Kenya, Tanzania, Uganda - Lake Victoria Environmental Management Project

GLOBAL ENVIRONMENT FACILITY l56LI -A:F Kenya, Tanzania, Uganda Lake Victoria Environmental Management Project Project Document June 1996 THE WORLD BANK  GEF Documentation The Global Environment Facility (GEF) assists developing countries to protect the global environment in four areas: global warming, pollution of international waters. destruction of biodiversity, anid depletion of the ozone layer. The GEF is jointly implemented bythe United Nations Development Programme, the United Nations EnvironmentProgramme, and the World Bank. GEF Project Documents - identified by a green band - provide extended project- specific information. The implementing agency responsible for each project is identified by its logo on the cover of the document. Global Environment Division Environment Department World Bank 1818 H Street. NW Washington. DC 20433 Telephone: (202) 473-1816 Fax: (202) 522-3256  Report No. 15541-AFR K:ENYA, TANZANIA, UGANDA Lake Victoria Environmental Management Project Project Document June 1996 Agriculture and Environment Operations Division Eastern Africa Department Africa Region  CURRENCY EQUIVALENTS Currency Unit = Kenya (KSh), Tanzania (TSh), and Uganda Shillings (Ush) US$1 = KSh58 (une 1996); US$1 = TSh615 (une 1996); US$1 = UShl,000 (June 1996) SDR1.0 = US$144424 WEIGHTS AND MEASURES Metric System GOVERNMENT FISCAL YEAR July 1- June 30 ACRONYMS ASARECA Association for Strengthening Agricultural Research in Eastern and Central Africa CBO Community-Based Organization CIPA FAO Committee for Inland Fisheries of Africa EAFFRO East African Freshwater Fisheries Research Organisation EU European Union FAO Food and Agriculture Organisation (of the United Nations) FIRI Fisheries Research Institute (Uganda) FY Fiscal Year GDP Gross Domestic Product GEF Global Environment Facility IAPSO Inter-Agency Procurement Services Office IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association IPM Integrated Pest Management ISP International Shopping Procedures IMF International Monetary Fund IUCN International Union for Conservation (World Conservation Union) KEMFRI Kenya Marine Fisheries Research Institute LVEMP Lake Victoria Environmental Management Project LVFO Lake Victoria Fisheries Organization MISO Management Information Systems Officer MTR Mid-Term Review NCB National Competitive Bidding NEAP National Environmental Action Plan NEMA National Environmental Management Authority (Uganda) NGO Non-Governmental Organization NSP National Shopping Procedures NWSC National Water and Sewerage Corporation (Uganda) OPO Operations Officer PDO Procurement/ Disbursement Officer PIC Project Implementation Committee PIP Proiect Implementation Plan RPSC Regional Policy and Steering Committee SAP Strategic Action Plan SIDA Swedish International Development Agency SOE Statement of Expenditure TAFIRI Tanzania Fisheries Research Institute TECCONILE Technical Cooperation for the Promotion of Dev't. and Env. Protection of the Nile Basin UNDP United Nations Development Programme UNEP United Nations Environment Programme WMO World Meteorological Organisation  PART I: PROJECT SUMMARY   KENYA, TANZANIA, AND UGANDA LAKE VICTORIA ENVIRONMENTAL MANAGEMENT PROJECT GRANT, CREDIT, AND PROJECT SUMMARY Borrowers: The Republic of Kenya, United Republic of Tanzania, and the Republic of Uganda Beneficiaries: Fisherfolk, smallholder farmers Amounts: (a) GEF Kenya SDR8.0 million (US$11.5 million equivalent) Tanzania SDR7.2 million (US$10.3 million equivalent) Uganda SDR9.2 million (US$13.2 million equivalent) (b) IDA Kenya SDR8.9 million (US$12.8 million equivalent) Tanzania SDR7.0 million (US$10.1 million equivalent) Uganda SDR8.4 million (US$12.1 million equivalent) Terms (GEF): Grant Terms (IDA): Standard, with 40 years maturity. Commitment Charge (IDA): Standard Onlending Terms: Grants to communities for microprojects Financing Plan (US$ m): GEF IDA Governments Totals Local 15.9 18.4 7.6 41.9 Foreign 19.1 16.6 0.0 35.7 Total 35.0 35.0 7.6 77.6 Economic Rate of Return: No ERR calculated, as project benefits are not readily quantifiable. The major direct economic benefit for which the project lays the foundation is avoidance of collapse of the lake fisheries, which is estimated to have a present value of US$270-520 million to the lake community. Staff Appraisal Report: Report No. 15429 Map No.: IBRD 27780 Project ID No.: F2-PA-44135 Vice President: Callisto Madavo, AFR Director: James W. Adams, AF2 Division Chief: Sushma Ganguly, AF2AE Staff: Graeme Donovan, AF2AE   KENYA, TANZANIA, UGANDA THE LAKE VICTORIA ENVIRONMENTAL MANAGEMENT PROJECT PART I: Grant and Project Summary 1. The Chief Executive Officer of the GEF has endorsed the GEF financed portion of the project pursuant to paragraph 30 of the Instrument for the Establishment of the Restructured Global Environment Facility. Country and Sector Background Kenya 2. Kenya remains a low-income country. Even though its population growth rate, which historically has been very high, dropped to about 3 percent in 1993, and although Kenya is one of the few countries in Africa that experienced a decline in fertility in the eighties, a significant and sustained increase in per capita income has proved to be an elusive goal in Kenya during the past decade. In spite of a few years of relatively good growth during the second half of the 1980s, the performance of the economy has been particularly inadequate in generating new jobs, and there has been no significant improvement in the incidence of poverty. Overall, the economy has generated only marginal increases in per capita output over the past decade; during the recent years, per capita income actually declined - from $340 in 1991 to $260 in 1994 (at current prices and exchange rates). 3. Sustained Government effort since mid-1993 to tighten fiscal and monetary policy has resulted in effective economic stabilization and the revival of economic growth. The fiscal deficit (exclusive of grants) has been sharply reduced over two years from over 11 percent of GDP in FY93 to about 2.5 percent in FY95. Combined with a generally tight monetary stance, these policies have resulted in the reduction of inflation, to a three-month annualized inflation rate of 2.8 percent by the third quarter of 1995. The recent decline in domestic interest rates and the subsequent capital outflow, as well as the gradual recovery of import demand, resulted in the shilling depreciating in the second quarter of 1995 to about KSh 55 per US dollar where it has since stabilized. In parallel with the improvement in inflation has been a resumption of real economic growth. GDP growth (at factor cost) for 1994 is estimated at 3 percent, the first significantly positive growth in three years, and it was projected at around 5 percent for 1995. 4. Rising population pressures, migration and rapid urbanization have increased the need for urgent actions to address Kenya's environmental problems. The more critical problems are related to soil and land degradation, water resource management, biomass and household energy issues, and the protection and management of fragile ecosystems, including national parks. Rapid urbanization and inadequate physical planning have also caused a significant deterioration in the urban environment. The Government adopted a comprehensive National Environmental Action Plan (NEAP) in June 1994. Areas for priority action include the development and adoption of a comprehensive environmental policy, the establishment of an effective institutional and legal framework, and the formalizing of a requirement for environmental impact assessments for all development projects.  2 Grant and Project Summary Tanzania 5. By the early 1980s, Tanzania had come to be a heavily state-controlled economy, whose rigid economic system was battered by numerous shocks, and whose inadequate policies led to economic stagnation and a fall in per capita income lasting almost a decade. Beginning in 1986, the Government embarked on a program to reform and fundamentally change the existing approach to economic development by dismantling the system of pervasive economic controls and encouraging more active participation of the private sector in the economy. Structural reforms, particularly relating to traditional exports and the parastatal and financial sectors, were not fully completed, and macroeconomic stabilization remained elusive. Nevertheless, the economy responded well to the reforms that were implemented (notably, liberalization of food crop marketing and progressive improvements in foreign exchange management) and the accompanying increased availability of external resources. Official estimates indicate that GDP growth averaged about 4 percent per year and exports grew by more than 4 percent per year during 1986-94 (versus a 5 percent p.a. decline during 1979-85), with a marked increase in food production, increased sales of traditional exports, and a doubling in non-traditional agricultural exports since 1985. Recent household surveys have shown that the adjustment program has been successful in reducing the incidence of poverty from about 65 percent of the rural population in the early 1980s to about 50 percent in the early 1990s. 6. Progress has been made in reforming the foreign exchange and trade systems over the last two years. Tanzania has moved to an interbank market and has abolished all export retention and import licensing, except for items related to health and national security. Excessive monetary expansion has been fueled by worsening fiscal management. The fiscal deficit (including grants) was about 6 percent of GDP in FY93 and 5 percent in FY94, after broadly balanced positions in the previous four years. This reflected widespread and increasing customs duty exemptions, an increasingly inefficient tax administration and the failure of the expenditure control system. Efforts are being made in the current fiscal year (among then a public sector hiring freeze, and reduced transfers to parastatals) to reduce the fiscal deficit below 4 percent of GDP. Inflation, which had accelerated above 25 percent p.a. is targeted by efforts to bring it down to 22 percent within the next fiscal year. Real GDP growth averaged about 3-4 percent per year during FY92 to FY94. Growth in FY94 was seriously compromised by weak economic management, and severe power shortages caused largely by less-than-average rainfall. These developments limited the scope for generating employment and, in particular, the high inflation rates resulting from macroeconomic mismanagement continue to erode the real incomes of the poor. 7. The recently completed National Environmental Action Plan focused on the need for action in the key areas of land degradation, water supply, environmental pollution, marine and freshwater resource management, habitat conservation and bio-diversity, and deforestation. The action program for implementation includes revision of the legislative framework to enable local participation in environmental management more fully. Policies will support the environment in various ways, including applying the forest and wildlife protection acts; developing the means for assessing environmental quality, including water and air pollution; and strengthening environmental awareness programs. Some Government policies are oriented towards using incentives, such as implementing the new land policy to enhance the security of tenure; pricing policies for fuel, including oil; and water rights to encourage efficient use and environmentally sensitive practices.  Grant and Project Summary 3 Uganda 8. With a per capita income of about US$200, Uganda is one the poorest countries in the world. Its weak economy and poor social indicators are the legacy of nearly 15 years of political turmoil and economic decline. Since 1987 the Government has been implementing an economic reform program supported by a large number of donors. The program aims to promote prudent fiscal and monetary management, improve incentives to the private sector, reform the regulatory framework, and develop human capital through investment in education, health and other social services. Economic recovery and stabilization have been successful; hard-won macroeconomic stability has been maintained for the past three years. The stability is precarious, however; continuation of good policies and further improvement are therefore required. The dilemma facing policymakers, is to get the economy moving ahead more rapidly, without generating inflation which could unravel the entire adjustment program. 9. Uganda's economic growth since 1987 has been good, but not spectacular. Real GDP grew by an average of 5.4 percent per annum from FY87 to FY93, a gain of about 2.5 percent per annum in per capita terms. To a large extent this growth was the result of bringing land and capital back into production, made possible by increased peace and security. More recently growth has also been fueled by some private investment and by the impact of trade, exchange rate and crop marketing liberalization. Preliminary indications are that real GDP rose by 5 percent in FY94, mainly due to strong performance by the manufacturing and construction sectors. The point has now been reached where further growth will depend on increased private investment. 10. The NEAP was approved by the Government in January 1994. The National Environmental Policy that was adopted subsequently calls for re-aligning sectoral development strategies so that they address priority environmental concerns relating to, among others, land degradation, deforestation, loss of wetlands, and dwindling fish stocks, several of which are directly related to environmental management of the Lake Victoria basin. The policy also emphasizes strategies cutting across sectors such as the need to control population growth and enhance security of land tenure. It also advocates environmental education and a system of environmental impact assessments as essential means of promoting rational resource use. The National Environmental Management Authority (NEMA) established recently will serve as the central policy advisory body on the environment, and coordinate implementation of the NEAP. Lake Victoria and its Surrounds 11. Lake Victoria (Map Number IBRD 27780), with a surface area of 68,800 km2 and an adjoining catchment of 184,000 kM2, is the world's second largest body of fresh water (second only to Lake Superior in size), and the largest in the developing world. Lake Victoria touches the Equator in its northern reaches, and is relatively shallow, reaching a maximum depth of about 80 m, and an average depth of about 40 m. The lake's shoreline is long (about 3,500 km) and convoluted, enclosing innumerable small, shallow bays and inlets, many of which include swamps and wetlands which differ a great deal from one another and from the lake itself. 12. Although there are many features of Lake Victoria which are of intense interest to biologists, it is fish that receive the most attention. Most of the fish species now in the lake also lived in the preceding, west-flowing rivers, but the cichlids, in particular, had a remarkable burst of speciation in response to the change from river to lake conditions.  4 Grant and Project Summary Similar things happened in the other great lakes, but in Lake Victoria it happened much more recently, more rapidly, and with, at first sight, fewer opportunities for ecological isolation in different types of habitat. The cichlids are capable of rapid genetic change, and more prone to speciation than other groups of African fish. 13. Kenya, Tanzania and Uganda control 6, 49, and 45 percent of the lake surface, respectively. The gross economic product of the lake catchment is in the order of US$3-4 billion annually, and supports an estimated population of 25 million people at incomes in the range of US$90-270 per capita p.a. The lake catchment thus provides for the livelihood of about one third of the combined populations of the three countries, and about the same proportion of the combined gross domestic product. With the exception of Kampala, the capital of Uganda, the lake catchment economy is principally an agricultural one, with a number of cash crops (including exports of fish) and a high level of subsistence fishing and agriculture. In Kenya and Uganda the areas of coffee and tea in the catchment are a significant part of those nations' major agricultural exports. The quality of the physical environment is therefore a fundamental factor in maintaining and increasing the living standards of the growing population. Major Threats to the Lake 14. The lake basin is used as a source of food, energy, drinking and irrigation water, shelter, transport, and as a repository for human, agricultural and industrial waste. With the populations of the riparian communities growing at rates among the highest in the world, the multiple activities in the lake basin have increasingly come into conflict. This has contributed to rendering the lake environmentally unstable. The lake ecosystem has undergone substantial, and to some observers alarming changes, which have accelerated over the last three decades. Massive blooms of algae have developed, and come increasingly to be dominated by the potentially toxic blue-green variety. Water-borne diseases have increased in frequency. Water hyacinth, absent as late as 1989, has begun to choke important waterways and landings, especially in Uganda. Overfishing and oxygen depletion at lower depths of the lake threaten the artisanal fisheries and biodiversity (over 200 indigenous species are said to be facing possible extinction). Scientists advance two main hypotheses for these extensive changes. First, the introduction of Nile perch as an exotic species some 30 years ago has altered the food web structure; second, nutrient inputs from adjoining catchments are causing eutrophication. Thus although the lake and its fishery show the evidence of the dramatic changes in the lake basin over the past century, the lake is not the source of the problem. The problems have arisen in the surrounding basins through human activity. Project Objectives 15. The Lake Victoria Environmental Management Project (LVEMP) is a comprehensive program aimed at rehabilitation of the lake ecosystem for the benefit of the people who live in the catchment, the national economies of which they are a part, and the global community. The program objectives are to: (a) maximize the sustainable benefits to riparian communities from using resources within the basin to generate food, employment and income, supply safe water, and sustain a disease free environment; and (b) conserve biodiversity and genetic resources for the benefit of the riparian communities and the global community. In order to address the tradeoffs among these objectives which cut across national boundaries, a further project objective is to harmonize national management programs in order to achieve, to the maximum extent possible, the reversal of increasing environmental degradation.  Grant and Project Summary 5 Project Description 16. The project is the first phase of a longer term program whose aims are as outlined above. The first phase will provide the necessary information to improve management of the lake ecosystem, establish mechanisms for cooperative management by the three countries, identify and demonstrate practical, self-sustaining remedies, while simultaneously building capacity for ecosystem management The project will consist of two broad sets of activities. The first set, designed to address specific environmental threats, will take place in a series of selected pilot zones. The second set of activities, which will improve information on the lake and build capacity for more effective management, will be of necessity lake-wide in scope. 17. In the pilot zones, the project would do the following in an integrated way: develop groundwater resources; conserve and develop wetlands; reduce sediment and nutrient flow, especially of phosphorus, into the lake; reduce fecal coliform and municipal nutrient output into the lake; regulate industrial effluent; define current contamination of fish and prevent any increase; stabilize the catch of Nile Perch, and increase the catch of indigenous species; increase incomes of local fisherfolk; and reduce water hyacinth to manageable levels. A total of fourteen pilot zones have been identified, four in Kenya, and five in each of Tanzania and Uganda. Work would be started in one pilot zone in each country in the first year - Nyakach Bay in Kenya (including the city of Kisumu), Mwanza Gulf in Tanzania (including the city of Mwanza), and Napoleon Bay in Uganda (including the city of Jinja). The other pilot zones are Berkeley Bay, Usenge-Yala, and Karungu Bay (Kenya); Mara-Shirati Bay, Speke Gulf, Emin Pasha Gulf, and Kagera- Rubafu Bay (Tanzania); and MacDonald-Berkeley Bay, Murchison Bay, Sesse Islands, and Sango Bay (Uganda). 18. Among lake-wide actions the project would: assess and measure sources of nutrients causing eutrophication; measure fisheries-trophic state interactions; model and monitor lake circulation; define and measure the contaninant threat; harmonize regulation and legislation; monitor recovery and impact; and build institutional capacity. 19. The project would support the following specific regional and national program activities: (a) management of fisheries, including the establishment and operations of the Lake Victoria Fisheries Organisation [US$2.3 million), improvement of fisheries research and the information base for fisheries [US$13.3 million], strengthening of extension, monitoring and enforcement capabilities of national fisheries administrations [US$14.1 million]; and studying and implementing a Fish Levy Trust [US$2.0 million]; (b) management and control of the water hyacinth infestation [US$8.3 million]; (c) management of lake pollution and water quality, including strengthening and harmonizing national regulatory and incentive frameworks and enforcement capabilities, and establishing a lake-wide water quality monitoring system [US$9.6 million], improvement of research and the information base for pollution control and water quality [US$4.3 million], pilot investments in industrial and municipal waste management [US$1.7 million], and priority waste management investments [US$4 million]; (d) management of land use in the catchment, including improvement of research and the information base for pollution loading from the catchment, assessment of agro-chemicals, and pilot investments in soil conservation and afforestation [US$9.2 million]; (e) wetland management, including improving the information base [US$3.4 million], and pilot investments in sustainable management of wetland products [US$1.5 million]; and (f) support for institutions for lake-wide research and management, and pollution disaster contingency planning [US$4.0 million].  6 Grant and Project Summary 20. Incremental costs of the project are estimated to be US$38.8 million (details in the SAR Annex 7). In addition to financing the baseline and adjusted baseline measures from non-GEF (IDA) sources, the three riparian governments have agreed to contribute US$3.8 million from their own resources to finance a part of the project's incremental cost. They have requested a GEF grant of US$35 million to fund the balance. 21. The total project cost of US$77.6 million would be financed by the Global Environment Facility (GEF) (US$35 million), IDA (US$35 million), and the Governments of Kenya, Tanzania, and Uganda (US$7.6 million among them). Estimated project costs and financing are given in Schedule A. Schedule B outlines the economic analysis, Schedule C the procurement methods and disbursement estimates, Schedule D the timetable of key project processing events, Schedule E the status of Bank Group Operations in the three countries, and Schedule F an overview of the three countries. Project Implementation 22. The Tripartite Agreement (signed August 5,1994) which set in motion a collaborative process of project preparation among the three countries, provided also for project implementation. In particular it established three National Secretariats, each headed by a high-level officer, selected by the respective governments, and supported by a modest staff. These Secretariats served an essential coordination role during project preparation, and it is planned that this role should continue into the project implementation phase. They will be strengthened by the appointment of a Procurement/Disbursement Officer, an Operations Officer, and a Management Information Systems Officer. Among other things, these three officers will ensure compliance with IDA and GEF reporting, procurement and disbursement procedures. The three Secretariats, one in each country, will provide a day-to-day central contact point and information clearing house for all agencies implementing the program, and all donors supporting it While the many implementing agencies will be responsible for progress on their own components, and for monitoring and reporting on that progress, the Secretariats will gather information from all the agencies in their respective countries, be responsible for overall monitoring, and prepare progress reports for decision making about the overall project The Heads of the Secretariats will also, when necessary, organize tripartite meetings of officials responsible for various components of the program. The Regional Secretariat in Tanzania will organize meetings, when required, of members of the Regional Policy and Steering Committee, which will also remain in place, with the same membership as it has had throughout project preparation. The Committee will have several roles, its most important being the mechanism for resolution of disputes arising during implementation of the program. 23. The Lake Victoria Fisheries Organization will assume overall coordination for components associated with fisheries, although as the project description outlines, implementation will be by individual national agencies, and the Regional Policy and Steering Committee will be responsible for overall program coordination, including coordination between the fisheries program as a whole and the rest of the program. 24. The various national agencies will implement components of the projects as follows. The three Fisheries Research Institutes (KEMFRI, TAFIRI and FIRI) will play lead roles in all sub-components of fisheries research, and will collaborate with the Fisheries Departments of their respective governments in the fisheries extension, and with the Ministries of Water in the Water Quality components. For the latter components, the Ministries of Water will be the lead agencies, and they in turn will collaborate closely  Grant and Prqect Summary 7 with the Ministries of Environment, Natural Resources and Agriculture in their implementation of the components on land use and wetland management. National wetlands committees in all three countries will also be involved in these components, with continuing assistance from the World Conservation Union (IUCN). The Moi, Makarere, and Sokoine Universities, and the Universities of Nairobi and Dar es Salaam, will be involved in many of the studies, including those on socio-economics. The water testing laboratories of the Kisumu and Mwanza Municipal Councils, the Uganda Water and Sewage Corporation, and the Lake Basin Development Authority (in Kisumu) will extend the reach of laboratories already operating or planned by the respective Ministries of Water. 25. In order to address the variations in implementation capacity, from country to country, and agency to agency, with some strong already but others less so, every sub- program makes extensive provision for capacity building. For the whole project in the three countries provision is made for more than 2,000 short term and on-job training courses, about 100 regional Masters Degrees, and 15 PhDs. Care will be taken to strike a balance in the training and its timing so that enough people are available to implement the project. 26. For the Water Hyacinth Control Program, national steering committees or task forces will be set up, and rearing units for biological control agents will be assisted by the respective national agricultural research institutes. Finally, the project will also draw on the resources of local and international consultants in areas where particular scientific expertise is called for beyond the abilities of staff in the implementing Ministries. 27. Because of the extensive scientific investments in the program, the worldwide scientific interest in Lake Victoria, the need to seek innovative solutions to solving environmental problems that draw on a broad spectrum of physical, biological and social sciences, and uncertainties associated with the dynamic lake ecosystem, it is also proposed to appoint a high level panel of internationally renowned scientists, initially with 7 members, to serve as an overall advisory group for the scientific studies in the lake. Possible scientific specialties for representation on the panel will be limnology, fish biology, zoology, entomology, plant physiology, microbiology, chemistry, meteorology, economics, anthropology, sociology, soil chemistry and physics, forestry, and ecology. The panel will contain at least three members representing the natural sciences and at least two from the social sciences, and its membership will be reviewed every two years, although members may serve unlimited terms upon reappointment by the nominating agencies. Following each two-yearly review, the panel will elect from among its members a corresponding secretary to facilitate communication within the panel. The panel members will be mutually acceptable to the three riparian states (as represented by the Regional Policy and Steering Committee) and to IDA. 28. As they collaborated during project preparation, IDA, UNDP, and UNEP will also collaborate during reviews of implementation. IDA will have overall responsibility for review, UNDP will focus on stakeholder consultation and participation aspects of the project, and UNEP will focus on water quality aspects of the project. As part of the Mid- Term Review of the project, the three governments will prepare an updated analysis of transboundary environmental concerns, to guide the second phase of project implementation, and set the stage for subsequent initiatives. The Implementation Completion Report prepared by the three governments at the end of the project will include a revised Strategic Action Program, containing an outline of interventions needed  8 Grant and Proiect Summary to address priority problems. IDA will use this as the basis for convening a donors' meeting to seek commitments to support such interventions. Project Sustainability 29. The two most important elements of sustainability are stakeholder ownership, and provision for fiscal continuance. They have been addressed by a highly participatory mode of project preparation, and will be addressed during implementation by special efforts to involve local communities, and support for a Fisheries Levy Trust study to seek sources of funds for ongoing support for lake ecosystem activities. 30. Catalyzed by GEF financing, the three governments prepared the project themselves, in the process resolving many issues among them, demonstrating good technical collaboration, and generating strong ownership for the implementation phase. The Tripartite Agreement signed in August 1994 covered both preparation and implementation, thus providing for the implementation phase a continuing legal framework which has already been tested and found sound. Institutional arrangements which have proved their worth during preparation - especially the structure of National Secretariats and a joint Policy Steering Committee - will be continued unchanged for implementation, although the Secretariats will be strengthened. 31. Supported by the UNDP, special efforts during preparation were made in all three countries to involve communities around the lake in generation and discussion of project proposals, along with information-gathering to ensure that project proposals address the needs of local communities. In al three countries consultants were engaged who visited communities, women's groups, projects of community-based organisations and NGOs in fisheries and fish processing, soil conservation, wetlands development, and water hyacinth control, among many others. In Tanzania, for example, a study of community needs was conducted in three regions, 12 districts, 24 fishing villages and more than 85 groups or communities. The consultants also worked with NGOs and others to conduct stakeholder workshops, and with the government working groups to incorporate a community focus into the preparation report. The large emphasis on fisheries extension is one of many outcomes of this process. Others include the provision for community micro-projects among the investments which the project supports, and the proposals for community involvement in many of the research programs to be conducted under the project. The government preparation report acknowledges that "one of the major setbacks in aquatic resource management in East Africa is the general lack of community participation in management programs", and notes that such participation "is considered key to the successful implementation of this program.' 32. Throughout the project special efforts will be made to involve local communities, and the capacity of a number of local NGOs and CBOs will be strengthened so that they could facilitate the process of community participation and ownership, and lead the communities in undertaking wise use activities of the resources in the lake and its basin. A special feature of the Fish Biology and Biodiversity Conservation program implementation, for example, will be attempts to involve local communities in identification of issues, tagging and recapture efforts, return of immature fish, surveilance of protected areas, sampling of commercial catches, protection of research equipment, and compilation of research data. Many of the other scientific initiatives will involve communities in carrying out the measurements, and in caring for monitoring equipment. For the water hyacinth control program, in particular, it wil be essential for local people to understand and assist with the biological control efforts.  Grant and Project Summary 9 33. The project will have community participation woven into virtually every component, funding for micro-projects, a great deal of community training, hundreds of stakeholder workshops, and provision for community participation in everything from scientific studies to water hyacinth control, fisheries research to own-enforcement of agreed fishery regulations, sustainable use of wetlands to soil conservation, with benefits springing from better fishing management, aquaculture, higher quality products, lower post-harvest losses, cleaner water, more control over local fishing beaches, and construction of community assets. 34. Acknowledging that availability of reliable and adequate funding is essential for management of fisheries, which involves continuing research, extension, monitoring and enforcement, the three governments have proposed to study and implement jointly a program in which funds raised from the commercial fisheries themselves will contribute to underwriting fisheries management in the longer term, as well as assisting some of the central monitoring and management initiatives to become fiscally sustainable. The study will identify sources of funds, and also examine in depth the issues involved in managing such funds on a regional basis. The LVEMP includes financial support for establishing a shared Levy Trust Fund among the three countries, should the study show this to be feasible. Lessons Learned from Previous IDA and GEF Involvement 35. This program will be the first of its kind within the region, addressing a complex set of managerial, scientific/ technical and institutional issues across three countries. It aims to provide Governments with the necessary skills, information, technical and financial resources, and a proper institutional and legal framework to carry out successfully such an endeavor. It will build technical capacity to promote, assist and coordinate the various initiatives within a regional framework, and help design a comprehensive set of national policies and strategies based on lessons learned from field experience. An important lesson incorporated from past operations was to ensure that preparation be done by the countries themselves. The resultant ownership will have the usual national benefits, as well as being especially important in this program which crosses national boundaries, since the three governments have already gained valuable experience working together during preparation. 36. The present report has responded to the GEF Technical Review by acknowledging the uncertainty about sources and mechanics of eutrophication, incorporating the specific management elements suggested by the reviewer, setting the stage for a new approach to modelling, reiterating the emphasis already contained in the first draft, that management of the lake's problems is the principal aim of the project, and delineating the project's large elements of capacity building. Rationale for GEF and IDA Involvement 37. Lake Victoria is an international water body that is both of great economic worth to the three riparian countries and of great scientific and cultural significance to the global community, mainly in respect of its unique waterborne biodiversity. It is suffering severely from three of the four major global environment concerns highlighted in the GEF Operational Strategy for International Waters - degradation of water quality due to pollution from land-based activities; introduction of non-indigenous species; and excessive exploitation of living resources. It is also facing their typical consequences - potentially irreversible environmental damage, hardship to the poor and serious health  10 Grant and Project Summary concerns. With poverty endemic to the region and many competing claims for scarce development resources, the case for GEF-support to overcome the barriers to concerted corrective action is extremely strong. As called for in the operational strategy, the GEF assistance will act as a catalyst for the three countries to develop a better understanding of how the lake functions, learn how the actions of their populations in the lake basin affect the lake environment, and work out ways jointly with one another to implement a comprehensive approach to managing the lake ecosystem to achieve global environment benefits. The project is consistent with both the GEF waterbody-based operational program and with the integrated land and water operational program, while also having elements of the third, contaminant-based, operational program. The project will in particular address another priority in the operational strategy - the conservation and sustainable use of biodiversity in freshwater ecosystems. As one of the world's largest unique freshwater biodiversity habitats, Lake Victoria is a clear priority for GEF assistance. 38. The GEF funding for this project will make possible the elaboration of a strategic framework for a large program of investments in the lake basin during the project implementation period, particularly in municipal waste management and soil conservation, and will also lay the foundation for a longer program of investments over time in these and other areas. It will thus have an enormous "leveraging" impact, for the benefit of the national and global environments. The GEF financing of preparation succeeded in generating strong "ownership" of the project by the three governments which prepared it, and catalysed close collaboration at every stage among IDA, FAO, UNDP and UNEP. The information and pilot work carried out in the GEF project will orient ongoing investments and guide new ones during its five years of implementation, and far beyond. Within the next two years, under projects already begun, IDA and the European Union will finance improvements to municipal sewage treatment schemes in Kampala and Jinja in Uganda, and Mwanza in Tanzania. The funds will also finance a study of storm water drainage, solid waste management, and water reticulation in Kampala. 39. Several other major infrastructure projects are planned to begin implementation in FY98 which will finance water supply and urban sanitation in the lake basin, directly in support of the LVEMP. Further projects are planned to support natural resource management in the lake basin, including soil conservation and catchment afforestation. All of these projects will reduce pollution and eutrophication in the lake. While most of these projects were identified initially in the absence of the LVEMP, the latter will increase markedly the success with which they address the priority issues. The major projects still forthcoming will "take their signals" from the framework and findings of the LVEMP. Numerous smaller scale activities with bilateral support, implemented by local communities and NGOs, will also benefit from being planned in the context of the improved information base and management plans designed for the ecosystem as a whole, which will result from the LVEMP. 40. The project is consistent with the Bank's Country Assistance Strategy (CAS) for each of the three countries. The CAS for Kenya was discussed by the Board on January 31, 1996. One of the key elements of the strategy is to improve environmental management within the country, and to assist Kenya to respond to its commitments to enhance protection of the global environment. The CAS for Uganda was discussed by the Board on June 1,1995. An important element of that strategy is to build domestic environmental management capacity, and in particular to address issues related to degradation of Lake Victoria. The CAS for Tanzania was discussed by the Board in  Grant and Project Summary 11 March 1994, and a Progress Report was discussed by the Board on May 23,1996. IDA financial support for the project is in line with two primary aims of the CAS, namely capacity building for improved public sector management, and creating a climate for environmentally sustainable investments. 41. The project will be the first substantial investment in the environment for IDA in two of the three countries following preparation of National Environmental Action Plans in all three. Various other donors have supported a range of initiatives in and around Lake Victoria, in smaller, uncoordinated, and sometimes incomplete ways. In the absence of a coordinated management system for the entire lake and its ecosystem, these smaller projects have sometimes fallen short, and continue to fall short, of realizing their maximum potential. Building on its wide-ranging relationships with all three governments, IDA has an important capability, and as implementing donor in this project an important opportunity, to support the development of such a coordinated management system. IDA also has the standing to mobilize scientific resources from across the globe in support of an initiative which has unprecedented interest to the global scientific community. Agreed Actions 42. At negotiations, agreements and assurances regarding the project's organization and operational arrangements were obtained, which inter alia included the following: (a) in order to ensure the cost-effectiveness of any one country's investments, the three governments agreed to take steps to ensure that project components with regional implications will proceed at a comparable pace in all three countries; (b) a high level panel of internationally renowned scientists, with 7 members, will be appointed to serve as an advisory group for the scientific studies in the lake, and they will meet at least once a year to review progress on program implementation; (c) national steering committees will be established in all three countries for the water hyacinth control program; (d) the policies, procedures and core membership of the Regional Policy and Steering Committee will not be changed without agreement of IDA; (e) herbicides used in the water hyacinth control program will be acceptable to IDA, they will be used sparingly, in strictly selected and confined areas, all persons applying such herbicides will be trained in their safe and appropriate handling and use, and mechanisms for careful monitoring of herbicide use will be established; (e with the exception of the biological control agents for water hyacinth, no new species will be introduced into the lake without first carrying out an environmental impact assessment; (g) prior to implementation of any intervention likely to have a negative impact on fish ecology (such as changes in net sizes or other controls over the fishing effort), the proposed intervention will be subjected to an environmental impact assessment, with provision for public comment; (h) prior to implementation of any project component related to pollution control, a project specific environmental assessment will be carried out to guard against the possibility that any uncontrolled dumping of domestic and industrial wastes would take place; (i) the National Secretariats will prepare annual work programs, training plans, and related financing plans and submit them to IDA for review by March 31 of each year; the annual work programs would include details of the procurement of goods and services and the procedures to be adopted for such procurement within the limits given earlier and agreed by IDA; (j) disbursement arrangements will be satisfactory to IDA, and each Government will open a Special Account at a commercial bank, and operate it in a timely manner; (k) procurement of the goods, works, and consultant services required for the project and to be financed out of the proceeds of the GEF Grant and the IDA Credit will be undertaken in accordance with procedures satisfactory to IDA; (1) the three Governments will have  12 Grant and Project Summary the records and accounts of the project, including those for the Special Accounts and Statements of Expenditure (SOEs), audited each fiscal year by independent auditors acceptable to IDA; and will submit to IDA the audit reports within six months after the close of the respective fiscal year; the audit reports will include a statement on the adequacy of the accounting systems and internal controls; (m) after the first project year, an annual comprehensive review will be held with the donors, to consider the annual work plan and new financial procedures and arrangements for the forthcoming fiscal year; modifications of project design and/or procedures will be introduced as appropriate; (n) annual National Workshops coordinated by the National Secretariats and an annual Regional Workshop coordinated by the Regional Secretariat in Tanzania will be held to assess implementation progress and agree on any adjustments needed; (o) a Mid-Term Review will be held prior to the end of March, 1999, during which the performance of the Lake Victoria Fisheries Organisation, the three National Secretariats, and the Policy Steering Committee will be reviewed and appropriate changes made; the review will also carry out an in-depth examination of the arrangements for community participation in project implementation; as part of the Mid-Term Review, the three Governments will prepare an updated analysis of the transboundary environmental concerns, to guide the second phase of project implementation, and set the stage for subsequent initiatives; (p) subject to satisfactory completion of the Levy Trust Study, the three Governments will jointly establish, by the end of July, 1988, a Levy Trust Fund into which funds raised from commercial fisheries will be placed and disbursed in support of joint fisheries management and central monitoring initiatives under the project; (r) the three Governments jointly will prepare and submit to IDA an Implementation Completion Report within six months after the closing date; the Implementation Completion Report will include a revised Strategic Action Program, containing an outline of interventions needed to address priority problems. 43. Prior to Credit Effectiveness, the three Governments will, inter alia: (a) confirm the membership of the Regional Policy and Steering Committee; (b) appoint Heads to the three National Secretariats with qualifications and experience equivalent to a Deputy Principal/Permanent Secretary, and appoint to each Secretariat a Procurement/Disbursement Officer, an Operations Officer, and a Management Information Systems Officer; (c) establish the Panel of Scientists; (d) agree standard methods for measuring and monitoring water quality; (e) provide evidence satisfactory to IDA that each of the three Governments has made budgetary allocations representing their first year contribution to the Project; (f) finalize and submit to IDA the annual work plans and financial plans for the first year of the Project Implementation Plan. Environmental Aspects 44. The program is in effect a regional environmental action plan for Lake Victoria, having as its central objective improving the environmental conditions of Lake Victoria and its catchment. However, the program will encompass a wide range of different interventions and investments, and has been designated as Category B for environmental analysis to ensure that adequate attention will be given to the many overall positive impacts as well as to individual components which might have adverse local environmental effects. 45. The project will locate and quantify the environmental problems arising from the very rapid growth of population around the shores of the lake, and in its catchment, identify the sources of pollution and nutrient inflows into the lake, propose and begin to implement ameliorative measures, including innovative pilot measures, and strengthen existing institutions to sustain solutions in the longer term. The area in which the project  Grant and Project Summary 13 is expected to make the most economic difference will be in heading off developing instability and possible serious collapse of the valuable lake fisheries. 46. The project will also address any negative environmental impacts which may arise in the course of project implementation itself, in the following ways: (a)fish ecology - any proposed interventions (such as changes in net sizes or other controls over the fishing effort) will be clearly defined and carefully assessed through an environmental impact assessment before introduction, in order to avoid unforeseen effects from attemptb to restore and stabilize the fish ecology in the lake; (b) aquaculture - no new species will be introduced into the lake into the lake without first carrying out an environmental impact assessment; (c) biological control agents - all biological control agents under consideration have been subjected to exhaustive field testing over twenty years in several countries, and there are no remaining doubts about their safety; any additional biological control agents available during project implementation will be subjected to similar testing protocols; (d) herbicides - use of herbicides in the water hyacinth control program will be confined to those acceptable to IDA, they will be used sparingly, in strictly selected and confined areas, all persons applying such herbicides will be trained in their safe and appropriate handling and use, and mechanisms for careful monitoring of herbicide use will be established; (e) pollutants - pollution control projects will be subjected to project specific environmental assessments to guard against the possibility that any uncontrolled dumping of domestic and industrial wastes might take place. Program Objective Categories 47. The overwhelmingly positive contributions of the program to environmentally sustainable development have been outlined above. The program will pursue poverty alleviation through its emphasis on restoration of stability to the lake fishery, with positive impacts on the lives of at least 500,000 persons whose livelihoods depend directly on the fisheries. Through community involvement in implementation, the program will seek to appropriate for poorer groups a larger share of gains arising from the fishery, and from using resources in wetlands and other parts of the lake catchment. Improvements in water quality around the lake will contribute to better health for all who rely on it for their water supply, especially poorer groups. The welfare of women will be improved by additional income-earning opportunities in fishery-related and wetland activities, as well as by better access to water supply and improved health through the control of aquatic weed infestations. The project will foster managerial efficiencies in both the public and the private sectors by improving policy analysis, regulatory enforcement, harmonized internal and external systems and procedures, and an environmental information base. The project will also support regional cooperation and understanding among the three riparian countries. Project Benefits 48. This regionally coordinated environmental management project is expected to generate greater benefits than the sum of any individual country programs, since it will reduce uncertainty in respect to actions by riparian partners and lower the probability that benefits of actions taken by an individual government will be offset by actions or non-actions by others. The project is expected to lay the essential foundations of knowledge, capacity building and establishment of institutions for a wider program of investments which will generate: (a) net economic benefits estimated to have a present value to the lake communities of US$275-520 milion from stabilising lake fisheries; (b) a reduction in the annual costs of the current water hyacinth infestation, estimated to be  14 Grant and Project Summary about US$6-10 million per year, as well as avoidance of even larger costs which might be associated with increased infestations in the future were nothing to be done; (c) a reduction in the additional water supply costs arising from treating water of deteriorated quality, these costs estimated to be at least US$3.5 million per year; (d) diminished incidence of disease among riparian communities as a result of improved quality of water and sanitary environment; (e) increased productivity from wetlands and areas with degraded soils; and (f) greater biodiversity, producing benefits to local communities, tourists and the global community, compared to a "non-program" situation. A more detailed discussion of project benefits is found in Schedule B. Risks 49. The main risk is that the strength of the commitments by the three Governments will fail to sustain a regional environmental management program for the lake basin. This may express itself through inadequate budgetary arrangements to fund regional bodies (such as the LVFO) or coordinating agencies, erosion over time of the powers given to such institutions, or unwillingness or lack of capacity to follow up on regional regulatory decisions or guidelines through enforcement at the national level. Since the three governments have collaborated well during program preparation, and the proposed program provides many opportunities for low-risk collaboration on technical issues, which should build confidence steadily during implementation, any waning commitment would seem likely to arise only from sources external to the program. The risk of inadequate or unforeseen results emerging from the research and studies in the program would be reduced by the appointment of a panel of scientists who will review regularly scientific issues arising in the course of project implementation. In the event of fiscal crises, the project is structured so as to allow postponement of work in the pilot zones planned for the outer years of the project. In this way the essential core of lake- wide activities will be preserved, as well as the coordinated nature of the adaptive environmental management approach in at least a sub-set of the 14 pilot areas. Upon resolution of any funding crisis, work will be resumed with minimum disruption to progress.  Grant and Project Summary 15 Schedule A LAKE VICrORIA ENVIRONMENTAL MANAGEMENT PROJECT Project Costs (US$'000) % % Total Project Component Local Foreign Total Foreign Base Exchange Costs A. Fisheries Management (LVFO) 314 1,649 1,964 84 3 B. Fisheries Research 6,893 5,910 11,802 50 17 1. Fish Biology and Biodiversity Conservation 2,618 3,164 5,782 55 8 2. Aquaculture 1,544 1,237 2,782 44 4 3. Socio-Economics Studies 1,332 1,048 2,382 44 3 4. Establishing Database 399 458 858 53 1 C. Fisheries Extension, Policies, and Laws 7,411 4,947 12,359 40 18 D. Water Hyacinth Control 5,423 2,042 7,465 27 11 E. Water Quality Monitoring 3,226 5,262 8,488 62 12 1. Eutrophication 2,720 3,409 6,129 55 9 2. Sedimentation (pilot study) 152 364 516 71 1 3. Hydraulic Conditions (pilot study) 138 700 838 83 1 4. Lake Victoria Management Model 216 789 1,005 78 1 F. Industrial and Municipal Waste Management 4,074 5,156 9,230 56 13 1. Management of Industrial and Municipal Effluent 1,871 1,897 3,768 50 6 2. Tertiary Municipal Effluent Treatment (pilot project) 481 260 740 35 1 3. Tertiary Industrial Effluent Treatment (pilot project) 462 260 722 36 1 4. Priority Waste Management Investments 1,260 2,740 4,000 69 6 G. Land Use and Wetland Management 8,093 4,488 12,560 36 18 1. Pollution Loading 1,962 1,603 3,566 45 5 2. Buffering Capacity of Wetlands 1,751 1,339 3,091 43 5 3. Assessment of Agro-Chemicals (pilot) 344 424 768 55 1 4. Soil and Water Conservation (pilot) 1,143 182 1,325 14 2 5. Sustainable Use of Wetlands Products (pilot) 969 366 1,336 27 2 6. Afforestation 1,924 552 2,476 22 3 H. Policy and Institutional Framework 3,097 2,193 5,290 41 5 1. LVEMP Secretariats 1,975 462 2,436 19 4 2. Support to Riparian Universities 319 628 947 66 1 3. Fisheries Levy Trust 803 953 1,755 54 2 4. Pollution Disaster Contingency - 150 150 100 1 Subtotal Base Costs 37,532 31,627 69,159 46 100 Physical Contingencies 3,550 2,604 6,155 42 9 Price Contingencies 707 1,482 2,270 65 3 TOTAL COSTS 41,869 35,713 77,582 46 112 Financing Plan (US$ million) Project Component Govemments GEF IDA Total % A. Fisheries Management (LVFO) 0.2 2.1 2.3 3 B. Fisheries Research 1.3 8.8 3.2 13.3 17 C. Fisheries Extension, Policies, and Laws 1.4 12.7 14.1 18 D. Water Hyacinth Control 0.8 4.5 3.0 8.3 11 E. Water Quality Management 1.0 8.6 9.6 12 F. Industrial and Municipal Waste Management 1.0 8.9 9.9 13 G. Land Use and Wetland Management 1.4 7.4 6.3 14.1 18 H. Policy and InsUtutional Framework 0.6 3.6 1.9 6.1 8 TOTAL COSTS 7.6 35.0 35.0 77.6 100  16 Grant and Project Summary Schedule B ECONOMIC ANALYSIS Background The LVEMP is a comprehensive program aimed at rehabilitation of the lake ecosystem for the benefit of the people who live in the catchment and its area of influence. The scientific evidence shows that the present methods of exploitation and development in the catchment are unsustainable, and that without intervention there could be serious environmental and related socio-economic consequences. The most pressing concern is a possible decline in the very valuable fishery (currently worth about US$320 million annually in export revenue), but this predicted decline represents merely an immediately obvious outcome of the loss of resilience of the ecosystem. Sediments and pollution are degrading water quality, increasing urbanization and agricultural expansion are both resulting in the loss of wetlands - including swamps and satellite lakes that still shelter a diminishing remnant of a once spectacular native aquatic fauna, changes in feeding chains and trophic systems since the introduction of exotic fish species are trending toward a highly unstable fisheries monoculture, and - a fundamental and ominous change - the anoxic portion of the lake waters (a biologically almost dead zone) has been steadily increasing over recent years. The fundamental objective of the LVEMP is to restore a healthy, varied lake ecosystem which is inherently stable and which can support, in a sustainable way, the many human activities in the catchment Development pressures in the catchment are increasing because of natural population growth and migration from poorer and less fertile rural areas, and the multi-purpose central role of the lake is becoming increasingly important even as its capacity to cope is being threatened. The economy of the lake catchment is worth in the order of US$34 billion annually and supports an estimated population of 25 million people at standards of living in the range of US$90-270 per capita p.a., based on national figures. The lake catchment economy is principally an agricultural one, with a number of cash crops (including exports of fish) and a high level of subsistence fishing and agriculture. The quality of the physical environment is therefore a fundamental factor in maintaining and increasing the living standards of the growing population. Gross Benefits The main economic benefits of the overall LVEMP derive from avoiding the losses that can be anticipated if effective action is not taken. According to the best understanding of the local and international scientific research community, as documented in the material presented by the Regional Task Forces for project preparation, the major consequences of not halting the present trends could be: (a) a decline in the overall fishery as a result of both overfishing and deterioration of lake water quality; (b) increasing extent and severity of water hyacinth infestation; (c) unsuitability of the lake water for domestic supply or animal watering; and (d) continued degradation of the wetlands. (a) Fisheries The most dramatic and direct effect of not taking action could be the onset of instability in the Nile perch fishery. One possible scenario would be a highly variable and unpredictable annual catch, which could drop in some years to as little as 10 percent of current  Grant and Project Summary 17 levels. On the other hand, fisheries models suggest that a sustainable fishery could be developed which would allow annual yields of perhaps 90 percent of current levels, still dominated by Nile perch but with a wider range of other species. The value of moving to the sustainable level of catch can be estimated, on a conservative basis, as the difference between the income stream from 90 percent of the current catch and that from an average 50 percent of the current catch, calculated after year 5 of a management programme: Export value of a sustainable fishery: 90% of $320m p.a. = $288m p.a. Export value of an uncontrolled fishery: 50% of $320m p.a. = $160m p.a. Difference, starting from year 6, attributable to the LVEMP = $128m p.a. Present value of this revenue stream at a 12 percent discount rate: = $600m. The major potential benefit of avoiding the projected collapse of the fisheries would therefore be preserving export revenues with a present value of US$0.4-0.8 billion, depending on the assumptions used. The direct revenues to the fishing communities on the lake, from these export fisheries, are estimated to have a total present value of US$0.2-0.4 billion. These communities would receive additional benefits from two sources: (a) that portion of the value added in processing and packaging which is distributed to them in the form of payments for good and services, estimated to have a present value of US$40-80 million; and (b) income from local production and marketing of fish, estimated to have a present value of US$10-20 million. Moreover, one objective of the LVEMP is to increase the proportion of local food fish in the system and the benefits of the program therefore include a real increase in the local fishery, which would be at least of the same order of magnitude as the loss avoided. The total present value of the impact of the LVEMP on the local fish economy is therefore estimated to be US$20-40 million. On reasonable assumptions, therefore, it is estimated that successful implementation of the LVEMP could protect annual export earnings from the fishery to the extent of about US$128 million per annum, which represents a present value of exports of US$600 million, and of revenue to the lake community of US$240-480 million. In addition, the present value of the local fishery would be increased by US$20-40 million over the case where no action is taken. Reversing the direct loss of revenue would have major impacts through the various industries and activities which support the fishermen active on the lake. It has been estimated that there is a multiplier of about 5 in terms of the numbers of people involved in these supporting activities and therefore half a million people, including workers and their families, would be affected by reversing the loss of revenue. Water hyacinth The spread of the water hyacinth infestation is imposing a wide range of direct costs on the lake community. These costs include: (a) delays in commercial waterborne transport of people and goods (in some cases reported to result in a 10-20 percent increase over scheduled times); (b) increased operating costs (and possible loss of revenue) for hydropower production at Owens Falls Dam, due to clogging of water intakes; (c) loss of fishing time (and revenue) as a result of blocking of the beaches; (d) increased difficulty and time spent on gathering water in villages where access to traditional water collection areas is blocked or dangerous (because of snakes or crocodiles in the weed); and (e) blockage of intakes and loss of production at urban and industrial water supply systems.  18 Grant and Project Summary Some initial estimates have been made for these costs but further data will be required to refine the estimates. It should be noted that these figures represent the present costs: the water hyacinth infestation is increasing at a rapid rate and - unless controlled - will spread and also become more of a problem at existing sites. In the absence of a successful control program, the following are the estimated costs within five years: (a) maintaining a clear passage for ships to dock at Port Bell in Uganda: US$3-5 million p.a.; (b) cleaning intake screens at the Owen Falls hydroelectric power plant at Jinja in Uganda: $1 million p.a.; (c) losses in local fisheries from accumulation of water hyacinth at fishing beaches and landing sites around the lake making it difficult or impossible for fishing boats to be launched or recovered: US$0.2 million p.a. but with a very serious local impact; (d) loss of the beaches as a water supply for domestic, stock and agricultural purposes: US$0.35 million p.a.; (e) loss of supply or increased maintenance costs in urban water supply schemes because of blockages of the water intakes by water hyacinth: US$1.5 million p.a.; and (f) small-scale horticultural irrigation schemes rendered useless because of blockages of channels and pipes with hyacinth: no costs have yet been attributed to these losses but they are important from a distributional viewpoint since such schemes are being developed to help women in the poorer lakeshore areas. The total of these direct costs attributable to the water hyacinth (at its present levels) is estimated to be US$6-10 million p.a., with a present value of US$25-40 million. This figure can be compared with the suggested US$4.5 million cost for the Ugandan government's emergency action program to tackle the problem, which must represent a lower bound to estimates of the damage in what is only part of the total shoreline. Water quality Deteriorating water quality will have a number of direct effects, the avoidance of which can be counted as potential benefits of the programme. These include: (a) additional water treatment costs to deal with increasing levels of algae; (b) impacts on water available for cattle: algal blooms can render water unsuitable for cattle and in extreme cases are known to be fatal to animals; (c) loss of potential tourist revenue: polluted or foul-smelling water would prevent the expansion of the present (low) level of tourism to the lake; and (d) health effects of increased malaria and bilharzia as a result of stagnant and polluted water. The costs of water supply improvements can be calculated once the extent of supply systems round the lake are detailed. As a first estimate, assuming (as before) that one million people are affected, an additional cost of US$1 per capita would mean US$1.5 million p.a. at present, but this would increase as the population connected increased and a value double this would be quite reasonable, i.e. US$3 million p.a. The costs of water for animals is more difficult to estimate but costs of $1 per beast spread over half a million cattle in the vicinity of the lake are plausible. A minimum cost associated with the decline in water quality is therefore estimated at US$3.5 million p.a.,(present value US$15 million) and increasing. Wetlands Given the lack of data on the type and extent of wetlands it is not possible to estimate the value of preserving these systems, but a wide range of functions of wetlands have been identified, both in general and for Lake Victoria in particular. These include: buffering of the impacts of increased loads of nutrients and sediments; breeding areas for fish and animals of value to the local population; protection of local water supply sources; provision of papyrus and other materials of commercial value. Preserving the wetlands is very important for  Grant and Project Summary 19 sustaining biodiversity, as well as for helping to maintain the lake as a functioning and stable ecosystem. On the other hand, development of wetlands has been promoted because of their potential for increased agricultural production and because of the perceived health problems associated with wetlands (such as mosquitoes and tsetse fly). Further work is required to understand and quantify the benefits of preserving key components of the existing wetlands systems but the balance of professional opinion, supported by informed local comment, is that the net value of preservation would be high. Biodiversity One objective of the LVEMP is the preservation of the existing richness of the haplochromid fish fauna because of its scientific interest and its role in providing a resilient ecosystem for the whole lake. The ecosystem support benefits are included in the valuation of stabilizing the fisheries, but the intrinsic and scientific value of the biodiversity that is believed to be in the process of continuing reduction under current conditions are additional benefits for which no valuation is yet available. Summary The major direct economic benefit for which the program lays the foundation would be avoidance of the predicted collapse in the fisheries, which is estimated to have a present value to the lake community of US$270-520 million. The water hyacinth problem, which is rapidly becoming more severe, is estimated to have an annual cost of US$6-10 million under current levels of infestation. These costs, whose present value is an estimated US$2540 million, as well as even larger costs which might be associated with increased infestations in the future were nothing to be done, would be largely avoided if the LVEMP were successfully implemented. Deteriorating water quality may impose additional water supply costs which are estimated to be a minimum of US$3.5 million p.a. (present value US$15 million) and would increase considerably without action. Other benefits arising from the preservation of wetlands and of biodiversity have not been valued here. Net Benefits The costs of achieving the benefits identified here will include the direct costs of the LVEMP, which is a regional program, and of national actions which are taken in support of the program. Many of the national expenditures, in particular, will be economically justified in their own right (for example, fisheries post-harvest improvements or provision of sewerage) and so the effect of the LVEMP will be to bring forward in time the net benefits of these programmes. In such cases, the costs and benefits attributable to the LVEMP will be the marginal ones related to the changes in timing or focus of the national programmes. Typical of the projects to be tackled as national concerns, within the framework of the LVEMP, which would be expected to produce net benefits in their own right, and where the costs attributable to the LVEMP may be exceeded by the benefits achieved through bringing the projects forward would be: expansion of artisanal fishing and processing; reduction in post-harvest fish losses; imnplementation of water hyacinth control; wetland conservation; improved pasture management; catchment soil conservation; rural water and sanitation; urban sewerage upgrading; industrial pollution abatement. In so far as these projects can be implemented under existing or proposed programmes and as long as they are economic in their own right, the net costs to the LVEMP will be minimal.  20 Grant and Project Summary Schedule Cl Kenya Lake Victoria Environmental Management Project Summary of Proposed Procurement Arrangements (US$ million) Item ICB NCB Other Total Civil Works 2.8 2.8 GEF (0. 1) (0.1) IDA (2.5) (2.5) Vehicles 2.2 0.1 2.3 GEF (1.0) (0.1) (1.0) IDA (1.0) (1.0) Equipment 3.6 3.6 GEF (1.9) (1.9) IDA (1.4) (1.4) Training 3.4 3.4 GEF (1.4) (1.4) IDA (1.6) (1.6) Consultants 3.7 3.7 GEF (2.2) (2.2) IDA (1.2) (1.2) Operating Costs 11.1 11.1 GEF (4.9) (4.9) IDA (5.1) (5.1) Totals 2.2 2.8 21.9 26.9 GEF (1.0) (0.1) (10.4) (11.5) IDA (1.0) (2.5) (9.3) (12.8) Notes: the difference between the total project costs in each category and the GEF and IDA provisions (in parentheses) would be financed by the Government.  Grant and Project Summary 21 Tanzania Lake Victoria Environmental Management Project Summary of Proposed Procurement Arrangements (US$ nillion) Item ICB NCB Other Total Civil Works 1.9 1.9 GEF (0. 1) (0. 1) IDA (1.6) (1.6) Vehicles 1.9 0.1 1.9 GEF (0.8) (0.1) (0.8) IDA (0.9) (0.9) Equipment 2.8 2.8 GEF (1.5) (1.5) IDA (1.0) (1.0) Training 3.4 3.4 GEF (1.6) (1.6) IDA (1.4) (1.4) Consultants 3.7 3.7 GEF (2.3) (2.3) IDA (1.0) (1.0) Operating Costs 8.9 8.9 GEF (4.0) (4.0) IDA (4.1) (4.0) Totals 1.9 1.9 18.8 22.6 GEF (0.8) (0.1) (9.4) (10.3) IDA (0.9) (1.6) (7.6) (10.1) Notes: the difference between the total project costs in each category and the GEF and IDA provisions (in parentheses) would be financed by the Government.  22 Grant and Project Summary Uganda Lake Victoria Environmental Management Project Summary of Proposed Procurement Arrangements (US$ million) Item ICB NCB Other Total Civil Works 2.2 2.2 GEF (0.3) (0.3) IDA (1.8) (1.8) Vehicles 2.5 2.5 GEF (1. 1) (1. 1) IDA (1.1) (1.1) Equipment 3.3 3.3 GEF (1.7) (1.7) IDA (1.3) (1.3) Training 3.2 3.2 GEF (1.3) (1.3) IDA (1.6) (1.6) Consultants 5.2 5.2 GEF (3.5) (3.5) IDA (1.2) (1.2) Operating Costs 11.7 11.7 GEF (5.3) (5.3) IDA (5.1) (5.1) Totals 2.5 2.2 23.4 28.1 GEF (1. 1) (0.3) (11.8) (13.2) IDA (1.1) (1.8) (9.2) (12.1) Notes: the difference between the total project costs in each category and the GEF and IDA provisions (in parentheses) would be financed by the Government.  Grant and Project Summary 23 Schedule C2 Summary of Disbursement Schedule Estimated GEF/IDA Disbursements KENYA Category GEF Grant IDA Credit Percent of Financing (US$ m) (US$ m) 1. Civil Works 0.1 1.5 100% of Foreign Expenditures and 90% of Local Expenditures 2. Vehicles and Equipment 2.7 2.2 100% of Foreign Expenditures and 90% of Local Expenditures 3. Consultants & Training 3.3 2.5 100 % 4. Micro-projects 0.7 90 % 5. Operating Costs 4.4 4.6 90 % 6. Unallocated 1.0 1.3 = Total 11.5 12.8 1 TANZANIA Category GEF Grant IDA Credit Percent of Financing |______________ (US$ m) (US$ m) 1. Civil Works 0.1 0.7 100% of Foreign Expenditures l___________________ l__________ land 90% of Local Expenditures 2. Vehicles and Equipment 2.1 1.7 100% of Foreign Expenditures I___________________ = _______I___ and 90% of Local Expenditures 3. Consultants & Training 3.5 2.2 100 % 4. Micro-projects l 0.8 90 % 5. Operating Costs 3.5 3.7 90 % 6. Unallocated 1.1 1.0 Total 10.3 10.1 UGANDA Category GEF Grant IDA Credit Percent of Financing (US$ m) (US$ m) 1. Civil Works 0.3 0.6 100% of Foreign Expenditures and 90% of Local Expenditures 2. Vehicles and Equipment 2.5 2.2 100% of Foreign Expenditures and 90% of Local Expenditures 3. Consultants &Training 4.3 2.5 100 % 4. Micro-projects 1.0 90 % 5. Operating costs 4.8 4.6 90 % 6. Unallocated 1.3 1.2 Total 13.2 12.1  24 Grant and Project Summary Schedule C3 KENYA, TANZANIA, AND UGANDA LAKE VICTORIA ENVIRONMENTAL MANAGEMENT PROJECT Estimated Schedule of Disbursement (GEF and IDA) (US$ million) IDA FY Semester Disbursement Cumulative % Total Disbursement 1997 1 0.0 0.0 0 2 6.8 6.8 10 1998 1 6.8 13.6 19 2 7.2 20.8 30 1999 1 7.2 28.0 40 2 7.6 35.6 51 2000 1 7.6 43.2 62 2 7.1 50.3 72 2001 1 7.1 57.4 82 2 4.8 62.2 89 2002 1 4.8 67.0 96 2 2.0 69.0 99 2003 1 1.0 70.0 100  Grant and Project Summary 25 Schedule D TIMETABLE FOR KEY PROCESSING EVENTS Time taken to prepare: 15 months Prepared by: Project PreparationTeam comprising representatives of the Govermnents of Kenya,Uganda and Tanzania through multidisciplinary Regional Task Forces and National Working Groups. Appraisal mission departure: December 1, 1995 Negotiations: May 20-22, 1996 Planned date of effectiveness November 1, 1996 Relevant ICRs: None This report is based on the findings of an appraisal mission in December 1996. The mission was led by Graeme Donovan, Principal Economist, Agriculture and Environment Operations Division, Eastern Africa Department (Task Manager), and included: Messrs/Mmes. Radha Singh (Institutional Specialist), Robert Hecky (Limnologist), Craig Harris (Sociologist). The mission was assisted by representatives of the UNDP, UNEP and FAO. The mission was assisted by and worked cooperatively with the Heads of the LVEMP National Secretariats of the three countries, the members of the Regional Policy and Steering Committee, the Ministries of Environment and Natural Resources, Water, Agriculture, Fisheries and Finance of the participating countries. The appraisal mission also worked in close cooperation with several specialised agencies in fisheries research, management, aquatic weed control, agriculture, water quality, and wetlands management of the three countries along with representative of the local/regional governments, and NGOs and CBOs responsible for the development of the Project. Valuable contributions were made by Lars Vidaeus and Robin Broadfield (ENVGC) and Les Kaufman(New England Aquarium). Milena Hileman, Lorenzo Marchesini, and Cora Favis assisted with preparing the cost tables. The peer reviewers are Stephen Lintner (ENVLW), Andrew Bond (ENVLW), Robert Robelus (ENVLW), Ernst Lutz (ENVPE), and Cynthia Cook (AF4AE). Dr. Edwin Ongley is the GEF technical reviewer. Sushma Ganguly and James Adams are the Division Chief and Department Director, respectively.  26 Grant and Project Summary Schedule E STATUS OF BANK GROUP OPERATIONS IN KENYA STATEMENT OF BANK LOANS AND IDA CREDITS As of March 31, 1996 (US$ millions) (Less Cancellations) Fiscal Undis- Credit No. Year Purpose Bank IDA bursed Fifty-four (54) loans and sixty seven (67) credits closed, 985.87 1519.23 of which SAL, SECAL or Program Loan/Credit: (60.90) (925.45) Cr.19040 1988 Population 111 12.09 4.90 Cr. 19730 1989 Geothermal Development 40.70 3.00 Cr.20600 1990 Third Nairobi Water Supply 64.80 21.54 Cr.20620 1990 Coffee Improvement II 46.80 15.76 Cr.21110 1990 Population IV 35.00 30.27 Cr.21980 1991 Forestry Development 19.90 10.45 Cr.21990 1991 National Agric. Ext. II 24.90 17.95 Cr.22040 (S) 1991 Agric. Sector Adjustment II 41.52 5.42 Cr.23090 1992 Universities Investment 55.00 46.12 Cr.23 100 1992 Health Rehabilitation 31.00 23.58 Cr.23330 1992 Mombasa and Coastal Water II 43.20 25.35 Cr.23340 1992 Wildlife Services 60.50 26.43 Cr.24400 1993 Parastatal Reform TA 23.32 18.04 Cr.24450 1993 Agric. Sect. Mngt. II 19.40 13.73 Cr.24600 1993 Emergency Drought Recovery 20.00 9.09 Cr.25960 1994 Micro & Small Enterprise 21.83 21.17 Cr.26710 1995 Institutional Development 25.35 22.96 Cr.26860 1995 Sexually Transmitted Infections 40.00 39.38 Cr.27970 * 1996 ARID Lands 22.00 21.58 Cr.28110 * 1996 Urban Transport 115.00 112.41 Cr.28120 * 1996 Nairobi Mombasa Road 5lam 49.57 Total 985.87 2331.54 538.70 of which repaid 733.04 598 Total held by Bank & IDA 252.83 2271.66 Amount sold 11.74 of which repaid 11.74 Total undisbursed 538.70 (S) Indicates SAL/SECAL Loans and Credits. * Not yet effective.  Grant and Project Summary 27 Schedule E Kenya STATEMENT OF IFC INVESTMENTS As of March 31, 1996 (In Millions US Dollars) Oriinal Gross Comminmenta Undisb IFC Held by Held by incl Fiscal Years Committed Obligor Type of Business [FC Loan Equity Ptpnt Totals IFC Ptpnt. Ptpnt. 1967/ al Kenya Hotel ProperLies, Ltd Hotels and Tourism 4 20 072 096 5 88 1970fl4177fl9181/88/90/9 Panafrican Paper Mills (E.A) Ltd Timber, Pulp and Paper 5226 579 397 6202 2487 1972 Tourism Promotion Services (Ken Hotels and Tourism 1 63 0 79 2 42 0.04 1976 Rif Valley Textiles Limited (RIV Textiles 6 87 2 77 1 30 10 94 2 06 0 39 1977 al X - Loans to small & medium scal Financial Services 2 00 2 00 1980/84 Development Finance Company o Financial Services 5 07 1.31 6 38 1 31 1981 at Kenya Commercial Finance Cow Financial Services 5 00 5 00 1982 a/ Bambufi Portland Cement Compa Cement and Construction M 4 43 4 43 1982 Diamond Truss of Kenya Limned Financial Services 080 0 80 0.80 1982V87 Industrial Promotion Services (Ke Financial Services 1 17 1.17 1.17 062 1983 a/ Tena Pak Converters Limited Timber, Pulp and Paper 2 17 0 37 2.54 1984/92 Leather Industries of Kenya Limit Manufacturing 212 0 63 2 75 0 63 1986 Equatorial Beach Properties Limit Hotels and Tounsm 3 67 3 67 5 36 1986 a/ Madhupaper Intemational Limited Timber, Pulp and Paper 8 50 1 97 28 65 39 12 1986 a/ Oil Crop Development Limited Food and Agribusiness 9 65 1 40 11 05 1988/92 Likulims Tools Ltd. Motor Vehicles nd Components (includ 0 06 0 06 0.06 1989 Premier Foods Industries Ltd Food nd Agribusiness 0 11 0.11 0.11 1989 al Premier Refrigeration and Engine Food and Agribusiness 0 14 0 14 1990 Frigoken Ltd Food and Agribusiness 0.06 0 06 0.06 1991 Malaa Industries Limited Food and Agnbusiness 053 0 16 069 069 1991 Novaskins Tannery Ltd Manufacturing 0 14 0 14 0 14 1992 a, Integated Wood Complex Limite Timber, Pulp and Paper 0 40 0 40 1992/93 Allpack Indusuies Limited Timber, Pulp and Paper 0 36 0.36 0 36 1993 Futur Hotels Limited Hotels and Tourism 0 50 0 50 0 43 1994 Aura Gamrents Manufacturing Li Textiles 0 30 0 30 0 30 1994 East Africa Reinsurance Company Financial Services 1.10 1 10 I 10 0.30 1994 Mosi Limited Food and Agribusiness 0 29 0 29 0 23 1994 a/ Saw Flom Limited Food and Agnbusiness 032 0 19 051 1994 Waterfont Hospitality Limited Hotels nd Tourism I 00 100 1.00 100 1995 Capital Fish Kenya Limited Food and Agribusiness 065 0.65 0.65 065 1995 Intemational Hotels (Kenya) Limi Hotels and Tourism 6 00 6 00 6 00 4 80 1995 Island Fanm Food and Agribusiness 0 50 0 50 0 50 0 50 1995 Kihingo Roses Limited Food and Agnbusiness 0.52 0 52 0 49 1995 Vegpro Kenya Limited Food and Agribusiness 095 095 095 0 15 1996 ]acartsda Hotel Ltd. Hotels and Tourism 0 50 0 50 0 50 0.50 1996 Magadi Soda Company Limited Chemicals and Petrochemica 9 00 9 00 9 00 8.60 Total gross commitments bh 129 03 19 25 35 67 183 95 Less cancellations, teffninations, epayment & sales 8067 880 35.28 12475 Total commitments now held cl 48 36 10.45 0 39 59 20 58 81 0 39 17 12  28 Grant and Project Summary Kenya STATEMENT OF IFC INVESTMENTS As of March 31,1996 (In Millions US Dollars) Peding Commitnints AEF-K-REP BANK 1.00 100 AlP-XENFUNDS 0.17 017 AlE-KENtOlNDS MGT 0.09 0.09 AEF-WAXATE CENTI 0.43 0.43 0.16 Panafrican PaperMills (A) Ltd. Timber, Pulp and Paper 15.00 15.00 Tol pendingconunitments 15.43 1.69 17.12 Toa commitments held and pending commitments 63.79 12.14 0.39 76.32 Totalundiabuwedcomnitmentu 16.20 0.92 17.12 ae invauemt which have ben fully cancelled, teeminatad, written-off, sold. redeemed or repaid. bt Gre. comnmitments oDns of appoved and signed project c/Held wrmitnmnti consist of disbursed and undisbured investements.  Grant and Project Summary 29 KENYA - IMPLEMENTATION ISSUES 1. As of March 31, 1996, there were 21 ongoing projects in the Kenya portfolio representing total commitments, exclusive of cancellations, of $812.3 million; three of these projects (in the amount of $187 million) were approved during the second and third quarters of the fiscal year and are expected to be made effective shortly. Undisbursed amounts totaled $538.7 million, or 66.3 percent of total commitments; excluding the three recently approved projects, the corresponding figure was 56.2 percent. Kenya's disbursement performance over the past few years, as measured by the disbursement ratio, has shown modest improvement - from 14.2 percent in FY93 to 15.4 percent in FY94 to 16.3 percent in FY95. The corresponding figure for the first ten months of the current fiscal year was 16.5 percent; present expectations are that the final FY96 figure will be around 21 percent. In the meantime, as of end-April 1996, eight of the 18 effective and disbursing credits had posted individual disbursement ratios for the fiscal year ranging between 22 and 40 percent. 2. Considerable progress has been made during the past two years in laying the foundation for aggressively addressing a number of generic implementation problems that have negatively impacted on the quality of the Kenya portfolio. In addition to regular project supervision, there has been since early 1994 an interactive dialogue between the Government and the Bank aimed at resolving problems being faced by the portfolio in general. It is explicitly recognized that Government commitment and ownership remain critical to timely and efficient project implementation, including resolution of major implementation problems if and as they arise. The August 1994 CPPR, organized with the active involvement of the Government, effectively initiated an ongoing process in which the Government and Bank staff are jointly addressing a number of "generic implementation bottlenecks" (including inadequate project budgetary allocations, delays in procurement/payment of contractors and suppliers, excessive delays in processing withdrawals and replenishments of the special accounts, and extensive delays in audit report submissions); it is also a process in which the Ministry of Finance (MOF) is playing a greater and more direct role in overseeing and monitoring the portfolio. The August 1994 CPPR was followed by mini-CPPRs in March and July 1995; these were followed by a Project Implementation Workshop conducted over four days in November 1995 to address primarily the operational needs of project managers, accountants and supply officers working on Bank projects. This approach to resolving portfolio- wide implementation problems has been greatly facilitated by the creation in mid-1995 of the multi- sectoral Operations Unit (OU) in the Nairobi Resident Mission, which established capacity for day- to-day dialogue with Government and hands-on implementation assistance. The OU and the MOF now meet once a month to review the status of overall project implementation, to agree on additional steps to be taken with respect to previously identified generic problems, and to identify/resolve any project-specific implementation problems that arise. 3. Results have been encouraging. The Government's recently adopted improved budgetary allocation process which attempts to ensure that all "core" projects are fully funded, resulted in FY96 being the first year in which no projects in the IDA portfolio experienced physical implementation delays due to a lack of adequate budgetary allocations. The Government is currently finalizing the FY97 budget, including provisions for all Government "core" development projects (in the context of the ongoing joint Government/IDA public expenditure review). Sustaining this process of expenditure rationalization should eliminate what, in the past, has been the most serious problem in ensuring timely implementation under the Kenya portfolio. 4. With the exception of projects primarily in the social sector, extensively delayed procurement and improper procurement have not been a major implementation problem in the Kenya portfolio. Excessive delays in the payment of contractors/ suppliers, on the other hand, continue to occasionally surface as a concern, although much improvement has been made in this  30 Grant and Project Summary area during the past year, with significant time reductions being achieved during the past year by the MOF and the Central Bank of Kenya (CBK) in processing PAs (payment authorities) under the special accounts as well as those for direct payments. Attention has more recently focused on individual implementing agencies/line ministries, on identifying the extent to which there may be excessive delays within the respective projects themselves concerning the processing of PAs, i.e., from the time of contractor/supplier invoice received until date PA is received by MOF, and specific actions to reduce such delays. 5. While increased attention is being given to the quality of accounts and how to use them more effectively as a management tool, timely preparation of accounts and timely audit of accounts still remains a problem. (It should be noted, however, that the quality of the audit reports themselves, most of which are done by the public auditor, is not an issue.) Still, the magnitude of the backlog of overdue audit reports is slowly being reduced - as of end-May, under the ongoing portfolio, there were only nine reports more than four months overdue. More reports are being submitted sooner (although still after the respective covenanted due date), in large part due to several ongoing initiatives: (i) the MOF (in particular, the Accountant General) is taking a major role in monitoring and overseeing the audit situation; (ii) there is a working group comprising the public auditor, the MOF and the OU, that, with expert consultant assistance, is developing a strategy and operational action plan to improve the quality and timeliness of accounts and audits; and (iii) the Department has been aggressive and consistent in applying remedies in those instances where audits are not received within a reasonable timeframe after becoming overdue. For example, in FY95, the SOE disbursement procedure was suspended under seven projects, total disbursements suspended under three projects and proposed amendment of legal documents has been conditional upon the receipt of any overdue audit reports under the respective project. At present, Board presentation is being made conditional upon receipt of all overdue audit reports for which the concerned accounts are the direct responsibility of the implementing agencies/line ministries under the proposed project. 6. As a result of these efforts, overall improvement in IDA's Kenya portfolio quality is being achieved. As of March 31, 1996, four of the 21 projects in the Kenya portfolio (or 19 percent) were rated "problem"; this compares with 33.3 percent (i.e., eight projects) for FY95 and 38.5 percent (i.e., ten projects) for FY94. These four problem projects are briefly discussed below: Cr. 2110-KE (Fourth Population). Almost six years old and with 80 percent of credit proceeds remaining undisbursed, agreement would be reached with the Government during the next "health mission" on bringing this project to closure by its June 30, 1997 closing date. Implementation progress to-date has been extremely disappointing, despite a restructuring of this project in October 1993 to finance the purchase of drugs for the prevention of sexually transmitted infections (in addition to the project's main objective of increasing the availability, accessibility and quality of family planning services provided by the Government and NGOs). Major problems in procurement, due mainly to weaknesses in the tendering system of the Ministry of Health (MOH) and to irregularities and lapses in strictly adhering to IDA's procurement guidelines, remain - at the Bank's insistence, the Government has recently agreed to the hiring of a procurement agent for all ongoing projects involving this ministry. Cr. 2440-KE (Parastatal Reform and Privatization TA). Originally intended as the engine for parastatal reform and privatization, the project's objectives and policy/implementation timetable as originally agreed have not been achieved. However, with the policy agenda for parastatal reform and privatization clearly defined under the recently agreed Policy Framework Policy for 1996-98 and the recently approved Structural Adjustment Credit, this project is now being formally restructured to support the reform implementation program set forth therein. Within this restructured project framework, implementation status would be re-evaluated later this year.  Grant and Project Summary 31 Cr. 2199-KE (Second National Agricultural Extension). Over five years old, with 70 percent of credit proceeds undisbursed and with disbursements under the credit recently suspended for noncompliance with audit covenants (i.e., outstanding SOE and project accounts audit reports more than 12 months overdue), this project is not expected to be completed by its closing date of March 31,1998. By the end of September, the Bank and the Government would agree on a specific implementation program through end-June 1997 and reconfirm project outcomes/identify specific outputs to be achieved at the end of that period. Satisfactory resolution of outstanding audit and financial management issues related to the project, including the lifting of the suspension of disbursements, is critical to project implementation during the next fiscal year. Implementation progress during the next year will form the basis for proceeding with the project beyond end-FY97. Cr. 2596-KE (Micro and Small Enterprise Training and Technology). Although the project implementation team is now finally in place (in February, almost two years after the project was approved) and a detailed implementation program agreed through the end of the year, it has been rated unsatisfactory until implementation progress is demonstrated. During the next nine months, supervision efforts will be intense, focusing closely on Government's commitment (i.e., actions) to improving the enabling environment for the jua kali (small enterprise) sector. 7. In addition to the above four rated "problem" projects, another four ongoing IDA projects are currently classified as slow disbursing operations, i.e., with disbursement lags of 50 percent or more (there are no operations approved by the Board more than one year ago but not yet declared effective, nor are there any over- aged operations - the Second Agricultural Sector Adjustrnent Operation, Cr. 2204-KE, although under implementation for slightly more than five years, had a significant technical assistance component and will close on June 30,1996): Cr. 2309-KE (Universities Investment). Four-and-a-half years old and originally scheduled to close at end-1996, expenditures under this project are mostly for staff development and procurement of highly specialized equipment, mainly for science and engineering. Staff development has proceeded as intended. However, due to flawed application of procurement procedures during the early years of the project, equipment procurement had to be retendered, and the first fourteen equipment contracts were awarded only in the second half of 1995 - as such, 75 percent of credit proceeds are currently undisbursed. However, remaining Phase 1 and Phase 2 equipment tenders are to be advertised and awarded in 1996, and past procurement problems are not expected to reoccur. A one-year extension of the closing date was recently approved, and completion of the project by that date is now anticipated. Cr. 2310-KE (Health Rehabilitation). Extensive delay in initiating the civil works for rehabilitation of Kenyatta National Hospital, which accounts for approximately 70 percent of credit proceeds under the project, is the primary reason for the current 70 percent disbursement lag. Commencement of this civil works component finally began in mid-1995, and this work is scheduled for completion by end-1996. No extension of the June 30, 1997 closing date is anticipated, and the next supervision mission will confirm with the Government, necessary arrangements for bringing the project to closure by that date. Cr. 2333-KE (Second Mombasa and Coastal Water). Approved in February 1992, project implementation is about 15 months behind schedule, thus explaining the current disbursement lag of slightly more than 50 percent. Start-up was initially slow due to institutional weaknesses in the National Water Conservation and Pipeline Corporation (NWCPC - the implementing agency) and delays in the selection of consultants. These initial delays were then followed by inadequate budgetary allocations (IDA proceeds as well as counterpart funding) in fiscal years 1993-95, resulting in further delays in physical implementation. This situation was further compounded by a seven-months' suspension of  32 Grant and Project Summary disbursements in 1995 by the Bank, for failure by NWCPC to timely submit to the Bank a number of audit reports required under the project. However, with adequate budgetary allocations having been provided in FY96 (and a respective disbursement ratio of 40 percent for the year as of end-May), the project is expected to be completed by June 30,1997- one year later than originally scheduled. A one- year extension of the closing date would be agreed by the Bank, upon confirmation by the Government that adequate project funding has been provided in the FY97 budget to ensure that the FY97 workplan can be timely implemented. Cr. 2686-KE (Sexually Transmitted Infections). An overoptimistic disbursement profile for the first (as well as second) year of project implementation, as assumed in the Staff Appraisal Report, compounded by delays in the establishment of a funding mechanism, acceptable to the Government, for disbursing credit proceeds to the participating NGOs and municipalities, explain the current disbursement lag of almost 80 percent A task force comprising the MOH, MOF and the Bank is presently working on resolving this bottleneck. There have also been delays in the appointment of a procurement agent to carry out all procurement under the project; it is expected that a contract will be signed by early July 1996. However, even with implementation expected to proceed shortly, as originally envisaged, the original disbursement projections will continue to be reflected in a relatively high disbursement lag during the next two-to-three years.  Grant and Project Summary 33 STATUS OF BANK GROUP OPERATIONS IN TANZANIA STATEMENT OF BANK LOANS AND IDA CREDITS As of March 31, 1996 (US$ millions) (Less Cancellations) Loan or Fiscal Undis- Credit No. Year Borrower Purpose Bank IDA bursed Twenty-seven (27) Loans and seventy five (75) Credits closed, 355.55 1,637.91 of which SECALS, SALs and Program Loans/Credits: (795.42) Cr. 18910 1988 Tanzania Agr. Exports Reh. l 30.00 11.79 Cr. 19700 1989 Tanzania Nat'l. Ag. & Liv. Res. 8.30 3.05 Cr. 19940 1989 Tanzania Agric. Ext. 18.40 2.50 Cr. 20500 1989 Tanzania Tree Crops 25.10 8.91 Cr. 20950 1990 Tanzania Ports Modernization 37.00 16.70 Cr. 20980 1990 Tanzania Health & Nutrition 47.60 30.81 Cr. 21370 1990 Tanzania Educ. Planning & Rehab. 38.30 23.80 Cr. 21490 1990 Tanzania Roads 1 180.40 68.59 Cr. 22020 1991 Tanzania Petrol Rehab 44.00 44.88 Cr. 22670 1991 Tanzania Railways Restructuring 76.00 59.66 Cr. 22910 1992 Tanzania Urban Sector Eng. 11.20 2.30 Cr. 23300 1992 Tanzania Engineering Credit 10.00 0.59 Cr. 23350 1992 Tanzania Forest Resources Man 18.30 10.43 Cr. 24130 1993 Tanzania Financial & Legal Ma 20.00 12.50 Cr. 24860 1993 Tanzania Telecom III 74.45 66.60 Cr. 24890 1993 Tanzania Power VI 200.00 133.43 Cr. 25070 1993 Tanzania Priv. Pub. Sect. Mgt. 34.90 22.50 Cr. 25370 1994 Tanzania ASMP 24.50 16.38 Cr. 25980 1994 Tanzania Roads 11 170.20 165.28 Cr. 26480 1995 Tanzania Mineral Sector Dev. 12.50 10.97 Cr. 27710 1996 Tanzania Financial Inst. Dev. 109 I0 Total 355.55 2729.96 722.60 of which repaid 296.91 89.21 Total held by Bank & IDA 58.64 2640.75 Amount sold 6.29 of which repaid 6.29 Total Undisbursed 722.60  34 Grant and Project Summary Tanzania STATEMENT OF IFC INVESTMENTS As of March 31,1996 (In Millions US Dollars) Ori2inal Gross Commitments IFC Fiscal Years Committed Obligor Type of Business IFC Loan Equity Ptpnt. Totals 1960 a/ Kilombero Sugar Company, Ltd. Food and Agribusiness 4.66 4.66 1978 a/ Highland Soap and Allied Product Manufacturing 1.38 0.37 1.75 1979 a/ Metal Products Limited Manufacturing 1.33 0.18 1.51 1985 a/ Amboni Limited Food and Agribusiness 4.38 0.99 5.37 1990 Tanganyika Sisal Spirning Comp Food and Agribusiness 2.00 2.00 1991 Mufindi Tea Company Limited Food and Agribusiness 2.80 2.80 1994 Nomad Safaris (Tanzania) Limite Hotels and Tourism 0.15 0.15 1994 Tanganyika Bus Services Compan Industrial and Consumer Ser 0.25 0.25 1994 Tourism Promotion Services (Tan Hotels and Tourism 8.04 1.06 9.10 1995 Eurafrican Bank (Tanzania) Limit Financial Services 0.73 0.73 1995 Moshi Leather Industries Limited Manufacturing 0.25 0.25 1995 RafTia Bags Tanzania Limited Manufacturing 0.50 0.50 1995 Tanzania Breeders and Feedmills Food and Agribusiness 1.00 1.00 1995 Tanzania Breiwries Limited Food and Agribusiness 11.00 6.00 7.40 24.40 1995 Tanzania Leatherlndustries Ltd. Manufacturing 1.00 1.00 1995 Tourism Promotion Services (Zan Hotels and Tourism 1.25 0.16 1.41 1996 MIC Tanzania Ltd. Infrastructure 1.00 1.00 Total gross commitments bt 40.74 8.75 8.39 57.88 Less cancellations, terminations, repayment & sales 14.52 0.55 0.99 16.06 Total commitments now held ct 26.22 8.20 7.40 41.82 Pending Commitments A&K TANZANIA LTD 0.45 0.45 AEF-ONE EARTH 0.70 0.70 AEF-TRADECO 0.93 0.93 AEF-ZAINAB GRAIN 1.00 1.00 Eurafrican Bank (Tanzania) Limit Financial Services 5.00 5.00 ULC LEASING 5.00 0.97 5.97 Total pending commitments 8.08 0.97 5.00 14.05 Total commitments held and pendingcommitments 34.30 9.17 12.40 55.87 Total undisbursed commitments 14.36 0.25 7.40 22.01 at Investments which have been fully cancelled, terminated, written-off, sold, redeemed or repaid. b Gross commitments consist of approved and signed projects. ct Held commitments consist of disbursed and undisbursed investements.  Grant and Project Summary 35 TANZANIA - IMPLEMENTATION ISSUES 1. As of March 31, 1995, there were 21 ongoing projects in the Tanzania portfolio representing total commitments of US$1.1 billion. Undisbursed amounts totaled $723 million. Disbursements on investment projects have risen from US$75 million in FY93 to US$119 million in FY95. However, the disbursement ratio has not increased owing to the relatively large commitments on investment loans in FY93 and FY94. Because of no new adjustment lending due to the inadequate macroeconomic environment, disbursements for the balance of payments support were minimal in FY95. 2. Efforts were made to improve the management of IDA's portfolio in Tanzania. Three problem projects have been restructured, and mid-term reviews have been carried out for six projects. Several former problem projects are now rated as satisfactory (e.g. Health and Nutrition, Tree Crops, and Petroleum Rehabilitation). At present, there are five projects rated unsatisfactory: Education Planning, Roads I and II, Parastatal and Public Sector Reform Project and Agriculture Exports Rehabilitation Project. The AERP is being closed on June 30, 1996. A CPPR was held in May 1996, and a joint action program was agreed to help resolve generic implementation issues (e.g. availability of counterpart funds, project management staff and incentives, and accounts/auditing). 3. On audit compliance, some progress has been made in reducing the number and length of delayed audit reports. Following a firm stance, audit compliance improved, and audits that were particularly delayed were submitted. 4. Inadequate provision of counterpart funds has affected IDA-financed projects particularly in agriculture, roads and education. Given the continuing weak fiscal situation, the inadequacy of counterpart funds needs to be addressed by reducing the development project portfolio and focusing on high priority activities. IDA has assisted the Government in defining a core investment program, limited to high-priority projects which would get most of their funding requirements. The Government has made some progress in reducing the number of projects in the development budget and improving the budgetary allocation towards core projects. However, this approach has not been sufficient to ensure adequate levels of counterpart funding owing to the severity of the budget crisis. 5. An important area of work in improving the portfolio has been the incorporation of the findings from consultations with beneficiaries of IDA projects. For example, supervision of the research and extension projects has taken place in the framework of the Farming Systems Approach, involving researchers, extensionists, and farmers in joining identification of improvements in the design and implementation of research and extension activities. The efforts to restructure the health and education projects, and to redirect a portion of funds to support new approaches to the social sectors, were based on surveys of both individual and focus groups over the past year. To improve overall implementation, a study has been done to address procurement issues, under the Integrated Roads Project, which include changes in the procurement code, regulations and standard bidding documents. The study is currently being reviewed by the Government and IDA for follow up action. A country Procurement Assessment is planned for June/July 1996. 6. Five IDA projects are identified as slow disbursing operations with disbursement lags of about 50% or more: Health and Nutrition, Education Planning and Rehabilitation, Railways Restructuring, Roads II and Petroleum Sector Rehabilitation.  36 Grant and Project Summary 7. Tanzania Health and Nutrition Project was slow to start and consequently suffered from management problems in the first three years of its implementation. These initial problems were addressed by setting up project management offices for each of the two main components. However, since the project was managed by different ministries with project coordination offices in two different cities, the management problems continued to plague the project as it was difficult to coordinate their activities. This particular problem has now been solved by locating both offices in Dar Es Salaam. In addition, the project was also affected by the Government's inability to meet covenants which were tied to major activities such as rehabilitation works and pharmaceuticals. The project has now been restructured and is also supporting pilot-testing of innovative mechanisms of services delivery, e.g. community health trusts and facility-based management. 8. The implementation of Petroleum Sector Rehabilitation has been behind schedule by two years mainly due to the delay in the credit effectiveness (18 months), for which the major issues have now been resolved. The project restructuring was completed in November 1994. As for the issue of losses of petroleum products on transit by rail, the consultant study has been completed and an agreement was reached on the recommendations of the study. An action plan for the railway to establish common-carrier liability tariffs has been in progress. 9. The Education Planning and Rehabilitation Project suffered a slow start largely due to: (a) the complexity of the project design and management; (b) the changing policy environment; and (c) disagreements on the continued relevance of some components. The disbursements increasingly lagged behind during the first three years. However, several measures have now been taken to improve the situation. The project management has been strengthened by the recruitment of accounting specialists; plans for improved implementation and restructuring have been agreed and a number of concrete actions have been taken; communication with the Bank has now improved; and part of the undisbursed balance is being used to finance pilot activities in demand-side activities. As a result of these actions, activities and the pace of disbursements have picked up again, and the project performance will further improve during the remaining period of the project. 10. The Railway Restructuring Project had a slow start in disbursements, mainly due to the learning curve which the executing agency, TRC, had to go through. The pace picked up since July 1995, and the disbursements are expected to improve. 11. Implementation of Roads II project has been delayed, first by the delay in effectiveness (about 5 months) and second due to problems of counterpart funds and management weaknesses. To address these issues the Government has agreed to engage a project management consultant to review management systems and procedures, determine the physical and financial status of the projects (including that of the ongoing Roads I) and prioritize the outstanding activities. Pending completion of this exercise and agreement on improved management arrangements and systems the Government will not enter into new civil works contracts for IDA financing. As a result, disbursements are expected to remain slow for one to one and half years. Despite these problems, progress has been achieved in (i) improving both the level and rate of transfer of maintenance funds to the Regional Engineers' Offices; (ii) completing the transport sector administration studies which is providing the basis for restructuring the sector; and (iii) defining an action plan for restructuring road transport companies.  Grunt and Project Summary 37 Scheduk E STATUS OF BANK GROUP OPERATIONS IN UGANDA STATEMENT OF BANK LOANS AND IDA CREDITS As of March 31, 1996 (US$ millions) (Less Cancellations) Loan or Fiscal Undis- Credit No. Year Borrower Purpose Bank IDA bursed Nine (9) Loans and forty eight (48) Credits closed, 42.92 1257.92 10.19 of which SECALs, SALs and Program Loans/Credits: (652.78) Cr.21240 1990 Uganda Water Supply II 60.00 40.65 Cr.21760 1991 Uganda Livestock 21.00 13.86 Cr.21900 (S) 1991 Uganda Ag. Sector Adj. Credit 100.00 4.80 Cr.22060 1991 Uganda Urban 1 28.70 14.18 Cr.22680 1991 Uganda Power III 125.00 81.51 Cr.23150 1992 Uganda Enterprise Development 41.85 32.76 Cr.23620 1992 Uganda Northem Reconstruct. 71.20 40.75 Cr.24180 1993 Uganda Econ. & Financial Management 29.00 7.64 Cr.24240 1993 Uganda Agric. Extension Prog. 15.79 7.02 Cr.24460 1993 Uganda Agric. Res. & Trg. 25.04 15.30 Cr.24930 1993 Uganda Primary Educ. 52.60 39.41 Cr.24960 (S) 1993 Uganda Financial Sector Adjustment Cr. 100.00 51.83 Cr.25830 1994 Uganda Small Towns Water 42.30 41.66 Cr.25870 1994 Uganda Transport Rehab. 75.00 76.12 Cr.26030 1994 Uganda Sexual Trans. Infections 50.00 49.41 Cr.26090 1994 Uganda Cotton Sector Development 14.00 12.00 Cr.26790 1995 Uganda District Health 45.00 44.25 Cr.27360 1995 Inst. Capacity Building 36.40 35.07 Cr.27770 1996 Environment Management 11.80 10.93 Cr.27980 1996 Private Sector Comp. 12.30 12.10 Total 42.92 2214.90 631.25 of which repaid 42.92 52.27 Total held by Bank & IDA 0.00 2162.63 Amount sold 25.82 of which repaid 25.82 TOTAL Undisbursed 641.44 (S) Indicates SAL/SECAL or Program Loan/Credit  38 Grant and Project Summary Uganda STATEMENT OF IFC INVESTMENTS As of March 31,1996 (In Millions US Dollars) OriinaEl Gia. Commiments Undisb IFC Held by Held by incl. Fical Years Committed Oblirgo Type of Business IFC Loan Equity Ptpnt. Totals IFC Ptpnt. Ptpnt. 1965 a/ MulcoTextiles, Ltd. Textiles 2.26 0.54 0.70 3.50 1972 s/ Tourism Promotion Service (Ugm Hotels and Tourism 0.73 0.38 1.11 19U4 Sugar Corporation of Uganda Lim Food ad Agribusiness 8.00 8.00 6.00 19U4 a TheToro andMityanaTea Comp Food and Agribusiness 1.12 0.50 1.62 1985 a/ UgandaTea Corpomtion Limited Food and Agribusiness 2.81 2.81 1985/93 Development Finance Company o Financial Services 0.98 0.98 0.98 1993 Clovergem Fish and Foods Limite Food and Agribusiness 0.85 0.85 0.78 1993 JubileelnsurnceCompanyUgan FinancialServices 0.10 0.10 0.10 1993 &I Nge-ge Limited Food and Agribusines 0.65 0.65 1993 Nile Roses Ltd. Food and Agribusiness 0.30 0.30 0.26 1994 RwenzoriPtopertiesLimited IndutrislandConsumerSer 081 0.19 1.00 1.00 0.05 1994 SkyblueApart-Hotel Hotels ad Tourism 0.51 0.51 0.51 0.51 1995 Cloveegem Celtel Limited Infrastructure 4.96 0.64 5.60 5.60 1.20 1995 Polypack Limited Manufacturing 1.00 1.00 1.00 1995 Rainbow Internationa School Ka Industrial nd Consumer Ser 0.79 0.79 079 0.31 1995 Uganda Lesing Company Limite Financial Services 0.33 0.33 0.33 Totidgrosscommitments b/ 2479 2.78 1.58 29.15 Lea cancellations, terminations, repayment & sales 9.68 0.54 1.58 11.80 Total commitsnmts now held et 15.11 2.24 17 35 17.35 2.07 Pending Commitmnents AEF GOVINDA KEWU 0.23 0.23 AEF-AGRO MGMT 0.60 0.40 1.00 EAGW 6.50 6.50 Total pending commitments 7.33 0.40 7.73 Total commitments held and pending commitments 22.44 2.64 25.08 Total undisburwcd commitments 2.07 2.07 It Inveatmentu which have been fully cancelled, terminated, written-off, sold, redeemed or repaid. b/ Grae commitments consist of pproved and signed projets. c/ Held commitmentts consist of disbursed and undisbursed investements.  Grant and Project Summary 39 Uganda: Implementation Issues 1. The IDA portfolio for Uganda as of March 31, 1996 consists of 20 projects, with a total commitment of about US$957 million, with an undisbursed amount of about US$631 million. The portfolio showed improvement in FY95, largely as a result of intensified effort by GOU and Bank staff to remove the obstacles to project implementation. Disbursements have increased steadily in recent years from US$135 million in FY1993, US$165 million in FY94 to US$193 million in FY95 and as of March 31, 1996, $133 million has already been disbursed. 2. IDA's Uganda portfolio showed solid improvement in FY95, thereby continuing the trend of the last few years. This is a real improvement and does not represent any relaxation in ratings: in fact, task managers and country teams have become more rigorous in assessing project performance in the past couple of years. It is the result of an intensified effort to resolve some of the obstacles to project implementation and therefore to get better results in the field. 3. On slow disbursing operations, the Second Water Supply Project, FY90, has only disbursed 38% of the US$60 million Credit; the procurement process for major civil works under the project was delayed as the procurement documentation had to be revised in order to comply with Bank procurement guidelines and procedures. In addition, procurement of major works for the Kampala sewerage system was postponed in order to gather more information before International Competitive Bidding was instituted. Although construction activities under three of the four civil works contracts have gained momentum, progress is still slow. However, the project's implementation performance has now become satisfactory, and the project meets its development objectives in many respects. 4. On the Transportation Rehabilitation Project, there was a 15-month delay in procurement activities/selection of consultants related to the main roads component (a major component of this project), primarily due to lack of familiarity (and therefore non- compliance) with Bank procurement procedures, on the part of project staff. In addition, there is a cost overrun (above the appraisal estimate) of about US$13 million (or 17% of IDA financed portion of the project), for the three main roads contracts. However, the Borrower has been asked to propose a solution, which may call for restructuring or cancellation of some of the lesser priority components at mid-term review, early next year (1997). Training of Borrower staff in contract administration and procurement is being undertaken, with a view to enhancing their skills. Additionally, a twinning arrangement with the Finland Road Authority is being put in place. At this time, steps have been taken to resolve the major procurement issues and the project's disbursement performance is expected to improve over the next few months. 5. The Power III Project has disbursed some 32% of the US$ 125 million (SDR 86.9 million) Credit. Project effectiveness was delayed by about one year to October 1992, as a result of delays in fulfilling the Conditions of Effectiveness. Thereafter, delays in meeting disbursement conditionality has contributed to the slow disbursements under the project. In order to ensure that the over 40 year old existing dam is adequately investigated and strengthened, the project provides for IDA financing to be initially limited to only the advance payment to the main civil work contract -which has been done- and withholding further disbursements until an adequate work program and associated bidding documents required to ensure the safety of the dam have been produced. This work program and the associated bidding documents are planned to be completed by mid-1996; meanwhile the African  40 Grant and Project Summary Development Bank has been disbursing alone to avoid disruption of construction of the Owen Falls Extension Project. 6. The effectiveness of Livestock Services Project was delayed because of complexities in project design. Implementation was also affected by the reorganization of the Ministry of Agriculture, Animal Industry, and Fisheries, which included the consolidation of crop and livestock extension, and subsequently the Government's decentralization program, involving a transfer of responsibilities to districts. Because of slow progress from that point, the project was classified as non-core for FY94 and received no budget funds. The project was then restructured and progress has been satisfactory since the restructuring was put into effect. 7. On Sexually Transmitted Infections Project, the disbursement lag was due to problems experienced in procurement. The bulk of the project finances drugs and condoms and since the credit became effective in July 1994, the Ministry of Health has been struggling to procure drugs and condoms. The problems are already being addressed; a team of Ugandan officials visited Washington in January to discuss outstanding issues on the number of tenders which were under review and to clarify IDA procurement rules. IDA is also making arrangements to provide them with a pharmaceutical procurement expert to help prepare procurement for the next two years. 8. The District Health Project became effective in July, 1995. This project supports delivery of health services with the Districts taking more direct responsibility for service management. This is in line with the Government's decentralization policy. Actual implementation of the project was delayed by the need to prepare districts to take on new responsibilities. The time required for strengthening the capacity of the districts to plan and manage their resources was underestimated. It has taken much longer to put in place accounting and management systems. It was assumed that the districts would be able to prepare good workable budget plans as a basis of their implementation by July, 1995 but was only submitted in December 1995. Implementation has now started and disbursement performance is expected to pick up. 9. The Small Towns Water and Sanitation Project was approved by the Board in February 1994, but did not become effective until August 1995 after changing the one remaining condition of effectiveness into a condition of disbursement. Project implementation started only in November/December 1995 after the conditions of disbursement were met. This amounted to a 17-month delay in getting started especially because of delays in establishing the legal framework for the water committees, and settlement by the Government of all its overdue debts to NWSC. In this interval, considerable start-up work was nevertheless carried out in the form of pilot activities in two of the 10 towns, funded through the remaining portions of PPF, a Japanese PHRD Grant, and a component of the First Urban Project. The implementation is now proceeding rapidly, with consulting firms for both major project components in place and tendering for a number of other items in progress. The Project Launch Workshop was held in March 1996. 10. Institutional Capacity Building Project was approved by the Board in June 1995 and became effective in August 1995. There were initial delays in procurement process. Actions to initiate procurement of goods and consultancy services have now been undertaken and are expected to redress the disbursement lag.  91e F Kenya at a glance Sub. POVERTY and SOCIAL Saharan Low. Kenya Afuica Income Dwelopment dIlmondd Poputin nid-1994 (milions) 20.0 572 3,182 LHe expectancy GNP per capIta 1994 (USS) 260 500 390 GNP 1994 (bftons US$) 6.6 286 1,241 Average annual growth, 1S0-94 Populton (X) 2.7 2.7 1.8 GNP G3ross Lab force (%) 3.4 2.8 1.9 per pln wy Moat recentesttmate flatyesravail sloe n 198) capiba enrolknnt Poverty: headcount index (t ofpopulatton) 37 Urban population (X ofota popWulason) 28 31 28 Ute expecy at birth (yars) 59 52 83 Inftamort lltyr 1,000 Ive biths) 58 92 68 Child mabiutrton (X of chgdren under 6) 23 38 AcoosS to sot wabAr Access to "et water (% odpopul aon) 67 Illiteracy (% opopulaton ag 15+) 22 35 Gro-s primary enrollment (% ofschoo popslon) 91 71 105 - Kenya Moleb 92 77 112 -Low-/nce group Female 91 64 98 KEY ECONOMIC RATIOS ens LONG-TERM TRENOS 1978 1981 1994 1995 Economic ra_oe GDP (biWon US$) 3.3 6.1 8.9 7.9 Gross doneic hIvealmwGDP 18.1 28.0 20.9 22.9 Opennes of economy Exports of goods and nonfadora svl GDP 29.8 25.3 38.6 37.0 Gmoa domestic avingslGDP 13.5 24.9 23.7 21.7 Grosa natlonal avngaGDP 9.2 22.6 20.4 18.7 Current account b&WxeGDP -8.6 -7.0 -0.4 -4.2 Savings Invesbiwnt Interest pymentWGOP 1.4 2.7 4.3 Total debtUGDP 39.6 68.1 106.0 Total debt wrvie/exports 14.9 39.2 33.3 Prew ntvaue of debt/GDP 75.1 Indebbdnes Pre entvalue of debtlexports 193.3 197544 1988-" 1994 1996 1996.04 (average annual growh) -Kenya GDPmp 4.8 3.3 3.9 5.0 5.3 -Low-ncome group GNPpercapfa 1.1 0.1 3.1 3.7 2.9 Exports of goods nd nfa 0.3 5.1 -1.3 7.5 3.5 STRUCTURE of the ECONOMY 1976 1986 1994 1995 of GDP) Agriculture 34.2 32.5 29.1 Or o .dpd hI Indusry 20.2 19.1 17.4 o. Manufacturing 12.0 11.7 10.5 o _ Sevce 45.6 48.4 53.5 .o " a -20. Privateconsumption 68.2 57.6 81.5 61.8 Genal govement consumptlon 18.3 17.5 14.7 16.8 -GOt -*-01P Imports of goods end non-feator servIks 34.5 28.4 35.7 38.2 1976-84 198646 1SS4 1998 (avesge annual gmwth) Agreufture 3.8 1.7 3.1 r a oxporm ad IWIo ('A Indu"ry 4.8 3.5 2.0 r Manufacturing 6.3 4.3 1.9 0 A ServIces 6.0 4.3 3.3 ./ Prhite consumpton 3.3 3.6 10.3 0.7 s o a General goverment eonsumptbon 4.3 5.5 8.6 10.3 15 Groas domec nvewnt 1.8 0.4 18.7 10.9 Imports of goods wnd non-fadtor evce -3.7 4.7 30.3 5.3 -EpCpts him Gross naonal product 5.0 3.0 5.8 6.4 Note: 1995 data we prelimiry estknats. Fge in Iakics am for ya other than tho epoclld. The diamond show forw key Indeo in hthe country (in bold) compared with i Income-group average. if daae amisf g, the dimond wv be Inomplete.  Schduh F Kenya PRICES and GOVERNMENT FINANCE 1975 1985 1994 1995 |Infation(%J DomesUic prkces (% change) 5C Consumer pries (Ave. Nairobi CPI) 19.1 10.7 28.8 1.7 40 Implicit GOP deflator 11.3 8.2 15.7 0.9 30 20 Government finnce (in fiscal years) 1974/75 1984/85 1993/94 1994/95 10 (% of GDP) 0 90 91 92 93 94 9f Current revenue .. 21.6 29.2 31.7 Current budget balance . -0.8 -1.0 5.2 -GOPdef. -CPI Overall surplusidefcit (on commitment basis .. -7.5 -8.0 -2.6 and exd. grants) TRADE (millions US$) 11975 1985 1994 1995 Export and Import levels (mill. US$) Total exports (fob) .. 940 1,482 1,783 3 Fuel .. 118 65 73 Coffee .. 281 233 302 2.500 Manufactures .. 117 159 184 2.000 Total Imports (cif) 1,486 2,04 2,606 1.0. Food .. 112 180 205 100 41b-IIEII-lIl Fuel and energy .. 461 332 329 5- o, i 11 111ll Capital goods 340 503 578 0 [ V IIi-i L Exportprlcelndex(1987=100) .. 90 122 .9 90 91 92 93 94 99 Import price Index (1987=100) .. 81 77 | lExports mlmports Termsoftrade(1987=100) .. 111 157 BALANCE of PAYMENTS 1975 1985 1994 1995 r- (millions USS) Exports of goods and non-factor services 955 1,552 2,645 2,954 | 6 rrnt account balance to GOP ratio (%i Imports of goods and non-factor services 1,131 1,850 2,448 3,053 Resource balance -176 -297 197 -99 0 e9 Net factor income -93 -213 -374 -365 I I I Net current transfers -13 81 148 128 -, -J Current account balance, t9 before offricial transfers -281 -429 -30 -336 Financhig iems (net) 244 397 134 203 .10 Changesinnet reserves 38 33 -104 133 .121 Memo: __ Reserves Including gold (miLt. US$) 173 417 625 453 Converslon rate (1ocakVS$) 7.3 16.4 56.1 51.0 EXTERNAL DEST and RESOURCE FLOWS 1975 1985 1993 1994 (millions USS) Totaldebtoutstanding and disbursed 1,290 4,178 7,120 7,273 IBRD 106 751 566 501 Compositlon of total debt, 1954 (mnIll. US$) IDA 81 408 1,631 1,789 Total debt service 151 621 627 888 IBRD 6 85 156 155 G A IDA 1 5 19 21 e88 501 Compositin of net resource flows 127| 1789 Offlclal grants 31 195 292 311 c Offlcial creditors 87 135 142 66 0E Private credKtors 33 8 -37 -276 2151 483 Foreign dect investment 17 18 2 4 Portfolio equity 0 0 0 0 Wotrd Bank program I Commitments 219 6 92 64 A-IBRD E - Bilateral Disbursements 51 113 226 97 8 -IDA D-Ov99rmufndateral F-Priate* Prlncipalrepayments 1 35 108 115 C-IMF G-Short-term Notflows 50 77 119 -18 Interest payments 6 55 67 62 Nat transfers 44 22 52 -79 Intenational Economics Departnent 4/24/96 Note: Govemment fiscal year (July to June).  B@hdulb r P2d 3of Tanzania at a glance Sub- POVERTY and SOCIAL Saharmn Low- Tanzania Africa Income Development diamond' Population mid-1994 (millions) 28.8 565 3,176 Lif expetancy GNP per capRa 1994 (USS) .. 510 390 GNP 1994 (billions US$) .. 288 1,239 Average annual growth, 1990-94 Population (%) 2.9 2.9 1.8 Labor force(%) 3.0 2.7 1.8 GNP Gross per primary Most recent esUmate (latest year available since 1989) capita enrollment Poverty: headcount Index (% of populatfon) 50 Urban population (X of total population) 23 28 26 Life expectancy at birth (years) 52 52 65 Infant mortality (per 1,000 live births) 84 94 53 Child malnutriton (% of children under 5) 28 38 Access to safe water Access to safe water (% of populas0on) 52 .. 67 Illiteracy (% ofpopulation age 15+) 32 50 41 Gross primary enrollment (% of school-age populalion) 68 68 106 -Tanzania Male 69 77 112 Low-income group Female 67 62 100 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1975 1985 1994 1996 Economic raoS' GDP (billions USS) .. 5.5 3.4 3.7 Gross domeatlc Investment/GDP .. 17.7 31.3 31.0 Openness of economy Exports of goods and non-factor services/GDP .. 7.7 23.8 28.0 Gross domestic savings/GDP .. 8.7 3.3 4.7 Gross national savings/GDP .. 9.8 12.0 9.1 Current account balance/GDP .. -9.3 -22.6 .. Savings Investment Interest payments/GDP .. 0.5 1.8 Total debt/GDP .. 76.1 220.3 Total debt servIce/exports 7.3 38.8 20.4 Present value of debWGDP .. .. 198.0 .. Present value of debtiexpolts .. .. 782.6 Indebtedness 1976-84 1985-94 1994 1996 1996.04 (average annual growth) -Tanzania GDP(dt market prices) .. 4.0 3.7 4.0 4.8 -Low-income group GNP per capita .. .. Exports of goods and nfs .. .. .._.._.. STRUCTURE of the ECONOMY 1976 1986 1994 1998 (% of GDP) Agriculture .. 52.1 56.9 56.8 Industry .. 12.0 16.8 16.8 4 Manufacturing .. 7.9 7.8 7.8 2 Services 35.9 26.3 26.3 oth t out ut and lnv etmenn I% go 91 92 93 94 99 Private consumption .. 74.9 88.4 85.1 General govemment consumption .. 16.4 8.3 10.3 -GDI _GDP Imports of goods and non-factor services .. 16.8 51.8 54.4 19765-4 1988-94 1994 1996 (average annual growth) Agricuiture .. 5.4 3.5 4.0 Industry .. 6.8 2.9 4.3 Manufaduring .. 2.8 -0.9 4.5 Services .. 1.3 4.1 4.1 PrivEae consumption .. General govemment consumption .. Gross domestic investment .. Imports of goods and non-factor services .. Gross national product , 4.1 4.9 Note: 1995 data are preliminary estimates. The diamonds show four key Indicatos In the country (in bold) compared with Is Income-group average. f data are missing, the diamond wIll be Incomplte.  adwidmle F Pip 4 do Tanzania PRICES and GOVERNMENT FINANCE 1975 1985 1994 1995 Inflation (%) DomUesc prflcas (3C change) Consumer prices 26.1 33.3 34.1 32.9 60 Impicit GDP deflator .. 27.7 25.0 34.0 4! Government finance o __ (% of GDP) 90 91 92 93 94 9s Current revenue .. 18.5 15.0 14.8 Current budget balance .. -2.3 -3.4 -4.2 -GDP det. *CPI Overall surplus/deficit .. -7.8 -8.0 -11.4 TRADE (millions US$) 1975 1985 1994 1995 Export and import levels (mill. USS) Total exports (fob) ., 326 486 600 Coffee .. 119 115 166 2.oDo Cotton .. 27 105 144 Manufactures .. 33 77 82 Total imports (cd) ' 999 13436 17503 I.DDO Food .. 78 128 137 5 Fuel and energy .. 223 149 155 Capital goods .. 434 656 695 0 b9 90 91 92 93 9 ss Export price index (1987=100) .. 96 126 Import prce Index (1987=100) .. 85 122 .. [ExOports [lmports Terms of trade (1987=100) 113 103 BALANCE of PAYMENTS 1975 1986 1994 1995 (millions US$) Exports of goods and non-factor services 482 445 848 1,025 Imports of goods and non-factor services 811 1,016 1,913 1,987 0 - Resource balance -329 -571 -1,065 -962 89 90 51 92 93 w s0 CU Zn :acco jr teba ice to GD atic (%) Net factor Income -3 -93 -147 -138 .10 Net current transfers 12 148 450 437 Current account balance, .20 before official transfers -321 -516 -762 -663 Financing items (net) 306 531 752 623 Changes in ntreserves 15 -14 10 40 Memo: Reserves including gold (mill. USS) 65 16 306 249 Conversion rate (localAUS$) 17.9 477.6 624.1 EXTERNAL DEBT and RESOURCE FLOWS 1975 1985 1993 1994 (millions USS) Total debt outstanding and disbursed 1,264 4,127 6,963 7,442 IBRD 80 266 140 114 IDA 81 568 1,759 1,998 Total debt service 36 181 172 172 Composition of total debt, 1994 Imill. USS) IBRD 5 40 45 42 IDA 3 7 23 25 G A Composition of net resource flows Fe5114 8 Offical grants 128 267 786 564 3