Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 38890 - AFR Technical Annex I

KENYA TECHNICAL ANNEX

O N A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 76.21 MILLION (US$114.4 MILLION EQUIVALENT)

TO THE REPUBLIC OF KENYA FOR A

KENYA TRANSPARENCY & COMMUNICATIONS INFRASTRUCTURE PROJECT (TCIP/CIP 1)

IN SUPPORT OF THE SDR 109.91 MILLION PHASE 1 (US$164.5 MILLION EQUIVALENT)

OF A US$424 MILLION EQUIVALENT REGIONAL ADAPTABLE PROGRAM LOAN

FOR A

REGIONAL COMMUNICATION INFRASTRUCTURE PROGRAM

March 5,2007

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective 28 February 2007)

APL BP BBs BPO CCK CAS CPIA DIR DPP EASSy ECA ERS ESMF FLSTAP FM FMR FMS FOI GAC GAP GOC GDP GJLOS GNI GoK GP GSAP ICT

Currency Unit = Kenya Shi l l ing (KES) 70.25 = US$1

1.5170US$ = S D R l

FISCAL YEAR January 1 - December 3 1

ABBREVIATIONS AND ACRONYMS

Adaptable Program Loan Bank Procedures Burundi Backbone System Business Process Outsourcing Communications Commission o f Kenya Country Assessment Strategy Country Policy and Institutional Assessment Detailed Implementation Review Director o f Public Prosecutions Eastern Africa Submarine System Economics Crime Act Economic Recovery Strategy Environmental and Social Management Framework Financial & Legal Sector Technical Assistance Project Financial Management Financial Monitoring Report Financial Management System Freedom o f Information Governance and Anticorruption Governance Action Plan Governance Oversight Committee Gross Domestic Product Governance Justice Law, Order and Security Gross National Income Government o f Kenya General Policies Governance Strategy and Action Plan Information and Communications Technology

IGA IP-ERS IRU IFMIS IDA IFC IPSAS IRCB IVR K A C C K E M S A Kenet MSI M C C MoIC MoRPW M&E MIGA N C L R NEPAD NSSF OD OP OPN P A D PPP RCIP RAP RBM RPF SMS TKL TCIP UK UNDP USAID US$ us WBG

FOR OFFICIAL USE ONLY Ini t ial Governance Assessment Investment Program for the Economic Recovery Strategy Indefeasible Right o f U s e Integrated Financial Management Information System International Development Association International Finance Corporation International Public Sector Accounting Standards Institutional Reform & Capacity-Building Project Interactive Voice Response Kenya Anti-Cormption Commission Kenya Medical Supplies Agency Kenya Education Network Trust Management Systems International Millennium Challenge Corporation Ministry o f Information and Communications (Kenya) Ministry o f Roads and Public Works Monitoring and Evaluation Multilateral Investment Guarantee Agency National Council o f Law Reporting New Partnership for Africa’s Development National Social Security Fund Operational Directives Operational Manual Operational Policy Note Project Appraisal Document Public Private Partnership Regional Communications Infrastructure Program Resettlement Action Plan Results-Based Management Resettlement Policy Framework Short Messaging System Telkom Kenya Transparency and Communications Infrastructure Project United Kingdom United Nations Development Program United States Agency for International Development United States Dollars United States o f America World Bank Group

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This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

Acting Vice President: Hartwig Schafer Regional Integration Director: Mark Tomlison

Sector Director Mohsen Khali l Colin Bruce

Sector Manager: Philippe Dongier Laurent Besanqon Mavis A. Ampah Harold Bedoya

Country Director for TCIP/CIP 1

Task Team Leader for the Program: Co-Task Team Leader for the Program Co-Task Team Leader for TCP/CIP 1

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AFRICA Regional Communications Infrastructure Program (RCIP)

Kenya Transparency and Communications Infrastructure Project (TCIPKIP 1) Kenya Technical Annex

Kenya Technical Annex I

CONTENTS Page

STRATEGIC CONTEXT AND RATIONALE ................................................................ 7 Country and sector issues .................................................................................................... 7 Rationale for Bank involvement ......................................................................................... 8

Higher level objectives to which the project contributes .................................................... 9

PROJECT DESCRIPTION ................................................................................................ 9

A . 1 . 2 . 3 .

B . 1 . 2 . 3 . 4 . 5 .

Lending instrument ............................................................................................................. 9 Project development objective and key indicators ............................................................ 10

Project components ........................................................................................................... 10

Lessons learned and reflected in the project design .......................................................... 11

Alternatives considered and reasons for rejection ............................................................ 12

C . IMPLEMENTATION ....................................................................................................... 12 Partnership arrangements .................................................................................................. 12

Institutional and implementation arrangements ................................................................ 13 1 . 2 . 3 . Monitoring and evaluation o f outcomes/results ................................................................ 14

4 . Sustainability ..................................................................................................................... 16

5 . 6 .

I . . Critical risks and possible controversial aspects ............................................................... 16

Credit conditions and covenants for TCIP ........................................................................ 17

APPRAISAL, SUMMARY ................................................................................................ 18 D . 1 . 2 . Technical ........................................................................................................................... 18

Economic and financial analyses ...................................................................................... 18

3 . Fiduciary ........................................................................................................................... 19

Safeguard policies ............................................................................................................. 19 4 . 5 . Policy exceptions and readiness ........................................................................................ 20

E . COMMUNICATIONS STRATEGY FOR TCIP ........................................................... 20 Annex 1: Kenya’s Fight against Corruption: Progress, Setbacks and New Frontiers ......... 23

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Annex 2: Government’s Side Letter on Governance. Accountability and Transparency ... 36 Annex 3: Results Framework and Monitoring ........................................................................ 40 Annex 4: Detailed Project Description ...................................................................................... 45 Annex 5: Project Costs ............................................................................................................... 56

Annex 6: Implementation Arrangements ................................................................................. 57 Annex 7: Financial Management and Disbursement Arrangements ..................................... 61

Annex 8: Procurement Arrangements ...................................................................................... 78 Annex 9: Economic and Financial Analysis ............................................................................. 91

Annex 10: Communication Action Plan for TCIP ................................................................. 108

Annex 11: Statement of Loans and Credits for Kenya .......................................................... 109

Annex 12: Country at a Glance ............................................................................................... 111

Map N o . 33426

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A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

1. Economic performance has improved. Good macroeconomic management and reforms implemented by the Kibaki Government since taking office in 2003 contributed to the strongest economic growth in Kenya since the 1980s. GDP growth i s expected to reach about 6 percent in 2006, compared to 5.8 percent in 2005 and 4.9 percent in 2004. Growth has resulted primarily from strong increases in agriculture, tourism, building and construction, electricity, telecommunications, and transportation. Guiding this recovery i s the Investment Program for the Economic Recovery Strategy (IP-ERS), articulated around three interlinked pillars: (i) strengthening economic growth; (ii) enhancing equity and reducing poverty; and (iii) improving governance. So far, implementation o f the IP-ERS has been uneven, producing mixed results and the government recognizes that more needs to be done in the areas of structural reforms and governance. Empirical evidence suggests that corruption fe l l in 2003-2004 (after the new Government came to power), but that results had subsequently shown a stagnation. As a result, the Government o f Kenya (GoK) launched a short-term governance action plan (GAP) covering the period November 2006 to December 2007 to accelerate transparency and accountability measures and to provide the enabling environment for private sector-led growth, particularly in the information, communications and technology (ICT) sector where Kenya has been a regional leader. Within i ts “Framework for improving ICT”, Kenya i s seeking to further liberalize the I C T sector, scale up private sector participation, and develop and implement a comprehensive eGovernment program’.

2. Recent telecommunications reforms and results have been impressive. Under the current leadership o f Ministry o f Information and Communications (MoIC), the country has been implementing important reforms in the telecommunications policy framework since taking office in December 2005. Actions include:

1. Market liberalization and sector reform

Liberalization of the international voice/data market was achieved with the award o f more than eighteen international gateway licenses over the last 14 months, including for the two mobile network operators, Safaricom and Celtel, where previous reforms had stalled. Consequently, tariff have fallen by over 50 percent and critical local market innovations are taking place (for example, Celtel launched in October 2006 a seamless local service across Kenya, Uganda and Tanzania).

In late 2006, the “Second National Operator” license was awarded competitively for US$169.7 million. This unified license reflects the best practice trend in the I C T sector. It i s technology and service neutral and allows operators to roll-out services and offer fixed and/or mobile and/or fixed-wireless services. After the license winner, V-Tel, a Dubai-based group, failed to come up with the required fee payment, the second highest bidder, an Indian group, Reliance Consortium, was awarded the license.

Telkom Kenya ( T U ) i s being restructured in preparation for privatization. In M a y 2006, MoIC secured cabinet approval to use a partial divestment from the highly profitable mobile operator Safaricom (owned 60/40 by TKL and Vodafone o f the UK) to finance TKL’s restructuring and retrenchment o f about 6,000 employees. In June 2006, IFC Advisory Service was given the mandate for both divestment in Safaricom and privatization o f Telkom. The process i s on going.

’ “eGovernment” means the use o f ICT to enhance the delivery o f Government services.

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2. New legislation

New telecommunications legislation i s being prepared to create a unified licensing regime and to position the country as a destination o f Business Process Outsourcing (BPO) activities. A Freedom o f Information (FOI) bill i s also being prepared.

3. Emerging Results

In response to this new environment, operators have boosted their investment and the overall mobile and fixed telephone penetration stands at 21 percent as o f June 2006 (against 15 percent in December 2005) and i s continuing to rise. Reflecting growing private sector confidence, foreign direct investment applications finalized by the Kenya Investment Authority jumped from around US$90 mil l ion in 2005 to about US$1.1 bil l ion during the f i rst 11 months o f 2006, driven mostly by information, communications, transport, and tourism. Over eleven medium-size BPO centers now operate in Kenya compared to one just over three years ago. Some foreign investors have launched joint ventures with local universities to develop software thereby taking advantage o f Kenya’s growing pool o f well educated technology graduates. Recently, two major international airlines announced plans to relocate their off-shore calling centers to Kenya in response to the improving ICT environment.

3. The Government i s keen to continue accelerating and deepening ICT reforms. The Government has laid out an ambitious vision for ICT in Kenya. I t includes: (a) expand infrastructure for Kenya to become Africa’s I C T hub; (b) provide a push for the growth o f the BPO industry; (c) revamp and extend eGovernment to improve service delivery to citizens and businesses; (d) develop rural I C T centers (access to information and appreciation o f technology throughout the country); (e) reform and enhance I C T research and development, including incubation centers and private sector participation (PPP); and (0 encourage ICT entrepreneurship. As part o f this vision over the next three years, the Government i s seeking to create an enabling environment for achieving the following specific goals: (a) tripling the number o f telephone lines from 7.5 mil l ion to 23 mil l ion in three years; (b) increasing the number o f Internet users from 1.25 mil l ion to 5 mil l ion in three years; (c) establishing at least one Digital Village or e-centre in each constituency within this year; (d) ensuring that every school in Kenya has access to I C T resources by the end o f the year; and (e) providing e-government services at district and constituency level.

4. The timing and scope of the Project fit well with the pace and scope of the Government’s ICT program. The Government approved for implementation comprehensive ICT Sector Guidelines on March 31, 2006 covering the new approach to ICT reforms nation-wide. The Bank considered and accepted these I C T Sector Guidelines as a substitute to a letter o f sector policy. The Government’s official request to IDA to support the Transparency and Communications Project (TCIP) under the Wor ld Bank Regional Communications Infrastructure Program (RCIP), specifically emphasizes the Government’s interest in accelerating connectivity and in deepening eGovernmentIdigitization.

5. In addition, the project i s well aligned with the Government’s agenda on governance. The TCIP will support implementation o f the Government’s Governance Strategy for Building a Prosperous Kenya (GSPK) and Governance Action Plan (GAP) by: (i) providing the technological infrastructure for a range o f transparency initiatives; and (ii) operationalizing a phased e-government program that includes a specific focus on e-procurement. A Government letter (see Annex 2) spells out how the TCIP will contribute to improving public service delivery and advancing governance.

2. Rationale for Bank involvement

6. The proposed operation supports the Bank’s Country Assistance Strategy (CAS, June 2004) and more recently, the CAS Progress Report (March 2007). In June 2004, the World Bank’s

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Board endorsed the current CAS for Kenya, a strategy o f reengagement closely linked with the Government’s IP-ERS. It proposes to help Kenya achieve i t s development objectives through four basic areas of support consistent with the Bank’s comparative advantage and in partnership with the Government and donors: (a) strengthening public sector management and accountability; (b) reducing the cost o f doing business and improving the investment climate; (c) reducing vulnerability and strengthening communities; and (d) investing in people. The CAS Progress Report, which the Executive Board will consider on March 27, 2007, continues the Bank Group’s strategic emphasis on growth and poverty reduction but gives enhanced attention to equity and governance.

7. The project supports the enhanced governance pillar o f the CAS Progress Report. In supporting the Government’s GSPK and GAP, the operation will focus on transparency initiatives (including transparency in judiciary and land record services, advancing FOI initiatives, and connectivity), while broadening stakeholder involvement and including additional private participation in I C T infrastructure services. The proposed implementation o f eGovernment applications will both increase public access to Government information and advance activities in support o f the eventual implementation o f the pending FOI legislation. These interventions will also help lay the foundation for further analytic and lending services and for the development o f the governance agenda beyond this GSPWGAP and for the next CAS.

8. The project will support “Digital Villages”, to be established across the country and operated through PPPs and will increase the access o f the rural and poor residents to government services. The project will also increase Kenyans access to competitively priced high-bandwidth connectivity.

9. The project i s building on best practices and emerging lessons learned from other Bank financed operations with eGovernment components. The project comprises innovative design elements such as those leveraging public resources through PPPs and supporting ICT initiatives with significant governance and transparency enhancing reforms. Based on i ts in-depth experience with ICT reforms and i ts support o f eGovernment applications in Ghana, Rwanda, Vietnam, Guatemala, and Kazakhstan, the World Bank Group i s well placed to engage in this emerging cross sector work and to catalyze the fragmented (not necessarily complex) implementation o f these new types o f reforms.

The project also reflects greater attention to equity.

3. Higher level objectives to which the project contributes

10. The Government acknowledges the significant role of the ICT sector for the IP-ERS and GAC goals. By the end o f the program, Kenya should have access to competitively priced high- bandwidth connectivity, which will benefit a wide cross section o f society. Bandwidth costs are projected to decline more than tenfold from around US$5,000-8,000 per month for 1 M b i t l s at today’s prices to under US$l,OOO per M b i t l s per month by 2010, which should translate into end-user broadband access at under US$lSO/month. T h i s in turn should significantly decrease the cost o f doing business, improve foreign and local private investment opportunities in the region, and increase the prospects for job creation. In addition, through eGovernment applications, the project wil l contribute to improving Government efficiency and transparency, particularly in public sector service delivery, greater fiduciary accountability and governance.

Costs are expected to decline further beyond 2010.

B. PROJECT DESCRIPTION

1. Lending instrument

11. The Project’s lending instrument i s an Adaptable Program Loan. The Kenya TCIP i s part o f the f i rs t phase o f the RCIP program, with which i ts objectives are fully consistent. Since the RCIP i s a regional project, regional IDA funding can be used up to 2/3 (two thirds) o f the full proposed IDA amount

9

o f the project, with country allocations derived from IDA’S performance-based allocation system covering 1/3 (one third) o f the project cost attributable to each individual country involved. Due to the current constraints on the regional IDA allocation, it has however been agreed that the eGovernment activities would be fully funded from the national allocation (US$30 mil l ion in TCIP). As such, out o f the US$114.4 mill ion envisioned for the Kenya TCIP, the Regional IDA funding will amount to US$56.83 mil l ion and the national IDA funding will amount to US$57.57 million.

PDO Connectivity development objective: To contribute to lower prices for international broadband capacity and extend the geographic reach o f broadband networks

Transparency

2. Project development objective and key indicators

Outcome Indicators - Volume o f international traffic - Volume o f national traffic using 2 proxies:

Internet user penetration Total teledensity (fixed and

mobile)

Average price o f international communications using the proxy: . price o f wholesale international

Satisfaction o f users wi th Government “El” capacity link

10. Better efficiency, transparency and access to services are central to the project. The TCIP has two overarching development objectives, similar to the RCIP’s: (i) to contribute to lower prices for international broadband capacity and extend the geographic reach o f broadband networks (the “connectivity development objective”); and (ii) to contribute to improved Government efficiency and transparency through eGovernment applications (the “transparency development objective”). Achievements under the project will be measured by indicators tracking changes in volume o f national and international traffic (including internet and teledensity), satisfaction o f users o f government services and volume o f transactions related to eGovernment applications. The baseline indicators and precise targets for the end o f the project (e.g. internet user penetration from 1.25 mil l ion to 3 mil l ion and price o f wholesale internet “El” capacity link from US$7,500 to US$1,200 per month), are provided in Annex 3, including a full description o f the results framework and monitoring. A summary table i s provided below.

services received through the eGovemment applications (average o f al l applications)

Volume o f electronic recorddevents processed with the eGovernment applications

3. Project components

At Closing o f Project 7,500 M b i t / s

80 per 1,000 people 40 percent

US$1,2OO/month

50 percent

100,000

11. T h e Kenya TCIP/CIPl Project i s structured around four components. Investments will be undertaken in: (i) enabling the institutional and regulatory environment; (ii) connectivity; (iii) transparency- eGovernment Applications; and (iv) project management (see Annex 4 for a detailed project description).

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12. Component 1: Enabling Environment (US$15 million including US$14.74 million of IDA contribution). This component comprises the following subcomponents: (a) policy, legal and regulatory technical assistance to accelerate the establishment o f the legal and regulatory framework for security o f e-transactions, privacy and data protection, intellectual property rights, etc., as well as support to continued sector reforms; (b) policy, legal and regulatory capacity building, consensus building activities, and training in the topics mentioned in the previous subcomponent (sector policy and implementation o f regulatory reforms); (c) establishment o f the disbursement and governance mechanisms for the telecommunications capacity purchase activities and the grant facilities for generating content for the Government Information Portal, the Digital Village initiative and the SMSAVR (Short Messaging SystedInteractive Voice Response) eServices initiative; (d) technical assistance for the establishment o f the PPPs for the eGovernment applications; (e) formulation and establishment o f a comprehensive Monitoring and Evaluation (M&E) system and associated capacity-building; ( f ) creation o f a scalable transaction-enabled Government information portal for key F O I interventions and real time M&E; (g) consultancy for classification o f Government data and collection and posting o f statutory information; (h) capacity building for MoIC, the eGovernment Directorate in the Office o f the President, the Kenya Education Network Trust (Kenet), the Public Procurement Oversight Authority (PPOA) and the BPO industry; (i) communications related to governance, connectivity and the project; and (j) additional technical assistance and capacity building not identified ex-ante.

13. Component 2: Connectivity (US$63 million including US$62.55 million of IDA contribution). This component will enhance connectivity in Kenya through the following subcomponents: (a) support for purchase o f broadband capacity in the regional and national networks for targeted user groups (universities, technical colleges, government users, and the BPO industry consistent with the World Trade Organization Rules); (b) support to the Government Virtual Communications Network to improve intra-Government communications; (c) support for the Digital Village initiative; and (d) support for the SMS/e-Services initiative.

14. Component 3: Transparency - eGovernment applications (US$30 million including US$29.16 million of IDA contribution). This component will support the following eight eGovernment applications: (a) pension administration; (b) drivers’ license registration; (c) wealth declaration form; (d) High Court Registrar; (e) company registration; ( f ) the Integrated Population Registration System (IPRS); (g) the Land Title Registrar; and (h) eprocurement in the Government’s Supplies Branch.

15. Component 4: Project Management (US$3 million including US$2.95 million of IDA contribution). This will include three sets o f management and staff: (a) a Project Coordinator (the I C T Board Deputy-Managing Director), Technical Manager and Grant Manager; (b) a Procurement Specialist, and a Financial Management Specialist; and (c) a Governance officer and a Monitoring & Evaluation Specialist. In addition, the component will finance office equipment, incremental operating costs and audits. The key management personnel, i.e., the Project Coordinator, Financial Specialist and Procurement Specialist, are expected to be in place prior to project effectiveness.

16. Contingencies (US$5 million of IDA contribution). Project funds are set aside to account for possible contingencies in project implementation, namely for differences in the estimated prices.

This component will cover project management.

4. Lessons learned and reflected in the project design

17. Appraisal Document (Section B.5).

The lessons for the regional project, including Kenya’s design are described in the RCIP Program

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5. Alternatives considered and reasons for rejection

18. Financing of ICT infrastructure was not a priority for the Kenya operation. Contrary to Burundi and Madagascar, the analysis showed that in the case o f Kenya the I C T infrastructure could be built by the existing market players without the need for a direct subsidy by the Government. Consequently, the TCIP operation does not include a national backbone component. The capacity purchase schemes i s meant to catalyze investment by telecommunications operators building telecommunications infrastructure. Indeed it provides them with better visibility o f the aggregated demand which underpin their infrastructure roll-out plans. It also constitutes a guaranteed init ial pent-up demand for international capacity which wil l switch from satellite to submarine cable connectivity when the submarine cable connectivity becomes available in the latter half o f 2008.

19. The eGovernment applications were accepted o r rejected based on agreed criteria. In order to ensure sustainable implementation o f the selected applications beyond the T C P project life, whenever the criteria were not met, the application was rejected as a candidate for TCIP support. The criteria demands the following for successful application:

Existence of a champion or change agent who could help reduce resistance from within government, the private sector or civi l society; Acceptability o f the PPP approach or possibility o f a joint venture with the private sector; Potential for improving internal efficiency, leading to greater transparency and less potential for corruption; and High potential for positively impacting citizens. Examples o f such impacts include job creation, faster and higher quality public service delivery, and reduced vulnerability to rent seeking.

’

. ’

C. IMPLEMENTATION

1. Partnership arrangements

20. Strong development partnerships are being promoted. The Bank intends to strengthen i t s partnerships with other development agencies involved in the digitization o f government, in particular with DFID, EU, UNDP and the Millennium Challenge Corporation2 (through USAID). These partners are involved or have strong interest in relevant programs such as financial management, M&E, Governance Justice Law, Order and Security (GJLOS), FOI, Institutional Financial Management Information System, private sector development, ICT, eGovernment, business solutions centre, governance, parliament, Digital Village related activities, trading platform for women’s craft sales, education management information system, eContent development, and procurement reforms. During project preparation, extensive consultations were also held with the academia, the private sector, c iv i l society and other government ministries and agencies. The public consultation for this operation was held in conjunction with the Bank-wide consultation for the Bank’s Governance Strategy. In addition to the involvement of private sector and the academia in project activities, the partnership with external

The Mil lennium Challenge Corporation Board o f Directors recently approved a two-year, US312.7 mi l l ion Threshold Program with Kenya. Kenya’s Threshold Program seeks to reduce public sector corruption by overhauling the public procurement system, wi th a specific concentration on health care procurements throughout the supply chain. A new public financial management reform strategy, which includes a public procurement component, i s being implemented by the Government of Kenya and supported by a coordinated group o f donors to reduce opportunities for corruption. The Kenya Threshold Program supports Kenya’s broader reform efforts and complements other donor efforts. This program will complement TCIP support related to eprocurement by focusing on the health and transport sector.

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stakeholders wil l continue during implementation through regular consultations, information sharing, and monitoring activities. The project will also work in close coordination with other Bank projects and in particular with:

The Financial & Legal Sector Technical Assistance Project (FLSTAP): the FLSTAP covers a wide range o f technical assistance areas including for agencies that will also be supported by TCIP in the context o f eGovernment activities (High Court Registrar, company registry for instance). The design o f TCIP was crafted in full consultation with the teams o f ongoing operations as to avoid overlaps. . The Institutional Reform & Capacity-Building Project (IRCB): the IRCB Project has a component dedicated to supporting and strengthening the new Public Procurement Oversight Authority. The eProcurement activities for the Supplies Chain o f the Ministry o f Roads and Public Works envisaged as part o f RCIP will greatly benefit from and will be complementary to the IRCBP support in that area.

.

2. Institutional and implementation arrangements

21. Anchoring the T C P at the Ministry o f Information and Communications i s consistent with: (a) the identification o f the MoIC as a champion for change and improved governance; (b) MoIC’s team track record o f consistently delivering over the last 14 months challenging sector reforms that are critical for project success; and (c) MoIC’s leading role in developing, driving and coordinating the country ICT policy and sector reforms. In this context, MoIC will provide overall orientation and oversight o f the implementation o f the TCP.

22. The Government’s new and independent I C T Board body will also be tasked with managing the TCIP. The MoIC has decided to set up an independent agency called the Information & Communications Technology Board (the “ICT Board”) for the purpose o f marketing Kenya I C T business process outsourcing opportunities both abroad and in Kenya. I t i s proposed that part o f the ICT Board will also play the role o f the TCIP implementation unit in charge o f the coordination o f the project activities. The TCP-related staf f would include an ICT Board Deputy-Managing Director (project manager/coordinator), as well as a financial management specialist, a procurement officer, technical manager, grant manager, M&E specialist and a Governance officer (the Governance Officer will report directly to the Board o f Directors o f the ICT Board, i.e. the Governance Oversight Committee).

23. The Government has designed governance and transparency measures for the project, including for the wider I C T sector framework. The Government i s particularly keen on having built- in governance mechanisms to ensure the I C T Board i s results-oriented and delivers in line with a set o f targets to be agreed upon. In this context, the measures to strengthen the governance framework include the following: (i) the establishment o f a mixed public-private sector Governance Oversight Committee; (ii) the establishment o f an institutional risk management policy framework; (iii) public disclosure o f M&E outputs with arrangements being compliant with recently enacted anti-corruption legislation ; (iv) the formulation, disclosure, and monitoring o f activity performance agreements signed between the ICT Board and line rninistries/agencies/entities that are benefiting from this project, and annual performance contracts with the I C T Board key staff; and (v) a far reaching communications strategy. More detail on each o f these features can be found in the Government’s letter on governance, accountability and transparency ( h e x 2) and in h e x 6.

24. Specialized implementing agencies will lead and implement key ICT activities. The I C T Board, as the executing agency for the project, will be responsible for coordinating the implementing agencies participating in the project. The ICT Board will also directly manage al l procurement and fiduciary requirements for the project, including those o f the implementing agencies, through the expertise made available in the project management unit. A table describing the implementation

The Kenya TCIP will be anchored at MoIC.

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arrangements by activity (beneficiary, implementing agency, governance) can be found in Annex 6. The other implementing agencies participating in the project include:

a) The eGovernment Directorate Office in the Office o f the President tasked with implementation o f the eGovernment applications components (except e-procurement) as well as with the overall project M&E arrangements; and

The newly created Public Procurement Oversight Authority tasked with implementation o f the e-procurement activities.

25. Robust financial management arrangements will be put in place ahead of project effectiveness as part of country systems building. Financial arrangements that are in process and scheduled to be completed by project effectiveness include: (i) deployment o f financial management staff at the ICT Board; (ii) development and dissemination o f operations manuals and guidelines for financial accountability and reporting; and (iii) orientation and capacity development arrangements for financial management staff. In addition, the project will have a comprehensive institutional risk management framework, including independent and effective oversight by the Governance Oversight Committee. More detail can be found in Annex 7.

26. The ICT Board will directly manage all procurement and fiduciary requirements for the project through a procurement officer to be hired before project effectiveness. The ICT Board, eGovernment Directorate and Public Procurement Oversight Authority will prepare annual Procurement Plans separately (in liaison with beneficiary agencies) , and submit them to the procurement officer who will group similar items into appropriate contract packages and produce a consolidated Annual Procurement Plan for the entire project. The ICT Board will carry out i t s procurement decisions in accordance with the agreed procedures. In addition to the Bank’s procurement reviews, the Public Procurement Oversight Authority will be responsible for ensuring that procurement processes and decisions are done in accordance with the applicable rules.

b)

objective: To contribute to lower prices for international capacity and extend the geographic reach o f broadband networks

3. Monitoring and evaluation o f outcomes/results

27. project, and technical assistance provided through the project will include support for M&E.

Monitoring and evaluation of TCIP will be embedded in the various components o f the

- Volume o f national traffic using 2 proxies:

Total teledensity (fixed and mobile) Internet user penetration

Average price o f international communications using the proxy:

price o f wholesale international “El” capacity link

transparency with the eGovernment applications

Use of outcome information Assess trends in international communications and regional communications integration

Assess level o f access to communications services within targeted countries

Assess competitiveness o f countries wi th regards to cost o f capacity Show improvement in quality o f eGovernment services

Indicate successful rollout and use o f eGovernment services

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Intermediate Results Component 1: Enabling Sound environment :onducive to investment md competition Component 2: ConnectiF Unfettered access for al l 3perators to regional infrastructure

Intermediate Results

Broadband demand i s not :onstrained by cost or iccess

Percent government employees with email account

I Results Indicators for Each component

Universities are connected to broadband services

Increased protection o f intellectual property & o f electronic transactions Mobile Phone charges decreasing

[ncreased viability o f regional and national infrastructure

Monitor sector competitiveness and efficiency o f regulation

Government i s connected

Improved governance and public sector services through eGovernment applications

. Number o f Departments adopting .

. .

. .

eGovernment applications percent o f land records digitized in central office o f the Ministry o f Lands percent o f archived H igh Court registry digitized percent o f wealth declaration forms analyzed Cost o f small purchases o f office supplies Number o f government domain names

Y Number o f market players buying capacity at the landing station

Price o f Internet Access Number o f BPO jobs

Number o f university PCs connected to broadband

Already captured

Number o f government institutions connected to the government virtual network

Share o f documents with security classification

Monitor competitiveness and assess fair access to infrastructure

Monitor level o f access to broadband services

Monitor level o f access to broadband services for students

Monitor increase in take-up o f capacity

Assess level o f connectedness within government, assess readiness for decentralization

Quality improvement o f electronic government services over paper based transactions

Use of results monitoring

Level o f demand for eGovernment services indicating successful implementation o f eGovernment

Measure o f success o f adherence to standards

28. The project will support the IDA Results Measurement System. This will be achieved by collecting data on the sector and namely on teledensity, and thus aligning with the country’s development progress relating to the 14 indicators endorsed by IDA deputies at their meeting in Hanoi in July 2004. With the project, the Bank management will have information to measure teledensity figures for participating countries in the regional program and depending on the specific eGovernment applications supported through the program will have built-in real-time monitoring and evaluation systems and can also contribute for other indicators such as cost o f business start up or public finance management, for example.

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4. Sustainability

Component Component 1: Technical assistance to sector ministry, regulator, M&E capacity

Component 2: Connectivity (a) Support for capacity purchase schemes in the regional networks to support targeted users (schools, universities, hospitals, eGovernment users, other user groups).

(b) Support for financing the governments’ virtual communications network.

Component 3: eGovernment applications.

Sustainability Technical assistance i s being provided to improve sustainability through capacity building inside the Ministry and regulator.

5. Critical risks and possible controversial aspects

Capacity can be leased (monthly, yearly, etc) or purchased for the l i fe o f the cable on an IRU basis (Indefeasible Rights o f Use), similar to a capital investment. To improve sustainability o f th is component capacity on the national and regional backbones wil l be purchased as much as possible on an IRU basis. In addition, the purchase o f capacity would be based in the principles o f cost-sharing, and the objective would be to compensate for high prices prior to expected reduction o f prices. Support w i l l be designed so as to be phased out as prices decrease. This component mostly relates to physical investments in infrastructure. Sustainability r isks would l i e on resources for network maintenance. Sustainability i s ensured through PPP arrangements or by targeting beneficiary agencies where commercialization can be achieved for cost-recovery purposes or where significant cost savings can be realized.

29. This project i s complex and ambitious with potential risks. A number o f r i sks related to the planning and execution o f the R C P have been identified. Some o f these potential r isks are found in other regional projects supported by the Bank and may lend themselves to lessons for more coordinated approach (refer to the R C P Program Appraisal Document for the r isks at the level o f the Program and the relevant mitigation measures). The table below summarizes the r isks identified at the level o f the country and project.

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6.

Governance issues with regards to capacity purchase schemes

Limited institutional capacity to implement the reforms required under the TA component

implementation o f eGovernment Inadequate preparedness for the

M a i n R i s k s I Rating I Mitigation measures

M

M

S

To project development objecti Governance issues, more particularly in Kenya

Risk o f slow take o f f during implementation

Risk that project resources may not be used for intended purposes owing to weak governance and corruption safeguards

S

I

The specific operation for Kenya includes an important set o f activities related to supporting transparency initiatives in the area o f eGovemment, eprocurement as well as grassroots initiatives. A specific risk assessment framework for Kenya with detailed mitigation measures will be prepared in liaison with INT by effectiveness. Leading up to project effectiveness, the team will work intensively with the counterpart agencies to more clearly identify project activities, implementation arrangements, and related issues to ensure that project implementation can proceed effectively. A strong M&E framework i s being established to facilitate supervision and progress monitoring.

A Governance Oversight Committee i s being established in Kenya to oversee al l the activities related to capacity purchase schemes and ensure alignment wi th al l the required enabling environment safeguards that w i l l be established. Project activities include continued TA assistance to participating agencies to ensure adequate implementation o f the required reforms. The eGovemment component wil l include substantial capacity building and support for the implementation o f the necessary organizational reforms for the success o f the identified eGovernment services and applications. A screening and prioritization methodology has been developed to identify the potential target applications to be considered under this component, the main premise being the demonstrated existence o f strong buy-in and leadership at the - - highest level in the beneficiary organization, among ofhers. . Establishment o f the I C T Board institutional risk

management pol icy framework comprising ongoing risk identification and response initiatives by management. Establishment o f the fiduciary oversight functions at the Governance Oversight Committee level. Deployment o f a risk based internal audit function. Quarterly financial and project progress reporting to stakeholders.

. . . Credit conditions and covenants for TCIP

30. Prior to effectiveness

The conditions o f effectiveness are as follows:

(a) The Recipient has developed and adopted the Project Implementation Manua

(b) The Recipient has recruited to the I C T Board: (i) a Deputy Managing I:

satisfactory to the Association. in a form and substance

rector in charge o f the Project’s overall coordination; (ii) a procurement specialist; and (iii) a financial management specialist; al l with qualifications, experience, and terms o f reference satisfactory to the Association and in accordance with the provisions o f Section 111 o f Schedule 2 to the Agreement.

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(c) The Recipient has established a financial management system, in form and substance satisfactory to

(d) The Recipient has opened the Project Account and deposited therein the init ial deposit referred to in

(e) The Recipient has established an institutional r i s k management policy framework satisfactory to the

the Association.

Section V.B o f the Financing Agreement.

Association.

3 1. The institutional risk management policy framework requires a comprehensive financial management system. The key elements to the risk management policy framework include: (i) establishment o f a Governance Oversight Committee, including Audit and Finance sub-committees with clear terms o f reference consistent with the Recipient’s Government’s financial management guidelines; (ii) updated financial management and procurement manuals setting out operational policies, procedures and fiduciary oversight methods; (iii) arrangements for public disclosure o f information and complaint handling mechanisms; and (iv) an effective system o f internal and external audits.

32. Disbursement conditions

The conditions o f disbursement are as follows:

(a) No disbursement for any grant related to generating content for the Government Information Portal, the Digital Village initiative and the SMS/NR eServices initiative unless the disbursement and governance mechanisms are in place and satisfactory to IDA, and the grants concerned shall have been made according to the procedures set in the Grants Operational Manual.

(b) No disbursement for purchase of telecommunication capacity unless the parameters and expenditures for such support have been defined and approved by IDA.

D. APPRAISAL SUMMARY

1. Economic and financial analyses

33. Given the nature of the activities financed under TCIP, it i s not possible to calculate an internal and economic rate of return. However, a discussion about the potential economic benefits o f the project, represented by the impact o f the eGovernment application at the Kenya High Court Registrar and for the connectivity component, i s presented in Annex 9. This should be read in conjunction with the economic and financial analysis presented in section D. 1 o f the RCIP Program Appraisal Document.

2. Technical

34. design o f the project components:

The following technical issues were covered during the project’s appraisal to strengthen the

Guidance was received from the World Bank’s Trade Sector anchor unit to strengthen the component related to the capacity purchase scheme for the BPO industry so that i t i s made compatible with Kenya WTO commitments;

Due diligence was carried out to assess the actual capacity requirement o f the combined 51 Kenyan universities and technical colleges and to formulate principles aimed at strengthening the sustainability o f the support;

Due diligence was carried out to assess the extent o f existing efforts related to the Government Virtual Communications Network, so as not to duplicate existing efforts and to leverage the potential support o f other donors in that area; and

.

.

.

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. Due diligence was carried out with GoK departments to identify l ikely candidates for eGovernment-related support. T h i s allowed a much better scoping o f the eGovernment components as well securing the early buy-in from the departments identified for support.

3. Fiduciary

35. Financial management risk i s rated substantial given that a number of proposed institutional arrangements, notably the deployment of finance staff, are not yet in place. The financial management assessment was discussed during negotiations and will be monitored and revised ahead o f project effectiveness. Institutional arrangements are expected to comprise: (a) the establishment o f acceptable financial management systems; and (b) safeguards that respond to country level fiduciary r isks o f weak governance and corruption, including (i) establishment o f the ICT Board institutional r i s k management framework comprising ongoing risk identification and response mechanisms; (ii) establishment o f fiduciary oversight functions o f the GOC; (iii) adoption o f risk-based internal audit; and (iv) arrangements for public disclosure o f information on financial accountability and project progress at various levels. Once satisfactorily implemented, financial management risk rating i s expected to improve to modest.

36. Procurement capacity assessment rates the procurement risk as “high”. An in-depth procurement capacity assessment was carried out during project appraisal, which rates the procurement risk ‘high” due to the following key issues and r isks concerning procurement during implementation o f the project: (i) the proposed executing agency, the ICT Board, created under MoIC, i s not yet operational and staffed; (ii) MoIC procurement unit i s staffed with one chief Procurement Officer and one Senior Procurement Officer who do not yet have the capacity to carry out procurement in accordance with Bank procedures; (iii) the ICT Board procurement officer along with all the implementing agencies project staff will need to be trained on Bank procurement procedures and policies; (iv) currently there are weak institutional arrangement for procurement oversight; and (v) National Standard Bidding Documents have not been reviewed by or cleared with the Bank. The recommended actions for mitigation o f these concerns are tabulated in Annex 8. 37. The supervision of the project may require additional measures. In addition to the mitigating measures tabulated in Annex 8, i t i s also suggested to assess the performance o f the proposed implementation arrangements 3 months after credit signing date. This would allow the Bank to determine whether there i s any need to make specific and tailored changes. An example o f such changes could be the appointment o f a procurement agent to handle all o f the procurement activities under the project, including monitoring o f the utilization o f the proposed US$8 mil l ion grants to support the Government Information Portal, the Digital Village and the SMS/IVR e-service initiatives. The Bank should also ensure that the supervision includes the relevant technical s taf f (ICT technical staff, IT procurement specialists, technical specialists) to provide technical advice (for instance on terms o f reference, technical specifications, etc.) in relation to the project activities deemed complex.

4. Safeguard policies

38. The proposed category for the RCIP Program i s B, and the TCIP i s not expected to have any major infrastructure work. The physical components o f TCIP will mostly be installation activities/fittings inside existing buildings. The r isks associated with this kind o f infrastructure are generally low, and the project i s therefore assigned to environmental category B under OP 4.01. LancUbuilding acquisition for the installation o f a Network Operation Center i s not likely to trigger OP 4.12 Involuntary Resettlement considerations. The project i s not expected to impact indigenous peoples in any negative way, and therefore OP 4.10 i s not triggered.

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39. An Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (RPF) have been prepared for the overall program. The ESMF and the RF'F have been reviewed by the Bank and publicly disclosed in all countries participating in the f i rst phase o f RCIP. They are also available on www.worldbank.org/rcir, as well as at the Infoshop. A specific costed Environmental Management Plan (EMP) and Resettlement Action Plan (RAP) will be prepared as necessary for the terrestrial facilities during project implementation, in line with the ESMF and RPF, once the exact locations o f those facilities have been identified. The institutional responsibilities for preparing the various safeguards instruments will l i e with the MoIC. Any specific required action for some o f the c i v i l works will be taken into account during project implementation. Institutional responsibilities for preparing the safeguard assessment strategy will be defined closely with the Safeguards Team.

Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.0 1) [XI [I Natural Habitats (OPBP 4.04) [I [XI

Pest Management (OP 4.09) [I [XI Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) [I [XI

Involuntary Resettlement (OP/BP 4.12) [XI 11 Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI

Forests (OP/BP 4.36) [I [XI

Safety o f Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP/GP 7.60). [I [XI Projects on International Waterways (OP/BP/GP 7.50) [XI

5. Policy exceptions and readiness

40. The Project does not require any exception to the Bank policies.

E. COMMUNICATIONS STRATEGY FOR TCIP

41. Effective communications through the life cycle o f the project (from planning and implementation through to M&E) are critical to the ultimate success of the project. Communication i s particularly crucial for the transparency initiatives related to the eGovernment components which require both internal government and public acceptance and uptake to be effective. The role o f communications includes, but i s not limited to:

Setting a clear communications plan and defining the issues around the project, while revisiting the strategies with the project team regularly; Ensuring appropriate disclosure and transparency at al l stages o f the project; Anticipating and addressing issues o f concern to citizens and other key stakeholders in urban and rural areas; Ensuring that the project implementation unit i s aware o f external perspectives by circulating, analyzing, and if necessary, responding to press and public opinions; Establishing a system to provide information through the web and other means; Determining the types o f information and communication activities that are best suited to addressing issues or problems;

. .

.

* By supporting theproposedproject, the Bank does not intend to prejudice thefinal determination of theparties' claims on the disputed areas

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. Preparing and disseminating both routine and complex outreach products (e.g., news releases, briefs, open editorialdarticles, Q&As, websites, etc.) that promote the strategic and timely flow o f information and key messages to key internal and external audiences; Overseeing planning, coordination, scheduling and logistics for press briefings, high-level meetings, stakeholder workshops and other communications-related activities; Ensuring cohesive and consistent talking points for the public and press; and Providing media training to project spokespersons.

' '

42. The communications context in Kenya presents important strengths and opportunities, as well as weaknesses for the project. Based on an assessment o f the communications situation in Kenya (see summary table below), the project design includes a communication framework outlining key success factors and proposed activities.

Strengths . M o I C has good reputation o f being committed to empowering people with information for transparency Ministry web portal already established Project i s generally well-received by public N o expected environmental or resettlement impact No strong opposition to the project Strong and enthusiastic private sector involvement Business Process Outsourcing component in Kenya l ikely to result in major job creation and generate much publicity and goodwill for the government Measurable, quantitative indicators o f success for the Program available Strong relationship and coordination between World Bank Task Team, Country Directormanager and Government offices

Very active c iv i l society - good opportunity to engage and obtain feedback, reality-check Diverse and relatively independent media voice Active citizenry keen to participate in decision making Relative to other African countries, public has easy access to internet through cyber-cafes - facilitates information dissemination

. . . . . .

.

Opportunities . . . .

Weaknesses . . Complex project to explain, with multiple components and technical terminologies Lack o f understanding by public and media regarding Kenya's position on the submarine cable infrastructure N o prior experience by MoIC/ICT Board on implementing World Bank project, and al l the associated disclosure/public communication requirements

.

Threats . Governance and corruption issues that might affect implementation . Submarine cable delays . Resistance/reticence by long-term employees to eGovernment transition

43. The Communications Framework highlights the importance of clear key messages. The development o f key messages will be extremely useful in framing the context o f public discussions. These could include, for example: . TCIP is more than just a telecom infrastructure project. It i s ultimately a social project - i ts potential

benefits will be widespread and long lasting. By the end o f the program, Kenya should have access to competitively priced high-bandwidth connectivity which will benefit a wide cross section o f society. Bandwidth costs are projected to decline more than tenfold from between US$5,000-8,000 per month for 1 M b i t / s today to under US$l,OOO per M b i t / s per month by 2010, which should translate into end- user broadband access at under US$ISO/month, and are expected to rapidly decline further. T h i s in turn should lead to lower prices for telephone services and better access to the internet that will

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significantly, decrease the cost o f doing business and increase the prospects for job creation and wealth generation.

TCIP wi l l contribute to both connectivity and transparency objectives. TCIP has two overarching development objectives: (i) to contribute to lower prices for international capacity and extend the geographic reach o f broadband networks (the “connectivity development objective”) and (ii) contribute to improved Government efficiency and transparency through eGovernment applications (the “transparency development objective”).

Both submarine cable and terrestrial networks are necessary to ensure viability of the overall regional program: In particular:

> The viability o f any submarine cable in the region i s directly impacted by the potential increase in traffic made possible by an acceleration o f the backhaul and backbone links, the development o f applications at national level, and Governments’ use o f the infrastructure to provide services; and

9 Conversely, without cross-border submarine cable initiatives, and the resulting reduction in broadband access costs, countries would not have the incentive to develop complementary infrastructure, and the development o f applications would be seriously hampered.

.

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Annex 1: Kenya’s Fight against Corruption: Progress, Setbacks and New Frontiers

Regional Communications Infrastructure Program (RCIP) Kenya Transparency and Communications Infrastructure Project (TCIP/CIP 1)

I. Introduction

1. T h i s Annex discusses highlights o f Kenya’s efforts since 2003 to address the problem o f corruption, including steps taken and setbacks experienced, and further actions that are planned by the Government. These actions build on lessons of experience and look at corruption through a broader governance lens. The Annex also updates the information on Kenya’s anti-corruption effort provided in the project paper for the Additional Financing Credit for Drought Emergency under the Arid Lands Resource Management Project Phase 11, which the Board approved on August 3, 2006, the Education Sector Swaps which the Board approved on November 7,2006, and the briefing provided to the Board on December 14, 2006. Another important source o f input has been consultations held in January 2007 with a wide variety o f stakeholders around the World Bank’s Board Paper on Governance and Anticorruption (GAC) as part o f the global consultation exercise.

11. Selected Highlights

2. Historical Perspective. Historically in Kenya, power has operated through a web o f informal networks based on personal ties, often with a strong ethnic and gender element, between leaders and supporters at all levels. The networks permeated public institutions, subverted formal rules and severely compromised systems o f public accountability. As a result, key institutions decayed. The judiciary, for example, became largely ineffectual and corrupt, and presidential powers (and single-party democracy until 1992) supplanted other vital institutions such as Parliament. Theft o f public resources, including procurement fraud, was documented by controllers and auditors general, but corrupt individuals used the court powers and other means to punish critics. Media freedoms suffered, and the police emerged in Kenya’s public opinion surveys as the most corrupt institution. When it came to power at the beginning o f 2003, the new government made a number o f bold moves in fulfil lment o f i t s campaign pledge to put a halt to corruption. These actions are discussed below.

3. Legislative Actions. In 2003, Parliament passed the Public Officer Ethics Act, requiring c iv i l servants to file annual declarations o f income, assets and liabilities, and the Anti-Corruption and Economic Crimes Act, which set up the Kenya Anti-Corruption Commission (KACC). The Government also enacted key legislation aimed at improving governance and public service delivery which include the Government Financial Management Act (2004) and the Public Audit Office Act (2004). In fulfillment o f the Anti-corruption Action Plan for April 2005-June 2006, a landmark Procurement Bill received Presidential assent in November 2005, establishing a semi-autonomous Public Procurement Oversight Authority responsible for the regulation of procurement in the public sector, including procurement o f security related contracts-transactions which were shrouded in secrecy in the past and associated with high level graft. In addition, the Privatization Act received Presidential assent in October 2005 setting the stage for the privatization o f public assets and operations including state corporations, as part o f the privatization program under a new privatization commission. In late 2006, legislation was introduced to Parliament that would increase the number o f judges, significantly reduce delays in corruption trials, fight money-laundering, and provide a framework for political party funding. Parliament recessed in December before completing this legislative agenda, but these items are expected to be reintroduced when Parliament reconvenes in March 2007. The Government i s also at an advanced stage in developing a Freedom o f Information Bill that will ensure public access to information. Meanwhile, implementation o f the new procurement act and regulations began in January 2007.

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4. Capacity Building and Administrative Actions. After 2003 there was a four-fold increase in the professional staff o f the KACC, recruitment magistrates and other legal staff, and the launch o f public education campaigns. The Attorney General’s Office had 126 new state attorneys in January 2006, significantly increasing i t s capacity. To speed up trials, the Chief Justice changed the rules o f the court in January 2006 to set rigorous time limits for disposing o f Constitutional references which tend to add years to the disposal o f cases. Responding to criticism that it relied too heavily on legislative measures, the Government began to take administrative steps more regularly. For example, in December 2005, the Government annulled the recruitment o f 3,000 police officers and suspended senior officers involved in the recruitment exercise, pending further investigation. The Kenya Revenue Authority also announced that i t was suspending several senior officers who work at the Port pending investigation into why they were not achieving performance targets for customs revenues. In addition, the Government fired the Managing Trustee o f the National Social Security Fund (NSSF) following investigation by the KACC, although months later he was appointed to head another parastatal (Meanwhile, a Bank-sponsored study o f the NSSF has shown it to be severely dysfunctional; for example, as a result o f mismanagement and low return on fund investments, the typical Kenyan retired worker can expect to receive a total retirement package that would cover no more than 12 months o f income). The Governor o f the Central Bank was also suspended pending investigations o f wrongdoing and i s now being prosecuted. Such suspensions and firings have become somewhat more frequent. For example, the Government recently suspended senior staff in the Ministry o f Lands and two senior executives at the Kenya Re-Insurance pending investigations into corrupt practices. Also on the administrative front, the judiciary has instituted a self- rejuvenating mechanism through a peer review on integrity and handling o f complaints, which i s expected to improve its systems and performance.

5. Results-based Management and Performance Contracts. Consistent with the focus on the effective and accountable use o f public resources, the Government has introduced a Results-Based Management (RBM) system as a tool for helping public sector institutions to focus their work, plan strategically and demonstrate the difference that each organization i s making to development. This focus on “Practical Results for Kenyans” i s based on international best practice in countries such as Canada, Sweden and the United Kingdom. The Government has also introduced performance contracts for all i t s senior officials including those in parastatals. The contracts are meant to create incentives for public sector managers and their staff to improve performance and accountability by undertaking to deliver specific outputs in line with their mandates. The availability o f these contracts (at http://www.dpm.go.ke/pages/splans.html) i s not widely known, and i s therefore a missed opportunity for public monitoring, assessment and pressure for enforcement. There i s also room to improve the focus o f the contracts themselves on issues o f corruption. Public sector management reform has also focused on introducing rapid results initiatives, service charters, codes o f conduct, and citizen scorecards. One important milestone in this home-grown reform program occurred in December 2006, when the President officiated at a public event in which all Ministers, Assistant Ministers, and their permanent secretaries received their performance scores as assessed by expert stakeholders on the basis o f the results-based management performance contracts their departments had signed.

6. Alleged Corruption Among Ministers. Following the constitutional referendum o f November 2005, the President reshuffled his Cabinet, removing ministers alleged to have been involved in large scale corruption and appointing a new and respected minister o f justice and constitutional affairs. During February 2006 two o f the ministers named in the report prepared by the former Permanent Secretary for Governance and Anti-Corruption resigned from office to allow for investigations to proceed. K A C C began to investigate these and all others mentioned as possibly involved in corrupt activities. A third minister, the Minister o f Education who had been the Minister o f Finance at the time o f the Goldenberg affair occurred in the early 199Os, resigned following his implication in the Goldenberg Commission report which was also released at this time (in July 2006, however, Kenya’s High Court ruled that he had

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acted appropriately in his role as Minister for Finance, and that because Kenya’s Attorney General of a decade ago had cleared him o f wrong-doing in a statement to Parliament at the time he could not be prosecuted - this High Court ruling i s being appealed against by the Hon. Attorney General on behalf o f the Government. T h i s was followed by Government seizure o f passports and firearms o f several individuals associated with Goldenberg. Prosecutions in the Goldenberg scandals began in mid-June 2006 but prosecutions in the Anglo-leasing case are awaiting the completion o f investigations by the KACC. The ongoing investigation and the status o f legal action in the Anglo-leasing affair have been much in the news recently. In October 2006, the Attorney General sent the investigative f i les o f 12 prominent individuals (including former Cabinet members), who had been recommended for prosecution, back to the KACC for lack o f evidence that would sustain prosecution. In late November 2006, the President reappointed two Ministers who had earlier left Cabinet because o f their alleged involvement in corruption scandals (both had undergone judicial processes that appear to have cleared them o f criminal wrongdoing). On January 19, 2007, local journals reported that the Attorney-General had cleared all four Ministers implicated in the scandal o f any wrongdoing, and this was received with a large-scale public outcry against the decision. The Attorney-General has, however, issued a statement indicating that in fact investigations are ongoing and that there has not been a judicial clearance on substantive issues o f corruption.

7. Other Measures. Separately, the President has required that members o f the new cabinet s i g n a code o f conduct, and that the KACC verify their declaration o f assets. These declarations are now being vetted by the KACC. The Government has ended ‘land grabbing’ and state sponsored ‘harambees’ or fund-raising. I t also set up the Ndungu Commission to look into the illegal allocation o f public lands and after making public the report in February 2006, gave individuals and organizations implicated a three month period to return land that was obtained illegally (whether deliberately or not). That period has now expired and further action by the Government i s awaited. As o f January 2007, 133 title deeds for illegally or irregularly acquired public land had been surrendered to the Ministry o f Lands. Measures were also taken to improve the governance o f public finances. They included enhancing the capacity o f the National Audit Office, which was then able to clear the long-standing backlog o f public accounts audits. In October 2005, the government established independent audit committees in al l ministries, departments, state corporations and local authorities. This step i s part o f a new risk-based internal audit approach, supported by the World Bank and other donors, that involves identifying the potential for fraud in advance and building the necessary r i s k mitigation processes into the design o f government systems and processes. The prospects for reducing rent seeking were further enhanced in November 2005 through additional measures such as the liberalization o f coffee marketing (after over a decade o f policy debate about it). Under the ongoing licensing reform program, about 9 percent o f licenses have been abolished, and another 50 percent are scheduled for harmonization, simplification, or elimination by December 2007 (including about 23 licenses that the private sector has identified as priorities).

111. Assessment

8. Despite the range o f actions on legislative, administrative, political and other fronts discussed above, the Government has acknowledged that the fight against corruption i s an uphill task. At a National Stakeholder Conference convened in late M a y 2006 by the Government to discuss future plans for fighting corruption, the Minister o f Justice and Constitutional Affairs noted that efforts so far ‘have only scratched the surface’. Meanwhile, the peer review by the New Partnership for Africa’s Development (NEPAD) indicates that 60 percent o f Kenyans feel that the government has not gone far enough in the fight against corruption and over 90 percent believe that there i s s t i l l corruption in government.

9. In January 2006 the former Permanent Secretary for Governance and Anti-Corruption alleged that some Cabinet ministers and other senior c iv i l servants in the new government were involved in big graft. In March 2006, hooded men raided the

Doubts about the Government’s Commitment.

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headquarters o f the Standard Media Group late at night, allegedly for national security reasons. In October 2006, the Attorney General sent the investigative files o f 12 prominent individuals (including former Cabinet members), who had been recommended for prosecution, back to the KACC. In late November 2006, the President reappointed two Ministers who had earlier left Cabinet because o f their alleged involvement in corruption scandals (both had undergone judicial processes that appear to have cleared them o f criminal wrongdoing, but public confidence in these processes i s quite low). In January 2007 two other Minister were cleared by the KACC o f interference with an investigation. Other allegations against them are being looked into. Overall, Kenyans continue to cite governance as the most pressing concern, and want more action on it, but some are concerned about the Government’s commitment to the fight.

10. Measuring Results to Date. Whi le there i s a broad domestic and international consensus on where Kenya i s coming from on corruption (historically) and where it needs to go, there i s much less agreement on the results that have been generated so far, and on the prospects for winning the fight. Transparency International’s Annual Corruption Perceptions Index has consistently placed Kenya towards the bottom o f the l i s t (in 2006 it ranked 142 o f 163 countries, whereas in 2005 it had ranked 144 o f 159 countries)). In June 2006, Transparency International (Kenya branch) reported that bribery increased in 2005 following declines in 2003 and 2004. Ranking public institutions for the occurrence o f bribery include the police, state corporations, and local authorities. Roughly 55 percent o f Kenyans fel t that corruption was unchanged, the same number as in 2003. But while 13 percent fe l t i t had worsened in 2003, the number jumped to 19 percent in 2006. A larger household survey released in early July 2006, conducted by the KACC and covering 21 districts in all provinces, found that public awareness o f corruption has r isen from about 75 percent in 2000 to 99 percent in 2005. The survey concurred that the police, the Ministr ies o f Health and Lands, and local and district governments were perceived as the most corrupt, Roughly 41 percent o f respondents believed that corruption has decreased from a year ago, 22 percent believed that there has been no change and 37 percent believe that i t has worsened. About 60 percent fe l t that the Government was performing badly on corruption, a figure similar to the NEPAD assessment. Contrasting with these more negative findings, Kenya’s score o f 3.0 (of a possible 6) on the question on “Transparency, Accountability and Corruption in the Public Sector” in the most recent Country Policy and Institutional Assessment (CPIA) conducted globally by the World Bank and released at end-May 2006 places Kenya at roughly the mid-point among the 79 l ow income developing countries covered in the exercise. Meanwhile, the 2006 Global Integrity Index, released in January 2007, gives Kenya a score o f 71 out o f 100, up from 61 in 2004, placing it in the same cluster o f “moderate” performers as Argentina, Uganda, and Brazil, well ahead o f Mozambique, Russia, and Senegal, and far ahead o f Tanzania, Egypt, and Vietnam.

1 1. Synthesis. Notwithstanding important legislative and institutional developments and the beginnings o f political accountability, more efforts need to be done to assure the public o f i t s commitment to fighting graft. This will ensure that the efforts already made and the ones that are planned, shall produce tangible and measurable results. This would require strong leadership at all levels, with an almost single-minded focus on reversing behaviors that have been entrenched, politically, socially and culturally for decades.

IV. Further Steps toward Better Governance

12. Broad-based Stakeholders Participation. There appears to be a growing realization among governance reformers in Kenya that the war against corruption requires the mobilization o f a broad range o f stakeholders, including c iv i l society, the media, private sector, faith-based organizations and professional bodies. For example, as recent experience indicates, civi l society and the media can have a powerful impact as sources o f information on corruption and as advocates for change. There i s some evidence that the reformers in Kenya might wish to reach out to these groups in a more systematic way. For example, the June 2006 Stakeholder Conference on the Draft National Anti-corruption Strategy, the

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largest of the three held since September 2005, brought together Kenyans from the executive, parliament, the judiciary, the private sector, the media, trade unions, faith-based organizations, professional bodies, and NGOs to consider the government’s national multi-year strategy for fighting corruption. The Draft Strategy itself arose from a process conducted years ago and updated recently that involved grass-roots inputs and consultations in al l eight provinces. The other recent broad-based consultations have focused on the Strategic Plan of the Kenya Anti-corruption Commission. A particular challenge i s to ensure that al l the broad-based participation and consultations cohere around a focused set o f workable initiatives oriented toward demonstrable results, while leaving participants the freedoms they need to serve as both advocates and critics.

13. Formulation of the Government o f Kenya’s updated Governance Strategy and Action Plan. Concurrently with these stakeholder consultations, Bank sponsored audit work at the project level (the INT-led Detailed Implementation Review [DR]) and at the level o f national and sectoral policy (the WBI-led Init ial Governance Assessment (IGA]) gave fresh insights into anti-corruption measures that the Government itself could take. These inputs all contributed to the formulation o f the Government’s Governance Strategy and Action Plan (GSAP) through December 2007. The GSAP reviews progress in terms o f legislation passed since 2003, administrative actions taken, public sector and financial management reforms, the role for the private sector, public education efforts, investigatiodprosecution, and restitution o f stolen assets. I t sets forth a matrix o f specific, time-bound actions accompanied by progress indicators in areas that include (a) strengthening the legislative platform for the fight against corruption (e.g., legislation for witness protection, anti-money laundering and greater disclosure of personal wealth declarations o f government officials); (b) facilitations transparency and public access to government information; (c) deepening public financial management reforms; deepening procurement reforms; (d) scaling down the role o f government; and (e) strengthening capacity for investigation and prosecution of corruption.

14. Transparency, Public Access to Information and Public Education. The Government i s at an advanced stage o f assuring public access to information through the proposed Freedom o f Information Bill, which seeks to empower members o f the public to have free access to information held by Government. The right o f the media to access and disseminate information will further enhance transparency and accountability. The Media Bill, at an advanced stage, will promote and protect a professional, self-regulating free and independent media. The Media Bill seeks to establish a Media Council o f Kenya and enshrine the “freedom to hold opinions without interference and to seek, receive and impart information and ideas through any Media regardless o f frontiers.” Both the above Bills will be submitted to Parliament when it reconvenes in March 2007. These legislative developments complement another initiative by Government to establish a National Bureau o f Statistics, through the Statistics Bill of 2006. The Bureau, which will replace the Central Bureau o f Statistics, will collect, compile, analyze, and publish statistical information, and will be guided by explicit provisions for public access and dissemination. A related aspect o f these transparency initiatives i s heavy investments in eGovernment, including e-procurement, and continued investment in public education and awareness-raising. To improve accountability in budget implementation, the Budget Monitoring Unit at Ministry o f Finance will be revamped, initially paying particular attention to roads and water programs. The Unit will prepare comprehensive quarterly reports on budget implementation for dissemination to the public.

15. Further Legislative Advances. A number o f bills were on the parliament’s l i s t to be passed into law in late 2006. The Witness Protection Act was passed but Bills on anti-money laundering and political party financing were not acted upon by the time Parliament recessed in early December. It i s expected that they will be considered when Parliament reconvenes in March 2007. The pending Statute Law (Miscellaneous Amendment) Bill proposes to amend the following laws, namely; the Judicature Act (Cap 8) to increase the number o f judges o f the High Court from fifty to seventy and those in the Court o f Appeal from eleven to fourteen; the Constitutional Officers (Remuneration) Act, (Cap 423) to implement the new salary structure for constitutional office holders; and the Anti-Corruption and Economic Crimes

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Act (ECA), 2003, to disallow applications for stay o f proceedings in cases involving economic crimes and corruption. The Miscellaneous Amendments Bill will also harmonize the penalties for offenses that can be prosecuted under both the ECA and the Penal Code and amend the Public Officer Ethics Act, 2003, to regulate the public officers’ declaration o f wealth. The Witness Protection Bill, 2006, if passed will provide for the regulation and operation o f a scheme for the protection o f witnesses in criminal cases, commissions o f inquiries and similar proceedings that are critical to the prosecution o f corruption cases. The proposed scheme under this Bill will be established and coordinated by the Attorney General. Legislation on political party financing i s also proposed.

16. Capacity to Prosecute. Despite improvements in the investigation o f corruption cases, the current capacity to prosecute i s s t i l l inadequate. This has affected efforts to effectively prosecute past and on-going cases on corruption. A number o f training programs have been launched to strengthen the capacity o f the State Law Office (SLO) and the Director o f Public Prosecutions (DPP) in the Attorney General’s Office. The government i s in the process o f recruiting additional lawyers, (130), including specialized and competent prosecutors with proven integrity. O f these, 65 will serve the State Law Office, 42 to the Department o f Public Prosecutions to make a total o f 104 and 23 to the Civ i l Litigation Department. Other initiatives include addressing legal challenges arising from corruption prosecutions (see paragraph 15) by, among others: publishing judgment and court statements; and establishing open hearings.

17. Disposal of Cases. In 2005, there were 503,948 new cases filed together with those pending at the beginning o f that year, bringing the total number to 1,074,602 cases. O f these, the courts were only able to deal with 541,167 cases, rolling over 535,840 to 2006. As part o f the effort to address this challenge, the following initiatives will be implemented. As indicated in the Miscellaneous Bill, the number of judges will be increased to 70 from 50. In addition to the absence o f judicial officers, the Government’s efforts to effectively dispose o f cases (including corruption cases) have been hampered also by the lack o f basic facilities such as court rooms, manual filling and retrieval o f cases, lack of equipment such as computers, poor remuneration and terms o f service for the judiciary especially for the magistrates. The World Bank-financed Financial Legal and Technical Assistance Project i s currently supporting the training o f judges and modernization o f the court system through automation o f the courts. It will also finance the recording o f court proceedings, better case management methods and improvement o f court administration. Meanwhile, the judiciary has proposed amendments to the Civ i l Procedure Rules to simplify the court processes and include alternative methods o f dispute resolution to shorten the time taken to dispose o f cases and reduce the backlog. The Chief Justice also issued a circular (January 2007) to address the problem o f multiple suits on the same issue being filed in different courts.

18. Implementation of Procurement Reform. In order to enforce the Procurement Act, passed by Parliament and assented to by the President in November 2005, gazettement o f the Public Procurement Regulations and establishment o f an independent Public Procurement Oversight Authority received Parliamentary approval (December 2006). The main objective o f the proposed procurement reforms i s to strengthen the institutional capacity o f the public procurement in order to enhance accountability and effectiveness by reducing rent-seeking opportunities and corruption. Among the initiatives proposed for implementation over the next one year are: (i) establishing and making fully operational (by March 2007) the Public Procurement Oversight Authority ensuring i ts independence and objectivity, and fully roll ing out o f the new procurement regulations and guidelines; (ii) posting on the ministries’ websites al l information on contracts, including names o f contractors, decisions o f Procurement Appeals Board, bidders and tender outcomes, and contractors’ performance; (iii) introducing a transparent Vetting System to pre-qualify companies interested in bidding for contracts to address conflict o f interest and to enable exposure o f fraudulent companies; and (iv) blacklististing companies found to have been involved in cases o f corruption in accordance with the new procurement law, and make this information publicly available,

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19. Implementation of Privatization. Further participation o f the private sector in the economy wil l be enhanced over the next year through privatization, restructuring o f the public sector and removal o f administrative barriers to trade. Among the initiatives to be implemented over the next year to enhance efficiency in the economy and encourage private sector participation include: (a) establishment o f a privatization commission by the end o f March 2007. The privatization commission will pave the way for a transparent and accountable process o f privatization, thereby making i t difficult to disguise corruption in the privatization transactions; (b) restructuringlprivatization o f Telkom Kenya i s moving forward with IFC technical assistance (e.g. retrenchment completed, Kshs 5.6 bi l l ion secured by Telekom from local banks, etc.). while the National Bank o f Kenya will be restructured in tandem with privatization (GOK’s 06/07 budget includes Kshs 20 bi l l ion for the NBK restructuring approved by Cabinet); (c) sale o f part o f government shares in Mumias Sugar Company was completed end-December 2006, and the action plan for further divestiture o f the Kenya Reinsurance Company, and KenGen for March 2007 remains in force; (d) plans for increased private sector participation also remain in place for the ports: and (e) liberalization o f the telecomm sector has already happened, including a recent CCK decision approving an application from Reliance Consortium for the second fixed line licence; (f) including in the finance bill for 2007/08 the elimination o f business licenses found not to serve a useful purpose; (g) initiating a legal and institutional framework to operationalize public-private partnership, allowing the private sector to participate in the provision o f water, energy, roads and transport services and limit the potential r isks from contingent liabilities that may arise in such operations; (h) submission to Cabinet o f a market-oriented financial sector reform strategy by March 2007; and (i) a diagnostic audit o f National Social Security Fund (NSSF) will be undertaken to form the basis for restructuring and reforms o f i t s governance.

20. Public Financial Management. Planned public financial management reforms (PFM) inc1ude:preparing and publishing external audit reports o f the Controller and Auditor General in a timely fashion in accordance with The Public Audit Act 2003;

Adopting a risk based internal audit approach, including establishment o f the ministerial audit committees expected to provide oversight. Empowering the Ministerial Audit Office and providing them a mandate for ensuring implementation o f audit recommendations. And, developing audit’s post-implementation reviews by the National Audit Office, communicating the results to the Public Accounts Committee, and publishing them;

Enhancing transparency and broader stakeholder participation, including members o f parliament and public in the preparation o f 2007/08 budget cycle;

Conducting expenditure-tracking surveys in at least one ministry to inform budget implementation and improve i t s effectiveness in achieving development goals;

Strengthening management and audit capacity for efficient and effective use o f devolved funds under the Local Authority Transfer Fund and the Constituency Development Fund, Constituency Roads Fund and Bursary Fund, among others;

Accelerating the implementation o f integrated financial management and information system (IFMIS) and make it operational in four spending ministries (including education, health) for the management o f the 2007/08 budget; and

Developing and enforcing objective criteria for granting tax exemptions and waivers to regulate the exercise o f discretionary powers and improve transparency and accountability in the tax exemption regime. This will be complemented by publication o f tax expenditure budgets from FY2007/08 onward.

Other measures being taken include preparing and publishing external audit reports in a timely fashion in accordance with the Public Audit Act 2003 and adopting a r isk based internal audit approach, including establishment o f the ministerial audit committees. These measures are expected to improve Parliamentary oversight on the executive’s use o f public funds.

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21. Results Measurement and Performance Management. Government i s deepening the focus on results as an integral part o f good governance, and i s making progress in roll ing out the RBM system in the public sector. N o w that a Results office has been established within the Public Sector Reform and Development Secretariat, additional steps related to the RBM’s implementation include developing systems for performance management and integrated performance appraisal, performance audits and monitoring and evaluation. Other actions include introducing service charters and score cards for selected Government ministries and departments.

22. Governance and Accountability Programs in Selected Key Ministries. Several Ministries that are central to the achievement o f ERS objectives are putting in place governance and anticorruption programs. Here are some examples: . Health. The health sector faces substantial governance strengthening challenges. The management

structure i s not aligned to the implementation o f the national health plan; accountability and transparency are weak; there i s poor utilization o f information for monitoring purposes; and tendering has been plagued by accusations o f corruption, failure to follow procedures and delays. In recent months, however, there have been some important developments. These include the initiation o f a SWAP approach, with teams appointed to work on key issues, including procurement, financial management, and monitoring and evaluation. The Ministry o f Health has developed a risk management approach to internal audit, and initial steps have been taken to improve procurement procedures, including through support from the Millennium Challenge Corporation with the redrafting o f procurement regulations for the Government as a whole (but with the Ministry o f Health as a lead sector for the reforms). Service delivery wil l be addressed through the adoption o f a risk- based management approach to internal audit; monitoring full implementation o f the recommendations by KACC into the operations o f the Kenya Medical Supplies Agency (KEMSA); and improved management o f the Global Fund Program. Weaknesses in the area o f procurement, financial management and governance identified by the World Bank’s Detailed Implementation Review will be addressed as follows:

(i) Procurement: finalization o f the sector specific procurement manuals, independent procurement actions, scaling up the capacity and involvement o f KEMSA in procurement and public notification o f contract awards;

DARE: undertake a comprehensive update o f progress on action plan from forensic audit; recruit auditors; and investigate and where necessary prosecute those found guilty;

Financial management: remittance o f funds directly to health facilities using commercial banks, instituting effective internal and external audit functions using a risk-based framework, disclosure o f information on financing and support to community monitoring over expenditure.

Education. The Government has developed i t s policy for strengthened governance and accountability in the education sector around the following themes: (i) community involvement through decentralized financing and procurement; (ii) resource allocation; (iii) consultation and social accountability; (iv) teacher management; and (v) public expenditure and management. The plan shows commitments for the future towards a more transparent and accountable environment in the education sector, but it also shows important progress already made. An independent public expenditure tracking survey has already been completed, and it concluded that “Overall, the flow o f funds has been efficient, with schools receiving funds allocated on time. Bottlenecks encountered in the flow are being addressed by the ministry. At school level, funds received have been correctly recorded and used for intended purposes. A large majority o f the schools have put in place systems that ensure transparency and value for money.

(ii)

(iii)

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Water. Since mid-2003, the Government through the Ministry o f Water and Irrigation has embarked on far reaching reforms in the water sector based on the Water Act gazetted in late 2002. These reforms have involved comprehensive institutional reforms and increased investments in water supply and sanitation to remove the bottlenecks to achieving safe and sustainable services. The continuing reforms include: (i) separation o f functions between each aspect o f service delivery - policy making, regulation, and service delivery; (ii) clarifying the role and responsibilities o f each new institution; and (iii) ensuring the new institutions are given the mandate and autonomy to perform, but at the same time are made accountable in meeting their responsibilities.

Road Sector. Government plans to establish three autonomous road authorities to streamline ownership, management, accountability and financing o f all road network activities in the country. This action will be implemented as soon as Parliament approves the legislative instruments. On- going actions to improve governance in the roads subsector include; (i) re-enforcement o f procurement regulations - for example, GOK funded contracts are no longer “given out” but advertised; and award o f all contracts i s based on contractor capability, current workload and past performance to encourage competition and fairness; and (ii) in-depth analysis o f the cost o f road construction in Kenya and other countries in the region to update market prices and improve project cost estimation. In addition, at least two actions agreed with government in 2004 have already been effected. First, road sub sector s ta f f who previously owned road construction companies removed themselves from such companies and kept their jobs, or left government to manage them. Second, lengthy payment procedures requiring 23 approvals and signatures, which led to delays in payments and cost inflation, were reduced to 6 approval steps, and the oversight function was also strengthened.

23. Measuring Progress in Governance and Anti-corruption. The KACC household (2006) survey cited earlier will be done annually. In addition, the Government has resolved to carry out a nation- wide assessment to measure how corruption and other issues related to public sector performance in governance are perceived by the public. The assessment will examine public service delivery, functioning o f government staff, financial management and procurement. The activity i s intended to support a unified vision and design for a statistical development strategy that will improve policy and decision making in the area o f governance. I t will facilitate monitoring the progress made in broad governance indicators, including targets specified in the IP-ERS and the Anti-corruption Action Plan. To ensure integrity and broad participation, the Government intends to establish a Steering Committee comprising o f Permanent Secretaries and representatives o f the private sector, civi l society, media, Parliament and development partners. In addition, to ensure independence o f the diagnostic process from the executive and credibility o f the process, data collection and analysis will be undertaken by an independent firm. The time frame for this assessment i s currently under discussion, but i s expected to be carried out in August-September, 2006. The results are to be widely shared, including through workshops at local and national levels. Currently, the Bank and other development partners, through the Statistical Capacity Building Project, are supporting the collection and analysis o f justice and crime statistics which would measure the impact o f crime on the public and the working o f the criminal and civi l justice systems. In March 2006, the project provided computers, software and training for the police, prisons, the judiciary and the probation department to improve the quality and timeliness o f statistics. Government plans to publish these statistics regularly and to place them in websites from mid-FY2006/07. These steps, and others, have been integrated by Government into the Governance Strategy for Building a Prosperous Kenya (GSPK).

V. World Bank Involvement in the Fight Against Corruption

24. The Bank Group i s Directly Supporting a Subset of Priority Actions in Kenya’s GAP. Given the prominence o f the corruption issue in Kenya, the Bank’s Country Assistance Strategy 2004- 2007 (now extended through June 2008) has recently been updated to account for the findings o f the numerous audits and analyses o f governance at the general and the sector level. In supporting the GSPK

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and the GAP, the Bank will focus on transparency initiatives (including transparency in the judiciary, and capacity building in the prosecutorial and judicial services); broadening stakeholder involvement, including additional private participation in infkastructure services such as the ports; accelerating public financial management reforms; and improving governance in high-priority sectors+ducation, HIV/AIDS, health, and roads. Analytic work in such areas as media development, parliamentary and judicial capacity, and police oversight mechanisms will help lay the foundation for the development and governance agenda beyond this GSPWGAP and for the next CAS.

25. Bank’s Comparative Advantage. In identifying priorities for Bank support, we take account of the importance (drawing in part on empirical evidence in the IGA and the findings o f the DIR) and potential impact o f the actions; the Government’s leadership and readiness for implementation; the comparative advantage o f the Bank Group; and what other partners are doing. It should be emphasized that while the GAP i s a short-term strategy, focused on actions in the year 2007, the challenges o f governance and corruption are large in scale and will require sustained efforts over an extended period of time. Our analytic work (including ongoing audits at the level o f projects and government systems) will focus on longer-term objectives and how policy and investments can reinforce them, while laying the groundwork for future operations. Operations-for example, the Institutional Reform and Capacity Building project, but also sectoral projects-will also continue to focus on the longer term by supporting the Government in building the capacity o f i ts systems to control corruption.

26. Transparency Initiatives are the First Governance Priority Area for Bank Support. A major pillar o f the updated GAP i s the Government’s significant “transparency deficit.” A Transparency and Communications Infrastructure project, which i s part o f a regional ICT initiative, will support the implementation o f “eGovemment,” which will both vastly increase public access to Government information and advance the eventual implementation o f pending freedom-of-information legislation. The Bank i s also providing additional support for transparency in specific areas o f potential impact. For example, the Bank has provided technical support for the recently passed Statistics Act (2006) and i s collaborating in strengthening national capacity to collect, compile, analyze, and publish statistical information. I t s assistance in this area wil l be channeled through a Statistical Capacity Building Project (Statcap), which will also include support for in-depth governance surveys. Another example i s a pilot program to record and disclose court proceedings, in collaboration with the National Council o f Law Reporting (NCLR). The ongoing Financial and Legal Technical Assistance Project i s supporting this pilot and other measures to improve performance along the judicial chain.

27. Broadening Stakeholder Involvement i s the Second Governance Priority Area for Bank Support. Given Kenya’s history o f patrimonial politics, a central challenge i s to identify and support interventions that can “crowd in” more stakeholders to ensure that public resources are efficiently and effectively used for the purposes intended. A greater focus on stakeholder involvement will include the following kinds o f initiatives: . Those that involve informed communities and service users in the delivery and oversight o f service

provision at the fkont line, including oversight o f procurement-for example, parents in school committees in the education sectonvide approach (SWAP), or community-driven development in the Arid Lands Additional Financing project.

Those that foster competitive arrangements for service provision-for example, by supporting private sector participation in the provision o f water, energy, roads (including a toll-road concession for a stretch o f 77km in and around Nairobi), and port services while limiting the potential r i s k s from contingent liabilities that may arise in such public-private partnerships. In addition, IFC has extended a pilot program originally developed in Ghana to support private educational institutions in Kenya and has invested U S 3 2 mil l ion investment in the Kenya-Uganda railways. MIGA i s providing support for a 45 Mega Watts private geothermal power plant.

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. Those that promote synergies between governance and equity-for example, by improving poor people’s access to justice, and increasing opportunities for participation in community-level development planning, monitoring, and evaluation.

Those that further develop, deploy, and integrate practical tools for systematic citizedstakeholder participation and monitoring.

Those that create pilots aimed at testing new participatory approaches for service delivery with built- in social accountability.

28. Selected Public Financial Management and Licensing Reforms are the Third Governance Priority Area for Bank Support. Here Bank support will focus on (a) procurement reform, including related transparency initiatives; (b) accelerated implementation o f an integrated financial management and information system (IFMIS); (c) support for risk-based auditing throughout the government; and (d) licensing reforms under which about 9 percent o f licenses have been eliminated, and another 50 percent are scheduled for harmonization, simplification, or elimination by December 2007 (including about 23 licenses that the private sector has identified as priorities). The financial management activities will be supported mainly through ongoing programs, principally the Institutional Reform and Capacity Building (IRCB) project. They will also involve scaled-up attention to standards in the accounting profession through a new partnership with the umbrella professional body, the Institute o f Certified Public Accountants o f Kenya. In addition, the Bank Group will scale up i t s advisory services on licensing reform

29. Governance reforms in high-priority sectors-education, HIV/AIDS, health, roads, and the judiciary-are the fourth area for Bank support. For education, the governance agenda i s being extended to the secondary and postsecondary levels and to the Teachers Service Commission under the Bank-supported education SWAP. In HIVMDS, the key issues involve remedial action for past misuse o f fhds administered by the National A I D S Control Council (NACC), and creating a new transparency regime and social accountability measures, including an independent complaint mechanism. Because o f the measurable progress being made, the World Bank plans to jo in with the U K ’ s Department for International Development (DflD) to provide a credit during the f i rst half o f 2007 based on the full rollout and careful monitoring o f the new operational arrangements. In the health sector, the Bank i s proceeding on three tracks: (a) through the existing IRCB project, i t i s providing assistance for the rollout o f IFMIS in the Ministry; (b) as chair o f the donor subgroup on health, i t i s heavily involved with others in developing a SWAP for health for which the centerpiece will be community-based management o f health facilities, with strong fiduciary safeguards, to support piloting this approach);’ and (c) i t will partner with others to scale up successful preventive effort^.^ For roads, the key governance actions proposed include establishing three autonomous road authorities to streamlined ownership, management, accountability, and financing o f al l road network activities in the country. These activities (and physical investments) are being supported under the ongoing Northern Corridor Transport Improvement Project (NCTIP), and additional financing would be considered in line with progress in these reforms. Working with development partners in Governance Justice Law, Order and Security (GJLOS’Fwhere the Bank heads the sub-committee on the judiciary-the Bank will provide support for improving the performance o f Kenya’s judiciary (including clearing the 1.1 mil l ion case backlog) through such measures as improved case management, process re-engineering, initiatives such as piloting a judicial clerkship program for top Kenyan law students, and training in Alternative Dispute Resolution methods. It will also support the full automation o f the recording o f court proceedings, building on the pilot exercise.

.

.

A staff-monitored program (without financing) i s in place, with monthly reporting and verification o f progress. One example i s the private sector/civil society’s Global Water Challenge, which involves multinationals,

GJLOS seeks to improve transparency and accountability, empower the poor, marginalized and the vulnerable inter international NGOs, and UNICEF to deliver clean water, sanitation, and hygiene education and support.

alia by promoting equal access to justice, and police and penal reforms.

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30. Vigorous Efforts will be Required During and Well Beyond the CAS Period. Given the history and scale o f Kenya’s governance problems, it wil l take vigorous actions on a broad front over the medium term to achieve sustained gains. The dynamics o f the election year are also l ikely to make significant reforms difficult, although not impossible. The Government has enumerated priority actions- from a larger work program-that it believes it can achieve in the short run. In areas in which preparation for implementation i s already well advanced-for example, procurement and other financial management reforms-such progress i s very l ikely to occur. We are also working to help consolidate governance improvements in water and sanitation, which the Bank has been supporting since 2004 through a technical assistance project. Other areas that require Parliamentary approval, such as the increase in the number o f judges, could be delayed. Meanwhile, analytic work in such areas as media development and parliamentary capacity, and police oversight mechanisms will help prepare the governance agenda beyond the timetable set out in the GAP.

3 1. Safeguarding Bank-funded Operations: Experience highlights the importance o f attention not only to broad strategic aspirations, but also to practical issues o f implementation, such as the risk o f corruption during project execution, operational staffing and budgets, and partnerships.

32. Additional Measures will Address Systemic Corruption R i s k s in Lending. All Bank-funded projects benefit from a range o f measures (e.g., results-based auditing) being rolled out across Government. In addition, recently approved operations contain a range o f provisions that reflect the Bank’s selective engagement with ministries, agencies, and institutions that champion good governance, and make clear that funds must be used for their intended purpose. For example, the Education Sector Support Program and Arid Lands Additional Financing contain enhanced public disclosure provisions, mechanisms for community monitoring, and independent complaints mechanisms. We will use similar measures to ensure that both existing and new Bank-supported lending operations address issues o f governance. In addition, beyond the regular project supervision that addresses policy and institutional issues, each year beginning in FY07 the Bank will undertake an integrated and in-depth technical, procurement, and financial management review o f projects with high fiduciary risk. This review may include sampling contracts, visually inspecting the actual delivery o f work, following up on audit findings and recommendations, and reviewing interim financial management reviews. The Bank wil l also agree with the Government on the release o f certain documents that will help enhance the transparency and accountability o f Bank-financed projects-for example, aide-mkmoire o f implementation review missions, audit reports and the Government’s formal responses to them, procurement plans and schedules, bidding documents and requests for proposals, shortlists o f consultants, and summaries o f bid evaluations that do not reveal confidential commercial information provided by bidders.

33. Work to Build Country Systems will Continue to be an Integral Part of Managing Project Corruption Risks. With overall donor support accounting for only about 5 percent o f Kenya’s development spending, measures aimed at protecting externally funded projects (including activities supported by the World Bank Group) are being carefully tailored to maximize impact by benefiting all Government spending. For example, after forensic audits o f Bank operations in 2005 showed problems related to faulty accounting practices, lack o f fraud risk management, weak oversight by senior Government officials, inconsistent application o f the Bank’s Procurement Guidelines, and failure to share lessons learned and best practices, the Bank initiated a dialogue with the Government over systemic anticorruption measures (such as risk-based audit procedures) that the Government has since applied to Bank operations, and more broadly, to strengthen Kenya’s systems. In the same spirit o f Kenyan system building, side letters are also being used in project agreements with the Wor ld Bank to reinforce implementing agency staff compliance with Kenyan anticorruption laws such as asset declaration, and to promote other transparency measures such as disclosure o f financial statements and audit reports.

34. Bank Staffing, Processes, and Internal Organization will Better Reflect Operational Priorities. A field-based governance adviser will be recruited for the Nairobi office to guide the Bank’s

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work on governance, and recruitment o f additional field-based staff procurement and financial management specialists i s in process. A cross-sectoral Operations Risk Mitigation Team will be established, to be chaired by the governance adviser, with a mandate to oversee risk-mitigation actions, advise task teams in the design and preparation o f projects, share and disseminate information on risks, advise the country management team on strategy for mitigating governance risks, and interface with INT as necessary. In addition, the roll ing intensive Country Program Review process will sharpen i t s focus on corruption issues.

35. Development Partnerships will be Deepened. As we intensify the equity and governance agenda in the Bank assistance program, it will be important to partner meaningfully and transparently with other stakeholders in the spirit o f mutual accountability. The Bank’s comparative advantage i s ESW, grounded in qualitative and quantitative research and comparative analysis. But even here the Bank will seek partnerships with other development and research agencies. During the rest o f the CAS period, we will also mobilize a small team o f external reviewers comprising a representative from each o f the following: (a) the donor subgroup on harmonization, alignment, and coordination; (b) the relevant donor sector working group; (c) the relevant professional association; and (d) the c iv i l society/governance network. This team will review al l projects proposed for Bank financing. The Bank has also committed to preparing the next Kenya CAS in the context o f a Joint Country Assistance Strategy, and to identifying opportunities for greater selectivity and division o f labor based on comparative advantage. A particularly important partnership has been that with the IMF: for example, in recent months there has been close collaboration and information sharing between staff o f the two organizations on issues o f governance, structural reforms, and the growth outlook during the preparation for and discussions on the second review under the I M F ’ s PRGF arrangement and the Article I V consultation. IMF staff also participated in a Bank-led governance mission in July 2006. This close partnership i s expected to continue.

36. Civil Society Partnerships will Receive Additional Support. Within Kenyan society, we propose deepening our partnerships with the private sector, professional bodies, faith-based organizations, youth groups, foundations, and trade unions, and our engagement with parliamentarians and nongovernmental organizations. For example, through the World Bank’s Parliamentary Network, parliamentarians have engaged the Bank on such issues as the need for analytic work on the functioning o f Parliament, collaboration in monitoring and evaluation at the community level, and technical support for key oversight committees. The Institute o f Certified Public Accountants o f Kenya has approached the Bank for institutional strengthening support to help ensure the quality o f the professional accounting practice and adoption o f best practice, including enforcing compliance with international standards. The Bank will seek trust-funded resources to finance a multiyear grants program to support such partnerships.

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Annex 2: Government's Side Letter on Governance, Accountability and Transparency

Regional Communications Infrastructure Program (RCIP) Kenya Transparency and Communications Infrastructure Project (TCIP/CIP 1)

REPUBLIC OF KENYA MtNISTRY OF FINANCE

KEWA TBANSPARBNCY AND COmKWCA'MONS MFIZASTRUCTURE PBOJRCT flap) GOVERP&HCE, ACCOUNTANL'IITY TRANSPARENCY

Please m k to the Financing Agrement negotiated on Iff March, 2007 and thc Appraiml Docrumant dated February, 2007.

I would &e to take this oppofiunnity to confirxn to the World Dank that thc O o v m e n t of Konya i s filly aonuaitted to the principte dtmmparmcy and accountability, the mhwmmmt af govcrnrrnoo and figkiting corruption in n u Counqy. As p am awwe Pmlibment p s s d the Public Opfloer Etlnics h t and the Anti-Cornrption and Economic Crimes Act in 2003

The Government has nl80 anacted key l%gislmlons aimed at improviw powmenee and service delivery. inoiuding the Government F j m c i a i Management Act (2004), the Public Audit Officc Act (2004), the Privatization Act and the Public Procursmoa~ Dispaml Act. Mora rooenUly, the Gavemmcnc has developed a Governance Action Plan fcn tbr pwiod July 2006 - J w 2007, and i e committed to its implementation.

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Arising from rho fomgoing, ir is cevidcnt hat the Transparency and Communications Inftwxrucnuc Projoct (TCIP) will enhance Tivmsparmcy m Government and accouatsbiiity in ;sc;Njce dclivary in a number o f mas using ICT:

Thus, c-govmnment will result in the effxoient and swift dtlivcry of pooh and SCW~WS to citiaem, bwincss, govmtmonl mployees and agmcies, To citizens and busimse, e-government wouId mean the shplificalion of p r h and Btrcamlining of the approval pmcass. To government employees d agenucs, it wouid mean the faciliktion of cms-agwy Goordination and cdlaboraion to cnsm oppmpriate and t h l y bdl~ion-makbg.

As envisaged, TCIP will conftibutc fo hpravo governance, transparency and accountabiljty in key agenciee indudiig h i o n Admiaistmtion, Mm' License Regbkath~, High Court RCgisicry, Company Raglrlration, Land Title Rcgistnrtion BS well a8 other aroaa which will be idontificd following appropriate due diligence.

Thc Public seclor has the gmtost need for maltu its pmcmmcnt system nwre cfftotivc sin= the public graauy cKpeols value fox its resixmas. In order ta malm h i e objectivu Public Procuromcnt s h l I bc uadutaken in the most acoountablc and vansparent IIWW~ZF.

Thus, Web-based purchasing will increaso transparency o f the pmmmt process and reduce tho risk or irreguteuitics. E-procumncnt a\so provides Q widcr choice of the goods and services that could be S Q W C ~ , trmsadon GO*, eliminate intcrmediasjcs and distributorrr, increases pdcc aanspmcy and m a t e s wctmrnles of scale and mi work effects.

i

Howovcr the rnaivation for Ueveloping the e-prmement system will be strategic, and move beyand dircct cfficitncy/Lrost savings. The system will provide consistency in p m m e n t praotinc and grmar transparency h

2

37

With en in@grated web-bed procurement s y s ~ r n In plwce, supplina and tcndcr bidders will q*ay broader acc~b;6 to gowmmmi tendm and quotations. Conversely Publio sactor agmeicr wif1 ais0 enjoy the benefits of making olecqortijc pwchasc of c o m m d y used itcms fim shan?d pdod OOntrBcts.

As envisaged mdcr TCDP, t)rc roll-out of c-proourement OE tlu, Supplies Branch of the Minisby of R o d and Public Worb will contribute signit'cantIy to Government commitment to cust raving tranaptwmcy for the procusenuunt o f g u l d office suppliw.

8 W d t h dealoration - amudIy in Bccordancc with Pubtic UMGW Ethic8 Act, 2004.

Public Officers are requfrcd to declwc their W d t h

This iahiative requires to bo implemented clcctronica!ly io d i m efficiency in the analysis o f thc irafmation. The TO-related activitias will! wcltrate Government's efforts in this m a ,

This will enable the public to WLU;OCSS thc tcquisik infunnation an the utilization of thc funds and we aw t h i s as a key engine for o n W i a g transparancy and participation in decision-making on bow thcir tax rwaurcrs h v e been exponded.

The TCIP activides =lared to the suppa of tho Dip id Village Lnitiativs as wall as to the Govemmcnt ltnfomation Pwtal will allow us to accelerafe and wale up these &bas in a sustainable mama,

The Govemmtnr is taking f~easurcs to ensure pn>pcr govcmwe, transparcnoy and bEcountabiIity. More spedfiasllly, and amongst other LRC?BSWS:

Wc arc establishing a Goveqmncre Overfiight Committete comprising of (the Board of Diicotors o f tht TCP executing agency, thr; ICT k d ) far tbs

The COC will monitor the implanrcntatirm of an jnstihtional riak m w c m m t poticy h m o w o k which will Include:

p ~ * c c I

3

38

o Wling up H linancc and audir c?ummitrcc with clear tmms of, rrfwencc consifitcnt with the CIr~vemrnent financial management guidelines,

u updated financial aranagemcnt and procurement manuals 8&g out apmtional policies, pmxduref and fiduciary ovasight melhods

u arronganrmts for public d~cIosutd of infwaation and m p h b ~ hdIing mechanisms; and

o an aeot ive systom of inkma1 aad txtcrnal audits

It i s also impottenl to note that kcy stacfat the ICT Board will have perfarmancc contraat and that bmtkiary agencies will oifo be operating under an Activity Pwfomaanee Aglooment with tho ICT Bosrd.

We are oonvinPeJ that these moasures, together with thclw alnady put in ptacc, will ensure effective d transparent use o f public rwour1oes av&led io tht: =tor.

Wc thank the ]Bank fix ha caminued support to our development agenda

Jwcph K. Xinyda, CB3

cc Bitange Ndema, PBD, CBS Permanat Secretary Ministry of Infmalian & Communications P. 0. Box 30025 NA€R.OBl

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Annex 3: Results Framework and Monitoring Regional Communications Infrastructure Program (RCIP)

Kenya Transparency and Communications Infrastructure Project (TCIP/CIP 1)

1. Monitoring and evaluation o f TCIP will be embedded in the various components o f the project, and technical assistance provided through the project will include support for M&E.

PDO Outcome Indicators Use of outcome information Connectivity development Volume o f international traffic Assess trends in international objective: Volume o f national traffic using 2 communications and regional To contribute to lower proxies: communications integration prices for international capacity and extend the . Total teledensity (fixed and Assess level o f access to geographic reach o f mobile) communications services within broadband networks targeted countries

Average price o f international communications using the proxy:

Internet user penetration

Assess competitiveness o f countries wi th regards to cost of capacity . price o f wholesale international E l

capacity link Transparency development objective: received through electronic delivery eGovemment services To contribute to improved Government efficiency and Volume o f electronic recordslevents transparency processed with the eGovemment eGovemment services

applications

Satisfaction o f users wi th gov’t services Show improvement in quality of

Indicate successful rollout and use o f

40

Intermediate Results Component 1: Enabling Environment, incl. Monitoring & Evaluation capacity-building Sound environment Monitor sector conducive to investment and competition o f electronic transactions o f regulation

Results Indicators for Each component Use of results monitoring

Increased protection o f intellectual property & competitiveness and efficiency

Component 2: Connectivity Unfettered access for al l Number o f market players buying capacity at Monitor competitiveness and operators to regional infrastructure

Broadband demand i s not constrained by cost or access

Universities are connected to broadband services

Increased viability o f regional and national infrastructure

Government i s connected

the landing station

Price o f Internet Access Number o f BPO jobs

Number o f university PCs connected to broadband

assess fair access to infrastructure

Monitor level o f access to broadband services

Monitor level o f access to broadband services for students

Already captured Monitor increase in take-up o f capacity

Number o f government institutions connected to the government virtual network

Share o f documents with security classification

% government employees with email account Component 3: eGovernment Applications. Improved governance and . Number o f Departments adopting public sector services eGovernment applications through eGovernment . % o f land records digitized in central applications office o f the Ministry o f Lands

% o f archived H igh Court registry digitized % o f wealth declaration forms analyzed Cost o f small purchases o f office supplies Number o f government domain names

.

. .

Assess level o f connectedness within government, assess readiness for decentralization

Quality improvement o f electronic government services over paper based transactions

Level o f demand for eGovernment services indicating successful implementation o f eGovemment

Measure o f success o f adherence to standards

41

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Annex 4: Detailed Project Description Regional Communications Infrastructure Program (RCIP)

Kenya Transparency and Communications Infrastructure Project (TCIP/CIP 1)

TCIP Component 1 (US$15m including US$14.74 million of IDA contribution): Environment for TCIP:

Enabling

1. Providing technical assistance to pursue sector reform, strengthen capacity, and accelerate enabling environment activities. Technical assistance will allow the Ministry o f Information and Communications (MoIC), the Communications Commission o f Kenya (CCK), the eGovernment Directorate at the Office o f the President, the Kenya Education Network Trust (Kenet) and the Public Procurement Oversight Authority (PPOA) to accelerate reforms, ensure that Component 2 and 3 activities are carried out in a sound and enabling environment. The technical assistance will take the form o f the following activities:

(a) Policy, legal and regulatory technical assistance. Th is will be aimed at accelerating the establishment o f the legal and regulatory framework for security o f e-transactions, privacy and data protection, intellectual property rights, etc. as well as to support continued sector reform to maximize the impact o f the connectivity component and strengthening the Public Private Partnership (PPP) framework to provide a sound basis for both the connectivity and eGovernment component.

(b) Policy, legal and regulatory capacity building. T h i s capacity building wil l be targeted for legal, policy and regulatory activities related to the above mentioned areas and will include training activities, consensus-building at national level and international level (in the context o f regional connectivity issues),

(c) Formulation of disbursement and governance mechanisms for key TCIP activities. Formulation o f the disbursement and governance mechanisms for (i) the purchase capacity activities, (ii) allocation o f grants for the generation o f content feeding the Government Information Portal, (iii) the allocation o f grants for the SMS/IVR e-Services initiative and (iv) the allocation o f grants as part o f the Digital Village Fund initiative. The latter 3 activities will feed into the formulation o f the Grants Operational Manual.

(d) Technical assistance for the establishment of PPPs. The assistance i s aimed at facilitating the establishment o f Public Private Partnerships envisaged for the commercialization o f some key Government services in the context o f Component 3 support for eGovernment applications. The assistance will include due diligence, working out the PPP arrangement parameters and establishing the said PPPs.

(e) Establishing and operating a comprehensive Monitoring and Evaluation system. This will entail the formulation and establishment o f a comprehensive Monitoring and Evaluation (M&E) system, M&E-related surveys, associated capacity-building, and training. The resulting information reporting output will partly feed into the Government Information Portal and will also form as integral part o f the institutional risk management policy framework monitored by the Governance Oversight Committee.

( f ) Scaling up the Government Information Portal. T h i s supcomponent will allow MoIC to scale up the Government Information Portal and upgrade it to a scalable transaction-enabled portal. The portal will be linked to all online eGovernment applications and will form a key element in the Government’s information disclosure efforts envisaged under the forthcoming Freedom o f Information (FOI) policy and bill. The portal will also be used to access real-time M&E data. A dedicated grant facility wil l focus on encouraging generation o f content for the portal.

(g) Classification of Government data. This consultancy activity will focus on classifying Government data into “disclosable/non-disclosable” in the context o f the FOI efforts. The activity will also focus

45

on the collection o f statutory information for i t to be posted onto the the Government Information Portal.

(h) Capacity building for MoIC, eGovernment Directorate, Kenet, the Business Process Outsourcing @PO) industry association and the PPOA. The capacity-building activities will focus on strengthening the capacity o f these institutions for the purpose o f carrying out relevant TCIP activities as part o f the implementation arrangements o f Component 2 and 3. For PPOA, the capacity-building assistance will be tailored in conjunction with on-going or forthcoming support from other Bank projects and from the Millenium Challenge Corporation, USAID and other donors.

(1) Communications related to governance, connectivity and the project (see Annex 10 for more detail).

(i) Additional technical assistance and capacity-building (to be determined). This part o f the program i s particularly important to provide the necessary flexibility to support forthcoming reform initiatives or scale-up the above technical assistance activities. Indeed, it was recognized as part o f appraisal that the budgeting o f all Enabling Environment activities may vary as the project moves into actual implementation and that regular reviews o f the procurement plan would allow for correction.

2. Sub-components (0 and (g) above are detailed below in more detail below.

TCIP Component If - Scaling up the Government Information Portal

3. Increased potential for the role o f the Government Information Portal. This component will strengthen the provision o f information on the existing portal developed by the Ministry of Information and Communication (www.information.go.ke). There i s increased potential and demand for the development o f web-based information services that provide Government agencies and the public with readily accessible and transparent content and data on development linked activities down to the local level. Examples include development expenditures down to the grassroots level, e-service provision and public monitoring data for key sectors such as education, health and agriculture, as well as environment and cultural applications.

4. A grant facility to generate content. The development o f information services and web content wil l be financed through a US$2.5 mil l ion content-based grants facility. Grant applications will be invited via advertisements four times per year over a three year period. The requested grant proposals will be threefold: some for developing specific content and applications; some inviting innovative new content and applications; and some for urban and rural community-based applications. The grant facility will be managed by the ICT Board Grant Manager and will follow the governance and disbursement mechanisms set in the Grants Operational Manual (the manual will be formulated as part o f the technical assistance activity specified in l(c) above). In practice the review o f proposals will be carried out by an independent consultant. A panel o f experts will be appointed by the ICT board (with rotating membership with a one year maximum term) will select te successful grant application based on the review o f the independent consultant’s analysis and recommendations.

5. Connectivity, hardware, software, IT support and advocacy campaigns accompany the scaling up of the Government Information Portal. To strengthen and upgrade current capacity over the three year period, the component will finance the purchase o f web servers for the MoIC (US$300,000), internet bandwidth for the MoIC servers (US$ 400,000), computers (US$lOO,OOO) and software (US$200,000). To ensure the information portal will be sustainably maintained, the component wil l also finance IT support and staff training activities (US$ 300,000). Finally, the component will also support advocacy and public awareness building campaigns for the information portal (US$200,000).

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TCIP Component l g - Classijkation of Government data and collection & posting of statutory information

6. Setting the stage for a new Freedom of Information (FOI) law. It i s worth noting that the Government o f Kenya, under the Ministry o f Information and Communications, has embarked on a new policy to support a Freedom o f Information (FOI) Bill, and i s working on merging this effort with an existing Freedom o f Information Bill proposal supported by a member o f the National Assembly and Civil Society organizations which by many accounts meets many o f the minimum international standards for such laws. Whi le the main rationale o f any F O I law i s that access to information i s central to democracy, human rights and nation building, experience tel ls that i t s more practical impact on society results from improved governance and better development outcomes. In the case o f Kenya, for instance, a F O I law would deter corruption as it makes procurement more transparent, company and land registries more open, and government officials and citizen representatives more accountable for their decision making, among others. In deepening access to information, FOI laws typically address the following elements: a) the means o f communication such as radio frequencies; b) media structure and regulation; c) digitization o f official records; d) electronic freedom o f information including in particular the release o f information through electronic means; e) registry construction, digitization and openness; f ) management o f archives; g) management and erosion o f the secretive culture o f the bureaucracy; and h) designation o f public depositories, at the national and local level, for al l public information. Analytic work in some o f these activities i s starting and TCIP will support some o f these.

7. shows that FOI policies usually require public bodies to automatically release information relating to: . Organization, functions and duties; . . . .

Examples of information disclosure in a FOI environment. Experience from other countries

The powers and duties o f i t s officers and employees; The procedure followed in the decision-making process, including channels o f supervision and accountability; The norms set by it for the discharge o f i t s functions; Rules used by the authority in dealings with the public, including the rules, regulations, instructions, manuals and records, held by it or under i t s control or used by i ts employees for discharging i t s functions; The monthly remuneration o f i t s officers and employees; Particulars o f concessions, permits or authorizations granted by it; and Details o f all contracts entered into including information on goods acquired, the contract sum, the name o f the contractor and the periods within which the contract will be completed.

. . . 8. TCIP support to accelerate FOI efforts. In advancing the work that would naturally fall ahead o f any release o f information, TCIP will support proactive disclosure o f information by helping to classify specific types o f information, even without an F O I in place. In this regard, the TCIP will finance a consultancy (US$500,000) to bring al l this information together and disclose it in the government information portal. I t could also begin to prepare a guide sufficiently detailed to enable any person wishing to apply for information under the Act to identify the classes o f information held by different government agencies, the subjects to which they relate, and the location o f any indexes to be consulted by any person.

TCIP Component 2 (US$63m including US$62.55 million of IDA contribution): Connectivity for Kenya:

9. TCIP support i s designed to lower the cost of capacity, stimulate use of ICT and increase access. This component will support connectivity in Kenya through (i) support for the purchase o f telecommunication capacity in the regional and national networks for targeted user groups (Universities & Technical colleges, government users, and the Business Process Outsourcing industry); (ii) support to

47

the Government Virtual Communications Network; (iii) support the rolling-out o f Digital Villages; and (iv) support the rolling-out o f SMS/IVR e-Services.

10. Cheaper telecommunications capacitv. This activity i s aimed at (i) boosting the use o f broadband capacity in universities and technical colleges and other social-oriented institutions ahead o f and after the arrival o f submarine connectivity, and improving inter-university connectivity and traffic generation; (ii) boosting the use o f broadband capacity for government users; and (iii) allowing the local Business Process Outsourcing industry to buy communications input at same price level as competitors in other countries ahead o f the arrival o f submarine connectivity. The capacity purchase schemes will support these targeted user groups to access cheaper capacity and therefore allow them to grow their consumption in l ine with their actual demand (currently constrained by the prohibitive cost o f capacity). This in turn will increase the viability o f international infrastructure and in particular submarine cable infrastructure when these become available as this realized capacity demand will immediately switch to submarine cable connectivity. The procurement process under this activity wil l be overseen by the Governance Oversight Committee as a risk-mitigation effort. While the precise arrangements and design o f purchase o f capacity schemes will be developed under subcomponent 1 (c), the context and overarching

TCIP Component 2a - Support to the Universities Use of Bandwidth - Capacity purchases - US$l9 million

11. Targeting universities and technical colleges. The Kenya Education Network Trust (Kenet) which represents 5 1 public and private-sector universities and technical colleges throughout Kenya has been chosen as the implementing agency while the ICT Board will remain the executing agency for all procurement and fiduciary considerations. Aggregated capacity requirement for universities and technical colleges will be contracted out competitively to telecommunications in several lots for (a) the period prior arrival o f submarine connectivity (i.e. what i s being bought i s capacity leases on satellite from eligible satellite capacity resellers); and (b) following the arrival o f submarine connectivity (i.e. what i s being bought capacity ownership submarine cables from eligible submarine wholesale capacity resellers).

12. Bringing connectivity closer to that of Western universities. Based on the detailed assessment related to the existing and planned rollout of personal computers in universities and colleges as well as to expected use per student and staff, universities and technical colleges can only afford capacity o f 18Mbit/s when the requirement for the 51 institutions i s conservatively estimated at a combined 225Mbits. The support from the project i s expected to enable the universities to access close to half this capacity (possibly more as i t i s expected that the combination o f aggregating the demand and leveraging the competitive bidding process will results in lower prices per mbit/s capacity). The project will also support a network monitoring center aimed at securing and managing the universities external and internal communications.

13. Sustainability. In order to guarantee sustainability o f the initiative, the project will support financing the purchase o f IRUs or Indefeasible Rights o f Use (i.e. purchasing the capacity as a capital investment for the duration o f cables’ l i fe as opposed to monthly lease). This i s possible because Kenet has the statute o f a licenced operator. Universities are maintaining their current budget l ine for telecommunications costs to ensure (i) ownership (ii) building an additional hnd for the purpose o f increasing the number RUs purchased. Kenet i s also working on an agreement with the Universities so that they contribute 25% o f the IDA contribution towards accelerating the roll-out o f personal computers within their campuses.

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TCIP Component 2b - Support to the Government Use of Bandwidth - Capacity purchases - US$7million

14. Government users are currently accessing voice and Internet through a satellite link dimensioned at 5 14kbitls (i.e. half a Mbit ls) shared by about 6,000 Government PCs with access to the Internet (shared by a potential 170,000 civi l servants targeted for email addresses roll-out). By comparison, this i s the capacity for Bank offices with less than 100 PCs. The project would support upgrading external broadband connectivity access by bidding out aggregated broadband Internet access requirement to operators.

Upgrading broadband access for Government offices.

TCIP Component 2c - Support to the Business Processing Outsourcing industry - Capacity purchases - US$8 million

15. Targeting the Business Process Outsourcing @PO) industry. The Government o f Kenya has identified the Business Process Outsourcing industry (BPO industry) as a key engine for job creation for the country. The Government i s keen to provide the best possible environment for this industry to grow fast. The cost o f international broadband capacity has been identified as a key constraint which limits the growth potential o f the BPO industry (currently in the range o f US$7000 per month for 1Mbitls duplex (this means a satellite uplink o f I M b i t l s combined with a satellite downlink o f lh4bi t ls ) as opposed to about US$700 in India or the Philippines. The Government i s looking at supporting the Business Process Outsourcing industry to buy communications input at similar price level to what will be available when submarine connectivity i s available (expected to be in the range o f US$l,OOO per M b i t l s per month for the BPO industry i.e. much closer to what i s being paid in competing BPO destinations).

16. Cheaper telecommunications capacity. The project will provide targeted cost subsidies to the industry to level down the cost o f the communications input. Subsidies will be based on capacity requirements being auctioned to telecommunications operators and on the difference with the average communication input cost from three competing destinations (likely India, Philippines and Mexico) or the expected submarine connectivity cost (whichever i s the highest to guarantee sustainability). The disbursement mechanism i s being discussed with the industry so as to (i) avoid creating a dependence on public funding and anticipate a relatively early phase out o f the subsidy in line with expected decrease o f connectivity costs (ii) link the award o f subsidies to the actual creation o f jobs and mechanism to prevent free-riding behavior (iii) minimize the amount o f bureaucracy involved.

17. The subsidy i s being conceived as a transitional and non-discriminatory subsidy with a sunset clause so as (i) to be compatible with Kenya’s existing commitments under the WTO, and (ii) to be designed to best achieve i t s purpose. Design features important to incorporate include: . That objectives be clearly defined and limited to subsidizing the near-term expansion o f the

downstream using sectors (so as to create economies o f access when the new cable comes on stream); . That eligibility be made available to a large array o f downstream services users according to specified criteria that minimizes discrimination; . That a fixed amount be set aside for the subsidy and with defined periods for i t s expiration, such that either exhaustion o f the amount or expiration o f time period close o f f the subsidy; and . That the subsidy i s at the margin (a system o f rebates based upon new demand take up could be put in place.)

18. formulate the detailed arrangements.

A technical assistance activity has been included in the Enabling Environment component to

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TCIP Component 2e - Support to the Government’s communications network - US$l6million

19. Building on existing efforts to connect Government. The project will complement on-going efforts by GoK to rationalize i t s Government network, so as to enable smooth intra-Government communications. These efforts are expected to allow migration o f inter-government office interaction towards a more paper-less environment with documents transmitted onto the network rather than in paper format. As the Government virtual network will make use o f operators’ fiber infrastructure, this i s expected to support operators’ infrastructure rollout plans. Considerable progress has already been made on the establishment o f GoK Virtual Private Network (VPN) to allow it to communicate and share f i les in a confidential and secure manner: all o f the government-owned buildings in Nairobi housing Ministry Headquarters have Local Area Networks (LANs) and most o f them have access to Wide Area Networks (WANs) and email services. However, there are s t i l l two buildings (NSSF and Utal i i House) in which small Ministries reside which are not fully networked.

20. An IP platform for seamless intra-Government communications. In order to leverage the data infrastructure o f the fiber optics system in a meaningful and cost-effective way, the government intends to purchase and install an IP Platform (a software solution allowing better security, performance, manageability, and support). The Government intends to deploy and manage the JP Platform in a Network Operations Center, the NOC, as well as to establish a National Data Center, the NDC, which will be the repository o f government f i les and information. The Government also has plans for a Disaster Recovery Center, which will provide a real-time mirror backup o f the NDC.

21. Rolling out email and document management systems. Another important aspect i s the rollout o f a standard email and document management package (a document management system or D M S for the automatic filing o f important records). Currently there are up to 170,000 civi l servants who should be assigned email addresses, using a standard format. Domain addresses exist for all ministries and they will be deployed in a systematic way, adding new sub-domains as appropriate.

22. The eGovernment Directorate as a standards guardian. The eGovernment Directorate at the Office o f the President wil l ensure that the Government’s standards and policies for ICT and applications are deployed in all government installations o f hardware and software. The Directorate, through i t s monitoring & evaluation oversight function, will measure and report on this. In addition, the Directorate will define operational and maintenance standards and ensure that adequate mechanisms are in place to ensure that systems operate a peak efficiency. The Directorate will also address the issue o f physical security o f the equipment and systems.

23. Training, change management and capacity building. These are required to enable the above to function. On the technical level, the government requires staff with the s k i l l set to manage the IP Platform and the NOC, the National Data Center and the Disaster Recovery Center. Web development and maintenance i s a specific s k i l l and training in this area must also be undertaken. Advanced training in these specific functions will be funded by the project. End user training i s also crucial, and it must entail not only use o f the email system but also o f the document management system.

24. Activity sequencing. These activities will be sequenced as follows: 1 - LAN connections within the buildings; RFP for the purchase o f the email and document management software; advanced IT Training for IT staff; preparation o f the RFP for the IP Platform, the NOC and the National Data Center (6 months) 2 - RFP for the National Data Center, NOC (with the Ip Platform) issued ( +2 months) 3 - Rollout o f the email system and the document management system, change management, training for the end users (+ 3 months) 4 - Rollout o f the Ip Platform and the NOC; establishment o f the National Data Center; preparation o f the plan for the Data Recovery Center (+ 6 months) 5 - RFP for the Data Recovery Center; follow-up training for end users (+2 months) 6 - Rollout o f the Data Recovery Center; advanced training for ICT staff.(+ 12 months)

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25.

26.

TCIP contribution to connect Government. TCIP will fund the following: The internal LAN connections in two buildings which are shared with government offices (NSSF and Utal i i House) along with their connections to the fiber optics network to serve five small Ministries. T h i s i s estimated cost US$1 million. The enterprise software licenses for government staff and the document management system for government records will be procured and deployed in a manner consistent with the standards and guidelines specified in the Government’s I C T policy, along wi th the hardware required for storage o f the data. Licenses, the management system and the rudimentary data warehouse are estimated at US$4 million. The project will also fund the software and hardware required for the IP Platform and the Network Operations Center, also in a manner consistent with the standards and guidelines specified in the Government’s I C T policy. Th is subcomponent i s estimated at US$7 million. Furthermore, TCIP will fund the training, change management and capacity building which will enable the government to take full advantage o f the internal systems and to ensure that they are professionally deployed and maintained. Considerable resources are required, on the order o f US$4 million.

Leveraging other sources of finance. Other development partners have indicated their willingness to fund the National Data Center and the Disaster Recovery Center; it should be noted that success o f the Government o f Kenya’s communication network i s contingent on secured funding for all elements described above.

TUP Component 2d - Support to the Digital Village initiative - US$l Omillion

27. TCIP will support the scaling-up of successfully piloted Digital Village initiative. Digital villages are e-centers that provide a suite o f services to the public via computers connected to the internet, digital cameras, printers, fax machines and other communication infrastructure. These services include, but are not limited to: e-mail and internet access; e-banking (e.g., money transfer services such as Posta Pay); eGovernment (e.g., police abstract forms, tax returns, P3 forms, and driving license applications); e- business (e.g., franchised postal and courier services); e-learning; e-health; e-markets (e.g., agricultural commodity pricing and exchange); and e-monitoring (e.g., real-time local level monitoring o f development funds and projects). Pilot Digital Villages are run by private entrepreneurs who obtained training in business and information technology from a certified program. T h i s component will support the Government over 3 years to ro l l out and scale up the successfully piloted Digital Village initiative which aims at providing internet access and e-services at the grassroots level via public-private partnerships .

28. TCIP support to include training, a grant facility, I T support, and internet connectivity. The provision o f training programs in business and information technology from a certified program will be supported by the project (US$2 million). Prospective entrepreneurs who have obtained certification will be eligible to apply for a Digital Village development loan from a revolving fund: the Digital Village Fund (DVF). The project will contribute US$4 mil l ion to the Government funded DVF over a three year period in 3 installments. Although initially envisaged as a grant facility, the DVF could be structured as a revolving fund (the funds allocated to each entrepreneur would be repayable into the DVF over a 3 year period). These funds received by the entrepreneurs will be used to finance set-up costs and the required infrastructure (computers, printers, software etc). The grant facility will be managed by the ICT Board Grant Manager and will follow the governance and disbursement mechanisms set in the Grants Operational Manual (the manual will be formulated as part o f the technical assistance activity specified in l(c) above). Over the first 3 years the project will support the provision o f IT support to Digital Villages (US$2 million) and finance internet connectivity (US$2 million) which are critical to support the incubation o f the initiative and ensure sustainability. Overall i t i s expected this project component will support the establishment o f 300 Digital Villages over a 3 year period.

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TCIP Component 2e - SMS and IVR e-Sewices - US$3 mil l ion

29. Mobile telephony as a growth engine. Africa, with Kenya at i t s forefront, i s currently the fastest growing mobile phone market in the world. Over the past five years the continent's mobile phone use has increased at an annual rate o f 65 percent - twice the global average. In June o f 1999, Kenya had 15,000 mobile phone subscribers. By the end o f 2004 the country had 3.4 mil l ion subscribers, and in the last 24 months this number has grown to over 7 mil l ion - about 21 percent o f the population. Economic research has shown that adding an additional ten mobile phones per 100 people can boost a typical developing country's GDP growth by 0.6 percent. A large part o f this boost comes from the innovative use o f mobile phone technology by local entrepreneurs.

30. Text messaging as a business tool for individual workers and farmers. Kenyan entrepreneurs, farmers, and laborers are coming up with original methods for solving their own problems. For example, contract laborers can now provide their phone numbers to potential employers and move on, instead o f having to wait for hours at a workplace in case a job arises. Access to market information through mobile phones also provides rural communities with invaluable information about centers of business. The Kenya Agricultural Commodity Exchange (Kace), now provides certain crop growers with up-to-date commodity information on mobile phones via Short Messaging Services (SMS). This allows farmers to access daily prices o f five commodities from a dozen markets, and many have quadrupled their earnings because they have access to information about potential buyers and prices before malung the often arduous journey into urban centers to sell their produce.

3 1. The Government wants to boost the use of text messaging services. The Government too i s now showing an interest in developing innovative communication and information applications that can be rolled out on mobile phones via SMS and Interactive Voice Response (IVR) technologies. For instance, potential applications include early warning systems; inexpensive and quick gathering o f monitoring data (e.g., tracking the spread and treatment o f HIV/AIDS by sending health clinic records via SMS; weather station readings); and the provision o f agricultural extension services.

32. However, consultations in Kenya demonstrate that the scaling up o f innovative mobile phone based applications and services face two principal constraints. On the one hand, many people with good ideas are unable to finance the development o f innovative applications. On the other hand, budget requirements for the init ial advocacy and awareness building campaigns are often a limiting factor and, with potential users unaware o f new products, new initiatives are hard to sustain. This project component aims to tackle these constraints and promote the growth in and scale-up o f innovative private sector and Government applications with the potential to stimulate pro-poor economic development.

Access to finance and sustainability are a problem.

33. A grant facility to support development o f private sector applications. The development, ro l l out and scale-up o f private sector applications will be financed under TCIP through a US$1.5 mil l ion grants facility. The grant applications will be invited via advertisements two times per year over a four year period (with the possibility o f accelerating the rounds to 2 or 3 years). T h i s component i s targeting the development o f 15 new applications. The grant will cover the expenses for service and content development (including consultations, website development, procurement o f software and hardware), licencing fees, advocacy and awareness building campaigns (including newspapers, radio and community sensitization tours). The grant agreement will specify that a certain proportion o f the annual revenues generated by the service for the f i rst 2 years must be reinvested in further awareness building and advocacy initiatives. The grant facility will be managed by the ICT Board Grant Manager and will follow the governance and disbursement mechanisms set in the Grants Operational Manual (the manual will be formulated as part o f the technical assistance activity specified in l(c) above). In practice the review o f proposals will be carried out by an independent consultant. A panel o f experts wil l be appointed by the

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ICT board (with rotating membership with a one year maximum term) will select te successful grant application based on the review o f the independent consultant’s analysis and recommendations

34. TCIP will also support agricultural extension, early warning systems, health services and education monitoring applications. T h i s activity (US$l Smillion) will finance the development o f at least 3 innovative Government applications. Following an inter-ministerial round o f consultations initiated by the MoIC, request for proposals from the private sector will be invited to develop selected applications and build capacity for managing and running the applications. Priority areas include agricultural extension applications (e.g., IVR platform for agricultural extension advise and requesting v i s i t s from extension officers), early warning applications (e.g., e-weather applications and collecting weather station data via SMS), health services (e.g., collection o f HIV/ADS and malaria indicators and sending out treatment reminders to patients via SMS) and education monitoring (e.g., collection o f school attendance data via SMS).

TCIP Component 3 (US$30m including US$29.16 million of IDA contribution): Transparency & eGovernment - Potential eGovernment applications for TCIP:

35. eGovernment as tool to improve Government efficiency and contribute to behavioral change. eGovernment applications apply the judicious use o f ICT to enable governments to improve their internal systems, deliver services more efficiently and effectively, and make information more accessible to the citizenry. There i s a clear rationale for considering the eGovemment component o f this project to be crucial towards incrementally contributing to increased viability o f investments in infrastructure: (i) It uses technology and modem approaches to increase the government’s ability to ensure

transparency and employ techniques to support anti-corruption activities; (ii) It augments the communications traffic flows relevant to national and regional communications

infrastructure; and (iii) It contributes to a behavioral change for citizens and businesses with regards to the increased use

o f broadband capacity, therefore encouraging the use o f the Internet and computers as everyday tools, This also contributes to improved viability o f investments in infrastructure.

36. The project team has taken a participatory approach to proposing eGovernment applications which can be supported by TCIP. During project preparation, up to 15 applications were proposed for inclusion in the project; v i s i t s to government officials helped to prioritize this ‘long list’. Given the funding envelope and considering the country’s stage o f development, i t was decided to focus on a small number o f applications which could have the greatest impact for government and for the citizens o f Kenya. Based upon discussions with GoK officials and an examination o f existing applications, the team narrowed down the l i s t o f potential applications to the following: support to pension administration, driver’s license registration, land information and land registration systems, high court registrar, the public servant’s wealth declaration, company registration, and improvements in eprocurement. In each case, the application was subject to scrutiny against the following criteria:

Existence o f a champion or change agent who could help reduce resistance from within government, the private sector or civi l society; Acceptability o f the PPP approach or possibility o f a joint venture with the private sector; potential for improvement o f internal efficiency, leading to greater transparency and less potential for corruption; Cost-benefit analysis (e.g., implementation and payback within a few years) and possibility for quick wins; High potential for positive impact for citizens and link to poverty reduction through making service delivery less expensive, less time-consuming for the beneficiary and the service institution, and less susceptible to fraud.

Criteria for the selection o f eGovernment applications.

.

. .

.

.

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37. Public Private Partnerships. The team carefully considered the sustainability o f each potential application. Given the environment within Kenya, it i s reasonable to conclude that the private sector could provide the ‘drive for results’ as it i s profit oriented and has considerable impetus for efficiency and effectiveness. Private sector f i r m s are usually early adopters o f the business process reengineering approach and are often quite amenable to joint ventures with government. However, i t was recognized that not every application i s a candidate for a joint venture approach. For example, some government services use data which i s considered to be too sensitive or confidential to be entrusted to the private sector; other government services are considered to be a ‘public good’, and therefore commercialization o f the services i s not feasible. In some cases, even when the public sector has already developed an application, such as with the Vehicle Registration System (VRS), there i s recognition that the private sector has considerable interest in third party use o f the data and may indeed be willing to enter into a joint venture to make it available in a secure way. In the case o f transport, both insurance companies and the police are in need o f the information generated by the VRS or the proposed driver’s license application.

38. Regardless o f whether the Government o f Kenya will enact eGovernment applications exclusively within the public sector or whether there will be a joint venture with the private sector, the project will assist the government to establish performance level agreements with the beneficiary agencies. As indicative examples, the government network should be operational 98% o f the time, pensions should be available to pensioners within one working day o f transmittal from Pension Administration, and businesses should be able to be registered within 30 days, and so on.

Performance agreement.

39. TCIP eGovernment roll-out. The proposed phasing outlined below will allow the Government o f Kenya to gain experience in tackling eGovernment projects while simultaneously accommodating the project and funding cycles o f the other development partners and World Bank projects which are contributing to similar efforts. I t also takes into consideration the government’s readiness to deploy modem technologies and the possibilities for Joint Ventures with the private sector. The following eGovernment applications will be considered for support by the project:

Phase Activity or Application Timeframe from cost Effectiveness

Phase I - quick wins 1. Pension Administration 2 years US$4million 2. Driver’s License Registration 1 year US$2million 3. Wealth Declaration Form 1 year US$2million

4. H igh Court Registrar 2 years US$3million 5. Company Registration 2 years US$3million

6. Support to the Integrated Population Registration System (IPRS) 2 years US$2million 7. Land Information and Land Registration System 3 years US$4million

8. eprocurement in the Supplies Branch 1-5 years US$3million

US$7million

Phase I1 - requires additional preparation and more in-depth planning

Phase I11 - considerable preparatory work to be done

Short, mid and long term improvements

Reserve for additional applications

TOTAL US$30million

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TCIP Component 4 (US$3m including USS2.95 million of IDA contribution): Project Management for TCIP:

40. Supporting the ICT Board for TCIP execution. T h i s component will consist o f support to finance project management related issues, and namely support for (a) a project coordinator (the ICT Board Deputy-Managing Director), Technical Manager and Grant Manager; (b) a Procurement Specialist, and a Financial Management Specialist; (c) a Governance officer and a Monitoring & Evaluation Specialist; (d) Office Equipment; (e) Incremental Operating Costs; and ( f ) Audits.

41. possible contingencies in project implementation, namely for differences in the estimated prices.

Contingencies (US$5 million of IDA contribution). Project funds are set aside to account for

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Annex 5: Project Costs Regional Communications Infrastructure Program (RCIP)

Kenya Transparency and Communications Infrastructure Project (TCIP/CIP 1)

Project Costs for Kenya

Contribution Project Cost By Component and/or Activity

and SMSIe-Services initiatives) (d) Transaction Adviser o f establishment o f PPPs for eGov applications (e) M&E system and associated capacity-building (9 Transaction-enabled Government portal and services (g) FOI-related consultancy for classification o f Government data and collection & posting o f statutory information

ect Communications contract

(b) Capacity purchase scheme - Government U s e

(b) 2 Procurement Specialists and 2 Financial Management Specialists (c) M&E Specialist and governance officer (d) Office Equipment (e) Environment Contract

The total cost given in the Table i s net o f taxes.

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Annex 6: Implementation Arrangements Regional Communications Infrastructure Program (RCIP)

Kenya Transparency and Communications Infrastructure Project (TCIPEIP 1)

1. Anchoring TCIP at the Ministry of Information and Communications. . The Kenya Transparency and Communications Infrastructure Project (TCIP) will be anchored at the Ministry o f Information and Communications (MoIC) and implemented by a number o f agencies. This i s consistent with: (a) identification o f the MoIC as a champion for change and improved governance; and (b) the MoIC team track record o f consistently delivering over the last 15 months on challenging sector reform issues which are critical for this project notably the push to leverage private sector participation with the actual liberalization o f the market (over ten international gateway licences delivered over the last 8 months), the engagement o f Telkom Kenya restructuring and privatization (an on-going IFC Advisory Services mandate), and the commitment to national and cross-border infrastructure open access defended by MoIC. In this context, MoIC will provide overall orientation and oversight o f the implementation o f the TCIP.

Executing Agency

I Office of the I President

Coordinating and

Implementing Agencies

ICT Board of Directors Board: 3 Public Officials + 5 Private

- - - - - - - - ICT Board

I

Deputy Managing Director/ TCIP Manager

- FM Specialist & Procurement Officer - Technical Manager, Grant Manager - Governance, M&E, & Communications Officers

Judiciary High Court

Registrar Records

Beneficiary Agencies Pension Admin.

J-- Wealth Declaration

Ministry of Lands I Land Titles

Department o f Transportation Drivers Licence

Company Registry

Ministry of

Supplies Branch Digital Village

Business Process Outsourcing

I I

Kenya Agricult. Commodity Exch. SMS & e-services

FOI Advancing Record

Classification

Network purchase Cap.

Directorate GovNet

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2. An independent agency created in the MoIC, the Information & Communications Technology Board (the “ICT Board”) wil l be in charge o f marketing Kenya ICT business process outsourcing (BPO) opportunities both abroad and in Kenya. Given the scope o f the project and the responsibilities o f relevant government agencies in implementing the components o f this project, the MoIC decided to house the TCIP implementation unit in charge o f the coordination, overall monitoring and reporting o f the project’s activities in the ICT Board. The TCIP-related staff would include an ICT Board Deputy-Managing Director (or the “TCIP-DMD”), with a role equivalent to that o f a project manager/coordinator and day-to-day management, as well as a financial management specialist, a procurement officer, a technical manager, a M&E specialist and a Governance officer (who will report directly to the Board o f Directors o f the I C T Board). The I C T Board will have the following responsibilities:

Executing Agency: the ICT Board.

3.

Oversee TCIP implementation, management and reporting ; Prepare implementation and procurement plans together with the implementing agencies; Coordinate with the World Bank on al l aspects o f project implementation; Work with implementing agencies to monitor performance agreements; Participate with eGovernment Directorate (Office o f the President) on policy dialogue at national level concerning legal and regulatory framework and issues that are critical for the success o f this project; With eGovernment Directorate, orrganize an annual workshop on ICT/eGovernment with all relevant partners in Kenya; Handle all procurement and financial management for the project in compliance with recently enacted anti-corruption legislation, including resource monitoring, preparation o f bid documents, appraisal and procurement o f contracts, and contracts management; Prepare quarterly consolidated financial and auditing reports to be submitted to the World Bank in accordance with Annex 6 and Annex 7 on financial management and procurement arrangements, respectively; Preparing the disbursement plan and responsibility for withdrawal o f funds, and payment to contractors and suppliers; Arrange and facilitate regular (monthly) meetings o f the implementing agencies to discuss progress with implementation and issues o f common concern; Report to the Governance Oversight Committee for overall guidance and direction; and Prepare materials for public dissemination following a communications strategy and coordinate stakeholder inputs and appropriate response.

Governance mechanisms. The Government i s particularly keen in having built-in governance mechanisms to ensure the ICT Board i s results-oriented and delivers in line with a set o f targets to be agreed upon. In this context, and as part o f the measures to strengthen the governance framework, the features described in the following paragraphs are being proposed:

4. Governance Oversight Committee. The Board o f directors overseeing the ICT Board will act as an independent Governance Oversight Committee (GOC) in charge o f overall strategic guidance and direction during implementation, have fiduciary and governance oversight o f the main disbursement areas for TCIP, and be responsible for monitoring the implementation o f the M&E framework, the risk management framework, and o f relevant performance agreements. I t i s proposed that the GOC would have a mixed representation from public and private sector (ex-officio Permanent Secretaries from MoIC, Finance and the Attorney General’s Office, as well as 5 members from the private sector chosen by professional bodies). I t i s also proposed by the Government that due consideration should be given to gender representation and age profile for GOC membership. The GOC will meet every 2 months.

5. established based on consultation and that a risk-based internal audit approach be adopted.

Risk management. It i s also proposed that an institutional risk management framework be

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6. To monitor and evaluate the implementation progress, specific milestones and performance indicators have been set in place. During implementation, project performance, including the achievement o f project outputs, progress toward the attainment o f development objectives, and implementation timeline will be monitored through the use o f semi-annual progress reports and impact studies prepared by the different implementing agencies. The Monitoring and Evaluation (M&E) related to project funding and implementation progress and impact will be carried out by the eGovernment Directorate (which has M&E capability) in the Office o f the President. For every bi-monthly meeting o f the Governance Oversight Committee, the eGovernment Directorate will prepare a status report on implementation o f eGovernment applications for consideration during the meetings. Each implementing agency wil l be responsible for the M&E at their subproject level and will report regularly to the eGovernment Directorate. The eGovernment directorate will consolidate the evaluation results from the different implementation agencies, identify common lessons learned and disseminate knowledge produced through the evaluation to the ICT Board.

Monitoring 8z Evaluation and disclosure of information.

7. Performance agreements. Activity performance agreements will be signed between the ICT Board and line ministries/agencies/entities that are benefiting from this project. Annual performance contracts between the Board o f directors o f the ICT Board and i t s key staff (Managing Director and deputy Managing Directors). On-going monitoring o f the activity performance agreements and annual performance contracts will be carried out by the Governance officer.

8. A far reaching communication strategy will be developed and implemented at the ICT Board in close consultation with implementing agencies, key stakeholders and substantive working partnerships with private sector participants.

Communication strategy.

9. I t i s also proposed that the compensation package for the Managing Director and the TCIP-DMD be inclusive o f a TCIP project perfonnance-related component. The award o f this compensation component would have to be validated by the GOC only if targets have been achieved.

10. World Bank supervision. The Bank will conduct four supervision missions per year during project implementation, including an annual progress review. A midterm review will be conducted, which will encompass: (i) a thorough review o f the execution o f the project and the achievement o f project objectives to date; and (ii) agreement between the Bank and the Borrower on recommended measures to ensure efficient execution o f the project and successhl achievement o f project objectives in the period after the review, al l in accordance with agreed performance indicators. The Borrower will provide the Bank a project completion report within six months o f loan closing and inputs to the Implementation Completion Report to be prepared by the Bank. The Bank will support public dissemination o f project information, including supervision reports on the project’s performance.

11. Other coordinating and implementing agencies under the oversight of the ICT Board. Whi le all procurement and fiduciary activities will be carried out by the I C T Board (the executing agency), TCIP will also leverage the capacity o f other entities for project activities implementation. As noted the minutes o f the Financing Agreement negotiations, the relationship between these entities and the ICT Board will be documented in the TCIP Implementation Manual. -Such entities will include notably: . The eGovernment Directorate in the Office o f the President will be tasked with the

implementation o f the eGovernment applications component (except e-procurement) in coordination with the entities to implement components under this project. The eGovernment Directorate will also be responsible for the overall project M&E arrangements. The newly created Public Procurement Oversight Authority will be tasked with implementation o f the e-procurement activities.

. 12. The particular case of managing the grant-based activities. A number o f activities have grant mechanism as part o f their disbursement mechanism. This i s notably the case for the Government Information portal, Digital Village initiative as well as the SMS/IVR e-Services initiative. The grant

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process activities will be carried out within the ICT board by the Grant Manager in coordination with the Financial Management and Procurement staff, T h i s wil l be described in detail in a Grants Operational Manual but should follow the following overarching principles:

Grants will be awarded in rounds (3 or 4 per year) Notice will be given for each round in major newspapers listing the main criteria for selection and providing details on how to obtain the request for proposals; The analysis o f grant proposals will be outsourced to an independent consultant with the appropriate expertise. The consultant will document the analysis and provide recommendations including prioritization o f proposals for possible approval; The Grant Manager will set up an ad-hoc technical committee including private sector representatives. The technical committee will finalize grant approval decisions taking into account the Consultant’s report.

.

.

.

the project u) Project management and implementation Component 2: Connectivity (a) Support for purchase of capacity in the regional networks

13. below:

The implementation arrangements for the TCIP project would be set up as described in the table

ICT Board GOC

Kenet, Government ICT Board GOC Agencies, BPO

environmen

(d) Support for financing the virtual governments’ communications network. (c) Digital village initiative

le) SMS / IVR e-Services initiative Component 3: Transparency - Preparation for eGovernment applications (a) eGovemment applications

eGov’t Office eGov’t Office/ ICT I GOC

Industry Government agencies ICT Board GOC

Grantees / Digital ICT Board GOC Village Grantees ICT Board GOC

Gov’t Agencies eGov’t Office GOC

Board

ICT Board GOC

eGov’t Office / ICT Board ICT Board GOC

ICT Board GOC

Procurement I Procur’t Authority 1

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Annex 7: Financial Management and Disbursement Arrangements

Regional Communications Infrastructure Program (RCIP) Kenya Transparency and Communications Infrastructure Project (TCIPEIP 1)

KENYA EXECUTIVE SUMMARY

1. Financial management risk i s rated substantial given that the proposed project’s institutional arrangements are not yet in place. The assessment was discussed during negotiations and will be monitored and revised ahead o f project effectiveness. Institutional arrangements are expected to comprise (i) the establishment o f acceptable financial management systems; and (ii) safeguards that respond to country level fiduciary r i sks o f weak governance and corruption, including (i) establishment o f I C T Board institutional risk management framework comprising ongoing risk identification and response mechanisms; (ii) establishment o f fiduciary oversight functions o f the GOC; (iii) adoption o f risk-based internal audit; and (iv) arrangements for public disclosure o f information on financial accountability and project progress at various levels. Once satisfactorily implemented, financial management r i s k rating i s expected to improve to modest.

2. Establishment of financial management systems. In order to satisfy minimum conditions for (i) timely and reliable financial information; (ii) effective internal controls; and (iii) an effective audit process, the following systems are expected to be put in place during the ongoing project preparation and ahead o f project effectiveness.

3. Project planning and budgeting function. The project’s budgeting system i s expected to be consistent with Government’s Medium Term Expenditure Framework (MTEF) and integrated in the annual budget cycles o f the Ministry o f Information & Communications (MoIC).

4. Accounting and internal control systems. Accounting and reporting systems that are integrated into the Central Government General Ledger system are required. System standards will include (i) monthly balancing o f accounts and reconciliation with the MoIC ministry general ledgers; (ii) arrangements for safe custody and sequential filing o f accounting documents; (iii) timely and accurate production o f periodic reports; (iv) reconciliation o f subsidiary accounts; and (v) effective internal control arrangements. The system will be based on Government Financial Management Regulations.

5. Staffing. There i s need for timely deployment o f project financial management staff. Arrangements will include IDA review and approval o f the organization charts and staff terms o f reference .

6. Financial management manuals. Procedures manuals that comprehensively describe accounting and internal control processes will be maintained to guide accounting and reporting practices, including the financial management o f grants for generating content for the Government Information Portal, the Digital Village initiative and the SMS/IVR eServices.

7. Internal audit function. Internal audit i s expected to adopt a risk based audit approach that i s designed to identify, assess and respond to operational r isks on an ongoing basis. The Internal Audit function i s expected to be independent, ultimately reporting directly to the GOC Audit Committee.

8. Financial reporting arrangements. The project i s expected to prepare and present quarterly

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financial statemend and annual audited financial statements7 within prescribed reporting deadlines. Reporting arrangements will include elaborate information collation arrangements to be set out in financial management manuals. Draft formats o f quarterly financial arrangements were presented and agreed during project negotiations.

9. External audit function. Annual financial statements audit arrangements will ensure adequate coverage o f all key activities, adopt a risk-based approach and ensure timely reporting. The function will be executed by the Kenya National Audit Office (KNAO) which i s assessed as sufficiently independent and effective. KNAO i s currently responsible for the audit o f all IDA funded projects in Kenya and has consistently been rated satisfactory. I t was agreed during project negotiations and included in the minutes o f negotiations that the Government will provide assurance that the scope o f the audit o f financial statements will include coverage o f grant funds.

10. Additional fiduciary safeguards. As part o f proposed institutional arrangements, the following additional fiduciary safeguards, expected to be in place by project effectiveness, are intended to respond to country level risks:

11. Governance and corruption risk mitigation arrangements. The outcome o f a recent Government-commissioned forensic audit and the Bank’s Integri ty Department detailed implementation review o f selected projects in the Kenya portfolio have been considered in developing the following recommendations for enhanced financial management effectiveness.

12. Institutional risk management. The I C T Board i s expected to carry out comprehensive risk assessments and develop mitigation action plans to be contained in respective institutional risk management policy framework. The Governance Oversight Committee (GOC) o f the ICT Board will be responsible for monitoring implementation o f the framework and action plans. Development o f the framework and action plans i s a condition o f project effectiveness.

13. finance sub-committees.

Establishment o f audit and finance committees. The GOC i s expected to constitute audit and

(a) The Audit Committee will be responsible for: (i) monitoring implementation o f the risk management policy frameworks; (ii) monitoring and ensuring timely implementation o f audit and operational review recommendations o f various fiduciary oversight responsibilities including, internal and external auditors, Government project monitoring agencies and IDA periodic review and supervision missions; (iii) overseeing the continuing efficacy o f accounting and internal control standards, policies and practices; (iv) ensuring compliance with legal covenants o f the IDA funding agreement; (v) overseeing the effectiveness o f the internal audit functions; and (vi) monitoring performance o f key internal audit staff against approved performance contracts.

(b) The Finance Committee will be responsible for: (i) review and approval o f quarterly financial statements; (ii) approval o f periodic operational budgets and financial performance; (iii) review and approval o f annual financial statements; and (iv) monitoring the performance o f key financial management staff against approved performance contracts.

Based on “Financial Monitoring Reports for World Bank Financed Projects: Guidelines for Borrowers” published by IDA on November 30,2002. ’ Audits to be guided by “Guidelines: Annual Financial Reporting and Auditing for World Bank-Financed Activities” dated June 30, 2003.

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The mandates, composition and functioning’ o f respective financial management sub-committees are expected to be documented and approved by the GOC. It i s expected that the committees will be staffed with appropriately experienced persons and meet regularly, at least once each quarter.

14. Social accountability. I t i s recommended that proactive and innovative community oversight activities are put in place to respond to fiduciary risks. The following arrangements, expected to be included in the institutional risk management policy framework, are proposed:

(a) Public disclosure o f information regarding; (i) the operation o f grant funded activities including generating content for the Government Information Portal, the Digital Village initiative and the SMS/IVR eservices, (ii) periodic resource appropriation and fund accountability; (iii) project implementation progress and operational results; and (iv) sharing o f best practice experiences amongst beneficiary entities. Arrangements should be made for prominent disclosure o f such information in the media and public locations; and for timely update o f information.

(b) Anti-cormption hotlines including tol l free communication lines should be established with explicit arrangements for collation o f information, follow-up action and public reporting. It i s proposed that collation and follow-up responsibilities are vested in Internal Audit and overseen by GOC Audit Committee.

15, funds flow and accountability arrangements include:

Efficient funds flow and accountability arrangements. Proposed improvements to project

(a) Simplification o f accounting; processes - Unnecessarily long fund remittance and payment processes should be reviewed. The Ministry o f Finance (MOF) through the Internal Auditor General (IAG) should assess payment processing procedures with a view to improving efficiency, effective control and timeliness. Key considerations in the process include (i) realigning the role o f technical oversight functions from involvement in routine transaction processing to conducting independent reviews and (ii) developing benchmark processing timelines to be adopted and monitored.

(b) Fund remittance - Bureaucratic delays in the remittance o f project funds from the Special Account through the Central Bank o f Kenya, MOF, MoIC and ultimately to the respective Project Accounts should be reviewed and unnecessary approval processes eliminated.

Required actions will be included in the institutional r isk management policy framework expected to be in place by project effectiveness.

16. Role of External Resources Department. Effective project monitoring by the M O F External Resources Department wil l be enhanced through ongoing capacity building in project oversight effectiveness.

17. Interim financial reporting - Quarterly financial statements have been identified as the preferred basis o f funding disbursement. Financial statement formats and preparation arrangements were agreed during negotiations. Arrangements for capacity building will be completed ahead o f project effectiveness.

18. Financial management action plan - The outcome o f th is review i s included in a financial management improvement plan comprising actions to be completed during project preparation and prior

Expected to be based on Government Treasury Circular No 16/2005 titled “Establishment and Operationalisation

63 o f Audit Committees in Public Service” dated October 4,2005.

to credit effectiveness and those to be monitored on an ongoing basis. Monitoring arrangements are included in the Implementation Support Plan (see paragraph 55).

KENYA SUMMARY PROJECT DESCRIPTION

19. As part o f the Regional Communications Infrastructure Program (RCP), the Kenya operation (the Transparency and Communications Infrastructure Project, TCIP) has two overarching development objectives (i) to support populations and businesses across the Eastern & Southern Africa region to have access to quality and affordable telecom services (the “connectivity development objective”) and (ii) making use o f affordable capacity, contribute to improved efficiency and transparency o f selected government functiondentities through eGovernment applications (the “transparency development objective”).

20. The project will be implemented through the MoIC. A Governance Oversight Committee (GOC) consisting o f permanent secretaries o f MoIC, MOF, and Attorney General Office as well as 5 representatives from the private sector nominated by professional bodies will provide policy direction and oversee overall project implementation, including fiduciary oversight.

21. The project will be managed by the ICT Board, an agency being established by the MoIC for the purpose o f spearheading MoIC’s efforts to strengthen the Business Process.Outsourcing Industry (BPO Industry) in Kenya. The I C T Board will include a Deputy Managing Director in charge o f TCIP coordination, a financial management specialist and a procurement specialist.

KENYA COUNTRY ISSUES

22. Financial management reforms. Through the Public Financial Management Reform Strategy, Government remains committed to strengthening fiduciary safeguards with a view to achieve economy, efficiency and effectiveness in the use o f public funds. With the support o f a number o f development partner-assisted initiatives, including the IDA-funded Institutional Reform & Capacity Building Project (IRCBP), Government i s seeking to rapidly enhance the financial accountability framework, particularly through strengthening legislation related to public financial accounting and audit. Activities to be funded under the IRCBP include (a) adoption o f modem accountability and reporting standards; (b) adoption o f risk based audit approaches; and (c) supporting the establishment o f effective Ministerial Audit and Finance Committees.

23. Diagnostic reviews. The most recent piece o f diagnostic work that provides an up to date critical assessment o f issues that may impact on this operation i s the 2006 Country Integrated Fiduciary Assessment (CIFA). The assessment, together with the current Country Assistance Strategy (CAS) that was effected in May 2004 review Government’s performance since the last Country Financial Accountability Assessment (in 2001) and CAS (in 1998). A recurring theme i s that policy changes agreed under past and ongoing projects have not been implemented consistently. Project implementation has generally been slowed down by constraints in the flow o f resources and limited absorptive capacity arising from bureaucratic processes in Government.

24. Portfolio review. The 2005 Country Portfolio Performance Review (CPPR) follow-up review highlighted Government’s commitment to improving portfolio performance. Agreement was reached on several key issues, some o f which have been applied in the design o f this operation. These include actions to improve audit compliance, closer monitoring o f project performance by MOF and improvements in the f low o f project resources.

25. Forensic audits. The findings o f forensic audits o f Government commissioned forensic audits o f selected projects in the country portfolio (November 2004 and June 2005) include the following financial

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management related issues:

(a) integrated and regularly reconciled with the rest o f the government’s central accounting system; (b) each project; (c) (d) necessarily identify major issues so that they can be actioned; and (e) government structure.

Projects were generally not controlled using a balancing general ledger system that was fully

Project designs did not identify fraud r i s k s and fraud r i sk management was not an integral part o f

Senior government oversight o f the projects was weak; Management accounts and project quarterly reports reflect levels o f activity but do not

Lessons learned and best practices are not shared among similar projects or passed into the wider

26. Use o f country systems. The project will, as much as possible, rely on existing Government financial management systems for overall project management, audit and oversight. Due consideration will be taken o f the various fiduciary safeguards enhancement recommendations, including all significant matters raised in various diagnostic and other reviews.

65

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KENYA PROJECT FINANCIAL MANAGEMENT DESCRIPTION

A Implementing entity

32. Financial resources wil l be included in the Government budget and channeled from Ministry o f Finance to MoIC for onward remittance to the ICT Board. Accountability wil l be monitored through the same channel and ultimately included in the Government financial reporting system. This arrangement i s consistent with IDA fimded projects in Kenya.

B Planning and budgeting

33. . Budgeting for the project has been undertaken by I C T Board in consultation and with extensive detailed input by the respective implementing entities. The budgeting process i s based on the Government Medium Term Expenditure Framework (MTEF). Proposed periodic reporting guidelines require quarterly activity, cash f low and procurement projection, analysis and review on an ongoing basis, comprising quarterly financial statements that may form the basis o f requests for reimbursement o f funds.

C Accounting

34. Books of account and list of accounting codes. The project’s accounting records will be maintained on a computerized accounting system. The codes relating to the project will be integrated in the Chart o f Accounts that match the classification used in financial statements.

35. Accountability. The I C T Board will coordinate with respective implementing entities the utilization o f funds to meet the eligible expenditure based on approved budgets and work plans, following the accounting procedures to be outlined in the Financial Management Manual and guidelines.

36. Accountability of grant funds. Accountability arrangements wil l include the following:

1. Public sharing o f information regarding activities supported by grant funds;

2. Ongoing independent oversight and strengthening o f fiduciary management capacity; and

3. Disbursement in tranches based on approved subproject, signed financial agreements, and financial and physical progress reporting.

37. Grants supervision arrangements. Grants supervision arrangements will integrate fiduciary oversight with M&E. Arrangements will be articulated in the financial management manuals and guidelines

38. Interim financial reporting. The form and content o f quarterly financial statements was agreed during project negotiations. Primary contents o f quarterly financial statements will comprise (i) financial reports, including a statement o f sources and uses o f funds by funding source, a statement o f uses o f funds by project activity/component; and fund balance statements supported by bank statements (ii) physical progress (output monitoring) report and (iii) a procurement plan and progress report. Financial statements will cover all project activities, including Government counterpart funding, resources provided by partners and non-cash

71

contributions wherever reasonably quantifiable.

39. Quarterly financial statements will form the basis o f periodic funding disbursements in which case they will include a detailed report o f projected cash requirements for each ensuing 6 months period supported by (i) a procurement progress report and related cash f low projection; (ii) a fund balance statement supported by bank balance certificates and reconciliation statements; and, (iii) additional disclosures in respect o f contracts paid out o f project funds.

40. Respective implementing entities will prepare separate quarterly financial statement inputs accounting for funded activities and detailing projected cash requirements for purposes o f periodic replenishment.

41. Quarterly financial statements are due within 45 days following the end o f respective calendar quarters. In order to meet this deadline, the ICT Board will issue internal reporting timelines, to be included in the Financial Management Manual and Guidelines.

D Internal control

42. Internal controls and financial management guidelines. The project’s internal controls will be based on GOK established accounting and internal control systems and documented in a Financial Operations Manual and guidelines.

43. Internal audit. The GOC i s expected to oversee the establishment o f Internal Audit functions, centrally coordinated by the Government IAG. Internal audit mandates, reporting frameworks and functioning will be guided by best practice guidelines issued by the international Inst i tute o f Internal Auditors. These wil l include responsibility for overall project r i s k management, monitoring compliance with fund accountability and reporting policies, procedures and guidelines and risk based approaches. The effectiveness o f internal audit will be complemented by the institution o f periodic audit issues follow-up by the GOC which wil l also support the demand for internal audit services.

44. approach has been assessed as reasonably compliant with professional best practice.

The IAG i s currently roll ing out a risk-based approach in Government. The proposed

E Flow of funds and disbursement arrangements

45. arrangements:

Disbursement arrangements. The following options are provided under IDA funding

(a) Statement of expenditure based disbursement - Requests for disbursement by IDA will be made on the basis o f approved work plans and cash f low projections for eligible expenditures. IDA will make advance disbursements in agreed proportions from the proceeds o f respective Credits into the Special Account to expedite project implementation. Advances will be used by the borrower to fund eligible project expenditures and evidenced in quarterly financial statements.

(b) Report based disbursement - Requests for disbursement by IDA will be made on the basis

72

o f approved work plans and cash flow projections for eligible expenditures. IDA will make advance disbursements in agreed proportions from the proceeds o f respective Credits into project Special Accounts to expedite project implementation. Advances will be used by the borrower to fund eligible project expenditures and evidenced in quarterly financial statements.

(c) Direct vuvment - Another acceptable method o f withdrawing funds under this arrangement i s the direct payment method, involving direct payments to suppliers for works, goods and services upon the borrower’s request. Payments may also be made to a commercial bank for expenditures against pre-agreed special commitments. Direct payment amounts will be included in quarterly financial statements.

The IDA Disbursement Letter will stipulate the minimum application value for direct payment and special commitment procedures as well as detailed procedures to be complied with under r e spec tive funding arrangements.

46. Flow of funds. Funds flow arrangements for the project shall be as follows: (i) IDA will make an init ial advance disbursement from the proceeds of the Credit by depositing into the Borrower-operated Special Account; (ii) Actual expenditure will be reimbursed through submission o f Withdrawal Applications and against interim financial statements; (iii) GOK counterpart hnds and transfers from the Special Account (for payment of transactions in local currency) will be deposited in the Project Account in accordance with GOK exchequer control and funding arrangements.

47. The following bank accounts will be used to channel project resources:

a) Special Account - GOK will establish a U S dollar Special Account that will receive IDA depositskransfers from the credit account. The account will be managed by MOF in accordance with GOK procedures for the management o f Special Accounts.

Project Account - A local currency project account operated in a local commercial bank will be opened to form the primary source o f finance for project activities and will be managed directly by the ICT Board. Remittances from the Special Account will f low through the MoIC Paymaster General account to the Project Account in line with GOK procedures. Respective bank accounts, including GOK depositing o f the initial tranche o f counterpart funds, are expected to be operational by credit effectiveness. Init ial cash flow forecasts upon which the advance disbursement will be made from the IDA Credit should also be prepared by the same date.

b)

48. Flow of grant funds. Grant beneficiaries will be expected to operate bank accounts into which IDA funds will be disbursed in tranches on the basis o f physical progress and simplified accountability. Details will be included in the financial management manuals and guidelines.

49. Counterpart funds. MoIC will ensure advance availability of counterpart funding contribution by depositing amounts equivalent to estimated quarterly cash requirements into the Project Account. Counterpart funds will be allocated through the normal Government budgetary process.

73

50. Remedies for non compliance. If ineligible expenditures are found to have been made from Special Accounts, the borrower will be obligated to refund the same. If the Special Account remains inactive for more than six months, IDA may reduce the amount advanced.

5 1. IDA will have the right, as to be reflected in the terms o f funding agreement, to suspend disbursement o f the funds if significant conditions, including reporting requirements, are not complied with.

74

F Financial reporting

52. Annual financial statements. The ICT Board will be responsible for Project financial statements prepared in accordance with International Public Sector Accounting Standards (IPSAS) which inter alia includes the application o f the cash basis o f recognition o f transactions.

G External audit

53, External audit. Under Kenyan legislation, the responsibility to audit al l Government funds and activities i s vested in Kenya National Audit Office (KNAO), which i s mandated to subcontract such services in the event o f capacity or other constraints. KNAO i s currently responsible for the audit o f al l IDA funded projects in Kenya and has consistently been rated satisfactory. There have been significant improvements in the office’s ability to ensure timely auditing and reporting. The office i s considered to be sufficiently independent, applied internationally acceptable auditing guidelines and therefore, acceptable to IDA.

54. I t was agreed during project negotiations and included in the minutes o f negotiations that the Government will provide assurance that the scope o f the audit o f financial statements will include coverage o f grant funds.

55. into consideration IDA guidelines, within six months after the year-end.

IDA funding agreements require the submission o f audited financial statements, taking

KENYA CONDITIONALITY

56. Actions required prior to credit effectiveness:

Action The ICT Board has developed and adopted the Project Implementation Manual in a form and substance satisfactory to the Association The ICT Board has recruited to the ICT Board: (i) a Deputy Managing Director in charge the Project’s overall coordination; (ii) a procurement specialist; and (iii) a financial management specialist; all with qualifications, experience, and terms o f reference satisfactory to the Association and in accordance with the provisions o f Section I11 o f Schedule 2 to the Agreement. The ICT Board has established a financial management system, in form and substance satisfactory to the Association. The ICT Board has opened the Project Account and deposited therein the init ial deposit. The ICT Board has established an institutional risk management policy framework satisfactory to the Association.

a)

b)

c)

d) e)

The institutional risk management policy framework requires a financial management system that includes: (i) establishment o f a Governance Oversight Committee, including Audit and Finance sub-committees with clear terms o f reference consistent with Government’s financial management guidelines; (ii) updated financial management and procurement manuals setting out operational policies, procedures and fiduciary oversight methods; (iii) arrangements for public disclosure o f information and complaint handling mechanisms; and (iv) an effective system o f internal and external audits.

76

I t i s also understood that the establishment o f a financial management system also means that quarterly financial monitoring reporting arrangements agreed upon at Negotiations are in place.

57. Actions required following credit effectiveness:

Action a) b)

Project independent audit arrangements completed. FM capacity o f the I C T Board developed and monitored on an ongoing basis.

KENYA IMPLEMENTATION SUPPORT PLAN

58. implementation support plan i s proposed:

Based on the outcome o f the financial management risk assessment, the following

FM Activity Frequency FM Deliverable

a) Interim financial statements Quarterly review b) Audit report review Annually

Financial statements review report

Audit review report

c) Review o f controls Six m o n t ~ y ' ~ (a) Clearance o f FM effectiveness

d) Transaction reviews Annually

conditions. (b) FM review report

FM review report

PPor aimng sessions

f ) Participation in regional Annually specialized training workshops

Information o n available training programs

59. systems are maintained for the project throughout i t s l i fe. In addition, Detailed Financial Management Reviews will be carried out regularly to ensure that expenditures incurred by the project remain eligible.

The missions' objectives will include that o f ensuring that strong financial management

l2 Respective reviews w i l l be based o n mutually agreed terms o f reference l3 These w i l l include a specific follow-up o f FM effectiveness conditions that comprise the underlying reason for a Substantial FM risk rating. l4 To be based on existing arrangements in conjunction wi th the Loan and Procurement Departments

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Annex 8: Procurement Arrangements

Regional Communications Infrastructure Program (RCIP) Kenya Transparency and Communications Infrastructure Project (TCIPKIP 1)

A. Procurement environment

1. Kenya’s f i rst National Procurement Law (The Public Procurement and Disposal Act 2005) was passed by Parliament in October 2005 and enforced in January 2007. The Regulations supporting the Law were also published by the Minister for Finance in January 2007. Prior to the enforcement o f the Law, procurement under the public sector had been governed by a set o f Regulations (the Public Procurement Regulations 2001) issued by the Minister for Finance in 200 1 and amended in 2002.

2. The Public Procurement and Disposal Act (2005) creates a central Public Procurement Oversight Authority (PPOA) to replace the Public Procurement Department (PPD) created under the Regulations (2001) in the Ministry o f Finance. The Act also re-establishes the Public Procurement Complaints,, Review and Appeals Board (the Appeals Board) which had been in operation since 2001. In addition, all public procuring entities have a Procurement Unit and a Tender Committee which are responsible for the implementation o f procurement process o f the procuring entities. The Executive Officers o f the procuring entities together with their Tender Committees are accountable for the procurement decisions o f their entities.

3. Public Procurement in Kenya i s recognized as a very important process via which over 70% o f public funds (excluding staff emoluments, debt servicing and other statutory payments) are spent. A major challenge in Kenya i s to ensure sound and efficient public procurement systems that ensure value for money, efficiency in service delivery and transparency, including providing equal opportunity to the bidding community. It also recognized that corruption in public procurement i s a major issue in Kenya as it i s very erosive o f public finds intended for public good and i t s resultant economic growth.

4. Among the overarching features o f the Procurement Law towards promoting transparency and accountability o f public procurement decisions include specific provisions for administering security-related procurement which has hitherto been vulnerable to corrupt practices. In addition, the Government has established a number o f complimentary anti- corruption legislative and administrative instruments. In 2003, it enacted an Anti-Corruption and Economic Crimes Act which creates the Kenya Anti-Corruption Commission (KACC) - an independent body corporate with immense powers relating to the fight against corruption, accountable to Parliament, and the Kenya Anti-Corruption Advisory Board (KACAB). The K A C A B members were drawn from the civi l society, professional bodies, trade unions, and religious sectors, vetted by Parliament and appointed by the President. In the same year, a Public Officer Ethics Act was enacted and enforced. This Act provides for Codes o f Conduct and Ethics for all public officers to enhance ethics and integrity in the Public Sector and govern the wealth declaration process. The Government introduced Performance Contracting for public agencies (parastatals in 2004/05 and Government Ministries and Departments in 2005/06). Chief Executives o f al l public agencies are required to s i g n Performance Contracts on behalf o f their respective agencies. One aspect o f performance contracting, which every agency i s assessed on, i s the initiation o f anti-cormption measures to curb corruption.

5. following procurement reform actions:

Under i t s Governance Action Plan, the Government has included implementation o f the

78

. Inject sunshine principles in bidding and procurement contracts including (i) ensuring all Ministries, Departments and agencies publish the inform on contracts required by law on a Government website; and (ii) ensuring the website i s working effectively and i s accessible to the public; . Introduce a Vetting System to pre-qualify companies interested in bidding for Government contracts to address the issue o f conflict o f interest; . Establish a mechanism for reporting and enforcing the current provision o f the law on “Blacklisting” companies; . Introduce e-procurement.

B. Assessment o f the agency’s capacity to implement procurement

6. The I C T Board being established by the MoIC to market the Kenya ICT business process outsourcing (BPO) opportunities both abroad and in Kenya, will also be the Project Executing Agency and will have overall responsibility for the management o f the project. Procurement will be centrally handled for all the activities in the four components under the project by the ICT Board who will be responsible for the overall project management, procurement and financial management, assisting CCK, eGovernment Office, Kenet, and the Public Procurement Oversight Authority. The s ta f f in the ICT Board will include an I C T Board Deputy-Managing Director, a financial management specialist, a procurement officer, a technical manager, a M&E specialist and a Governance officer.

7. An in-depth procurement capacity assessment was carried out during Project Appraisal, which rates the procurement risk ‘high” due to the following key issues and r isks concerning procurement during implementation o f the project: (i) the proposed executing agency “The Information and Communications Technology Board (the “ICT Board”) i s not yet operational and staffed; (ii) MoIC procurement unit i s staffed with one chief Procurement Officer and one Senior Procurement Officer who do not have the capacity to carry out procurement in accordance with Bank procedures; (iii) the ICT Board procurement officer along with all the implementing agencies project staff wil l need to be trained on Bank procurement procedures and policies; (iv) Weak institutional arrangement for procurement oversight; and (v) N o National Standard Bidding Documents that have been reviewed by and cleared with the Bank.

8. In addition to the mitigating measures highlighted in the table below, it i s also suggested to assess the performance o f the proposed implementation arrangements 3 months after Credit signing date. This would allow the Bank to determine whether there i s any need to make specific and tailored changes. An example o f such changes could be the appointment o f a procurement agent to handle all o f the procurement activities under the project, including monitoring o f the utilization o f the proposed US$8 mil l ion grants to support government information portal, Digital Village initiative and SMS/IVR e-service initiative.

79

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C. Procurement Arrangements

10. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" current edition; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" current edition, and the provisions stipulated in the Legal Agreement, and the Operational Manual to be developed to guide the project implementing agency. The various items under different expenditure categories are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The f i rst Procurement Plan will cover contracts to be carried out in the f i rst 18 months o f project implementation and updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

11. Procurement of Works: A total o f about US$O. 1 mil l ion o f works would be procured under this project which will include wiring o f buildings for telecommunications in-building networks. Works will mostly be carried out as an integral component o f the supply and installation o f telecom goods and services contracts. For this reason, works contracts wil l not appear in the procurement plan separately. Should need arises for carrying out minor works separately, it be reflected in the respective Procurement Plan, and the Bank's current standard bidding documents for (small) works will be used.

12. Procurement of Goods and Telecom Services": A total o f about US$59.3 mil l ion of goods and Telecom Services would be procured under this project which will include: (a) Procurement o f office equipment for ICT Board; (b) Monitoring & Evaluation System; (c) IT equipment (including installation) in the context o f the Government Information Portal, universities virtual network, Government virtual communications network, pension administration application, drivers' licence application; (d) purchase o f capacity and Internet access for universities and related institutions, the Government and the Business Process Outsourcing sector. Contracts costing the equivalent o f U S $ 250,000 will be procured following ICB procedures. The Bank's current Standard Bidding Documents for Goods will be used for ICB contracts. National Standard Bidding Documents that are acceptable to the Bank will be used for N C B contracts whose value range between the equivalent US$70,000 and US$250,000 per contract. Goods which are estimated to cost less the equivalent o f US$ 70,000 will be procured through Shopping. On exceptional basis and upon prior agreement o f the Bank, goods may be procured through Direct Contracting.

13. Grants: A total o f about US$8 mil l ion wil l be awarded in accordance with the provisions o f paragraphs 3.12 o f the Guidelines for Procurement under IBRD Loans and Credits issued by the WB May 2004, and with the provision o f paragraphs 3.14 o f the Consultants Guidelines issued by the WB May 2004, and established private and commercial practices which are acceptable to the Bank as applicable. The formulation o f a comprehensive Grants Operational Manuals has been retained as a condition for disbursement for these activities. The grants under the project are for: (i) to generate content on the Government Information Portal, (ii) support the Digital Village Initiative; and (iii) support the SMSAVR e-Service initiative.

14. Selection of Consultants: A total o f about US$37.18 mil l ion o f consulting services will be procured under the project to carry out assignments in the following areas o f expertise:

l8 Telecom Services in this context means the purchase of telecommunication capacity.

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ICT/telecommunications regulations; telecommunications and IT networks; public-private partnerships in eGovemment; project management activities; audit, capacity-building, communications etc. The Credit will finance costs o f recruitment o f Technical Advisors to assist the government in the design o f the PPP arrangements for the eGovernment applications, the preparation o f bidding documents, evaluations and the decision o f contract award to the private sector partners ; the design o f disbursement and governance mechanisms for the capacity purchase schemes, for the support to the Digital Village initiative, for the support to the SMS/IVR e-Service initiative as well as for the support to the Government Information Portal content generation.

15. Contracts for consulting services will, as far as feasible, be awarded following the procedure o f Quality and Cost Based Selection (QCBS); Procedure o f Quality-Based Selection (QBS) would be followed for assignments which meet the requirements o f paragraph 3.2 o f the Consultant Guidelines; Procedure o f Fixed Budget (FBS) would be followed for assignments which meet the requirements o f paragraph 3.5 o f the Consultant Guidelines; and Procedure of Single-Source Selection (SSS) would be followed for assignments which meet the requirements o f paragraphs 3.9-3.12 o f the Consultant Guidelines and will always require the Bank’s prior review regardless o f the amount. Consulting services estimated to cost less than US$lOO,OOO per contract under this project would be procured following the procedures o f Selection Based on Consultants’ Qualifications (CQS). Procedures o f Selection o f Individual Consultants (IC) would be followed for assignments which meet the requirements o f paragraph 5.1, 5.3, and 5.4 o f the Consultant Guidelines. Least-Cost Selection (LCS) would be used for assignments for selecting the auditors and other repetitive services. For all contracts to be awarded following QCBS, QBS, LCS and FBS, the Bank’s Standard Request for Proposals will be used. Sample documents for small consulting assignments will be prepared by the ICT Board procurement officer with the Bank’s assistance.

16. determined in the procurement plan on the basis o f i t s nature and availability o f f i rms .

Contracts for which short l ists may consist exclusively o f local consultants will be

17. Training, Workshops, Study Tours. A total o f about US$3.25 mil l ion i s allocated for training and capacity building activities the staff o f the ITC Board, the MoIC, Kenet, eGovernment Office, Public Procurement Oversight Authority, other beneficiary agencies in the context o f eGovernment efforts as well as Government virtual communications network-related activities including rollout o f email systems and document management system. Yearly training plan wil l be cleared by the Bank and these activities would be disbursed against reasonable actual costs. The ICT Board members will be trained in areas such as financial management, procurement, as well as monitoring and evaluation and communications, policy and regulations, etc.

18. Operating Costs: A total o f about US$O. 148 mil l ion would be required to cover the costs o f operations and maintenance o f office, transport and equipment and recurrent staff costs will be financed from the Operating Cost budget o f the Credit. Procurement o f goods and services financed under the Operating Cost will be procured in accordance with Government administrative procedures satisfactory to the Bank.

D. Procurement plan

19. The Borrower has developed a procurement plan for project implementation which provides the basis for the procurement methods. The plan has been agreed between the Borrower and the Project Team during project negotiations and will be posted in the project’s

84

database and in the Bank's external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The procurement plan signed on March 2,2007 does not include grants as this will be determined as part o f the relevant technical assistance activity.

Expenditure Category

1. Goods

2. Works

E. Frequency of procurement supervision

Contract Value Procurement Contracts Subject to Threshold (US$) Method Prior Review

250,000 ICB All contracts

270,000 <250,000 NCB 1150,000 - <70,000 Shopping None

270,000 ~100,000 NCB None <70,000 Shovving None

20. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Executing Agency (the I C T Board) has recommended three to four supervision missions per year to carry out post review o f procurement actions.

Services, Training Firms

21. The Bank should ensure that supervision includes the relevant technical staff (ICT technical staff, IT procurement specialists, technical specialists) to provide technical advice (for instance on terms o f reference, technical specifications, etc.) in relation to the project activities deemed complex.

N o Treshold QCBS 2100,000

Table A: Thresholds for Procurement Methods and Prior Review

Individuals

400,000 CQ None 400,000 LCS 2100,000 400,000 FBS 2100,000 Y0,OOO Individual consultants All contracts

I 3. Consultant I I I I

J0 ,OOO Individual consultants None

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A. ~ ~ ~ ~ $ ~ ~ ~ r

nomic analysis of ~ G o ~ ~ r ~ ~ ~ n t € ~ ~ ~ ~ n ~ ~ ~ ~ the case o f the Kcnya High Court

n 3-5 years, This

o p e ~ a t ~ o n ~ ~ We cxpect that this XG'I' ~ n ~ e ~ e ~ ~ i o n , as w e l l as the other eight not c ~ n s i d e r e d here, will help catalyze: a system ~ o d e ~ i z ~ ~ i ~ ~ drive in the public sector, improve p ~ ~ ~ i c sector e f ~ c ~ e ~ c ~ in the p r ~ ~ ~ i s ~ o ~ of services, enhance ~ranspasency and dcmocsitcy, and help produce ~ ~ o d u ~ ~ ~ v i ~ gains result ing in systematic impact on CDP growth.

2. The first section focuses on 'Figure 9 + l , , ~ o s t and eGovmmt deriving the theoretical model for the component: rhe caSe *fthe K ~ ~ ~ ~ , H ~ & court eGovernment applicationj in the Kenya Registrar, 2007-20 15 I l i g h Court Registrar. \4'htlc the a t a ~ l a h i l i t \ ~ of dim constrttincd Ihc ,'.<>

tinalysis and model spccitic3tion. n e managed get tfic bar;ic information ?4,0

necessary and rcasonablc projections LO rest tlic soundness itf' the economic model J e x r t b c in Scction 2 and shotv mc.:isurrtble and mettriingtiil cost-benetit rrs:ilts. 3 . The second section o f this annex 4 0

focuses on the theoretical model 2 0 -

! 2 :I

embodied in the eCio~~crnn icn t litcraturc 3,j __- , I . . -.-- devclopcd by the i iuropean Commission's ?OO- 2t;JK 2-109 :tl:I, : I 1 1 1 2 1 1 1 :I,:? ?>!-I i c J l j eGom-nment Economics program.- The

cGovcrnnient act i \ , i t ics result in an improvement in labor producti\ it). of thc publ ic sector and, 3s a conscquensc. contrtbutes to 3 numbcr of' intcmicdiate rcsulls (c.g.. better services. cost savings. efficiencies, ctc. 1. and cvenruslly to GDI' g r o u th. l ' hc modc l specified in this i n n e x proposes 3 l incr productiyity function for thc publ ic scctor, wh ich takes into account four dit'fcrcnt cfl'ctts: ( i ) cflicicncy: (ii) substitution; {iii) reorganization: ( , ivl itxwtxtioii: and (v ) niacroecononiic effects. These fi\.e canipoi icnts cnier into the estimation of public sector productivity.

basic tenet o f this body of research i s that -(; M> - . u i t t i m t eGovt.mmer.t -C'osts \\,ith eCioiwmmnr

91

4. In summary, the economic analysis indicates a potential net benefit of the eGovernment application in the Kenya High Court Registrar of US$5.2 million over the 2007-2012 period. As figure 9.1 illustrates, the costs per year o f providing record retrieval services for the public, without an eGovernment application, would increase from about US$5 mil l ion in 2007 to around US$9 mil l ion by 2012. The slow record retrieval system would continue to affect court efficiency and impose high transaction cost to the public. In turn, the costs per year following the proposed eGovernment application would r ise during the initial period o f the investment, then taper off.

1. Economic analysis o f eGovernment applications: the Kenya High Court Registrar

5. This section describes in some detail the background o f Kenya High Court eGovernment application and quantifies to the extent possible the economic impact (based on the theoretical model described above) on the entities undertaking the project, on society, and on various stakeholders. In deriving the economic analysis, this section will help identify the estimated fiscal impact o f the applications, determine whether the arrangements for cost recovery are efficient and equitable, and assess the potential contribution to growth.

1.1. Background

6. A manual court registry contributes to delays in the dispatch of justice. The High Court o f Kenya maintains manual records o f court cases. About ten years’ worth o f f i les are kept in “current” status in the High Court registrar. In their present condition and location, f i les can easily disappear or become misplaced and there i s no systematic tracking system. In short, the manual system i s prone to significant human error, contributing to delays in the dispatch of justice when a needed f i le cannot be obtained in a timely manner.

7. Establishing a document management and archiving system could convert the paper records into electronic format and make them web-enabled for easy access. About ten years ago, such a system was considered but never implemented. Newer technologies now exist which are specific to the legal system and which provide immediate and real-time access to all sections o f the legal documents from the initial complaint or charge through to the final determination o f the case. The National Council for Law Reporting i s already providing online access to legal documentation from the Supreme Court. An examination o f the Registry o f the National Council for Law Reporting and their corresponding website (www.kenyalawre.ports.or.ke) shows that the website i s professionally maintained and that the private sector i s willing to pay for access to the decisions o f legal cases. Lawyers in particular are in need o f access to legal precedents, judgments and histories o f court proceedings. The Registry can be expanded to include access to these additional offerings for a fee, which wil l partially offset the costs o f maintaining the system. According to their website:

“The National Council for Law Reporting i s a corporate body established by the National Council for Law Reporting Act,1994 and given the exclusive mandate of: publication o f the reports to be known as the Kenyan Law Reports which shall contain judgments, rulings and opinions o f the Superior Courts o f record and also undertake such other publications as in the opinion o f the Council are reasonably related to or connected with the preparation and publication o f the Kenya Law Reports” (section 3).The Kenya Law Reports are the official law reports o f the Republic o f Kenya which may be cited in proceedings in all courts o f Kenya (section 21). “

8. There i s a need to develop the bases of an efficient court management system-by scanning and digitizing the court records of the Kenya High Court. The project could embark on a two phased activity over the next two years in this regard:

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Phase I: Scan current court records including the backlog, and establish a proper document management and indexing system. Establish a MOU with the Kenya Law Registry to transfer f i les to them for loading into the system and for making them accessible on demand.

Phase 11: Once the backlog has been scanned, ensure that the files are fully digitized and indexed for new cases entering the court. Continue to feed files to the Kenya Law Report and ensure that the process i s sustained by the High Court.

9. Focus on commercial aspects would help bring efficiency gains and generate partnerships with the private sector. It i s anticipated in the project to use a private sector firm to conduct the data capture exercises and to provide a turnkey solution for this effort. The project will f h d the necessary consultancies, hardware, software, BPR, systems and data capture exercise, as well as the enhancement o f the commercialized display and retrieval mechanism in a searchable online web based format. The project i s anticipated to take two years and cost US$3 million.

1.2. Efficiency/effectiveness effect

10. The eGovernment application i s expected to have a significant impact on the efficiency and demand of High Court Registrar services. We can quantify this efficiency/effectiveness effect deriving three variables: (i) financial resources; (ii) time efficiency; and (iii) savings on operational costs. Table 1 contains the entire database used to carry out the analysis and the assumptions utilized.

11. Financial resources. The High Court registrar i s expected to increase i t s capacity to acquire resources directly from the public as it becomes more efficient. With the eGovemment application, i t i s estimated that the High Court registrar will be able to handle in i ts back office more than twice the number o f records it handles per day-increasing from 160 records in 2007 to 362 records by 2012, compared with an increase to around 185 records by 2012 without the eGovernment application. Direct revenues generated from this increased efficiency could increase by some US$650,000 between 2007 and 2012. This increase will be based on the higher number o f records handled in the back office and will be reflective o f a decline in the cost (to the public) o f handling a record from an average o f KSh. 1,000 per record every time the public goes to v i s i t the registrar to KSh.590, over the 2007-2012 period.

12. Time eficiency. I t i s possible to measure a time efficiency variable o f the eGovernment application on service delivery. Based on the estimated increase in the number o f records handled at the High Court registrar on a yearly basis and the difference in the time estimated to process one record from 10 hours to 1 hour between 2007 and 2012 at the average hourly wage rate for the public sector, the expected time efficiency impact to the public o f the eGovernment application i s close to US$4.7 million.

13. Saving on operational costs. Cost savings o f around U S $ l .O mil l ion will gradually come from: (i) the result o f the new services provided per day, annualized) multiplied by the measure o f time-savings generated by the new services in the period (roughly 3 months per record handled); and (ii) the variation in the cost o f the public personnel involved in the I C T unit rising from 1 to 25 persons over the period 2007- 2012, compared to an increase o f 1 to 6 ICT staff without the eGovernment component. I t was not possible to estimate the variation in investments due to the supply o f new services over the period.

1.3. Substitutiodintegration effect

14. An extra incentive to increase productivity in the High Court Registry could be measured from deriving a substitutiodintegration effect between technology and personnel. Taking the cost

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o f innovation compared with that o f personnel, including new ICT personnel, the analysis does not show large net benefits. In fact, most o f the years the net benefit i s negative, reflecting the low degree o f efficiency in the public administration to partially substitute and partially integrate the latter with a wide implementation o f eGovernment services.

1.4. Back-officeheorganization effect

15. The reorganization effect at the High Court will capture the for need for improved service delivery in the short run. The f i rst wave o f project will focus on digitizing the records in order to bring efficiency to the courts. As in the private sector, the back-office reorganization effect i s connected to the difference between the cost o f delivering a given service and i ts perceived value. In the case o f the High Court, the cost o f delivering the service from the back office may be close to each other, but the real difference i s in the productivity. The higher paid ICT staff will be more productive. By reorganizing the production line with a more efficient I C T environment, they High Court will be processing between 20-30 percent more records than before the investment and wil l be helping to reduce the backlong in court cases-improving the overall efficiency o f the judicial.

1.5. Investment in innovation effect

16. Investments in innovation increases the general trend o f productivity. The increase in the expenditure o f hardware, software, consulting programs supporting the introduction o f eGovernment, and training programs supporting the introduction o f eGovernment captures this effect. In the case o f the High Court we use the cost o f the component and disbursed in large tranches during the f i rst couple o f years o f the program. In calculating the net benefits, i t s impact impact shows up earlier in the period and then disappears as the efficiency drivers counterbalance the initial investment costs.

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S

< I!

2

8 B

0 x 2 N

'E P &

.- e a

tl w

2. Economic model

17. components:

The economic model presented below i s a liner equation broken into five main

a. EffectivenessEfficiency Effect; b. Substitutionhtegration Effect; c. Back-Office Reorganization Effect; d. Investments in Innovation Effects; and e. Macroeconomic Effects.

2.1. Effectiveness/effciency effect

18. It i s assumed that the introduction o f eGovernment applications in the selected agencies wil l increase their supply capacity and that services produced will be demanded by users. We expect that the e-services delivered by the selected public agencies will also gain in efficiency and effectiveness. The effectiveness/efficiency effect can be broken into direct and indirect effects.

Direct Effect

19. The direct effect takes into account only the strictly internal benefits for the participating agencies, most o f which can result in very tangible financial gains. In particular, the direct effect can be attributed to the following concrete intermediate outcomes potentially yielded by eGovernment :

Costs savings: cost reduction o f the service (aggregated) or o f the single transaction in the lands ministry, the company registry, the High Court Registrar, among others; Financial resources reallocation to services o f greater social use (e.g., speedy access to information and public records); Human capital reallocation according to areas delivering services with more social value; Faster tax collection (Allocations in Aid) when services are provided in these agencies for a fee; Increased revenue coverage (i.e. emergence o f a greater number o f potential users for these services); New revenues from new premium services (e.g., from the Kenya Law Reports where there could be a potentially larger market using their records interface); and Better budget management (proxy for “financial management and business planning improved”).

20. The underlying reasoning o f the direct effect i s that eGovernment applications enable those implementing agencies to make “expenditure” productive and to manage taxes in the most efficient way. If this expenditure i s helped by eGovernment to become more “productive”, i t will then act as a multiplier o f the GDP generated by the public sector (GDP,,).

21. This direct effect can be attributed to the concrete impacts listed above (and possibly to others) and the sum o f weights and indicators associated to each one o f them will give the estimation in monetary terms o f the direct effect, which can be rendered graphically as2’:

As a formula: b’fpsd , where b ’= ratio between “direct output” and the overall output produced by 21

public sector and tpsd = variation o f the output directly produced by public sector, in period t.

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Direct Effect on Variation o f output directly F l = b * TI produced by PS in period t,

accordingly to the model

Indirect effect

22. The Indirect Effect consists o f three components: the f i rst two are related to efficiency drivers and the third one focuses instead on the effectiveness drivers. The estimation o f the indirect effect aims at gaining a monetary quantification o f all three components in relation to the “ease and convenience” accruing from more effective/efficient services to citizens and businesses, as well as to the public sector employee in their roles as users o f G2G eservices. As it will become clear, however, such quantification will be easier for the f i rst two components than the last.

23. The first two components will have to be estimated through the consideration o f the opportunity cost deriving for each category o f users from the possibility to have access to:

a. More time efficient “old public services”, (henceforth A component) where the opportunity cost i s measures by the time “saved” multiplied by the average hourly wage for each range o f users;

b. New efficient public services as a result o f back-office integration and “interoperability”(henceforth B component): created by the fusion o f one o f more stand-alone services, through ICT-driven organizational innovation. Such measures could be connected to:

Additional effects o f opportunity cost; Reorganization o f Organizational Units (OU) involved in service delivery (which represents an ex-post measure o f reorganization activity); and Investments in improving public administration’s interoperability .

24. Finally, the last component (henceforth C Component) derives from access to more effective public services, that i s to say services that by their quality should increase user satisfaction and provide them with better l i f e chances and opportunities. At least for the f i rst two cases (A and B components), a monetary measure o f the output effect can be given.

25. (A) Component: Time Eficiency. Assuming that each user group (citizens, businesses, government employees), and, more properly, each sub-set o f these groups (i.e., retired, housewives, etc.), expresses an hour- opportunity-cost (i.e., related to the average wage or income), i t i s relatively easy to give a “monetary measure” to the generated time-saving. In particular, it can be estimate as follows22:

in the number o f G2B e-services incomes for G2G e-services citizens and

Sector, in sector, in business, in

N e w Services Effect, in period t

26. This approach gives a monetary measure o f the gained or lost efficiency using an “opportunity-cost” paradigm. More precisely it estimates the increased “time efficiency” o f the services multiplying the difference between the number o f services provided in the period t (when we assume the impacts o f eGovernment i s already felt), with respect to the period t-1 (before the introduction of eGovernment), for the average wage / retribution o f the three groups. The assumption i s that if the number o f e-services provided increase, this means that public administration worked more efficiently and users had to waitluse fewer hours to receive a service they needed or simply to comply with an administrative requirement. The increase in the number o f services provided in a given period t could actually mean, not only that public administrations speedily processed files opened in that given period, but also that they were able to process f i les cumulated in the previous period. T h i s could become a virtuous cycle leading to time compression in f i le processing with tangible benefits for users. T h i s time efficiency effect can also be considered a proxy measure o f Administrative Burden Reduction.

27. (B) Component: New services. A measure could also be given to time saved through the use o f new services, generated by the mix o f two or more old ones. In this sense, while a simple increase in the speed o f a service i s taken into account by the A Component, this second component considers just new services delivery and takes into account interoperability and back- office integration among different un i ts o f public administrations (for instance, transactional services which involve more than one office o f the same municipality). The contribution o f these new services can be quantified and given a monetary value in the same way as for the previous one, as an additional “time-saving” effect for the users’ group. Although further investigation i s needed to avoid duplications, for the moment, the final outcome o f this effect can be expressed as:

Number o f Measure o f Variation in the number o f Variation o f the new e- time-savings personnel involved in the investment, due

- - services * generated by + organization units which + to the supply o f provided in new services in supply new ICT-driven new services in

period t period t services in period t period t

28. The monetary translation mechanism remains the same as the one used for measuring the previous A Component. On the other hand, the variation in the number o f employees working in organizational un i ts involved in the provision o f new services provides a measure o f reorganisation in those areas which deliver new services, or in other words a proxy calculation o f

= Ratio between efficiency effect and the overall output produced by the public sector = Variation in the eMiciency o f the public sector, in period t = Increase/decrease in the number o f G2B e-services provided in period t = Increase/decrease in the number o f G2C e-services provided in period t = Increase/decrease in the number o f G2G e-services provided in period t = Average wagelyearly incomes for the business sector, in period t = Average wagelyearly incomes for citizens, in period t = Average measure o f yearly incomes both for citizens and business, in period t

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changes in human resources allocated to new interoperable services. Finally at the right end side o f the “graphic equation” it i s added the variation in investments necessary for the effective delivery of these “new services”. Also this new services effect can be considered a proxy measure o f Administrative Burden Reduction23.

29. (C) Component: Effectiveness Effect. Finally the services’ effectiveness measurement - a mostly qualitative item - represents, at the same time, the biggest technical challenge for this model and an element to which an eGovernment impact assessment cannot renounce. I t i s probably obvious to observe that more timely efficient and new services do not by themselves ensure that user needs are met and that user and general social value are increased. Th is latter two results depend also on more intangible sides o f quality and on whether services are really needed and relevant by a given user group in a given territory.

30. Moreover, the services generating the impacts estimated so far by the f i rs t two components, refer mostly to the so called general collective public administration services. These services reflect government administration of, and reactions to, market and social processes, or to put it differently how the government facilitate or hinder the basic l i fe events o f a citizen or o f a business within society: changing residence, registering a business, complying with taxes, transferring properties, requesting certificates, registering for obtaining basic welfare coverage, and so on. Naturally contributing to a more efficient provision o f these services would be already an outstanding result for eGovernment. Reducing the time wasted by citizens and businesses to get these services and/or comply with public administration mandatory requirements i s a public value. Yet, if the public sector must proactively contribute to the well being o f society, there are other more suitable services that i t should provide especially to citizens. These services reflect the quality o f the interaction between fiscal policies and the market process and the influence on individual opportunities this has. They are “process” or “opportunity” indicators. To put it in simple words, the question i s how government uses resources gathered through taxation to increase the l i f e chances and opportunities o f individuals through, health, education, vocational training and other services aimed at increasing the capability o f individuals to find a job. H o w eGovernment contributes to the provision o f opportunities i s much harder to evaluate and measure. In light o f these considerations, below we limit ourselves to a very preliminary reasoning on a number o f steps that would be needed to extract from qualitative analysis and subjective judgement, as well as from available socio-economic statistics, some parameters to be further manipulated and quantified and finally inserted into an equation. To proceed further one would have to carry out: a) focus-group identifying eGovernment services considered effective and desired; b) monetary estimate o f the contribution o f the above identified services on local environment in terms o f impact on local GDP, but also on health, education, employment, and social inclusion indicators. Once the above i s taken care of, then the (C) Component in the model wil l take into account also: a) the existence o f these services on the local level: i f presents, the contribution in terms o f greater GDP attainable should be estimated; b) the use o f socio-economic indicators derived from officially compiled statistics as an external measure or “weight” o f

23 b”’pS,,, Pl)’ps*, = Pr,, * ts + AUO., f AIns , where

b “‘ PS, ns p l l l

prns ts AU0.s

N n s

= Ratio between new services effect and the overall output generated by public sector = New services effect, in period t = Number o f new e-services provided in period t = Measure o f time-savings generated by new services in period t = Variation in the number o f personnel involved in the organization uni ts which supply

= Variation o f the investment, due to the supply o f new services in period t

PS, ns

new ICT-driven services in period t

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services to identify their degree o f effectiveness. Further effort i s therefore needed to translate qualitative expressions into monetary ones24,

3 1. In conclusion, the EfficiencyEffectiveness Effect (direct and indirect effects) can be presented as follows25:

Component A Component B Component C

in period t in period t in period t Output) in period t

2.2. Substitutiodintegration effect

32. In presence o f an increase o f public sector role and function, measured by the various components o f the EfficiencyEffectiveness Effect discussed earlier, an extra incentive to the increase o f i t s total productivity can derive also from the SubstitutionDntegration between technology and personnel. When the cost o f innovation compared with that o f personnel decreases, it can be efficient for public administration to partially substitute and partially integrate the latter with a wide implementation o f eGovernment services.

33. The wages. For the model purposes, it i s relevant to find a measure for wages variation o f those organisational unit / subset o f public employees “sensitive” to eGovernment projects. The term “sensitive” refers not only to those sectors which have already experienced eGovernment procedures, but also to those which would do so in the future. As eGovernment tends to involve the whole public body, the whole set o f compensations could perhaps be “weighted” for the relevance o f each category in the eGovernment project’s development. This issue needs o f course - - further analysis.

34. For the moment, however,

Variation of the wages o f the public sector, during n predetermined periods o f time, with specific reference to those areas involved with the supply o f e-Government services

t i s possible to illustrate wage variation as follows:

- -

in the i organisational unit already involved in the provision o f e-Services in developing e-

35. Where the left end side o f the “graphic equation” derives from a weighted average o f the growth o f the wages, experienced in the t-n period, for the subset o f public employees involved

24 I t might be useful in assessing the C Component as the perceived value o f use o f a set o f e-services with respect to non-ICT-driven services in period t. f””p~,$ = effectiveness effect in period t.

f PS

f PSd E,,

25 by,, = b’ E,, PSd + b “ , q Y P S , & + b’”ps,ns p ‘ p S , n s + b“ “ , t . f t ~ “ P S , $ where, = Variation o f the output produced by the public sector, in period t = Variation o f the output directly produced by the public sector, in period t = Variation in the efficiency o f the public sector, in period t PS.&

PS,ns = N e w services effect, in period t f””ps.t.ft = Effectiveness Effect in period t

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or to be involved in the eGovernment process.26 This i s reflected both in the weighting factors Ki, which estimates the importance o f these employees in developing eGovernment, and in the use o f a subset o f employees as denominator.

36. The price o f the innovation. T h i s component tr ies to evaluate the role o f an increase/decrease in the average costs public administrations face when they want to acquire a new technology. However, technology i s not the only aspect to be considered in the eGovernment adoption process. Actually, at least four components have to be taken into account:

The increase in the average cost o f hardware2’;

The increase in the average cost o f software2*;

The increase in the average cost o f consulting interventions supporting the introduction o f eG~vernmen?~; and

The increase in the average cost of training programs supporting the introduction of eGovernment3’.

37. For the moment, i t i s possible to define the increase in the “Price o f eGovernment implementation”, with the variables expressed in terms o f variation in the average cost, as follows3‘:

Variation in the average price o f the overall investment needed to set up eGovenunent programs in n pre-determined periods of time

increase in the average cost

38. At f irst instance, i t i s possible to affirm that an increasing wages/innovation prices ratio tends to lead to a productivity growth. As a consequence, the Substitution / Integration Effect between Technologies and Personnel can be represented as follows32:

Y

N * PS t-in , where Variation o f the wages o f the public sector, during j bargaining periods cj>2), wi th specific reference to those areas inolved in the supply o f eGovernment services Variation o f the wages o f the public sector, during j bargaining periods 6>2), in the ith organizational unit involved in the supply o f eGovernment services Weighting factor, which estimates the importance o f the employees o f OUs already involved in the provision o f e-services in developing eGovernment Number o f public sector employees working in operating u n i t s already involved in the provision o f eServices in developing eGovernment

27 Shw.1-n = increase in the average cost o f harware

28 S,w,t.n = increase in the average cost o f software

29 S , t - n = increase in the avg. cost o f consulting interventions supporting eGovernment

30 Stp, t -n = increase in the average cost o f training programs supporting eGovernment

31 $egou,t-n = $hw,r-n + ssw,t-n f s w , i - n + $tp,t-n ] , where ,!f?egou,t-n = Variation in the average price o f the overall investment needed to set up eGovernment

programs in n pre-determined periods o f time 32 [ w p s , t - j n - period t

egou~t-n 1 where c = ratio between substitutiodintegration effect and GDP increase in

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Contribution o f

Public Sector labor productivity increase in period t

2.3. Back-office/reorganiation effect

39. The reorganization effect o f eGovernment i s due for the main part to the need o f Organizational Units and areas involved in service delivery to cope with users’ demands in the short run. This i s particularly true for eGovernment, where the f i rst wave o f project focused on speedily bringing online services (without back-office reorganization) were not delivering any real impact. Even this effect can be attributed to the “efficiency” value driver and i t s measurement i s ex-ante: the variation o f productivity i s not tied to the change in human resources involved in service delivery through eGovernment applications, but to the drivers o f back-office reorganization. As in the private sector, the back-office reorganization effect i s connected to the difference between the cost o f delivering a given service and i t s perceived value. If this cost grows disproportionately with respect to the perceived value, i t will be the case to modify the delivery organization influencing by this way the general productivity. For what concerns the measurement o f variation in labor costs, i t i s possible to adopt the same approach o f the private sector. In particular, in the short run, if labor costs per unit o f product (defined as L=W/?r, namely wages on labor productivity) increases more than prices, enterprises will receive an immediate stimulus to change the organization scheme o f production. This i s a short-run effect, which works when enterprises do not have time to make investments to increase their competitiveness. By reorganizing the production line, or other specific factors, in fact, they tend to reach a competitive growth in the short term. With specific reference to public sector, we define33:

Variation o f the labor cost in the public sector El in the period t

40. Hence, while the measurement o f variations in labour costs does not present any particular problem, the difficulty i s that there i s not any “price” o f product for public sector to consider. Users in general do not pay for a specific public service and, if it happens, it i s usually only a part o f the production cost. It i s the overall contribution (the indirect taxation), indeed, that covers the expenditures public agencies make when providing all their services. Moreover, a growth or a decrease in taxation does not represent an incentive for public administration to increase / decrease i ts productivity, as it does not follow a profit-oriented approach. Consequently, the “Back-Office Reengineering effect” can be described as follows34:

Average wage in the public sector in i the period t

Productivity in the public sector in the I period t

=

33

L PS,t = WPSJ - npsst , where

L , , = Unit labor cost in the public sector, with reference to those Organizational Uni ts

W , , = Avarege wage in the public sector in the period t nps,t = Productivity in the public sector in the period t

involved with the supply o f eGovernment services in period t

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productivity increase in period t

41. Concluding, i t i s possible to affirm that the reorganization effort in the administrative Operative Units manifests itself in case o f increases in the unit cost o f labour, or in the Average Social Cost o f Use, or even in the Average Social Value o f Use with respect to the spread o f Perceived Value. This happens because users perceive a value augmentation o f services delivered, especially if supported by ICT-driven policies, or because the users’ social costs o f obtaining them grow.

2.4. Investment in innovation effect3’

42. Investments in innovation can be ascribed to the “efficiency” value driver. In particular, the purpose o f this measurement i s to analyze the role o f investment in the increasing and in the general trend o f productivity. The characteristic element o f this component i s the consideration o f ICT investments, but also o f their related aspects: organization consulting, training, hardware, software, etc. This effect regards investments, realized by both private and public research centers, to produce small or large innovations. The impact o f such innovations (as new innovations replace the older ones) generate an increases in productivity, after a lag time. This effect can be easily measured. It i s possible to use the four categories o f expenditure previously used to measure the SubstitutiodIntegration effect, even if in this case the absolute value o f expenditures has to be considered, and not just the average cost per category. Consequently, by introducing the following items: (i) the increase in the expenditure in hardware36; (ii)the increase in the expenditure in software3’; (iii) the increase in the expenditure in consulting programs supporting the introduction o f eG~vernmen t~~ ; and (iv) the increase in the expenditure in training programs supporting the introduction o f eG~vernmen t~~ . The Schumpeter’s effect can be thus described as follows4o:

Increase in the expenditure in + Increase in the expenditure in + Increase in the expenditure in + Increase in the expenditure in VI= e ” [-.;.. 111111111*110111 m] 43. I t s impact on public sector productivity can be observed in the long-run.

ASCU,., = Variation in average social cost o f use for services, in period t-I ASVU, = Variation in average social value o f use for services, in period t

8 h , , . , , = Increase in the expenditure in hardware in period t-jn 8,,,, = Increase in the expenditure in software in period t-jn

I?,,.,, = Increase in the expenditure in consulting in period t-jn I? a,.,n = Increase in the expenditure in training in period t-jn

35 (eIt-jJ = Contribution o f investment innovation, in period t 36

37

38

39

40 e [ EhYf.Jn + B , I ~ J n + ECp,,gn + E , l $ n ]

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2.5. Macroeconomic effects 44. particular, some aspects have to be considered:

Take up can be considered as an amplifier and enabling condition for eGovernment. In

0

0

0

45. In

The technological scenario. In case o f increasing trends in delivering ICT-based products and services, users should demand more ICT-based public services. Th is does not reflect only on the delivery channel, but also on the time o f delivery.

The existence o f private competitor services. An increase in the delivery o f some kind o f public service through e-GSP (eGovernment Service Providers) could induce an increase in the direct or indirect efforts o f public sector for providing services in a better and speeder way; and

The general education level. With reference both to the personnel o f public sector and to the entire population, some links should appear between the general level o f education and the push to provide more knowledge-based services, via eGovement programs.

this way, the more the social environment i s “receptive” (because o f a wide ICT diffusion, for instance, or because o f a broad, deep-rooted use o f e-services the more the increase in public sector productivity can be observed). In particular, this happens for two reasons:

The push to innovation exerted by community on public sector (the more innovative processes are used on every-day life, the more they wil l be demanded); and

The high level o f ICT literacy o f civi l servants, as well as o f users, which incentives the use o f advanced services.

For the moment, we define the overall equation for other macroeconomic effects linked 46. to take up as follows41:

47. Hence, the final equation for the productivity in the public sector will be the following:

&S,t = bfps + c [ FPpS.,-jn - &ov,m 3 + d [ I:,,, + ASCUt.1 + ASVU, ] +

e [ B,,,,, + B,,,, + B , , , , + Elp.r,n 1 + f ( h t + i s + I :g

48. overall GDP growth, as explained in the opening paragraph.

Summing up al l the effects on the public sector productivity and, indirectly, on the

B. Economic analysis o f the connectivity component

49. In the case o f Kenya, there will be no direct IDA financing for national backbone infrastructure as there are already several market players competing to roll-out an extensive national backbone. The project i s financing international capacity purchase schemes to (i) lower

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the cost o f access to capacity for targeted users; and (ii) increase the viability o f international infrastructure initiatives.

Lowering the cost of access to capacity for targeted users

50. colleges, the Government and the Business Process Outsourcing industry.

The project will allow the purchase o f international capacity for universities and technical

5 1. This i s aimed at providing access to broadband capacity for (i) universities and technical colleges and government users ahead o f and after the arrival o f submarine connectivity; and (ii) for the local Business Process Outsourcing industry to allow them to buy communications input at same price level as competitors in other countries ahead o f the arrival o f submarine connectivity.

52. The project will contribute to close the connectivity gap between Kenyan universities and universities o f the Northern hemisphere, allowing Kenyan students, researchers, and academics to have access to the same quality information input and tools as their peers elsewhere.

53. Access to ICT can help developing countries overcome inefficiencies in trade promotion, logistics, and customs services to become more competitive and integrated in the international trading system. The implementation o f RCIP wil l have a transforming impact on regional communications traffic, which in turn will have an important impact on regional and global trade and overall economic integration o f the participating countries and the whole region.

54. The economic benefits o f the implementation o f the program can be demonstrated by the increase o f regional and international trade transactions and thus o f the volume o f foreign trade through the following channels: . Fink, Mattoo, and Neagu (2002)42 find that a lO%decrease in the bilateral price o f phone calls

i s associated with an 8% increase in bilateral trade; and . Freund and Weinhold (2000)43 find that a 10% increase in the relative number o f web hosts in a country i s associated with and increased trade flows by 1%.

55. More specifically, in the case o f Business Process Outsourcing industry, the telecommunication input i s a critical component o f i t s cost structure. For the BPO industry the gains which can be realized from a decrease in the cost o f capacity are l ikely to be higher than the ones observed by Fink et a1 across the whole economy. For instance, i t i s estimated that bringing the cost o f international capacity to the level o f competing destinations (a cost reduction o f 80%) would allow the industry workforce and output to grow by over 200% over 6 months.

42 Carsten Fink, Aaditya Mattoo, Ileana Cristina Neagu, 2002. Assessing the Impact o f Communication Costs on International Trade, Policy Research Working Paper #2929, The World Bank: Washington, D C 43 Caroline L. Freund & Diana Weinhold, 2000. On the effect o f the Internet on international trade, International Finance Discussion Papers 693, Board o f Governors o f the Federal Reserve System, US.

106

Increasing the viability of international infrastructure initiatives

56. The Detailed Feasibility Study for the EASSy project argued that for the long te rm economic viability o f EASSy (and o f any other major submarine fiber cable connecting the region to the rest o f the world), it i s extremely important that African counties develop their domestic and regional network infrastructure as quickly as possible to meet the expected growth o f demand for Internet traffic, which i s likely to be substantial. In Kenya this infrastructure i s already being rolled-out. To ensure the viability o f the whole infrastructure system it i s important to stimulate their additional usage by the public administration and citizens through the support o f subsidizing internet access and usage by educational institutions, and development and implementation o f e- Government applications,

57. In this context, TCIP’s components were designed as an integrated and interlinked program to ensure long term economic viability o f the infrastructure, to maximize the development impact o f the investments, and to enable the init ial investment costs to be recovered.

58. The capacity purchase schemes will support these targeted user groups to access cheaper capacity and therefore allow them to grow their consumption in line with their actual demand (currently constrained by the prohibitive cost o f capacity).

59. Financing capacity purchase before the arrival o f the new submarine infrastructure has the effect o f boosting capacity volumes. When the new submarine infrastructure becomes available, th is already realized capacity demand will immediately switch to submarine cable connectivity which will produce higher cash-flows in the crucial “make or break” early years of these large scale investments.

107

Annex 10: Communication Action Plan for TCIP

Regional Communications Infrastructure Program (RCIP) Kenya Transparency and Communications Infrastructure Project (TCIP/CIP 1)

radio, newspapers, billoards, buses etc. Translation o f information materials into Kis wahili

Demo CDsDVDs to be played in queuelwaiting areas o f government

.

. Step-by-step information leaflets

Key Communications Success Factors, Proposed Activities and Cost Estimate

Communications budget = US$ 1 mil l ion over 5 years.

offices Dedicated email account and distribution l i s t s

Relevant trainings (e.g., writing, media training etc.)

Media briefings and progress update Fact sheets wi th statistics on service

.

.

. .

Dedicated communications staff andor consultant

US$lO,OOO

US$lOO,OOO

US$50,000

Proactive engagement o f C iv i l Society Organisations (consumer groups, NGOs, faith-based organizations, ICT-interest groups etc.) Timely disclosure o f key documents (such as environmental and social frameworks)

Internal change management

Marketing and promotion o f new eGovernment applications and Digital Villages

Channeling and responding to public feedback, questions and suggestions Capacity building o f communications staff and key project spokespersons Media outreach

Miscellaneous

making groups

Public website specific to project Liaising wi th World Bank’s Public Information Center staff Newspaper advertisements . Dissemination o f documents through channels such as chief o f villages . Workshopsltraining . Information leaflets

. us$10,000

108

Annex 11: Statement of Loans and Credits for Kenya

Project ID FY Purpose

Difference between expected and actual

disbursements Original Amount in US$ Millions

IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

PO87479 2007 KE-Edu Sec Sup Project (FY07) 0.00 80.00 0.00 0.00 0.00 81.42 0.00 0.00 PO90567 2006 KE-Inst Reform & C B T A (FY06) 0.00 25.00 0.00 0.00 0.00 21.96 6.46 0.00 PO72981 2005 KE-GEF W KE Int ECOSYS M w t SIL 0.00 0.00 0.00 4.10 0.00 3.22 0.83 0.00

PO83131 2005 KE-Energy Sec Recovery Prj (FY05) 0.00 80.00 0.00 0.00 0.00 77.57 33.13 0.20

PO85007 2005 MSME Competitiveness 0.00 22.00 0.00 0.00 0.00 19.68 9.04 0.00 PO49618 2004 =-Nairobi Wtr & Swg Inst Rst SIL 0.00 15.00 0.00 0.00 0.00 7.89 5.90 0.00

PO82615 2004 KE-Northern Corridor Tmsprt SIL (FY04) 0.00 207.00 0.00 0.00 0.00 191.36 79.49 0.00 PO82396 2004 KE-Agricultural Productivity Prj (FY04) 0.00 27.00 0.00 0.00 0.00 15.45 6.95 0.00

PO78209 2004 KE-Dev Learning Centre LIL (FY04) 0.00 2.70 0.00 0.00 0.00 2.09 1.02 0.00 PO82378 2003 KE-Free Primary Edu Supt (FY03) 0.00 50.00 0.00 0.00 0.00 0.19 -2.28 0.00

PO78058 2003 KE-Arid Lands 2 SIL (FY03) 0.00 120.00 0.00 0.00 0.00 81.62 -10.04 0.00

PO70718 2001 Regional Trade Fac. Proj. -Kenya 0.00 25.00 0.00 0.00 0.00 14.79 12.39 0.00

( ~ ~ 0 5 )

PO83250 2005 KE-Financial & Legal Sec T A (FY05) 0.00 18.00 0.00 0.00 0.00 16.33 3.01 1.60

(FY04)

PO66486 2001 KE-Decentr Reprod Hlth & HIV/AIDS 0.00 50.00 0.00 0.00 0.00 27.66 22.02 23.98

Total: 0.00 721.70 0.00 4.10 0.00 561.23 167.92 25.78

(FYOl)

109

KENYA STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions o f U S Dollars

Committed Disbursed

FY Approval Company

IFC IFC

Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2000 1997 1997 2000 1998 2000 1997 2005 1982

2001 2005

1994 1996 1999 2006 2005 2000 2004 2005 1994 1996 2006 1972 2000

AEF AAA Growers

AEF Ceres

AEF Deras Ltd.

AEF Lesiolo

AEF Locland

AEF Magana

AEF Redhill Flrs

BARCLAYS B K KEN Diamond Trust

GTFP Barclays Ke GTFP I & M BANK

Gapco Kenya

IM Bank

IPS(K)-Allpack IPS(K)-Frigoken

IPS(K)-Prem Food

Intl Hotels-Ken

K-Rep Bank

K-Rep Bank

Kingdom Hotel

Kongoni

Mabati

Magadi Soda Co.

Magadi Soda Co.

Panafiican

Panafrican

Panari Center

TPS EA Ltd.

Tsavo Power

0.18 0.00 0.93 0.00

1 .oo 0.00 2.50 0.00 0.08 0.00 0.60 0.00

0.28 0.00 10.00 0.00 0.00 0.80 14.31 0.00 2.71 0.00 12.78 0.00

3.00 0.00 0.00 0.36 0.00 0.06 0.00 0.11 0.86 0.00 0.00 1 .oo 0.00 0.43 20.00 0.00 1.96 0.00 2.50 0.00 22.00 0.00 2.50 0.00 10.28 0.00 15.55 0.00 6.30 0.00

0.00 0.04 9.91 0.83

0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 4.50 4.00 0.00 0.00 0.00 1 .oo 2.20

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.85 13.91

0.18 0.93 1 .oo 2.50 0.08 0.60 0.28 0.00 0.00

14.31 2.71 7.78 3.00 0.00 0.00 0.00 0.86 0.00 0.00 0.00 1.96 2.50

18.90 0.57

10.28 15.55 0.00 0.00 9.91

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.80 0.00

0.00 0.00 0.00 0.36 0.06 0.1 1 0.00

1 .oo 0.12 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04 0.83

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00

0.00 0.00 4.50 4.00 0.00 0.00 0.00 0.00

2.20

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.85 13.91

Total portfolio: 140.23 3.63 12.55 13.91 93.90 3.32 11.55 13.91

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

2006 Greenlands 0.00 0.00 0.00 0.00 2005 Barclays-Ken ya 0.01 0.00 0.00 0.00 2006 Adv Bio-Extracts 0.01 0.00 0.00 0.00

Total pending commitment: 0.02 0.00 0.00 0.00

110

Annex 12: Country at a Glance

Regional Communications Infrastructure Program (RCIP) Kenya Transparency and Communications Infrastructure Project (TCIPKIP 1)

Key Deve lopment Ind lca tors

(2005)

Population, mid-year (millions) Surface area (thousand sq. km) Population growth (%) Urban population (%of total population)

GNl(Atla6 method.US$ billions) GNIpercapita(Atlas method,US$) GNIpercapita (PPP, international $)

GDP growth (%) GDP per capita growth (%)

(most r e c e n t estlmato, 2000-2005)

Povertyheadcount ratioat $laday(PPP,%) Povertyheadcount ratio at $2a day(PPP,%) Life expectancyat birth (years) Infant mortality(per 1000 live births) Child malnutrition (%of children under 5)

Adult Ilteracy, male (%of ages 15 and older) Adult literacy, female (%of ages 15 and older) Gross primaryenrollment, male (%of age group) Gross primaryenrollment,female (%of age group)

Access to animprovedwatarsource (%of population) Access to improved sanitation facilities (%of population)

Kenya

34.3 500 2.3 42

8.0 530 1770

2.8 0 A

23 a

50 ‘ 48 79 20

78 70 1yI D8

02 40

Sub- Saharan

Africa

741 24,205

2.1 37

552 745 1901

5.3 3.1

44 75 40 DO 29

E39 87

58 30

LO w income

2,353 28,205

10 31

1364 580

2,488

7.5 5.6

59 00 39

73 50 la 99

75 35

N e t A l d F lowa

(US$ millions) Net ODA and official aid Top Jdonors (in 2004):

United States Japan United Kingdom

Aid (%of GNI) Aid par capita (US$)

Long-Term E c o n o m l c Trends

Consumer prices (annual %change) Implicit GDP deflator(annua1 %change)

Exchange rate (annual average, local per US$) Terms of trade index ($, 2000 = DO)

Population. mid-year (millions) GDP (US$ millions)

Agriculture Industry

Services

Household final consumption expenditure General gov’t final consumption expenditure Gross capital formation

Exports of goods and services Imports of goods and services Gross savings

Manufacturing

1980

397

38 27 39

5.0 24

D.9 9.0

7.4 77

8 . 3 7.205

32.0 20.0 0 .0

40.6

02.1 8 .8

24.5

29.5 35.9 15.4

1990 2000

1 8 6 5 P

85 40 93 67 07 73

16.4 4.1 51 l7

17.8 D.0 D .0 0.1

22.9 702 04 DO

23.4 30.7 8,591 9,705 (%ofGDP) 29.5 32.4 8.0 8 .g

514 50.7

02.0 75.5 8.8 15.1

242 l7 A

25.7 210 3 13 29.0 8.0 152

n 7 n 0

2005

035

#I 71 46

4.0 8

D.3 3.7

75.6 92

34.3 l7.977

27.4 l7.0 P A

54.9

09.0

25.4

24.7 30.9 23.0

n o

A g o dlstr lbut lon, 2005

Male 75r

80-84

15-48

50-34

15-19

c-4

20 10 0 10 20

P€TC(nl

Under-5 m o r t a l l t y r a t e (per 1,000)

200

150

100

50

0 1880 1885 2000 2004

0 Kmye rn Sub-Saharan Afrlca

Growth o f G D P and G D P per Capita (%)

1980-90 1990-2000 2000-05 (average annualgmuth %j 3.6 2.7 2 2 4 2 2 2 2.0

3.3 19 10 3.9 12 3.3 4.9 13 2.5 4.9 3 2 3 .O

4.5 3.0 3 .O 2.6 0.9 19 0.4 0.1 3 .O

4 A 10 5.0 1s g A 5.1

0 A 5.2 -3 2

Note. Figures in italics are for years other than those specified. 2005 data are preliminaryastimates. ..indicates data are not available. a.Countrypovertyestimateisfor 897. b.Aiddata arefor2004.

Development Economics, Development Data Group (DECDG)

111

Ken vz

Balance o f Payments and Trade

(US$ millions) Total merchandiseexports (fob) Total merchandise imports (cif) Net trade in goods and SeNICeS

Workers’ remittances and compensation of employees (receipts)

Current account balance as a %of GDP

Reserves. including gold

Cent ra l Government Finance

(%of GDP) Revenue

Expense

Cash surplus/deficlt

Highest marginal taxrate (%)

Tax revenue

Individual corporate

External D e b t and Resource F lows

(US$ millions) Total debt outstanding and disbursed Total debt service HlPCand MDRldebt relief (expected:flow)

Total debt (%of GDP) Total debt service (%of exports)

Foreign direct investment (net inflows) Portfolio equlty(net inflows)

~~

2000

1773 3.033 -10s

538

-284 -2.2

897

22.8 8.8 8 .5

2.1

30 30

8,145 591 -

48.4 212

ffl -8

2005

2,820 5.085 -1729

484

-1073 -8.0

2.043

S. 6 7 . 2

20.6

-2.4

30 30

6.826 364 - 42.4

6.5

46 3

C o m p o s l t l o n o f t o t a l external debt. 2004

1.1.r.1.544 US16~lllOrm

Pr lva te S e c t o r Deve lopment 2 0 0 0 2005

Time required to start a business (days) - 54 Cost to starta business (%of GNIpercaplta) - 48.2 Time required to register property(days) - 73

Ranked as a major constraint to buslness (%of managers surveyed M o agreed)

Corruption - 73.8 Cost of financing - 73.3

Stock market capitalization (%of GDP) 0.1 24.2 Bank branches (per 00,000 people) .. 14

iovernanca Indlcators, 2000 and 2004

Volcemd accountability

Political stability

Regulatory quality

Rule of law

Control of corruption

0 25 50 75 I00

2004 0 2000 higher valuerlmply bettornllmgs

Countws p(~cm111e rank (0.130)

OurOB K . ~ f m ~ ~ ~ . K ~ ~ ~ ~ . M ~ a r U L i l . ~ r l d 8 ~ n k

Technology and Infrastructure

Paved roads (%of total) Fixed llne and mobile phone

High technologyexports subscribers (per 1000 people)

(%of manufactured exports)

Envlronment

Agricultural land (%of land area) Forest area (%of land area, 2000 and 2005) Nationally protected areas (%of land area)

Freshwater resources per capita (cu. meters) Freshwaterwithdrawal (%of internal resources)

CO2 emissions par capita (mt)

GDP perunit of energyuse (2OOOPPP $ perkgofoilequivalent)

Energyuse per capita (kg of 0 1 1 equlvalent)

2000

Q.1

n

3.9

48 8.3

646 7.6

0.31

2.0

507

2004

85

3.1

44 8.2 8.0

8 8

0.22

2.1

494

(US$ millions)

IBRD Total debt outstanding and disbursed Disbursements Principal repayments Interest payments

IDA Total debt outstanding and disbursed Disbursements Total debt service

IFC (fiscalpar) Total disbursed and outstanding portfollo

Disbursements for IFC own account Portfolio sales.prepayments and

repaynents for IFC own account

of vhich IFC ownaccount

M IGA Gross emosure

47 0

40 7

2282 ff0 45

99 99 40

n

42

1 0 5 0

2.882 78 73

0 5 87 n

a

49 New guarantees 37 0

Note: Figures in italics are for years other than those specified. 2005 data are preliminaryestimates. ..indicates data are not available. -indicates observation is not applicable.

Draft ff - 8/8/08

Development Economics, Development Data Group (DECDG)

112

%BO ZBBB ZDOQ 2006 33.5 22 8

52 0 6 0 23 21 20

e7 t t4 .p17 m e4 72 77 7% 7% 63 T5 73

Goal 7 : halve tho proportton o f peapi# without ~ ~ ~ ~ ~ l n a b l e BCCBG6 to bBs1C nQ0dS CCBW to an impfov 45 62 GCBSS t# impfoved 42 48

6 5 6 3 6 2

0 2 0 3 0 3 62 0 PPP $ ptrr x;$ of oil equrv 2 2 22 2 0 21

8 0

:T indicators (par t,000 people)

w i

113

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ChalbiChalbiDeserDeser tt

NNggaannggeerraabbeell iiPP llaaiinn

BBii lleesshhaa PPllaaiinn

DDaanniissssaa

HHii ll llss

Mt. KenyaMt. Kenya(5,199 m)(5,199 m)

E A S T E R NE A S T E R N

R I F T VR I F T VA L L E YA L L E Y

C O A S TC O A S T

N O RN O R T HT HE A S T E R NE A S T E R N

N YN YA N Z AA N Z AKarunguKarungu

LodwarLodwar

LokicharLokichar

KangatetKangatet

KitaleKitale

EldoretEldoret

ButereButere NyahururuNyahururuFallsFalls

KerichoKericho

NarokNarokLolgorienLolgorien

MagadiMagadi

NamangaNamanga

KonzaKonzaMachakosMachakos

KibweziKibwezi

VVolol

TTsavosavo

KwaleKwale

GarsenGarsen

BodheiBodhei

KolbioKolbioBuraBura

NguniNguni

IkuthaIkutha

KituiKitui

MackinnonMackinnonParkPark

LokichokioLokichokio

KarunguKarungu

KakumaKakuma

EmbuEmbu

NanyukiNanyuki

ThikaThika

GilgilGilgil

MbalambalaMbalambala

Garba Garba TTulaula

MandoMandoGashiGashi

WWajirajir

El WEl Wakak

TTarbajarbaj

RamuRamu

BunaBuna

MoyaleMoyaleSololoSololo

MarsabitMarsabit

NorNorth Horrth Horr

South HorrSouth Horr

MaralalMaralalKapedoKapedo

MarigatMarigat

ArcherArcher’’ssPostPost

IsioloIsiolo

ManderaMandera

KisumuKisumuNakuruNakuru

GarissaGarissaNyeriNyeri

KakamegaKakamega

NAIROBINAIROBI

CENTRALCENTRAL

WESTERNWESTERN

CENTRAL

E A S T E R N

R I F T VA L L E Y

C O A S T

N O R T HE A S T E R N

N YA N Z A

WESTERN

Karungu

Lodwar

Lokichar

Kangatet

Kitale

Eldoret

Butere NyahururuFalls

Kericho

NarokLolgorien

Magadi

Namanga

KonzaMachakos

Kibwezi

Vol

Tsavo

Kwale

Shimoni

Malindi

Garsen Lamu

Bodhei

KolbioBura

Nguni

Ikutha

Kitui

MackinnonPark

Lokichokio

Karungu

Kakuma

Embu

Nanyuki

Thika

Gilgil

Mbalambala

Garba Tula

MandoGashi

Wajir

El Wak

Tarbaj

Ramu

Buna

MoyaleSololo

Marsabit

North Horr

South Horr

MaralalKapedo

Marigat

Archer’sPost

Isiolo

Mandera

KisumuNakuru

Garissa

Mombasa

Nyeri

Kakamega

NAIROBI

E T H I O P I A

SOMALIA

TANZANIA

UGANDA

SUDAN

Ng’iro

Milg

is

Suam

Turk

wel

Tana

Mara

Galana

Athi

Ewaso

Thua

Tsavo

Lak Bor

Loga Bogal

Lak Dera

INDIANOCEAN

Lake

Victor ia

LakeTurkana

To Murle

To Juba

To Dila

To Imi

To Kismaayo

To Bur Gavo

To Dar Es Salaam

To Moshi

To Arusha

To Seronera

To Musoma

To Kampala

To Mbale

Yat ta P lateau

NdotoMtns.

Lot ik ip i P lain

Mau Escarpment

CheranganyHi l l s

ChalbiDeser t

Ngangerabel iP la in

Bi lesha Plain

Danissa

Hi l ls

Mt. Kenya(5,199 m)

34°E 36°E 38°E 40°E 42°E

34°E 36°E 38°E 40°E

2°S

0°

2°N

4°N

4°S

2°S

0°

2°N

4°N

KENYA

0 40 80 160120

0 40 80 120 Miles

200 Kilometers

IBRD 33426

NOVEMBER 2004

KENYASELECTED CITIES AND TOWNS

PROVINCE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endorsemen t or a c c e p t a n c e o f s u c h boundaries.