PROJECT INFORMATION DOCUMENT (PID)
CONCEPT STAGE
Project Name
Region
Sector
Project ID
Borrower(s)
Implementing Agency
Environment Category
Date PID Prepared
Estimated Date of
Appraisal Authorization
Estimated Date of Board
Approval
Report No.: AB4046
Emergency Private Sector Development Additional Financing
MIDDLE EAST AND NORTH AFRICA
General information and communications sector (60%); General
finance sector (20%); General industry and trade sector (20%)
P112064
MIN. OF PLANNING AND DEV. COOPERATION
Ministry of Planning and Development Cooperation and Iraq
Telecom and Post Company
[ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined)
September 22, 2008
n/a
October 16, 2008
1. Key development issues and rationale for Bank involvement:
The EPSDP was approved in December 2004 and provides US$55.0 million of financing to lay
the foundation for a comprehensive private sector development strategy in Iraq. The project
addresses key priorities in institutional capacity building and essential communications infrastructure
to help foster the development of the private and financial sectors in Iraq. A secondary objective of
the project is to generate jobs.
The proposed additional financing grant provided through the World Bank Iraq Trust Fund (ITF)
would help meet the financing gap required to complete the implementation of the EPSDP’s two
telecom components: “Rehabilitation of Selected Parts of National Telecommunications Network
(MWN)” and “Upgrading of Selected Parts of Telecommunications Infrastructure for the Payments
System (IIBN)”.
Additional financing of US$10.0 million is required for the two telecom components for the
following reasons:

Financing Gap Caused by Foreign Exchange Variations in the MWN contract: An allocation
of US$8.15 million is needed to pay for financing gap caused by foreign exchange (USD vs.
Euro) fluctuations in relation to the microwave network component. The contract was
awarded in Euro 30.7 million while internal accounting and reporting for the EPSDP under
ITF is done in US dollar. The USD/Euro exchange rate has depreciated by almost 25% since
the award of the contract, increasing from USD/Euro of 1.2705 in June 2006 to USD/Euro of
1.5875 in July 2008.

Contract Variations for Microwave Network: An allocation of approximately US$ 983,617 is
needed for contract variations for this component. The ongoing implementation of the
microwave network requires changes to the contract to pay for additional power generators
resulting from frequent power failures in Baghdad and other areas, build new towers for
2
equipment installation, and build shelters for site areas where security conditions are
unfavorable.

Contingency for Contract Variations for IIBN: An allocation of US$ 200,000 is required as
contingency for possible contract variations for the IIBN component. Such contract
variations could entail unanticipated changes in the type or amount of equipment required or
the supply costs due to unpredictable security conditions in Iraq.

Contingency for Future Foreign Exchange Variations: With continuing foreign exchange
fluctuations, an additional contingency of approximately US$ 667,648 is planned to offset
future fluctuations and ensure that the microwave network can be implemented.
2. Proposed objective(s)
The proposed project development objectives and description remain the same as the original
project. The proposed project will provide the foundation for sound investment climate from a
financial and institutional perspective; develop a pipeline of opportunities for the private sector that
would lead to job creation; provide essential infrastructure for the survival of a modern private
sector, namely a reliable payment system supported by the necessary telecommunications
infrastructure.
3. Preliminary description
EPSDP consists of six components broadly divided into three categories: (i) Private Sector
Development (PSD); (ii) Telecom; and (iii) Project Management. Components 1 and 2
(Strengthening of the Project Institutions to Support Private Sector and Improving Access to Finance
and Foreign Markets) comprise the first category and are managed by the Ministry of Planning and
Development Cooperation Project Management Team (MOPDC PMT). Components 3 and 4
(Upgrading of Selected Parts of Telecommunications Infrastructure for the Payments System and
Rehabilitation of Selected Parts of National Telecommunications Network) finance telecom
development and are managed by the Iraq Telecommunications and Postal Company Project
Management Team (ITPC PMT). Components 5 and 6 finance project management costs for the
MOPDC and ITPC PMTs respectively. The components are described in detail below:

Component 1 - Strengthening of the Project Institutions to Support Private Sector: This
component helps establish and/or strengthen key institutions that support or encourage the
private sector and financial sector in Iraq and enable them to play their appropriate role. It
supports institutional strengthening with business planning, design of procedures, design of
any necessary rules and regulations, provision of start-up facilities, training, support of
twinning arrangements, support for the initial activities and any other necessary technical
assistance for selected institutions such as the Export Promotion Agency, the Economic
Development Fund and the development of Industrial Zones in Basra and Erbil. In Iraq’s
present investment climate, where investors are skeptical of the business environment,
industrial zones can be catalysts for reform and private sector development and offer a unique
package of regulatory simplicity, investment security, infrastructure and hassle-free access to
inputs.

Component 2 - Improving Access to Finance and Foreign Markets: This component provides
3
assistance to eligible Iraqi private firms to build the necessary capacity to qualify as a
potential player in the new market economy. This assistance will be channeled through two
agencies: (i) the Export Promotion Fund (EPF) at the Ministry of Trade (MOT) that will
channel technical assistance to eligible firms to develop export plans to access new export
markets; and (ii) the Economic Development Fund (EDF) at the Ministry of Planning and
Development Cooperation that will channel technical assistance to Iraqi private enterprises to
develop feasibility studies for new projects which require funding from financial institutions.
The component also acts as a catalyst to transform the two key private sector promotion and
competitiveness programs, EPF and EDF, through well-tested public private partnerships. It
also includes an enterprise survey which would assess the cost of doing business in Iraq with
the aim of identifying key bottlenecks to private sector development and areas for future
Bank Group engagement in private sector development and finance in Iraq.

Component 3 - Upgrading of Selected Parts of Telecommunications Infrastructure for the
Payments System (IIBN): This component funds critical physical communications
infrastructure for providing enhanced capacity for interconnecting the Central Bank of Iraq
(CBI) headquarters with CBI’s branches in Mosul and Basra (currently connected via
VSAT). The IIBN will also provide for more effective communications between CBI and the
two government-owned banks (Rafidain and Rasheed) as well as the headquarters of 20
private banks in Baghdad. The successful implementation of this phase will allow CBI to
establish a communications network with banks throughout Iraq. The expanded network will
allow CBI to make effective use of good and reliable bandwidth capacity that would become
available with ITPC under this project, and augment it with appropriate state-of-the-art
technologies to establish transmission links to banks in other provinces and districts of Iraq.

Component 4 - Rehabilitation of Selected Parts of National Telecommunications Network
(MWN): This component builds a modern and integrated national digital backbone
microwave network to improve delivery of communications services to the government and
people of Iraq. In particular, this component focuses on rehabilitating and upgrading three of
the five national backbone microwave routes and associated spur routes that have been
severely damaged. The three routes are: (i) Baghdad - Erbil; (ii) Baghdad - Mosul; and (iii)
Baghdad – Ammara - Basra. The remaining two routes are being developed under the
Japanese Government Bilateral Assistance program to Iraq. The microwave links will
provide immediate voice and data connectivity for the key cities in the districts of Baghdad,
Baquba, Kirkuk, Erbil, Mousa, Sulaimaniya, Dohuk, Ramadi, Hadetha, Alquaim, Kut,
Ammara, Basra and Um Qaser, and improve national and international connectivity.
The component consists of two subcomponents: (i) supply, installation and commissioning of
the three backbone microwave routes and the associated spur microwave routes utilizing
tested technologies that can be rapidly rolled out in the current environment in Iraq; and (ii)
provision of training and operational telecommunication services. ITPC will be expected to
interconnect with all interested telecommunications and data service providers and provide
transmission capacity at cost-based prices in line with the principles of transparent regulation
and fair competition.

Components 5 and 6 - Project Management: These components finance expenditures directly
related to the management of the project such as: procurement and audit consultants;
maintenance of office equipment; transportation and travel, including per diem allowances
4
for Project staff in travel status; rental of office space; utilities and office administration,
including translation, printing and advertising; fuel costs; communication costs; costs for
production of bidding documents and drawings; and commercial bank charges. No salaries
of the Recipient’s civil servants will be financed under the project. The grant recipient will
finance the salaries of the PMT staff.
Summary of Additional Financing
(in US$)
8,148,735.60
983,616.59
200,000.00
667,647.81
10,000,000.00
Microwave and IIBN Components
Financing Gap Caused by Foreign Exchange Variations for Microwave Network
Contract Variations for Microwave Network
Contingency for Contract Variations for Inter-Banking Network
Contingency for Future Foreign Exchange Variations for Microwave Network
REQUEST FOR ADDITIONAL FINANCING
4. Safeguard policies that might apply
Safeguard Policies Triggered
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Forests (OP/BP 4.36)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP 4.12)
Safety of Dams (OP/BP 4.37)
Projects on International Waterways (OP/BP 7.50)
Projects in Disputed Areas (OP/BP 7.60)
Yes
X
No
X
X
X
X
X
X
X
X
X
5. Tentative financing
Source:
Borrower
Iraq Reconstruction Trust Fund
Total
6. Contact point
Contact: Hamid R. Alavi
Title: Sr Private Sector Development Spec.
Tel: (202) 473-2221
Fax:
Email: Halavi@worldbank.org
($m.)
0
10
10
TBD