Uganda - Forestry Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16764 PERFORMANCE AUDIT REPORT UGANDA FORESTRY REHABILITATION PROJECT (CREDIT 1824-UG) June 24, 1997 Operations Evaluation Department 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 (annual averages) Currency Unit = Uganda Shilling (Ush) 1988 US$1.00 298.7 1989 US$1.00 639.0 1990 US$1.00 1092.9 1991 US$1.00 1872.1 1992 US$1.00 2,132.2 Abbreviations and Acronyms BOU Bank of Uganda CARE Cooperative Assistance and Relief Everywhere CTB Central Tender Board DANIDA Danish International Development Agency ERR Economic rate of return EU European Union FAO Food and Agriculture Organization of the United Nations FD Forestry Department FR Forest Reserve ICR Implemenation Completion Report IDA International Development Association KGR Kibale Game Reserve LTC Land Tenure Center MIS Management information system MOHUD Ministry of Housing and Urban Development NGO Nongovernmental organization NORAD Norwegian Development Agency OED Operations Evaluation Department PAR Performance Audit Report PPF Project Preparation Facility SAR Staff Appraisal Report TA Technical assistance UNDP United Nations Development Programme Fiscal Year: July 1-June 30 Director-General, Operations Evaluation : Mr. Robert Picciotto Director, Operations Evaluation Department Mr. Roger Slade for Ms. Elizabeth McAllister Division Chief, Agriculture and Human Development Mr. Roger Slade Task Manager : Mr. Christopher Gibbs FOR OFFICIAL USE ONLY The World Bank Washington, D.C. 20433 US A. June 24, 1997 Office of the Director-General Operations Evaluation MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT Subject: Performance Audit Report on Uganda Forestry Rehabilitation Project (Credit 1824-UG) Attached is the Performance Audit Report for the Uganda Forestry Rehabilitation project, prepared by the Operations Evaluation Department (OED). The project was supported by Credit 1824- UG for SDR 10 million (US$13.0 million equivalent), approved in FY88. The credit was fully disbursed and closed on schedule in December 1994. A total of US$ 16.73 million equivalent was provided in additional financing by the European Commission, DANIDA, UNDP, NORAD, and CARE, a nongovernmental organization in support of specific project components. The main objectives of the project were to: increase wood production for the rural and urban populations; manage and conserve natural forests for sustained production of timber and charcoal; expand and increase the productivity of private softwood plantations; and strengthen the Forestry Department (FD). To achieve these objectives, the project included specific components for peri-urban plantations and pilot wood farms; farm forestry; natural forest rehabilitation; softwood plantation rehabilitation; strengthening of the FD; and training. With the exception of the peri-urban plantations and pilot wood farms, the project failed to achieve its objectives. The peri-urban plantations and pilot wood farms successfully employed private firms to afforest public forest reserves. This component received valuable financial and technical assistance from NORAD, unanticipated at appraisal and sustained since the project closed. Farm forestry was built on inadequately tested foundations-a one-year pilot program supported by CARE. The project attempted to expand CARE's model too rapidly under the auspices of the FD, which proved unable to do so. This component also suffered because DANIDA withdrew its financial support when the FD's financial management was judged to be inadequate. The rehabilitation of natural forests was hampered by delays in inventory work and the procurement of vehicles and equipment. Ultimately, planned civil works were completed and the FD improved its control over the forest estate, but no final management plans were produced, little was done to improve logging, and charcoal production was suspended. The rehabilitation of softwood plantations performed poorly. Private sawmillers had neither the equipment nor the market incentive to harvest mature plantations, and new plantings were adversely affected by the use of poor seed. Rehabilitation of the FD was built around a large technical assistance component, and provision of vehicles, equipment, civil works, and training. Technical assistance largely failed because the firm chosen to implement it lacked relevant experience and proved ineffective. Delays occurred in the procurement of vehicles and equipment-the first deliveries came after three years-and in the completion of civil works. Training, 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. 2 funded by UNDP and executed by FAO, went well. But because training was undertaken before the training facility was completed, costs were higher than expected and the total amount of training carried out fell below expectations. The Implementation Completion Report (ICR) for Credit 1824-UG rates project outcome as satisfactory, institutional development as substantial, sustainability as likely, and Bank performance as satisfactory. OED disagreed with these ratings when the ICR was reviewed. The audit confirms OED's ratings of outcome as unsatisfactory, institutional development impact as modest, and sustainability as unlikely. The overall economic rate of return is reestimated to be 3 percent, down from the rate of 15 percent estimated at appraisal. The audit rates Bank performance as unsatisfactory. The underlying causes of these results were weaknesses during preparation and implementation. The greatest weakness was during preparation. The appraised project was too large and complex, and poorly sequenced for conditions in Uganda at that time. The Bank's review process during preparation failed. Reviewers faulted the project's size and complexity, but were not heeded. Economic analysis at appraisal was partial. The cost of evicting encroachers from the natural forest was excluded from the analysis. During implementation, the Bank should have objected to the firm chosen to manage technical assistance: the Bank rated the firm selected as the weakest of the four under consideration. Because the project was financed from several sources, it lacked coordinated oversight and the several components went their separate ways: the FD's operations became, and remain, disjointed. Attention should be drawn to the eviction of encroachers from the natural forest. The project supported the reestablishment of the national forest boundary and it was known during project preparation that encroachers would be evicted once the forest boundary was redemarcated. During preparation, the Bank assumed that it could support the project without becoming involved in resettlement. But evictions were carried out, largely as a result of the natural forest rehabilitation component, financed by the European Community, and the policy of government which was known. Most evictions were carried out with few problems, but hardship resulted for those who were forcibly evicted. After the evictions, the government provided a relief and resettlement program for the people affected, supported by OXFAM. The Bank offered to assist government in this, but no assistance was requested. The Bank subsequently helped the government establish its resettlement policies. The lessons of this project are that: (a) complex projects requiring high levels of coordination are especially inappropriate for countries recovering from periods of civil strife with weakened administrations; (b) the Bank's peer review process followed during project preparation must be vigorously applied and respected; (c) small-scale pilot actions to test new approaches to resource management may need to be tested and refined for several years before being scaled-up; and (d) the Bank must systematically and sensitively apply its policy on resettlement. Attachment Contents Ratings and Responsibilities................................................................................................. 3 Preface .......................................................................................................................................... 5 1. Introduction ........................................................................................................................... 7 2. Objectives and Design ........................................................................................................ 8 3. Im plem entation ................................................................................................................ 10 Forestry Department Rehabilitation.............................. 10 Peri-Urban Plantations and Pilot Wood Farms ................. ......... 11 Farm Forestry ...................................................... 11 Natural Forest Management and Rehabilitation......................... 12 Encroachment .......................................... ...... 13 Rehabilitation of Softwood Plantations............................... 14 Training ..................................................... 14 4. O utcom e ............................................................................................................................... 15 The Economic Rate of Return ............................... ......15 5. Findings and Issues .............................................................................................................. 17 6. Lessons and Strategy for the Future.............................................................................18 Lessons ................................................ .....18 Future Strategy ......................... .................18 Annexes A . Basic D ata Sheets ................................................................................................................ 21 B . T ables ................................................................................................................................... 25 1. Table 1: Key Indicators of Project Implementation ........... ..........25 2. Table 2: Forest Department Staff Position .....................27 3. Table 3: Economic Analysis-Summary Table..........................28 C. Borrower Com m ents ..................................................................................................... 31 D. DANIDA's Com ments.................................................................................................... 35 This report was prepared by Christopher Gibbs (Task Manager) and Frank Thornley (Consultant) who audited the project in October, 1996. Emily Chalmers provided editorial assistance, and Scott Dineen and Carla Sarmiento provided administrative support.  3 Principal Ratings ICR Audit Outcome Satisfactory Unsatisfactory Sustainability Likely Unlikely Institutional Impact Substantial Modest Borrower Performance Unsatisfactory Bank Performance Satisfactory Unsatisfactory Key Staff Responsible Task Manager Division Chief Director Appraisal M.A. Bromhead M. A. Hussain C. Madavo Midterm C. Keil J. Shivakumar F. Colaco Completion P. Ryan S. Ganguly J. Adams  5 Preface This is the Performance Audit Report (PAR) for the Uganda Forestry Rehabilitation project, for which Credit 1824-UG, in the amount of SDR 10 million (US$13 million equivalent) was approved in July 1987. The fully disbursed credit closed on schedule in December 1994. The PAR is based on the Implementation Completion Report (ICR) prepared by the FAO/World Bank Cooperative Programme for the Africa Regional Office, on the Staff Appraisal Report, President's Report, and the legal documents, on study of the project files, supervision reports and project documents, and the findings of an OED mission. The mission visited Uganda in October 1996 and met with officials of the Government of Uganda, the implementing agency, cofinanciers and people affected by the project. The collaboration of these officials and other persons is gratefully acknowledged. The draft PAR was sent to the government and cofinanciers for comment. The comments received from the Uganda Ministry of Natural Resources are reproduced as Annex C. All the comments received from government have been responded to in the text. Comments from DANIDA, a cofinancier, are attached as Annex D. T 7 1. Introduction' 1.1 The Forestry Rehabilitation Project (FRP) was identified in 1984, prepared in 1985, and appraised in 1986. An IDA credit for SDR10 million (US$13.0 million equivalent) was approved on June 26, 1987 and declared effective (after two postponements) on January 11, 1988. The fully disbursed credit closed on schedule on December 31, 1994. A Project Preparation Facility (PPF) advance of US$1.25 million was approved on April 3, 1987 to aid project start-up. The project received financial support from four donors for specific components: the European Union (EU) (US$7 million); the Danish International Development Agency (DANIDA) (US$7.5 million); the United Nations Development Programme (UNDP) (US$1.4 million); and Cooperative Assistance and Relief Everywhere (CARE) (US$0.18 million), a nongovernmental organization (NGO). Additional support was provided by the Norwegian Development Agency (NORAD) during implementation (US$2.53 million). 1.2 The FRP was identified when the Government of Uganda (GOU) was rebuilding an economy and civil administration that had been severely damaged by more than 15 years of ineffective government and civil strife. The need for such a project to help rebuild the forestry sector was enormous. When the project was being formulated, the government was disbursing only a fraction of the funds the Forestry Department (FD) needed to operate effectively. The FD had a professional staff of 160 graduates and 215 diplomates but only 14 working vehicles; its houses, offices and training college at Nyabyeya had been looted and damaged; and encroachment and illegal felling were rampant because the department had lost control of much of the forest estate. 1. This PAR draws heavily on the Implementation Completion Report and a study funded by the EU, "Evaluation of the EDF-Funded Natural Forest Management and Conservation Project, A Component of the World Bank Forestry Rehabilitation Project, Uganda (1988-1995)", July 1996. 8 2. Objectives and Design 2.1 The project's overall objective was to improve management of Uganda's forest resources in order to meet domestic needs for forest products sustainably. At the same time, the project aimed to increase the area and improve the management of conservation forests to protect unique ecological systems. These aims were appropriate, as energy and agriculture sector work in the early 1980s had shown that uncontrolled and illegal exploitation was depleting Uganda's forest resources severely. The overall objective of FRP was to be pursued through six components: (i) rehabilitation of the FD; (ii) peri-urban plantations and pilot wood farms; (iii) farm forestry; (iv) natural forest management and rehabilitation; (v) softwood plantation rehabilitation; and (vi) training.2 A subcomponent to help sawmillers purchase equipment was dropped at appraisal.3 2.2 At the core of the project was an FD rehabilitation component aimed to support reconstruction and renovation of offices and accommodation, provision of transport and equipment, and technical assistance for planning, procurement, financial management, and the study of forestry problems. The peri-urban plantation component aimed to establish of 900 ha of eucalyptus plantations for demonstration purposes by the FD, and 1,000 ha for production of fuelwood and poles by farmers, all on FD land. Farm forestry aimed to establish nurseries capable of producing 27 million multipurpose tree seedlings annually throughout Uganda within six years. In addition, this component would develop three agroforestry research and demonstration centers and provide small grants to NGOs to promote farm forestry. 2.3 The natural forest management component aimed to redefine the boundary over 1,350 kms of the public forest; enrich by planting 26,000 ha of degraded public forest; improve logging management and biomass inventory; and make charcoal production more efficient. A subcomponent aimed to increase significantly the public forest designated as conservation forest or protected areas. Softwood plantation rehabilitation aimed to improve 13,900 ha of plantations by pruning, thinning and felling, by adding 2,750 ha of new plantings, and reestablishing previously abandoned fire protection systems. The training component provided for rehabilitation of the Nyabyeya Forest College and the Nakawa training sawmill, and study tours. 2.4 While these components were unexceptionable, their planned scale and sequencing created problems for implementation. First, project design was overly ambitious. The project aimed to do too much too quickly given country circumstances. At identification, a modest project with virtually the same components had been proposed, at an estimated cost of US$15 million. By appraisal, project cost had increased to US$33.3 million, and cofinancing had to be found. At full development, the recurrent cost of the appraised project was an estimated USh 2,100 million, compared to a 1984/85 allocation of USh 460 million-almost a five-fold increase. Technical assistance (TA) requirements had grown during preparation from 60 person- months to 240, and, during implementation, to more than 1,000. The farm forestry component in particular had been expanded to unrealistic proportions. It had been based on a modest, US$1 million CARE project begun only in January 1984 that had established about 150 small nurseries 2. Performance indicators and levels of achievement of project components are summarized in Table 1 of Annex B. 3. The ICR takes the view that dropping the component was a design error that hurt the harvesting program. However, the audit encountered no evidence that shortage of credit was a problem and does not support this view. 9 in 11 districts, capable of producing about 2 million seedlings per year. By appraisal, the component had grown to a proposal for over 1,000 nurseries in 26 districts, capable of producing 27 million seedlings annually within six years. 2.5 Second, the project failed to ensure that the FD would receive adequate recurrent funding. Nothing was included other than the customary clause in the Development Credit Agreement that the borrower would provide sufficient operating funds. Further, the project suffered greatly from shortages of counterpart funds.4 Project design did address the issue of cost recovery, an appropriate concern. But the suggestion that a plan for cost recovery would in some way help address the chronic problem of the FD's inadequate access to recurrent funds was incorrect, because new revenues generated from forestry went into general revenue. 2.6 Third, activity sequencing was inadequately addressed. Training facilities were needed before the training college could be rehabilitated; inventory work had to be completed before work plans for managing the natural forests and plantations could be drawn up; and, most importantly, the FD needed vehicles, equipment, sound buildings, and improved management systems before it could be expected to mount a major development effort effectively. Furthermore, project design failed to make adequate allowance for substantial inefficiencies and corruption in government administration at that time. The result was long delays in procurement and contracting that disrupted schedules.5 The PPF advance did little to alleviate the sequencing problem, since it was approved only two months before full implementation began. 2.7 Fourth, insufficient attention was paid to the comments of some Bank reviewers during preparation. At each stage of its processing, reviewers noted that the project was inappropriate because of its size and complexity and the high operating cost burden on the government budget. These criticisms were not given serious attention. The quality of the project at entry was low in large part because of the failure of the Bank's internal review process. 2.8 Lastly, the design failed to address adequately the problem of illegal encroachment of the forest. During project preparation, it became evident that forest reserves had been severely encroached by people who would have to be evicted if the FD was to regain full control of the forest estate. Little was known about the encroachers during preparation-their exact numbers, their assets, whether they were temporary or long-term settlers, or whether they had land or homes outside the forest-and the study on encroachment included in the project was never completed. Since it was evident that redemarcation of the forest boundary, combined with government's policy of removing encroachers, would lead to evictions and hardship, the project should have required an appropriate resettlement plan: it did not. The Bank later claimed that civil disturbances, poor access, and limited resources precluded resettlement planning, and that the Bank intended to support no activities that led directly to resettlement. But this explanation is not sufficient. Bank policy makes resettlement planning mandatory and there is no evidence that a decision not to demand a resettlement was ever discussed by Bank management. 4. The counterpart funding scarcity became so acute that, for the final two years, IDA raised the disbursement percentage for recurrent costs to 80 percent, though it should have declined to 30 percent. This tactic helped in the short term but did nothing for long-term sustainability. 5. Project staff involved in initial procurement efforts were reported to have been physically intimidated. A significant delay stemming from slow initial procurement involved the Nyabyeya College. The College was supposed to be rehabilitated in the first year so that it could be used for in-service training programs beginning in the second year. In fact, the work was not completed until the sixth years of the project. 10 3. Implementation 3.1 Implementation did not go smoothly from the start. First, the Project Coordinator never functioned in the overall coordination role that had been envisaged, and the Project Coordination Committee met too infrequently to be useful. As a result, the various components and cofinanciers went their separate, uncoordinated ways. Second, Bank supervision missions required the development of a computer-based management information system (MIS) that linked the entire range of project management functions early during implementation. Such a 6 system was neither envisaged at appraisal nor included in the consultants' contracts. The proposed MIS plan proved too demanding, given the lack of computer skills in the TA team and among FD staff. Not only did this episode achieve nothing, it created considerable acrimony between the government and the Bank and wasted large amounts of staff time and effort. Had the Bank suggested during preparation a less ambitious MIS for the entire FD (and not for just a project) something of lasting value might have been achieved. Forestry Department Rehabilitation 3.2 The FD rehabilitation component, built around a huge injection of TA, failed. At audit it was difficult to discern any impact of the TA on FD management. The TA company selected by the government proved ineffective.7 With the exception of a minor stores inventory control system, the TA team did not design and install the required management systems. After four years, the original TA contract was terminated prematurely, and a smaller team of individually recruited consultants took over. The replacement team worked satisfactorily but focused mainly on implementing the project's physical objectives. The loftier goal of FD rehabilitation was no longer seriously pursued. 3.3 FD rehabilitation suffered early on from delays in procurement and contracting caused primarily by bottlenecks in government agencies-principally the Bank of Uganda (BOU), which was slow in issuing letters of credit; the Central Tender Board (CTB); and the Ministry of Housing and Urban Development (MOHUD), which took time to provide necessary clearances. These problems were eventually overcome, but only after Bank and FD staff, and consultants had spent much time and effort and the implementation timetable had been irretrievably set back. The first deliveries of vehicles and equipment did not arrive for three years. In terms of strengthening field operations, these years were essentially lost. The inventory program was also delayed and in the end was only about half was completed. 3.4 Major procurement delays and unsatisfactory contractor performance undermined the civil works program. Escalating costs, aggravated by initial delays and poor cost estimates, led to severe cutbacks in the building program. Apart from a modest program at one field station, the rest of the field station building program was cut. The Nyabyeya Training College 6. Except for the inventory and computer specialists, the TA consultants were not required to be specially skilled with computers. 7. The Task Manager at the time rated the proposal of the firm selected by government as by far the weakest of the four received. Why the Bank did not object to the selection is unclear. It seems possible that staff transfers associated with the 1987 reorganization may have been a factor. 11 rehabilitation went well after initial delays, but the program at FD headquarters at Nakawa was a failure. The works were only about 70 percent complete at closing, and nothing more had been done by the time of audit. The headquarters building is incomplete and unused; the workshop is incomplete, though parts of it are being used; and the compound wall is incomplete. 3.5 In addition to inventory work, the project included several studies.9 These were carried out except for the encroachment study, but the completed studies have had little impact on FD operations. The project also included a small research component. Typical of its kind-limited and with no priorities-its impact was negligible. Peri-urban Plantations and Pilot Wood Farms 3.6 This component progressed satisfactorily after a slow start. The FD achieved 168 percent of its planting target (of 900 ha) and 76 percent of the private sector target (of 1,000 ha) was also met. The prospects for sustainability of the private plantings look good since establishment required a minimal subsidy and some trees have already been harvested as a cash crop. Costs of associated civil works were higher than anticipated. The component was cofinanced by NORAD, which also provided a full-time Chief Technical Adviser for two years and for two months per year thereafter. NORAD's continued support has contributed to the satisfactory performance of this component. Farm Forestry 3.7 This component was built on inadequately tested foundations. It was designed not only to increase the number of nurseries in Uganda able to provide farmers with seedlings but to expand the range of species used, develop agroforestry by establishing three agroforestry research and demonstration centers, and provide NGOs with small grants to promote farm forestry. But the CARE program on which the nurseries were modeled had been running for only one year. CARE's design called for two years of preparatory work, after which responsibility for care and maintenance would be handed over to the FD. But when the first handover took place, activity ground almost to a halt. Seeing this, an early Bank mission proposed that CARE stay involved for an additional year. The Bank also noted that the program was too large and should be cut to 25 percent of the design size. 3.8 Design problems were compounded by the shortage of operating funds and delays in procurement. In 1991, when funding problems were not resolved after a considerable effort to do so, DANIDA ended its agreement with IDA, intending to fund this component directly. But shortly thereafter DANIDA determined that the FD could not provide the financial management necessary for funds to be handled securely and declined to proceed. The component ended. DANIDA's withdrawal was a vote of no confidence in the TA team. During its brief life, this component established some 350 nurseries, which produced 10 million seedlings. Most of the seedlings were eucalyptus and plans to grow other species and pursue agroforestry never materialized. The three planned agroforestry centers were established but the NGO grant program was not implemented. 8. Notwithstanding the ICR's contention that the borrower attached high priority to completion. 9. An inventory of softwood and natural forest reserves; an inventory of milling and logging equipment; a study on the market potential for softwood products; a similar study on hardwoods; a study of forest encroachment; and a study on charcoal. 12 Natural Forest Management and Rehabilitation 3.9 This component was financed principally by the EU. Initially, activities were hampered by delays in the procurement of vehicles and equipment and later by delays in inventory work. However, the civil works went well. The ICR calls them as exemplary, but recently some problems have surfaced with the quality of the masonry. Physical achievements were satisfactory-boundary demarcation exceeded the target of 1,350 km, and enrichment and encroachment planting reached about 80 percent and 45 percent of their respective targets. The planting program was adversely affected by the transfer of six forest reserves from the FD to National Parks and Wildlife in 1992-93. Also, the need to replant encroached areas was considered less important than it had been at appraisal because of strong natural regeneration. The government was to have supplied maintenance funds for the various plantings, but did not. Project funds were diverted for the purpose, but some of the planting in encroached areas is considered jeopardized for lack of maintenance.12 3.10 Because inventory work was delayed, no final forest management plans were prepared. However, two forest management plans have been prepared since the project closed and a further eight are scheduled for completion in 1997-98. However, this component did enable the FD to improve its control over the forest estate, a substantial achievement. Stock mapping began in 1985 and a timber tracking system was introduced that, together with improved patrolling and clear boundaries, has helped reduce the amount of illegal felling. However, illegal extraction continues at an unknown level.13 Instead of improving charcoal production, the government has banned its production and completed a study of fuelwood demand in 1996. 3.11 In agreement with IDA, royalty rates for timber were increased and collection was improved, but total revenue collected is well below appraisal estimates.14 Royalty rates remain low from fear that loggers will further evade the royalty if the rates are increased. During the final year of FRP and for the year following (1994 and 1995), royalty collections were virtually suspended as control of the forests was first decentralized to local governments and then recentralized. But in 1996, royalty collection recommenced and the FD has since been given an Appropriation in Aid against uncollected royalties that has approximately doubled its recurrent funding.5 10. These reserves, comprising about 46 percent of the tropical high forest reserve, had been the main target of work on the project's conservation component. A major stimulus for their transfer was conditionality associated with a proposed United States Agency for International Development environment and conservation project. The result was overextension of the FD, reflecting poorly on donor coordination at the time. 11. A point that was made during project formulation by a knowledgeable observer. 12. Op cit, footnote 1. 13. Anecdotal evidence suggests that illegal logging continues at a significant level. It is disturbing to note that for the past several years there has been considerable timber production from private holdings on the islands and shores of Lake Victoria. When this source has been depleted, pressure on the public domain will intensify, and it is unlikely that the FD, with its present operating capabilities, will be unable to prevent an increase in illegal extraction. 14. On first-class species, the royalty increased from USh 5,000/rn' in 1988 to USh 30,000/' in 1995. The change cycle is biennial rather than annual, as was agreed with IDA. 15. Funds are made available subject to royalties being collected. However, the funds are requisitioned from the treasury and have to be budgeted and accounted for in the same manner as funds from the normal recurrent budget. As such they may be frozen if overall funding is tight. 13 Encroachment 3.12 To reestablish its control, the FD had to deal with the problem of encroachment in the tropical high forest. Although the exact scope of this problem was unspecified at appraisal, the SAR (para. 1.13) identifies "serious encroachment by agriculturalists (though little permanent settlement)." Subsequent studies showed that many encroachers had no land outside the forest 16 reserve, that they had built permanent houses and planted perennial crops. An SAR working paper noted that the integrity of the high forest would be restored by redemarcating their boundaries and repossessing the encroached areas. But the SAR said nothing about evicting encroachers nor did it address the possible consequences for the people displaced. However, Bank a telex of August 22, 1986 noted that the Bank "cannot get involved with resettlement under this project and must assume nobody will be evicted as a result of our project." The Bank assumed that it could support a forestry rehabilitation project and not become directly involved in resettlement. But this assumption set aside a problem that made the project the target of criticism when evictions from the forest became the object of international attention. 3.13 Ultimately, some 100,000 encroachers were evicted from 100,000 ha of forest reserve. About two-thirds of the evictions were carried out with little problem: the encroachers were given six months' notice to vacate and they complied with the order. The accepted explanation was that these encroachers knew their occupancy was temporary; many had been given temporary cultivation licenses by the FD to regularize encroachments that had been encouraged by previous regimes. But the remaining evictions were forced. In addition, encroachment of the Kibale Game Corridor was somewhat different. Here encroachment had been encouraged by previous regimes, and settlements dating back to the 1950s included schools, health posts and markets. A study recognized the settlements' permanency and recommended that the area not be cleared, but the government rejected this recommendation on the grounds that leniency would encourage more encroachment. Eviction notices were served, but the settlers ignored them. In March 1992, the government evicted the encroachers, causing considerable hardship. The government then stepped in and, with the help of OXFAM, mounted ex post a relief and resettlement program. The Bank response to this emergency was to assess the situation in April and December 1993 and to offer assistance if a request was received from the GOU. No request was made. Neither the Bank nor the EU supported the resettlement and relief effort, although the EU subsequently contributed to a development program in the district where many of the evictees had settled. The study of encroachment included in the project was never carried out.18 3.14 The natural forest conservation subcomponent. From the outset, this subcomponent absorbed more resources than were envisaged and too many for Uganda's circumstances. It accounts for about 40 percent of the US$10 million equivalent the EU spent on the project, plus supplemental donor funds.19 In addition, it received significant TA beyond what had been 16. Especially Land Tenure Center (LTC), "Settlement in Forest Reserves, Game Reserves and National Parks in Uganda," LTC Research Paper 98, University of Wisconsin-Madison, July 1989; and two FD surveys in Mabira Forestry Reserve (1985) and Kibale Forestry Reserve (1982). 17. University of Wisconsin - LTC, "Settlement in Forest Reserves, Game Reserves, and National Parks in Uganda," 1989. 18. The audit mission was unable to determine why not. 19. Specifically, a Global Environmental Facility/UNDP project, and support from Voluntary Overseas Services. Responsibility for the high rate of expenditure rests with the Bank and the EU, which provided less than adequate supervision. 14 estimated at appraisal to compile biodiversity inventories for 62 forest reserves (75 percent of the area planned). But the quality of the work was high and the inventories provide a base for a national nature reserve master plan. To date only two reserves-Budongo and Mabira-have been demarcated on the basis of interim biodiversity assessments. However, since six forest reserves were reclassified as national parks, this subcomponent more than met its original aim. It also supported pioneering work in ecotourism and promoted community involvement. Rehabilitation of Softwood Plantations 3.15 This component fared poorly. It aimed mainly to induce private sawmillers to clear-cut overmature plantations and got off to a slow start for three reasons: first, few sawmillers had suitable equipment; second, the training sawmill at Nakawa needed rehabilitation; and, timber prices were low because of high rates of illegal felling, reducing the incentive to invest.20 Later, when the Nakawa mill became operational, it became possible to induce private sawmillers to acquire mobile sawmills. These sawmillers were given concessions to log softwood plantations and their numbers continue to grow. 3.16 Logging and mill management are generally poor, however, and the efficiency gains expected under the project have not materialized. The mills have an annual capacity of 3,000 m3 but typically process about half that amount. To deal with the felling backlog, further use of pit sawyers is indicated, but the FD is reluctant to support pit sawyers because of their inefficiency and a general ban on pit sawing in plantations was enacted in 1997. Achievements in thinning and pruning were negligible, and the output of these activities has not been salable. The planting program also fell short of its target. New plantings reached over 90 percent of the 750 ha target, but replanting-delayed by the felling program-reached only 18 percent of its goal. New plantings have also been affected by the poor quality of the seed used, resulting in badly formed trees. Shortages of operating funds have resulted in poor maintenance of the new stands, which will be little better than the existing mature plantations if present practices continue. No new management plans have been made for the plantations, and management remain ad hoc. Training 3.17 This component, funded by the UNDP and executed by the Food and Agriculture Organization of the United Nations, got off to a quick start. Training did not take place at the Nyabyeya College as expected because it had not been rehabilitated in time. The alternate venues used were costly, cutting into the training budget and reducing the total amount of training that could be offered. Sawmill training, introduced late in the project, also went well. With support from the EU and NORAD, TA personnel provided effective training. However, local counterparts to the main consulting team derived little benefit. Though delayed, the Nyabyeya College was rehabilitated and is now functioning well, carrying out a full schedule of in-service certificate and diploma training programs, with support from NORAD. 20. In fact, most of the early felling was licensed to pit sawyers in an emergency response to fell dead and dying cypress trees that had succumbed to an aphid attack. 15 4. Outcome 4.1 The project failed to achieve its primary goal of creating an institutional base for the sound management of Uganda's forest resources. The FD functions better now than it did when the project was formulated in the mid-1980s largely because of the project's injections of vehicles and equipment into a department that was essentially inoperative.21 But the FD is still managed on an ad hoc basis: it has prepared few work plans, has no information system to provide feedback to managers, and shows little evidence of strategic thinking. Operating funds are still so constrained that monthly meetings are held to decide allocation priorities. In addition, some of the vehicles purchased under the project have been sold to headquarters staff, eliminating some of the equipment gains made and reducing the staff's operational mobility.22 The agency remains top-heavy with managers (Table 2) and a hiring freeze has left many essential positions unfilled, including a number of forest guard posts. 4.2 Despite institutional problems, the project made substantial progress in environmental protection and conservation. With boundaries demarcated and encroachment virtually eliminated-and with continued EU support-the natural forests are now reasonably well protected. Good work has been done on forest conservation, and the planned (if belated) demarcation of nature reserves is expected to be completed with the EU's continued support. The Economic Rate of Return 4.3 Data by which to assess the project's quantifiable outcome are scarce. However, it is clear that both the SAR and the ICR overestimated the project's economic rate of return (ERR), largely because of inaccuracies in the treatment of the natural forest management component. The SAR, having ignored the evictions, could not take account of their cost in the economic analysis, and the ICR followed the same approach. The EU-supported evaluation of the component made a more thorough analysis, finding that the cost of the eviction program-in terms of crop and stock losses and of agricultural production foregone-was large. Despite increases in the value of timber and the assumed benefits from tourism, community use, improved watersheds (of benefit to fisheries) and carbon sequestration, plus a biodiversity option value, the EU analysis showed a net present value of US$ 1.078 million at 5 percent over 25 years. The SAR included a strong caveat regarding the poor quality of the data and noted that some heroic assumptions were made. These statements are indicative of the analytic overoptimism that resulted in an ERR of 45 percent for this component at appraisal. 4.4 The ICR overestimated the ERR for the softwood plantations by including in project benefits mature trees that had been harvested before the project began and benefits to sawmillers 21. Civil works is something of an exception to this. The FD headquarters functions at Nakawa despite its incomplete buildings. Similarly, there is no indication that the one forest station whose buildings were rehabilitated under the project performs any better than the stations which were not rehabilitated-another indication of project overdesign. 22. The vehicle sales were part of a government plan to reduce operating costs. But the FD does not require staff to use the vehicles for work, nor does it provide the mileage reimbursement that might be an incentive to do so. 23. Op cit in footnote 1. 16 from improved utilization of forest resources (a claim for which the audit found no evidence).24 Making adjustments to the ICR's benefit stream for these two factors reduces the ERR for the softwood component from 10 percent to 1 percent. The ICR's ERRs for the peri-urban and farm forestry components, of 5 and 6 percent respectively, are reasonable. 4.5 To obtain an indicative ERR for the project as a whole, the ICR's net benefit stream was adjusted to reflect the changes to the softwood benefit stream referred to above and to completely remove the benefit stream for the natural forest management component. Given the uncertainty of the data, these results should be more reasonable than those that include a stream with a negative ERR. On this basis, the indicative ERR of the project is 3 percent, compared with 15 percent in the SAR (Table 3) and 9 percent in the ICR. 4.6 The project failed to enable the FD to operate at an acceptable level on a sustainable basis. The only effectively functioning activities at audit were those still receiving support from the EU and NORAD, including control of encroachment and staff training. In other areas, such as softwood plantations, management is poor. Without external support, the FD is unlikely to be able protect the integrity of the forest estate. Two factors influence this outcome strongly: shortages of staff and operating funds, and the depletion of private forests. Once the forest resources from private lands around Lake Victoria are exhausted, the forests in the public domain will again come under pressure. However, sustainable farm woodlots are in place in a number of districts. The project's pilot wood farm component cannot claim sole credit for this, as a number of NGOs have been and remain active in supporting this aim. But the project deserves some credit. 24. The ICR, appendix B, para. 36, claims that the high return in the SAR for this component was calculated by claiming such benefits, but the statement is not correct. The SAR did not count benefits from harvesting mature tree before the project began. 25. The text of the ICR is equivocal on sustainability but, although it contains many caveats, is far more optimistic than this audit. 17 5. Findings and Issues 5.1 Based on the project's inability to achieve its major objective, shortcomings in implementation-in particular the failure to address resettlement issues- and the low ERR, the audit downgrades the rating of project outcome from the ICR's satisfactory to unsatisfactory. In addition to overestimating the ERR, the ICR appears to have looked at project achievements in the abstract rather than comparing them with what was intended. 5.2 Institutional development is rated as modest, not substantial as concluded by the ICR. Despite the project, the FD as presently constituted and funded cannot carry out its mandate without significant external support. Adding to this concern is the likelihood that pressure on natural forests in the public domain will increase when the timber on private lands around Lake Victoria is depleted. Lack of institutional development and operating funds in the FD make overall project sustainability unlikely, although the ICR rated sustainability as likely. 5.3 Bank performance is rated as unsatisfactory for several reasons.26 First, the project as appraised was too large, too complex, and poorly sequenced in light of difficult conditions prevailing in Uganda. Bank reviews during preparation that warned against growth in the project's size and complexity were not heeded. Second, the Bank failed during preparation to deal adequately with the resettlement of encroachers. To propose that a study of encroachment be done (which was not undertaken) when it was known that encroachers would be evicted from the forest was inadequate. Third, the Bank should have objected to the appointment of the consulting firm chosen by the government to implement project TA. The project was critically dependent on the success of TA, and its failure undermined project implementation. The files suggest that the strongest candidate for the TA task was not chosen. Weak TA was compounded by the requirement that a large computer-based MIS for management functions be developed. Only in the later stages of implementation did Bank supervision take a pragmatic and supportive approach, resulting in better progress. Finally, with several project financiers, supervision was uncoordinated, the components went their separate ways, and the FD's operations became, and remain, disjointed. 5.4 Borrower performance was also unsatisfactory.27 Too much time was spent resolving problems caused by the uncoordinated acts of the BOU, the CTB, and MOHUD; counterpart funding was not provided at promised levels; and when it became obvious (irrespective of the cause) that the TA team could not perform adequately, the government moved too slowly to rectify matters. 26. The ICR does not give an overall rating for Bank performance. The ICR rates identification as highly satisfactory and preparation as satisfactory, despite the fact that it finds shortcomings in design similar to those described in this audit. The ICR rates appraisal performance as unsatisfactory and supervision performance as satisfactory. The ICR does not, however, address the problems caused by the computer-based MIS issue nor the failure to ensure coordinated oversight of the whole project. 27. The ICR rates borrower performance as satisfactory given the constraints that prevailed in the country. In the audit's view, it is more accurate to say that performance was unsatisfactory because of the constraints that prevailed in the country at the time. 18 6. Lessons and Strategy for the Future Lessons 6.1 The main lessons of FRP concern project design and preparation. First, complex projects requiring high levels of coordination are especially inappropriate for countries recovering from periods of conflict with weakened administrations. In FRP, project scope was expanded greatly during preparation, necessitating multidonor financing and coordination of implementation. Simply making government processes work-such as for procurement and disbursement of funds-was challenging enough after years of inaction. 6.2 Second, the Bank's project review process must be respected. The problems posed by increased project size and complexity were identified during preparation by several reviewers, but their concerns were not properly accounted for. The Bank's project review process failed. An excessive burden was placed on TA during implementation, which failed badly because the firm chosen proved less than competent. 6.3 Third, new initiatives in natural resource management require testing before scaling up. Some FRP components were built on inadequately tested foundations. A period of pilot action should have been built in to the project design in order to test new approaches fully-such as for farm forestry-before applying them more widely. A staged project, with a participatory approach might have produced more lasting results in keeping with capacity growth of the FD. 6.4 Fourth, Bank policy on resettlement must be applied systematically and sensitively. As soon as it was clear that people could be involuntarily removed from the forest, after the forest boundary was redemarcated, a plan to resettle them in accordance with Bank Operational Manual Statement 2.33 (1980) and Operational Policy Note 10.08 (1986), should have been drawn up by government to the Bank's satisfaction. Failure to do so left many evictees in need of relief and resettlement assistance, provided by the GOU with the support of OXFAM, after the fact. Future Strategy 6.5 Although project performance was unsatisfactory, some useful foundations were laid and, with the continuing support of the EU and NORAD, the FD is building on this base. Two areas, however, require further support: sectoral management and plantations. 6.6 Sectoral management. In line with current GOU policy, as many forestry activities as possible should be shifted to the private sector and a single entity chosen to manage the remaining public forest sector activities. The GOU will need help to make and implement such measures. Currently, the UK Department of International Development (formerly the Overseas Development Administration) is known to be interested in supporting institutional development in forestry. One idea under consideration involves converting the FD into an autonomous body that could become independent of budgetary uncertainties by retaining the revenue it raises. This idea should be examined carefully, as the history of parastatal creation is not a happy one. 19 6.7 Plantations. Action is also required to meet Uganda's growing demand for industrial wood.28 Plantations are the only effective means of meeting this demand. Without them, the natural forests will be depleted in the not-too-distant future. While the FD has already awarded licenses for large private sector industrial plantations on reserve land, public plantings will also be needed. The public sector should also address the problems of aphid infestations and low seed quality. Since two donors are currently active in the sector (the EU and NORAD)-and two more, Britain and Germany, are discussing involvement-it is unclear whether the Bank needs to follow-up on FRP. Both the GOU and Bank Operations' staff, however, believe that a need exists for about 40,000 ha of additional industrial plantations over the next 20 years, and investment in these plantations may be unattractive to private entrepreneurs. 28. The Uganda Energy Assessment, ESMAP/World Bank, October 1994 (Draft White Cover) indicates that the demand/supply situation for woody biomass is more or less in balance, in contrast to perceptions at the time the project was identified, when many believed a crisis was looming.  21 Annex A Basic Data Sheet UGANDA-Forestry Rehabilitation Project (Credit 1824-UG) Key Project Data (amounts in US$ million) Appraisal Actual or Actual as % of estimate current estimate appraisal estimate Total project costs 33.30 32.25 96.80 Credit amount 13.00 13.78 106.00 Cofinancing 20.30 18.47 91.00 Cancellation - Date physical components June 30, 1994 Dec. 31, 1994 completed Economic rate of return 15% 3% Institutional performance Moderate Cumulative Estimated and Actual Disbursements FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 Appraisal estimate 400 2,100 4,400 7,100 9,600 11,600 12,700 13,000 (US$ thousands) Actual (US$ thousands) 1,560 2,448 4,073 7,020 9,140 10,831 13,097 13,775 Actual as % of appraisal 390 117 93 99 95 93 103 106 Date of final disbursement: May 25, 1995 FY=From July 1 to June 30 22 Annex A Project Dates Original Actual Identification December 1984 December 1984 Negotiations January 1987 12-18 May, 1987 Board presentation July 1987 June 17, 1987 Signing July 1987 July 6, 1987 Effectiveness October 4, 1987 January 11, 1988 Mid-term review March 31, 1990 May 31, 1990 Closing date December 31, 1994 December 31, 1994 Staff Inputs (staff weeks) Actual Stage of Project Cycle weeks '000US$ Through appraisal 31.5 46.8 Appraisal-Board 75.1 135.1 Board-Effectiveness 15.0 28.9 Supervision 132.7 279.5 Completion Total 254.3 490.3 23 Annex A Mission Data Performance Rating Imple- Develop- Types of Date No. of Staff days Specializations mentation ment Problemc (month/year) persons infield represented Statusb Objectives Appraisal through Board approval July 1986 F,E,D - - Supervision Id June 1988 4 36 F S S M 2 Nov. 1988 3 45 F,PS S S M 3e March 1989 2 9 F,PS - - CW, M,S 4 July 1989 3 30 F,PS,FF U U M,F,T,S 5 Feb. 1990 3 36 F,PS,FF U U M,F,P,TA 6v May 1990 3 30 F,FA,FF,OA - - M,TA,OS 7 Dec. 1990 1 15 E 8 July 1991 4 32 F,E,PS,FA U U M,F,A 9 Nov. 1991 3 27 F,PS,FA U U F,P,ME,CW,IN 10 Dec. 1992 1 7 F U U M,CW,F 11 March 1993 1 11 F U U F,ME,CW,A 12 Jan. 1994 1 10 F S S M,F,ME,CW Completion Sep. 1995 2 32 E,F - - a. E=Economist; F=Forester; D=Disbursements; PS=Procurement Specialist; FF-Farm and Extension Forestry Specialist; FA=Financial Analyst; OA= Operations Advisor. b. HS=Highly Satisfactory; S-Satisfactory; U=Unsatisfactory. c. S=Staff recruitment; CW=Civil Works; F=Financial; OS=Office Space; T=Transport; M=Management; TA=Technical Assistance; P-Procurement delays; ME=Monitoring, reporting and Evaluation System; A-Aphid Infestation; IN=Slow Forestry Inventory. d. IDA/DANIDA review mission e. Review missions. f. Completed form 590 not available. 24 Annex A Other Project Data Borrower/Executing Agency: Government of Uganda, Forestry Department FoLLOW-ON OPERATIONS Amount Operation Credit no. (UJS$ million) Board date Environmental Management Capacity Building 2777 11.80 09/14/95 Project Agricultural Sector Management 2845 17.90 04/16/96 25 Annex B Table 1: Key Indicators of Project Implementation Indicator Unit SAR Actual PERI-URBAN Activity Planting - FD '000 ha 900 1513 Planting - Farmers '000 ha 1000 756 Road construction km 55 0 Road rehabilitation km 50 0 Incorporated production Firewood - FD '000 m3 stacked 144 18 Firewood - Farmers '000 m' stacked 142 5 Poles - FD '000 1736 117 Poles - Farmers '000 917 331 FARM FORESTRY Activity Districts involved no 26 24 Nurseries established no 1030 351 Seedling prod. '000 105400 10714 Demo. centers no Incorporated production Firewood '000 m' stacked 825 73 Poles '000 5306 470 NATURAL FOREST Activity Encroachment planting ha 17300 7626 Enrichment planting ha 8700 6912 Boundary marking High forest km 1350 4547 Savannah '000 ha 632 2781 SOFTWOOD Activity Replanting ha 2000 363 New planting ha 750 690 Pruning - I ha 310 178 Pruning - 2 ha 1750 357 Thinning - I ha 4400 0 Thinning - 2 ha 2700 0 Thinning - 3 ha 2700 0 Clearfelling ha 2000 379 Salvage felling ha 0 526 Road rehab. km 210 200 Road construction km 30 0 Incorporated production Timber Thinning '000 m 204 0 Improved utilization '000 ms 94 0 Improved protection '000 ms 2 0 Charcoal '000 kt 27 0 26 Annex B Table 1: Key Indicators of Project Implementation (continued) Indicator Unit SAR Actual TRAINING Study tours pm 64 59 Fellowships pm 27 29 Nyabyeya College Teacher training pm/no 352/22 0/0 Forester/Ranger pm/no 208/104 30/66 DFO/FO Prof. Management pm/no 50/20 47/256 Foresters (Refresher) pm/no 200/20 116/224 Rangers (Refresher) pm/no 300/30 0/0 Guards (Refresher) pm/no 150/30 0/0 Orientation pm/no 125/10 0/0 Enrichment planting tech. pm/no 40/100 0/0 Demo center farmer train pm/no 600/160 70/525 pm=person months 27 Annex B Table 2: Forest Department Staff Position Post Approved Filled Vacant Headquarters Commissioner 1 1 0 Dep. Comm. 1 1 0 Asst. Comm. 3 3 0 Principal Forest Off 6 6 0 Senior Forest Officer 10 0 10 Forest Officer 12 31 0 Asst. FO 0 6 0 District Admin. Principal Forest 6 4 2 Senior Forest Officer 33 0 33 Forest Officer 152 92 60 Asst. FO 165 107 58 Forest Ranger 300 277 23 Forest Guard 33 0 33 Nyabyeya College Principal Forest 1 1 0 Senior Forest Officer 1 0 1 Forest Officer 8 8 0 Asst. FO 0 3 0 Note: Support staff omitted. Table 3: Economic Analysis-Summary Table Snummary(UshM) 1988-95 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Ped-urban Incremental 568 0 0 0 59 143 68 115 183 247 307 365 420 471 521 568 612 655 benefits Direct costs -1819 0 -104 -198 -171 -316 -639 -392 FD Cost share -1350 -25 -88 -76 -261 -253 -339 -236 -73 Post-project costs -392 0 0 0 0 0 0 0 -392 -465 -465 -465 -465 -465 -465 -465 -465 -465 Net Renellts -2993 -25 -192 -274 -373 -425 -910 -513 -282 -218 -157 -100 -45 7 56 103 148 190 Farm Forestry Incremental 986 0 0 40 96 148 198 246 258 270 256 243 231 220 209 198 188 179 benefits Direct costs -1146 -2 -90 -238 -754 -62 F) Cost share -851 -16 -55 -48 -164 -159 -214 -149 -46 Post-project costs -68 0 0 0 0 0 0 0 -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 NetBenefits -1079 -18 -145 -246 -823 -73 -16 97 144 202 188 175 163 152 141 130 120 Ill Softwood Incremental 0 0 0 0 0 0 0 0 0 0 0 0 0 0 45 45 53 53 benefits o Direct costs -2446 -2 -16 -27 -92 -446 -585 -980 -298 FDCostshare -1815 -34 -118 -102 -350 -340 -456 -317 -98 Post-project costs 0 0 0 0 0 0 0 0 0 -395 -395 -395 -395 -395 -395 -395 -395 -395 Net Benefits -4261 -36 -134 -129 -442 -786 -1041 -1297 -396 -395 -395 -395 -395 -395 -352 -350 -342 -342 All Components Incremental 1554 0 0 40 155 291 266 361 441 517 563 608 651 691 775 811 853 887 benefits Direct costs -5411 -4 -210 -463 -1017 -824 -1224 -1372 -298 0 0 0 0 0 0 0 0 0 FD Cost share -4016 -75 -261 -226 -775 -752 -1009 -702 -217 0 0 0 0 0 0 0 0 0 Post-project costs -460 0 0 0 0 0 0 0 -460 -928 -928 -928 -928 -928 -928 -928 -928 -928 NetBenefits -8333 -79 -471 -649 -1638 -1284 -1967 -1713 -534 -411 -364 -320 -277 -236 -155 -117 -74 -41 Table 3: Economic Analysis-Summary Table (continued) Sunmary(UshM) 2005 2006 2007 2008 2009 2010 2011 2-12 2013 2014 2015 20/6 2017 2018 2019 2020 2021 2022 2023 Peri-urban Incrementalbenefits 695 733 769 804 837 868 897 925 952 977 1001 1024 1046 1067 1086 1105 1123 1139 1155 Direct costs FD Cost share Post-project costs -465 -465 -465 -465 -465 -465 -465 -465 -465 -465 -465 -465 -465 -465 -465 -465 -465 -465 -465 Net Benefits 230 268 305 339 372 403 433 461 487 513 537 560 581 602 622 640 658 675 691 Farm Forestry Incrementalbenefits 170 161 153 146 136 132 125 119 113 107 102 97 92 87 83 79 75 71 68 Direct costs FD Cost share Post-project costs -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 -68 NetBenefits 102 93 85 78 70 64 57 51 45 39 34 29 24 19 15 11 7 3 0 Softwood Incremental benefits 56 81 145 186 214 214 214 214 719 727 744 941 1411 1710 1928 1928 1928 1928 1928 Direct costs FD Cost share Post-project costs -395 -395 -395 -395 -395 -395 -395 -395 -395 -395 -395 -395 -395 -395 -395 -395 -395 -395 -395 NetBenefits -339 -314 -250 -209 -181 -181 -181 -181 323 332 349 546 1016 1314 1533 1533 1533 1533 1533 All Components Incrementalbenefits 921 975 1067 1136 1187 1214 1236 1258 1784 1811 1847 2062 2549 2864 3097 3112 3126 3138 3151 Direct costs 0 0 0 FD Cost share 0 0 0 Post-project costs -928 -928 -928 -928 -928 -928 -928 -928 -928 -928 -928 -928 -928 -928 -928 -928 -928 -928 -928 NetBenefits -7 47 140 208 261 286 309 331 855 884 920 1135 1621 1935 2170 2184 2198 2211 2224 ERR Audit ICR SAR Peri-urban 5% 5% 7% Farm Forestry 6% 6% 20% Nat. Forest neg 10% 45% Softwood 1% 10% 51% All 3% 9% 15% Notes: 1. Costs of Strengthening FD and Training have been shared among the other components in proportion to their shares of direct costs. 2. As noted in the text the Natural Forest Management component has been omitted from this analysis. 4 31 Annex C TVUAUft T"MaNp=OMM. MINtSTRY OF NATURAL RESOURCES EAL.me al P.O. BOX 7096/7270 Tax: esm KAMPALA - UGANDA W A" 0aie Mmes as mN06W KUM ue M -- asa7uC OF1A3CDA C/Adm/218 22nd May, 1997 Mr. Roger Slade, Chief Agriculture and Human Development Division, Operations Evaluation Department, 1818 H. Street N.W., Washington D.C. Dear Mr. Roger Slade, RE: UGAADA FORESTRY RMIABILITATION PROJECT (CREDIT 1824-UG) DRAFT PERFORMANCE AUDIT REPORT Thank you very much for your memo dated 16th April on the above subject. I am sorry for the delay in responding but I hIad to have an input from officials of the Forestry Departmnt which, inevitably, led to the long delay caused. The report was generally very objective and provided an excellent analysis and account of the Forestry Rehabilitation Project. Knowing the Project was a complex one, the Report has dissected critical issues .in a clear manner. The Performance Audit Report is rightly critical of the design of the Project. However it must be recognized there were many sponsors and supervisors of the Project components. Often the supervision by the various donors was not coordinated to achieve cohesiveness and act in a timely manner. The slow progress of the Project was a shared responsibility amongst which were the Forest Department, World Bank, Central Tender Board, the Consultant whose lack of action in one way or another led to poor results. In particular, the incompetence of the consultant led to loss of confidence in the World Bank which gave "no objection" to the Consultant who was clearly known to have been rated very low among competing firms/individuals who applied for the Consultancy job. Comments on Soecific Issues With respect to the Natural Forest Management and Rehabilitation component, there is insufficient distinction between pre and post- project achievements. Actually, during the past two years (post- Project period) substantial progress has been made in the preparation of forest management plans, the revision of 32 Annex C Departmental Standing Orders for Forest Department, timber, tracking, curtailment of illegal timber felling, and improved revenge collection. A lot of ground work has been done in bou=dary resuryeys of Forest Reserve areas etc. I think that we could have done better. Para 3.1.0 "Because inventory work was delayed, no final forest management plans were produced. ." Addition noted in Two forest management plans (FMOs) have been prepared in 1996/97 pwe. 3.10. without up-to-date forest inventory and a further eight are being scheduled for completion in 1997/98. The production of FMPs does not have to depend on having forest inventories in place. Rather it is a matter of approach since the inventory can be a prescription of the plan-itself which can set out how and when it is to be done. Emphasisnotedin para 3.10 "This component has done little to improve natural forest para.3.10. management, although it has enabled FD to regain substantial control over the forest estate. In particular, .. " The very essence of forest management for FD was to regain control over the protected forest estate. This was an immense undertaking- the success was no mean achievement. Planting trees for the purposes of enrichment, demarcation of boundaries and the reforestation of encroached areas were, and are still by comparison of little importance and have virtually ceased to be part of the project activities considered not worthy by the WE/3EC and other donors, para 3.10 "..For the last-year of the project and for the following two years (1995 and 1996), royalty collections have been virtually suspended.." Addition noted in However, it should be noted that royalty collection J2 1996 was pam 3.10. undertaken and during the course of the year this greatl-r improved. para 3.10 "Nothing has been done to improve logging practices or Add notedin charcoal production - the latter because the government has banned pa 3.JO. charcoal production". To improve logging practices and exploitation control, NT&CP began to develop stock mapping activities in the latter part of 1985. In this connection more activities are to be intensified further during 1997/98 Financial Year. Noting the lack of efficiency in the control of charcoal production, action was taken in 1995/96 to carry out thorough fuelwood supply and demand (including the situation on charcoal production): " A Study of Woody Biomas derived Znergy Supplies in Uganda" by Energy for Sustainable Development. para 3.15 " A serious attack of aphids continues to affect cypress and has now spread to pines. To deal with pests and the falling backlog, further use of pitsawyers seems indicated. But the FD is reluctant to support pitsawyers because of the perceived inefficiencies of pitsawing,.." 33 Annex C The aphid attacks cypress and not pines. Different species of Conmaction noted. aphids are involved (which, however, had limited effect only on a small proportion of two species of pine) which are now of very limited economic importance within -existing plantation crops. Today aphids are not a significant issue with regard .to voliev of resources use by pitsawyers but do affect cypress trees thus making mechanical sawmilling difficult. The inference drawn by the draft PAR is entirely wrong as to the VewSnoted role of pitsawyers processing plantation timber logs. Since the pa3.16 start of 1997 there has been a general ban on pitsawing activities within the plantations. Reversing that policy would be detrimental and regressive. para 6.3, Footnote 28. Without further action in the medium term (i.e next five years or enoted so) a national wood energy crisis is still looming. There are para. 6.7. acute deficits already in certain parts of Uganda. para 6.3 ".. it is doubtful whether the Bank needs to become active Views noted in follow-up activities to this project". pam 6.7. There are opportunities still for continued Bank involvement in the forestry sector. It is, therefore, regrettable that the Bank has been absent during the past two years thus missing an opportunity. to review FRP. I would like to express my profound gratitude to the operations Evaluation Department of the Bank which has provided an audit document of FRP. .Z.Dr. PEP14AKNT SECRETARY c.c Minister of Natural Resources '.c Commissioner for Forestry c.c Ag. Chief Economist s 35 ROYAL DANISH MINISTRY OF FOREIGN AFFAIRS Annex D Mr. Rodger Slade OED (AEDD) . 'I3d The World Bank oK-t449 Capwnh.w K 1818 H Street N.W. DnAAk Washingto=, D.C. 20433 T& .4533920000 USA F= .453154 Us 33 Tc= 31 Z92 ETR DK nd. D imefern 1G4. E 20, 7 Say 1997 ~arda-Forestry Rehabilitation Proect (Cr. 1824-l1 oDraft PCrformance Audit etert. Please refer to your letter of 16. April 1997 with enclosed draft PAR for which you welcome comments. We are in full agreement with the contents of the report. However, iv paragraph 3.8 is stated that Dan- ida:11when funding problems were not quickly resolved ---". This may not reflect that lengthy nego- tiations preceded the decision to withdraw. The FD rel- uctance to follow purchasing procedures and hence delay in procurement was, together with local failure to pro- vide operational funding, major factors in ending the agreement. The direct funding supposed to follow the cofinancing with IDA was neve7r established, due to the failure of the GOU to accept CAE as the responsible organization for accounts and dispersement of Danida funds, which was a precondition. Although not substantial I hope these comments will clarify the actions taken by Danida. Yours sincerely, P. E. Schmidt 4  I  �� л � „ О � � � О .. г` -� � � � � � �