Uganda - Second Education Project

RESTRICTED Report No. P - 9 5 6 This report is for official use only by the Bank Group and specifically authorized organizations or persons..lt may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF UGANDA FOR A S-ECOND EDUCATION PROJECT June 3, 1971  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECCiri'MDATI^N OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMEN2T CREDIT TO THE REPUBLIC OF UGANDA FOR A SECOND EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed development credit in an amount in various currencies equivalent to $7.3 million to the Republic of Uganda. PART I - INTRODUCTION 2. The first IDA credit to Uganda for education (Credit No. 101 UG), signed in April 1967, provided $10 million to help the Government expand secondary school enrollment and improve the curricula in secondary schools by adding science subjects and practical courses. Under the project, 24 new secondary schools are being constructed and 15 existing schools are being provided with additional facilities. Construction work on these schools is expected to be completed shortly, and despite delays in pro- curing furniture and equipmentall the new facilities should be fully ready for use by mid-1972. 3. Uganda is unusual in that a very substantial proportion of the students at primary and general secondary level are enrolled in private schools. Taking account of these schools and the additions to the public school system being provided under the First IDA Education Project, there is no need for a number of years for any significant further expansion at primary or general secondary level. The shortage of trained manpower, how- ever, is acute in almost every field and is steadily worsening as the econ- omy expands. At the same time, despite the extensive private school system, the Government has been spending quite heavily on public education, which accounted for 16 percent of total capital expenditure and 28 percent of recurrent expenditure in the 1970-71 budget. Thus, while an urgent need exists to improve specialized training facilities to gear the education system more adequately to Uganda's manpower requirements, careful planning is required to achieve a better balanced system within the limits of avail- able resources. 4. The Uganda Government has been working on plans for some time to help meot this problem. In February/March 1969 a UNESCO mission visited Uganda to draw up preliminary proposals for further development of the edu- cation sector. The UNESCO report was discussed with the Uganda Government by an IDA/UNESCO mission in December 1969, and a formal request for finan- cial assistance for a Second Education Project was submitted to the Asso- ciation by the Government in February 1970. The project was appraised in the field in June 1970.  - 2 - 5. Negotiations for the proposed project were held in W4ashington from March 29 to April 2, 1971. Uganda was represented by the Honorable Emanuel B. Wakhweya, Minister for Finance; Mr. W.W. Rwetsiba, Permanent Secretary, Ministry of Education; lMr. J. Geria, Permanent Secretary desig- nate, IMinistry of Finance; Mlir. A. Ocaya, Commissioner for Economic Affairs, MHinistry of Finance; Dr. N.O. Edyegu, Ministry of Health; Mr. B.M. Kalemera, Attorney General's Chambers; Mr. J. Lwabi, iMinistry of Education; Mr. M. Okai, Ministry of Agriculture, Forestry and Cooperatives; Mir. F. Sali, Project Director, First Education Project; Mr. F.H. Scholey, lMinistry of Labour; and Mr. C. Sentongo, Ministry of Planning and Economic Development. 6. A faction of the army seized power in Uganda on January 25, 1971, deposed former President Obote and established a military government under General Idi Amin. In early February General Airiin dissolved parliament, dismissed the former cabinet, assumed all executive and legislative powers, and announced that he would rule by decree until the country could be re- turned to civilian rule; all political activity has been banned for two years. A largely civilian Council of Ministers, eight of them senior civil servants of the previous Government, has been appointed. Day-to-day admin- istration of the country appears to have continued substantially uninter- rupted. 7. The major action so far taken by the new Government in the econ- omic field has been to modify substantially the program of nationalization announced by President Obote in May 1970. Under the May 1970 pronouncement a 60 percent Government participation was to be acquired in all banks, insurance, oil, bus and major manufacturing companies, and in industrial estates; about 80 companies were expected to be affected by this decision. Agreements Ior compensation have already been reached with eight major con- cerns on that basis. The new Government has announced that it is vjilling to renegotiate these agreements on the basis of a Government participation of 49 percent if the companies concerned so wish and that it also intends to limit its participation to 49 percent in another 11 major companies with whom agreements have not yet been completed. The other companies covered by the May 1970 pronouncement will now be left entirely in private hands. 8. The Government has announced its intention to honor all existing obligations. No legislation of significance to the consummation of the proposed credit or to any existing agreement between the Bank/IDA and Uganda has been suspended or altered. WIork on Bank Group financed projects has not been affected by the change in Government. I find no reason why the Bank Group should withhold assistance for projects that are, as in this case, essential to the country's long-run progress and should not be post- poned.  PART II - CURRENT AND PROSPECTIVE OPERATIONS 9. The proposed credit would be the seventh IDA credit to Uganda. In addition, before Independence in October 1962, Uganda received a Bank loan of $8.4 millon for powTer !'evelopment, which ;ras guaranteed by the United Kingdom. The s-mmary statement of' the loan and credits thus far provided to Uganda is contained in Annex 1 to this report. Uganda is also guarantor, jointly and severally with Kenya and Tanzania, of six Bank loans for common services in East Africa (see Annex 2). The first of these loans is also guaranteed by the United Kingdom. 10. The Smallholder Tea Project (Credit No. 109 UG) has gone well and the planting pro-ram of 9,700 acres provided for in the Development Credit Agreement was successfully comipleted in 1970. Actual expenditures on leaf collection, planting materials, nurseries and fertilizer proved to be less than were estimated and the Association has agreed to the Government's re- quest that the consequential savings under the credit of about $630,000 be made available to help finance the planting of a further 3,800 acres of smallholder tea during 1971. The Closing Date of the credit has accordingly been postponed from December 31, 1971 to June 30, 1972. 11. Vhile the performance of the Government and the consultants under the First Highway Project (Credit No. 108 UG) has been satisfactory, the reconstruction of one of the main roads in the project has fallen behind schedule as a result of a delay by the contractors in transferring required staff and plant to these works from another project in Uganda being carried out under bilateral assistance. Execution of the project is now proceeding satisfactorily, and costs are within the estimates. The Association has agreed to postpone the Closing Date for the credit from December 31, 1971 to June 30, 1972. 12. Work on the Second Highway Project (Credit No. 164 UG) is on schedule, and after some initial slowness the rate of disbursements has picked up considerably. However, project costs are on average about 30% higher than estimated. The Association has reviewed the situation and con- cluded that the Conditions of Contract currently in use in Uganda place a high element of risk on the contractors, who in many cases attempt to cover themselves by raising their bids. The Association has advised the Govern- ment to adopt some form of international standard conditions of contract for civil engineering works, such as the FIDIC conditions(Federation Inter- nationale des Ingenieurs Conseils) already used in many African countries. The Government has undertaken to review existing contracts to see whether economies might be effected consistent with the terms of the contracts. 13. The Development Credit Agreement for the Smallholder Tobacco Project (Credit No. 212 UG), which was signed in July 1970, has not yet become effective. This has been principally due to delays in Uganda in making certain required modifications to the Cooperative Society Rules and  - 4 - consequently in finalizing the Subsidiary Loan Agreements for on-lending the credit between the Government and, respectively, the Uganda Produce Marketing Board and each of the three tobacco unions involved. The Asso- ciation is actively pursuing this matter, and it is hoped that all the actions necessary prior to effectiveness of the credit will be corapleted in the near future. Meanwhile, preliminary work on the project has been proceeding satisfactorily. 14. As indicated above, some delay has occurred in procurement of furniture and equipment under the First Education Pro-iect (Credit No. 101 UG). This may necessitate a postponement of about nine months in the Closing Date for the credit beyond the present date of December 31, 1971. 15. Performance under the First Beef Ranching Project (Credit Mo. 130 UG) has been good, and it is expected that all funds will be committed by the end of 1971, about nine months ahead of schedule. 16. A Second Livestock Project, which would continue and expandc the scope of commercial ranching operations started under the first project, has recently been appraised, and an application for a second smallholder tea proiect has been received. 17. IFC's only investment in Uganda so far has been in the Hulco Textile Company. This investment was sold to the Government in September 1970 following the Government's announcement in lMay 1970 of its intention to acquire 60 percent of the share capital of Nvlulco. IFC is currently considering a loan of about $1.0 million to the Tourist Promotion Services of Uganda (TPSU). TPSU, in a joint 60:40 venture with the Uganda Develop- ment Corporation, plans to builc twzo loc.ges at a total cost of about $2.2 million. PART III - DESCRIPTION OF THE PROPOSED CREDIT 18. BORROIJER: The Republic of' Uganda PURPOSE: To help finance a second education project comprising (a) a teacher training program for secondary school teachers; (b) the expansion of vocational, agricultural and paramedical training facilities and exten- sions to upper secondary and technical secondaly schools; and (c) related tech- nical assistance AIOIUNT: US$7.3 million equivalent in various currencies  AlIORTTZATION: In 50 years, inclucing a ten-year period of grace, through semi-annual installments of