FSM TC&I says that agreements proceeding for World Bank funding of FSM fiber optic project

By Bill Jaynes
The Kaselehlie Press
November 1, 2017
FSM—World Bank funding is not yet secured for the FSM fiber-optic cable project, but according to a memo from the FSM Department of Transportation, Communication & Infrastructure (TC&I) and FSM Senator Esmond Moses, at least some of the World Bank funding could be in place by the end of the year. The FSM stills needs to cover several details but Moses says all parties are working together and most of those details should be in place by then.
The fiber optic cables have already landed in Chuuk, and Yap. Since then rumors have circulated that the company that handled the laying of the cable was suing the FSM for payment for its services and product since the funding is not yet in place. Senator Moses says that is not true. He said that in fact, the representatives of the company were surprised and thrilled during President Christian’s recent State Visit to Japan when the FSM made an $8.5 million payment on the bill from locally held funds. He says those funds will be reimbursed when World Bank disbursement conditions have been met.

The memo from TC&I said that department “with generous support from the Department of Justice, the Department of Finance and Administration, FSM Telecommunications Corporation (FSMTC), and the FSM Telecommunications Cable Corporation (FSMTCC) can report significant progress towards meeting the project disbursement conditions since its last briefing to Congress during the September Special Session.”
It says that TC&I has identified the two most critical actions necessary for meeting those conditions. Once of the tasks is hiring the Open Access Entity (OAE also known as FSMTCC) CEO so that the CEO than take necessary actions to “operationalize” the OAE. Also remaining to be done is the completion of arrangements between FSMTC and the OAE for transit, facilities sharing, and related matters either by passage of legislation or by agreement.
TC&I wrote that two potential options were presented to and approved by World Bank. One was the “HANTRU1 Transfer” bill, which would have transferred that line from FSMTC ownership to ownership by the OAE (FSMTCC). Congress rejected that offer. The other option was the “IRU Deed” (Indefeasible Rights of Use).
TC&I says that in late September, FSMTC provided its proposed revisions to the “IRU Deed”. “Subject to completing some technical requirements and obtaining further World Bank approval, it appears that the IRU deed may be agreed in principle between the OAE and FSMTC,” the memo said.
Because that option has been selected the memo says that significant additional work is required to implement it, including the development of a new business plan for the FSM Open Access Entity “to address and mitigate the greater financial and operational risks inherent in this approach…”
The memo says that TC&I projects that the OAE CEO will be able to obtain approval for the final OAE operational budget and the IRU Deed by the second or third week of November. “Due to the operational and market risks posed by the IRU Deed, the budget estimates may need to be adjusted upward from the $1 million already appropriated,” it says.
Agreements need to be put in place between the OAE and TC&I and the World Bank to take over implementation responsibilities for the cable projects. The OAE also needs to be “fully operationalized”, meaning that it will need hire its key staff, obtain office space, set up bank accounts, set up a financial management system, develop maintenance and operations agreements, and other tasks to set up its operations.
In May of 2017, the OAE board selected Adolfo Montenegro as CEO. Last week, the Department of Justice approved a contract for the new CEO. The OAE, TC&I, and DoFA are now seeking to negotiate a final contract and resolve all outstanding issues for Mr. Montenegro to begin work under the contract. “The first deliverable under the new contract will be the completion of the OAE budget, business and marketing plan, which (are) required for project fund disbursement,” the memo says.
It says that project agreements can be entered into as soon as the OAE CEO and the World Bank set a schedule. The actions for operationalizing the OAE will take additional time. The memo says that if the government is making good progress and is able to secure the additional funding requirements according to an approved OAE budget, World Bank may consider a partial lifting of the project disbursements conditions. The target date for government to make that request is by the end of November.
“Assuming the IRU Deed will be finalized, no substantive legislation will be required for project disbursement,” the memo says.
Senator Moses says that he doesn’t anticipate any difficulty with the three items Congress will need to act on.
The memo provided a list of projected dates for completion of individual tasks. A partial lifting of World Bank disbursement conditions is projected for some time in late December with ownership and implementation of cable infrastructure investments being transferred to the OAE by January 1. After that date additional actions will be require to operationalize OAE and obtain full lifting of project disbursement conditions.
Moses says that the fiber optic connection of Kosrae through Kiribati is not part of the arrangements that are currently being made but that it will not be nearly as complicated as the establishment of the OAE and the IRU has been.
To make a very long and complicated story short, fiber optic connectivity of all FSM States is progressing nicely and all parties are working together to come to final agreements.