Uganda - Agricultural Sector Adjustment Credit Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No.: 16821 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF UGANDA AGRICULTURAL SECTOR ADJUSTMENT CREDIT (Cr. 2190-UG) June 27, 1997 Agriculture Operations Eastern and Southern Africa Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS At Appraisal: USh 510-USS I At Completion: USh 1,050 - USS I ABBREVIATIONS AND ACRONYMS AEP Agricultural Extension Project AGDP Agricultural Gross Domestic Product AGSEC Agricultural Secretariat APC Agricultural Policy Committee APSEC Agricultural Policy Secretariat ARDP Action Research and Development Program ARTP Agricultural Research and Training Project ASAC Agricultural Sector Adjustment Credit ASAP Agricultural Sector Adjustment Program ASMP Agricultural Sector Management Project BOU Bank of Uganda CDO Cotton Development Organization CIR Country Implementation Review CMB Coffee Marketing Board CMBL Coffee Marketing Board Limited CMU Coffee Monitoring Unit COREC Coffee Research Center CP FAO/World Bank Cooperative Program CSBM Coffee Subsector Budgetary and Monitoring System CSDP Cotton Subsector Development Project CSM Coffee Subsector Management DCA Development Credit Agreement ERP Economic Recovery Program FAO Food and Agricultural Organization GOU Govemment of Uganda HARE Headstart Program for Agricultural Research and Extension ICR Implementation Completion Report IDA Intemational Development Association IFAD Intemational Fund for Agricultural Development LPRP Land Policy Research Program LPRC Land Policy Research Committee MISR Makerere Institute for Social Reseach MAAIF Ministry of Agriculture, Animal Industry and Fisheries MFEP Ministry of Finance and Economic Planning MLHPP Ministry of Lands, Housing and Physical Planning MOTI Ministry of Trade and Industry NARO National,Agricultural Research Organization NARSP National Agricultural Research Strategy and Plan NAESP National Agricultural Extension Strategy and Plan NGO Non-govemmental Organization PASP Program for Agricultural Sector Planning PCU Project Coordination Unit PIU Project Implementation Unit RM Resident Mission SAC Structural Adjustment Credit SCORE Sub-committee on Research and Extension UCDA Uganda Coffee Development Authority UNEX Unions Export Services UCTF Uganda Coffee Trade Federation USAID United States Agency for International Development VODP Vegetable Oil Development Project FISCAL YEAR OF BORROWER Govemment of Uganda July I - June 30 Vice President C. Madavo Country Director J. Adams Technical Manager S. Ganguly Task Team Leader T. Sharif  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT REPUBLIC OF UGANDA AGRICULTURAL SECTOR ADJUSTMENT CREDIT (Cr. 2190-UG) CONTENTS PREFACE ......................................................................i EVALUATION SUMMARY ..................................................................... ii INTRODUCTION ........................................................................i PROJECT OBJECTIVES ....... .............................................................. ii IMPLEMENTATION EXPERIENCE AND RESULTS . . .................................................................... iv FUTURE OPERATIONS AND KEY LESSONS LEARNED .................................................................. . . ..Vi PART 1: PROJECT IMPLEMENTATION ASSESSMENT .................................................................. . . ..I A. STATEMENT/EVALUATION OF OBJECTIVES ......................................................................I B. ACHIEVEMENT OF OBJECTIVES . .....................................................................2 C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT .................................5 Implementation Record ........ .............................................................5 Major Factors Affecting Project Implementation ............................ ..........................................9 D. PROJECT SUSTAINABILITY ...................................................................... . 10 E. BANK PERFORMANCE ...................................................................... 11 F. BORROWER PERFORMANCE ....................................................................... 11 G. ASSESSMENT OF OUTCOME ................................................................................ 12 H. FUTURE OPERATIONS ........................... 13 1. KEY LESSONS LEARNED ........................... 13 PART I: STATISTICAL TABLES .......................... . . . 15 A. Aide Memoire B. Evaluation Summary of Government's Completion Report This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF UGANDA AGRICULTURAL SECTOR ADJUSTMENT CREDIT (Cr. 2190-UG) PREFACE I. This is the Implementation Completion Report (ICR) for the Agricultural Sector Adjustment Credit (ASAC), Uganda, for which Credit 2190-UG of SDR 69.5 million (US$ 100 million equivalent) was approved by the International Development Association (IDA) on December 13, 1990 and became effective on January 3, 1991. The Credit closed on December 31, 1996 after three extensions to the original closing date of June 30, 1995. SDR 68.3 million (98%) of the credit was disbursed, with the last disbursement taking place on June 24, 1997 following the processing of the final withdrawal application. SDRI.2 million (US$1.7 million) is being canceled. 2. The ICR was prepared by staff of the FAO/World Bank Cooperative program (CP) on behalf of AFTA l/CD4 of the Africa Region. Contributions to the report were made by Brian Falconer (AFCO4) Charles Magnus (AFTS 1), Edgardo Quisumbing, Fred King and Taqi Sharif (AFTA 1) and it was reviewed by Sushma Ganguly, Technical Manager, AFTA1. The ICR is based on information obtained from the project files and on the findings of an ICR mission which visited Uganda in April/May, 1997. The mission's aide-memoire is attached as Appendix A. The borrower prepared its own assessment of the project performance, a copy of which is attached as Appendix B. Messrs. T. Lamrock (Economist/Mission Leader) and L.E. Eturu (Management Specialist, Consultant).  - ii - IMPLEMENTATION COMPLETION REPORT REPUBLIC OF UGANDA AGRICULTURAL SECTOR ADJUSTMENT CREDIT (Cr. 2190-UG) EVALUATION SUMMARY INTRODUCTION 1. The project was designed and appraised in the context of far reaching macro-economic and sector policy reforms by the Government of Uganda (GOU) during the period 1991-93, following the substantial gains made under the Economic Recovery Program (ERP) of 1988-1990. As an integral part of these reforms, the Agricultural Sector Adjustment Program (ASAP) set out the Government's guiding policies for reform and growth in the agricultural sector and formed the basis for external support by IDA under ASAC. Foreign exchange availability for agricultural inputs was limited and the Government recognized the importance of market reform, research, extension and sectoral management as key contributors to growth in the agricultural sector. Coffee production was well below past levels and continual problems were being faced by Government in financing the procurement of the crop under the Government-owned Coffee Marketing Board (CMB). The ASAC project was, therefore, designed as a hybrid, with complementary adjustment (84% of project costs) and investment (16% of project costs) components. Reforms in the agricultural sector were rightly focused on coffee, owing to the crop's importance in terms of employment and rural incomes, and in trade and foreign exchange earnings. The reform program was set out in a letter of development policy to IDA in November 1990. PROJECT OBJECTIVES 2. ASAP's objectives were: (a) to promote agricultural growth and diversification by institutional, price and tax reform in coffee procurement, marketing and export, and by strengthened agricultural research, extension and sectoral management, and (b) to support the financial stabilization of the coffee subsector by controlling credit expansion through improved institutional arrangements for the financing of coffee procurement and marketing. To complement IDA's support to the Government's macroeconomic reforms, ASAC was designed to help address the Government's need for balance of payments support and policy reform (the adjustment component), financing essential agricultural sector imports, including fuel, and to assist in capacity building of institutions charged with the responsibility for the implementation of the Government's agricultural growth strategy (the investment component). 3. A number of key policy areas were supported under the project. These included: (a) appropriate measures to ensure that positive interest rates were maintained on commercial bank loans, including crop finance loans; (b) implementation of the Coffee Subsector Budgeting and Monitoring System and adoption of a Coffee Subsector Budget for 1992, based on expenditure priorities; (c) issuance of coffee export licenses to the private sector; (d) adoption of measures to facilitate the marketing of a significant share of coffee exports by the private sector; (e) revision of the coffee export taxation system to further increase incentives to exporters; (f) the institutional and financial restructuring of CMB, and  - ji - strengthening institutional arrangements for regulatory functions consistent with GOU's export liberalization strategy; (g) adoption of an Agricultural Sector Rehabilitation and Development Plan and (h) establishment of a National Agricultural Research Organization (NARO) to plan and oversee the implementation of a national agricultural research program. The project's objectives were highly relevant to the liberalization of the economy in general, and were consistent with the Government's objectives in encouraging private sector trade and investment. The reforms in the coffee subsector were aimed at liberalization while recognizing that a number of policy changes were appropriate as a first stage intervention in reforming a subsector with entrenched parastatal control. 4. The investment component, as appraised, comprised the following five sub-programs: (a) Head Start Program for Agricultural Research and Extension (HARE) to implement high-priority adaptive research and extension activities through a series of sub-projects; (b) Program for Strengthening Agricultural Sector Planning (PASP) to improve the efficiency of policy reform and project preparation, appraisal and implementation; (c) Land Policy Research Program (LPRP) to enhance the capacity of the Makerere Institute for Social Research (MISR) for sustained applied research in land access and policy development; (d) Support for Coffee Subsector Management (CSM) including the establishment of the Uganda Coffee Development Authority (UCDA), the restructuring of CMB and the commercialization of Coffee Marketing Board Limited (CMBL); and (e) Support for Project Coordination and Monitoring. 5. In 1994, ASAC was restructured at Government's request. It was decided to address the capacity constraints of the Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) through a separate Agriculture Sector Management Project (ASMP) and to cancel the PASP component. Additional activities consistent with the ASAP were introduced. The main changes were: (a) further balance of payments support under the adjustment component ($1.4 million); (b) a nursery development program to be implemented by UCDA (cost US$ 1 million) to facilitate the availability of coffee seedlings from the private sector; (c) rehabilitation of the Land Registry (US$ 1.1 million) to be implemented by the Ministry of Lands, Housing and Physical Planning (MLHPP) to provide essential equipment for maintaining records properly; and (d) support to the Cotton Development Organization (CDO), prior to the effectiveness of the Cotton Subsector Development Project (CSDP), for the procurement, dressing, and distribution of improved cotton seed to farmers (US$ 1.5 million) to enhance cotton production. Other items included support to business advisory services in connection with the ginneries' restructuring in the cotton subsector, and pre-project activities for Vegetable Oil Development Project (VODP). Three extensions of the closing date (originally June 30, 1995) to December 31, 1996 were approved to assist in the completion of these activities. This reallocation of funds under the investment component, albeit close to the original closing date, provided support for activities that strengthened private sector participation and agricultural growth and diversification (e.g. coffee nurseries, cotton, oilseeds). 6. Project costs were estimated at SDR70.6 million (US$101.6 million) at appraisal, of which IDA was to finance SDR69.5 million (US$100 million, consisting of the adjustment component (SDR60.1 million) and the investment component (SDR9.4 million). The adjustment component, which was to be released in two tranches, was fully disbursed. Project costs under the investment component were SDR8.6 million. In total, project costs are estimated at 98% of SAR estimates. Investment costs were lower than forecast because of shortfalls in civil works and under-utilization of funds in the case of the Land Registry Rehabilitation subcomponent.  - iv - IMPLEMENTATION EXPERIENCE AND RESULTS Adjustment Component 7. The implementation of the project has been satisfactory, with major changes in the policy framework in agriculture contributing to the improved economic growth and development in the country. ASAC has made a positive contribution to overall agricultural growth (which has averaged 7.9% per annum for food crops, and 6.3% for export crops, during the project) and diversification. Policy changes under ASAC complemented reforms in the coffee subsector that were supported by the country's second Structural Adjustment Credit (SAC II), 1993-1996. The project was well designed to address issues in, and to support, the reform process in the coffee subsector, and to make a good start on the overall sectoral growth strategy in research, extension and planning. Whilst effectiveness (and the first tranche release of the adjustment component) was on time, the second tranche of the adjustment component, originally expected in October, 1991, was released in December, 1992, following completion of action on outstanding policy measures. 8. Overall, the project has made substantial contributions in achieving its objectives. The adjustment component of ASAC assisted in stabilizing the financing of the coffee subsector and paved the way for commercial financing, initially domestic, but now mainly foreign sourced. It was instrumental in establishing an industry framework consistent with the Govemment's macroeconomic strategy of liberalization involving the commercialization and eventual privatization of CMB (one of the first parastatals to be so restructured), the establishment of an industry regulatory authority (UCDA), and the introduction of private sector competition. Policy reforms were further deepened under SAC II. UCDA's Board of Directors were made more representative of the coffee industry, issuing of licenses to the private sector was simplified, and UCDA's key role in monitoring coffee quality was strengthened. ASAC also supported studies and technical assistance on such important topics as the Coffee Stabilization Tax (when coffee prices were extraordinarily high), the Warehouse Receipt System (to facilitate crop financing of smallholder coffee traders), and training of coffee traders and processors on risk management. The project provided foreign exchange resources at a critical time in Uganda's economic recovery program, contributed to the macro-economic stabilization and adjustment process, and increased the incomes of an estimated one million smallholders. Coffee production has grown from a level of 2 million bags (60 kg) in 1991/92, with an export value of US$121 million, to a record 4.1 million bags in 1995/96, with an export value of US$389 million. Farmers' share of the export price has risen from 30% in 1991 to over 60% in 1996. 9. The project set minimal subsector marketing reforms to be achieved, but the reforms actually introduced were far deeper than those specified. Under ASAC, it was envisaged that the liberalization of export marketing would be limited to the issuing of export licenses to selected cooperative unions and two private sector exporters, with CMB, the parastatal solely responsible for coffee procurement and marketing, being restructured to operate commercially within a competitive system. However, by May, 1992, the export marketing of coffee had become fully liberalized. There were I I export licenses issued; the system of administered prices and taxes had been removed; CMB's financial, inventory and marketing systems were strengthened through technical assistance from ASAC, and the Government provided further equity to complete the financial and institutional restructuring to enable CMB to operate commercially. CMB had been transformed into CMBL, a limited liability company, initially owned by the Government, but which was to be privatized by September 1996. As envisaged during appraisal, CMBL is being privatized, with GOU currently reviewing bids received from the private sector. The  - v - industry regulatory function had been taken up by the Coffee Monitoring Unit (CMU) which later became UCDA, and has contributed in undertaking reforms that were necessary to liberalize the areas of production, processing, marketing and transportation All export sales were through public tenders and the private sector was dealing with 25% of coffee exports. The development cess was being collected and the financing of the crop was being handled totally through commercial banks. There was a broadening of private sector participation with the export registration of coffee traders reaching a peak of over 150 in number in 1994/95. This was, however, an initial over-reaction to liberalization. By the close of the project, the active licensed exporters numbered 42, with 10 major traders exporting 66% of the coffee crop. 10. Internal marketing of coffee has also changed drastically since 1991. Previously, farmers sold coffee to primary cooperative societies or domestic traders for primary processing and onward transfer, reprocessing, and grading by CMB, through the cooperative unions. Now, in addition to the CMBL central processing facility, 14 private final processing plants are operational, as well as 30 Cooperative Unions and over 300 private hulling facilities. Vertical integration is now a wide-spread characteristic of Ugandan coffee marketing. Much of the processing in the CMBL facility is undertaken on a contract basis as opposed to purchase and resale of processed coffee amongst domestic traders. Some 90% of the coffee crop is now procured through village-based agents on behalf of the exporters, who are representatives of either international traders or roasters. Investment Component 11. Most of the project's investment related activities have been successfully implemented. The performance of capacity building programs in subsector management, and agricultural and social research were satisfactory, and the nursery development program achieved its targets. But there were some shortfalls. First, PASP, the component for building capacity for sector planning was not implemented. Instead, IDA and GOU agreed that it should be canceled and sector planning be addressed through the ASMP. Second, the rehabilitation of the land registry system was not fully completed as the component was only added about one year prior to the original closing date. The main procedural implementation difficulties were experienced in the areas of release of Government funds for project activities, delays in the withdrawal of funds from the Special Accounts in the Bank of Uganda (BOU), and, in adherence to the Bank's procurement procedures, described as "cumbersome" by the project's implementors. The technical assistance to the Project Coordination Unit (PCU) for advice in procurement matters started in June, 1991, thereby initially delaying implementation of the project investment subcomponents. There were also delays in meeting the conditions of effectiveness for HARE. 12. As indicated earlier, ASAC has made a positive contribution to overall agricultural growth, but it is difficult to quantify fully. This is particularly so in agricultural research and extension. Under HARE, notable achievements were recorded in releases to farmers of improved food crop varieties which have contributed to increased agricultural production. Other achievements include training and sensitization of farmers to eradicate tsetse fly, and production of over 457,000 seedlings of various types of trees under the agroforestry sub-program. The project was the vehicle by which NARO was established to raise the status and improve the capacity for agricultural research, and by which further IDA support to research and extension was prepared and initiated.  - vi - 13. ASAC has provided support for crop diversification by financing activities in the cotton subsector prior to the effectiveness of the Cotton Subsector Development Project (CSDP), the proposed IFAD-supported VODP, and the establishment of Coffee Research Center (COREC). Valuable support was provided to the land debate by building capacity for land research in MISR, and assisting in bringing the research results into the policy discussions leading to the draft Land Bill of 1993, the land law in the Constitution, and the draft Land Tenure and Control Bill of 1997. Overall Project Management 14. While project management responsibility was vested with the individual project implementation units in each ministry/agency, overall responsibility for agriculture sector policies, project coordination, and monitoring was mandated to the Agricultural Policy Committee (APC), a multi-sectoral body, chaired by the then Permanent Secretary, Ministry of Finance and Economic Planning (MFEP), and comprised of permanent secretaries of several key ministries and heads of relevant agencies. In terms of meeting its commitments on key policy actions required under ASAC, the performance of the Borrower has been commendable. This can largely be attributed to the pivotal role played by APC, which also received solid technical support from the AGSEC/PCU. A major factor in the successful implementation of policy reforms in the coffee subsector was the key role played by the Chairman of the APC. By virtue of his office as Permanent Secretary, MFEP/ Secretary to the Treasury, he was able to represent the interests of the agricultural sector at meetings of the cabinet and of the President's Economic Council. 15. The project was complicated with many components being implemented by a number of agencies and departments. Therefore, coordination of project activities, procurement and reporting took on an important function to ensure successfui implementation. The structure of the project's management, with the centralized PCU coordinating Project Implementation Units (PIU's) in each agency, was well designed to address this. Disbursements were, however, slow initially. Under the adjustment component, they were slow on account of a number of factors such as the non-eligibility of petroleum imports prior to project effectiveness, limitations on number of items eligible for import, and a complex disbursement mechanism. Following modifications in these areas, the disbursements flowed smoothly. Disbursements were slow under the investment component as there was only one special account for all the implementing agencies. This problem was addressed by providing a separate special account for the requirements of the research subcomponent. 16. Supervision of the project, both from the Resident Mission (RM) and from Headquarters, was satisfactory. Continuity of Bank staff for task management, and close liaison between Headquarters and RM staff in supervision, as part of a team, contributed to achieving project objectives. The Bank management's prompt action in agreeing to a restructuring of ASAC in mid-1994 had a positive impact on implementation progress. FUTURE OPERATIONS AND KEY LESSONS LEARNED 17. HARE was the forerunner to the Agricultural Research and Training Project (ARTP - Cr. 2446- UG), and the Agricultural Extension Project (AEP - Cr. 2424-UG). UCDA is earning a significant income from the cess on coffee to sustain its operations in the future. CDO, which received initial support form ASAC, is now being fully supported under CSDP. Research on cash crops, such as coffee and cotton, will also be sustained from the cess that is being collected by the regulatory agencies. Overall, therefore, the prospects for agricultural growth and diversification are promising following the support received from ASAC, and the project's results are expected to be sustainable.  - vii - 18. The key lessons learned from the project were as follows: (a) Impressive achievements were made under the project, particularly in the areas of policy reforms in the liberalization of the coffee subsector, and in facilitating the establishment of institutions for coffee development (UCDA) and national research (NARO). This is the result of Government's strong commitment to policy reform, which provided the project management team with strong support and funding. (b) Effecting substantial policy reforms requires a strong and effective mechanism to coordinate policy issues affecting several sectors. The APC, comprised of permanent secretaries of several key ministries and heads of relevant agencies, and with solid technical support from AGSEC/PCU, was instrumental in steering the policy reforms that were required, and in facilitating the achievements under the investment component. The Permanent Secretary, MFEP/ Secretary to the Treasury, played a key role. (c) The survival of CMB (which was transformed into CMBL) was necessary to avoid a total collapse in the industry at the time of deregulation, and this was reflected in the project's design. When market reforms are being introduced, it is important that there is a phased entry of private sector participation. (d) The policy reforms that were undertaken required institutional and financial restructuring of existing institutions and the establishment of new ones. The hybrid design of the project, which provided financial and technical support to these institutions through the investment component, was an important factor in the achievement of the project's objectives. (e) Disbursements were initially slow as there was only one special account for a number of implementing agencies under the investment component. In the case of sizable subcomponents that require disbursements to a number of locations in the field, it is more appropriate to provide separate special accounts for them. (f) Capacity building and gaining experience in procurement is critical for smooth implementation and takes time. Centralizing procurement for a multi-agency implemented project helped in this area.   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF UGANDA AGRICULTURAL SECTOR ADJUSTMENT CREDIT (Cr. 2190-UG) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. STATEMENT/EVALUATION OF OBJECTIVES 1. The project was designed and appraised in the context of far reaching macro-economic and sector policy reforms by the Government of Uganda (GOU) during the period 1991-93, following the substantial gains made under the Economic Recovery Program (ERP) of 1988-1990. As an integral part of these reforms, the Agricultural Sector Adjustment Program (ASAP) set out the Government's guiding policies for reform and growth in the agricultural sector and formed the basis for external support by IDA under ASAC. Foreign exchange availability for agricultural inputs was limited and the Government recognized the importance of market reform, research, extension and sectoral management as key contributors to growth in the agricultural sector. Coffee production was well below past levels and continual problems were being faced by Government in financing the procurement of the crop under the Government-owned Coffee Marketing Board (CMB). The ASAC project was, therefore, designed as a hybrid, with complementary adjustment (84% of project costs) and investment (16% of project costs) components. Reforms in the agricultural sector were rightly focused on coffee, owing to the crop's importance in terms of employment and rural incomes, and in trade and foreign exchange earnings. The reform program was set out in a letter of development policy to IDA in November 1990. 2. ASAP's objectives were: (a) to promote agricultural growth and diversification by institutional, price and tax reform in coffee procurement, marketing and export, and by strengthened agricultural research, extension and sectoral management, and (b) to support the financial stabilization of the coffee subsector by controlling credit expansion through improved institutional arrangements for the financing of coffee procurement and marketing. To complement IDA's support to the Government's macroeconomic reforms, ASAC was designed to help address the Government's need for balance of payments support and policy reform (the adjustment component), financing essential agricultural sector imports, including fuel, and to assist in capacity building of institutions charged with the responsibility for the implementation of the Government's agricultural growth strategy (the investment component). 3. A number of key policy areas were supported under the project. These included: (a) appropriate measures to ensure that positive interest rates were maintained on commercial bank loans, including crop finance loans; (b) implementation of the Coffee Subsector Budgeting and Monitoring (CSBM) System and adoption of a Coffee Subsector Budget for 1992, based on expenditure priorities; (c) issuance of coffee export licenses to the private sector; (d) adoption of measures to facilitate the marketing of a significant share of coffee exports by the private sector; (e) revision of the coffee export taxation system to further increase incentives to exporters; (f) the institutional and financial restructuring of CMB, and strengthening institutional arrangements for regulatory functions consistent with GOU's export  - 2 - liberalization strategy; (g) adoption of an Agricultural Sector Rehabilitation and Development Plan and (h) establishment of a National Agricultural Research Organization (NARO) to plan and oversee the implementation of a national agricultural research program. The project's objectives were highly relevant to the liberalization of the economy in general, and were consistent with the Government's objectives in encouraging private sector trade and investment. The reforms in the coffee subsector were aimed at liberalization while recognizing that a number of policy changes were appropriate as a first stage intervention in reforming a subsector with entrenched parastatal control. 4. The investment component, as appraised, comprised the following five sub-programs: (a) Head Start Program for Agricultural Research and Extension (HARE) to implement high-priority adaptive research and extension activities through a series of sub-projects; (b) Program for Strengthening Agricultural Sector Planning (PASP) to improve the efficiency of policy reform and project preparation, appraisal and implementation; (c) Land Policy Research Program (LPRP) to enhance the capacity of the Makerere Institute for Social Research (MISR) for sustained applied research in land access and policy development; (d) Support for Coffee Subsector Management (CSM) including the establishment of the Uganda Coffee Development Authority (UCDA), the restructuring of CMB and the commercialization of Coffee Marketing Board Limited (CMBL); and (e) Support for Project Coordination and Monitoring. Items to be financed under the investment component were mainly renovation and construction of research and office facilities, vehicles and equipment, training and study tours, consultant services for coffee subsector reform, and incremental staff and operating costs for project management. 5. In 1994, ASAC was restructured at Government's request. It was decided to address the capacity constraints of the Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) through a separate Agriculture Sector Management Project (ASMP) and to cancel the PASP component. Additional activities consistent with the ASAP were introduced. The main changes were: (a) further balance of payments support under the adjustment component ($1.4 million); (b) a nursery development program to be implemented by UCDA (cost US$ I million) to facilitate the availability of coffee seedlings from the private sector; (c) rehabilitation of the Land Registry (US$ 1.1 million) to be implemented by the Ministry of Lands, Housing and Physical Planning (MLHPP) to provide essential equipment for maintaining records properly; and (d) support to the Cotton Development Organization (CDO), prior to the effectiveness of the Cotton Subsector Development Project (CSDP), for the procurement, dressing, and distribution of improved cotton seed to farmers (US$ 1.5 million) to enhance cotton production. Other items included support to business advisory services in connection with the ginneries' restructuring in the cotton subsector, and pre-project activities for Vegetable Oil Development Project (VODP), being supported by the International Fund for Agricultural Development (IFAD). Three extensions of the closing date (originally June 30, 1995) to December 31, 1996 were approved to assist in the completion of these activities. This reallocation of funds under the investment component, albeit close to the original closing date, provided support for activities that strengthened private sector participation and agricultural growth and diversification (e.g. coffee nurseries, cotton, oilseeds). B. ACHIEVEMENT OF OBJECTIVES 6. Overview. The Credit was appraised in June, 1990, approved in December, 1990 and became effective on January 3, 1991. Support for CMBL and MISR subcomponents, under the investment component, closed on June 30, 1995, as planned. After three extensions to the original closing date of June 30, 1995, the Credit finally closed on December 31, 1996. A total of SDR68.3 million was disbursed and an undisbursed amount of about SDRI.2 million is being canceled. Investment costs were  - 3 - lower than forecast because of shortfalls in civil works and under-utilization of funds in the case of the Land Registry Rehabilitation subcomponent. 7. Adjustment Component. Overall, the project has made substantial contributions in achieving its objectives. The adjustment component of ASAC assisted in stabilizing the financing of the coffee subsector and paved the way for commercial financing, initially domestic, but now mainly foreign sourced. It was instrumental in establishing an industry framework consistent with the Government's macroeconomic strategy of liberalization involving the commercialization and eventual privatization of CMB (one of the first parastatals to be so restructured), the establishment of an industry regulatory authority (UCDA), and the introduction of private sector competition. Policy reforms were further deepened under the Second Structural Adjustment Credit (SAC II). UCDA's Board of Directors were made more representative of the coffee industry, issuing of licenses to the private sector was simplified, and UCDA's key role in monitoring coffee quality was strengthened. ASAC also supported studies and technical assistance on such important topics as the Coffee Stabilization Tax (when coffee prices were extraordinarily high), the Warehouse Receipt System (to facilitate crop financing of smallholder coffee traders), and training of coffee traders and processors on risk management. The project provided foreign exchange resources at a critical time in Uganda's economic recovery program, contributed to the macro- economic stabilization and adjustment process, and increased the incomes of an estimated one million smallholders. Coffee production has grown from a level of 2 million bags (60 kg) in 1991/92, with an export value of US$121 million, to a record 4.1 million bags in 1995/96, with an export value of US$389 million. Farmers' share of the export price has risen from 30% in 1991 to over 60% in 1996. 8. The project set minimal subsector marketing reforms to be achieved, but the reforms actually introduced were far deeper than those specified. Under ASAC, it was envisaged that the liberalization of export marketing would be limited to the issuing of export licenses to selected cooperative unions and two private sector exporters, with CMB, the parastatal solely responsible for coffee procurement and marketing, being restructured to operate commercially within a competitive system. However, by May, 1992, the export marketing of coffee had become fully liberalized. There were I I export licenses issued; the system of administered prices and taxes had been removed; CMB's financial, inventory and marketing systems were strengthened through technical assistance from ASAC, and the Government provided further equity to complete the financial and institutional restructuring to enable CMB to operate commercially. CMB had been transformed into CMBL, a limited liability company, initially owned by the Government, but which was to be privatized by September 1996. As envisaged during appraisal, CMBL is being privatized, with GOU currently reviewing bids received from the private sector. The industry regulatory function had been taken up by the Coffee Monitoring Unit (CMU) which later became UCDA, and has contributed in undertaking reforms that were necessary to liberalize the areas of production, processing, marketing and transportation All export sales were through public tenders and the private sector was dealing with 25% of coffee exports. The development cess was being collected and the financing of the crop was being handled totally through commercial banks. There was a broadening of private sector participation with the export registration of coffee traders reaching a peak of over 150 in number in 1994/95. This was, however, an initial over-reaction to liberalization. By the close of the project, the active licensed exporters numbered 42, with 10 major traders exporting 66% of the coffee crop. 9. Internal marketing of coffee has also changed drastically since 1991. Previously, farmers sold coffee to primary cooperative societies or domestic traders for primary processing and onward transfer, reprocessing, and grading by CMB, through the cooperative unions. Now, in addition to the CMBL central processing facility, 14 private final processing plants are operational, as well as 30 Cooperative Unions and over 300 private hulling facilities. Vertical integration is now a wide-spread characteristic of  - 4 - Ugandan coffee marketing. Much of the processing in the CMBL facility is undertaken on a contract basis as opposed to purchase and resale of processed coffee amongst domestic traders. Some 90% of the coffee crop is now procured through village-based agents on behalf of the exporters, who are representatives of either international traders or roasters. 10. Investment Component. Most of the project's investment related activities have been successfully implemented. The performance of capacity building programs in subsector management, and agricultural and social research were satisfactory, and the nursery development program achieved its targets. But there were some shortfalls. First, PASP, the component for building capacity for sector planning was not implemented. Instead, IDA and GOU agreed that it should be canceled and sector planning be addressed through the ASMP. Second, the rehabilitation of the land registry system was not fully completed as the component was only added about one year prior to the original closing date. The main procedural implementation difficulties were experienced in the areas of release of Government funds for project activities, delays in the withdrawal of funds from the Special Accounts in the Bank of Uganda (BOU), and, in adherence to the Bank's procurement procedures, described as "cumbersome" by the project's implementors. 11. As noted earlier, ASAC has made a positive contribution to overall agricultural growth, but it is difficult to quantify fully. This is particularly so in agricultural research and extension. Under HARE, notable achievements were recorded in releases to farmers of improved food crop varieties which have contributed to increased agricultural production. Other achievements include training and sensitization of farmers to eradicate tsetse fly, and production of over 457,000 seedlings of various types of trees under the agroforestry sub-program. The project was the vehicle by which NARO was established to raise the status and improve the capacity for agricultural research, and by which further IDA support to research and extension was prepared and initiated. 12. ASAC has provided support for crop diversification by financing activities in the cotton subsector prior to the effectiveness of the Cotton Subsector Development Project (CSDP), the proposed IFAD-supported VODP, and the establishment of Coffee Research Center (COREC). Valuable support was provided to the land debate by building capacity for land research in MISR, and assisting in bringing the research results into the policy discussions leading to the draft Land Bill of 1993, the land law in the Constitution, and the draft Land Tenure and Control Bill of 1997. 13. In overall sector planning, PASP did not proceed and was later canceled in 1994. Sector planning then became the subject of the ASMP, which was not effective at the time of ASAC's closing, but is expected shortly. Therefore, ASAC's impact on sectoral planning was less than planned. Still, the major policy reforms in the sector, which were supported by the Agricultural Policy Committee (APC) and technical assistance under ASAC, were well planned and sequenced.  - 5 - C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT Implementation Record Adjustment Component 14. The implementation of the project has been satisfactory, with major changes in the policy framework in agriculture contributing to the improved economic growth and development in the country. ASAC has made a positive contribution to overall agricultural growth (which has averaged 7.9% per annum for food crops, and 6.3% per annum for export crops, during the project) and diversification. Policy changes under ASAC complemented reforms in the coffee subsector that were supported under SAC II during 1993-1996. The project was well designed to address issues in, and to support, the reform process in the coffee subsector, and to make a good start on the overall sectoral growth strategy in research, extension and planning. Whilst effectiveness (and the first tranche release of the adjustment component) was on time, the second tranche of the adjustment component, originally expected in October, 1991, was released in December, 1992, following completion of action on outstanding policy measures. 15. Initial disbursement progress was slower than expected. This was due to a number of factors. First, petroleum imports were not eligible prior to project effectiveness. Second, the original eligible imports list was limited, and had to be expanded. Third, the disbursement mechanism was complex, and required modification. Fourth, demand for imported agricultural inputs was far less than that assumed at appraisal on account of high interest rates, and depreciation of the Ugandan Shilling. There was also a general lack of local currency in the banking sector. In addition, donor-financed aid programs supplied large quantities of inputs at subsidized prices. To facilitate disbursement, the positive list was extended to include items that were not specifically for the agricultural sector (e.g. roofing sheets, bicycles and cement). When the foreign exchange auction system replaced the Open General License and Special Import Program systems, the originally designed mechanisms for disbursement, the Development Credit Agreement (DCA) was amended (January, 1993) to permit ASAC adjustment funds to be used in the auction for imports, subject to the standard negative list that applied to other IDA adjustment credits. At the same time, the amount eligible for petroleum imports was increased. Further changes were necessary to permit these funds to be used for interbank transactions when the auction system was terminated. Following these changes, disbursement was prompt and 100% of the adjustment component (SDR 60.1 million) was disbursed. 16. The project helped build capacity to undertake a number of key studies to support policy analysis and formulations. The most notable contributions were the regular studies on cost of production and marketing of coffee, and analysis of the comparative advantage of Uganda's agricultural commodities. These studies established the foundation and data base for much of the analysis of coffee pricing, taxation and financing, and indeed in other subsectors. It also provided technical advice to the APC on ginneries' restructuring in the cotton subsector, and on policy options and strategies to improve competitiveness of crops in line with GOU's policy to increase and diversify exports. 17. Of the total SDR 60.1 million (US$ 84.6 million) disbursed under the adjustment component, SDR 23 million (US$ 32.4 million) was disbursed under the positive list for agricultural inputs, SDR 18.8 million (US$ 26.2 million) for petroleum produacts, and SDR 18.3 million (US$ 26.0 million) for general imports.  -6 - Investment Component 18. The technical assistance to the Project Coordination Unit (PCU) for advice in procurement matters started in June, 1991, and so the implementation of the project investment subcomponents was initially delayed. There were also delays in the satisfaction of the conditions of effectiveness for the HARE subcomponent, namely the appointment of the Project Implementation Unit (PIU) head and Senior Agricultural Services Adviser. The components of the investment program are discussed in detail below, but it should be noted that, in the overall impact of the project, the positive impact of the adjustment component was more important. Head-Start Program for Agricultural Research and Extension (IHARE) 19. HARE was designed to implement high priority research and extension activities through a series of sub-projects which would focus on production constraints and adaptive research to fine-tune technologies, and would improve their dissemination. In addition, HARE was designed to provide technical assistance, training, studies, vehicles and equipment, and selective rehabilitation and reconstruction of research facilities. The nine sub-projects comprised a package which was expected to be an effective way of achieving the longer-term objective of building a research capacity. The establishment of a semi-autonomous research organization was a condition of the second tranche release. 20. During 1992-93, the AEP and ARTP came on-stream before the technology dissemination and research sub-projects were completed. The transition from HARE to the new projects was eventually achieved through a restructuring of both ASAC and HARE itself. Following the establishment of NARO and a review of the HARE program, NARO identified a number of improved technologies for on-farm demonstration and seed multiplication, and training of field extension staff. Twelve sub-programs implemented by NARO under an Action Research and Development Program (ARDP), including most that had previously been identified under HARE, generally achieved their original objectives. Notable achievements were recorded in releases to farmers of improved varieties which have contributed to increased agricultural production (e.g. cassava, groundnuts, simsim, new beans, sweet potato, potatoes); training and sensitization of farmers to the use of mono-screen trap for tsetse fly control; rehabilitation of 66 fish ponds (60% of target) and distribution of 72,000 fish fry (85% of target); on-farm grain storage trials, training and technology dissemination in 10 districts; production of over 457,000 seedlings of various types of trees under the Agroforestry Research and Extension sub-program; field studies on Improving Production and Utilization of Forest Plantations; and Improving Smallholder Dairy Production. 21. The APC's Sub-committee on Research and Extension (SCORE), which was chaired by the Secretary for Research in the MAAIF, was responsible for review and approval of the work plans and budgets, setting priorities, approving individual sub-projects, and recruitment of staff. The component was implemented by the PIU in MAAIF. There was a lack of consensus amongst those involved on these institutional arrangements for implementing HARE, and this caused delays in implementation. Program for Agricultural Sector Planning 22. PASP was conceived at a time when there were several other initiatives to strengthen sectoral planning in different ministries responsible for agricultural development. The main objectives were to provide technical assistance and capacity building support to MAAIF, newly established from a number of hitherto independent ministries, and to the agriculture section of the former Ministry of Finance and Economic Planning (MFEP). PASP subsequently underwent a number of revisions in response to  - 7 - institutional changes and the restructuring of key ministries, with the last revision undertaken in September, 1993. The overall subcomponent objectives, however, remained valid and unchanged. By the time an agreement, in principle, was reached between the Borrower and the Food and Agricultural Organization (FAO) for TA support under this subcomponent, PASP was declared non-core by Government in fiscal year 1993/94. In light of this decision by GOU, and with two years remaining to the original closing date, the Bank advised GOU that it would be better to cancel this subcomponent, and address the capacity building requirements of MAAIF fully through the proposed ASMP. Following the acceptance by GOU of this strategy, which was preferred over a piece-meal approach to capacity building, the subcomponent was canceled in March, 1994. While the main program under PASP was not implemented, the relevant ministries received vehicles, equipment, and some overseas training. Strengthening of agriculture sector planning/prioritization of expenditures to make public spending more efficient is underway, and is to be further addressed under ASMP. Land Policy Research and Legislation 23. In conjunction with the financial support provided by the United States Agency for International Development (USAID) to Makerere Institute for Social Research (MISR), ASAC's support has been successful in rehabilitating its physical facilities and building its capacity to move forward into an operational phase in which it will be able to compete for Government and donor-financed research programs. The capabilities of MISR have been raised, and its status within the Makerere University is now semi-autonomous, an important factor for it to be able to set conditions of service to retain the staff trained overseas under ASAC. The research findings on land issues were an important input to the discussions in the Constituent Assembly on the new constitution, and into the draft land legislation. ASAC helped this process by financing seminars and workshops to build the link between the research and policy formulation. The quality of the MISR civil works contract, and delays in procurement were the main implementation problems. The delays in procuring the library equipment were such that it could not be completed before the closing date of the project. Only part of the required equipment was procured, and this has resulted in the library being partially operational. Coffee Subsector Management 24. The project's activities in this area were originally designed to support the organizational, financial and institutional restructuring of the CMB and the Cooperative Unions, and the transfer of CMB's regulatory function to an autonomous authority. ASAC financed many important studies covering the coffee subsector that have guided the reform process. Following an initial study to recommend the design of UCDA, ASAC assisted in joint Government of Uganda/World Bank subsector reviews in 1993 and 1995 that were central to guiding policy and resolving issues. The project provided equipment to UCDA, particularly communication and information systems, that have proved to be vital in obtaining, analyzing, and distributing daily international coffee market information. 25. The commercialization of CMBL was crucial to its continuation as a participant in the coffee market. The project's support to CMBL was in the form of technical assistance in the areas of financial management and information systems, and these have made a valuable contribution to the commercialization of CMBL. The project specified financial restructuring measures for CMBL to be taken by the Government as conditions under the Credit. However, the commercialization process was hampered as CMBL remained constrained by cumbersome decision making between the management, board and the Ministry of Trade and Industry (MOTI), by the cost of maintenance of non-productive assets, and the inability of the management to rapidly restructure its staff due to trade union objections.  - 8 - CMBL could not have competed fully with newly-licensed private sector exporters until there was a complete acceptance, both internally and externally, for it to assume a new identity as an efficient market trader. Its market share has fallen over the years to about 4%, although its main processing facility in Kampala is currently about 40% utilized on a contract basis. GOU has recently received bids from the private sector for the sale of CMBL. A decision on this matter is expected shortly. 26. The responsibility for the restructuring of the Unions remained with the Unions themselves, with advice to be provided from a Cooperatives Finance Specialist under ASAC. This technical assistance was not provided and the project's support to the Unions in the changing economic environment has been negligible. The Unions initially handled 10% of the market at the beginning of the reform process, but by 1996, Union Export Services (UNEX), established with support from the European Union to export coffee for the Unions, handled only about 1%. Project Coordination and Monitoring 27. Government assigned the responsibility for agriculture sector policies and of overseeing the implementation and monitoring of ASAC to APC. A PCU was established in the then Agricultural Secretariat (AGSEC) to manage the implementation process. This included coordination of the activities of the various Project Implementation Units (PIUs) which were established in the relevant ministries, overall planning of procurement, and financial management and control. The Project Coordinator, Financial Advisor, Procurement Specialist, Accountant and Disbursement Officer, formed the core of the PCU. Since AGSEC had the responsibility to implement the ASAP, and the Project Coordinator was the Director of AGSEC, the PCU was synonymous with AGSEC. ASAC funded technical assistance, which was provided by the FAO under an agreement with GOU, and vehicles, equipment and training. 28. The APC established five sub-committees to facilitate policy decisions, and to link and interface more closely with the technical ministries and departments of government responsible for the different subcomponents of the project. The five sub-committees were: (a) SCORE responsible for HARE; (b) Land Policy Research (LPRC) for land policy reforms; (c) Coffee Subsector Management (CSM) for coffee reforms; (d) agricultural inputs for the adjustment component (inputs only); and (e) procurement. Apart from the Procurement Committee which was chaired by the Director AGSEC/Project Coordinator, the other sub-committees were chaired by the relevant Permanent Secretaries to whom the responsibility for the subcomponents fell. 29. The structure thus established for the implementation of ASAC is considered to have been well designed. Except for problems during the early phase of the project, overall, financial management was satisfactory. This can largely be attributed to the pivotal role played by APC, which also received solid technical support from the AGSEC/PCU. A major factor in the successful implementation of policy reforms in the coffee subsector was the key role played by the Permanent Secretary, Ministry of Finance/ Secretary to the Treasury. By virtue of his office as the then Permanent Secretary, Ministry of Finance and Economic Planning (MFEP)/ Chairman, APC, he was able to represent the interests of the agricultural sector at meetings of the cabinet and of the President's Economic Council. Other Activities under Extended ASAC 30. The following activities were included when ASAC was restructured and the project's closing date was extended:  - 9 - UCDA Nursery Program: The nursery program has successfully established 370 robusta and 70 arabica clonal nurseries, providing about 3 million seedlings for replacing old bushes and, in the case of robustas, replacing wilt-affected bushes with disease tolerant seedlings. ASAC supported this program by financing basic inputs for the establishment of the nurseries to be operated by private farmers. Rehabilitation of Land Registry/Land Administration Systems: The strategy for land administration systems had to be in accordance with the land legislation including the Land Reform Act and the Government's decentralization strategy, and ASAC financed an external study to recommend new land information systems. The results of this study were not known by the time of the project's closing. However, there was a recognized need to at least halt the deterioration of the central land records by buying essential equipment identified on the basis of an initial study on computerization of land records. On account of indecisiveness on the part of MLHPP, the procurement of this equipment could not be completed. Cotton Subsector: Prior to the effectiveness of CSDP, ASAC financed the procurement and distribution of improved cotton seed by CDO to farmers for the 1994/95 planting season, and provided business advisory services for the financial management and restructuring of institutions in the cotton subsector. Coffee Research Center: ASAC supported the establishment of the Coffee Research Center (COREC), formned by upgrading the coffee research program to the status of an institute under NARO, on the site of the coffee, cocoa, tea and palm oil research station in Mukono district. COREC is expected to play an important role in the research and monitoring of tracheomycosis (coffee wilt disease), and testing and disseminating preventive strategies. VODP: ASAC supported some pre-project activities (e.g. soil surveys) but, pending the selection of the private sector investor for the project, the proposed import of oil palm seeds was not undertaken. Project Costs 31. Project costs were estimated at SDR70.6 million (US$101.6 million) at appraisal, of which IDA was to finance SDR69.5 million (US$100 million, consisting of the adjustment component (SDR60. 1 million) and the investment component (SDR9.4 million). The adjustment component, which was to be released in two tranches, was fully disbursed. Project costs under the investment component were SDR8.6 million. In total, project costs are estimated at 98% of SAR estimates. Investment costs were lower than forecast because of shortfalls in civil works and under-utilization of funds in the case of the Land Registry Rehabilitation subcomponent. Major Factors Affecting Project Implementation 32. The main procedural implementation difficulties were experienced in the following areas: Counterpart Funding: Even though budgetary provisions for project counterpart funds were made, central budgetary constraints often resulted in reduced allocations being released. This was overcome by devising a system to advance funds from the Special Accounts to meet local costs. In the extension phase, some of the components' expenditures fell under technical assistance contracts which were in disbursement categories that could be 100% financed. This allowed the project to continue with minimal interruption;  - 10- Special Accounts (SAs): Delays were experienced in the withdrawal of funds from the SA in BOU. The pace of disbursements was affected by having only one SA for all the subcomponents under the investment component. Disbursements under the NARO/HARE subcomponent improved following the setting up of a separate SA for NARO activities under ASAC. Flows of funds from SAs improved further when they were transferred from BOU to commercial banks; and Adherence to Bank's Procurement Procedures: procurement procedures proved to be cumbersome to the implementing and coordinating units, particularly because of delays in establishing letters of credit and clearing goods. There were also difficulties in specifying, within the procurement procedures, a general standard of quality and the local availability of technical support and service for equipment. This has occasionally resulted in sub-standard or unserviceable equipment being procured in some cases, although it had met the required specifications. 33. The investment component of the project was complicated with many subcomponents being implemented by different agencies and departments. Therefore, coordination of project activities, procurement, and reporting took on an important function to ensure successful implementation. The structure of the project's management, with the PCU coordinating PlUs in each agency, was well designed to address this. 34. As mentioned above, following the consolidation of the separate ministries of agriculture and fisheries into MAAIF, the activities of PASP being declared non-core in the 1993/94 GOU Budget, and the decision to decentralize implementation responsibility to the districts, it was agreed to address the capacity building constraints of MAAIF at the center and in a few selected districts through a proposed stand-alone project - ASMP. D. PROJECT SUSTAINABILITY 35. The sustainability of the major policy reforms is very likely. Government has continued on the adjustment path and economic growth has been high. Growth in agriculture has remained strong, even with drought in 1996/97. Private sector participation has helped lead to continuing growth in coffee and other export crops. In addition, the sustainability of many of the organizations and institutions that ASAC helped to build is promising. CMBL is now under the final stages of privatization with a rebidding process concluded in June 1997. A sale will enable CMBL to operate competitively and commercially in the coffee industry. UCDA has an assured budget derived from the export cess on coffee, and these funds will continue to support research and development in the industry, both in marketing and quality, and in production renewal and expansion. MISR will continue to be supported through a combination of Government funds and other donor supported programs, and will continue its collaboration with the Land Tenure Center, Wisconsin. The lands information systems study for MLHPP, now under consideration, will set out a plan of activities and investments, the source of financing for which has not yet been identified. CDO, which received initial support from ASAC, and is now being funded under CSDP, has been procuring and distributing sufficient quantities of cotton seed to farmers. Cotton production has increased from 15, 000 bales in 1993/94 to 57,000 bales in 1995/96, and is estimated at 100,000 bales during 1996/97. 36. NARO has developed a prioritized research program, and has established a research network consisting of nine institutes, each having a set of disciplines and geographical mandate. NARO is benefiting under the ARTP and will continue to be supported through a combination of Government and  - 11 - donor funds. Presently, over 90% of the NARO budget is funded through externally funded projects. Government budget is small but rising, from less than 0.1 % of agricultural gross domestic product (AGDP) at the beginning of the project to between 0.4-0.5% of AGDP in 1996/97. 37. AGSEC was transferred from the Bank of Uganda to MFEP in August, 1995 and, following that Ministry's restructuring, is now under the Ministry of Planning and Economic Development. Following a review of APC's and AGSEC's new roles, and implementation responsibility for components under new IDA-supported projects resting with concerned ministries/agencies, AGSEC has been restructured into a smaller unit. Now known as the Agricultural Policy Secretariat (APSEC), its main functions are to perform secretariat services for the APC, and to continue to provide advice to it, as required. APSEC is also the coordination unit for CSDP. The funding of APSEC is provided from CSDP until the end of 1999. After that time, the Government will need to find the appropriate role and financing for APC and APSEC. E. BANK PERFORMANCE 38. Supervision of the project, both from the Resident Mission (RM) and headquarters, was considered satisfactory. During January 1991 - April 1997, 11 supervision missions were undertaken, and additional specific reviews of reforms in the coffee subsector and supervision of the HARE and Land Tenure Research programs were also carried out. Continuity of task management, initially from the RM and then from headquarters, combined with Bank management's decision to provide specific support through an alternate task manager, alternating between headquarters and the RM, as part of a team, contributed to the achievement of project objectives. The supervision missions sought to address the key issues affecting the project's performance by taking these up with GOU, and directing their efforts towards facilitating project implementation. The Bank management was responsive to requests from the Government for modifications to procedures and component design, in keeping with the overall thrust of the ASAP, as circumstances changed. In particular, the Bank's prompt action on agreeing to a restructuring of ASAC in mid- 1994 had a positive impact on the progress of most components. Disbursements, which totaled about 65% in early 1994, improved to 98% when the project closed (December 31, 1996). The Bank also provided technical advice on, inter alia, such important matters as Coffee Stabilization Tax (when coffee prices were high) and Warehouse Receipt System (which would facilitate crop financing of smaller traders), and training on Risk Management. Difficulties were encountered in resolving procedural issues, mainly relating to procurement, during the first half of the project. F. BORROWER PERFORMANCE 39. Overall, in terms of meeting its commitments on key policy actions required for liberalization of the coffee subsector and other critical actions required for project implementation, the performance of the Borrower has been commendable. This was largely possible on account of the pivotal role played by the APC, and the continuity provided by policymakers represented on the APC from key ministries throughout the project period (e.g. MFEP, MOTI). In addition, APC received solid technical support from the AGSEC/PCU (including from experts funded under technical assistance) on policy-related and project implementation matters. The performance of MAAIF/NARO and MISR was, overall, satisfactory, while IJCDA recorded major achievements While the intenit ot GOUJ was to eventually  - 12- divest its shareholding in CMBL, CMBL continued to lose its market share of coffee exports over the years. 40. Compliance with covenants under the DCA have been satisfactory with the exception of the delayed compliance with the requirement to provide audited accounts, particularly of CMBL. Several reviews of CMBL's financial statements for the fiscal years 1993/94, 1994/95 (last year of CMBL subcomponent), and 1995/96 were undertaken by private firms of auditors to determine the market value of CMBL's assets, prior to GOU seeking bids for CMBL from the private sector. Despite regular follow up by IDA, the audited accounts of CMBL for 1993/94 and 1994/95, which were the responsibility of the Auditor General, were not provided to IDA. (CMBL has submitted draft financial statements for 1993/94 and 1994/95 to the Auditor General). The shortage of Government's funds for project activities has been mentioned above. The Government has provided its evaluation of project performance as its contribution to the ICR (see Appendix 2). G. ASSESSMENT OF OUTCOME 41. ASAC was a strong contributor to the overall economic changes during the project period and it complemented policy-related conditionalities under SAC 11 and accompanying development interventions. As indicated in paras. 7-12 above, the project's overall impact has been substantial and positive. It successfully supported the stabilization and growth objectives of ERP, and an annual growth rate target of 5% was exceeded. Estimates indicate that more than one million coffee farmers producing, on average, between one to twenty bags of kiboko coffee, have benefited under ASAC. 42. During 1992, in conjunction with the on-going adjustment program and agreement with IDA, further reforms were introduced. Coffee proceeds were permitted to be exchanged at the Bureau exchange rate, the export tax was replaced by a processor withholding tax, and a minimum floor price for coffee was introduced. From the end of 1993, full retention of export proceeds were permitted. A Coffee Stabilization Tax was introduced in the 1994/5 budget, intended to stabilize the currency during the coffee boom of that time, but was discontinued in 1996. The continuation of subsector reforns then became conditions of SAC II in 1993, and included actions on the removal of the floor price, and the restructuring of UCDA. 43. The export registration of coffee traders reached a peak of over 150 in number in 1994/95, but many of the new licensed traders dealt in low volumes for a short period of time or were inexperienced in dealing in a sophisticated international market, thus suffering financial losses. During this time, the industry experienced a setback in its international reputation due to exports of low quality coffee by some exporters. This issue was subsequently addressed by UCDA and the then Uganda Coffee Exporters Association, forerunner to the Uganda Coffee Trade Federation (UCTF), by the enforcement of quality standards and a code of conduct of trade. By the close of the project, the active licensed exporters numbered 42, with 10 major traders exporting 66% of the coffee crop. 44. There were, however, exceptions. Firstly, as indicated previously, PASP was not implemented. Secondly, the rehabilitation of the land registry systems was not fully completed. This subcomponent was included at the time of the project's extension and the main problems related to indecisiveness on the part of MLHPP in terms of preparation and sequencing of the activities to be undertaken in a short time frame to meet the closing date of ASAC. The major part of the canceled credit relates to this item.  - 13 - H. FUTURE OPERATIONS 45. HARE was the forerunner to the Agricultural Research and Training Project (ARTP - Cr. 2446- UG), and the Agricultural Extension Project (AEP - Cr. 2424-UG). To ensure the sustainability of the extension services in the future, efforts are ongoing to make these services demand driven by empowering the communities at grassroots level to decide which services they regard as beneficial, and for which they are initially prepared to share the cost. Under a proposed AEP II, the delivery of extension services by specialized non-governmental organizations (NGOs) is also being considered if this proves more cost-effective. UCDA is earning a significant income from the cess on coffee to sustain its operations in the future. CDO, which received initial support form ASAC, is now being fully supported under CSDP. Research on cash crops, such as coffee and cotton, will also be sustained from the cess that is being collected by the regulatory agencies. Overall, therefore, the prospects for agricultural growth and diversification are promising following the support received from ASAC, and the project's results are expected to be sustainable. I. KEY LESSONS LEARNED 46. The key lessons learned from the project were as follows: (a) Impressive achievements were made under the project, particularly in the areas of policy reforms in the liberalization of the coffee subsector, and in facilitating the establishment of institutions for coffee development (UCDA) and national research (NARO). This is the result of Government's strong commitment to policy reform, which provided the project management team with strong support and funding. (b) Effecting substantial policy reforms requires a strong and effective mechanism to coordinate policy issues affecting several sectors. The APC, comprised of permanent secretaries of several key ministries and heads of relevant agencies, and with solid technical support from AGSEC/PCU, was instrumental in steering the policy reforms that were required, and in facilitating the achievements under the investment component. The Permanent Secretary, MFEP/ Secretary to the Treasury, played a key role. (c) The survival of CMB (which was transformed into CMBL) was necessary to avoid a total collapse in the industry at the time of deregulation, and this was reflected in the project's design. When market reforms are being introduced, it is important that there is a phased entry of private sector participation. (d) The policy reforms that were undertaken required institutional and financial restructuring of existing institutions and the establishment of new ones. The hybrid design of the project, which provided financial and technical support to these institutions through the investment component, was an important factor in the achievement of the project's objectives. (e) Disbursements were initially slow as there was only one special account for a number of implementing agencies under the investment component. In the case of sizable  - 14 - subcomponents that require disbursements to a number of locations in the field, it is more appropriate to provide separate special accounts for them. (f) Capacity building and gaining experience in procurement is critical for smooth implementation and takes time. Centralizing procurement for a multi-agency implemented project helped in this area.  - 15 - PART II: STATISTICAL TABLES Table 1: Summary of Assessments A. Achievement of obiectives Substantial Partial Negligible NotApplicable (/) (/) ~~(V) (10 Macro policies El El I Sector policies E L I r : Financial objectives L LI FI Institutional development [71 FI LI Elm Physical objectives C E El Poverty reduction LI LI I] Gender issues FJ LI I Other social objectives FI L L I Environmental objectives LI LI Public sector management EF LI FI Private sector development [I LI LI LI Other (specify) FI L EL LI B. Project sustainability Likely Unlikely Uncertain (/) (1) (E)  - 16 - Highly C. Bankperformance satisfactory Satisfactory Deficient Identification 1 [El Preparation assistance EI E Appraisal FI Zg ED Supervision E E E Highly D. Borrower performance satisfactorv Satisfactorv Deficient Preparation | E z Implementation FII EC I Covenant compliance F } E Operation (if applicable) F 1 [ Highly Highly E. Assessment of outcome satisfactory Satisfactory Unsatisfactory unatisfactoI3 (0, (/) (/) (V) [2 [3~F E~ C:  - 17 - Table 2: Related Bank Loans/Credits Loan/Credit Title Purpose Year of approval Status Preceding operations 1328-UG Ag. Rehabilitation Project 1983 Completed 1434-UG Second Technical Assistance 1983 Completed 1539-UG Agricultural Development 1985 Completed Project 1824-UG Forestry Rehabilitation 1987 Completed 1893-UG Sugar Rehabilitation 1988 Completed Following operations 2178-UG Livestock Services 1990 Ongoing 2424-UG Agricultural Extension 1992 Ongoing 2446-UG Agricultural Research and 1993 Ongoing Training 2608-UG Structural Adjustment Credit II 1993 Completed 2609-UG Cotton Subsector Development 1994 Ongoing 2845-UG Agricultural Sector Management 1996 Awaiting Effectiveness  - 18 - Table 3: Project Timetable Steps in Project Cycle Date Planned Date Actual/Latest Estimate Identification Nov. 1988 Preparation Nov. 1988-May 1990 Appraisal June 1990 Negotiations Oct. 1990 Board presentation June 1989 Signinig Dec. 13 ,1990 Effectiveness Feb. 1, 1991 Jan 3, 1991 First Tranche Release Feb. 1991 Feb. 1991 Second Tranche Release Oct. 1991 Dec. 1992 Midterm review Dec. 1992 - HARE June 1993 LPRP 2/ anid PASP Project completion June 1995 Dec. 31, 1996 Credit closing June30, 1995 Dec.31, 1996 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual (US$ millions) | FY . 1991 1992 1993 1994 1995 1996 1997 A. Expressed in SDR Appraisal Estimate 25.7 54.1 66.5 68.2 69.5 - - Actual 14.4 27.0 36.2 54.2 64.2 66.7 68.3 Actual as % of estimate 56% 50% 54% 79% 92% 96% 98% B. Expressed in US$ Appraisal Estimate 37.0 77T9 95.7 98.2 100.0 - - Actual 20.5 37.8 50.1 76.2 91.0 94.7 96.9 Actual as % of estimate 55% 48% 53% 78% 91% 95% 97% I/ Prepared by Bank of Uganda Agricultural Policy Committee with assistance from IDA 2/ With HARE being integrated into NARO's work program under ARTP, satisfactory progress under LPRP, and discussions between GOU and IDA on canceling PASP, the MTR of these subcomponents was not undertaken.  - 19- Table 5a: Key Indicators for Project Implementation The President's Report listed a number of policy actions that were to be monitored under the Credit. The fulfillment of these policy actions were conditions of the second tranche release. These policy actions and conditions, set out below, were considered to have been fulfilled by December, 1992, originally planned for October, 1991. Table Sb summarizes the policy actions that were required under ASAC and a time table for their implementation. Conditions for Second Tranche Release (a) In the context of the macro-economic framework as set out in the Government's Policy Framework Paper (FY 91 to FY 93) continue to apply policy measures to ensure that positive real interest rates on commercial bank loans, including crop finance loans are maintained. (b) Progress in the implementation of the Coffee Subsector Budgeting and Monitoring System for the CS 91, according to an agreed work plan, and adoption by the Government of a Coffee subsector Budget for CS 92, satisfactory to IDA. (c) Complete the financial and institutional restructuring of CMB satisfactory to IDA, consistent with the findings of the CMB balance sheet report, including formalizing Government's injection of working capital to CS91 as contribution to CMB's equity, providing additional equity capital, as required, to meet CMB's incremental base working capital requirements for CS92, and strengthening institutional arrangements for development and regulation of the coffee industry consistent with the Government's coffee export liberalization strategy. (d) Issue coffee export licenses to at least two private sector parties other than cooperatives and implement measures to significantly increase the share of the coffee exports by the private sector by: (i) ensuring adequate profit elements in exporters fixed margins; and (ii) establishing a price grading structure for coffee to maximize quality and sales value. Adopt an action plan to implement a new coffee export taxation system to further increase trade incentives while safeguarding fiscal objectives under the stabilization program. (e) Establish a semi-autonomous National Agricultural Research Organization to plan and oversee the implementation of a national agricultural research program, satisfactory to IDA.  - 20 - Table Sb: Proposed Action Matrix for Implementation of Recommendations of the Task Forces based on Policy Actions Required under ASAC and the Coffee Subsector Review of 1993 Recommendations Action by Recommende Actual d Completion Completion Date Date A. Production Issues 1. UCDA to finalize UCDA 12/1/93 Completed during comprehensive Nursery Development December 1993. Program. 2. Government Nurseries to be Privatization commercialized on cost recovery recommended - basis. MAAIF 6/30/94 August 1994. 3. Establish 75 private sector MAAIF and 6/30/94 There were 126 nurseries with mother gardens. UCDA Nurseries by June 1994. 4. UCDA budget target for UCDA 6/30/94 On going but Coffee Subsector Research and budget prepared Development to 40 percent. in Oct. 1993. B. Marketing Issues 5. Allow exporters to choose any of the marketing methods that suits them best. UCDA 12/1/93 March 1994. 6 Submit evaluation report on introducing Auction System for marketing Uganda Arabica coffee. UCDA 3/3194 February 1995. 7. Floor Price 7.1 Finalization of the recommendations of the Price Policy Committee. UCDA 10/1/93 February 9, 1994. 7.2 Implementation of the recommendations of the Price Policy Committee. UCDA 12/1/93 February 0, 1994.  - 21 - Table Sb (Cont'd): Proposed Action Matrix for Implementation of Recommendations of the Task Forces based on Policy Actions Required under ASAC and the Coffee Subsector Review of 1993 Recommendations Action by Recommende Actual d Completion Completion Date Date 7.3 Review Floor Price System and replace it with Indicative Price System. UCDA 10/1/94 Published daily since February 1994. 8. Implement the revised criteria for licensing/registration of exporters. UCDA 12/1/93 March 9, 1994. 9. Each export processing plant Exporting 12/1/93 Continuous as should have a 'Registered Quality Processing new exporters Controller'. plants and start new UCDA processing plants (being complied with). 10. UCDA 10.1 Preparation of a plan for restructuring of UCDA especially with regard to the composition of UCDA 10/1/193 February 1994. Board of Directors, quality control, its role in expanding nurseries for clonal varieties and research. 10.2 Amendment of UCDA Ministry of Statute, 1991, and rectification by Trade and Board of the plan for restructuring. Industry 12/1/93 April 15, 1994. 10.3 Establishment of new Board of Directors of UCDA and its standing Committees UCDA 12/15/93 July 1994. 10.4 Establishment of Exporters Coffee 11/15/93 December 1993 Association Exporters  - 22 - Table 5b (Cont'd): Proposed Action Matrix for Implementation of Recommendations of the Task Forces based on Policy Actions Required under ASAC and the Coffee Subsector Review of 1993 11. CMBL 11.1 Preparation of corporate plan CMBL 10/1/93 June 1994. for CMBL which would inter-alia incorporate the establishment of cost centers to facilitate privatization in a phased manner. 11.2 Ratification of the plan by CMBL 12/1/93 August 1994. CMBL Board 11.3 Privatization of CMBL CMBL 9/30/96 Bids for sale of CMBL to private sector received in June 1997. C. Transport Issues 12 Partial liberalization of coffee UCDA 12/1/93 Complete transportation by allowing exporters liberalization to transport up to 20% of annual implemented on exports by road to ports of export. March 9, 1994. 13. Implementing road user Ministry of Under review as charges based on road damage costs. Communication part of Roads s, Works and 6/30/94 Sector Investment Transport Program. 14. Restructuring of Uganda As in 13 above. Continuous Railway Corporation 15. Full liberalization of coffee UCDA 10/1/94 March 9, 1994. transportation to ports of export.  - 23 - Table 6: Key Indicators for Project Operation ACTION PROGRAM ACTUAL ACHIEVEMENT Coffee Crop Financing Achieved before second tranche release in Dec. 1992. For 1993/94, US $38 million Reinstate commercial banks as lenders for was available to exporters as prefinance crop finance/revise institutional funds. Since 1993/94, crop financing has arrangements. been a minor problem. Pricing of Export Crops Farmers are now recovering about 60% of the export price against 20% before Adjust producer prices and liberalization. GOU removed export tax on processing/marketing margins for coffee. coffee in July 1992. A new stabilization tax, Increase farmers' share of the long-term imposed in 1994/95, was abolished effective, coffee export price. Increase price and tax July 1, 1996. incentives for exporters. Processing and Market Institutions Against a target of 40 licenses to private sector exporters by 1993/94, 87 have been Abolish CMB's export monopoly and issued in 1995/96. The private sector is now provide incentives for private sector responsible for 95% of coffee exports. participation in exports. Public Expenditure Review Establish and secure funding for high PER's have been undertaken since 1993/94 priority agricultural projects. to establish such priorities. Agricultural Research and Extension Implement an integrated national NARO has been established and is being agricultural research plan and support the supported under ARTP (CR. 2446-UG), establishment of a semi-autonomous while a national unified extension system is National Agricultural Research Organization being supported under AEP (CR. 2424-UG). (NARO).  - 24 - Table 6 (Cont'd):... Key Indicators for Project Operation ACTION PROGRAM ACTUAL ACHIEVEMENT Production * UCDA to finalize comprehensive Completed in 12/93. 370 new nurseries Nursery Development Program by Dec. (105% of target) and 333,750 mother bushes 1993. (79% of target) have been established. * Establish 75 private sector nurseries by 126 nurseries were in place at 5131/94. June 1994. Marketing Allow exporters to choose any method that Completed in March 1994. suits them best by Dec. 1993. Floor Price Review Floor Price System and replace it Indicative Price System in place since March with Indicative Price System by Oct. 1994. 1, 1995. UCDA Amend UCDA Statute, 1991 by Dec. 1993. Completed on April 15, 1994. CMBL Prepare Corporate Plan by Oct. 1993. Plan prepared by May 1994. Some non- Privatize CMBL by Sept. 1996. productive assets of CMBL were sold prior to its privatization. Bids from prospective buyers (received in June 1997 )being considered.  - 25 - Table 6 (Cont'd):... Key Indicators for Project Operation ACTION PROGRAM ACTUAL ACHIEVEMENT Transport Partial liberalization of coffee transportation Completely liberalized in March 1994. (20% by road) by Dec. 1993. HARE (Research) Component The component's integration with NARO, due by 1/1/94, has been fully implemented. Performance in most sub-projects has been satisfactory. MISR Component The rehabilitation of buildings and the training has been completed. Land Policy Component The Technical Committee's Report on Land Tenure was published in June 1993.  - 26 - Table 7: Studies Included in Project Consultant/Author Title of the Study AGSEC Economics of Crop Production 1992/93, March 1993 AGSEC Impact of Presenit Exchange Rate Appreciation on Comparative Advantage of Export Crops 1993 AGSEC/IDA Consultant Report on Risk Management Strategies for the Uganda Coffee Sub-Sector 1993 AG SEC/Task Forces Report on Establishment of Cotton Development Organization (CDO); Report on Liquidation of Lint Marketing Board; Report on Establishment of Lint Marketing Company; Report on Debt Relief and Cooperative Union Restructuring Agricultural Secretariat A Working paper on: (i) CSDP Production Credit Component; (ii) Animal Traction in North Eastern Uganda; (iii) Document on "The Cotton Sub-Sector Credit Financing Program AGSEC/Consultant The Report on Fair Liability of Cotton Union Debts - 1994 AGSEC/ FAO Consultant Study of the Provision of Ag Services in the Context of Structural Adjustment Reforms 1994 AGSEC The Impact of Structural Adjustment on Agricultural Services - Ugandan Case Study 1994 AGSEC The Economics of Crop and Livestock Production - 1993/94 GOU/IDA Joint GOU/World Bank Task Force (1994) Reports on: Coffee Production, Processing, Marketing and Coffee Transportation; Key Issues and Recommendations AGSEC/UCDA Report of the Task Force on the Implementation of the Coffee Production Program 1994 AGSEC/MFEP/BOU Coffee Stabilization Tax - Technical Committee Response to the Memorandum Submitted by Uganda Coffee Exporters Association 1995 AGSEC/Consultants A Rapid Appraisal Of Rural Finance and Credit Schemes Vol I and II - 1994 AGSEC/BOU/MFEP Coffee Stabilization Tax - An Evaluation of Its Impact 1995 AGSEC Analysis of Cost of Processing, Marketing and Indicative Price Structure of Major Agricultural Exports - 1994 AGSEC/NICU Strategy for Agricultural Mechanization in Uganda - 1994  - 27 - Table 7 (Cont'd): Studies Included in Project Consultant/Author Title of the Study AGSEC/MAAIF Guidelines for Financing Veterinary Doctors for Establishment of Private Practices under Livestock Services Project - 1995 AGSEC/MAAIF Guidelines for Financing Small and Medium Scale Livestock Enterprises under Livestock Services Project - 1995 AGSEC/BAS CSDP Ginnery Profiles 1995 - Business Plans - Methodologies and Workplan AGSEC Strategy and Guidelines for Supply of Cotton Pesticides and Payment Arrangements under Cotton Stabex/ADP Funds for 1995/96 Season - 1995 AGSEC/lntemational Report on the Role and Possible Restructuring of Agricultural Policy Committee Development Consultants and Agricultural Secretariat - September, 1995 AGSEC Programs and Rural Micro-enterprise Projects in the Agricultural Sector - November 1995 AGSEC Towards Employment Oriented Growth and Poverty Reduction in Rural Areas - An Agenda for Possible Solution - November 1995 AGSEC Towards Growth and Poverty Reduction in Rural Areas - A Review of Agricultural Policy Agenda and Future Perspectives - November 1995 AGSEC/National Tech. Emergency Action Plan for Control of Water Hyacinth - November, 1995 Committee AGSEC/UCDA The Roles and Activities of Uganda Coffee Development Authority (UCDSA) in the Context of Coffee Sub-Sector Reform - January 1996; Review of coffee Stabilization Tax, Crop Finance and Risk Management - January 1996; Review of Coffee Research Extension and Nurseries - January 1996; Privatization of Coffee Marketing Board Ltd - January 1996 AGSEC/ACDI A Program to Build Rural Financial Capacity - march 1996 AGSEC Private Sector Development Strategy for Rural Development - Project Profiles - July 1996 AGSEC/Task Force Report of the Task Force on Privatization of Coffee Planting Seed Services - Sept. 1996  - 28 - Table 7 (Cont'd): Studies Included in Project Consultant/Author Title of the Study AGSEC/Task Force Report of the Task Force on Operationalization of Capacity Building Program for Rural Finance Nov. 1996 AGSEC National Strategy and Program of Action for Private Sector Development in Rural Areas Vol. I and 11 - November 1996 AGSEC/MPED Medium Term Agricultural Sector Modernization Plan - October 1996 AGSEC/Task Force Draft Report of Rural Development Sectoral Working Group - anti Poverty Action Plan - October 1996 AGSEC Interim Report on Assessment of Impact of Sub-Sector Reforms Under ASAC and CSDP - January 1997  - 29 - Table 8A: Project Cost (USS '000s) Appraisal Estimate Actual Subject to Revisions Item Local Foreign Total Local Foreign Total ^omponent Hare 2,750.2 4,363.6 7,113.8 635.0 1,335.8 1,970.8 Land Policy Research Program 615.1 761.0 1,376.1 210.0 232.5 442.5 Agricultural Sector Planning 187.4 3,086.7 3,274.1 12.9 178.8 191.7 Coffee Subsector Management 11.2 1,789.9 1,801.1 0.0 1,032.4 1,032.4 Project Management Support 274.5 1,503.7 1,778.2 515.0 1,565.1 2,080.1 PPF 239.0 1,031.0 1,270.0 430.0 623.4 1,053.4 Other 0.0 0.0 0.0 2,250.0 3,399.3 5,649.3 Adjustment Component 0.0 85,000.0 85000.0 0.0 84,619.0 84,619.0 Total 4,077.4 97,535.8 101,613.3 4,052.9 91,683.8 97,039.2 Note: Project accounts were kept in accordance with disbursement categories. To facilitate allocation of funds amongst different activities, these were grouped under "other" in July 1995. Figures for some subcomponents were not readily available during the [CR mission, but were provided subsequently. Expenditures under the "other" category since July 1995, by component, are shown below. Item Estimate Actual Agricultural Research (HARE) 2,205.6 2,477.3 Coffee Nursery Program (UCDA) 1,000.0 939.8 Warehouse Receipt System Study (UCDA) 48.0 36.5 Land Registry Rehabilitation (MLHPP) 1,150.0 144.5 Procurement and Distribution of cotton seeds 1,500.0 1,390.0 Support to APSEC 630.0 615.1 Women Study 21.6 21.6 C-redit Study (Rapid Appraisal) 45.2 45.2 Business Advisory Services (BAS) 185.0 185.0 Additional Support to BAS 32.5 32.5 Support to Coffee Farmers Association 25.0 30.0 Support to Uganda Coffee Federation 100.0 80.2 :apacity Building Study 175.0 174.0 MISR ( Civil Works + Library equipment) 82.6 57.1 Research on Cocoa, tea & Palm Oil 45.0 38.2 Training & Study Tours (APSEC) 27.0 28.0 Refurbishing of APSEC Offices 260.0 116.5 Land Tenure Law Bill 17.5 11.7 VODP 130.0 66.1 Audit fees 0.0 7.0 BMB Consultants (CMBL) 0.0 43.0 Total 7,680.0 5,649.3  - 30 - Table 8B: Project Financing Appraisal Estimate (USSM) Actual/Latest Estimate (USSM) Source Foreign Local Total Foreign Local Total IDA 97.5 2.5 100.0 n/a n/a 96.8 Domestic Contribution - 1.6 1.6 - .9 .9 TOTAL 97.5 4.1 101.6 n/a n/a 97.7 Table 9: Economic and Financial Costs and Benefits The President's Report made no estimate of the economic costs and benefits of the adjustment nor investment components of ASAC, and no economic rate of return was calculated. In view of the sectoral nature of the project, the contributions made by the private sector and other donors under other concurrent and subsequent programs, other Government macro-economic policy actions that have had a direct influence on sectoral growth, and the difficulty of assessing benefits attributable to investments in research and extension, the economic rate of return oni the investments under ASAC was not attempted.  - 31 - Table 10: Status of Legal Covenants Agreement Section Covenant Present Original Description of Covenant Comments Type Status Fulfillment date Credit 3.01 (b) 3 C The borrower shall make available to CMBL, as a Fulfilled grant, the proceeds of the credit which may from time to time be allocated as set forth in schedule 1. Credit 3.01 (c) 3 C The borrower shall make available to Makerere Fulfilled University for use by MISR as a grant, the proceeds of the credit which may from time to time be allocated as set forth in schedule 1. Credit 3.01 (f) 5 C The borrower shall carry out the project in Actions accordance with the implementation program set required forth in schedule 6 of the agreement. under the structural adjustment component fulfilled. Credit 3.04 (b) I CD The borrower shall have the project accounts and Fulfilled special accounts for each fiscal year audited by independent auditors; and fumish a certified copy of the audit report to IDA not later than six months after the end of each such year. Credit 3.04 (c) I CD For all expenditures with respect to which Fulfilled withdrawals from the Credit account were made on the basis of statements of expenditures, the borrower shall maintain adequate records and accounts reflecting such expenditures; and ensure that such records and accounts are included in the annual audit referred to in para (b) of the Section and that a report of such audit contains a separate opinion by said auditors on the proper use of SOE's. Credit 3.05 1 CP Borrower shall cause CMBL to maintain adequate Fulfilled Records and accounts, have its records, accounts partially and financial statements (Balance Sheets, statements of income and expenditure and related statements) for each FY audited, by independent Auditors, and fumish to IDA not Ister than 6 months after the end of such year: (a) certified accounts of its financial statements for such year as so audited; and (b) the report of such audit by said auditors. Credit 3.06 (b) S C The borrower shall cause CMBL to carry on its Fulfilled operations and conduct its affairs in accordance with sound administrative, commercial and financial practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Present Sta C - Covenant complied with CD - Complied with after delay CP - Complied with partially NC - Not complied with  - 32 - Table 11: Compliance with Operational Manual Statements Basically, there was compliance with the applicable Bank Operational Manual Statements. Table 12: Bank Resources: Staff Inputs" Stage of project cycle Planned | Revised Actual Weeks US$ Weeks USS Weeks | USS Preparation to appraisal n/a n/a 49.3 107.8 Appraisal n/a n/a 71.5 188.2 Negotiations through Board approval n/a n/a 2.7 7.9 Supervision n/a n/a 145.9 442.1 Completion2' n/a n/a 12.0 54.7 TOTAL 281.4 800.7 n/a - Not available from Cost Accounting System As of June 19, 1997. The cost for completion is estimated. Amounts are in US$ thousand. 21 Undertaken by FAO/CP.  - 33 - Table 13: Bank Resources: Missions Performance Rating Number Days in Specialized Staff Implementation Development Stage of Project Month/Year of Field Skills Status Objectives Types of Cycle Persons Represented Problems Appraisal 5/90 Supervision 1/91 8 11 FA, Ec, Res, Proc, - - - Disb, Mgmt, Coffee 4-5/91 2 15 FA, CO 2 1 PM 6-7/91 4 24 FA, Ec, Leg, Tea 2 1 PM, F 9-10/91 4 15 FA, EC, Land, Mgmt 2 1 5/92 3 12 FA, EC, Res 2 1 F 11/93 1 10 FA 2 1 PM, F 1/94 2 8 FA 2 I F 6/94 1 12 FA 2 1 F, Proc 2/95 1 6 FA 2 2 F, Proc 6-7/96 2 19 FA, Land 2 2 F, Proc 3-4/97 1 7 FA 2 2 - Completion /l 4-5/97 2 14 Ec, Mgmt - - Abbreviations: Ec = Economist; FA = Financial Analyst; Mgmt = Management Specialist; Tea = Tea Specialist; Coffee = Coffee Marketing Specialist; Disb = Disbursement Specialist Proc Procurement Specialist; Res = Research Specialist; CO = Country Officer Leg = Legal Officer; Land = Land Tenure Specialist PM = Project Management; F = Financing (due to shortage of counterpart contributions) Proc = Procurement 1/ Carried out by FAO/CP   Appendix A - Mission's Aide-Memoire FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS Investment Centre Division UGANDA: Agricultural Sector Adjustment Credit (ASAC) (Cr 2190-UG) Implementation Completion Report Mission - Aide-Memoire A. Introduction A FAO/World Bank Cooperative Program (CP) mission2 visited Uganda from 23 April to 7 May 1997 to prepare the ICR for the above project. Discussions were held with the concerned officials from the Project Coordination Unit, the Agricultural Policy Secretariat (APSEC), staff of the Research department of the Bank of Uganda, Uganda Coffee Development Authority (UCDA), Uganda Coffee Farmers Association (UCFA), Uganda Coffee Traders Federation (UCTF), Coffee Marketing Board Limited (CMBL), Makerere Institute for Social Research (MISR), Ministry of Planning and Economic Development (MPED), Ministry of Lands, Housing and Physical Planning (MLHPP), National Environmental Management Authority (NEMA), Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) and National Agricultural Research Organization (NARO). Field trips were undertaken to the Coffee Research Centre (COREC), and to the District Farm Institute coffee nursery at Mityana, private coffee nurseries and farms, and private processors. A wrap-up meeting was held by the Agricultural Policy Committee on 6th May, 1997 at which this aide-memoire was discussed. The mission would like to express its appreciation for the assistance given by the officials of the Government of Uganda and its agencies, staff of the industry groups, and for the cooperation and courtesy of the staff of APSEC. B. Background The Credit was designed and appraised in the context of far reaching macro-economic policy reforms initiated by the Government of Uganda following the Economic Recovery Program (ERP) in 1988-1990. To support the ERP, the Agricultural Sector Adjustment Program (ASAP) set out the 2 The mission comprised Tim Lamrock (FAO TCIR - Economist/Mission Leader) and Mr L. Eturu (Project Management Specialist - Local Consultant).  2 Government's guiding policy for reform and growth in the Agricultural Sector and formed the basis for external support to the Government by IDA under ASAC. Coffee production was well below past levels and continual problems were being faced by Government in financing the procurement of the crop under the Coffee Marketing Board (CMB). The importance of coffee in the sector in terms of employment and rural incomes, and in trade and foreign exchange earnings, focused sectoral reforms around the coffee industry. Foreign exchange availability for agricultural inputs was limited and the Government recognized the importance of market reform, research, extension and sectoral management as key contributors to growth in the agricultural sector. This was set out in a letter of development policy to IDA in November, 1990. C. Project Objectives and Components ASAP's objectives were (i) to support the financial stabilization of the sector by controlling credit expansion through improved institutional arrangements for the financing of coffee procurement and marketing; and (ii) to promote agricultural growth and diversification by institutional, price and tax reform reform in coffee procurement, marketing and export, and by strengthened agricultural research, extension and sectoral management. To complement IDA's support to the Government under the ERP, the Credit was designed to address the Government's need for balance of payments support for essential sector imports, including fuel, and to assist in capacity building for institutions charged with the responsibility for the implementation of the Government's agricultural growth strategy. The Credit totaling SDR 69.5 million (US$ 100 million equivalent) was a hybrid consisting of a sector adjustment component and a complementary investment component with objectives consistent with the ASAP. The adjustment component, available conditionally in two tranches totaling US$ 85 million, was to finance specified sectoral inputs with a maximum available to finance fuel and petroleum products of US$ 17 million. The investment component (US$ 16.6 million including contingencies) as appraised comprised the following five sub-programs: (i) Head Start Program for Agricultural Research and Extension (HARE) (US$ 6.0 million base costs); (ii) Program for Strengthening Agricultural Sector Planning (PASP) (US$ 2.7 million); (iii) Land Policy Research Program (LPRP) (US$ 1.2 million); (iv) Support for Coffee Sub-Sector Management (US$ 1.5 million); and (v) Support for Project Coordination and Monitoring (US$ 2.8 million). Items to be financed under the investment component were mainly renovation and construction of research and office facilities, vehicles and equipment, training and study tours, consultant services for coffee subsector reform, and operating costs for project management. D. Achievement of Project Objectives Overall, the period 1991-1996 saw major reforms in the coffee industry in Uganda. The project contributed to the sector reforms by assisting policy changes to promote private sector entry into the marketing and export of coffee, and to begin the commercialization of the Coffee Marketing Board. This step included the establishment and support of the UCDA to assume industry monitoring and regulatory functions. During this time, significant macro-economic changes to the Ugandan economy also took place that built on the project's coffee industry reforms, and key amongst these were overall market deregulation and the introduction of a free foreign exchange regime. The first stated objective of the project, to ensure financial stability through improved institutional arrangements for the financing of coffee procurement and marketing, was mainly reached by the time of the release of the second tranche in December, 1992. This was achieved by the withdrawal of  3 Bank of Uganda's direct financing of the coffee crop, and was replaced by the involvement of commercial banks, supported firstly by policy measures to ensure real positive interest rates, and secondly by the establishment of a Coffee Subsector Budgeting and Monitoring System and the subsequent adoption of the Coffee Subsector Budget for 1991 and 1992 crop seasons. The project provided foreign exchange resources at a critical time in Uganda's ERP, and contributed to the macro- economic stabilization and adjustment process at that time. Since 1992, further developments in the Uganda coffee industry marketing and export systems, not anticipated at appraisal, have taken place that have had a direct impact on the financing of the crop. Coffee procurement and export is now carried out by three categories of businesses: (i) locally financed, local exporters; (ii) internationally financed local brokers/agents, (iii) internationally financed direct procurers. Vertical integration is now a key characteristic of the industry. By the end of 1996, over 90% of the coffee crop was procured with finance accessed from foreign sources. The second objective, to promote agricultural growth and diversification, is a wide, non-specific objective against which it is difficult to gauge one individual project's impact. For the coffee subsector however, it can be said that this objective has been largely achieved as a result of the project. The coffee subsector has grown from a production level of 2 million bags (60 kg) in 1991/2, with an export value of US$ 121 million to 4.1 million bags in 1995/6, with an export value of US$ 389 million. Farmers' share of the export price (free on truck, Kampala) has risen from 30% in 1991 to over 60% in 1996. Rehabilitation and tree replacement with disease resistant clonal varieties has taken place, and farmers, recognizing the value of the retums possible from coffee particularly now with cash settlements received from private sector traders, are improving production from their coffee gardens. This has been achieved as a result of the marketing reforms and the establishment of UCDA as the industry regulatory body on the marketing side, and the involvement of the private nursery development and extension activities on the production side. ASAC has made a contribution to overall to agricultural growth and diversification, but the mission finds it difficult to quantify the extent to which this is the case. This is particularly so in agricultural research and extension, not specifically focused on the coffee industry. However, the mission recognizes the success of some of the HARE sub-programs (notably the groundnut, simsim and cassava programs) that have resulted in releases to farmers of improved varieties and have contributed to increased agricultural production. The project was the vehicle by which NARO was established to lift the status and capacity for agricultural research, and by which further IDA support to research and extension was prepared and initiated. HARE was the forerunner to the Agricultural Research and Training Project (ARTP Cr 2446), and the Agricultural Extension Project (AEP Cr 2424). The project has assisted in the preparation of the Cotton Sub-Sector Development Project (CSDP Cr 2609) and the proposed Vegetable Oil Development Project (VODP) for IFAD financing. Valuable support was provided to the land debate by building capacity for land research in MISR, and assisting in bringing the research results into the policy discussions leading to the draft Land Bill 1993 and the land law in the Constitution. ASAC has also supported the preparation of further revisions to the land law, now in the form of the draft Land Tenure and Control Bill, 1997. Therefore the project's activities can be considered as part of the process in promoting agricultural growth in these areas. In overall sector planning, the PASP did not proceed and was later canceled. In 1994, sector planning then became the subject of the Agricultural Sector Management Project (ASMP), but this later project was not effective at the time of the ASAC's closing. Therefore ASAC's impact on sectoral planning was negligible.  4 E. Implementation Experience and Results General The Credit was appraised in June, 1990, approved by the Board of IDA in December, 1990 and became effective on 3 January, 1991. The adjustment component and the support for CMBL closed on 30 June, 1995 as planned. After two extensions to the original closing date of 30 June 1995 for other investment components, the Credit finally closed on 31 December, 1996. A total of SDR 68.26 million (US$ 96.9 million) was disbursed and an undisbursed amount of SDR 1.24 million (US$ 1.7 million) was canceled3 . The implementation of the project has generally been satisfactory but was behind the time schedule proposed at appraisal. Whilst effectiveness (and the first tranche release) was on time, the second tranche of the adjustment component, originally expected in October 1991, was released in December, 1992. The technical assistance to advise the PCU in procurement matters started in June, 1991, and so the movement of the project investment components was initially delayed. There were also delays in the satisfaction of the conditions of effectiveness for the HARE component, namely the appointment of the PIU head and Senior Agricultural Services Adviser. As the original closing date of 30 June, 1995 approached, the investment components were modified and the project's closing date extended to 30 September, 1996, to make use of the expected undisbursed funds, arising mainly from the cancellation of the PASP component. The components added were activities not contemplated at appraisal but which were considered to fall under the general thrust of ASAP. The main changes in cost terms were: (i) a nursery development program to be implemented by UCDA at a cost of US$ 1 million; (ii) rehabilitation of the Land Registry (US$ 1.1 million); and (iii) importation of cotton germplasm for multiplication (US$ 1.5 million). Other items included support to business advisory services in connection with the cotton subsector, pre-project activities for VODP, and continuation of the original project activities. A further extension to 31 December, 1996 was approved to assist in the completion of some of these activities. The adjustment component was fully disbursed and was generally satisfactory. The mechanisms needed to be altered to take account of the Government's changing policies towards deregulation in the foreign exchange system. Most of the project's investment related activities have been successfully and fully implemented. The capacity building programs in subsector management, and agricultural and social research were satisfactory, and the nursery development program achieved its targets. But there were exceptions. Firstly, the component for building capacity for sector planning was not implemented. This was mainly due to differing pressures on issues of institutional responsibility for sectoral planning. This could not be resolved and the PASP under ASAC was canceled. Sector planning then became the subject of the IDA- supported ASMP. Secondly, the rehabilitation of the land registry systems was not fully completed. This component was included at the time of the project's extension and the main problems related to preparation and sequencing of the activities to be undertaken in a short time frame to meet the closing Figures correct as at 16 April, 1997 from World Bank intemal disbursement records.  5 date of ASAC. The major part of the canceled credit relates to this item. Further details of the individual components are set out below. The main procedural implementation difficulties were in the areas of release of Government funds for project activities, delays in the withdrawal of funds from the Special Accounts in the Bank of Uganda, and in the Bank's procurement procedures. Even though budgetary provisions for project counterpart funds were made, central budgetary constraints often resulted in reduced allocations being made. This was overcome initially by devising a system to advance funds from the special accounts to meet local costs. In the extension phase, many of those components were in disbursement categories which could be 100% financed. Flows of funds from special accounts improved when they were transferred to commercial banks. Procurement procedures proved to be cumbersome to the implementing and coordinating units, particularly because of delays in establishing letters of credit and clearing goods. There were also difficulties in specifying, within the procurement procedures, a general standard of quality and the local availability of technical support and service for technical equipment, and this has resulted in sub-standard or unserviceable equipment being procured in some cases although it had met the required specification. The project was well designed to address issues in, and to support, the reform process in coffee, and to make a start on the overall sectoral growth strategy in research, extension and planning. The project was complicated with many components being implemented by other agencies and departments, and became more so when the project was extended. Therefore, coordination of project activities, procurement and reporting took on an important function to ensure successful implementation. The structure of the project's management, with the PCU in the Bank of Uganda coordinating PIU's in each agency, was well designed to address this. Adjustment Component Initial implementation progress was slower than expected, particularly with respect to the disbursements under the adjustment component. Whist this was initially due to the disqualification of petroleum imports prior to project effectiveness due to inadequate documentation, other factors impeded disbursement which prompted a redefinition of the eligible imports list and later to a change in disbursement mechanism. Firstly, demand for imported agricultural inputs was far less than that assumed when the quantum of the adjustment component was originally determined. This was due to high interest rates, depreciation of the Ugandan Shilling, and slower than expected growth in the agricultural sector. There was also a general lack of local currency in the banking sector. In addition, donor-financed aid programs supplied large quantities of inputs at subsidized prices. To assist disbursement, the positive list was extended to include items that were not specifically for the agricultural sector (e.g. roofing sheets, bicycles and cement). When the foreign exchange auction system replaced the Open General License and Special Import Program systems, the originally designed mechanisms for disbursement, the Development Credit Agreement was amended (January, 1993) to permit ASAC adjustment funds to be used in the auction for imports subject to the standard negative list that applied to other IDA adjustment credits. At the same time, the amount eligible for petroleum imports was increased. Further changes were necessary to permit these funds to be used for interbank transactions when the auction system was terminated. Following these changes, disbursement was prompt and 100% of the adjustment component was disbursed. SDR 23 million (US$ 32.4 million) was disbursed under the positive list for agricultural inputs, SDR 18.8 million (US$ 26.2 million) for petroleum products and SDR 18.3 million (US$ 26.0 million) for general imports. Therefore, some of the ASAC adjustment component was applied to imported inputs  6 not specifically for the agricultural sector, and it is not possible to determine the extent to which this is the case. Given that the original adjustment amount of US$ 68 million (US$ 85 million less US$ 17 million for petroleum products) was based on an assumed demand for inputs and a level of growth in the agricultural sector, the actual growth in the sector was less than that originally assumed at appraisal. Investment Component Head-Start Program for Agricultural Research and Extension (HARE) HARE was designed to implement high priority research and extension activities. This was to be done through a series of sub-projects which would focus on production constraints and adaptive research to fine-tune technologies, and would then improve their dissemination. In addition, HARE would provide technical assistance, training, studies, vehicles and equipment, and selective rehabilitation and reconstruction of research facilities. The nine sub-projects comprised a package which was expected to be an effective way of achieving the longer-term objective of building a research capacity. The establishment of a semi-autonomous research organization was a condition of the second tranche release. During 1992, the AEP and ARTP came on-stream before the technology dissemination and research sub-projects were completed. The transition from HARE to the new projects was complicated but was eventually achieved through a restructuring of both ASAC and HARE itself, and a new program, including on-farm research and outreach and called "Action Research and Development Program" (ARDP), was implemented by NARO. The APC sub-committee on Research and Extension (SCORE), which was chaired by the Secretary for Research in MAAIF, was responsible for review and approval of the work plans and budgets, setting priorities, approving individual sub-projects, and recruitment of staff. The component was implemented by the PIU in MAAIF. There was a lack of consensus amongst those involved on these institutional arrangements for implementing HARE, and this caused delays in implementation. In the final analysis, HARE achieved its main objectives. It created the institutional framework for research and extension. A National Agricultural Research Strategy and Plan (NARSP) and a National Agricultural Extension Strategy and Plan (NAESP), supported respectively by ARTP and AEP, were developed. NARO was established as an autonomous research organization, while the Unified Extension Service was established within MAAIF. The progress of sub-projects was largely satisfactory. Notable successes were recorded in cassava, sweet and Irish potato, cotton, groundnuts and beans where ground- level production impacts were achieved. Agricultural Sector Planning PASP was conceived at a time when there were several other initiatives to strengthen sectoral planning in different ministries responsible for agricultural development. This component was the subject of strong and unresolved sectoral interests which prevented it from moving forward. PASP subsequently underwent a number of revisions in response to institutional changes and the restructuring of key ministries, with the last revision undertaken in September 1993. The overall component objectives, however, remained valid and unchanged. PASP was declared non-core by Government in fiscal year 1993/94, following which the component was canceled in March 1994. While the main program was not implemented, the relevant concerned ministries received vehicles, equipment and some overseas training. Sector planning is to be addressed under ASMP.  7 Land Policy Research and Legislation In conjunction with USAID's involvement in MISR, ASAC's support has been successful in rehabilitating its physical facilities and building its capacity to move forward into an operational phase in which MISR will be able to compete for Government and donor-financed research programs. The image and stature of MISR has been raised, and its status within the University is now semi-autonomous, an important factor for it to be able to set conditions of service to retain the staff trained overseas under ASAC. The research findings on land issues have been an important input to the discussions in the Constituent Assembly, and into the draft land legislation. ASAC helped this process by financing seminars and workshops to build the link between the research and policy formulation. The quality of workmanship in the civil works contract, and delays in procurement were the main implementation problems. The delays in procuring the library equipment were such that it could not be completed before the closing date of the project. Only part of the equipment requirement was procured, and this has resulted in the library being only partially operational. Coffee Sub-Sector Management The project's activities in this area were originally designed to support the organizational, financial and institutional restructuring of the CMB and the Cooperative Unions, and the transfer of CMB's regulatory function to an autonomous authority. ASAC financed many important studies covering the coffee subsector that have guided the reform process. Following an initial study to recommended the design of UCDA, ASAC assisted in joint Government of Uganda/World Bank subsector reviews in 1993 and 1995 that were central to guiding policy and resolving issues. The project provided equipment to UCDA, particularly communication and information systems, that have proved to be vital in obtaining, analyzing and distributing daily international coffee market information. The commercialization of CMBL was crucial to its continuation as a competitor. The project's support to CMBL was in the areas of financial management and information systems, and these have made a valuable contribution to the commercialization of CMBL. The project specified financial restructuring measures for CMBL to be taken by the Government as conditions under the Credit. However, the commercialization process was not all-encompassing as CMBL remained constrained by cumbersome decision making between the management, board and the Ministry of Trade and Industry, by the cost of necessary maintenance of non-productive assets, and the inability of the management to rapidly restructure its staff due to trade union involvement. CMBL could not have competed fully with newly-licensed private sector exporters unless there was a complete change of management will, both internally and externally, for it to assume a new identity as an efficient market trader. Its market share has fallen over the years to about to 4% although its main processing facility in Kampala is currently about 40% utilized on a contract basis. The responsibility for the restructuring of the Unions remained with the Unions themselves, with advice to be provided from a Cooperatives Finance Specialist under ASAC. This technical assistance was not provided and the project's support to the Unions in the change process has been negligible. The Unions initially handled 10% of the market at the beginning of the reform process but by 1996, Union Export Services (UNEX), established to export coffee for the Unions, handled about 1%.  8 Project Coordination and Monitoring Government assigned the responsibility of overseeing the implementation and monitoring of ASAC to APC. A Project Coordination Unit (PCU) was established in the then Agricultural Secretariat (AGSEC) to manage the implementation process. This included coordination of the activities of the various Project Implementation Unit (PIUs) which were established in the relevant ministries, overall planning of procurement, financial management and control. The Project Coordinator, Financial Advisor, Procurement Specialist, Accountant and Disbursement Officer formed the core of the PCU. Since AGSEC had the responsibility to implement the ASAP, and the Project coordinator was the Director of AGSEC, the PCU was in fact AGSEC. Technical assistance was provided by ASAC under a Trust Fund arrangement between IDA and FAO and vehicles, equipment and training were financed. The APC established five sub-committees to facilitate policy decisions, and to link and interface more closely with the technical ministries and departments of government responsible for the different subcomponents of the project. The five sub-committees were: (i) sub-committee on Agricultural Research and Extension (SCORE) responsible for HARE; (ii) Land Policy Research (LPRC) for land policy reforms; (iii) Coffee Subsector management (CSC) for coffee reforms; (iv) agricultural inputs for the adjustment component (inputs only); and (v) procurement. Apart from the Procurement Committee which was chaired by the Director AGSEC/Project Coordinator, the other sub-committees were chaired by the relevant Permanent Secretaries to which the responsibility for the subcomponents fell. The structure thus established for the implementation of ASAC is considered to have been satisfactory. Overall financial management was satisfactory. The PCU/AGSEC facilitated implementation of policy reforms under ASAC. The project helped build capacity to undertake key studies to support policy analysis and formulations. The most notable contributions were the regular studies on cost of production and marketing, and analysis of comparative advantage of Uganda agricultural commodities. These studies established the foundation and data base for much of the analysis of coffee pricing, taxation and financing, and indeed in other sectors. Other Activities under Extended ASAC The following activities were included when ASAC was restructured and the project's closing date was extended: UCDA Nursery Program: The nursery program has successfully established 370 robusta and 70 arabica clonal nurseries, providing about 3 million seedings for replacing old bushes and, in the case of robustas, replacing wilt-affected bushes with disease tolerant seedlings. ASAC supported this program by financing basic inputs for the establishment of the nurseries to be operated by private farmers. Rehabilitation of Land Registry/Land Administration Systems: The strategy for land administration systems had to be in accordance with the land legislation and the Government's decentralization path, and ASAC financed an external study to determine the details of recommendations on new land information systems. The results of this study were not known by the time of the project's closing4. However, there was a recognized need to at least halt the deterioration of the central land records. The 4Consultanfs report received April, 1997.  9 original proposal considered at the time of ASAC's extension involved a civil works component to renovate office space to house the required equipment. IDA agreed to finance a modified proposal, with the civil works component requiring to be financed through Government funds. Due to non-availability of funds for this purpose, the civil works did not proceed and MLHPP decided not to proceed with the equipment procurement. Cotton Sub-Sector: ASAC financed the import and distribution of cotton seed for the 1994/95 planting season for seed multiplication, and provided business advisory services for the financial management and restructuring of institutions in the cotton subsector. COREC: ASAC supported the establishment of the Coffee Research Centre, formed by upgrading the coffee research program to the status of an institute under NARO, on the site of the coffee, cocoa, tea and palm oil research station in Mukono district. COREC is expected to play an important role in the research and monitoring of tracheomycosis, and testing and disseminating preventative strategies. VODP: ASAC supported some pre-project activities (e.g. soil surveys) but the proposed import of oil palm seedlings was not undertaken. F. Impact on Coffee Subsector The project set fundamental subsector marketing reforms as conditions for release of the adjustm'nt component, but the reforms actually introduced were far deeper than those specified. Under ASAC, it was envisaged that the liberalization of export marketing would be limited to the issuing of export licenses to selected cooperative unions and two private sector exporters, with CMB being restructured to operate commercially. The pricing and taxation mechanisms were to be replaced by a revised pricing and grading structure to maximize quality and sales value, and to implement a new taxation system to increase trade incentives. Government actions went further than this and by May, 1992, the export marketing of coffee had become fully liberalized. There were 11 export licenses issued, the system of administered prices and taxes had been removed, CMB had become CMBL although not fully operationally restructured, and the industry regulatory function had been taken up by the Coffee Monitoring Unit (CMU) which later formally became UCDA. All export sales were through public tenders and the private sector was dealing with 25% of coffee exports. The development cess was being collected and the financing of the crop was being handled totally through commercial banks. During 1992, further reforms were introduced. Coffee proceeds were permitted to be exchanged at the Bureau exchange rate, the export tax was replaced by a processor withholding tax and minimum floor price for coffee was introduced. From the end of 1993, full retention of export proceeds were permitted. A Coffee Stabilization Tax was introduced in the 1994/5 budget intended to stabilize the currency during the coffee boom of that time, but was discontinued in 1996. The continuation of subsector reforms then became conditions of the IDA Structural Adjustment Credit II (SAC II) in 1994 and included actions on the removal of the floor price, and the restructuring of UCDA. The export registration of coffee traders reached a peak of over 150 in number in 1994/95 and was more an over-reaction to liberalization. Many of the new licensed traders dealt in low volumes for a short period of time or were inexperienced in dealing in a sophisticated international market, thus  10 suffering financial losses. During this time, the industry experienced a setback in its international reputation due to exports of low quality coffee by some exporters. This issue was subsequently addressed by UCDA and the then Uganda Coffee Exporters Association, forerunner to the UCTF, by the enforcement of quality standards and a code of conduct of trade. By the close of the project, the active licensed exporters numbered 42, with 10 major traders exporting 66% of the coffee crop. Internal marketing of coffee has changed drastically since 1991. Previously, farmers sold coffee to primary cooperative societies or domestic traders for primary processing and onward transfer, reprocessing and grading by CMB through the cooperative unions. Now, in addition to the CMBL central processing facility, 14 private final processing plants are operational, as well as 30 Cooperative Union and over 300 private hulling facilities. Vertical integration is now a wide-spread characteristic of Ugandan coffee marketing. Much of the processing, both hulling and processing/grading in the CMBL facility, is undertaken on a contract basis as opposed to purchase and resale of processed coffee amongst domestic traders. Some 90% of the coffee crop is now procured through village-based agents on behalf of the exporters who are representatives of either international traders or roasters. G. Institutional Performance Borrower Performance The performance of the Borrower, through its movement on policy and key actions required for project implementation, has been satisfactory. Compliance with covenants under the DCA have been satisfactory with the exception of the late compliance with the requirement to provide audited accounts of CMBL. The audited accounts for 1993/4 onwards have not been provided to IDA. The shortage of Government's funds for project activities has been mentioned above. The PCU has provided the Borrower's contribution to the ICR to the mission. World Bank Performance Supervision of the project, both from the Resident Mission and Washington, was considered satisfactory. Nine full supervision missions were undertaken, and additional specific supervision of the HARE and Land Tenure Research programs were also carried out. Management was responsive to requests from the Government for modifications to procedure and component design, in keeping with the overall thrust of the ASAP, as circumstances changed. Difficulties were encountered in resolving procedural issues, mainly relating to procurement, due to problems in communication with Washington. Through country implementation reviews (CIRs), much was accomplished in trying to harmonize the different systems of IDA and Government. H. Project Sustainability The sustainability of many of the organizations and institutions that ASAC helped to build is promising. CMBL is now under the final stages of privatization with a rebidding process due to conclude by June, 1997. This will put CMBL on a footing to be able to operate competitively and commercially in  II the coffee industry. UCDA has an assured budget derived from the export cess on coffee, and these funds will continue to support research and development in the industry, both in marketing and quality, and in production renewal and expansion. MISR will continue to be supported through a combination of Government funds and special projects, collaborative research funds and other donor supported programs, and will continue its collaboration with the Land Tenure Centre, Wisconsin. The lands information systems study, now under consideration, will set out a plan of activities and investments, the source of financing for which has not yet been identified. NARO has developed a prioritized research program, and has established a research network consisting of nine institutes, each having a set of disciplines and geographical mandate. NARO is benefiting under the ARTP and will continue to be supported through a combination of Government and donor funds. Presently, over 90% of the NARO budget is funded through externally funded projects. Government budget is small but rising, from less than 0.1% of agricultural gross domestic product (AGDP) at the beginning of the project to between 0.4-0.5% of AGDP in 1996/97. AGSEC was transferred from the Bank of Uganda to the Ministry of Finance and Economic Planning in August, 1995 and, following that Ministry's restructuring, is now under the Ministry of Planning and Economic Development. Now known as the Agricultural Policy Secretariate (APSEC), it will continue to provide advice to the Agricultural Policy Committee, and is the coordination unit for the CSDP. The funding of APSEC is provided from the CSDP until the end of 1999. After that time, the Government will need to provide for financial support to APC and APSEC in the regular budget. I. Future Operations Coffee Industry Against the positive aspects of the industry reforms and the current status of the industry, some negative aspects have also arisen that have implications for the future. These relate mainly to concerns from industry regulators on the impact of the emergence of a vertically integrated industry in which a small number of large coffee traders control about 90% of the trade, with much of the financing for the crop being sourced outside Uganda. Firstly, this vertical integration has brought about a marketing system where coffee is not always transacted at arms length at the point of export, and therefore issues concerning transfer pricing at the point of export are relevant. Where no arms length transaction takes place, transfer prices determine corporate taxation and cess ultimately being levied in Uganda. There is also concern that foreign exchange is being lost to Uganda due to under-reporting of export value of coffee. On the other hand, vertical integration has bought about improvement in efficiencies in the marketing systems and higher prices at the farm level, and the collection, processing, grading, storage and transport are all economic activities carried out domestically. This is a complex issue and a detailed study needs to be carried out into the impact of various options on the economic and fiscal costs and benefits, and on future expansion and investment, keeping in mind that this is an issue that is not restricted to the coffee industry only. Following this, a position and options paper could be considered by the APC. Secondly, the fact that coffee procurement is about 90% pre-financed from offshore sources is giving rise to the concern that, if external circumstances were to change and this finance were not available, the industry would face a financing crisis that the domestic financial systems could not handle.  12 Also, there are a large number of locally based exporters handling between 20% and 25% of exports for whom financing remains a constraint to their businesses. ASAC has supported an initial study into warehouse receipt systems, and work is being continued by the Common Fund for Commodities to examine options in this area. Research and Extension ASAC initiated the establishment of NARO as an autonomous agricultural research institution, and conceptually HARE was designed to incorporate both research and extension activities. The successor projects to HARE are separate projects in research and extension, and the need for cooperation and collaboration between the institutions involved to ensure that the research-extension link is strengthened cannot be understated. Further, two factors are currently having an impact on the delivery of extension services. Firstly, the retrenchment of staff as a result of the Civil Service Reforms has significantly reduced the number of extension staff and, as a result, effectiveness of outreach has been reduced. Secondly, the decentralization of the extension service to the districts, where the District Administrations may not regard agriculture as a priority in their allocation of funds, has threatened the funding and therefore sustainability of the service. J. Main Lessons Learned The key lessons learned from the project were as follows: * It is useful to set quantitative targets at the design stage for project objectives to permit a more objective assessment of achievement to be made; * Where a large component ( in this case Land Registry Rehabilitation) is to be added at the end of a project, it is important that it is as thoroughly prepared and appraised as if it were included at inception, and that it can be fully completed under the resources and time frame of the remaining project's life; * The survival of CMBL was necessary to avoid a total collapse in the industry at the time of deregulation, and this was reflected in the project's design. When market reforms are being introduced, it is important that there is a phased entry of private sector participation; * Whilst the project did require financial restructuring under its conditions of effectiveness, CMBL would have fared better if it had undergone a complete commercial restructuring at its inception, and this is now being undertaken in the lead up to privatization; * Capacity building and the leaming process in procurement is critical for smooth implementation and takes time. Centralizing procurement for a multi-agency implemented project helped in this area. * Procurement procedures which do not accommodate specifications on general quality and post- sale back-up can lead to unserviceable equipment being procured. * Effecting substantial policy reforms requires a strong and effective mechanism to coordinate policy issues affecting several sectors.  13 K. Items Outstanding AGSEC has agreed to provide the mission with details of the final costs of the components, the studies undertaken under the project and the training programs achieved. The audited accounts of CMBL from 1994/5 onwards remain outstanding. L. Follow-up On return to Rome, the mission will prepare a draft ICR to be forwarded to IDA by mid-May, 1997. Kampala, 6th May, 1997.  Appendix B - Borrower's Contribution AGRICULTURAL POLICY SECRETARIAT (APSEC) THE AGRICULTURAL SECTOR ADJUSTMENT CREDIT (ASAC) IMPLEMENTATION COMPLETION REPORT 1. OBJECTIVES AND MAIN FEATURES 1.1 ASAC which became effective on January 3, 1991, was a broad-based agricultural project aimed at enhancing the agricultural Sector's supply response under the GOU Economic Recovery Program. The project was also to complement IDA assistance under the Economic Recovery Program by financing the importation of agricultural inputs, including petroleum products, by alleviating balance of payments constraints and support to Government's implementation of the Agricultural Policy Agenda. Under the agenda there was also a program for Coffee Subsector reforms, emphasizing institutional and crop finance reforms. The project therefore was a hybrid consisting of a sector adjustment component and a complementary investment component. 1.2 The adjustment component and the support for CMBL closed on June 30, 1995 as planned. After two extensions to the original closing date of 30th June, 1995 for other investment components, the Credit finally closed on December 31, 1996. 2. THE ADJUSTMENT COMPONENT 2.2 This was supported by quick - disbursing funds equivalent to US$ 85 million for importation of essential sector inputs including petroleum products, as part of the adjustment and stabilization objectives. 2.3 The funds were to be disbursed in two tranches, with the first tranche amounting to US$ 50 million. Total disbursements related to the importation of petroleum and petroleum products were be subject to a ceiling of 20% (US$ 17m). 2.4 The quick disbursing part of the credit financed 100% of the CIF costs of eligible goods according to a positive list approved by GOU and IDA. Contracts for goods to be imported, each estimated to cost US$ 2 million or more were awarded following simplified ICB procedures. Imports of smaller quantities by Government institutions required the use of procurement procedures of the purchasing institutions involving three price quotations. For private importers, the procedure required quotations from eligible suppliers from at least two countries. 2.5 The allocated funds did not move as quickly as was expected except in the case of petroleum imports, partly because the agricultural inputs as per the list had limited demand in the country while the procurement procedures were cumbersome to the private importers including tedious L/C procedures. The banking sector also lacked adequate local shilling cover to purchase the foreign exchange. To partly address the issue of demand, the positive list was in 1993 expanded to include bicycles, motorcycles, cement and iron sheets.  2 2.6 Starting from 1993, IDA approved auctioning of the funds as part of a pool in the weekly sales at Bank of Uganda (BOU). The auction system involving bidding for the funds by commercial banks on behalf of their identified clients did not significantly increase the demand as the basic constraints continued to exist. This situation continued in 1994 when the banks were expected to bid for the funds for retail to their clients. 2.7 During 1994/95, the method for accessing foreign exchange for imports changed due to the liberalization of the market. The present system, also applicable to the credit funds under the extended period, involves reimbursements by the donors based on SOE of imports compiled from customs returns. This has quickened the accessing of funds. 3. INVESTMENT COMPONENT 3.7 The Investment Component consisted of five programs as follows: (a) Headstart program for Agricultural Research and Extension (HARE) to implement high priority adaptive research and extension activities, through a series of sub-projects. (b) Program for Strengthening of Agricultural Sector Planning (PASP) to improve the efficiency of project implementation, policy reform implementation and project preparation and appraisal. (c) Land Policy Research Program (LPRP) to complement on-going USAID - financed efforts to enhance the capacity of the Makerere Institute for Social Research (MISR) for sustained applied research in land access and policy development. (d) Support for Coffee Sub-Sector Management (CSM) to assist the Coffee Marketing Board (CMB) in implementing its restructuring program and the Government in the detailed design of subsector policy reforms. (e) Support for Project Coordination and Monitoring, to include the PPF and operations of the Project Coordination Unit (PCU) and support to the Agricultural Policy Committee's oversight function. 3.8 The PASP program in (b) above was canceled in 1992 in favour of a larger Agricultural Sector Management Project (ASMP) to be designed later. 3.9 The rest of the programs under the Investment Component progressed well as discussed below. Head-Start Program for Agricultural Research and Extension (HARE) 3.10 The program, managed through a Project Implementing Unit (PIU) headed by a Director, had nine key priority areas including technology dissemination through improved extension, improving production and utilization of forest plantations, strengthening cotton research and production, fish culture research and extension, groundnut and simsim research and development, agro-forestry research and extension and on-farm grain storage. 3.11 HARE laid the foundation for formulation of agricultural Research and Training Project (ARTP) which resulted in the establishment of the National Agricultural Research Organization (NARO) in 1993 and the Agricultural Extension Program (AEP) which introduced the Unified Extension System (UES).  3 HARE further paved the way for preparing and implementing an Action Research Program which aimed at transferring the research results and technological packages from existing research stations to farmers. 3.12 The support for the extension services under ASAC ended in 1995 following the AEP Program. AEP 11 is now under preparation for further support by IDA. Agricultural research is a high priority area for Government funding and NARO has continued to receive support from GOU and donors. The organization is concentrating on high priority research to generate affordable technologies which are demand driven. Current Government policy is to promote private sector participation in agricultural research. Land Policy Research Program (LPRP) 3.13 The LPRP had three main subcomponents, namely, Land Policy Research directed at land tenure and land resource use; staff training and development; and physical rehabilitation of MISR facilities. 3.14 Research was conducted in the area of land reform policy culminating in production of a report on Land Tenure Law Reform in April, 1993, including a draft on the Tenure and Control of Land Bill. The Bill was presented to Cabinet for review but because of the 1995 constitution making process, the debate on the draft bill was postponed to await the new constitution. 3.15 The Draft Bill has since been revised with support from ASAC, by a Task Force to take account of provisions in the new constitution and the 1997 Bill has been presented to Government and will be debated by Parliament in the current session. 3.16 MISR has also carried out studies on Land Markets and Compensation, Common Property Resources and Land Tenure, Land Disputes and Settlements and Buffer Zones. The Project has also undertaken rehabilitation of MISR offices and staff flats, provision of vehicles and office equipment, and training of staff. 3.17 MISR is a research institute of Makerere University and carries out wide ranging research on social and economic issues. It is expected to do this mainly on cost recovery basis. The capacity building provided under ASAC has enhanced MISR's capacity to carry out its mandate. Support to Coffee Sub sector Management (CSM) 3.18 The Coffee Sub Sector reforms and market liberalization program was launched by the Government of Uganda in 1990. Under ASAC, Coffee Sub sector reforms were given the highest priority because of the compatibility of sector's objectives and performance with macro-economic objectives of maximizing the export earnings, to minimize balance of payments problems, increasing Government revenue and controlling inflation. 3.19 In 1992 the Uganda Coffee Development Authority (UCDA) was established as the regulatory body for the subsector. UCDA with support of ASAC launched a program to propagate and promote new high yielding variety of robusta clonal coffee. The program involved the privatization of the Government-owned clonal coffee nurseries and encouraging and supporting the private sector to increase the supply of planting materials. 3.20 Following the repeal of the Coffee Marketing Board Act of 1969, the CMB ceased to exist legally and a Government Company "Coffee Marketing Board Limited" (CMBL) was floated in 1991 and took over the marketing functions of CMB. Under the project, Government provided adequate funds  4 to the new company which improved the liquidity position of the company significantly and reduced its dependence on short term borrowed funds. CMBL was also provided with Technical Assistance (TA) for a period of two years. 3.21 The CMBL played a crucial role in the initial years of the liberalization when the private sector did not have adequate experience in coffee export. The share of CMBL in coffee export marketing has steadily declined and is presently about 4%. The company is now set for privatization initially by selling majority shares to a core investor and later divesting all Government shares. 3.22 Some of the key achievements of the program are: a. Farmers are now paid promptly and their share in realized export prices has improved from 30% to about 60%. b. The past trend of neglecting coffee trees has been largely reversed and exports have risen from about 2.2 million to over 4.0 million bags during 1995/96. c. Efficiency and cost effectiveness at all levels of the coffee marketing chain has improved. d. Competitiveness of the coffee sub sector has greatly improved. Support for Project Coordination and Monitoring 3.23 A project Coordination Unit (PCU), was established in Agricultural Secretariat (AGSEC) for planning, procurement, financial management and control and coordination of all components of the Credit. In this regard, a document setting out "Guidelines of Financial Management and Internal Controls" was prepared and approved by APC and IDA. 3.24 The Management of ASAC, like other IDA assisted programs, was constrained because of the delays in the release of counterpart funds by Government, cumbersome approval procedures for procurement of consulting services and goods, the indefinite delays in reimbursements and withdrawal of funds from the Special Account which was maintained by the Bank of Uganda. Most of these problems were however overcome in the early stages of the project when GOU and IDA reached agreement involving: a. A system to effectively utilize the funds in the Special Accounts was developed to meet the IDA share in local cost, thus reducing the pressure on counterpart funds demand whose timely availability was always an issue because of Government budgetary constraints. c. Both the special and local accounts of the project were transferred from BOU to Commercial banks to speed up disbursements. 3.25 Throughout the life of the project, ASAC accounts were regularly audited, and reports submitted to GOU and IDA. Similarly regular accountability statements were submitted to Government for the Counterpart funds. Progress reports were submitted to Government and IDA at regular intervals. Special reports were also submitted as and when required by APC and IDA.  5 3.26 Agricultural Secretariat (AGSEC) now Agricultural Policy Secretariat) (APSEC) which was originally a department of BOU has been transferred to Ministry of Planning and Economic Development (MPED) as a semi-autonomous body, but with the same mandate as a Secretariat to the APC. The operations of the department are to be funded under CSDP following the closure of ASAC in December, 1996. Starting 1998/99 from, it is envisaged its operations will be funded under the proposed ASMP. 4. ASAC EXTENDED PROGRAM 4.26 In order to allow the completion of some of the programs under ASAC and to fully utilize the savings resulting from the PASP program which had earlier been canceled, ASAC was extended three times from the original closing date of June, 1995 to June, 1996, and then December, 1996. The key activities in question under the extended period were as follows: Agricultural Research Coffee Nursery Program (UCDA) Land Registry (MLHUD) Warehouse Receipt System Importation of Agricultural Inputs Support to APSEC Credit Study (Rapid Appraisal) Business Advisory Services (BAS) Support to Uganda Coffee Trade Federation (UCTF) Capacity Building Study for Rural Finance MISR Establishment of Coffee Research Centre (COREC) Refurbishing of APSEC offices Support to the preparation of the Vegetable Oil Development Project (VODP) 4.27 Most of the activities were therefore a continuation of original Credit programs and/ or activities required to complete the restructuring/process in the concerned organizations subsectors. New areas included the following:  6 Business Advisory Services (BAS) 4.28 The Restructuring of the Cotton Sub-Sector started at the end of 1993 with the Debt Relief program to cooperative unions, well before the CSDP. These activities were funded under ASAC up to its closure. Land Registry Development 4.29 The Land Registry program is a product of the land policy studies under the MISR program. The program was intended as precursor to the implementation of the expected law arising from the studies and to stop further deterioration of the condition of the existing land records and registers and to establish a modern computerized Land Information System. Support was in form of consultancy for the initial computerization of the Land Registry and consultancy for the comprehensive development of the Land Registry and the procurement of computer hardware and software as well as technical and office consumables. The said procurement of computer equipment was however, never undertaken largely because of delays in finalization of the procurement list. 5. KEY ISSUES AND LESSONS Coordination 5.1 The Agricultural Sector Adjustment Credit (ASAC) was a complex project involving many agencies in its implementation as well as targeting reforms in key subsectors. Resistance in the implementation of some of the reforms was experienced. This problem, together with the multi- institutional nature of the project, were overcome by working through the APC system which provided an appropriate forum for discussion of implementation and policy issues and consensus building. Disbursements 5.2 The need for efficiency in disbursements of ASAC funds and other IDA projects brought about a policy change by transferring the project special and local accounts from BOU to commercial banks, a step which has greatly improved the disbursement process. It also brought about the system of accessing IDA funds to meet one month's IDA share in local cost, a measure which has reduced over dependence on counterpart funds which are often not so timely. 5.3 The flow of funds from PCU through the PIUs to the end users scattered around the country, especially under HARE was affected by untimely accountability. Access to the Adjustment Funds 5.4 The modalities of accessing funds under this component evolved over the period of the Credit. Originally individual importers had to apply for the funds through their commercial banks. Later on the banks were expected to apply and thereafter retail the funds to their clients. And later on reimbursements were based on returns from commercial banks for qualifying items financed by the banks. Currently reimbursements are based on returns from Customs Department. Each of these was associated with varying degrees of difficulties to access the funds. The present system appears to be more effectively addressing the quick disbursing objective of the funds.  7 Activities Under the Extended Period 5.5 During the extended period of the project the re-allocation of project funds facilitated the addressing of policy issues arising from the reforms/studies. Procurement 5.6 In some cases, items to be procured were of a highly technical nature and compilation of procurement lists with appropriate specifications was slow. 5.7 The securing of Tax Credit Notes (TCNs) introduced during the project period was sometimes cumbersome. 5.8 IDA and Government procurement procedures were sometimes a source of delay. Reporting 5.9 Because of the centralized nature of the project under APC, reporting worked well.   IMAGING Report No.: 16821 Type: ICR