Uganda - Education Project

RESTRICTED Report No. P-532 FILE CO-PY This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE STATE OF UGANDA FOR AN EDUCATION PROJECT April 6, 1967  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AN\D RECCMENDATION CF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE STATE CF UGANDA FOR AN EDUCATION PROJECT 1. I submit herewith the following report and recommendation on a proposed development credit in an amount in various currencies equivalent to $10.0 million to the State of Uganda to finance part of the cost of a program for the expansion and improvement of buildings and equipment for general secondary education. PART I - HISTORICAL 2. Uganda became an independent country in October 1962 and joined the Bank and IDA in, September 1963. In November 1965 the International Development Association received a request from the Uganda Government for an.education credit to expand and improve buildings and equipment for general secondary education. Prior to the request a UNESCO representative had assisted the Uganda Government in the preparation of the project. The appraisal mission which visited Uganda during November and December 1965 assisted the government authorities in improving the project. 3. Formal negotiations took place in ulashington in October 1966. The Uganda delegation wTas led by the Honorable J.S. Luyimbazi Zake, Minister of Education, and included representatives of the Ivlinistry of Education and the Treasury. 4. This is the first education,project proposed for IDA financing in Uganda, as well as the first IDA credit. While still a British protectorato Uganda received one loan from the Bank amounting to $8,4 million.. The status as of February 28, 1967 was the following: (US$ million.) Year No. Borrower Purpose Amount Undisbursed 1961 279-UG Uganda Electric Power 8- Total (less cancellations) 8.4 of which has been repaid 0.9 Total now outstanding 7.5 Amount sold: 8.3 of which has bee.n repaid 0.9 7.4 Total now held by Bank Ool This loan is guaranteed by the United Kingdom.  PART II DESCRIPTION OF THIE PROPOSED CREDIT 10. The main characteristics of the proposed development credit are as follows: Borrower: State of Uganda Purpose: To help finance the construction and equipment of 39 general secondary schools. Amount: Various currencies equivalent to $10.0 million. Amortization: 50 years, including 10-year period of grace, in semi-annual installments beginning September 1, 1977 and ending March 1, 2017. Service Charge: 3//4 of 1% per annum. PART III - THE PROJECT 11. A report entitled "Appraisal of Education Project - Uganda" (TO-541b), dated April 5, 1967, is attached. (No. 1) 12. The project is for the construction. of new and expansion. of existing general secondary schools and the purchase of furniture and equip- ment. The project's estimated total cost including allowances for con- tingency is $14.3 million. The proposed credit of $10.0 million, would cover foreign exchange costs estimated at $3.4 million equivalent and local currency costs of approxim.ately $6.6 million.equivalent, leaving $i.3 million equivalent to be financed by the Government of Uganda. The Association would thus finance about 70% of the project cost. Though considerable local cost financing is involved, I believe that, in. view of Uganda's sub- stantial needs for financial resources, both external and internal, and the efforts of the Government to improve its fiscal performance (see paragraph 24), IDA would be justified in financing this proportion of the project cost. 13. Of the total cost including furniture and equipment, 45% is for academic buildings, 19% for student hostels, 19% for staff housing, 10% for site works, and 7% for professional and supervisory services. 14. The project would consist of: (a) the construction of 24 new general secondary schools, 23 of which are on sites that before 1965 were used for intermediate education and one on a completely new site, to include academic facilities, stude.n.t hostels and staff houses;  - 4 - (b) the construct-ion of additional facilities in 15 existing general secondary schools, to include the items mentioned under (a), and (c) the necessary furniture and laboratory equipment. 15. The project would be Lmplemented during 1967-70 and the schools in the project fully utilized by 1972. 16. For the purpose of administering and supervising the execution of the project and to assure necessary coordination with other agencies, the Government has established within the Ministry of Education a "project unit" headed by a project manager and staffed with two architects and an accountant, all acceptable to the Association. The Government has also agreed to employ a qualified and experienced firm of architects to under- take the architectural and engineering services required. 17. Enrollment in secondary education is low compared with many other developing countries. Existing secondary school facilities are not adequate to meet the estimated manpower need and a major expansion is called for. To meet manpower requirements in the period 1966-1972, and to allow for normal replacements in the labor force, Africanization, the increasin,g intake of students for higher education, dropouts and repeaters at various levels, it is estimated that a total output of about 33,000 from secondary schools would be required during the period. Without an expansion, of facilities, the output would amount to only about 18,000. The project, together with more intensive utilization of existing facilities, is designed to fill the gap. By 1972 the proposed project will increase the output from general secondary schools by up to 3,500 per year, which will meet a considerable part of the manpower demand at this level in the 1970's. It would also raise the general standard of secondary schools and broaden. the curriculum by adding science subjects and practical courses. PART IV - LEGAL INSTRUMENTS AND AUTHORITY 18. Copies of the draft Development Credit Agreement between, the State of Uganda and the Association, and the Recommendation. of the Committee provided for under Section l(d) of Article V of the Articles of Agreement of the Association relating to the project are being distributed to the Executive Directors separately. 19. The proposed Development Credit Agreement is in the form generally used for education,projects. In, order to insure that land and buildings will be available for the purposes of the project (Section 4.02), the Gover.nment has entered into agreements with various church groups who own some of the schools to be improved and expanded under the proposed credit.  PART V - THE ECONOKY 20 A report entitled "Current Economic Position, and Prospects of Kenya, Tanzania and Uganda" (No. AF-35, dated September 13, 1965), was circulated to the Executive Directors in connection with a loan for East African. Railways and Harbours (No. 428-EA). A memorandum updating the economic information. on Uganda kNo. AF-53) was circulated to the Executive Directors on October 27, 1966 (R 66-141): significant developments which have taken place since then. are summarized below, and basic data on the economy are attached (No, 2). An Economic Ilission visited Uganda during October-December 1966 and its report, which is currently under preparation., is expected to be circulated by mid-year. 21. Uganda's national accounts have recently undergone a revision. and hence the figures, which are set out in the attached Basic Data, are not comparable with those in the earlier memorandum (AF-53). The revised national accounts indicate that, during the period 1960-65, Uganda's gross domestic product at constant 196h prices grew at an average rate of nearly 4.0 percent. This growth rate conceals marked variations in individual years, arising from fluctuations in, earnings from the country's two main exports (coffee and cotton), and adverse weather conditions. Thus, in the period 1960 through 1962, GDP at constant prices remained virtually stagnant, followed by a marked increase in 1963 through 1964, when it grew at 7.8 percent. In 1965 the growth of GDP again, slowed down.to 4.3 percent. 22. In,recent years, the uneven economic performance of Uganda has also stemmed from the difficulties faced by the Government in dealing with the complex tasks of economic developmsnt. Rapid Ugandan.ization has created some inevitable transitional problems in the fun,ctioning of the Government and parastatal agencies, particularly because of the continued expansion of the range of public se:^vices. Though an inflow of technical assistance might prove helpful in ove coming this problem in. the short- run, it is clear that an. appr'priate long-qterm solution, will have to take the form of a systematic build.iup of the educational system, in order to insure the supply of qualified Ugandans at all levels of activity and, in particular, the middle level. The proposed credit is expected to make a significant contributio.n towards the augmentation. of Uganda's manpower resources. 23. A major factor in the economy is the producer price level for coffee and cotton lint. In. the latest economic memorandum (AF-53) it was noted that the Price Assistance Funds (i.e. the Funds intended to help stabilize producer prices) of the Coffee an,d Lint Mlarketing Boards were almost exhausted by early 1966. The main reason for this was that nearly the whole of the current coffee and cotton, export proceeds (less admini- strative expenses) were paid out to producers and at the same time the Government continued to draw export taxes on, these commodities from the balances accumulated over the past years in the two Price Assistance Funds. Hence, export taxes became a charge on the past savings - rather than the current receipts - of the two Funds. A second factor was the  use of the Funds to enable African cooperatives to purchase cotton ginneries nd coffee pulperies from non-Africans. In general, producers' prices were closely related to export prices, and hen.ce the occasional payment of prices somewhat higher than export prices was n.ot a significant factor in the depletion of the two Funds. The virtual exhaustion. of the two Funds underlined the urgent need to review policy concerning the two crops, and also the institutions charged with the respon.sibility for implementing it. In 1966 the Government appointed two Committees of Inquiry into Cotton and Coffee, with wide terms of reference. On the basis of the recommendations of the Committee on cotton, the Government has taken the bold step of reducing the producer price of cotton. to 40 cents per pound in the current crop year, from 60 cents per pound in the preceding crop year. No action. has yet been taken in relation to coffee, presumably because of the expectation that the Coffee Marketing Board will have a small surplus in. the present year (after payment of export taxes), following its success in.selling large coffee stocks in. the no.n-quota markets. To a lesser extent, the fact that coffee prices to producers were reduced in, 1965 and unchanged in. 1966 has perhaps led to a reluctance to cut the price further in the present year. For the future, the Government has stated its firm intention to maintain. nroducers' prices at a level consistent with world market prices for these commodities. The implications of this policy either for export taxes or the Price Assistance Funds are not clear. The producer price of cotto.n at 40 cents per poun.d is very close to the world market price and hence does not leave a margin for an, export tax on. this commodity. However, in relation to world coffee prices, the producer price in Uganda will still enable the Governmen.t to collect an. export tax on. this commodity. Though the two price Assistance Funds will continue, it is inevitable that their role in price stabilization will be drastically reduced. 2h. Government financial performance has been somewhat uneven. in the period 1960-65, culminatin,g in, 1965/66 in a large overall deficit amounting to about