Greater Mekong Subregion of the Subregional Telecomm Pattaya, Thailand 2-4 July 1997 ‘Third Mceti ions Forum, Summary of Proceedings I. INTRODUCTION 1, The Third Meeting (the Meeting) of the Subregional Telecommunications Forum (STCP-3) was held in Pattaya, Thailand from 2-4 July 1997, It was hosted by the Post and Telegraph Department of Thailand (PTD), the Ministry of Transport and Communications (MOTC), the Telephone Organization of Thailand (TOT), the Communications Authority of Thailand (CAT) , and the National Economic and Social Development Board (NESDB), in coordination with the Asian Development Bank (ADB). The Meeting had the following objectives: i) to review developments in the telecommunications sector in the participating GMS countries; ii) to review the progress in the implementation of the STCF workplan; iii) to discuss the implementation of the East Loop Project; and iv) to discuss private sector financing options for telecommunications projects. The agenda of the Meeting is attached as Appendix 1 2. Participants included delegations from Cambodia, Lao People’s Democratic Republic (Lao PDR), Myanmar, Thailand, and Viet Nam. Representatives from the Asi: Pacific Telecommunity (APT), Australia, the Export Import Bank of Japan (Japan Eximbank), the Intemational Telecommunications Union (ITU), Japan, Kreditanstalt ftir Wiederaufbau (KIW), the People’s Republic of China (PRC), and the Working Group on eonomie Cooperation in Cambodia, Laos, and Myanmar (WG on CLM), attended as observers. The list of participants is attached as Appendix 2. The Meeting was chaired by Mr. Sethaporn Cusripituck, Deputy Director General, Post and Telegraph Department of ‘Thailand, and co-chaired by Mr. Ginter Hecker, Manager, ‘Transport and Communications Division, Infrastructure, Energy, and Financial Sectors Department (West), ADB. 3. Based on the decision of the Sixth Ministerial Conference held in Kunming, ‘Yunnan Province, People’s Republic of China in August 1996, to invite the private sector to the third meeting of the Forum, a panel discussion involving the participation of private sector representatives was held on the second day of the Meeting. The panel discussion covered various aspects of private sector participation in telecommunications in the GMS, The summary of the pane! discussions is attached as Appendix 3. I OPENING SESSION 4. HE. Ditek Charsenphol, Deputy Minister. Ministry of Transport and Communications of Thailand, welcomed the participants on behalf of the Royal Government of Thailand. He stressed the importance of telecommunications in promoting economic growth and the welfare of the peoples in the subregion. He said that to ensure progress towards the development of the subregional network, cooperationamong the GMS countries through the STCF, as well as assistance of the international community, were essential. He emphasized the important role of the private sector in the liberalization and expansion of the telecommunications industry, citing the role of competition in promoting quality of service and reasonable price for the consumers. In his opening remarks, Mr. Sethaporn Cusripituck, Deputy Director General, Post and Telegraph Department of Thailand noted that the availability of adequate and reliable telecommunications facilities, like roads and railways, will reduce the geographic isolation of rural communities. He thanked the Government of Australia for supporting the activities of the STCF, and the Government of France for its financial contribution to the East Loop Project. 3. Mr. Giinter Hecker, Manager, Transport and Communications Division, Infrastructure, Energy and Financial Sectors Department (West), ADB emphasized the importance of a coordinated approach to the expansion and improvement of the telecommunications sector through a progressive and phased development of domestic systems to form a subregional network. He indicated that progress has been made towards the implementation of priority subregional projects. In particular, he announced that ADB has approved a regional technical assistance for the East Loop Project with funding support from the Government of France. Mr. Tony Coghlan, First Secretary, Ausiralian Embassy in Bangkok indicated that the Government of Australia is pleased to support efforts of GMS countries to promote telecommunications infrastructure that would bring about closer links among the countries in the subregion and between them and the rest of the world, Australia has been actively supporting the subregion with an allocation of $140 million in official development assistance (ODA) during fiscal year 1996-1997, representing 10% of its total ODA budget. I. Review of Developments in the Telecommu ns Sector AL Over -w of Developments in the Telecommunications Sector 6. Mr. Robert Rothery, Project Engineer, Transport and Communications Division, Infrastructure, Energy and Financial Sectors Department (West), ADB, reviewed the context of subregional cooperation in telecommunications under the framework of the MS Economic Cooperation Program assisted by the Bank. He referred to the recommendations of the Telecommunications Sector Study conducted in 1995 that became the basis for the identification of priority subregional projects and supporting studies. These recommendations include the adoption of optical fiber for the transmission network, implementation of common technical standards, and cooperation on “soft” issues such as training and tariffs. 7. The outcome of STCF-2, held in Phnom Penh in July 1996, was reviewed, The Meeting reviewed the 13 priority projects and established the East Loop as the first project to be prepared. It also established training needs and mobile communications as priority studies and agreed to establish a Working Group on Tariffs. The ADB agreed to develop draft terms of reference (TORs) for the East Loop Project, the two studies, and the Working Group on Tariffs Policy.B. Country Speeifie Developments 8. ‘The patticipating countries reported on recent developments in telecommunications policies and infrastructure projects, in particular, those activities that relate to the development of the subregional network. The Meeting noted that while individual GMS countries are making progress in implementing various facets of theit national telecommunications development plans, there is a need to continue integrating these national efforts into the GMS framework, 9. The Meeting was informed of the key developments in the GMS countries that contribute to the development of the subregional telecommunications network. In Cambodia: i) optical fiber links to Thailand and Viet Nam had been included in the (elecommunications master plan, consistent with GMS recommendations; ii) in August 1997, construction of an optic fiber transmission link will begin, connecting Phnom Penh. to the Thailand network (Project C3); iii) work will also begin on the construction of an optic fiber transmission link connecting Phnom Penh to Viet Nam (Project C2); and iv) maritime radio telephone services along the coastlines will soon be provided with future expansion over major inland waterways, including those along the Mekong River. The Common Channel Signaling System No. 7 (CCS#7) is included on all optical fiber ission systems. In Lao PDR: i) Entreprise du Telecommunications Lao (ETL) has had discussions in Thailand and Viet Nam Posts and ‘Telecommunications (VNPT) in Viet Nam on the C1 Project linking Udon Thani in Thailand to Vinh in Viet Nam via Vientiane; funding of the Lao PDR portion, however, still has to be secured; ii) the Lao PDR Government has entered into a joint agreement for a satellite system which would be operational by 1998; and iii) the cellular phone system has been expanded to Luang Prabang, Savanaket and Pakse. In Myanmar, participation in the SEA-ME-WE 3 optic fiber submarine cable project is underway with the signing of a number of agreements with participating countries as well as supply contracts. This project will provide an important link to Thailand, and to the GMS network. 10. In Thailand: i) the Udon Thani-Nong Khai link to allow crossing at the Thailand Laos Friendship Bridge to Lao PDR is being implemented as part of the China Southeast Asia Terrestial Optical Fiber Cable (CSC) Project: ii) with regard to the SEA-ME-WE 3 project, the CAT has signed the Construction and Maintenance Agreement for the system in March 1997; and iii) CCS#7 will be used for all new switches to be installed from 1997 onwards. Thailand expects to complete the introduction of the SDH and CCS#7 network-wide, within five years, and by the end of 1997, all switches will be 100% digitalized. In Viet Nam: i) survey, design and construetion is ongoing for the Vietnamese portion of the C1, C2, and C11 projects and is scheduled for completion in 1998: ii) a feasibility study for launching a domestic satellite is ongoing, with scheduled operation by the year 2000; and iii) a team has been established to look into cross-border issues, initially focusing on mobile telecommunicationsIV. IMPLEMENTATION OF THE STCF WORKPLAN Il, _ The Meeting reviewed the five key elements of the workplan as follows: i) the st Loop Project: ii) taining in Thailand; iii) training needs study; iv) mobile tclecommunications study; and v) working group on tariffs policy. A. East Loop Project 12 ‘The Meeting was informed that ADB has approved a regional technical assistance (RETA) project to assess the feasibility of improving telecommunications facilities among Cambodia, Lao PDR, Thailand, and Viet Nam, otherwise referred to as the East Loop Project. The Government of France is contributing US$770,000 for the RETA. The project includes components for assessing alternative financing arrangements for the identified project components, including private sector financing. In addition, the project will also assess the national institutions involved and recommend a program of institutional strengthening for them. The project, for which the Bank is the executing agency, will be guided by a steering committee, with each participating country designating its implementing agency to coordinate day-to-day implementation of project activities. 13. The Meeting noted that a number of the elements included in the East Loop Project are already being implemented at the national level. ADB requested the participating countries to integrate these efforts closely with the subregional project. It was clarified by the concerned countries that there are no restrictions in the CSC Agreement that would impinge on the East Loop project. Cambodia kindly offered to be the base country for the project, subject to availability of resources and the consultants’ workplan, The participating countries designated their implementing agencies for the project as follows: i) Cambodia, the Ministry of Posts and Telecommunications (MPTC); ii) Lao PDR, ETL; iii) Thailand, TOT and CAT ; and iv) Viet Nam, VNPT. ‘Training Program for GMS Telecommunications Personnel 14, Mr. Sutham Malila, Senior Executive Vice President, TOT, reported, on behalf of Thailand, the outcome of three uaining courses conducted by TOT for the GMS countries, namely: i) optical fiber transmission systems; ii) optical fiber splicing; and iii) preventive maintenance for optical fiber transmission systems, Twenty participants from five GMS countries (PRC was not able to join the training courses) availed themselves of the training which included onsite observation. Experts from the Asian Institute of ‘Technology (AIT) and senior executives from TOT were also involved as. special lecturers in the training courses. Apart from the leaming that took place, an important outcome of the training courses was the friendship and goodwill generated among participants that could help foster further collaboration among the GMS countries, TOT offered to conduct future training courses for both technicians and instructors, as may be required by GMS countries. The CAT indicated that it will also support training programs in GMS countries in the form of observation tours and on-the-job training in CAT international telecommunications systems such as satellite communications, submarinecable, and international gateway exchange. The GMS countries and ADB expressed their appreciation to Thailand for conducting the training courses, C. Draft TOR for the Telecommunications Tr: ing Needs Study 15, The Meeting recalled that in STCF-2, highest priority was accorded to the conduct of the telecommunications training needs study. The Meeting considered a draft TOR prepared by ADB for a study that will look into the nature and extent of the telecommunications training needs within the subregion. The study will include the identification of existing and potential providers of telecommunications training programs in, the subregion as well as possible sources of funding.|The report resulting from the studly will identify the anticipated training needs in each off the GMS countries relative to the existing and proposed technological development in the subregion. 16, ‘The Meeting suggested that the work of the consultants include facilitation of training programs that are already available to GMS countries, such as those conducted by TOT. The Meeting agreed to the suggestion that the study focus on training needs and opportunities at the subregional level, since country-specific needs will have to be addressed by national programs. The Meeting also agreed to the suggestion that a short list of important and immediate training needs should be made, taking into account the work that APT has already done in this area, and that priority be accorded to training requirements for the technology envisioned for the subregional telecommunications network. The Meeting accepted the offer of Thailand to be the base country for the project. D. Draft TOR for the Mobile Telecommunications Study 17. ‘The Meeting reviewed the recommendations of the Telecommunications Sector Study on mobile telecommunications pertaining to the following, among others: i) introduction of market-based matitime VHF radiophone service covering all inland waterways and coastal areas of the GMS; ii) provision of GMDSS network along the coastlines of Cambodia, Myanmar, Thailand, and Viet Nam; iii) policy on the utilization of'a satellite-based radio mobile services; iv) licensing policy for cellular mobile systems in border areas; and v) policy for the development and implementation of trunked mobile radio networks along the principal transport corridors. As proposed in the draft TOR prepared by ADB, the study will assess the feasibility of implementing these recommendations. Initially, the study will focus on identification of any institutional, regulatory or technical barriers to the implementation of these recommendations. Subsequently, the study will focus on the development of proposals to overcome such barriers. 18.. ‘The Meeting adopted the TOR as proposed by ADB with the suggestion that the study include frequency coordination with respect to mobile communications services, It ‘was suggested that frequency coordination should be initiated on a bilateral basis, with other countries joining subsequently as they may find beneficial. The Meeting welcomedthe offer of Lao PDR to be the base country for the study. The Meeting requested ADB to assist in identifying sources of funds for the study, Draft TOR for the Establishment of the W Policy ing Group on Tariffs 19, ‘The Mecting considered the draft TOR prepared by ADB for the Working Group on Tariffs Policy that was recommended by STCF-2. The Working Group was Proposed primarily to look into the feasibility of establishing consistency between the various telecommunications tariff regimes in the GMS countries, As proposed in the draft TOR, the Working Group will focus on charges for calls between the GMS countries. Two representatives from each GMS country will comprise the membership of the Working Group. 20. The Meeting adopted the TOR of the Working Group as proposed by ADB and requested the Bank to identify sources of funds for the operations of the Working Group. VY. OTHER MATTERS 21. ‘The Cambodian delegation requested ADB for assistance in preparing, and possibly financing, a telecommunications project involving the private sector along the lines proposed during the pane] discussion on the second day of the Meeting. I. DATE AND VENUE OF THE NEXT MEETING 22. The Meeting agreed to hold the next meeting of the STCF in Lao PDR in June ot July, 1998. VI. STATEMENT OF OBSERVERS. 23. Mr. Amarendra Narayan, Director, Project Development, Asia Pacific Telecommunity (APT) affirmed APT’s long-standing partnership with ADB and offered its continuing support for the Bank’s activities in the subregion, Dr. Shailendra Kumar Hajela, Coordinator, Regional Office, International ‘Telecommunieations Union (ITU), informed the Meeting that ITU has been working closely with the countries of the subregion and is prepared to collaborate with ADB in efforts to promote cross-border links through telecommunications infrastructure. Mr. Gerhard Munster, Vice President, Export and Project Finance, Kreditanstalt fur Wiederaufbau (KfW), thanked the organizers of the Meeting for the opportunity to participate both as observers and panclist. KW reaffirmed its commitment to support infrastructure development in the GMS not only asa donor but as an export finance agency, and indicated that it will continue to explore areas of collaboration for mutual benefit. 6VII. ACKNOWLEDGMENTS 24, The Meeting expressed their sincere appreciation to the Royal Government of Thailand, in particular, the Post and Telegraph Department, the Ministry of Transport and Communications, the Telephone Organization of Thailand, the Communications Authority of Thailand, and the National Economic and Social Development Board, for the excellent arrangements for the Meeting and for the hospitality extended during their stay in Pattaya,Appendix 1 Greater Mekong Subregion ‘Third Meeting of the Subregional Telecommunieations Forum (STCF-3) Pattaya, Thailand 2-4 July 1997 Provisional Agenda and Program 2 July 1997 0830-900 Registration 0900-0930 Opening Session Welcome and Opening Remarks -- HE. Direk Charoenphol Deputy Minister Minister of Transport and Communications Thailand --- Mr. Sethaporn Cusripituck Deputy Director General Post and Telegeaph Department ‘Thailand -- Mr. Giinter Hecker Manager, Transport and Communications Division Infrastructure, Energy and Financial Sectors Department (West) Asian Development Bank Mr. Tony Coghlan First Secretary Australian Embassy, Bangkok Australia 0930-0945 Coffee Break 0945-1015 Review of Developments in the Telecommunications Sector A. Overview -- Mr. Robert Rothery Project Engineer Transport and Communications Division Infrastructure, Energy. and Financial Sectors Department (West) Asian Development Bank1OIS-1115 1115-1200 1200-1330 1330-1500 1500-1515, 1515-1530 1530-1600 Review of Developments in the Telecommunications Sector (continued) B. Country Specific Developments ‘Cambodia People’s Republic of China Lao PDR Myanmar ‘Thailand Viet Nam Implementation of the STCF Workplan A. Status of the East Loop Project (C1, C2. C3) Mr. Robert Rothery Project Engineer Transport and Communications Division Infrastructure, Energy, and Financial Sectors Department (West) Asian Development Bank B. Training Program for GMS Telecommunications Personnel -- Telephone Organization of Thailand Working Lunch Implementation of the STCF Workplan (continued) C. Draft TOR for the Telecommunications Training Needs Study D. Draft TOR for the Mobile Telecommunications Study E. Draft TOR for the Establishment of the Working Group on Tariffs Policy Study = Mr. Robert Rothery Project Engineer Transport and Communications Division Infrastructure, Energy, and Financial Sectors Department (West) Asian Development Bank Coffee Break Other Ac es in the STCF Workplan Statements of Observers Cocktail Reception Hosted by: Post and Telegraph Department of Thailand3 July 1997: 0830-0900 0900-0915 0915-0920 0920-0950 0950-1020 1020-1030 Greater Mekong Subregion Meeting of the Subregional Telecommunications Forum (STCK-3) Pattaya, Thailand 2-4 July 1997 Provisional Agenda and Program Panel on Private Sector Participation in Telecommunications in the GMS Registration (for private sector representatives) Background to Private Sector Participation in GMS Infrastructure Finance _ Mr. Filologo Pante, Jr. Head, GMS Unit Programs Department (West) Asian Development Bank -- Mr. Robert Rothery Project Engineer Transport and Communications Division Infrastructure, Energy, and Financial Sectors Department (West) Asian Development Bank Introduction of the Panel Private Sector Participation in Telecommunications Projects -- Mr. Surind Vanichseni Vice President and Acting Director ‘Telecommunications Association of Thailand ‘inanced Projects in the GMS: Experience with the Lao land Power Sector Project and Possible Parallels in ‘Telecommunications Projects -- Mr. Robert Kay Executive Vice-President MDX Power Co., Ltd. Coffee Break1030-1100 1100-1130 1130-1200 1200-1330 1330-1430 1430-1445 1445-1500 1500-1600 ‘The Role of Private Financial Institutions in Privately-Financed ‘Telecommunications Projects --- Mr. Roland Sand Deputy Director ‘Telecommunications Asia-Pacific Deutsche Bank The Role of Bilateral Donor Financing in Telecommunications Projects <- Mr, Gerhard Minster Vice President, Export and Project Finance Telecommunications Division Kreditanstalt fur Weideraufbau (KfW) Private Sector and Cofinancing Operations of ADB. --- Mr. Paolo Lombardo Investment Officer, Private Sector Group Asian Development Bank Working Lunch ‘Views and Experiences on Private Sector Participation in Telecommunications Projects Summary of Panel Discussions - Mr. Tom Reid Consultant Asian Development Bank Coffee Break Open Discussion4 duly 1997 1000-1030 Follow-Up Activities 1030-1100 Adoption of Summary Proceedings 1100-1115 Closing Session 1145-1245 Lunch 1300-1500 ExcursionAppendix 2 GREATER MEKONG SUBREGION THIRD MEETING OF THE SUBREGIONAL TELECOMMUNICATIONS FORUM ROYAL CLIFF BEACH RESORT PATTAYA, THAILAND Cambodia H.E, Mr. Koy Kim Sea, Under Secretary of State, Ministry of Telecommunications and Post Mr. Phan Ho, National Coordinator, Ministry of Planning Lao PDR Mr. Somlith Phouthonesy, Deputy Director of Post and Telecommunications ‘Mr. Padapphet Sayaichoth, Deputy Director, Lao Telecom Company Myanmar U San Tin, Head of Office, Ministry of Communications, Post and Telegraph U Aye Kyaw, Assistant General Manager, Myanma Posts and Telecommunications, Ministry of ‘Communications, Post and Telegraph Thailand Mr. Sethapom Cusripituck, Deputy Director-General, Post and Telegraph Department (PTD) (Head of Delegation) Ms, Panupom Patarachoke, Chief of Regional Telecommunications Section, International Services Division, PTD Ms. Hataitip Chairojkanjana, Chief of International Economic Cooperation Sub-section, PTD Mr. Saneh Saiwong, ‘Telecommunication Engineer 4, PTD Ms. Sudanong Charuthus, Director, International Affairs Division, Ministry of Transport and ‘Communications Mr. Chiute Visalachitra, Transport Technical Officer 6, Ministry of Transport and Communications Ms. Kobkul Motana, Planning Analyst, Planning Bureau, Ministry of Transport and Communications. Mr. Nibhon Swangsupaya, Deputy Director, Regional Economic Development Cooperation Committee Office (REDCCO), Office of the National Economic and Social Development Board (NESDB) Ms. Chuthatip Maneepong, Assistant Director, REDCCO, NESDB Mr. Boonsong Lujananon, Vice President, Telecommunication Engineering and Development, The ‘Communications Authority of Thailand Mr. Charoon Thongma, Assistant Director, Telecommunication Planning Division, ‘The Communications Authority of Thailand Mr. Pichai Srirattanagool, Assistant Director, Intemational Telephone Division, ‘The Communications Authority of Thailand Mr. Sribhumi Sukhanetr, President, TCT, The Telecommunications Association of ThailandMr, Nopanut Hutacharaoen, Senior Director, International Business Relation Sector, TOT Mr. Kittipong Tameyapradit, Senior Director, Telecommunications Corporate Planning Mrs, Darawadee Bunnag, Senior Staff, Intemational Cooperation Analysis Staff Unit, TOT Ms. Srisunan Hoonsuwan, Director, International Relations Division, TOT Ms. Angkana Pacharapha, Manager, Technical Cooperation Sector, TOT Viet Nam Mr. Pham Quang Dat, Manager, Post and Telecoms Policy Dept, Department General of Post and ‘Telecommunications (DGPT) Mr, To Chi Thanh, Manager , International Cooperation Division OBSERVERS Asia Pacific Telecommunity (APT) Mr, Amarendra Narayan, Director, Project Development Mr. K.B, Malla, Programme Assistant Australia Mr, Tony Coghlan, First Secretary, Australian Embassy, Bangkok Export-Import Bank of Japan ‘Mr, Kenichi Koganei, Chief Representative, Bangkok Office Japan Mr, Tetsuo Anda, First Secretary, Embassy of Japan Minor ‘Takahara, Deputy Ditector, International Cooperation Division, Ministry of Posts and ‘Telecommunications, Japan Kreditantstalt fiir Weidaraufbau (KEW) Mr, Rolf Langhammer, Technical Expert/ Telecommunications Ms. Mona Hussain, Senior Project Manager, Telecommunications International Telecommunications Union Dr, Shailendra Kumar Hajela, Coordinator , ITU Regional Office Mr. K.K. Gunawardana, Area Representative for North AsiaPeople’s Republic of China Mr. Liu Haiying, Deputy Director, Yunnan Post and Telecommunication Administrative Bureau Ms. Liu Fan, Engineer, Department of Planning and Construction, Ministry of Posts and ‘Telecommunications ‘Working Group on Economic Cooperation in Cambodia, Laos and Myanmar Mr. Takao Horiguchi, Chief Coordinator PRIVATE SECTOR PANELISTS. Mr. Roland Sand, Deputy Director, Telecommunications - Asia Pacific, Deutsche Bank Mr. Gerhard Minster, Vice President, Export and Project Finance, Telecommunications, Kreditantstalt fir Weideraufoau (KEW) Mr. Robert Kay, Executive Vice President, MDX Power Co. Ltd. Mr. Surind Vanichseni, Vice President, Telecommunications Association of Thailand PRIVATE SECTOR REPRESENTATIVES, Mr. J. Andersen, Representative in Japan, Great Northern Telegraph Company-Denmark Mr. Bric A. Beherndt, Marketing & Business Development Manager, Krone-Thailand Mr. Paul Boukobza, West and South East Asia Commercial Director, Access Systems Division, Alcatel- Paris Mr. C. F. Chicarelli, Managing Director, Alcatel ~Thailand Mr. Neil Crane, TELSTRA Mr. Dhongehai Lamsam, President, Loxley Public Co., Ltd. Mr. Niyot Masavisut, Analyst, Export-Import Bank of Thailand Mr. Diodoro Merino, Regional Head, Alcatel-Spain Mr. Jan Pelkonen, Nokia Telecommunications Mr. Rabin Pojchanardwong, Vice President, Loxley Public Co., Ltd. ASIAN DEVELOPMENT BANK Dr. Ginter Hecker, Manager, Transport and Communications Division, Infrastructure, Energy and Financial Sectors Department (West) Mr. Filologo Pante, Jr., Head, GMS Unit, Programs Department (West), Division IIT Mr. Paolo Lombardo, Investment Officer, Private Sector Group Mr. Robert Rothery, Project Engineer, IWTC Ms, Carol Guina, Consultant, RETA 5693 Mr. Tom J. Reid, Consultant Ms. Irene Macabasco, Project Assistant, RETA 5693,Appendix 3 Greater Mekong Subregion Third Meeting of the Subregional Telecommunications Forum Pattaya, Thailand 2-4 July 1997 Panel on Private Sector Financing Options for Telecommunications Projects ‘Summary of 1. INTRODUCTION 4 The Sixth Ministerial Conference held in Kunming, Yunnan Province, People's Republic of China, in August 1996, agreed to encourage greater participation of the private sector in infrastructure investment in the subregion. Consistent with this decision, the Third Meeting of the Subregion Telecommunications Forum (STCF) in Pattaya, Thailand in July 1997 included a panel discussion involving private sector representatives to discuss private sector participation in telecommunications investment. M PANEL PRESENTATION ON PRIVATE SECTOR PARTICIPATION IN TELECOMMUNICATIONS IN THE GMS 2 The panel presentation on private sector participation in telecommunications in the GMS was conducted on Thursday, 3 July, 1997. The session was opened by Mr. Filologo Pante, Jr. Head GMS Unit, and Mr. Robert Rothery, Project Engineer, Transport and ‘Communications Division, both fram ADB. Mr. Pante outlined the policy developments in the GMS, particularly in countries undergoing transition from a centrally-planned to a market economy and the opportunity that this has provided for ADB to promote private sector participation in development of the subregion. Mr. Rothery reviewed the extent of private sector involvement in the GMS telecommunications sector. He estimated that for the GMS countries to reach a telephone density of 10%, an investment of $16-24 billion would be required. Such a level of investment requires new approaches by GMS countries including private sector participation in telecommunications, reform of existing regulatory structures, and the opening of domestic networks to new competitors, among others. 3. ‘The panelists and their respective topics were: () Mr. Surind Vanischeni, Vice President and Acting Director, the Telecommunications Association of Thailand —- “Private Sector Participation in Telecommunications in Thailand”, (i) Mr. Gerhard Milinster, Vice President, Export and Project Finance, Telecommunications Division, Kreditanstalt fur Wiederaufbau (KfW) —- “The Role of Bilateral Donor Financing in Telecommunications Projects"; (ii) Mr. Paolo Lombardo, Private Sector Group, ADB — "Private Sector and Cofinancing Operations of ADB", (iv) Mr. Roland Sand, Deputy Director, Telecommunications Asia-Pacific, Deutsche Bank —- ‘The Role of Private Financial Institutions in Privately-Financed Telecommunications Projects"; and2 (v) Mr. Robert Kay, Executive Vice-President, MDX Power Co. Ltd. --- "Privately- Financed Projects in the GMS: Experience with the Lao PDR- Thailand Power Sector Project and Possible Parallels in Telecommunications Projects” 4 Mr. Tom Reid, ADB Consultant, acted as Rapporteur for the panel discussions and highlighted some of the important points made during the presentations. 5, Mr. Surind Vanischeni described the development of the telecommunications sector in Thailand. He pointed out that the traditional national security argument underlying government ownership of telecommunications facilities is no longer valid today. With developments in telecommunications technology, national security agencies are increasingly building and operating their own telecommunications networks independently of public networks. There is, therefore, increasing opportunity for national telecommunications organizations to allow private sector participation through franchise concessions as is currently allowed in the telecommunications sector in Thailand, Full participation through private sector ownership of parts of the telecommunications networks is also currently allowed. Mr. Surind emphasized that the full benefits of private sector participation in the telecommunications sector could only be obtained if competition in the provision of services is allowed, 6. Mr. Gerhard Minster reviewed risk structure of telecommunications projects from the point of view of a lending agency. He pointed out that telecommunications has become commercially viable even in rural areas such that the private sector has become increasingly interested in investing in telecommunications. He emphasized that, in developing project proposals for private sector financing, it is important to focus on revenue generating customers to be serviced by the project. The key concems of the private sector investor also include political stability and a reliable legal and regulatory framework in the host country. In outlining KfW's lending policies, he emphasized sovereign risk, corporate risk and project risk as elements of project assessment. 7. Mr. Paolo Lombardo outlined the mechanisms available at ADB, through the Private Sector Group, for financing private investment in infrastructure. He explained that Bank assistance ranges from simple project financing to creating the proper policy environment and institutional support. ADB's objective is to build a conducive environment for private sector investments in general and for infrastructure projects in particular. ADB's lends to the private sector on commercial terms without government guarantees. The Bank's key considerations include an appropriate legal and institutional framework, tariff policy, commercialization, and corporatization and privatization initiatives. In selecting project finance opportunities, the Bank is concemed with satisfying three principles: (i) the catalytic role of the project, (ji) the demonstrational role of the project (ie., its potential to serve as a model ), and (ii) the developmental role of the project (ie. its potential to provide employment, generate foreign exchange savings or eamings, and promote human resource development) Mr Lombardo also provided a detailed outline of the Bank's terms and conditions for private sector lending 8 Mr. Roland Sand reviewed Deutsche Bank's role in providing private sector finance for infrastructure investment. Mr. Sand cited the increasing interest in the financial sector to invest in telecommunications. He outlined the unique features of the telecommunications sector —- as compared, for example, to the energy sector -- in terms of marketidemand risk, completion (the traditional idea of a completion date or pre/post3a construction cut-offs is not applicable) and vendor financing. Mr. Sand described Deutsche Bank's approach to assessing the telecommunications market and in considering an investment proposal -~ (i) assessing the overall economic environment in the country concemed; (ji) assessing the telecommunications environment (including the regulatory framework, and the intent and pace of liberalization, etc.); (ii) assessing customer growth, usage and revenue growth; (iv) assessing the quality and capacity of existing operators; and (v) assessing capital expenditures and operating costs. He emphasized the need for a “reality check’, particularly in assessing demand, usage and revenue forecasts. 9. Mr. Robert Kay described the Theun Hinboun power project in Lao PDR in which MDX Power of Thailand was a key player. In describing the overall capital structure of the project, he emphasized that the equity structure was just as important as the debt structure. He emphasized that, in the context of the GMS, equity participation of the government is important but the source of equity financing could pose some problems. In the Theun Hinboun Project, ADB provided the Lao PDR government with a loan to finance its 60% equity participation in the Theun Hinboun Power Company. Mr. Kay also outlined how the financial, environmental and technical risks of the project had been addressed.