A fiber optic

network has been established to interlink government agencies in Malé and other islands. This network connects 106 government offices, of which 79 are directly connected via optic fiber and 27 via ADSL. The connectivity between the NCIT and the 106 government offices is in the form of a star or spoke topology, where all connections are point-to-point and terminate at the NCIT. All interoffice communication traverses the NCIT data center.

(iii) Deployment of network infrastructure to 20 outer atolls. Four atolls have active

connectivity via microwave technology, offered by the local mobile operator, Dhiragu. These four atolls also provide connectivity and backhaul traffic from 21 government offices located in other islands. The remaining 16 atolls are equipped with the necessary network and communication infrastructure and will be provisioned as soon as the applications are ready to be rolled out to them.

2. Applications

4. The application component had the following outcomes:

26 Appendix 9

26 A

ppendix 6 (i) An enterprise architecture and framework for developing e-government services.

The servers, databases, and storage supporting this framework are also hosted in the NCIT data center.

(ii) A web portal for individual citizens, businesses, and government agencies, which

offers a range of services.

(iii) Government E-Letter Management System (GEM) for exchanging documents between the government agencies.

(iv) Transport Online for processing driver’s licenses.

5. The foundation (institutional framework, regulations, hardware, software, and human resources) for the remaining e-government applications is ready and the remaining applications and services (passport control, updating of national security records, health records, etc.) are expected to be completed soon. 6. The current security and authentication policy uses a central Windows Active Directory-based database with username, password, and the national identity to authorize user access to resources within the Government Network of Maldives (GNM).

3. National Computer Center

7. The National Computer Center (NCC) was renamed the National Centre for Information Technology (NCIT). The building is currently occupied by more than 30 NCIT employees and hosts the core data center for information and communication technology (ICT) operations and application development, a maintenance center, and training facilities.

4. Internet Kiosks

8. Four atolls have been connected to the main computer systems at the NCIT building in Malé through microwave networks provided by the local mobile operator. The current bandwidth for these links is 128 kilobytes per second but can be scaled up to 2 megabytes per second. The other 16 atolls have the necessary network infrastructure to make them operational following the deployment of applications to those sites. The four atolls are also providing GNM network access to 21 other government offices located in others islands. 9. In addition to visiting the data center, network operations center, and other ICT related facilities at the NCIT in Malé, the ADB team also visited the Secretariat of the South Huvadhuatholhu Atoll Council, Thinadhoo, Huvadhuatholhu atoll, on 30 April 2011. The project completion review mission observed the recently deployed kiosk and standard network infrastructure for interlinking Thinadhoo to the main data center at the NCIT.

5. Sector Reform Program

10. The telecommunication sector reform has been carried out and was reflected in the midterm review.1

1 ADB BTOR, Midterm Review Mission for Loan 1882-MLD (5-6 August 2008), SATC, 18 August 2008

Appendix 9 27

Appendix 8

27

C. Recommendations for Sustaining the Project and Future Projects 11. The NCIT should be nominated as the focal organization for all ICT initiatives and standards for the nation. The NCIT should spearhead the development of network and application architecture, ICT strategy and policy, and standardization and implementation guidelines for core components, through best practices and research in the sector. The Government of the Maldives made such an announcement in late 2010 and assigned the NCIT to this role. 12. Continued support from key stakeholders is essential for the success of the NCIT and ICT initiatives in the country. Without support from public leaders, organizational commitment, and incentives, it would be difficult for the NCIT to set policies and standards, and implement and sustain ICT projects. Since the NCIT has been the focal agency for ICT, it will receive continued support from the government. 13. The NCIT should take the lead in developing a business case and seeking support from the Ministry of Finance and Treasury in allocating necessary capital and operating funds to complete the remaining modules and sustain the project. The business case, accompanied with a financial model, should reflect current and projected expenses, benefits (savings), efficiency gains, and cost reduction efforts. Work in the following areas could further strengthen the business case: streamlining of projects across various agencies, outsourcing, and quantification of ICT benefits including savings in travel costs, personnel efficiency, and contribution to gross domestic product (GDP). 14. Local entrepreneurs should be encouraged fill the gap in available ICT capacity. This will help the NCIT to cope with the lack of resources and the cost of developing capacity in the ICT sector. The NCIT is in a key position to influence the growth of local ICT capacity through partnership programs with academic institutions, businesses, and agencies that are involved in education, training, and commercial aspects of ICT. Such a partnership program could alleviate dependence on overseas capacity and reduce operational costs. It would also create new revenue streams, contributing to GDP growth. The NCIT is in the process of establishing such an environment. 15. The Maldives is limited in land and resources and relies heavily on imports for almost all its commodities. Promoting green computing, energy reduction, minimization of e-waste, and health and safety policies will have direct savings for the country and should be prioritized. The national ICT strategy should promote this. 16. Various initiatives to encourage the adoption of ICT and government applications should be launched. Beginning with the management team itself, other non-ICT staff should be brought on board periodically, and trained to use the system. The success of ICT adoption depends largely on its growing use by non-ICT personnel. Narrowing the digital divide through localization of the content, and ICT training can help improve the use of ICT among citizens. Programs like e-citizen training and dual language portals are already in the pipeline. 17. Adopting a formal project management framework approach, and a central repository for projects, processes, guidelines, and templates would help with the efficient processing of ICT projects. This could have positive impacts on the overall efficiency of the organization, as well as facilitating engagements with development partners.

28 Appendix 9

28 A

ppendix 6 Figure A9: E-government Architecture

29 Appendix 10

SUMMARY OF NETWORK EQUIPMENT SN Product Description Quantity POP Structured Cabling Items 1 PWUEF-7X19ERN-BK Network open rack 4 2 FL2-96RPNL-B 96-ports rack mount termination panel (10.5" height) 19 3 FL2-FLMT1050-B Flush mount (10.5" height) for cabinet 6 4 FL2-48RPNL-B 48-ports rack mount termination panel (5.25" height) 2 5 FL2-FLMT0525-B Flush mount (5.25" height) for cabinet 8 6 FL2-24RPNL-B 24-ports rack mount termination panel (3.5" height) 2 7 FL2-6PSMDSC 6 pack single-mode duplex SC adapter plug-ins 312 8 – Single-mode SC connectors, jacketed 3.0/0.9mm 1,400 9 – Patch cord requirements (6m) SC-SC SMF duplex 145 10 – Patch cord requirements (6m) SMF duplex SC-MTRJ 96 11 – Patch cord requirements (15m) SMF duplex SC-SC 20 12 – Patch cord requirements (12m) SMF duplex SC-MTRJ 96 13 45RU network rack 600 x 600 2 Sub-POP Structured Cabling Items 1 FL9000CL cabinet 5 2 CCC 59M1 8 3 12 core splice tray 275 4 Single-mode SC connectors, jacketed

3.00/0.9 mm 3,208

5 SC/PC SM adaptor 3,208 6 Cabinet base 13 7 Fiber cable fixture device 13 8 Bare fiber protection tube 275 9 Single fiber heat shrink tube 3,208 10 Patch cord requirements (2m) SMF

duplex 129

Equipment at Malé Main Data Center 1 NetScreen 5200 chassis Federating core 2 2 NetScreen 208 Hosting facilities firewall 2 3 NetScreen 25 NCIT network firewall 1 4 Cisco 4507R Chassis POP 1 backbone switch x 4, POP 2 and 3 backbone

switch x 2 6

5 Cisco 6506E/FWSM Hosting facilities firewall 2 6 Cisco 3750G-24TS 2 7 Cisco 2811 ADSL router 1 8 Cisco 2950G-48 NCIT network switch 1 and 2 2 9 Cisco 2950G-24 Internet facilities switch 4 10 Cisco 2950-24 4 11 Cisco 2950-12 ADSL facilities switch 01 3 12 HP DL380 G4 8 13 Dell workstation 3 14 7.6M C-band Tx/Rx motorized

Gregorian earth station antenna 1

15 Satellite LNB equipment 1 lot 16 Redundant RF equipment 1 lot 17 FlexiDAMA-SkyIP system 1 lot 18 Liebert NX 30kVA UPS 2 19 Liebert GXT 10kVA UPS 1 20 45RU network rack 600 x 600 8 21 NOC monitoring 50" plasma wall-mount screens 3 22 NOC monitoring software HPOV NNM 1000 nodes 1 23 NOC monitoring software Netscreen security manager 1 24 NOC monitoring software MRTG 1 25 NOC monitoring software Ciscoworks 1 26 HP tape backup HP Ultrium 230e external tape drive 1 27 NOC furniture Helpdesk and monitoring stations at NOC 1

Appendix 10 30

Appendix 8

30

SN Product Description Quantity Equipment at Malé Main Remote Sites 1 NetScreen 25 34 2 NetScreen 5GT 60 3 NetScreen 5GT-ADSL 37 4 Cisco 2950G-24 10 5 Cisco 2950C-24 13 6 Allied Telesyn AT-MC103XL

media converter 68

7 Liebert GXT2 6kVA UPS 2 8 Liebert GXT2 1.4kVA UPS 9 9 5RU cabinets 26 10 Wall-mount cabinets 32 11 Wall-mount cabinets for ADSL

sites 70

Equipment at Remote Island Sites 1 NetScreen 5GT 146 2 Cisco 2950C-24 24 3 Liebert GXT2 3kVA UPS 24 4 2.4m antenna system 24 5 Satellite LNB unit 24 6 Agilis ALB180 C-band block-up

converter (BUC) 24

7 SkyIP remote terminal 24 8 PEP client 24 9 Alied Telesyn AT-MCR12 media

converter chassis 24

10 Alied Telesyn AT-MC102XL media converter

292

11 27U rack Island network rack 25 12 Wall-mount cabinets 123 Equipment under WiMAX POC 1 DENSEI-LAMBDA DC power

supply 2

2 BMAX-MBST-IDU-4CH BreezeMAX Micro BST indoor network interface access unit (4 channels) TDD unit, DC power

2

3 BMAX-BST-RM-PWR-FEED 19" front panel for power feeder with 2 covers 2 4 BMAX-GPS-IGA Indoor GPS adaptor unit 2 5 GPS-CBL-50 50m indoor-outdoor cable, for connecting the GPS outdoor

receiver to the GPS indoor adaptor 2

6 IOC LMR240-1-60 60m indoor unit to outdoor unit cable, for connecting the MBST to the ODU

2

7 BMAX-GPS- OGR Outdoor GPS receiver 2 8 BMAX-BST-AU-ODU-HP-TDD-

3.3b BreezeMAX base station high power outdoor radio unit 2

9 OAC LMR-400-1-1 Outdoor unit to antenna cable 2 10 BS ANT 90V/3.3-3.8 Antenna 3.3-3.8 GHz, 90° sector vertical polarity 1 11 BS ANT 120V/3.3-3.8 Antenna 3.3-3.8 GHz, 120° sector vertical polarity 1 12 BMAX-CPE-IDU-1D BreezeMAX data bridge indoor module with one 10/100

Base-T data port 3

13 BMAX-CPE-ODU-PRO-SA-3.3 TDD

BreezeMAX CPE pro outdoor radio unit -3,300 -3,400 MHz, with integrated antenna

3

14 CBL-BB/30 30m indoor unit to outdoor unit baseband cable 3 15 CPE-CBL-US Indoor CPE power plug US 3 16 SAU LOK 1unit per pack SU alignment unit for PRO CPE-SA/SE, Led OnKey -

reduced size 3

31 Appendix 11

ECONOMIC REEVALUATION

A. General 1. The project completion review mission conducted an economic reevaluation of the project by comparing “with” and “without” project cases, using similar methodology to that at appraisal, and updated data. In the “without” project case, it was assumed that the original state of the government network and internet applications would be retained. In the “with” project case, the government network was established and some internet applications were in operation. With this network and applications in place, most government documents were transmitted through the internet, with large time cost, transport cost, and paper savings. In the meantime, the applications are under development and improvement. The use of this network and applications is also being expanded to more atolls and citizens. In the reevaluation, its economic benefits were estimated by comparing “with” and “without” project cases. Consequently, the economic internal rate of return (EIRR) was calculated and sensitivities were tested. B. Costs 2. The project costs considered in the evaluation included both capital costs and operation and maintenance (O&M) costs. The actual capital costs for the project were about 6.0% higher than that estimated at appraisal. The implementation also took about 5 years longer than planned. Actual annual investment costs were used. In considering current use and future development, the O&M costs for the project were estimated based on the following assumptions:

(i) Rf 4.55 million per year for network maintenance cost, which was adopted from the RRP (footnote 4), but only 70% of this cost was taken into account since the network facility was not fully used. It was assumed that maintenance costs would increase by 2% a year.

(ii) Operational costs were estimated based on 30 staff in the National Center for Information Technology (NCIT) with an average salary of Rf3,840 per month. It was assumed that the operational cost would increase by 5% a year, along with the expansion of the system.

(iii) An additional 20% above costs was added to reflect other O&M costs at the NCIT and other government agencies, such as electricity, auxiliary equipment, commodities, consultancy, administration, etc.

3. All of the O&M costs were estimated in constant 2011 prices. Both the capital and O&M costs were converted into economic costs using a standard conversion factor of 0.90, as in the report and recommendation of the President (footnote 4). C. Benefits

4. The direct benefits of the project include (i) reducing the cost of data collection, (ii) faster processing and availability of information, (iii) time saved in delivering documents, (iv) cost savings for transportation, (v) cost savings for paper usage, and (vi) easy access to government guidelines and procedures, and (vii) more accessible information on markets. In the reevaluation, the following quantifiable economic benefits were estimated by comparing “with” and “without” project cases (based on discussions with the NCIT).

(i) Time cost savings. It was estimated that hand-delivering documents among government agencies cost about 20–30 minutes per trip. This is time saved using

32 Appendix 11

the GEM . The gross domestic product per capita in 2010 was used to calculate average time cost per hour. It was also assumed that the time cost would increase 10% each year.

(ii) Transport cost savings. It was estimated that about 800 trips per day were saved through delivering documents via the GEM rather than by hand; the average cost was about Rf30 per trip in Malé. The transport cost for traveling between Malé and the atolls was estimated at Rf2 million per year.

(iii) Paper cost savings. It was estimated that about 4,000 transactions take place per day for exchange of documents over the GEM. About 40,000 pieces of paper can be saved per day (assuming an average 10 pages per transaction). An average cost of Rf60 per pack of paper (500 sheets) was applied.

(iv) Other cost savings. For the unquantifiable benefits, 30% above savings was added. About 3,000 government staff are registered in the GEM system. As the project expands, all 10,000 government officials will be connected by the system. More internet kiosks will be installed and used. It was assumed that the benefits would increase by 20% each year before 2015 and 10% each year afterwards.

D. Economic Internal Rate of Return Reevaluation 5. The recalculated EIRR was 16.5%, which was much lower than the 25.0% estimated at appraisal.1 This was mainly due to much higher capital costs2

1 In RRP (footnote 4), the economic evaluation was carried out separately for the four components. The EIRR for

the whole project was calculated to be 25%.

and a longer implementation period than estimated, and the exclusion of some incomplete applications. However, the recalculated EIRR was higher than the ADB recommended social discount rate of 12%, and the project can be considered economically viable. The EIRR was subjected to sensitivity analysis to test different scenarios, including the effects of a 20% increase in O&M costs, a 20% decrease in benefits, and a combination of these two scenarios. The sensitivity analysis results show that the project continued to be economically viable for all scenarios. In the worst case, with a combination of both a 20% O&M cost increase and a 20% benefit reduction, the EIRR would still be 13.6% for the whole project. The sensitivity test also shows that the EIRR is more sensitive to changes in benefits than to changes in O&M costs. Therefore, the government and the NCIT should pay more attention to improving existing applications and developing new ones, and to expanding utilization to more government agencies and citizens, which will maximize the benefits of the project. Table A11.1 shows the EIRR calculation for the whole project. Table A11.2 lists the results of the sensitivity tests.

2 In the RRP (footnote 4), only Rf101.33 million of capital costs in economic terms was considered.

Appendix 11 33

Table A11.1: Economic Reevaluation of the Project (Rf million)

NetCapital Maintenance Operation Total Time Transport Paper Others Total Benefit

2002 1.13 1.13 (1.13) (3.12)2003 6.21 6.21 (6.21) (15.37)2004 4.46 4.46 (4.46) (9.85)2005 20.26 0.41 20.67 (20.67) (40.80)2006 20.20 0.82 21.02 (21.02) (37.04)2007 29.23 2.05 31.28 (31.28) (49.22)2008 17.24 3.28 20.52 (20.52) (28.82)2009 47.91 4.10 52.00 1.86 4.00 0.60 1.94 8.39 (43.61) (54.70)2010 4.18 1.49 5.67 2.97 6.40 0.96 3.10 13.43 7.76 8.692011 4.26 1.57 5.83 3.71 8.00 1.20 3.87 16.79 10.96 10.962012 4.35 1.65 5.99 4.83 9.60 1.44 4.76 20.63 14.64 13.072013 4.43 1.73 6.16 6.28 11.52 1.73 5.86 25.38 19.22 15.322014 4.52 1.81 6.34 8.16 13.82 2.07 7.22 31.28 24.94 17.752015 4.61 1.91 6.52 10.61 16.59 2.49 8.91 38.59 32.07 20.382016 4.70 2.00 6.70 13.79 18.25 2.74 10.43 45.21 38.50 21.852017 4.80 2.10 6.90 17.93 20.07 3.01 12.30 53.31 46.42 23.522018 4.89 2.21 7.10 23.31 22.08 3.31 14.61 63.31 56.21 25.432019 4.99 2.32 7.31 30.30 24.29 3.64 17.47 75.70 68.39 27.622020 5.09 2.43 7.52 39.39 26.72 4.01 21.03 91.15 83.62 30.152021 5.19 2.55 7.75 51.20 29.39 4.41 25.50 110.50 102.75 33.082022 5.30 2.68 7.98 66.57 32.33 4.85 31.12 134.86 126.89 36.482023 5.40 2.82 8.22 86.54 35.56 5.33 38.23 165.66 157.44 40.412024 (73.31) 5.51 2.96 (64.85) 112.50 39.12 5.87 47.24 204.72 269.57 61.78

Net Present Value (NPV): 147.6 Economic Internal Rate of Return (EIRR): 16.5%

Discount Rate: 12%

BenefitCost NPVyear

Source: ADB project completion review mission

Table A11.2: Sensitivity Analysis

Scenarios EIRR (%) Base Case 16.5% Sensitivity Tests

(i) Maintenance cost 10% higher 16.4%(ii) Maintenance cost 20% higher 16.2%(iii) Operation cost 10% higher 16.5%(iv) Operation cost 20% higher 16.4%(v) Benefits 10% lower 15.3%(vi) Benefits 20% lower 14.0%(vii) Benefits 10% higher 17.6%(viii) Benefits 20% higher 18.7%(ix) O&M cost 10% higher & benefits 10% lower 15.1%(x) O&M cost 20% higher & benefits 20% lower 13.6%

EIRR = economic internal rate of return, O&M = operation and maintenance. Source: ADB project completion review mission.