Ifrz tresident - FSM President

Ifrz tresident
Qa{ikir, Pofinpei
fe(ernter{ Stotcs of fr'fiuonuin
JuIy 74,'"2014
11-r"
|{srrrrable Dohsis Halbert
Speaker
Eighteerth Congress of the Federated States of Micronesia
Palikir, l)'ohnpei, FM 96941
Re:
IDA-17 Finalcing and Timeline for FSM Telecommunications Connectivity Project
Dear Spi:aker Halbert:
am pleased to transmit to the FSM Congress a copy of the most recent World Bank
commur ication on our telecommunications connectivity project. The communication advises
us on ttLe results of internal consultations within the World Bank as to notional financing
I
amcunts and processing milestones for the project.
I am pleased also to inform Congress that the proposed World Bank grant financing amounts
have becn increased over what had been contemplated in IDA-16. The International
Developrnent Association has now confirmed the availability of US $51 million, which would
fully furrd construction of a Palau-Yap-Guam fiber optic cable and also a fiber optic cable
connecting both the islands of Weno and Satowan in Chuuk to the current Pohnpei cable. In
addition the US $51 million includes substantial amounts for technical assistance, for project
managernent, and for redeployment of O3B satellite bandwidth to Kosrae, along with a five
year subr;idy for Kosrae connectivity. It is important to keep in mind that these amounts are
notional. and depend on final project design and procurement costs.
I would ,Llso like to highlight the importance of the processing milestones necessary for project
completion. The World Bank proposes to secure formal Board approval for the project by
November 30,2014. In order to accomplish that, FSM and Palau need jointly to confirm
project c,3sign, scope and costs by the end of this month, and must also jointly recruit a project
director. In addition, the ADB team, with suppofi from relevant FSM and Palau stakeholders,
must cornplete environmental and social safegtrards work by the end of August 2074, inciuding
public disclosure of relevant documents.
Forlunat::ly, the Micro-Pal Fiber Optic Joint Committee has been active, and our FSM
Telecornmunications Task Force has been vigorously pushing the project forward. Therefore,
we anticipate being able to meet these processing milestones, in that regard, I would like to
thank Cc,ngress for the support it has shown for the project, including approval of the $500,000
PRIF Grant, which will be necessary to put us in a position to qualify for the full US $51
rnillion li-rnding. I wouid also request that Congress continues its unqualified support for the
project, t:specially during these delicate preparatory stages where we are trying to secure World
Bank Borud approvai.
The Honorable Dohsis Halberl
July 16, .)014
PageZ
The "dir;ital divide" poses a substantial threat
to our education, health, and economic
developrnent objectives. We have pushed the World Bank to increase the scope of the project,
and we rrow have confirmed fiber optic funding not only for the State of Yap, but also the State
of Chur.k, along with substantially improved, subsidized connectivity for Kosrae. am
I
confidert that as a nation we can wholeheartedly support this project and work together to
bring tu,enty-first century telecommunications services and lower prices to the people of the
FSM.
rl
Sincerel y,
Enclosure:
,1rll Speakers and President
of Chuuk Senate
Office of the Presidentl P.O. Box PS 5;l, Palikir, Pohnpei, FM gbglr
Thtffi
wOffiLffi &AruK
lWMffi - IWk
I woRlu nantcnqvr
Level 19, 14 Martin Flace
SYnNEY t\$W 2000
AU$TRAI.IA
Telephon€ {61-?) S2?3 7773
FRANZ R, NREE$"QROSS
Country Director
Timor-L€ste, Papua New Guinea & Pacific lslands
East Asia and Pacifie R€gion
July 9,2414
H.H. ErnanuelMori
Presidcnt
Otfice of thc Prcsident
l'() llox 53
Palikir, FM 96941
FEDERA"I'ND S'I'AI'ES OIf MICRONESIA
Dear Plesidenl Mori,
P rop ose d Pu I a u- FS M C o n n ec I i tt i t-v P roj e d (p l.l 0 5 I 2)
'l'he purpose of this lettel is (a) to brisf you on the results of our internal consultation wirhin
the Worlcl Bank on the availatrility of lilA-17 resour:ces to suppclrf the F$M pnrtion of the PalauFSM Connectivity Project (P130592), and (b) to re-confirm the key processing milestones ihat iie
ahead be{bre the prcrject can be presen(ed to the World Bank's Baard of Executive Directors.
Before I begin, let me thank you fol yonl strong support fcrr the Wr:r"ld Bank's mission to
FSM {Pohnpei) in May. These visifs followed productive discussions on May 9, 2014, between
the Asian l)evelopnrent Bank (ADB) and World Bank (WB) tearns in Manila, together with
reprpsentatives of the Micro-Pal FibeL Optic Joint Cornmittee.
The Joint Committee is a very important vehicle within which all stakeholders can work
collaboratively. The Project is a complex operation, involving two soveteign governmerts and
telecommunications industry stakeholders. It is essential, thelefore. that effective coordination
and collaboration is mainfained during both the preparatiott *ncl implem*ntation of this Project.
I^. Av*il*ble IDA financing for the project
I am pleasecl to infbrm you thnt IDA mnnagement has conilrmcd the availahility of UfiDS l,0
million ficr FSM for this Project, coniprising USD38.6 million in regional lnAIT grants which
would complement USDl2.4 rnillion in national lDAlT grants" The allocations are expected to
be broadly sufficient to provicle grant financing for (i) FSM's share *f a new cable linking PalauYap-Guam; (ii) a nerv cable linking Chuuk to Pohnpni; (iii) iniproved cr:nnectivity for l(osrae;
and (iv) iunding fnr technicalassistance and prnject management, A notieinal breakdown of the
availability of regional and national IDA funds by component and invcstment astivity is trrrovided
in the table belo,,v,
ffiJ*on
o*An'*&noup
")
FI.E. Enianuel McN"i
July 9,2014
Notional Estimated Cost Allocation (F$M)
Tofal
Financing
Nstional IDA
Ilalau'Yap-Grram
22.5
1"2
Chuulc-Pohnpei
24.5
8.2
Itosrae Connectivity
Conrponenl 2
1,0
1.0
Technical assistance
7.s
7.4
0.5
12.4
38.6
Activity
Conrponenl
Regional
IDA
l
Componcnl 3
Prcject rnanagement
Total fintinrated frojccf Cosfs
0,5
51.0
2t.3
r
6.3
0"5
2. Cornponent I Dcscription
The scope and funding for component one has lreen the subject of in{enss analysis and
discussion, The confirmatinn nf funding lrom IDA management, sufficient to meet the estimated
cosrs to FSM of fiber optic cables for Yap and Chuuk, ailows us rlow to propose the following
activities:
Palau * Yap - Guanr C$ble: Palau and FSM willjointly own the cable systern up trt
the landing statiors tei be built in eacii colrnlry, comprisiug an undivided 50% share of
the international bandwidth capacity available ovel the cable system, and wilI separately
own their respective lanciing station and related domestic terrestrial infi'aslructure. Both
governments have agreed on the principle of equal (50/50) sharing of coustruotion and
opera{ing costs for the cable, 'lhe cost estimate is based on the anticipated costs to FSM
for a new cable and related infiasffucture.
Chuuk
-
Pohnpei Cabler The financing for the catrle eont:e*tion for Chunlc will be
will be formed for the catrle for Palau ancl Yap, It is
separate front the consoftilun which
anticipated that bidding and constructing the two cable systenls concurrently, as part ofa
single initiative, will generate some cost savings, which have been factored into the cost
estimate for the Chuul<-Pohrrpei segment. The pruposed hudget also includes the
additional c*sts of a liber optic spur connecting Weno to $iatowan. The cost estimate is
bnsed on the anticipatecl costs o{'a new cable and related infiastructure,
Kosrne Connectivify: 'ilre prnposed financing would seaure the redeployment ol'the
existing O3b contract fi'nrn Ciruuk to Kosrae, at a wholesale price in l(osrae whlch
would lre sirnilar to the estimated price lb'r bandwidth in Clruuk and Yap on the nsw
sutrmarine cabls. Th* LJS$l milliorr onc-off subsidy would meet the costs of O3B
bandwidth for l{osrae for 5 yeals. I-lowevei, the World Banlc is unable to t'inance, even
in pail, a cable to l{osrae. Teclmical analysis has eonclurJed that a cable for Kosrae is not
l.l,E. EmanuelMori
-J"
.luly 9. ?0i4
viable, both fi"onr a finansial ancl development ilnpact perspective, given tlre small
populati<xr and the high costs of a pable,
3. Processing Milestones
for Finalizing Project Preparation
The World Bank Cruup's technical tearn has been working with ADB's technical team and
the r"elev*nt agencies in Palar"r and FSM on the detailed liext steps, timelines, and resporrsibilities.
In view of tl"re timeline pre{brred by all stalceholders, inclucling the Mioro-Pal Fiber Optic Joirit
Committee, we would like to be able to secure Board approval by Novpmbpr 30,2014. We lrave
advised the .lcint Clomrnittee menrbers that the following steps need to be completed in order tei
{inalize Ploject preparation.
Projecl fresign, Scope nnd Cosls. We request conlirmation frum FSNd of the proposed
Prnject activities ancl i:udget allocations, as set out in this lettcr. We also stfongly
recommcnd that the Governments of Palau anc{ FSM, througl'r the Joint Committee,
leach a fbrmal decision in July 2014 on the pref'elled scope and hrLrdget allocation for the
Palau-Yap-()uam cable segrnent, in order to finalize the Project's costs and associated
financial analysis. Once a final rlecision on project design and scope heen tal<en by each
Gcvernment, bolh ADB and WB will be able to finalize the Project'n financial analysis
and commitrnent of firnds.
b.
Recruilmenl ot"a llrajeel direclor to $upport the Joint Canrmittee. We are pleased to
note that the Joint Committee iras received several exprcssions of interest for this
position and tliat evaluation ol-candidates is ongoing. 'fhe next step rvill be to complete
the selection procqss, lbllolving standmd evaluation procedures, with a vietv to
rnobilizing the director be{br"e end*July,20l4. 'Ihis position is essential to advance the
preparatory work including establishment of cable conrpanies, negotiatiorr ol permits,
licenses, and preparation of bitlding clocuments.
Complelion of lhe environnrentnt! and socitrl srtfegunrtls worl* {inancecl by the ADB.
Pr"rblic disclosule of these documellts, in both Palau and FSM, are lequirecl befble the
Worlcl Bank can conduct Ploject appraisal. The consultants have initiated the analytical
work and consultatiotts. A rnission to Palau and Yap has ah'eady taken place. A rnission
to Chuuk will be undertairen in mid-Juiy 2A14. The key issne at this stag€ is to contlrm
the potential cable larrding sites and assess environmental and social issues, and
associated rnitigation nleasures. '{'he draft rcports are expe*ter{ to be completecl by endJuly 20i4.
If
these milestones can be achieved, the World Bank wouid sxpecf to appraise the project in
in coordination with the Asian Developrient Bank, ncgotiate the relevant legal
agreements in Octaber, and prcs*nt the Pro.iect to its lJoard of Directors by 30 November.
fieptember,
4.
Other Mafters
I appreciate
JC [",
that F$M is taking steps to strengthen its legal and regulatory fi'amework tbr
to support further market growth and expansion and to strengthen the business case fbr the
H.E. Emanuel Mori
-4-
Iuly 9, 2014
submarine cable investment. I encourage you to finalize the recruitment CIf $ector investment
and Development speeialists uncler the existing Technical Assistance Grant Financing. These
advisers will be central in helping you to exarnine and implement these infiastructure investmsnts
as proposed for the telecommunications sector
In closing, I would like to thank you for your continued leader"ship on thi$ important topicn
which should lead to nrore effioient, wide reaching and affordable telecommunipations for the
people of FSM. I would also like to reaffifix my commitment, on behalf of the World Bank
Group, to work closely with your team Xo sn$uls this operatinn can be prepared and irnplemented
in n timely hshion.
Sincerely,
{"*w,M&,W
Fmnz R. Drces-(iross
Country Director
Timor*Leste, Papua New Ouinea
& Pacifie Islands
East Asia and Paci{ic Region
Mr.I(ensley lkosia, Secretary, Depaftnent of Finance and Administration (DoFA)
Mr'. Francis Itimai, Secretary, Depa$ment of Tmnsportation, Communications &
Infrastructure (DTC&I)
Ms, Senny Fhillip, Assistant Secretary, (DoFA)
Mr. Michael Willcock, Executive Dircctor, The World Bank