Evaluation of India-United Arab Emirates submarine telephone cable

The Project - The Evaluation - Overall Conclusion & Success Rating - The Main
Findings - Lessons
The Project
This project consisted of 1,964km of coaxial underwater cable, together with installation
facilities for a 14 Mhz telecommunications system, linking Bombay in India with
Fujairah in United Arab Emirates (UAE). The cable was co-owned by India and UAE
telecommunications authorities (VSNL and ETISALAT respectively). ODA grant
support of £3.7m was provided from its Aid and Trade Provision (ATP) to assist the
purchase of the Indian share of the cable.
The Evaluation
The evaluation was carried out by an economist from ODA, an economist from DTI and
a consultant telecommunications engineer.
This evaluation report was used in the preparation of an additional report: "ATP
Synthesis Evaluation Study: a synthesis of the evaluation studies of 8 projects financed
under the Aid and Trade Provision" (see EvSum490).
Overall Conclusion & Success Rating
The project has been highly successful. Implementation was trouble free and within
budget. The cable generated high financial and economic returns.
The Main Findings
● The
financial rate-of-return was around 33%. This was lower than at appraisal,
because the cable filled more slowly than expected. The economic rate-of-return
may have been around 80%. These returns are typical of the international
telecommunications sector.
● Despite this, the project was not optimal. Domestic exchange and transmission
constraints have limited the uptake of the cable. The alternative, expanding
satellite use to accommodate traffic growth, would have been cheaper.
● In addition, although the project is technically and financially sustainable, the
Telecommunications Corporation operating the cable does not maximise the
potential benefits it offers.
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● No
monitoring of the project was undertaken. In the event, this did not have any
detrimental effects.
● The benefits of the project were shared by business, in the form of better
telecommunications services; government, in the form of increased taxes and
revenues; and private callers. The poor will have benefited only indirectly.
● The use of ATP was not necessary to secure the contract for the British
manufacturer. Its tender was the cheapest and the best. The UAE authorities were
not eligible for ATP assistance, so their decision was made on the tenders alone.
The same was true, in this instance, of the Indian authorities.
● The
level of ATP appraisal involved in this study did not include proper
assessment of whether the satellite alternative was preferable. In addition, it did
not focus on the critical constraints imposed on the project by the domestic
network, or the institutional makeup of the client institution. Detailed appraisal is
necessary in ATP projects to allow judgements on the overall appropriateness of
an investment strategy to be made properly.
● In some circumstances ATP recipient governments will not be influenced by
credit terms, but will prefer to make decisions purely on the basis of the tenders
themselves. Appraisals should seek to establish the manner in which aid and credit
terms are to be evaluated by prospective purchasers.
● ATP should not be provided in circumstances where shared ownership means it
cannot have a decisive influence on the tender award.
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