Uganda - Agricultural Research and Training Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 11238-UG STAFF APPRAISAL REPORT UGANDA AGRICULTURAL RESEARCH AND TRAINING PROJECT NOVEMBER 23, 1992 Agriculture and Environment Operations Division Eastern Africa Department Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Uganda Shillings (USh) US$1 = USh 1,170 (June 1992) WEIGHTS AND MEASURES Metric System GOVERNMENT FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS ARTP - Agricultural Research and Training Project ASAC - Agricultural Sector Adjustment Credit CIAT - International Center for Tropical Agriculture CIR - Country Implementation Review CTB - Central Tender Board EAC - East African Community EC - European Community ELU - Extension Liaison Unit ERP - Economic Recovery Program EFMP - Economic and Financial Management Project FAF - Faculty of Agriculture and Forestry, Makerere University FAO - Food and Agriculture Organization FS - Faculty of Science, Makerere University FVM - Faculty of Veterinary Medicine, Makerere University GOU - Government of Uganda GTZ - German Agency for Technical Cooperation HARE - Headstart Agricultural Research and Extension Program [ARC - International Agricultural Research Center IDA - International Development Association IDRC - International Development Research Center IFAD - International Fund for Agricultural Development IlTA - International Institute for Tropical Agriculture INIBAP - International Network for Improvement of Bananas and Plantain ISNAR - International Service for National Agricultural Research MAAIF - Ministry of Agriculture, Animal Industry and Fisheries MCIC - Ministry of Commerce, Industry and Cooperatives MFAD Manpower for Agricultural Development Project MFEP - Ministry of Finance and Economic Planning MPS - Ministry of Public Service MU - Makerere University MUARIK - Makerere University Agricultural Research Institute at Kabanyolo MWMEEP - Ministry of Water, Minerals, Energy and Environment Protection NADIC - National Agricultural Documentation and Information Center NARB - National Agricultural Research Board, or NARO Board NARO - National Agricultural Research Organization NARS - National Agricultural Research System NARSP - National Agricultural Research Strategy and Plan, or Research Master Plan PAPSCA - Project for the Alleviation of Poverty and Social Costs of Adjustments PIU - Project Implementation Unit PPF - Project Preparation Facility SAC - Structural Adjustment Credit SOE - Statement of Expenditures UNDP - United Nations Development Program USAID - United States Agency for International Development  FOR OFFICIAL USE ONLY REPUBLIC OF UGANDA AGRICULTURAL RESEARCH AND TRAINING PROJECT Table of Contents I. BACKGROUND ...................................... 1 A. Economic Setting ..................................... 1 B. Major Development Issues ............................... 2 C. General Institutional Issues ............................... 2 D. Bank Assistance Strategy ................................ 3 E. Lending Program and Economic and Sector Work ................. 3 F. Aid Coordination ..................................... 5 G. Implementation Experience and Lessons Learned .................. 6 H. Rationale for IDA Involvement ............................. 7 II. THE AGRICULTURAL SECTOR .................................. 8 A. Salient Features ...................................... 8 B. Recent Performance .................................... 8 C. Sectoral Objectives .................................... 9 D. Sources of and Constraints on Growth ........................ 9 E. Public Expenditures and Sectoral Management ................... 11 F. Sectoral Development Strategy ............................. 11 HI. AGRICULTURAL RESEARCH AND TRAINING ....................... 12 A. Background and Current Status ............................. 12 B. Agricultural Research and Education Issues and Constraints .... ....... 16 C. The National Agricultural Research Strategy .................... 17 IV. THE AGRICULTURAL RESEARCH AND TRAINING PROJECT ......... ... 18 A. Project Rationale and Objectives ............................ 18 B. Detailed Features ........... .......................... 19 C. Project Costs and Financing ............................... 24 D. Procurement . ..................................... 27 E. Disbursement ............ .......................... 29 F. Accounting, Auditing and Reporting ......................... 30 This report is based on the findings of an appraisal mission which visited Uganda in July 1992. The mission consisted of E. Quisumbing (Agriculturist/Task Manager), J. Coates (Sr. Financial Analyst), T. Eisemon (Education Specialist) and C. Balina (USAID, Civil Engineer). Contributions based on previous missions were also made by V. Mackrandilal (Sr. Economist), V. Venkatesan (Sr. Extension Specialist), S. Bhlttacharya (Sr. Procurement Specialist), A. Bolar (Consulant, Financial Analyst), P. Boekstcgen (Resarch Specialist, FAO/CP) and D. Corbetr (Consultant, Research Specialist). The lead adviser was A. Spurling (Principal Agriculturist), and peer reviewers were N. Colletta (Sr. Gen. Education Specialist) and C. Pattanayak (Sr. Agriculturist). Messrs. J. Shivakumar and F. Colaco are the managing Division Chief and Department Director, respectively, for this operation. Mmes. C. Jones, J. Bekker, B. Mudd, M. Gunawardane, and M. Hileman provided assistance in editing, computing and document processing. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  V. ORGANIZATIONAL AND IMPLEMENTATION ARRANGEMENTS .... ....... 31 A. Overall Project Arrangements ............................. 31 B. Research Arrangements ................................. 34 C. Education and Training Arrangements ........................ 39 D. Initiatives for Women .................................. 40 VI. BENEFITS, JUSTIFICATIONS, AND RISKS ......................... 40 A. Main Benefits and Beneficiaries ............................ 40 B. Economic Justifications ................................. 41 C. Sustainability and Financial Implications for Government .... ......... 42 D. Project Risks ...................................... 43 E. Environmental Impact .................................. 44 VII. ASSURANCES AND RECOMMENDATION ......................... 45 A. Assurances and Agreements ............................... 45 B. Recommendation ..................................... 47 list of Annexes l. Cost Tables 2. Estimated Disbursement Schedule 3. Detailed Budget for Identified Activities under the PPF 4. Technical Assistance 5a. Terms of Reference - Agricultural Economist Sb. Terms of Reference - Agricultural Extension Education Specialist 5c. Terms of Reference - Architectural and Construction Supervision Consultant 5d. Terms of Reference - Financial Management Specialist Se. Terms of Reference - Monitoring and Evaluation Specialist Sf. Terms of Reference - Procurement Specialist 5g. Terms of Reference - Research Fund/Foundation Consultant 6. Donor Funded Research Projects in Uganda 7. Agricultural Education and Training Component 8. Summary of Degree Training 9. Distribution of Female Researchers 10a. Implementation Plan 10b. Schedule of Key Activities 1 la. Procurement Schedule for Civil Works 1 lb. Procurement Schedule for Equipment and Material 12. Financial Management 13. Monitoring, Evaluation and Planning 14. Annual Work Program and Project Supervision and Implementation 15. Documents in the Project File 16. Staff Recruitment Plan Map No. IBRD 24111: Agricultural Research Institutes  REPUBLIC OF UGANDA AGRICULTURAL RESEARCH AND TRAINIG PROJECT (ARTP) Credit and Project Summary Borrower: Government of Uganda (GOU) Beneficiaries: National Agricultural Research Organization (NARO) Makerere University (MU) Amount: SDR 17.80 million (US$25.04 million equivalent) Project Objectives: The project would support the Government's strategy for improving productivity and diversification in the agricultural sector through the development and transfer of improved technology. The broad objective of the project is to develop an organizational framework and institutional processes for agricultural research which are sustainable and efficient as well as responsive to the production constraints facing farmers in Uganda. The specific objectives of the project are threefold: (a) launch and support the key activities of NARO, induding high priority research; (b) strengthen the linkages and coordination among the research system, the extension service and the agricultural faculties of the university; and (c) improve agricultural education and training capacity. Project Description: The project would provide financial assistance to support four broad sets of activities. First, the project would support the institutional development of the National Agricultural Research System (US$7.02 million). The project would finance the activities of the NARO Board and Secretariat, develop and implement improved administrative, evaluative and priority-setting systems for research programs, and upgrade the capacity of researchers to implement the priority research programs. Second, the project would support the rehabilitation of research Institutes (US$4.20 million) at Serere, Tororo, Jinja and Kifu, and provide the requisite vehicles and research equipment. Third, the project would support the Implementation of the high-priority research programs (US$12.34 million) by providing payments for incremental recurrent operating costs, including salaries and allowances under the newly introduced Terms and Conditions of Service for research. Fourth, the project would support strengthening agricultural education and training capabilities (US$5.31 million) at Makerere University. Specially, it would support the domestic and foreign based education of degree candidates and staff, the upgrade of facilities and equipment at three faculties-Agriculture and Forestry, Veterinary Medicine, and Science--and improved curricula for the programs at the Colleges of the Ministry of Agriculture, Animal Industry and Fisheries. Project Benefits: The technological advances from a stronger agricultural research service would improve the productivity and profitability of the crop and livestock husbandry practices of small farmers. Farmers would increase their income. Agricultural output would be augmented and diversified, thus expanding food supplies and exports. The sustainability of agricultural growth would further be enhanced by the project's education and training component, which would improve the proficiency and availability of trained researchers and technicians.  - Hi - Risks: The uncertainty associated with depending on funding from the Government budget and potential weaknesses with project management are the primary constraints against the successful implementation of the project. To address the funding constraint, IDA is pursuing several measures at the macroeconomic and project levels to support the Govermment's efforts. These measures include enhancing revenue collection, reprioritizing budgetary allocations, improving the efficiency of Government's financial management, diversifying the sources of research funding, and gradually curtailing IDA's contribution to the incremental recurrent costs of the project. The effectiveness of project management would be enhanced through training, technical assistance and improved monitoring and control systems. A midterm review would be undertaken before the end of year 3 to assess difficulties, if any, and adjust the project design, if necessary. Project Costs Local Foreign Total % Foreign % Total Component (US$ million) Exchange Base Cost A,. Institutional Development 2.22 4.07 6.30 65 25 B. Rehabilitation of 0.86 2.59 3.44 75 14 Research Institutes C . Implementation of High- 9.95 0.96 10.91 9 43 Priority Research __ D. Agricultural Education and 1.65 3.04 4.69 65 19 Training Total Baseline Costs 14.68 10.66 25.34 42 100 Physical Contingencies 0.20 0.46 0.67 69 3 Price Contingencies 1.81 1.05 2.86 37 11 Total Project Costs 16.69 12.17 28.87 42 113 Financing Plan: Foreign Local Taxes Total Funding Source (US$ million) IDA 12.17 12.87 25.04 GOU 2.80 1.03 3.83 Total 12.17 15.67 1.03 28.87 a/ Numbers may not add up due to rounding. Estimated IDA Disbursement (US$ million) IDA Fical Year 93 94 9S 96 97 98 99 00 Annual 0.20 0.97 4.53 6.28 5.03 3.57 2.76 1.70 Cumulative 0.20 1.17 5.70 11.98 17.01 20.58 23.34 25.04 Economic Rate of Return: Not applicable. Map No: IBRD 24111: Agricultural Research Institutes.  REPUBLIC OF UGANDA AGRICULTURAL RESEARCH AND TRAINING PROJECT I. BACKGROUND A. Economic Setting 1.1 Uganda is well endowed with natural and human resources. It has abundant, fertile land and favorable climatic conditions for agricultural growth, and it once had a relatively well- developed manufacturing sector and an effective transportation system. In 1990 the agricultural sector accounted for 60 percent of Gross Domestic Product (GDP). Agriculture provides over 90 percent of the country's export earnings and is a major source of government tax revenue. 1.2 The first years after Independence clearly demonstrated the economic potential of the country. GDP grew by about 6 percent annually from 1963 to 1973. However, starting in 1970, political turmoil and economic mismanagement radically threatened to arrest the progress. As a result, real GDP declined by about 20 percent during the 1970s. In early 1981 the Government initiated a recovery program with the assistance of donors, including the World Bank and the International Monetary Fund (IMF). The recovery was short-lived, and beginning in 1984 a renewed cycle of instability escalated expenditures, accelerated inflation and overvalued the currency, leading to further reductions in GDP. A military coup, followed by civil war, eventually brought the economy to a standstill. 1.3 The National Resistance Movement (NRM) Government, which assumed power in January 1986, inherited an extremely poor infrastructure, a grossly underutilized manufacturing sector, rampant inflation and a huge external debt that required a total debt service of over half the 1984/85 export earnings. After a gradual return to political stability, the Government initiated an Economic Recovery Program (ERP) in 1987, backed by a Structural Adjustment Facility from the IMF, an Economic Recovery Credit (Cr. 1844-UG) from the International Development Association (IDA) and other donor financing. In 1989, the Government obtained an Enhanced Structural Adjustment Facility from the IMF and a second Economic Recovery Credit II) from IDA to accelerate the reforms. The Fund program supported further demand-management initiatives, while the IDA credit supported further structural measures, particularly those that promoted the stabilization objectives. 1.4 Continued support for the ERP is being provided under the Structural Adjustment Credit (SAC), approved in November 1991. The two primary goals of SAC are to (a) remove the remaining constraints on the private sector and create an environment in which private initiatives can flourish and thus enable so that Uganda to realize its comparative advantage, and (b) improve the effectiveness of the Government. 1.5 The performance of the economy under the ERP has been good. GDP has increased more than 6 percent annually, albeit from a low base, and per-capita income has risen at 3.5 percent annually. With improved access to donor-funded foreign exchange, imports rose at the beginning of the period, but then leveled off in the face of the declining value of exports. The balance of trade has gone deeply into deficit, largely because the price of coffee, Uganda's main export, began to drop sharply in international markets in 1987. Uganda's imports of goods and services in FY1990/91 were US$674 million, against exports of US$216 million.  - 2 - B. Major Developmental Issues 1.6 Uganda faces six major structural, institutional and financial problems that must be addressed during the next three years. First, underlying structural problems, primarily in the financial and coffee sectors, continue to impede stabilization. Second, although government expenditures have increased somewhat in recent years, government revenues are still very low (16 percent of GDP). Therefore, resources for economic and social services remain inadequate, thus making increased efforts to strengthen and mobilize revenue a priority. Third, while the ERP has reduced inflation, more efforts are required to reduce inflationary pressures. Fourth, the sharp decline in the export prices of coffee during the past two years and the petroleum price increases after the Gulf War again highlight Uganda's vulnerability to adverse external events. Thus, its export base must be diversified. Fifth, a stepped-up program of institutional strengthening, including parastatal and financial-sector reform, is required. Sixth, a major reform of the civil service is urgently required to achieve a streamlined, efficient, effective and manageable organization. 1.7 The policy framework of the Govermnent's ERP for the next three years, as well as the Bank;s assistance strategy, will support executing these developmental priorities. The policy dialogue in key areas--financial intermediation, public expenditures, civil service reform, export diversification and environmental management--is being intensified through economic and sectoral work. Policy reforms in these and ancillary areas could be supported through structural and sectoral-adjustment lending. The Government's ongoing efforts to rehabilitate the country's infrastructure and essential public services could be supported with direct investment lending. C. General Institutional Issues 1.8 Uganda's recent political turmoil has left the country with very weak institutions. The civil service, the main employer in the formal sector, has grown beyond the needs of the country and is characterized by inefficiency, a lack of financial discipline and obsolescence. Support institutions, such as the university and training and research agencies, have deteriorated dramatically since independence, and are neither self-reliant nor financially viable. During the past few years donor agencies and the IDA have helped the Government implement several measures to remedy these weakness, but these efforts have fallen far short of a comprehensive and sustained program of institutional reform. The institutional development strategies have relied largely on short-term foreign expertise in the form of technical assistance and ad hoc overseas training. Vital progress has been made at maintaining key operating systems in important agencies, but at the cost of perpetuating dependency. 1.9 The Government recognizes the weaknesses of Ugandan institutions and has demonstrated its commitment to tackle the problems. A candid report of the Public Service Review and Reorganization Commission (PSRRC) provided the basis for a reduction in the number of ministries and self-accounting units (from 46 to 23) in 1991, and for continued reductions in the civil service. The Government has also established a secretariat to develop a national capacity- building plan to strengthen Ugandan self-reliance and to train the managers, professionals and technical staff required to improve both public- and private-sector performance. However, completing a comprehensive and systematic institutional reform program could be a complex and long-term process. Action is being initiated with IDA support to strengthen key agencies --------- -- -- ---------  -3- responsible for economic and financial management and developmental planning, thus enabling them to be at the vanguard of the larger civil service reform program. D. Bank Assistance Strategy 1.10 The overall objective of the World Bank's assistance strategy for Uganda is to shift the emphasis from addressing the short-term needs for security, stability and rehabilitation to creating an economic environment conducive to reducing poverty by promoting long-term sustainable growth and improving basic living conditions. The overall approach would be to strengthen essential Government institutions, policies and functions in a manner that nurtures private-sector participation in both agriculture and industry and improves the delivery of essential social services. 1.11 The Bank will continue to play a lead role in helping the Government design and implement its ERP to move the economy toward sustainable long-term growth, and in mobilizing the required financial resources to support the Government's development program. The Bank will fulfill this role by supporting policy dialogue with economic and sector studies, by designing a lending program that would balance adjustment and investment lending and by improving the coordination of aid. E. Lending Program and Economic and Sectoral Work 1.12 The IDA and the IMF supported an initial effort of economic stabilization and recovery during the early 1980s. In June 1981, the Government adopted a comprehensive Recovery Program. IDA committed the Reconstruction H and HI Credits in 1982 and 1984, respectively, as well as an Industrial Rehabilitation Credit in 1982 and an Agricultural Rehabilitation Credit in 1983. The initial experience was encouraging, in terms of both stabilization and the recovery of output. However, in 1984, the economic program went off track, and security conditions again began to deteriorate. Inflation accelerated to 125 percent in 1985, and the recovery effort was overwhelmed by the intensification of civil strife. 1.13 To date, the cumulative total of Bank Group lending to Uganda stands at US$1.68 billion. Of this amount, six IDA credits, five supplements, and two Africa Facility Credits totalling US$676.1 million have been in the form of quick-disbursing assistance, including an Agricultural Sector Adjustment Credit (ASAC) in FY91. The current portfolio consists of 27 projects, totalling US$1.16 billion; six projects totalling US$228 million are in the agricultural sector. Through the technical assistance credit (FY88), IDA has strengthened the administrative and institutional capacity of the key ministries responsible for implementing the recovery program. Other credits have helped the Government rehabilitate the nation's essential infrastructure; still others have improved productive capacity and bolstered basic social services. The recently approved SAC (November 1991) continues quick-disbursing support to the Recovery Program while also attempting to remove constraints on the private sector and improve the efficiency of Government. 1.14 During the next three years, the Bank's economic and sectoral-work program and its lending operations will be used to implement the Bank's assistance strategy. Lending operations will build on the foundation of knowledge accumulated during the past few years and will cover  the industrial and financial sectors, transport, the private sector and key export-oriented crops. The macroeconomic measures necessary for establishing the base for sustainable long-term development have also been identified through this work. A study of public expenditures-- identified as an area of utmost priority- was prominent in these efforts. A second Public Expenditure Review (PER), undertook in FY92, sought to improve public expenditure management. The Bank has also completed a paper that recommended an export diversification strategy for Ugandal/. Pending the overall restructuring of the financial sector, which would be supported by a planned FY93 financial-sector adjustment operation, the Enterprise Development Project (EDP) (FY92) supports preshipment export financing as part of a package of initiatives to realize the objective of diversifying exports. The measures necessary for supporting continued growth in agriculture have been identified in a World Bank MemorandumJ2. Building on the agriculture-sector-study, an operation planned for FY94 would support the continued liberalization and restructuring of production, processing and export marketing in the cotton sector. Congruent with the recommendations of the "Agricultural Sector Memorandum," this operation would provide additional support to agricultural research. Agricultural extension would be strengthened by the Agricultural Extension Project, which is expected to become effective in January 1993. A smallholder development project would promote agricultural growth in ikey smallholder-dominated crops, such as cotton and dairy products. 1.15 The Bank's activities in human resources would seek to improve access to basic social services. Education V would focus on education, and Health II would continue efforts to strengthen basic health services, as well as the ability of the Government to respond to the manifold economic and social impacts of the AIDS disease. Education V is based on several subsectoral studies that have influenced the development of the Ministry of Education's Five-Year Investment Program (1992-1997). Both operations will be linked to the human resources study initiated in FY92. An issues paper on women in development has identified key aspects of the status of women that must be addressed immediately and will provide the basis for integrating these aspects into other parts of the Bank's human resources and agriculture work programsl/. 1.16 To help alleviate poveily, the Bank's assistance strategy consists of four elements. First, the lending program to promote growth and diversification described earlier would offer opportunities for using labor productively; including labor available within the poorer segments of society. The broad participation of smallholder farmers in the production of both food and export crops would support overall efforts to distribute the benefits of agricultural growth to the rural poor. Second, dialogue on the public expenditure program would focus on increasing expenditures by the Government for basic social services in the health and education sectors. Third, the Bank, through policy dialogue and lending, would support strengthening social-sector ministries to enable public programs to expand the delivery of social services. Fourth, the Bank is supporting the Government's special project for the Alleviation of Poverty and Social Costs of Adjustment (PAPSCA). PAPSCA, initiated in 1990, seeks to provide support to the poorest in 1/ The World Bank. 'Uganda: Export Diversification Strategy." Eastern Africa Department, July 3, 1991. eTh World Bank. 'Uganda: Agricultural Sector Memorandum." Report No. 10715-UG, Agriculture and Environment Division, Eastern Africa Department, June 8, 1992. The World Bank. "Uganda: Women in Development: Current Issues and Agenda for Further Research." Population and Human Resources Division, Eastern Africa Department, June 28, 1991.  -5- Uganda's society and to mitigate the adverse effects of adjustment on the poor. Poverty and growth issues would be the focus of the forthcoming country economic memorandum (FY93). 1.17 Institutional weaknesses limit the Government's ability to implement the policy agenda, and impede the implementation of projects. Thus, capacity building and institutional refonn figure prominently in planned lending operations. The Bank's strategy is to address central policy measures in the context of structural adjustment lending. Complementary assistance to improve the Government's economic and financial management and to support reform at the sectoral level would be provided in the form of technical assistance to freestanding operations or to sector- specific operations. Moreover, a major study is being undertaken to develop an action plan for removing constraints on the effective use of available talent within the civil service, for preparing a medium- and long-term training program to address key skill gaps, and for elaborating a strategy and framework for future Bank initiatives in capacity building. 1.18 The recently approved Economic and Financial Management Project (EFMP) addresses problems in the core agencies that are responsible for economic and financial management and are expected to play key roles in the overall public service reform programs (para. 1.9). Significant resources will be allocated to strengthening the capacity of the Ministry of Finance and Economic Planning (MFEP) and the Bank of Uganda to formulate and implement effective economic- development policies. 1.19 The pressures on the environment are not as severe in Uganda as they are in other Sub- Saharan countries, but they could become serious and must be addressed if economic growth is to be sustained. The Bank is supporting efforts by the Government to prepare an Environmental Action Plan that would call for strengthening public institutions responsible for environmental management and monitoring. The Bank would offer technical assistance to the Government in establishing an appropriate institutional and legal framework for environmental protection and to develop cost-effective information systems. The Bank would also support strengthening environmental research at Makerere University. F. Aid Coordination 1.20 During the next three years, the Bank's activities would also focus on strengthening and coordinating donor support for Uganda's reform efforts. Discordant and contradictory activities by donors are distinct threats that could undermine the reform program. More action is required to increase the support of other donors for reform. Of course, responsibility for coordinating aid rests primarily with the Government, but the Bank is willing to help improve the Government's capacity in this area. 1.21 The Bank would foster the coordination of donor support by (a) promulgating to donors its own views on necessary reforms, expected performance by the Government, and financing needs, (b) explaining to donors its own proposed activities for supporting of the reform program, (c) encouraging donors to support areas of the reform program in which they have specific expertise, and (d) flagging systemic issues that may impinge on the effectiveness of donor support. The bank would pursue this four-pronged strategy within the framework of the Special Program of Assistance and the Consultative Group process (with meetings planned every 12 to 18 months). Coordinating donor support effectively also requires frequent contact with donor representatives and the regular dissemination of information on policy developments and project  - 6 - activities. The role of the Bank's Resident Mission has been expanded to facilitate this exchange. Regular meetings with local donor representatives will be used as a vehicle for intensive consultations with the main donor agencies. IDA and the IMF have collaborated closely on the design, implementation, and monitoring of Uganda's ERP. This collaboration has been particularly helpful at enabling the Government to focus on key macroeconomic stabilization measures, as well as on long-term structural reform. G. Implementation Experience and Lessons Learned 1.22 The implementation of IDA-financed projects slowed down during the civil disturbances in 1985 and 1986, but since the return of peace and stability in much of the country has shown steady progress. Disbursements rose to US$77.7 million in FY86, declined slighdy to US$63.3 million in FY87, and then increased sharply to US$107.1 million in FY88, reflecting the more rapid disbursements under the first Economic Recovery Credit (ERC I). Disbursements in FY89 were US$99.9 million, rising to US$164.9 million in FY90 and to US$169.0 million in FY91. In FY82, disbursements were US$122.30 million. The lending program for Uganda has increased dramatically from two operations in FY87 to five in FY88, to seven in FY89, to six in FY90, and to five in FY91, including two African Facility Credits, three supplements to ERC I and one supplement to ERC II. The FY92 program included four operations, one of which was a Structural Adjustment Credit. 1.23 The implementation experience of agricultural projects has been mixed, and some useful lessons have been learnt and applied to the design of the proposed project. The major constraints on implementing the project are inadequate and tardy counterpart funding, poor salaries and weak management and financial systems. These issues are being addressed at the macro, sectoral and project levels. Regular public expenditure reviews and a stronger revenue collection capacity are being supported under SAC. A general Public Sector Reform Program is underway. Staffing structures are being streamlined and incentive arrangements are being rationalized with support from SAC and EFMP. 1.24 In January 1991, a special implementation review mission examined counterpart funding in greater depth. This mission concluded that the problems had been created by a combination of (a) excessive control and delay at the central level and (b) inadequate procurement planning and poor budgeting within beneficiary agencies, particularly the consolidated Ministry of Agriculture, Animal Industry, and Fisheries (MAAIF). Thus, the design of the proposed project calls for specific actions to strengthen financial and other management systems for agricultural research by establishing a National Agricultural Research Organisation (NARO). The budgetary process and linkages with the MFEP were reviewed at the Country Implementation Review in May 1992, and agreement was reached on measures for releasing of funds promptly and responding to the financial requirements of projects more effectively. Agreements between the Central Tender Board and the sector ministries were also reached on streamlining procurement procedures. 1.25 A review of the implementation experience in agricultural research and extension (R&E) in Africa, Asia and Latin America has also provided useful lessons.4/ In these regions, the The World Bank. 'Strengthening Agriculturml Research and Extension - The World Bank Experience." Opeations and Evaluation Dcpartment, September 1, 1983.  -7- more successful research organizations have displayed some combination of the following characteristics: (a) a strong central organization, with overall responsibility for most aspects of national research and the funding control necessary to back it up; (b) a degree of autonomy from the routine bureaucratic structure of the Ministry of Agriculture; (c) solid links to national planners and policymakers, despite the semi-autonomous or autonomous status of the organizations; (d) the existence of service units-either part of or closely related to the central research organization--that perform important planning, monitoring and evaluation functions; (e) the decentralization of regional research; and (f) the active participation of farmers, the extension service and other clients in applying and communicating research results to users. The design of the proposed project has incorporated these characteristics. 1.26 The implementation of R&E projects has faced six major constraints: (a) the lack of clarity in national objectives for agriculture, marked particularly by an inadequate allocation of resources to R&E; (b) limited input by the Government in the design of research components or projects; (c) inadequate coordination between the research activities financed by the Bank and other developmental activities in the sector; (d) limited sector- or economy/wide work on issues affecting agricultural R&E; (e) weak linkages between research and extension; and (f) the lack bf clarity or agreement on the definition of various stages in the process of technological development and transfer. The Agricultural Research and Training Project (ARTP) has been designed to address these issues. All agricultural research currently financed by the Bank will be consolidated into the proposed ARTP, and an effective mechanism for coordinating the activities of other development agencies involved in agricultural research will be established. The NARO Secretariat and Makerere University will develop analytical capacity to support agricultural-sector policymaking and research planning, identification, design, implementation and dissemination will be clarified and streamlined. 1.27 The project would also address weaknesses that have been observed in other research projects funded by the Bank- the absence of a supportive and conducive environment for agricultural research; the lack of feedback from farmers and other clients; inadequate support for human resource development (specifically for technical and methodological skills) and administrative and other support services; and weak monitoring and evaluation (M&E) capabilities, thus diminishing the accountability of research organizations; and ill-defined channels for communicating research results. Previous projects have focused more on monitoring quantifiable parameters (expenditures, disbursements, civil works and so forth) than on ensuring the quality of programs and the applicability of results. Thus, the proposed project would support developing an M&E system that would provide periodic assessments of the quality of programs, the applicability of results, and the costs and benefits of research (Annex 13). H. Rationale for IDA Involvement 1.28 IDA has supported the Government's economic recovery program and is helping to expand the agricultural-sector reform program under ASAC. Smaller, more focused investment projects are also required to restore the effectiveness of key agricultural support services, and additional assistance is necessary to strengthen sectoral management, refurbish R&E services, and accelerate and rationalize personnel training. IDA's direct involvement in this project is essential for: (a) encouraging a greater focus on efficiency in restructuring the national agricultural research system; (b) promoting strong linkages among research, extension, and agricultural faculties and clients; (c) applying the experience of neighboring and other countries in  establishing, managing and sustaining national agricultural research systems; (d) coordinating planned IDA involvement in the other key support services; and (e) facilitating the coordination of other donor support to the national agricultural research system. The project would build on the experience of previous and current donor support to agricultural research and extension and complement other ongoing and proposed IDA/International Fund for Agricultural Development (IFAD) operations. II. THE AGRICULTURAL SECTOR A. Salient Features 2.1 Agriculture dominates Uganda's economy, accounting for 60 percent of GDP, over 95 percent of export earnings, 80 percent of employment, and 40 percent of government revenues. Its contribution to the economy is even greater given that it provides the economic base for much of the manufacturing and service industries. The country is endowed with some of the finest agricultural land in Sub-Saharan Africa. It has a favorable climate, with ample rainfall and little temperature variability. Some 30 percent of a total arable land area of 17 million hectares is cultivated, predominantly by smallholder farmers, with prominent participation by women and an average cultivated area per family of 1.3 hectares. 2.2 The bulk of land cultivation in Uganda represents a "low-resource' agricultural system in which labor is the principal input, entailing relatively few cash costs and low productivity per unit of labor and land, and thus generating limited marketed surplus. Farmers reduce risks by diversifying their crops and integrating livestock into the crop production system. Food crops also dominate the contribution of agricultural production to GDP. Coffee accounted for over 95 percent of all export earnings in 1989 and 80 percent in 1990. Thus, the Government consequently assigns high priority to diversifying the agricultural export base. 2.3 With support from the Economic Recovery Program (ERP), the agricultural sector is recovering from the devastation of the almost two decades of political instability and economic mismanagement. Production levels have generally returned to 1965-70 levels, but the population has increased by more than two-thirds. Thus, output per capita is now considerably lower than it was in the late 1960s. Further growth in production depends on a political and financial environment conducive to private-sector initiatives and supported by adequate infrastructure and sound agricultural support services. B. Recent Performance 2.4 From 1981 to 1989 the agricultural sector (including food and cash crops, livestock, forestry and fishing) contributed an average of 63 percent of GDP. In 1990, food crops accounted for 74 percent of agricultural GDP; livestock products, 16 percent; forestry and fishing, 6 percent; and cash crops, 4 percent. During the same period, GDP growth in agriculture averaged 2.8 percent annually, with the rate of growth rising to an average of 5.4 percent annually during the 1986-89 period. Although real output from cash crops showed marginal growth over the past decade, food crops have grown at an average rate of 3.3 percent since 1981 and 5.9 percent since 1986. The growth registered during the past four years is due  - 9 - primarily to the more secure political and financial environment and specifically to an improved transport system. The liberalization of trade and foreign-exchange allocations have made agricultural inputs more readily available, also contributing to the recent growth. 2.5 The recovery of food crop production since 1986 reflects an expansion in the area cultivated rather than increased yields per unit area. The expansion was facilitated by the rehabilitation and cultivation of abandoned or new lands; a more secure environment and greater economic opportunities; the restoration of rural marketing services; and the removal of obstacles to trade in food crops-namely, simplified licensing practices and more open export-trade regulations for the private sector. The livestock subsector had seriously been affected by looting and by deteriorating animal health services, but since 1986 a marked growth in dairy production aided the subsector's recovery. 2.6 Cash crops have been affected adversely by low farmgate prices. Only sugar and tobacco production grew significantly during the past four years. A slow return to security in the north, the absence of incentives for producers, inadequate seed supply and distribution systems, and an inefficient and financially weak processing subsector have hampered the reactivation of the once- flourishing cotton industry. Thus, the Government's decision to liberalize the internal marketing of lint has had little impact on the industry. The production of tea increased in the latter half of the 1980s, after the Government introduced trade incentives by offering exporters foreign- exchange retention privileges. C. Sectoral Objectives 2.7 The Government's sectoral goals are to diversify agricultural production, processing and the export base, while achieving food self-sufficiency and improving the well-being of the rural population. Increased resource productivity is a primary objective; the Government hopes both to increase yields and to continue expanding the area cultivated with traditional farming methods. It must also diversify exports to reduce the vulnerability of the economy to a volatile international coffee market. The coffee subsector must perform strongly while also responding to stabilization objectives that call for developing nontraditional exports gradually. Achieving these objectives will require overcoming severe constraints-- inadequate incentives for producers, inefficient financial and marketing systems and institutions, a poor infrastructure, weak agricultural support services, an inefficient use of public resources in the agricultural sector, and weak planning capabilities in the agricultural sector. The Government's strategy is to establish an environment that is conducive to growth and development by providing required agricultural support services; improving the transport, processing and marketing infrastructure; adopting coffee subsector policies that help keep the economy on a stable track; and improving the efficiency of the public expenditure program and sectoral planning. D. Sources of and Constraints on Growth 2.8 The Government expects the agricultural sector to be the main source of growth, although it recognizes the need to diversify the economy. With improved production technologies and current long-term projections for crop prices, Uganda's comparative advantage rests with the traditional export crops-coffee, cotton and tea--and in such new areas as sesame, hides and skins, spices, vanilla and horticultural crops. Some of the food crops currently produced are regionally  - 10- competitive. However, Uganda's landlocked position limits international competitiveness given its high transport and handling costs. 2.9 Short- to medium-term prospects for recapturing lost export markets for the traditional export crops offer important opportunities for growth. Tea exports in 1989 represented only about 20 percent of annual exports in the early 1970s, with less than half of the 20,000 hectares under tea being harvested. Improved prospects for international prices and recent actions to liberalize tea exports and grant foreign-exchange retention privileges should encourage the rehabilitation of both tea estates and smallholder farms and a return to improved husbandry practices. The remaining constraints are inadequate incentives for smallholder farmers, weak extension services, the inefficient parastatal ownership and management of tea factories, and the unresolved ownership of expropriated estates. 2.10 Growth in cotton production depends on increasing the low average yield (around 400 kg/ha) and the area under cultivation. Yields of up to 1,000 kg/ha can be obtained with existing coaonseed varieties; further yield increases can be attained if improved seed varieties are developed, provided that farmgate prices are raised relative to prices for competing food crops. The necessary research to realize this potential should be initiated now. Better husbandry practices will improve the quality of and increase yields for coffee production. They include replacing old Robusta coffee trees with improved, high-yielding Robusta clones or with higher- value Arabica clones wherever feasible. 2.11 The recently introduced export-import scheme for noncoffee products is encouraging the development of nontraditional exports. Beyond the weak agricultural research and extension services, the key constraints on export diversification are the inadequate policy and financial environments and an insufficient infrastructure to move agricultural products from primary production centers to the international transport network. Considerable progress has been made toward restoring the private sector's confidence in the Government's ability to manage the economy, but the private sector is still hesitant and uncertain about the Government's intentions and policy initiatives. 2.12 Growth with diversification includes iuport substittion in addition to export diversification. Prospects for import substitution rest in dairy, sugar, tobacco and edible-oil production. The main challenge in dairy production is to improve the efficiency of fresh-milk collection and processing, which is presently controlled and operated by a parastatal agency. Growth in sugar production depends on completing the rehabilitation of sugar estates, making the necessary foreign-exchange accessible to sugar companies, and creating a pricing policy that encourages efficient import substitution. Developing the domestic production of edible oil will require improving support services, marketing, and extension and research for the domestic production of oilseeds. 2.13 Sustained sectoral growth will require that farmers adopt improved production technologies and the development of nontraditional exports. Improved technical information is already available for some crops, such as maize and beans, which can substantially raise yields, provided that the extension system is made more efficient. Funding constraints, fragmented extension services, and the dilapidated state of support facilities must be addressed. In addition, an expanded program for food crop research is essential for raising production and productivity. Appropriate technologies and practices for seeds and planting material, soil management, weed management, pest control, postharvest handling, storage and marketing must also be developed.  - 11 - The main impediment is the absence of an organizational framework within which a prioritized national agricultural research plan can be developed and implemented cost effectively. 2.14 The adoption of improved agricultural practices and diversification in production and exports will require that farmers adjust their production strategies and invest in new technology. These adjustments and investments must be supported by effective agricultural support services, including research and extension, as well as by efficient markets for the transfer of land ownership. The effectiveness of agricultural research and extension has been eroded by the destruction of infrastructure, the loss of skilled personnel due to low wages, and inadequate operating funds. The challenge is to create lean and sustainable organizations for research and extension that address the main technological constraints facing farmers. E. Public Expenditures and Sectoral Management 2.15 Expenditures in the agricultural sector are spread over production, marketing and service activities. Recurrent expenditures are allocated heavily to salary costs due, primarily to the