WORLD BANK TO CREATE PNG TELECOM FUND

PACIFIC ISLANDS REPORT

Pacific Islands Development Program/East-West Center
With Support From Center for Pacific Islands Studies/University of Hawai‘i

WORLD BANK TO CREATE PNG TELECOM FUND
Would subsidize telecom development in rural areas

PORT MORESBY, Papua New Guinea (PNG Post-Courier, April 21, 2008) - The World Bank is planning to set up a rural telecommunications fund in Papua New Guinea. But that will not be done unless the National Government makes a formal request.

World Bank regional director Nigel Roberts in a statement last week said many rural areas were not getting services and that a good way was to create a rural telecommunications fund.

He said a rural telecommunications fund is an instrument that provides commercial operators a transparent subsidy for extending coverage to unprofitable areas.

"The bank is planning such a fund in PNG, at the Government’s request," Mr. Roberts said adding such a fund exists in more than 20 countries in Africa, Asia and Latin America.

He said this after brushing aside allegations leveled by Telikom that International Financial Corporation (IFC), its business arm was subsidizing Irish-owned telecommunications company Digicel’s operations in the country to undermine local telecos.

He said while competition is good, it is also a risk.

"There’s a danger that one monopoly gets replaced by another, leaving the new monopolist free to jack up prices and turn excessive profits."

"A second risk is that new entrants will ignore remote areas where costs are higher and revenues lower. Making telecoms reform work, then, means more than just introducing competition," he said.

Roberts added that strong national regulation is needed to establish price formulae that are fair and open to public inspection as well as to monitor the performance of telecoms and to keep the market open to new competition.

"You also need ensure that remote areas are not neglected. A good way to combine private sector efficiency with social obligations is to create a rural telecommunications fund," he said.

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