Uganda - Industrial Rehabilitation Project

D -it of The World Bank FOR OMCLAL USE ONLY epwt No. 12130 PROJECT COHPLETION REPORr uGAA DUSTRAL IILITATION PROJECT (CREDIT 1248-UG) JUNE 30, 1993 HICROGRAPHICS Report No: 12130 Type: PCR Public and Private Enterprise Division Eastern Africa Department Africa Regional Office Tbis document has a resticted distribon and may be used by recipients only in the performance of tdeir offica duies. Its conten may not otwise be disclosed wout Word Bank adtorizat  CURRENCY EQUIVALENIS FrAED PARATLL MARI= Septeber 1983 USS1 = Ush 180 Ocftber 1984 US$1 = Ush 402 June 1985 US$1 = Ush 650 USS1 = Ush 1,400 October 1986 US$1 = Ush 1,400 US$1 = Ush 8,000 June 1987 USSI = New Ush 60 June 1989 US$1 = Now Ush 200 Jun 1992 USSI = Now Ush 1,000 ABBREVIATIONS UCB Ugnda Commercial Bank UDB Uganda Development Bank UNDP United Nations Development Prog- m FISCAL YEAR Govemen July I - June 30 UCB October 1 - September 30 UDB Jamnary 1 - December 31  FOR OFFICIAL USE '1AE WORLD BANK Wsbtum DX. 20433 U. S A. Office of Djr.cor-G.nrl June 30, 1993 ME1ORANDUM TO THE EXECUI DIRECMTU S AND THE PRESIDENT SUBJEC: Project Completion Report on Uganda Industrial Rehabilitation Project (Credit 18UG) Attached is the Project Completion Report on Uganda - Industrial Rehabilitation Project (Credit 1248-UG) prepaed by the Africa Regional Office. Part II was prepared by the Borrower. Thiu project was designed to (i) rehabilitate industial projects to restore domestic capacity for the production of essential goods and services; and (ii) strengthen two development institutions - the Uganda Development Bank (UDB) and Uganda Commerci Bank (UCB) - to provide industri loans for rehabilitation and development. The capital injection for the two financial institutions that was required under the credit was not undertaken upfront as expected; instead, the equity was met as part of sub-loan repayments through acceptance of debt for enuity. Institutional weaknesses were aggravated by severe political, security and macroeconomic problems. The performance of UCB was relatively better than that of UDB. However at credit closing, both institutions were in serious financial difficulties because of serious arreirs and the poor quality of the overall portfolio. The PCR provides a candid assessment of these problems. Overall, the operation is rated unsatisfactory and its sustainability as uncertain. The project was partially successful in its institutional development objectve of improving project analysis capacity in the two financial insttutions. No audit is planned. Atachment This docment has a restricted distribution and may be used by redpiets only in the performance of the ! official dUtie. Its contens may not othewise be disdosed without World Bank authoriation.  FOR OMCIL USE ONLY PROJECT COMFLETION REPURT UGANDA NDUSTJUAL REHABLiTATION PROJECT (CREDIT 1248-UG) Tab Of Contents Ples PREFACE .............................................. .. . i EVALUATION SUMMARY .......................... ., PART1: PROuECTREVIEWFROM BAN1S PERSPECrIVE . I PwojecIdentity .........,., I Backcground 1........................ ProjecAObfjectives and Dceiptic 2 PrQject Design and Organbatio...... ............. 3 ProjectI. .. . .. ..ation 3 PrqjectResults ......................... Sustaimbility 6 Bowwe Perfornmnce...................... 7 ProjectRationsip.. 8 Conaungservices ...8 Proje Dct tacan Deat.................... 9 LA ssos Learnl... 9 PART I: PROJECr REVIEW FROM THE BORROWER'S PRSPECTIVE THEPROJECT OEBECTIVS AND DESCRPIMON . .11 Objctives ..11 Desription ..11 Project Desigp and Orgnatic . ..11 ProjectI....e....t.....n.............. 1 Disburseients ..12 Perfrmance ..13 Sustainability ..13 Fdinpsand Lessons .earned............. 14 Findings ..14 Lessons Leamned ..14 PART III: PROJECr' PRISIE...15 ReaWd BakLoans/Credits .15 ProjeatTietble.I 1S This document has a rticted distribution and may be ud by r ints only in the performance of thei offic dutis Its contents my not othewis b dislosed without Wodd lank authorization.  PROJECT COMPLETION REPORT UGANDA INDUSTRIAL REHABLTATION PROJECT (CREDITM1248-UG) Table of Contns (ConL) Pagp Credit Disburseme~nts ...................... 16 PICO i DEsut .................,,,.......................... 16 ProetImplemnaion . 16 ProjectCotsand Fincing ......... ....... ...................... 16 Status ofCovnats .............. 17 UseofBankResources .............. 18 ANNEXES I. Uganda Develqmet Buk: Chareristics of Sub-Proecs Ficed Unr Creit 12-UG .......... 19 H. Uganda Deveopment Bank: Pefrmane of Sub-Projects Fianed Under Credit 124-UG ..20 II. Ugands Development Bank: Sctora Disiton of Sub-Projwecs Financed Undet Crit 1248-UG .21 IV. Uganda Development Bank Investmnt Cost Distuibuion of Sub-Projects Under Credit 1248-UG .22 V. Uganda Development BanL: Sim Distrlbut fof Sub-LoamUnder Credit1248-UG .23 VI. UgandDevklpment Bank Rqpaynt Peormance of Sub-Projects FnaLced Under Credt 124-.UG .24 VII. Uganda Development Bank: Porfio Amars of Over Six Months .2 VM. Uganda Development Bwk: Comparative Income Stame .27 IX. Ugnda Development Bank: Comparnive Balane Sbhet. 28 X. Uganda Commcial Bank Ch And Perfomance of Sub-Projects Financed Under Credit 1248-UG .29 Xi. Uganda Commemial Bank Size Distribution of Sub-Loans Financed Under Credit 1248-UG .......................... 30 XU. Uganda Comm_er Bank Portfolio A ars of Over Six Months .... ......... 31 XII. Uganda Commeri Banik Comparative nome Stemnts ................. 32 XIV. Uganda Commercial Bank CompmtiveBalanceShet .................... 33  PROJECT COMIPlEON REPORT UGANDA INDUSTRIAL REHAILIATION PROJECT (CREDIT 1248-UG) PREFACE This is a Prolect Completion Report (PCR) for the bndust ReWabilitation Project in Uganda, for which Credit 1248-UG In the amount of SDR 31.5 million was approved on May 18, 1982. Te USS equivaent wS.O million at the time of approva, but incased to $38.8 million by the closing date. The Credit was losed on June 30, 1992, treeo year behind schedule. It was disbursed folly and the last disburseme was made in October 1992. The PCR waS prepared by the Publc and Prvate Enterprise Divisn, Easten frica Dement of the Africa Regional Office (Pefae, Evaluation Summary, Pars I and III). A draft was sem for comment to the Uganda Development Bank (UDB) and the Uganda Commercial Bank (UCB), the two f ci i who were responsible for the execution of the project. PI n of this PCR was started in July 1992 and is based, inter Al on the Staff Appraisal Rehort the Credit and Project Agreeme; superiion repons; correspondece tween IDA and ) the Borrower and (O) the two financial Itediaies; and internal IDA m e  - ii . PROJECT COmPLEnON REPORT UGANDA INDUSTRIJ,AL REABILTATON PROJECT (CREDIT 1248-UG) EVALUATION SUMMARY I. Following the cation of the 1979 war, the Govarment of Uganda iiiated n economic recovery program Involving the rehabilitation of the productive sedors of the ecoomy wbich wo terally in rins as a result of the depedatons of the mfiitary regime (1971-79). In pportof theseffbus, IDA inily proided two Recontu credits and a Technical Assisace creit lhe credt under rewiew cciaplements thes6 credits. Objective Bi. The objectves of the credt were to: (i) rehabilitate a nunber of iustri prjecs to reoe some of the domesdtc cpcity for producing essntial goods and services; and (H) sregthen UDB and UCB to mor effctively underak the Inmedio function for industr reabiitation and devlopment Imleento Exprence i. ' Ie Imple g agencies were: (a) UDJI for financing rehabit of medium- a lan W scale industries; and (b) UCB for fiacing small scale indwsres (SSi;). The original alloctin of US$30.0 million to UDB and US$5.0 to UCB were revised in the course of project Irplementation to US$28.0 million and US$7.0 million respectvely, to enable UCB to fnamce mor SSJ becms of its apid commiment of the orginal locaon The Government was to conribule US$10.0 million and US$6.5 milion from the allocations of UDB and UCB respectivdy to their paid-I capital and te balance to be on-lent to them The Goverment decided to m&ae thes equity cotition out of loan rpayment by b-projects. Iv. Ibe record of project implentatlon was mixd. While UCB implem the proctd latively ily, UDB w hped itimy projectI by Istioal and by political, security nd sevec problem (Pa 5.01). Crit _omadmam and closing daes wero extended tuice from June 30, 1984 and June 30, 1989, to Decmber 31, 1989 and June 30, 1992 re tvdy. v. UDB S _.pts. The cdit provided finaicing of US$28 million to 15 sub- prjet. Abowt 73% of t mon (US20.5 miion) wet to 10 b-proet in a4 )~~~~ ~ ~~~~~~~ > ' ' ....,I . 4 ,'  H ii - food and beverages, and engineeing sub-sectors. About 50% of the sub-projects were based on imported aw matrials, receiving 36% of the amount. Most projects took firm 24 to 7S mouhs to Implement and two are still under construction. Capacity utilization ragd between 7-90 percen, the averg being 44%. Becuse of the contining economic difficulties, pardiulady the shotage of foreigl exchange for import of raw mat s, and the long start-up perod needed for pr foj to go into commrcial production, it Is premaure to pass judgment at this stage on the success or filure of the beneficiay enrpries (Para 6.01). vi. UCI SubWo-pjecs. UCB provided finacing of US$10 mfllion under the credi to 80 smail-scale enterprises, mosdy in agoprocessing, building, and clothing sub-sectou. Since most of the sub-projects were based on local raw matrials, their performac was t affced by the shorte of foeign exchange an their capacity utlization was than that of UCB subpoects. Es the case of UCB sub-projects, project reshould be considered to be satsfacty (Pam 6A. vii. St hin of UDB and UCI. 'TM objecdve of strengthening the capabilities of UDB and UCB to undertake rore efectively the _ fun fti was not achieved in the case of UDB. While the technical assistance provided under the credi did hdp improve UDB staff capabilitlcs to some extent, the political and economic situation and suspensions of credit lines by the donors due to Govenment defaults in itlment aments adveeldy affeced UDB portfolio. Lack of autonomy from Government in the matOer of project 1prval, in determation of interest rates together with interfrence from Board in management fucutions impaie emangme effectiveness. UCB, on the other hand, was able to develop a better organition, by sengeg its Development Finae Group, which bandled fminaig of small- scale industry. Because the capital injection into UDB and UCB, provided under the aedk, was done out of sub-oan repayments, financial strengthening of these institutions was accomplshed only paily and too late. Mainly because of are and the poor quality of the overall portfolio, both ntitutions are in serous financial difficulties (Paras 6.03, 9.02 and 9.03). viii. Since rehabiliaton took place during a period of econmic and political dfficulties, and since most entises are not yet able to realize their fill potental due to shortage of foreign exchange and other operational problems, it is prematu to make a judgment on the modium- and long-term sustainability of their econmic benft. Under improved operatig conditio, ecoomic beMfits of most of the assisted pris are likely tD be suaable. Regri the finncial intermediars, UCB, although presenty in a poor finial codion, has the potendal of improving its position with the return of more stable economi conditons. UDB, however, has been vrtuly an am of the Govaement, limitng its ability to operate as an autonomous intui Its survival wilhout enorm Goven subsidies (Para 9.02), and Its susanab are qustonbe (Pr 7.01). uldiap and bm= larnd iL The rous of the project a mixe L While the objectine of rehablitating a number of Industrial proects was achieved by providing resources for import of plant and machinery and nt woking capital, the suW-pojects con to fce opeatoa polem due to conmic difficulties, pacully t shortage of fori echang to Impor raw materials asa spar. pa. Maiy becagse of masive curren depreciaon, both UDB and UCB are under-apitalized and, due  - iv - to large portfolio arrears, are in precaious flanmcial poridoti. The main lesos learned from this experienCe are as follows: (a) wito political and economic stabilty, thaee is littls chance of success for an eneprise rehabiitation project like this which does not target specific invesing wies; (b) in a situion of svere and dronic foreign exchange shonage, while providing resou to indusial project for capitalmivestment snd six months requreme of impored raw maWials, the Govenmnet shoudd have also ensured adequate codtuity of complementary resources in foreign exchange for import of raw mterias and spare part to enure opation at a reasonable capacity for longer periods, wiot which invesm in capital stck was not able to genate funds to rey loans, thus creatng liquidity problems for the financog institutions; (c) development finace istiions should be give autonoy in day to day management and held accoutable for reslts. Excessive Govenment control and Board Inefaence demoralized UDB managemt and caused loss of focus on priorities; (d) a def. ed procedure and deadline(s) for capital injection out of IDA resourcesshould have cmen spelled out in IDA's project documents; for lack of this, financial strengthing of the two f'na in iares could not tke place in dme; and (e) without a longer term strategy for the financial sector, such fincional ivesmen are unlikely to achieve much. (This is now being done under a proposed Finncial Sector Adjusuen Credit).  PROJECr COMIFION REPORT UGANDA IUSTRIAL REABILIrATION PROJECT (CREDir 1248-UG) PA.qT I: PROJECr REVIEW FROM VDA'S PERSIECTIV 1. Ptejd Idenity Name ndtr Rdabilitaion Project Cedit No. 1248UG VP Unit Aftica Region CMy Ugan sector : 2. Badcgod 2.01 Ugan acideved in 1962 with a number of important advantages: a favorable climate fertile soils, a well-esablished indienous smdUalhdr sector producing coffee, comtn, tea and tobacco and an mple domec food supply; a small ndstil sector contributg ept of ttile and copper; a weldeveloped tansport uaturan exportable suplus of hydroelecrIcity; one of the most advanced educadon systems in East Afiica; and a complemnt of skilld nd urained anpower, r d that of Kemy or Tanzania Th favorable conditons, combined with competen economic mna ent, contute to a steady 2% per year growth dudng the sxti an aver savg rt of 13%, whic e ed a hilevel of investme, and budgety piluses which contributed to a signiflant amount of development outlays. 2.02 Uada's polia situation, howevet, wa less ficitou; intea conflicts and rvalres amon t o aios ngdoms and the rest of the couty gd t at my bO to stag a coup in 1971. ike depredations of th mitay eim (1971-79), wih unprecedene loot of moveable goods and dama to every sector of the ecoomy (crops, lvestock, facres and buidings), duig and aftr the war (197946), vitally redued Ugans economy to ns. During this period, GDP _god and per capha Lcoms fell. Sao and 10V8=01 aXnI d GovICM11 mV declined real terms. Only agriculurW e cond gwwing i usPows to bod seui needs and lack of opporaunin the monetied sco. 2.03 Te new Govesme which took ove aft the 1979 wr placed the ighest prrtes to oratin of law and orde ad _ t of the direy produe sectors. ln 1981, it _ odwda _ Smptdwwi"f cial prog to sailizth o eonomy. k abo prepad an ooic towvay wgram wlchav2 top priorit to rehabilitaon of agriculture which had distinct possibiltis for expots and for supplying some domesi _iudui needs. 2.04 in th 196s, Ugnas Idustrial t accoued for about 11% of P, supplying the domesti marke with basic: goods lik edibl oil, soap, pape and Cemen and producin smal able surpluses of texts and pper Incomm with o scs, k w o tet of tragesfthesvo ni. By 1980, InduI valueaddedhad ntoabout%ofDP. Many ndstrae pris cdod down and most ote were The conequent mass odus  -2- of expariate entrepnurs, mosly Asivs, deprived the sectr of its managers, techni ad prvate investrs. The rehabilitation of the industial sector was considered by the Govem to be an impora eleme of its economic recovey progrm he most obvious and geneally bindi constraint on recovery was foreigik exchge for raw mateials, spare parts and capital goods to replace outdated and damaged plants. 2.05 Ugana's financial sector comprises the Bank of Uganda, seven conmnercial bank., four other crodit instituions, two development banku, a post office sings bank and several ins_ur companies. The Uganda Commerci Bank (UCB), wholly govermentuowned, is the leus comme bank ad the Uganda Developme ak (DB), also whlly governmeneowned, Is do main development fiacing Iintto. Durig the early 1980s, the fnacl systm was unsuccessfl In rapidly expading the doit basoe pemt needed inas in lending. Need wa also felt to strngte selected banks to more effectively undertak the em diaon fimon fr iustrial rehabilitation and development. 2.06 In support of the Gcvent's economic noovery effr, parculaly d1 rehabilitation of tbe protuctive sectors, the Bank Group povided a Recostcion Credit of US72 million, which was followed by a Technical istance Credit (to fInance studies to build up a project pipeline) and a Second Recocon Credit (to finance import of inpu for the iultue and industry sectors). The credit under review complemented the last two credi. 3. Project Objectves and Descripdon 3.01 Objecftives. The objectives of the project we to: () rehabilitate a number of industrialentr to restore some of the domesdc capacity for producing esst goods and services; and 01) stregen UDB and UCB to more effectively undertba the Itermedia function for industrial ehabilitation and development 3.02 Descripdon. The project had two component: (i) US$30 million for 1DB, of which US$20 milion would be on-lent by thae Governent as a line of credit for relending to rehaili selected medim- and large-scoe industr enterpis in Uganda, and US$10 million conibuted as equity to UDB's capital; and (f) US$5 million for UCB, of which US$3.75 million would be on-lent by the Goverment as a line of credit for re-lending to rehailitate small-scale industri eneprs in Uganda, and US$1.25 million conbuted as equity to UCB's capital. Wihin the overal credi amount of US$35 million equivalent, the amounts under the two components were modfied in he course of project ImplemeItaon (Pars 5.02). Among other th , the UDB cmonent also pwvided for a techical assistance sub-component to impove UDB's project appraisal capabilites. (Technical asistae funding was also provided to UDB from a Technical Assin Credit and from UNDP fanig for which IDA was the executing agency). 3.03 rA amounts for credit line were onlent by the Govenmet to UDI and UCB at 6.5% p,a. for a maximum of 15 years and 10 yeas rectively. UDB and UCB were to relend die proceeds of the creditto derbonrowers at 14% p.., wih maturities of up to 1S years and 10 years respctively. (is rate was subject to anual revws and was actually revised a few dmes in view of the hih ra of inlaon and currecy dep im durig proect mmi Go"mmed would cary the exchange risk agait a choge of 1% (revsed to 10% in 1988) to be pldbyd h . Ihocrdit would fico (i) caphipl ex_e for the r _ of obsolete or e down plant, machiney, tools and other aqipmt of industril in the public joint and private sectors (II) cost of intlainand comsinn;(ill upto two year  .3- stock of spar pam for plant and machinery; (iv) trucks and other transport equipment: (v) repais of exisdg structures and civil workss; (vi) costs of key expatriate management staff Pr project operation for up to two years after rehabilitation; and (vii) up to six months requirem of Wn.ported raw matris for filly utilizing rehlbilltated equipmen. 4. Project Deign and Orgization 4.01 Following the cessation of war and the installation of a civilian Govenmnt, there wa an immediate need fo ,roviding foreign exchage rources to rehabflitte the productive sector of the economy. h project was designed and ftmuated to redress the constrait on the iustri sector in Uganda and at the same time to establish quicldy an effective framewor for technical and fnanci assistance to industry. While shortages of imported aw maewis and sparo pars were the major constraints to indus production i the shorterm, the enterprises also needed replacemen of obsolee and damaged plan, machinery, tools and otier equipment, repairs to civil works and assistance i installation, commissioning and opemion of the plants. While the needs for rehabition of the sector were extensive, the Wain objective in designing the major componet of the project (assistance dtugh UDB to medium- and large-scale enteprises) was to provide asitn to a limited nber of priority industrial enteprises, pre-lccted by the Govanment, IDA and UDB, on the basis of potentdal for (i) saving foreign excdhnge direcdy trough producing esal conumer goods and conuctionmaterials and (i) contbutig to foreign exchange egs indirecdy throgh producing emnal inputs for agricultural actiities. For re abilt of small-scale industries, based on a indicative sample in three priority sub-sectors (food prceing, farm implemens and engineing workshops) it was estimated that the allocation of US$S milion would be adequate to finance, on a fairly selectiva basis, 40-50 sub-projecs over a time frame of 3 years. For re-lending fknds to i-Ausial enteprie, the two financial inrdes selected were appropriate. They poessed the basic capabilkies although some shening was needed. 4.02 The project was well-prepared and its timing was approprate. The scope and scale of the project were appropriate In light of its objectives and the imple n capability in the country. The two financial intemediaries, which were responsible for project implemetion, were associated right from the outset in project preparadon and formulation and were well aware of their reponsibilies in project imlemention. S. Project Implementton 5.01 Ihe credit became effective on September 16, 1982, about four months after Board approval and three months after credit signature. The record of project implemenation is checkerd. While UCB implemented its portion of the investment component involving financing of small-scale industies qudte efficieny, UDB was reatvely slow in implementig its portion, involving fianing of medium and large industries. Apart from institutional w esses, the maintors adverely affectingrwjet imp were: the frequ breakdown of law and order and political umoil, hih rami, of iion, massive depcia of the curency, negative intert rates, shorage of foreign exchange and local credit, reversal of the Govenment policy, for about 18 months, of the Governnt assuming exchange risk on foreig edits subloaned to idutri entpren, and ssesion of lies of credi by donors maily due to defaus of repayments by the Govement (IDA suseded commimen under the investment componen of the credit between October 28, 1986 and August 10, 1987 becase of the disttins resulting from highly negtive imerest tes and the over-valod xchange rate, which were adversely affecting UDB's pfitability and ne worth, subsidizinimport substitutio companies and creaig disincenties f export idustry). Ih credi  -4 - suspensions and the chage i forep chango isk policy furer compounded the problems fced by industial enteprpes due to the mac-onomic conditions meandoned above, partdularly tho which had already received partial di affecting their implemetaton schedules, viablity nd debt rpaym capacty. Repaymt ddeful adversely df the flnanci position of the two bank. 5.02 ln the couse of proJect implementation, the credit allocations were revised as follows: O1*d lt -Revisa 20d Revbioo MM ID.E .E .D .EI (Amovat in Million) UDB 30 27 30 27 25 25 Ctet lm ( (15) ( (17.5) (17.5) (15.5) Bquity 'ouu (10) (9) (10) (9) (10) (9) Teclmuimlusuiutanoe t(0-P* (0M A() (03) UC9 5 43 5 43 7 63S Cedit line (3.75) (3.4) (3.75) (3.4) (05) (S.4) oqu_y eonulon (1.2) (1-1) (1.(1.1) (63) (1. iM4Mg for Emplnymml of xpeus to imo UOSDB proet appma opaba. 5.03 Ote major variances btween planned and actua prjec 1m wer as follows: (a) Due to a quick commimnt of aocated funds and stwong demand for fidnacg new project sponsored by experienced small-scao entreV p creu, UCB was autorized in May 1986 to use IDA hnds for financing e small-cale industia dvelopt projecs, in addition to financing rehabilitation of existin SSI projec (para 3.02); (b) Credi comcitment and losing dates wer extended thrice fom 6M30/84 and 6(30/89, finlly to 12/31/89 and 6/30192 respectively; while progress ofmann wa genely saifctory, iwere laggig behind due to the oval economic situation credit ndon and reversal (ntween May 1987 and November 1988) of the excange risk policy by the Govme; (c) the fee payable to the Goverme by UDB and UCB for assuming exd rsk on ei sub-loans was Increased from 1% to 10% in Novmer 1988, folbwing the Gom ent decsion to rvet back t the preos poliy of auming exchange risk on foreign creit for a fee; the inces was jusfed by frequn and masive  .5- devaluations and tho ce in the rates of intt ratzes chaged to ultie borowas to 35% p.a.; and (d) UlDB fiaced under the credit three sub-oject in exces of USS4.0 million each, aIthough the original intendto (as statd in the MOP) was that such large poject wold not be financed. However, It appears tha this matter was nOt finally considered important enough to be included as a covan in the legal greeme. 5.04 h. revised allocati of funs, proviing fort: (a) a tehcal assitn compne of US$SO0,000 to UDB; ad (b) adjustmen of fids betwee UDB and UCB for sub-oans to enteprises, and otht varince were justified in tbe c prevailing at the time of Theo issu of cWtzatio of UDB and UCB, for which over 47% of IDA crdit (US$165 million) wu earmarked, trmained a mat of conernto evey supevio mission. T Govermet did not give suient Importace even to hcasing th audhozed capital of the two instItutons, whkh coud have been done under a statutry order signed by the Mnister. 'Me ease was necessay to allow injecton of funds into UDB ad UCB as pa capitl, paruary afer the Crency Refm State of 1987, which eroded the value of heir alteady Insufficien authorized and paid-in capital. (nhe Stu reed tat as from May 15, 1987, aU monetary u and obligations be converted 0 1 new shming = 100 old ddlli). It appes that the initia inusion Of funds into UDE's capital was done by way of 'capital contrlbutions"In Installments, which by dte end of Deember 1986 ammnted to Ush 7.847 bilion In old Ush. However, condtued massive deauatio and cuncy depreciaon eroded the vilue of the capital contribut to UDB. Consequenly, UDB's debt equit ratio frequenty exceed the 4:1 rado which was a ivenant In die Proect Agrekem The Govemet made fluther ntritiond in 1987 ad 1989 to incra the cal conibution to L'sh 1.15 billion, which UDB consdered to be the equvent of USS10 million. As regards UCB, the Govent contbutd a total of about Ush 268 million to UCB's paid-in capital by to end of Juve 1992 out of rpaymens of UCB sub-loans under IDA Credit. 5.05 Since the _maer and dming of capital nfsion from the IDA credit into UDB and UCB was not spelled out in the legad ae t the Gov ent decided to do it out of m of subloans; dis kept the isue of capitalization open-ended. While in the case of UDB, this was accomplished witho undue delay, it has not yet been completd in the case of UCB and is awaing. repaymen of oas by sub-borower. 6. Ptoject Resuls 6.01 UDB su-rojects. rhe credi pwvided fincing of US$28.0 milion to 15 sub- prjec mosy in prity sectors, of which 5 were public p. Mum public received about 50% of the fmancing. This is eo because of the dearth of privt iv r ollowing the exodus of Asian In the sevens and n ization of a mmlber of Industrial entpises. About 73% of the amonmt (US$20.5 million) wen to 10 sub- ptooe Insltaow_, focd and Uas, an niern su4co. About 50% of thasSb proects wer based on Impord taw mdials, receng 36% of th a _amL Most prets took frm 24 to 7S moths to Implement and two a sti under constucto Capaity utzaton ranged betwme 7-90 percent, avea being 4496. Four sub-projcts, whch rceived finacg of US$9.2 million or 37%, lolvd rehbiitatin of production capciy for ber, sprit so dr and to prodcts. Giv e cit preva iing Uganda, IDA c drd that ths sub- projects met th criteria pa ph 3.03) for project selecon viz prodon of enIa goods and services. Bcau of the cotinug eommic diultie, particularly he dwhor of 1reg  -6- exchange for import of raw materials, and the long start-up period needed for projects to go into commercial production, It is premature to pass judgment at this stage on the success or failure of the beneficiary enterprises. However, given the continued low rate of capacity utilization (only 5 sub- projects are operaing at 60% or higher capacity), it would still be fair to say that the project results were less satisfactory than those visualized at a4praisal. Annexes l-VII provide data on the peformance ef the sub-projects. 6.02 UCB sub-projects. UCB provided financing of US$10 million under the credit to 80 small-scale entprses, mosdy in the agr-processing, bulding, and clothing sub-sectors. About 79% of the sub-project received financing for amounts below Ush 50 million (US$50,000 at the present exchange rate). Only scanty information on the performance of the sub-projects is available (Ae X and Xl). However, judging from their generally unsaisfctory repayment perfom (Ann XlI), it apa that these sub-projects were nevertheless perfoming better than UDB sub- projects. TbI was perhaps because most UCB were based on local raw mateuials and their perfmace was not afected less adversely by the shortage of foreigm exchange. The sub-loans are estimatd to have created 1,964 jobs at a cost of Ush 2.1 million (US$2,100) per job. In the case of UCB sub-projects, project results should be considered to be sasfactory. 6.03 Sreghenng of UDB and UCB. The second objective of the project, to stregt the institutional capabilities of UDB and UCB to underae more effectively the intermediation funcD, was not achieved in the case of UDB. While the technical assistance provided to UDB did help improe systems, procedures and staff capabilities to some extns, the political and economic situation and suSpsions of credit lines from time to dme by the bilateral and iternaal donors adverey afected staff morale. Further problems in the smooth functioning of UDB were created by undue intree in its operational matters by the Govenment (which required prior consultation beore submission of the sub-projects to Board for approval and by UDB Board members, many of whom were political appointees without appropriate professional background and were encroaching upon the management functions of the General Manager, affecting his autnomy and effecivens). UCB, on the other had, was able to develop a better organiaion, by strengthening its Developmen Finance Group, which handled financing of smal-scale industry. Because of the modaity adopted for capital injecdon, the project did not accomplish financial strengthening of these i 7. SustainabiHty 7.01 Since rehabilitation took place during a period of economic and political difutis, and since most enterprises were not able to realize their full potential due to shortage of foreign exchange and .VJier operonal problems, it is premau to make a judgment on the medium- and long-tem susainabiity of their economic benefits. Under improved operating conditions, economic benefs of most of the assise enterprises are likely to be sustainale. Regarding the finaci intermediaris the UCB, although presently in a poor financia condition, has the potential of imprving is position with the retur of more stable economic condiionsThe UDB, howevr, has been vituay an arm of the Government and unable to opere as an autonomous titiona It has survived so -far only with enormous Government subsidies (Pa 9.02), without which its su8talnaity is questionable. In developing its lending program for the future, the Bank Group is the refm of the public enteris and of the fiancial sector as a whole. A Finanal Sector Adjusunn Credit being processed by lDA would have a tchnical assistan componet to improve the capbilte of the key instuions in the sector.  -7 - 8. IDAs Performance 8.01 The Bank Group prvided considerable assisuce to the Governme and the two flnancW intrmediries in idenifying, preparing and mlemenig the project. IDA, however, did Qot take up with the Governm the issue of UDB's autnomy at cri appraisal nor did t pursue during supevision the issue of undue intference by UDB's Board in maagemen mae. It was also deficient i not insiting strongly enough with Governmen to increase the authorized and paidin capital of the two bank right at the beginnng of project imlemetaton a in any case following the currnc refoms of 1987, whereby the value of thei capital was reduced by a factor of 100. IDA did not field supervision missions afr July 1989, ailthough d _ of subs a (US$10.0 millon) were yet to be oompleted. appws to be pardy due to the factbat, by July 1989, 100% of the UCB component and 85% of the UDB compot bad been committed and it was expected that d would be completed by December 1990, and pardy because the techical ssisuce compo was completed. 9. Borrower'sPer 9.01 Govrat performance. he Govment was the borrower of the IDA credit, but the major portion was inme d through UDB and UCB to industrial entseris. The Govnmen's perfomanc affected project Implemetatio to some exte Goverment was pay responsible for the delay in project implemention because its default in repaymet of cret istmen often triggered edit suspensos by donors, but this was due to c nces beyond is control viz. extreme shortage of foreign chage. Govement did not allow UDB sufficient autoom in project selecdon and setting of interest rates. It was also slow in incasiog the authorized and paid-in capital of UDB and UCB; these delays have led to UDB vwiolating its 4:1 debt- equty ratio covenan and to UCB having an unacceptably low capital to risk assets ratio until 1989. Government also, for a period of 18 months, caused uncertainty in UDB and in the wub4brower, by chanfng its position on bearing the foreign exchange risk on the loan. Uanda Develpmet Bk (IUDB) 9.02 UDB was the intemediary for channdling 80% of the credit. Although most of the sub-projects to be financed were pro-selected, it took UDB about 6 years to commit the amount and 9 yeas to disburse it. This was due to project appisal, supervision, and other or iona weakness in UDB, which were addressed through technical assite provided by IDA and UNDP. Other factrs responsible for delay in project imple ion were the macro economic and security situatios change in the foreig exchange risk policy by the Goveoment for about 18 months (Para 5.01), and occasional suspension of wthrawals from the credit by donors, due to Govment defults in repayments of credit. These events. and the shortage of local currc reorcs with lntrepreneus often disrupted project implemen Over the years, UDB's financial posiion was advesly affected by large ares and poor collction (Anmexes VI and VII). Under thlir extenl audit' pressure, large provisios had to be made for loans in 1989 and 1990 (Amuex VV . UDB nurred a loss of Ush 336 million in 1990, mainly due to a provision for loan losses mounting to Ush 2.1 billion, or 93% of its total itert income. In recent years, UDB was sved from insolvency by exchange gain on a loan it made to an export-orend enterprise repayments of which were to be made in foreign excne. UDB's extenal auditors have complained of window-dressing by UDB by rscheduling some of Is loans, withut adequate analysis of recovery prosects, in order to presen an improved finacial posiion at the dme of UDB's appial by a donor for a line of credit The auditors also pointed out that ceain idividu UDB los exceeded  -8- UDB's equity, althoug, acording to its own policy stateme, its investment in any one project shud not exceed 20% of UDB's equity. Despite enorous, subsdies provided by the Govemne in the form of low interestforegn credts, an unusually hih spread of 20% on its boowings, fequ replenshment of its paid-in capital, UDB i Presently facing a liquidity crisis and is in poor shape. As of December 31, 1990, the latest period for which audited accou are gavlable, UDB's cuet atio was less than one, loan collections we only 24% ot billiw, N prvisions a_mnd to 19% of the portfolio whereas over 78% of the portfolio was affcted by ears of over 6 months (As of June 30, 1992, about 97% of the portflio was affected by aes of over 6 months). Ugnda Commedal Bank (UCB) 9.03 UCB's role in this project was secondary. Its main fimction wascommerCial banking but it had orgnied a special uni caled the DevelOpmen Fin Groupw to handle its term financing opeati to small scale industries (SSIs). It was resosible for utizing only 20% of the Credit. Its perform in project mi I on was better tma dt of UDB. t had commined 93% of its original allocation of SDR 4.5 milion (US$5.0 million) by Febuay 1986 and 100% of tho rvised allocation of SDR 6.5 million (US$7.0 million) by June 1988. While the repayment pefoman of its IDA sub-loans was better than tht of UDB's sub-loans, its SSI portfolio was buildn up arrears due to repayment performance of its SSI bormro s. This bas also resulted in only small amounts of LDA sub-loans repaymen beg avalable for its caitalization. I receot years, UCB's overall portfo and financial pition have also deterora sharply (Amxes and XIV). It Incred huge lo durng FY89-91, many because of lare prvisions for loan losses. In FY89 it hadanegativ equity. It caried out a rauation of fixed se (Ush 26.6 billion) in FY90 which accun for positv equity in FY9o-91, but the eroi of equy connes. Unless immediat steps are taken by the Government to stengthen UCB financially and to reucture It, UC is very close to insolvency. 10. Project Relatonshp 10.01 IA'seatonbipwiththeGovementand twofin iamd remained excellent _togouwt Still, the course of project impl remained uneven. This was due mainly to politcal tmoil, security problems and the ma-economic difficulties faced by the country. Both UDB and UCB maunined good relationships with a number of multilateral and bilateral donors, who were inte d in assindg the rehabilitation of the economy and provided grts and credits through them for the purpose. 11. Cong Swvices 11.01 The project inlduded a component for technical assisutce to UDB in an amount of US$500,000. Ibis componet fumded the services of cosubn to UDB in areas of project appaisal, suevion and accountg. In addion, th Bank acted as the excuting agency for a UNDP proedt under which a firm of _ t wa re to provide an d autitiog asstac to UDB for a pedod of four months. The pefrmae of all the s wa satisfttry. 7bTey enabled UDB to develop oiat procedure in the respective areas and provied traiing to loca sff.  -9- 12. Project _ b and Data 12.01 The Development Credt Agreem (DCA), Project Agreems (PA) between IDA on the one band and U1DB and UCB on the other, and the Subidiay Loa Agreements between the Governm and the two finaci nteediaries wer stadard documts conaining tem and conditions of the credit to the Govnmemn, the responsibilities and obligations of the two financial intermedaies in execung the project and the trn and conditions of on-lendig and relending. Mhe e coaned special provisions reqdring the Goveme to Increase the authrized capital of UDB and UCB, and to pay in certain amouns as paid-in capital, and requidag UDB and UCB to submit audited accon by certa dates. UDB was fiurer reqired to protec Itsef from exchange riskl and to maintain a debt-equity ratio of 4:1. The leg agreement should have required dt Goverment, as dth ody sh der, to pay in the agreed mos of equity conution to UDB and UCB out of the IDA credit by parcular dates and in a defined manmer. in a side leter, th Govemen shoud also have commtted itselfto allowing UDB to opera autonomouy, without having to comult it inomally befre submitting the projec to its Board for approval. 12.02 Te Staff Appraisal Report did provide a usefl famework for IIDA and the financi inteediar in projet imp to but did not comment on the issue of UDB's automy or its subservienc to the Governent -in the m of fiacing projects. It also did not bring out in reitidc term the enormous difficulties the country and the fincial ons were likely to fce in implemenIng the projecL 12.03 Most of the data for PCR preparon was readily avaW le from IDA files. The rmainn was provided by UDB and UCB, but the data provided by them wetm not always 13. isos Learned 12.04 Ihe tesults of the project are mixed. WhUi the objewve of rhabilating a munber of indusa projects was achieved by provid resources for import of plant and machney and int workig capital, the sub-projects contin to face operaonl problems due to economic difficultes, paclarly the shortage of foreign exchae to import raw materis and spare parts. Maily becas of massive cuncy depreciaton, bothi UDB and UCB are under-capitalized and, due to arge portfolio ars, are in precaius fiancial positio he main lessons leaned from this experience are as folows: (a) wit political and economic stabiity, there is lite chance of success for an entepe rehabilkation project like this which does not target specific investg (b) in a situadon of sever and chron foreig excanse sbortge, while providig rourcs to Industrial proec for capital and si months requiement of Imported raw materias, te Goverme sboult have also eoud adequate continuity of lementary resources in foreig exc for import of taw mate and spare par to enr operao at a resonable capaciqt fr loner peiods, without which Ivestme in capia stock was not able to genert find to repay loans, thus creating liquidity pblems lbr te fing idoXs;  11 PART H. PROJECT REVIEW FtOM THE BORROWERS PERSPECIVE THE PROJECT OBJECTVES AND DESCRIPTON OBJECIVES 1. The objective of the Projeat was the achievement of a national revival of agricultre and idutry though the provision of credit and odter loan facilies to prospecdve epr . UDB', objective were to provide a channel for financial and technical assistanCe to promote industril rehabilitation and development The Project also focused on improving the capacity of UDB to prepare and appraise development projec for financing by external donors wWle ning the Ban's own finance and management. IDA and UNDP put in place insutio b _ug technical asnce to help UDB execute its growing development banking responsibiity with a US$30 million IDA credit line in the pipeline. The Project objectives wex overly opmc to assume that the revival of the economy could be achieved with a few yeam, with the provision of credi after ten years of ewnomic n en It also umed dhs aftaer the fall of Amin's Govermen in 1979, the era cterized by civil ste and insecurity had ended in Uganda. DESCRIPTlION 2. A line of credit of US$30.0 diHon was appwoved by the Bank againt guarantee of Uganda Government to cover part of UDB's resource requireme for financng 25 selected projects for rehabilitation in the indal sector. Mhe loan was on IDA!s standard term for fFIS. Prior Word Bank approval was necesay for each sub-project. Tle aggafree limit per project was US$4.0 million. The sub4loans were to be made withn the frmework of UDB's operang policies. PROJECT DESIGN AND ORGANIZATION 3. Mme key element of the Project was the provision of six highy qualified experts in strategic line positons in UDB, i.e. (AGM Projects, AGM Finnc and Admion, CA, Financial Analyst, ldustrial Economist and Industrial Engineer) ncetly for a two-year pero during which the selected sub-projects were to be ap sed and UDB's finances and management strengthened. PROJECT IMPLEMENTATION 4. The Project became effective on 1 September, 1982. However the environment in which the ptoject functioned frouated its efectvene. Political Instability made rcuit of the sx line consultants almost impossible. AU the six consultants were never in place concurrenty at any time durig the project's life. Two of the expertu died shortly after satig their . At one stage the reWainng expe wero evacuated for fi months due to civil sti. I is only since 1986 ihat the project opeatd (five years aftr start) in a sable enioment. S. Dldays in UDB hnp l of the project were maily duo to the foDlowg (a) The iniial list of idusti selected by IDA for the Project conisted of mainly gOVe owned and Asian exproprid ndst whose lea own i could not be estisheM As per the terms of the project, t  Companies could not be appraised and financed Wot resolving the ownership problems. (b) Out of the odginal list of 25 prese_cted projec, only ten qu6Iified for appraisal ad finance. Accordinly, the Bank had to seek aroval from IDA to appraix six other sub-projects which wert not on the original list. The approval of IDA to appraise the six sub-projec took a long time thus extending the implementation period of the cet. (c) The Implementation of the Technical Asssta component of the Project, patdclay the recument of the six key line eprt was rot smooth as indicated below: Politcal itability made recruitment of the six line consulta almot mpossible; such that the six consultants wee never in ple concurently at any point dudng the project's life, contray to what was envisaged in the ptoject. The top two technical posts namely AGM (Finance & A sn) and AGM (Operati) were tever concurrently filled. There was lack of expate team- wotr Sbr these two posts. (d) Similay in the apptaisal departm there were never a concurnt team conwsing of expart such as: an economist, indusrangineer, fiacl analyst from which the local staff could benefit as a tam They were enggd at differ times. ThI engineer and Chief Accntn died shordy after sting their assiments. The replacem engeer egapd In 1985, ran away in the same year due to insecury. At one stage the remaiig expers were evacuaed for five months due to civil strife. The enmi aed also did not contriute much. Thus, overal UDB did not befit from dte aprais expariat personnel. (e) The conultig firm which was engaed to appraise a number of preseected sub- projects was iadequate in its work such dtat appraisals were not approved for financing by IDA. This and the iffeci ss of the apprais expatiat peomel had a great bearing on the rate at which the sub-projects were -ai and hence finds committed. In sneam the apis was done by the local sta4 only takng advantage of the aining t of the techal sitance, both local and oveseas. 6. iD dzunde the la proceeded satisfactorily aft 1987. However, dm wa need frter exte_ion of dosing dates of the Project to allow UDB to comit firther fia whko m ainly due to cq of prvous preselected subroJects and sving on f&lly disbursd sub-projects. 7. Due to o _ by the Governmet of aars o glbal loans to IDA, ut_lbwton of exitng lines of credi was supended, threby i the ds of  13 pary disbursed loans to sub-project and affecting thir viability and loan repayment capaciq and in tum the financial situation of UDB. 8. mmbo nby the Govanen in May 1987 tat t wbuld nc longer ben feign excha risks on loan in foreig curncy contributed to the derioration of the porfolio Mhm decision of Governm on exchange risks affected the Bank's loan olection effo seriouy as the sub-loan contracts betwen th Bak and its sub-borowers were in dispu theeby treening the Bas financi viability. m isue was finally resolved when the Governmen agmed resume beaing UDB sub-loans povided d UDB imposd a lO% foeig exchange risk fee payable to Govrmen by its sub-borwe. The deay in solving the freig excage risk e, thdfore, impded loan collections fom UDB sub-browers at a criical period of the Projec PERORMLANCE 9. Given the difficult politcal eonom ad secriy condiidons dat previ in th 1980s, UDD's peomance i imple the Project should be rated as mixed, conidering the shoromings of the Tecical sistance component of the Project 10. Out of the 16 sub-projects fimded, only, ten are operating sadsfcorily while five ar exeiencn opeatioa problems and one is not yet opeaional. Neariy all sub-proJects hmv arrears of principal and intt cawed by time and cost ovrns as a result of delaye Implemention and an envhrnme of etm austerity. The sub-rjects sufred finacially due to inflaton co _ntal devaluatio, shota of freig exchange and local cret Mm perstence of these problems oded the equity base of _ and in tu affted eventa pefom of the subproects and hence the Ban I1. Sit of th subrJets financed by UDB were publc enterpi which sufferd frm delayed Ilementtion as a rut of Governmt bureaucatic prces. 12. Te Govwmnrqemo tthat UDB musobtaiMn sty of Fiancleaance for sub-loas bedre submission t UDB Board for appwval also caused exe delas in the impaon of the Project 13. The Managent and staff of UDB played a maJor role in the Istuio' ai e during the time of the Project, often making up shortfais n pthe project 14. The a _ of the financial system a other acdvite s on of the success of the Project. The fcial support of the project facliad both equIme and traing, hse strategy wa larggdy devloped by UDB local staff In coamdu 15. There was little con ton fom the first fo (4) advisor but the AGM Olinance =d4A I ' I - and the ead Pioct Opato conatrbd aay t saff ad t tainng of countpa stff. The syst of financ ad u g ar sufietl devd and manned by a ttaind cor of saf T_e are th argmets fwr -th projc's _ Ilt.  14 FINDINGS AND LESSONS LEARNED Findings 16. UDB's performance under the loan has been mixed. During the implementation of the Project, Ugaida passed through serious economic difficulties in addition to political turmoil. 17. The imx ct of these problems on UDB's portolio has bee severe. Porfolio anes are bigh Fu, iemore, UDB has been epeiencing delays in capitalzadon by Govenment which is creating a liquidity crisi and could affect UDB's debt-seicing capaciy. 18. Prendy UDB is makn considerable contribution by fiacin iWdustri and agricultual development In common with other finacial iu s, it has serus portlio problems, which have affcted its viability. In addion, it has to rely on Inernional Fnanes ttutns and the Govenment to provite credits for on-lending to sub-projects. Given this senr, there is rethink going on its opetional strategy and role in the more stable ecnomic sition in the country. Lem= Larned 19. A few lessons can be drawn from the experience of impl ion of this project. Firsty, in view of the contry's foreig exchnge problems and heeon ausiy situtio, IDA dsud ave given highe pio to fincing projet which had potential for earing foreig exchange. Secondly, the Bank should have done a more thorough apprasal of projects with a view to ensuring that the sponors had the necsary counepart funds to meut any cost escalations and maagemen capabi to implement the project. Thirdly, the project should have taken Into account the mobilization of local cumency resuc for the sub-projects. Fourthly, there was lack of quick iniiati to provide cncal and finana assistauce to restructure jects e ncing opeaiona prems long befre the problems becam serious. Lasty, it should have been avoided to continue financing sub-projects in an environment of severe poliical and economic insbility.  15 PROJECT COMPZLMON REPORT UGANDA INDUSW-U% REHABILITATION PROJECT (CREDIT 1248.UG) PART rm: PROJECT PROFILE 1. Rdated Bak LoanCredits Year of Credit Mle AOQ, 3=u Second Reconstruction Rehabilitation of productive 1982 Fuly disused Program (1248) seces Second Technical Assistance Preparaton of a pipeline of 1984 Fully disbred Credit projects and TA to financial instiuions Entwpdse Developmen Improve opeating environment 1991 On-oing Project for all project, public or private 2. Projec Thnetable IlM Date lanned D. Revind Dat Al IdentIfication 7/9 7/79 7179 Preparation 4/80 4/80 Appraisal 9181 9/81 Credit Negodation 4/82 4/82 Board Aprova 05/1882 05/18/82 Credi Signature 06/29/ 06/2/82 Cdit Effectves 09116/82 09/16/82 Credit Ckl g 6/30/89 6/3090 and 91 06/30/92 Crodit Coption 12131/89 12/31/90-91 3111292  16 3. Credit Dlsbursements Cumulative Estimated and Actual Disbursmets (US '000) FY 1984 1985 1986 1987 1988 1989 1990 1991 19 92 Appraisl 10.0 21.2 29.2 33.4 35 3S Estma Actul 0.1 6.? 8.8 13.2 24.3 28.3 32.5 35.9 38 .3 Actual as % of 1 29 30 40 69 81 Badmaw 4. Project Iuplementation 1nWa FsdmateAcua Submission of sub-poject for Bank approvalaorizatlc8a 06/30/84 12131/89 Loan Di 063089 06130J92 S. Project Costs and FPla_g A. EWect Costs (USS Id Agom sthat ised Esfat AM Loca F.E. Total Local F.E. Total Local F.E. Total NA 35 35 NA 38 38 NA 39 39 B. 1![D3ect Finaing Ptm=d MDA 35 38 39  17 6. Stou of Covenants UGANDA DEVELOPMENT BANK (UDB) Compliance cmt Eubect Deadlbne StatL Pffliect AgMentem UDB not to enter into Pardy in compliance. Section 2.08 new commitmene to UDB dissolved its land to small Commerce Dqment ndutries and but esublished a SSE ca knce. Depame Section 3.02 Audited accounts to be Sept.30 each In copliance. funhhed nO later year ta 9 months afte end of Its fiscal yar Section 3.03 Debt-equity ratio shall No. in compliance not exceed 4:1 Section 3.05 UDB to proct itself In compliance _aint FE rik Deopme CrWi Authorized Capital to 06/30/83 In compliance, but Anent be increased to Ush further incease need Secdon 4.01 1.5 bilion to capitalize (at current exchange rate) th specifled US$10 million ftm the IDA Credit UGANDA COMMERCIAL BANK (UJCB) EcAgmMtiSet Audited accoun to be June 30 each In compli. 3.02 submIted withidn 9 months year of fiscal year Developmet Credit (1) Authorized capital to be In compliance, but Agreee Secdon 4.01 creased to Ush 1 billion fiurher increa and (2) Governmen topa needed to capitalie at least Ush 180 million (at hecurent extchange rae) US$65 million from 0630/83 the IDA credi  18 7. Use of Bank Resources A. Staff LnuM (Not Available) B. Missions Stage of erojl Month/ No.of Days in Specia- Performa Types CXaz... Persons field lization ce Rating of represented Status proble r U S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~i -Identification 7n9 NA NA NA -Preparation 4/80 2 16 1 FA M,F,P ,0 -Appraisal 8/81 4 17 1 ENG. M,Y 3 FA Appraisal through Board ApUXW Board thirough Suvision 11/82 1 8 1 FA 2 M,PO 5/83 3 17 2FA 2 M,F,P 1 Engr. 10/83 2 8 1 FA 2 M,F,P 1 Econ. ,0 5/84 2 9 2FA 3 M,F,P ,0 11/84 2 10 2 FA 3 M,F,P to 7/85 2 NA 2 PA 3 M,F,O 2/86 1 5 1 FA 3 F 6/86 2 2 2FA 3 F 5/87 1 11 I FA 3 F 9/87 1 4 1 FA 2 P,F 7/89 1 4 1 Engr. 2 F,Mac ro F=Financial; M=Management; Mac=Macro-economic; O=Organizaflonal; P=Polltical; Pro=Procurement  19 ANt!lB) I Pgep I of 1 UGANDA DEVELOPMNT BANK (UWD) CRARACTERISIICS OF SUtIDPRW1ECTS FINANCED UNDER CREDIT 1243UG Owerhip Sub- ilfi Sublo (PubIid co (CSS ml No. Sub4%iM p P (rius Ush(ml A.1 Seombul Stoel Sag Wio di" PVatb NA 0.91 Work. preu A2 Ugad Tea Ago-id Tea 51% Pubc 9,360 4.05 Coip. 49%Private A3 Bats shoe Leadthw Shoes Private NA 1.00 A.4 TUMPECO BnU naml Warn Publb 29 0.71 A.6 Ugnda Food and BeOr P d 2222 6.41 RnwieJ Bovale A.7 Asoclaed Cheical Batties Prvat 65 0.73 A.8 ULATI Lt TAe Leather Pube 463 0.85 A.9 NYM Textiles colson YAn PubEs 1,249 4.64 A.10 BAT (U) Lld. Agm.ndy Twoao Private 66 1.43 Pdw A.11 Kalira Sugar A duy Suga SIPubio 1,029 3.92 Works 49%Pttvte A.12 Kampala 1ote Food and soft Drinb Private 27 0.27 A.13 Unda Wood Wood Tiber Pvdae NA 0.37 A.14 Sa)utx AVondusry Surial coto Pivth NA 135 AA Weot Nilo Food and Spit Prvate 1,540 1.07 Distilling Beveag A.16 Nalay Eagg. Meal Fabra- Privat 424 037 _giedog tUs TOTAL 16,474 2L0S  Pag lofI UGANDA DEVELOPMENT BANK (UD) PEFORMANCE OF SUDROJECTS FINANCED UNDER CREDIT 124U8UG Coa EaUded te Compon Job Caymt ROg 5G Coat (Ush m) (montal jObS (Ugh UI1idon IDA Sub.L _ . El . I. AZ P Cd HE I Snbtae Sel NA NA NA NA NA NA NA NA NA (D) UpsndiTT(A) 36 27 26M 9360 36 72 lo0 93 90 DBa Shoe (D) NA NA NA NA NA NA NA NA 20 MPE>CO (A) 35 NA NA 29 12 24 23 1.3 14 Uganza 36 19 166S 2722 NA 21 NIL NIL 75 Bewed. (C) Asnsocd 40 52 NA 65 NA 36 20 3.2 45 Daed. C) ULAIn (A) NA NA NA 463 NA 36 NIL NEL 10 NYllL (A) 36 50 344 1249 48 75 75 16.5 25 B.A.T.Ltd (A) NA NA NA 66 NA 24 NIL NIL 87 Kidm Sugr (A) NA NA NA 1029 48 NA 3000 03 so ampIa BottIm NA NA NA 27 NA 24 NIL NA 10 (A) Ugpnda Wood 37 29 NA NA 24 NA NA NA Under I(B) c Sanyuot (D,B) 51 100 477 NA NA NA NA NA under COM. Wst NlC 57 74 436 1540 6 10 63 24.4 7 Dihtig (A) Nc4 yEng.(C) NA NA 78 424 NA 24 17 25 60 A. b opeti S. Underw onation C. Wini up D. 5 w which da not aible  21 ANNEXM pad I of I UGANDA DEVELOPMIENT BANK (UDB) SECTORAL DISllItUllON OF M-PROJECTS FINANCED UNDER CREDIT 124UG TOTAL IDA Funning P jetCost S by No. % by (USS % DA Secw No. (Ush MilLion) Cost Minlion) Amount ApoVomsulg 4 10.4S5 27 63 10.72 36 Te~~Pioam 1 1,249 7 a 4.64 14 Foodl Nd Svm 3 3,789 20 23 7.76 32 Luuthor 2 463 13 3 1.86 6 Ehgiasedag 3 453 20 3 2.00 8 Wood 1 NA 7 - 0.37 1 C _emicab 1 65 7 - 0.73 3 TOTAL 1S 16.474 100 100 28.08 100 .1. r  22 Pap I of I UGANDA DEVELOIMNT BANK (UDI) INVEMET COSO DSTtISRIUTON OF SU-PROJECTS UNDER CREDIT 12S-IUG Colt Di ;tu on No. Pojet Cost % by % by IDA Fnancing % by (Ush million) (Ush milion) No. Amount (USS million) Amount Up to SOO 6 1,074 40 7 4.36 16 5014,10W -- over 1,000 5 15,400 33 93 20.09 72 Not Avadib 4 - 27 - 3.63 12 TOTAL IS 16,474 100 100 28.06 100  23 AMY Pig I of 1 UGANDA DEVELOPbENT BANK (UPS) SIZE DISTRIBUTION OF SUBWLOANS UNDER CREDIT 124SUG TOTAL IDA Frhwcing Loansi. P.jat Cost Diatibuo (Ushmillion) %byNo. 9 by Amount(USS %by (Ush mil) No. Amount silhlsa) Amount LAsM..n500 3 451 20 3 1.01 4 501-1.000 5 2.097 33 13 4.27 15 Ovw 1,000 7 13,926 47 S4 22.80 81 TOTAL is 16,474 100 100 2.0 100  "4~~~~~~~~~~V Pap I of 1 UGANDA DEVEWL IT BANK (UDI) REPAYMT PERFOANCE OF SU15PROJECTS FNANCED UNDER CR 124UG (As of June 30, 1992) (Amount in U Sb millon) 1 2 3 4 Armof pdaoipal IDA ad iaw of over Sum No. houwe Tot IDA SubLoa 6 mos A-1 Sembul Ste Mils Ld Nil NA A-2 UpSd Tea Copoadmn 8,786 4,098 A-3 Bab Sho Nil Ni AX4 TUMPECO 27 17 A4 Uganda _ia 2,182 3 A-7 Assoiaed B_ater Nil Nil A- ULATI 4S9 132 A-9 NYML 1226 SS7 A-10 B.AT. (U) Ld. 64 Nil A-11 KaimSuWork 890 Nil A-12 Kqupaa Botds 23 21 A-13 U_and Wood tAil_ 337 202 A-14 Sun'1,1m0 474 A-15 Wee Nio Disng 1,105 174 A-16 Naby Bognoubg 414 Nil TOTAL 16,6S2 67M  25 P&g 1of 2 UGANDA DRLOHRN BANK O OLo UARREARS OF OVER SIX MONThS (Amovat i.k U Sh .1111c) AsofDoe3mbm31 19S9 1990 1991 Aof 9130192 AhL XmLIQ.hB33ADI Dat Inomphdo fr Put A. i.La iaii nass A -d huct (1+2) dbil, by (2+4) Pre ia of outudig am affeced by sucars (2+3) dvdW by (Z+4) Pdnslpsl Ia cs (U1.Sb mIllon) - Retweem642 moatsa S of tI due for Ove 12 mouts as S of ldud for P,_n  26 ANN8X sn Pap2 of 2 UGANDA DEVELOfiNNT BANK PORTFOUO ARREARS OF OVER SIX MONTIS (Amount U S Miion) An of 12M389 12131/90 1211/91 WM D. DA(Ub m io) 1. Lowptin in anonu 661 130 3.35 5 2. bdumtd cgs in a 898 3,328 7,942 11,609 3. Pdoiu afhecod by auna 4,350 14,707 3,395 19,03 4. Tall p*dl outa_t 5,89 19,646 17,001 19,967 '--SW8n c pbOd _or An to loan ou _al q 23.1 21.1 45.5 S3.5 (1+2) divded by (2+4) Pmiotd= of outsta kn 77.7 78.5 4S.5 969 affectd by - (2+3) diIded by (2+4) w of aamws 88 9 7.5 6 PAO*d A WuMn 9.4 7.3 12.9 IS - etwm 6-12 mo_Aas % of total do for r1pyommnd *Ovw12 mootstbas % of totaldis for  27 ANNEX Pap 1 of I UGANDA DEVELPM4NT BANK COMPARAIVE INCOME STATEM (U Sh uiiml) Yea ended Densbe 13 1984 l9U 19 1987 1988 1989 1990e 31 C IQOOet fiol kou 176 477 2J16 4,074 15 411 601 184 imam boom ahrntm 11 72 207 6W8 30 54 161 417 hirnvmaU To.dtl kom o m 187 549 2,723 4,732 185 465 762 221 L.uu.lnauiuI Eimn 157 666 697 1,= 52 145 290 5A Net QCmO Inome 30 (117) 2,026 3,480 133 320 472 1,685 Exobaa in 791 1.372 61 571 1,102 1,062 M - HN_ 84 30 98 260 5 16 223 9S tdaIme 114 (87 2,915 5,112 1" 907 1,797 28 OTHMR EXPRN Ssjdm and tld do 133 319 712 34 10 268 421 A di' expea 220 448 916 1,07S 6S 12 362 S90 3_lo.s 121 Z - - - - - - 482 873 1,235 1,787 89 242 630 1,011 Piofit beo prov (368) 960 X1,80 3,325 110 665 1,167 1,1 forkoanlosms Pfisoa for w bsan 105 964 766 755 85 355 1,014 2,112 PoJ(Low) br tax (473) (1,94 914 2,606 25 310 53 (81) Tax 15 187 40 Ss Not PWo(Lo) (473) (1,799) 914 19 10 12 113 *h.iwUamulboodaub  28 UGANDA DEVELOMENT BANK COMPARATIVE SALANCE SHE S (U Sb minim) Asof Dl.31 1983 1 98S 1996 1987 18 1A8 990 Ca em?Auas 2667 4S616 6,143 17,097 611 1,402 3,135 4.9 Lo _Om g 2,503 9,24 19.888 36.140 1.475 354 6. 12,0 :ZSL. 145 1,109 I.8M 2161 111 466 1,480 3.592 CMu 998 1,943 3,973 7,791 389 953 1,69 2,191 No Loam 1360 6,202 14,040 25.718 975 2.085 3.706 6.20 FPmd Asua S5 128 108 258 6 96 274 366 T--WAS 4.0, 106 20.91 4303 1 3.53 7,115 1ll2 CM 1297 1.507 2.194 6,979 231 1.048 2.2 4,71 LAg'_ 2,371 3.892 9.497 19, 986 2037 3,111 5sX tal Liabti 38 S.9 11,01 26.W7 1.217 30 563 10.106 Rom~ Shm CapIa 532 1,143 1,143 1.143 11 11 11 11 itoasma and (729) 52 (1.614) 37 14 137 30 5 Ib CapM 611 6,932 9,071 14.02 350 350 1.150 1.150 Total alqt 414 5,547 8,600 16.166 375 4" 1,462 1.n6 Tdl Lbill d 4,082 10,946 20,291 4303 12 3X3 7,115 11X232 *oADA hw *0M C 15, 1M87, al mStl ofIumS @ 1 _ i 1Old _up ud bo Cmas b _P .D Sl_t df 1967.  29 ANNEX X UGANDA BANK (UCI) ARACTETCS AND PERFORMANCE OF SUI4OECS FINNCED UNDEIt CREDIT 1AWUG (Amou in U Sb milion) 1 2 3 4 S 6 7 Tutu No.of SUIFoj Jobs Cot pr Sedor b oa UCS Pumoing IMA Plusuiog C_u4 job Apopossning 34 1,377.1 256.8 84.9 739 1.9 DUIMA 13 672 51.9 468A 415 1A CloSn 8 1796 48 101.9 1S0 1.0 GraPu 7 4283 17.9 324.7 151 2.8 CUz " 4 101.1 465 31.3 141 0.7 Sowp 3 470.6 181.1 19A 72 6X Mindg 2 431. .9 211.3 46 94 Kom 2 29.8 1.8 22.1 63 OS survis 2 110.0 2.4 82 36 3.1 _da. s 219.8 17.6 15..3 121 1.8 TOTAL S0 4.6 714.7 2,437X 196 2.1  30 aExI2 PFli 1 of 1 UGANDA COMMERCIAL BANK (UCI) SZE DISTRIDUTION OF SW-LOANS FINANCED UNDER CREDIT 1248.UG (Amoh in U Sb mil'ion) TOTAL UCB LOAN IDA SUB-LOAN No.of Sub- P%j. %by % by %by by Loa Si= lom Cot No. AML Amount Amot Amount Amount Up to o 63 1,136 36 41 15 22 981 40 51-1-o 12 1.24 39 34 398 54 834 34 ova 10 5 792 25 25 170 24 23 26 7TOAL SO 3,152 100 100 723 100 t438 100  3L ANNEX Xlt Page 1 of I UGANDA COMMERCIAL BANK PORTFOUO ARREAtS OF OVER 6 MONTHS As of 12131/89 123190 12/31/91 6130192 IDA iUB4LOANS (U.Sh milion) 1. Low prinolplinnan 1l 103 154 247 X. JntsuzsagdObargeiuianat 27 170 487 585 3. ncipal a- dby amu 95 433 403 597 4. To l prin loutstading 411 1,034 2,063 2,438 iuinRg capk_Hzod inst M~% Anwazw ton outsading 8.5 22.6 25 28 (1+2) dvided by (2+4) P;op!imn of ou-ading loan 27.9 SO 34.6 39.1 datd by (2+3) dvided by (2+4) A" of am PtIn*pa inaus - Btwum 6-12 moads s % of tot d. fo psymm 3.5 12.2 7.1 4.1 Oer 12 modas % of toal u for -PyM 1.7 S.5 15.4 11.7  32 6NNI!X XM Pap I of 1 UGANDA COMMERCLAL BANK COPWARATIVE INCOME SFrAITENNTS (U Sh wa) PY e - Sqtpmbr 30 1983 1984 1985 1986* 1987 1988 1989 1990 1991 INOMP, hnsa and 2,122 3,180 9,422 242 658 1,788 5,736 10,048 15,175 DiuaounA Other income 346 1,204 5,636 91 322 872 2,402 3,345 6,036 Totbl income 2,46R 4,384 15,OS7 333 980 2,660 8,N18 13,403 21,211 bltuon 409 814 2,059 50 123 373 2,392 3,652 6,052 Sabuus and 719 1,158 2,714 57 172 683 1,989 3,828 4.538 Aflowance Adma.and Odher 550 1,017 5,179 67 294 1.268 3,112 5,390 7,050 Depresiados NA 475 585 5 8 27 88 217 1,016 Proviosm 55 556 3,723 41 44 8 4,535 3,895 4,972 Told xpme 2,236 4,020 14,260 220 641 2,359 12,116 16,982 23,628 Chwtifisl homnS 262 364 798 113 339 301 (3,978) (3,579) (2.417) lAs TaXation 131 - - 172 29 - - 131 364 798 113 167 272 (3,978 (3579) (2,417) EbDz2aaa~iusry ite 256 (393) (524) (19) Net Produ(LoAW) 131 364 798 113 167 15 (4,371) (4,103) (2,436) * N FlgtW for FY86 have bean s_d i. n am shilnsp o foolte conMpuailc wth figmes for .wbssqnmt Yau=; the Cwunuy Returns StRtote of 1987 rqd convasnio of al monotazy buactions 6 1 nCw sV h100 old is effusv May 15, 1987.  33 Pgplofl UGANDA COMERCIAL BANK (UC3) COMPARAWM BALNCE SHEETS (U b Mio) As of Sept.30 1983 1984 198 1986 198? 1988 1989 1990 1991 Cush ad Bak 5,584 155 31,700 820 1524 2,461 2,605 8,715 13,499 hwasumn 916 829 2,541 63 87 278 418 715 1,276 Advane and 18,460 20,842 58,367 1,195 3,486 9,955 23,865 32,8 52,600 Qlhs Accor s Total Curent 24,960 37,216 92,608 2,078 5,097 12,694 26,888 41,9 67,375 Acw Net Fnwd Ass 12,238 12.0S6 12,500 139 224 696 1,831 29,651 29,563 Totl Auet 37,199 49,272 105,108 2,217 5,321 13,390 28,719 71,649 96,938 LMNLfflFB Cune Depot 16,551 26,745 64,27S 2,00 5,028 11,821 27,865 49,023 65,732 aN Other A/Cm Bs Paab 8,200 9,864 27,771 Bank Ovoa*n 824 703 87 Cumet Lib. 24,751 3660A9 92,046 2,065 5,028 11,821 28,69 44,726 66,602 TWO l ides lH 126 3,711 7,079 12,590 ToWa Labiitis 24,751 36,609 92.046 2,065 5,028 13,086 32,400 s1,805 79,192 Share aital S00 500 S0 5 91 91 199 199 199 Reserves 11,826 11,981 12,214 147 201 177 203 26,975 26,975 Rtained 78 137 302 35 (4,531) (8J34) (11J070) Pm&/(lous) GOvL Funds 44 45 47 1 448 1,304 1,642 Totd Equity 12,448 12,663 13,063 152 292 304 (3,681) 19,844 17.746 Toa bilities 37,199 49,272 105,108 2,217 5,321 13,390 28,719 71,49 96,938 and Equity Gousas entc 6,193 21,269 16,212 282 159 2j,85 3,564 6,199 * Now Figu hr FY86 bho be std in shllins to hd_ o_mpwismw pth sr sw_*.apintym to Cuneq Rans Staw of 1987 requird tha al mosetayr utisa and eob_lalo be _ot 0 gm _ shillg br 100 oM ahilup wkb elfet ft. May 15, 198?.