Uganda - Third Technical Assistance Project

Document of The World Bank FOR OFFIOCAL USE ONLY Repwt No. P-4853-UG MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 13.8 MILLION TO UGANDA FOR A THIRD TECHNICAL ASSISTANCE PROJECT July 26, 1988 Eastern Africa Department This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World BDank authorization.  CURRENCY EQUIVALENTS Currency Unit D Uganda Shillings (USh) 150.001 USh 1.00 US$ 0.0067 SDR 1.00 = US$ 1.31062 US$ 1.00 SDR 0.7630 GOVERNMENT FISCAL YEAR July 1 - June 30 s After the currency reform and exchange rate adjustments of July 1, 1988. 2 At June 30, 1988.  FOR OICAL USE ONLY UGANDA THIRD TECHNICAL ASSISTANCE PROJECT CREDIT AND PROJECT SUMMARY Borrower: Uganda Beneficiary: Ministries of Finance, Planning and Economic Development, Bank of Uganda Amount: SDR 13.8 million (US$18.0 million equivalent) Terms: Standard, with 40 years maturity Onlending Terms: Not Applicable Financins Plan: Government - US$3.0 million IDA - US$18.0 million CIDA - US$2.0 million Total - US$ 23.0 million Economic Rate of Return: Not Applicable Staff Appraisal Report: No. 7221-UG MaP: IBRD No. 18540R This document has a restricted distribution and may be use by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorizatic.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF UGANDA FOR A THIRD TECHNICAL ASSISTANCE PROJECT 1. The following memorandum and recommendation on a proposed development credit to Uganda for SDR 13.8 million (US$18.0 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms with 40 years maturity and help finance a third technical sesistance project. Co-financing in the form of a grant for US$ 2.0 million equivalent is expected from the Government of Canada. 2. Background: The present Government, which came to power in January 1986, inherited an economy and a public service in disarray. The new Government had considerable success it, restoring peace and stability and, in May 1987, it formally launched a program of economic reform which is being supported by the Special African Facility of the IME and an IDA Economic Recovery Credit. Initial measures were taken to establish a realistic exchange rate, reduce the budget deficit, introduce expenditure controls and limit monetary expansion. The sustainability of the reform process, however, depends, in part, on the Government's capacity to implement and monitor the agreed program effectively. The development and maintenance of this capacity will, in turn, depend upon the restoration of essential administrative and managerial functions within Government which have collapsed or been seriously weakened over the years of political turmoil and economic decline. In the shert term, immediate assistance will be needed to strengthen the Government's capacity for sound economic and financial management and to restore financial discipline in the public sector. At the same time, the Government must begin the process of rehabilitating the key government institutions which are responsible for carrying out the fundamental and indispensable functions of Government necessary to complete the task of recovery and embark on the longer-term process of economic and social development. 3. In previous technical assistance projects (Credit 1077-UG, US$ 8.0 million and Credit 1434-UG, US$ 15.0 million), emphasis was placed on strengthening the Government's capacity to prepare and monitor development projects and on establishing effective planning mechanisms. In spite of the setbacks experienced as a result of political turmoil, progress on the restoration of the Government's planning capacity has continued to be made, a system for the monitoring of development projects has been established, and efforts are currently under way to rehabilitate the country's statistical base. In the Ministry of Finance and the Bank of Uganda, however, which had not been the focus of the previous credits and which must play central roles In the recovery process, capacity has been eroded by the loss of qualified staff, inadequate material and logistical support, and the collapse of order and discipline. Improvements in the budgetary process, expenditure control, debt monitoring and management, government accounts and government procurement are essential for effective financial management of the recovery process. 4. The experience gained from the previous technical assistance projects clearly demonstrates that an intensive and focused effort such as that devoted to planning assistance can yield sustainable improvements. The proposed project will build on the positive results achieved in the  - 2 - development of effective planning mechanisms and initiate programs to restore the capacity of the Ministry of Finance and the Bank of Uganda to carry out the administrative and management functions which are iadispensable for sound financial management and economic recovery. 5. Proiect Objectives: The objectives of the project are tot (a) establish and institutionalize data collection and analysis in the Ministry of Finance and the Bank of Uganda; (b) improve the budgeting process to enable it to function as the Government's primary tool for tranalating policy initiatives into actions and to eliminate wasteful expenditure; (c) strengthen the capacity for financial and economic policy formulation in the Ministry tf Finance; (d) rationalize the Government's procurement process to reduce costs; and (e) provide long and short-term advisory services for the implementation and monitoring of the Government's Economic Recovery Program, with a special emphasis on encouraging qualified Ugandans currently outside the country to return in order to undertake these tasks. 6. Proiect Descriptions Under the project, financing would be provided for the services of national and international consultants, training activities, upgrading of facilities, equipment and special studies to achieve the objectives outlined above through the following project components: 1. Financial Information System. Restore the computerized Government accounting system and develop a financial information system to Mi) monitor the recovery program, (ii) control expenditures, (iii) meet the information needs of the revenue generating departments, and monitor external debt. ($4.2 million). II. Budget Reform. Strengthen and improve the budget process by (i) establishing a system for determining objectives and priorities for recurrent and development expenditures; (ii) developing an appropriate budget structure and expenditure classification system; (iii) ensuring budget allocations on the basis of priorities and performance rather than historical trends; (iv) developing a training system which supports the budget reform exercise. ($2.8 million). III. Government Procurement Functions. Rationalize procurement by (i) re-establishment or the authority of the Central Ternder Board, (ii) establishment of appropriate competitive bidding procedures, and (iii) centralization of provis'oning, procurement, storage and distribution of common user items. ($4.3 million). IV. Manaaement of the Recovery Process. Strengthen the capacity of the core ministries to plan and monitor economic recovery by financing (i) logistical and short-term advisory assistance to the Economic Analysis Unit in the Ministry of Finance $0.9); and (ii) a resettlement program to encourage the return to government service of highly qualified expatriate Ugandans and the provision of special advisory services (to the extent possible by Ugandan nationals currently working abroad) to assist in implementation of the recovery program ($6.2 million). V. Statistics Rehabilitation Program. Continue support to the statistics rehabilitation program initiated under the Second Technical Assistance Credit which is developing the requisite data base for the implementation and monitoring of the recovery process and subsequent development programs ($2.1). VI. Aaricultural Secretariat. Continue support to the Agricultural Secretariat which is charged with formulating, coordinating, directing and reviewing key policies and programs in the agricultural sector ($2.5).  - 3 - 7. Rationale for IDA Involvement. Rehabilitation of the GoverrAment's fundamental administrative and management functions is essential for the implementation of the economic recovery program and for sustained economic growth. Although IDA has had considerable success in bringing together substantial donor resources in support of Uganda's Economic Recovery Program, the major concern expressed by the donor community has b^en whether the Government has the capacity to implement the extensive and complex action programs necessary for success. The project specifically addresses this concern by providing the resources required to strengthea the core ministries through technical assistance and a program to attract expatriate Ugandans back to their country to contribute their skills and experience to national reconstruction and recovery. The project will provide the technical and advisory services which are immediately required for the implementation of the recovery program while, at the same time, initiating a longer-term program to rehabilitate essential government administrative and management functions and the development of the appropriate linkages between them. 8. Agreed Actions: The project supports the policy actions which have been agreed in the context af the IDA Economic Recovery Credit. During negotiations, the Government agreed to submit to IDA by July 31, 1989 evridence that it had secured the equivalent of not less than $2.0 million for financing the Statistics Rehabilitation Program. Conditions of Disbursement: a) procurement component: agreement on division of responsibilities betwee; Central Tender Board and proposed Supplies Directorate and on detailed work program including extent of centralization and initial budget for the Directorate; b) financial information system component: completion of the Requirements Definition and Strategy Study for the Ministry of Finance and Bank of Uganda and preparat,on of a prioritized work program. 9. Justification and Risks: The Project would help the Ugandan Government remove major institutional obstacles to effective implementation of the recovery program and start a process of rehabilitating the administrative infrastructure and institutional environment essential to sustain economic recovery. The major risks associated with the project are the difficulty of sustaining institutional reforms in the face of inadequate civil service remuneration, and resistance to reform on the part of those who benefit from the current lack of fiscal discipline and budgetary control. To offset these risks, the present Government has initiated a number of measures to reduce the size of the civil service, to restore discipline, and to increase wages for remaining employees. Improvement of working conditions through the provision of adequate supplies and logistical support under the proposed project will also increase morale and productivity in the units affected. 10. Recommendation: I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed project and that the Association administer the CIDA grant. Barber B. Conable President Attachments Washington, D.C. July 26,1988  -4- SCHEDULE A UGANDA THIRD TECHNICAL ASSISTANCE PROJEC? Estimated Costs (US$ o000 Local Forei8n Total A. Financial Information System: 779.1 2,482.7 3,261.8 B. Budget Reform 143.8 2,035.4 2,179.2 C. Economic Analysis Unit 264.2 337.9 602.1 D. Statistics Rehabilitation 288.1 1,244.7 1,532.8 E. Implementation of ERP 73.4 4,406.6 4,880.0 F. Supplies Directorate/CTB 188.7 3,254.3 3,443.0 G. Agricultural Secretariat 114.8 1,734.6 1,879.4 Baseline Costs 1,882.1 15,496.2 17.378.3 Physical Contingencies 70.6 1,196.3 1,266.9 Price Contingencies 2,671.9 1,762.3 4,481.5 Total Project Costs 4,671.9 18,454.8 23,126.7 Financing Plan Local Foreign Total IDA 1.5 16.5 18.0 CIDA .0 2.0 2.0 Government 3.0 -- 3.0 Total 4.5 18.5 23.0  SCHEDULE B Page 1 of 2 UGANDA THIRD TECHNICAL ASSISTANCE PRO:ECTI Procurement Method and Disbursements (US$ million) Procurement Method ICB LCB Other N.A. Total Computers and peripherals 0.S 0.8 (0.8) (0.8) Civil Works 0.05 0.05 (0.0) (0.0) Vehicles and office equipment 0.3 0.5 0.2 10.0 (b.3) (0.2) (0.2) (0.7) Supplies, packaged software 0.2 0.2 (0.2) (0.2) Technical Assistance 14.5 14.5 (12.0) (12.0) Training 3.7 3.7 (2.8) (2.8) Resettlement Costs 0.35 0.35 (0.35) (0.35) Allowances 1.4 1.4 (0.85) (0.85) Counterpart salaries 0.4 0.4 (0.0) (0.0) Operations and Maintenance 0.6 0.6 (0.3) (0.3) TOTAL 1.1 0.55 0.4 20.95 23.0 (1.1) (0.2) (0.4) (16.3) (18.0) 1Amounts in parentheses are IDA-financed.  -6- SCHEDULE B Page 2 of 2 Disbursements CategorZ USS mlhlior.S 1. Equipment 1.15 1002 of foreign expenditures and 80? of local expenditures 2. Training 1.80 1002 of foreign expenditures and 80S of local expenditures 3. Consultant Services 9.75 100S of total expenditures 4. Operation and Maintenance 0.26 90? of total expenditures 5. Resettlement Costs 0.17 1002 of total expenditures 6. Staff allowances for: la) Economic Analysis Unit 0.13 100? of total expenditures (b) Others 0.24 85? of total expenditures 7. Refunding of Project Preparation 0.60 Advance 8. Unallocated 3.90 Estimated Disbursemontst (US$ million (IDA FY) 1989 1990 1991 1992 1993 1994 1995 Annual 0.6 3.6 4.8 4.5 2.6 1.5 0.4 Cumulative 0.6 4.2 9.0 13.5 16.1 17.6 18.0  -7- SCHEDULE C Page 1 of 1 UGANDA THIRD TECHNICAL ASSISTANCE PROJECT Timetable of Key Project Processing Events (a) Time taken to prepare: 10 months (b) Prepared by: Government with IDA Assistance (c) First IDA mission: May 1987 (d) Appraisal mission departure: February 1988 (e) Planned date of effectiveness: October 1988 (f) List of relevgnt.PCRs ai PPARs: Nonel IA PCR covering the first and second Technical Assistance projects will be prepared following completion of the second TA project.  Schedule D THE STATUS OF BANK GROUP OPERATIONS IN UGA A. STATEMENT OF SANK LOANS AND IgA CREDITS (ar of 4rcha 19088 -US9 Mi lM I on Amount (Les. Cancellations) Loan or Undle- Credit No Year Borrower PurDose Bank IDA buroed One (1) loan and fourten (14) crodite fully disbursed 8.40 288.48 1248-UA 1082 Uganda Industrial Rehabilitation 85.69 12.21 1928-40 19o8 Uganda Agricultural Rehabilitatlon 79.19 21.19 1829-U 1983 Uganda Third Education 82.19 .19 1484-40 1984 Uganda Second Technical Assist. 15.l1 8.82 1445-U0 1984 Ugrnda Third Highway 58.a9 42.12 151-ua 195 Uganda Water Supply and Sanitation Program 28.19 8.65 1589-uo 1985 Uganda Agricultural Devolopment 16.19 S.81 1560-UO 195 Uganda Second Power 28.80 28.68 156-UG 1985 Uganda Petroleum Exploration Promotion S.10 4.74 16s-u3 1987 Ugonda Fourth Highway 18.18 18.18 1i24-uo 1998 Ugrnda Forestry Rehabilltation 12.67 12.86 9840--u 1968 Uganda Non-Sector Specific (Econ. Recow. Cr/SAF) 24.01 11.28 1844-U 1988 Uganda Non-Sector Speclfic (Econ. Recov. Cr./SAF) 66.00 48.89 1806-US 1968 Uganda South West Ag. Rehab. 10.48 10.48 1898- 1998 Uganda Sugar Rehab. 25.98 25.9# Totl 6.40 721.78 262.84 of which hao been repaid 6.98 4.45 Total now outstanding I 717.2e IDA amount sold: 17.50 of whtch has ben repeid 7.35 TOTAL NOW HELD BY BAN AND IDA 1.52 71.28 TOTAL UNDISSURSED 0.00 262.84  UGANDA Schedule 0& B. STATEMENT OF IFC INVESTUENTS March 30. 1988 Amount In US$ million FTsc Obiloor Typo of Business Loan Equity TSTl 1905 Mulco Textiles, Ltd. Textiles 2.79 .71 3.60 1972 Tourism Promotions Services Tourism 1.11 - 1.11 1988 Toro and Mityans Tea Food and Co., Ltd. (TAWrECO) Food Processing 1.62 - 1.62 1988 Sugar Corp. of Uganda Food and Food Processing 8.00 - 8.00 1984 Uganda Too Corp. Ltd. Food and Food Prooessing 2.81 - 2.81 1984 Development Finance Development Finance - 0.38 0.38 company of Uga -- Total gross comitmenta 16.34 1.09 17.42 nuw held by IFC - == Total undisbursed (including 3.92 0.27 4.19 participants portion) = = Source: IFC Disburements Section  IBRD 1864OR ' 2* ar s< -nd S U D A N / ,