Uganda - Livestock Services Project

Document of The World Bank FOR OFFICIAL USE ONLY CjZ- 2476&- OCG Rqept No. P-5283-UG MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 16.1 MILLION TO THE REPUBLIC OF UGANDA FOR A LIVESTOCK SERVICES PROJECT August 1, 1990 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 440 1/ Usn 1 US$0.002273 1, After currency reform and exchange rate adjustment of July 1990. WEIGHTS AND MEASURES Metric System ha = hectares km = kilometers 1 = litres m = million GOVERNMENT FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS ERC II Second Economic Recovery Credit (Cr. 1844-1-UG) GDP Gross Domestic Product GOU Government of Uganda MAIF Ministry of Animal Industry and Fisheries TA II Second Technical Assistance Project (Cr. 1434-UG) TA III Third Technical Assistance Project (Cr. 1951-UG) UVA Uganda Veterinary Association  FOR OFFICIAL USE ONLY UGANDA LIVESTOCK SERVICES PROJECT CREDIT AND PROJECT SUMMARY Borrower: Government of Uganda (GOU) Amount: SDR 16.1 million (US$21 million equivalent) Beneficiaries: Ministry of Animal Industry and Fisheries; private veterinarians Onlending Terms: US$2.3 millior, to commercial banks at an interest rate of 34.5 percent, repayable over 10 years, with the Government bearing the foreign exchange risk Financing Plan: US$ million Government 3.7 IDA 21.0 TOTAL 24.7 Economic Rate of Return: 49Z Staff Appraisal Report: Report No. 8486-UG dated July 30, 1990 Maps: IBRD No. 22158, 22159 and 22160 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.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF UGANDA FOR A LIVESTOCK SERVICES PROJECT 1. The following report on a proposed development credit to Uganda for SDR 16.1 million (US$21 million equivalent) to help finance a Livestock Services Project is submitted for approval. The proposed credit would be on standard IDA terms with a maturity of 40 years. 2. Background. Agriculture contributes about 75Z of Uganda's GDP and supports about 2.2 million small producers with average land holdings of 2 ha. Small scale agriculture is characterized by low capital outlays and unimproved technology. The sector was devastated by two decades of political instability and economic mismanagement. Through the Economic Recovery Program, the Government of Uganda (GOU) hAs begun to rebuild this sector which is potentially a major source of growth. An Agricultural Sector Action Program has been drawn up with IDA assistance, which envisages: (a) improved incentives for producers; (b) establishment of efficient and competitive marketing arrangements for inputs and outputs; (c) rationalization of crop processing capacity; and (d) dev lopment of research capacity and agricultural services to support improvements in small farm productivity and encourage diversification of the sector, currently dominated by coffee. This agenda complements GOU efforts to build rural infrastructure and activate rural enterprises. 3. Livestock contributes 30% of the agricultural GDP, ard almost one-third of farming households depend on livertock for a major part of their income. Production potential is high because quality pasture can be grown year-round and animals provide milk, meat, manure and draught power. Cattle, which make up 90? of domestic animal biomass, are highly vulnerable to disease, with rinderpest, contagious bovine pleuropneumonia, trypanosomiasis and East Coast Fever causing most mortality. The presence of tsetse flies and ticks and the high temperature and humidity in many parts of Uganda contribute to disease risks and threaten Uganda's livestock prospects. From the mid-1950s to the mid-1970s, disease control programs were implemented effectively and the evolution of modern dairying, ranching, pig and poultry production increased livestock sector productivity. Since then, the disease control program has broken down due to lack of vaccines, acaracides and drugs, the deterioration of services provided by the Ministry of Animal Industry and Fisheries (MAIF), and the collapse of the transport and marketing systems. Tsetse flies, which had been exterminated, have re-established in several areas. Since 1985, nearly a third o.' Uganda's cattle have been lost to disease. Per capita consumption of meat and milk has fallen by 502 since 1970. Unless immediate measures are taken, losses will escalate and production of meat and milk will be jeopardized. 4. Measures to control diseases and rebuild the national herd need to be complemented with measures to ensure adequate nutrition year-round, to improve cattle productivity and to protect the environment. An increase in area under forage, using Uganda's excellent potential for legume-based forage production and capitalizing on recent technological developments, is therefore urgent and timely. Advanced farmers in Uganda have already  -2- demonstrated the success of this technology and there is need for a program to replicate it. 5. KAIF's capacity to service the livestock sector has been badly eroded. While the number of veterinarians has increased tenfold to around 500 during the last 20 years, they have been absorbed into MAIF which has been crippled by an unclear mandate, inadequate salaries, and a lack of operating funds and supporting investments. For several years MAIF has been implementing a policy of fully recovering the cost of curative services involving drugs and acaracides. Government policy is that MAIF should concentrate on disease prevention, encouraging the development of private veterinary practices for curative services, and the distribution of drugs through private channels. With assistance under TA II (Cr. 1434-UG), a functional review of HAIF has been conducted, including a detailed inventory of current staff resources and their responsibilities. From this starting point there is now a need to define and implement a reorganization plan and an associated timebound and monitorable Action Program to reduce staff numbers and promote cost effective delivery of selected animal health services within a more limited mandate for the public sector, incldding development of private veterinary practices, voluntary retirement schemes, and staff retraining. The preparation of this Action Program is being financed uider TA III (Cr. 1951-UG). 6. Rationale for IDA Involvement. The Bank's assistance strategy aims at restoring productive capacity, while steering the economy towards long-term growth. Rebuilding the livestock sector is an important element in restoring agricultural produc:ivity. The establishment of efficient viable livestock services is therefore fully consistent with the country assistance strategy. IDA has been involved with livestock sector studies since 1984 and has been taking the lead among donors in the dialogue in this sector. Joint efforts between IDA and the Government have identified the problems in the subsector and led to the preparation of the proposed project. The project complements other IDA projects such as ERC II (Cr. 1844-1-UG), which aims at supporting the macro framework; the Agricultural Sector Adjustment Credit, which will underpin the sector framework; and other proposed agricultural services projects. The proposed streamlining of MAIF's organizational structure and staffing strength builds on efforts initiated under TA II and supplements civil service reform initiatives under ERC II aimeu at functional rationalization within selected ministries, including MAIF. 7. Objectives and Main Features. The project has two main objectives. The first and immediate objective is to reverse the decline in livestock numbers by dealing with the alarming animal disease situation. To this end the project would support an emergency national disease control program and a tsetse fly control program. The disease control program would be complemented by improved animal nutrition through support for forage development. The second objective would be to improve the quality and cost-effectiveness of livestock services provided by MAIF. This would involve institutional reform, retraining, and launching the privatization of veterinary practices. The project, to be implemented over five years, would need to be followed by an operatior. to broaden and consolidate  - 3 - institutional reforms and provide further assistance to MAIF's animal health and production services. 8. Project Description. The project would provide funds for: (a) a national animal disease control prcgram, including the establishment of mobile service units equipped to control disease outbreaks, and the rehabilitation of HAIF's diagnostic facilities for disease control; (b) a tsetse fly control program in the Luwero, Mubende, Masindi and Hoima districts (areas not covered by other donors); (c) forage development through seed production and services covering about 7,500 milk producing farms, 12,000 ha of communal and ranch; areas and 10,000 km of grass strips to protect terraced cultivation in the southwest; (d) credit channeled through suitable commercial banks and training to assist in the establishment of about sixty private veterinary practices; (e) institutional development, including technical assistance, to help execute a program to streamline HAIF's organizational structure and reduce its staffing levels; and (f) project management support to MAIF in the areas of financial management and procurement. The total cost of the project is estimated at US$24.7 million, with a foreign exchange component of US$17.3 million (70Z). A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and disbursemants, and the disbursement schedule, are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Uganda are given in Schedules C and D, respectively. Three maps are also attached. The Staff Appraisal Report, No. 8486-UG, dated July 30, 1990, is also attached. 9. Agreed Actions. Terms of reference of key consultants have been agreed. In addition, assurances have been obtained on: (a) an action program to streamline MAIF's structure and staffing and to introduce an improved management information system; (b) preparation of acceptable annual work programs and a joint mid-term review to be carried out prior to December 1993; (c) measures to secure counterpart funds, and cost recovery measures; (d) transfer of curative veterinary services to private veterinarians; (e) financial arrangements to assist in privatizatTon of veterinary services, including selection criteria of participating )anks, composition of committee screening loan applications, operation of a credit guarantee scheme, and level of interest rates; (f) eventual privatization of packaging and distribution of forage seeds; (g) phasing out Government ranches and farms not required for extension and research; and (h) guidelines for procurement of insecticides. Agreement was also obtained that prior to credit effectiveness: (a) contractual arrangements for the recruitment of key consultants would be completed; (b) the Project Management Committee, comprising key project staff, would be established and its members appointed; and (c) Subsidiary Loan Agreements between GOU and the participating banks would be executed. 10. Benefits, Environmental Impact and Risks. The project would reverse the spread of significant livestock diseases and avert major epidemics which would otherwise decimate the national herd and, complemented by animal nutrition improvements brought about by expanded areas under forage, would directly increase the production of animal products, for which there is a ready market. Crop productivity would  -4- improve through better soil fertility and draught animal power, and the forage component would assist erosion control through soil and water conservation. Control or eradication of the tsetse fly would allow re- establishment of crop or livestock production into areas currently infested. Milk production as a result of project impact would support efforts made by other donors to expand milk processing and marketing facilities. Many small dairy farmers are women. The project -ould benefit about 500,000 households, of which 802 depend heavily on livestock for income. 11. Since technology for disease control is well tested, risks arise mainly from weak implementation of components. Technical assistance and training would reduce these risks. Strengthening the capacity of MAIF and redefining its functions calls for a high level of commitment, which GOU has displayed. A similar commitment is required towards efrorts outside the scope of the project for ensuring its, financial sustainability, and this has been sought under ERC II. 10. Recommendation. I am satisfied th.e the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, D. C. August 1, 199C  Sched'ile A UGANDA LIVESTOCK SERVICES PROJECT ESTIMATED COSTS AND FINANCING PLAN Estimated Project Costs: a/ Local Foreirn Total -JUS$ million----------- National Disease Control Natl. Disease Prevention Program 0.4 2.1 2.5 Region-al Support 1.2 3.4 4.6 Tsetse Fly Control 1.0 3.5 4.5 Veterinary Privatization 1.2 2.4 3.6 Forage Development Extension 0.3 0.3 0.6 Management 0.4 0.3 0.7 Training 0.2 0.2 0.4 Seed Production 0.6 0.4 1.0 Project Management 0.4 0.8 1.2 Institutional Development - 0.4 0.4 Project Preparation Facility 0.2 0.6 0.8 TOTAL BASELINE COSTS 5.9 14.4 20.3 Physical Contingencies 0.6 1.4 2.0 Price Contingencies 0.8 1.6 2.4 TOTAL PROJECT COSTS 7.3 17.4 24.7 a/ Exclusive of duties and taxes FinancinR Plan: Local Foreign Total ------ USS million------------ IDA 4.7 16.3 21.0 Government of Uganda 2.6 1.1 3.7 TOTAL 7.3 17.4 24.7  -6 Schedule B Page 1 of 2 UG tDA LIVESTOCK SERVICES PROJECT PROCUREMENT METHOD AND DISBURSEMENTS Procurement Method a/ Total Procurement Element ICB LCB Other N/A Costs - -__________-----US$ Million--------------- Buildings 0.14 2.46 2.60 (0.14) (2.46) (2.60) Vehicles & Equipment 4.75 0.25 0.10 5.10 (4.75) (0.25) (0.10) (5.10) Tech. Assist. and Consultants 5.07 5.07 (4.44) (4.44) Personnel & Op. Costs 4.69 1.50 6.19 (3.18) (0.04) (3.22) Other (Line of Credit & PPF) 3.06 3.06 (3.06) (3.06) Drugs 2.74 2.74 -p (2.62) (2.62) TOTAL 7.63 2.71 9.85 4.56 24.75 (7.5) (2.7) (7.7) (3.1) (21.0) a/ Figures in parenthesis show respective amounts to be financed by IDA.  -7- Schedule B Page 2 of 2 Amount of the Percentage of Credit Allocated Expenditures Category (US$ million) to be Financed 1. Civil Works 2.3 1002 of foreign and 80Z of local costs 2. Vehicles and Equipment 4.6 100Z of foreign and 802 of local costs 3. Technical Assistance and 4.0 1002 of foreign and 802 Training of local costs 4. Drugs and Forage Seeds 2.4 100Z of foreign and 802 of local costs 5. Credit for Veterinary 2.0 100? of total costs Practices 6. Operating Costs 2.9 a/ 7. Refinancing PPF Advance 0.8 Disbursed amount 8. Unallocated 2.0 Total 21.0 a/ Operating costs: 10OZ in Year 1, 60? in Year 2, 45Z in Year 3, 25? in Year 4 and 15? in Year 5. Estimated IDA Disbursements: IDA Fiscal Year 91 92 93 94 95 96 Annual 2.1 3.0 3.5 4.0 5.3 3.1 Cumulative 2.1 5.1 8.6 12.6 17.9 21.0  -8- Schedule C UGANDA LIVESTOCK SERVICES PROJECT TIMETABLE OF KEY PROJECT PROCESSING EVENTS (a) Time taken to prepare 5 months (Feb.-June 1989) (b) Prepared by Government, with assistance from IDA and consultants (c) First IDA mission September 1989 (d) Appraisal mission departure December 4, 1989 (e) Negotiations May 1990 (f) Board consideration September 11, 1990 (g) Planned date of effectiveness November 1990 (h) Relevant PCR Beef Ranching Development Project (Cr. 130-UG), 1982  -9- STATUS OF SANK GROUP OPERATIONS IN UGANDA Schedule a ~~~~~~~~~~~~~~~Page 1 of 2 A. STATEME>NT OF AUNK LOANS AND IDA CREDITS (as of June 30, 1990) ------US2l illion------ Amount(Lesa Cancellations) Loan or Fiscal Undis- Credit No. Year ,orrc er Purpose Bank IDA bursed One (1) loan and *eventeen (17) fully disbursed, 8.40 346.16 Of which SECALs, SAL* and Program Loans a/ Cr. 1841-I 1989 Uganda Economic Recovery Credit 0.00 1.70 Cr. 1282-0 1982 Uganda Reconstruction Credit II 0.00 70.00 Cr. 1474-0 1984 Ugands Reconstruction III 0.00 60.00 121.70 Cr.1248 1982 Uganda IDf I 36.00 5.99 Cr.1328 1983 Uganda Agricultural Rehabilitation 70.00 9.53 Cr.1434 1984 Uganda Second Technical Assistance 15.00 1.86 Cr.144l 1984 Uganda Third Highway S8.00 24.35 Cr.1639 1986 Uganda Agricultural Development 10.00 7.13 Cr.1660 1986 Uganda Second Power 28.80 27.06 Cr.1S81 1986 Uganda Petroleum Exploration Provotion 6.10 S.58 Cr.1803 1987 Uganda Fourth Highway 11.00 5.70 Cr.1824 1988 Uganda foro-itry Rehabilitation 13.00 9.17 Cr.0340 b/ 1988 Uganda Non-Sector Specific (Econ. Recov. Cr/SAf) 24.00 0.03 Cr.1844-0 b/ 19M Uganda Non-Sector Specific (Econ. Recov. Cr/SAf) 6e.00 1.83 Cr.1869 1988 Uganda South West Ag. Rehab. 10.00 9.65 Cr.1893 19s8 Uganda Sugar Rehabilitation 24.90 21.79 Cr.1934 19M Uganda Health Rec. 42.50 36.73 Cr.1951 1988 Uganda Tech. Ass. III 18.00 16.36 Cr.1844-2 b/ 1989 Uganda Econ. Recovery Credit 25.00 2.03 Cr.1962 1989 Uganda Public Enterpri;es 16.00 11.73 Cr.1966 199 Uganda Education IV 22.00 12.35 Cr.1986 1989 Uganda Railways I 7.00 6.36 Cr.1991 c/ 1989 Uganda Telecom II 52.30 60.70 Cr.0341 b/ 1990 Uganda Economic Recovery Credit 12.80 1.72 Cr.184-3 b/ 1990 Uganda Economic Recovery Credit 1.60 0.19 Cr.2087 b/ 1990 Ugenda Economic Recovery Credit 125.00 69.42 Cr.2088 1990 Uganda Poverty A Sow. Costa 28.00 29.12 Cr.2124 1990 Uganda Water Supply II 60.00 59.71 Total 8.40 1131.06 414.85 of which repaid 8.40 24.44 Total held by Bank A IDA 0.00 1108.61 Zs=_ TOTAL Undisbursed 414.86 a/ Approved after FY80. b/ SAL, SECAL or Program Loan. c/ Not yet effective. ugledl.kl 7-19-90  - 10 - Schedule 0 Page 2 of 2 8. STATEMEENT OF IFC INVESTMENTS IN UGAMDA (as of June 30, 1990) Amount in US3 Million Fiseal Year Obligor Type of Business Loan Equity Total 1965 Mulco Textile., Ltd. Textiles 2.79 0.71 3.60 1972 Tour'sm Promotions Services Tourism 1.11 - 1.11 1984 Toro and Mityana Tre Co., Ltd. Food and Food (TAMTECO) Processing 1.e2 - 1.82 1984 Sugar Corporation of Uganda Food and Food Processing 8.00 - 8.00 1986 Uganda Tea Corporation Ltd. Food and Food Procussing 2.81 - 2.81 1986 Development Finance Company Development Finance - 0.38 0.38 of Uganda Total gross commitments 18.33 1.09 17.42 Less: Repayments, cancellations, oxchange adj ustments, torminations and s*les 4.76 0.72 6.47 Total Commitments now held by IFC: 11.68 0.37 11.96 Total undisburseA (including 0.00 0.00 0.00 participants' portion) Source: IFC Disbursements Section ug2edl .wkl 7-19-90  UGANDA LIVESTOCK SERVICES PROJECT , MAJOR CA1TLE MOVEMENTS MaY, MARCH 1989 MaYo P ) OTIDO ARUA , \> *; l A/ A rUA/ KITGUM K DO 1 X Area affected by catto rushing {1983-89) XjS_ D T^a~~~hUm<JrXrr