Uganda - Second Technical Assistance Project

Document of The World Bank FOR OMCIAL USE ONLY (<~lq V43- (J5 Reqt No. P-3691-UG REPON! MND lEDA5IED3IO or TME PRESXDENT OF THE IliTID DEVELOPUEtIT ASSOZO TO TIM EXECUTI DIRECTORS PROCFSED CREDIT OF SDR 14.2 IMILLOBiI TO THE REpuBLC OP UG_ND FOR A SECOUD TECHNICAL ASSISTANCE PROJCT December 5, 1983 I M dmuut a restid ihedm md my be moed by rec_lmlumb. im the Pfmmme O i ,'ir oIla idi lb mhamb mimy ng dbwu be ilicimi witbeu Werd Bak _mihahi.  Currency Equivalents Currency uit -Uganda Shillings (USh) US$ 1.00 - lSh 150 (First Window) US$ 1.00 - lSb 280 (Second idow) USh 1.00 U 1S$ 0.0067 (First Window) USh 1.00 - US$ 0.0036 (Second WLndow) SDR 1.00 - US$ 1.05928 From October 1975 to May 1981, the Ugandan shilling as tied to the Special rawingW Right (SDR) of the IMP (SDR 1.00 - USh 9.66). Hoekver, the Ugandan shilling was devalued by 9O1 in June 1981 and has subeqUeutly been floating in relation to a basket of currencies. Since August 1982, the Bank of Uganda bas operated a dual ezchange rate systes, including a second window at which foreign exchange ist traded mre freely. Abbreviations CPTC ' Coolth Pnd for Technical Cooperatiot EDI - Ecomic Developmat Institute ESAT Z Eastern and Southern African NMaagement Institute IPA - Institute for Public Administration liPID -Ministry of Planing and Economic Development NIM - M1nistry of Power, Posts and Teleications OPE - Office of Project Exection of lJDP Fiscal Year July 1 - June 30  FOR OMCIL USE ONLY -i-. UGANDA SECOND TECHNICAL ASSISTANCE PROJECT CREDIT AND PROJECT SUffARY Borrower: Republic of Uganda. Anount: SDR 14.2 (US$ 15.0) million equivalent. Terms: Standard. Project Objectives The project aims at: and Description: (a) strengthening the Government's decision making, planning, project preparatiou and implementation capabilities through external assistance; and (b) transferring skills to Ugandans through training. To achieve these objectives, it would finance technical expertise provided by expatriate advisers or consulting firms, training and equipment. Risk: The main risk facing the project is possible delays resulting from the Government's weak administrative apparatus which hampers dec.sion making. The project addresses this risk directly by providing technical assistance in key areas of economic management. A second risk is the difficulties encountered in recruitment of long-term experts due to the difficult living conditions and security situation in the country. The project is therefore designed to break sub-projects, where appropriate, into phases utilizing more short-term experts which are easier to hire. Estimated Project Costs: Local Foreign Total - US$ Million- Technical Assistance 1.6 8.8 10.4 Training 0.3 3.2 3.5 Vehicles and Support Equipment 0.2 3.0 3.2 Total Project Cost 2.1 15.0 17.1 (net of taxes) Ihis document has a resuicted distnbution and may be used by reipients only i te performnce of theiir ofrica duties. Its contents may nototherwise be dicosed without World Bank authorization.  -ii- Financing Local Forein Total -in US$ million- Plan: Proposed IDA Credit - 15.0 15.0 Government of Uganda 2.1 - 2.1 Total Project Cost 2.1 15.0 17.1 Estimated FY84 FY85 FY86 FY87 FY88 Disbursements: Annual 0.20 2.50 5.30 4.50 2.50 Cumulative 0.20 2.70 8.00 12.50 15.00 Rate of Return: Not applicable. Appraisal Report: None.  REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF UGANDA FOR A SECOND TECHNICAL ASSISTANCE PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Uganda for SDR 14.2 (US$15) million equivalent on standard IDA terms to help finance a second technical assistance project. PART I - THE ECONOMY 2. An economic mission visited Uganda in May-June 1983 and its report, entitled "Uganda - Country Economic Memorandum" will be distributed to the Executive Directors shortly. A summary of social and economic data is given in Annex I. Background 3. Uganda achieved independence in 1962 with a number of important advantages: (a) a favorable climate, fertile soils and rich mineral base for economic development; (b) an established indigenous smallholder sector providing a widening range of export crops and an ample domestic food supply; (c) a small but rapidly growing industrial sector, contributing exports of copper and textiles; {d) a well-developed transport system, including facilities shared with Kenya and Tanzania under the East African Common Service Organization (EACSO) which later on became the East African Community (EAC); (e) an exportable surplus of hydroelectricity, with substantial scope for further development on the Victoria Nile; and (f) one of the most advanced education systems in East Africa. The initial years after independence clearly demonstrated the economic potential of the country. Real GDP grew by 4.8% per annum from 1963 to 1970, implying an increase in per capita terms of at least 2% per annum. The country was also able to maintain a reasonable savings rate (averaging 13%) which permitted implementation of an ambitious investment program without undue pressure on domestic prices or the balance of paymeuts. Although Uganda's export volumes grew slowly, export earnings were more than adequate to cover import requirements and the country maintained a current account surplus in most years. The Government's budgetary position  was also sotmd: revenue increased faster than recurrent expenditure during the latter half of the 1960s and, together with non-bank domestic borrow- ing, helped finance a significant proportion of development outlays. 4. However, after the coup in 1971, the situation quickly deterio- rated. Under the military regime, many skilled personnel left the country, the parastatal sector became bloated with the addition of many abandoned or confiscated industries, and professional standards within the administra- tion were eroded. On top of these largely self-imposed problems, the Ugandan economy was shaken by a series of external shocks: the sharp rise in petroleum prices after 1973, the breakup of the EAC in 1977, and the damage and looting which occurred during the 1978-79 war. As a result of these developments, real GDP stagnated through 1977 and then fell over the next three years. Import levels had to be cut by 50X from 1970 to 1979, due to lower export volumes, worsening terms of trade (except during the coffee boom years of 1977-79) and dwindling aid receipts. The Government's budgetary position also became increasingly untenable, as the revenue base was undermined and expenditure control collapsed. The resultant deficit was financed increasingly by bank borrowing, leading to monetary expansion and price inflation (averaging 74% per annum from 1977 to 1979). Not surprisingly, critical shortages developed and a large share of economic activity was diverted to the pervasive parallel market system called ..magendo". Recent Developments 5. By April 1979, when the military regime was overthrown, the Ugandan economy was in ruins. Initial efforts to promote recovery were constrained by an unstable political situation, administrative weaknesses and a severe shortage of foreign exchange. As a result, many of the ad- verse trends evident during the 1970s continued through 1980. In partic- ular, real GDP continued to decline while the inflation rate rose above 100% per annum. Then, in mid 1981, the Government made a dramatic break with the past by announcing a major devaluation of the Ugandan shilling and related price adjustments. Through a series of financial programs, sup- ported by assistance from the IMF and other donors, further policy reforms have been introduced over the past two years (see paragraphs 7 to 10). As a result, there has been a marked improvement in economic performance, despite the negative impact of internal security problems and adverse conditions in the world economy. The difficult security situation results from the disintegration of law and order during the 1970s and the need to rebuild the security forces after the 1978-79 war. Although most of the country is now at peace, periodic incidents of violence continue to occur, especially in the areas surrounding Kampala, disrupting production and transport activities and diverting budgetary resources for security-related activities. As regards the world economy, although Uganda's terms of trade have improved since 1981, the index remains at less than half the peaks achieved during the coffee boom years of 1978-79, and only 60% of the level in 1970. Equally important, Uganda's export earnings are now constrained by the quotas on coffee sales imposed under the International Coffee Agreement (ICA). During 1982/83, for example, Uganda's estimated coffee production was 40% higher than the quota limit; the balance was either stocked or sold on non-quota markets at discounts of up to 50%. The combination of economic recession and tighter fiscal policies in developed  countries has also affected the availability of external assistance. For Uganda, aid mobilization has been made particularly difficult by the legacy of international isolation imposed during the 1970s and the continuing concern overseas about the security situation in the country. 6. The economic recovery is evident in a number of indicators. (a) GDP grew on average by 5% per annum during 1981 and 1982, and this growth rate was probably sustained into 1983. The recovery was initially concentrated in subsistence agriculture but has been more generalized over the past two years. (b) Export volumes rose by an estimated 57% from 1980 to 1983, and would have recovered even more without the coffee quota con- straint. This export growth, together with improved aid utiliza- tion during 1983, has helped to finance a much-needed expansion of import volumes since 1981. (c) Government revenue has increased more than fourteenfold over the past two years, from 1.1% to 6.1% of GDP. Expenditure growth on the other hand has been less rapid, because the Government has restricted cash release to ministries in order to remain within the IMF ceilings. Consequently, the budget deficit was held to less than 2% of GDP during 1982/83. (d) The resultant restraint on bank borrowing by the Government has reduced the rate of monetary expansion. This, together with falling import prices, has helped to control general inflation, which is down from an estimated 100% per annum in 1980-81 to 45% in 1982 and about 30% in 1983. Despite this progress, overall levels of economic activity and trade remain substantially be'.ow the peak levels achieved in the early 1970s. As a result, per capita GNP is still only two thirds of the 1970 level. The burden of this income loss falls most heavily on wage and salary earners, especially in the civil service, who often have to resort to secondary employment or improper activities in order to survive. The Government 's Policies and Programs 7. The Government's primary goal is to restore law and order, a basic prerequisite for future economic progress. Second only to this, however, is the goal of rehabilitating the productive sectors. The first step towards rehabilitation was the introduction of the financial program for 1981/82, which has been followed by similar programs during 1982/83 and 1983/84. These programs have been supported by three stand-by arrangements with the IMF (for a total of SDR 320 million), drawings from the First and Second IDA Reconstruction Credits (providing US$145 million after June 1981) and assistance from other donors. Major actions taken by the Government are summarized below. (a) The official exchange rate was devalued from under USh 8 to USh 78 per US dollar in June 1981, and has subsequently been steadily depreciated further to USh 150 per US dollar on July 1, 1983.  -4- Since August 1982, the Government has also opened a second window where foreign exchange is more freely traded in an auction system. The rate established at the second window has fluctuated between USh 240 and USh 300 per US dollar over the past year, and was at USh 280 per US dollar on July 1, 1983. These exchange rate adjustments have led to a substantial reduction in the premium and importance of the unofficial market for foreign exchange. (b) The initial devaluation in June 1981 was accompanied by the removal of most price controls. The major exceptions were for producer prices of traditional export crops, retail prices of petroleum products and utility tariffs. For these controlled items, significant price increases have been introduced over the past year. Petroleum prices have been increased by more than twentyfold since December 1980 to reflect fully the impact of window-one exchange rate changes. Producer price adjustments have been more moderate, with increases of about tenfold for most major export crops. However, these increases are still substan- tially higher than general inflation and net returns from the production of all major export crops are now positive. The most serious lags in price adjustments have been for utility tariffs. Although most major tariffs have been increased by at least 1002 since 1980, these adjustments are inadequate to reflect present costs of supply, to provide resources for future development and to encourage efficient utilization of services. (c) Various measures have been introduced to improve monetary and fiscal discipline. To help control the demand for money and allocate credit, most interest rates have been nearly doubled over the past two years (although they still remain negative in real terms). As part of its obligations under the IMF stand-by arrangements, the Government has agreed to and met ceilings on the growth of net domestic credit and net credit to the Govern- ment. On the fiscal side, a number of measures were taken in mid 1981 to streamline and improve the elasticity of the taxation structure. Strict control has also been maintained over cash releases to ministries, although this has sometimes been at the cost of underfunding critical functions and the accumulation of domestic arrears. 8. The Government's Recovery Program, released in April 1982, was intended to provide a broader framework for the development of the economy during 1982/83 and 1983/84. It includes proposals for further policy and institutional reforms, as well as a project-specific investment plan. The total cost of the investment plan is US$737 million (including a "tail" of expenditures in 1984/85), of which about 80% is in foreign exchange. This cost is barely one third of the original project submissions and could have hardly been cut further without jeopardising the Recovery Program's modest goals. The basic strategy of the Recovery Program is also well suited to present conditions in Uganda, focusing on the short-term revival of the economy's productive sectors. While the Recovery Program recognizes the importance of the social sectors, on both humanitarian and developmental grounds, actual allocations to these sectors have been sharply curtailed,  - 5 - pending progress on rebuilding the productive base of the economy. In all sectors, priority is given to rehabilitation and improved utilization of existing capacity, with expansion limited to certain well-defined areas, such as production of agricultural implements and balancing investments. There are, in fact, very few new projects included in the investment plan. Consistent with this strategy, appropriate criteria have been used to help screen and select projects. For the productive sectors, primary emphasis has been given to projects which promise rapid foreign exchange benefits through either improved export performance or judicious import substitu- tion. 9. Participants at the last Consultative Group meeting for Uganda, held in May 1982, endorsed the Recovery Program both as a framework for government action and as a vehicle for mobilizing and allocating external assistance. At that time, the World Bank had estimated that new commit- ments of loans and grants would have to reach US$400 million in 1982 and US$450 million in 1983 for the Recovery Program to be implemented on sched- ule. Actual commitments averaged about US$360 million per annum over these two years, an encouraging response but still short of requirements. Aid utilization also has been slower than expected. As a result, net disburse- ments of loans and grants during 1982 and 1983 will be only about 70% of the levels projected at the Consultative Group meeting. It therefore is not surprising that the overall pace of implementation has fallen short of the Recovery Program's targets, and many projects included in the invest- ment plan are still to be started. The Government, for its part, has recognized that economic recovery will not be fully completed by June 1984. It has therefore decided to revise and extend the Recovery Program, as a two-year "rolling plan", for the 1983-85 period. The revised Recovery Program will comprise a mixture of rehabilitation projects carried over from the existing investment plan and a limited set of new projects select- ed with the sole objective of consolidating the recovery process. The Recovery Program has been adopted by the Government to be distributed to the next Consultative Group meeting, scheduled for late January 1984. 10. A decisive start to the process of economic recovery has now been made. The basic priority for further action is to strengthen the adminis- trative framework for implementing the Government's programs, for carrying them forwara and making them more effective. In some cases, strengthening means rebuilding what already existed in the early 1970s; in others, it means developing new institutions and policies relevant to today's real- ities. The administrative weaknesses faced by Uganda (and many other Sub-Saharan African countries) are inherently difficult to tackle and progress will be slow. However, the magnitude of the task ahead should not be allowed to undermine the commitment to much-needed economic reforms. The Government has already initiated action in this area: the Report of the Public Service Salaries Review Commission, which covers many issues relating to the organization and operation of the civil service besides salaries, was presented in November 1982 and is presently under review by the Government; the Government passed the Expropriated Properties Act in February 1983 to provide a legal basis for resolving ownership issues, and is about to start a series of financial and accounting studies on major parastatal organizations; various measures have been introduced over the past two years to improve foreign exchange budgeting and import licensing  - 6 - procedures; and, the Agricultural Policy Committee was established in August 1982 to advise the Government on prices, marketing and resource allocations for the agricultural sector. Not surprisingly, given the severe erosion of the country's productive base and infrastructure during the 1970s, much remains to be done before Uganda's recovery can be con- sidered complete. But, the Government's Recovery Program and evolving policies are headed in the right direction, and merit support from the international community. Sectoral Priorities 11. Economic revival will depend on increasing production levels, especially of exports. This entails the highest priority initially being given to export crop production, to the supporting transport and communica- tions infrastructure, and to the production of basic consumer goods, build- ing materials and agricultural inputs by the industrial sector. Other sectors, especially the social sectors, also require urgent rehabilita- tion. But in the near future, the rehabilitation of these sectors must be limited to the extent of their potential contribution to the recovery process. Improvements in medical services, the repair of damaged class- rooms and the rehabilitation of hazardous urban water systems, for example, may be expected to provide an important, if unquantifiable, incentive to producers. 12. Agriculture dominates the Ugandan economy, providing livelihood to 90% of the population and supplying almost all Uganda's exports in recent years. Ugandan agriculture is largely dependent on small- and medium-scale peasant farms; no attempt was ever made to encourage expatri- ate settlements, and even today, large-scale estates are only significant in tea and sugar production. With its favorable natural conditions, Uganda produces an overall food surplus in most years, though areas like Karamoja in the north-east, which are vulnerable to drought and which depend on a traditional trade of cattle for grain, have suffered periodic food short- ages as a result of low rainfall and insecurity. The rehabilitation of agriculture is the top priority for Uganda's economic recovery. Coffee, cotton, tea, and tobacco exports could all continue to grow rapidly over the next three years (although the previous peak levels are not likely to be reached until later in the 1980s and coffee exports will probably remain subject to ICA quota constraints). In addition, scope exists for expanding non-traditional exports (e.g., hides and skins, foodstuffs and fertilizers) to neighboring countries. The revival of cotton and other agricultural production would also supply some domestic industrial needs. During the rehabilitation phase, the Government has decided to give top priority to improving incentives, including changes in producer prices and the market- ing system. Closely related to this is the supply of inputs, implements, spares for processing and transport, and consumer goods to stimulate the production of surpluses. Over the longer term, agricultural services, including research and extension, will also need more attention. 13. Although Uganda's industrial sector has always been relatively small, it did in the past make a valuable contribution towards supplying the domestic market with basic goods and, in some instances (e.g., textiles and copper), produced a surplus for export. However, the sector largely collapsed during the 1970s. Although industrial production did begin to  recover during 1982, performance of the sector remains very uneven, with many enterprises still closed down and average capacity utilization of only about 30%. At present, the most obvious and generally binding constraint is the severe shortage of foreign exchange. However, the longer-term decline in the sector reflects more fundamental constraints which are re- emerging as the foreign exchange situation improves. These include: shortages of qualified managerial and technical expertise, problems of creditworthiness (res'lting from ownership uncertainty, financial indisci- pline and, more recently, the Impact of devaluation on costs), and over- expansion and political interference in the management of the parastatal sector. The Government has now declared its intention to follow a "mixed econDmy" strategy, with only essential public services reserved exclusively for the public sector. In other areas, domestic and foreign private enter- prise is to be encouraged, either wholly owned or in joint ventures with the Government. The Government expects to close down or sell off a number of the existing industrial enterprises, while the financial viability of the remaining parastatals is to be restored through increased tariffs, asset revaluation and injections of new capital. Actions initiated by the Government in this area, including the Expropriated Properties Act and a program of financial and accounting studies, were noted in paragraph 10. However, the modalities for restructuring the parastatal sector are still to be worked out fully. 14. Uganda's transport system, formerly one of Africa's best, deteri- orated rapidly during the 1970s for the sane general reasons outlined ear- lier: the departure of skilled personnel, political interference, and in- adequate provision of resources for essential functions like maintenance. In addition, the breakup of the East African Community (EAC) in 1977 had a serious effect, especially on Uganda's access to international trade routes. As a result Uganda lost virtually all railway rolling stock and aircraft and her part-ownership of railways and port facilities in Kenya and Tanzania. This both necessitated heavy new investments by Uganda, and seriously disrupted international traffic movements while increasing their cost. Transport was moreover the sector possibly most seriously affected by the war and the widespread looting which followed. The vehicle fleet in particular was decimated. Rehabilitation of the transprort system and sector institutions, thus becomes a key requirement for eccnomic recovery. 15. The World Bank recently completed an assessment of Uganda's energy sector. Energy use is primarily based on electricity, petroleum and woodfuels. At the present time, Uganda's electric generating capacity is underutilized. However, the surplus could be quickly absorbed as the economy recovers and the opportunities are taken to substitute for more expensive fuels (such as petroleum products) and to secure long-term export agreements with neighboring countries. As a result, the Government has initiated two studies on the power subsector, one on the rehabilitation of the Owen Falls Station and the other to help prepare a least-cost power development program. As regards petroleum, the Government has succeeded in reducing the cost of imports over the past two years, through the impact of higher retail prices on domestic consumption and smuggling as well as improvements in supply arrangements. Preliminary work to ascertain the extent and economic viability of petroleum resources in the Lake Albert area has also been started, although local oil production remains very much a longer-term and uncertain prospect. Woodfuels are estimated to account  for 95Z of total energy and 71% of commerclal energy consumption in Uganda. There is therefore mounting concern that uncontrolled cutting will eventually deplete the most accessible forest resources and lead to further soil erosion problems. Aid and Debt 16. Under the base-case scenario presented in the recent Country Economic Memorandum, Uganda's GDP is projected to grow by 4.7% per annum through 1985 and 3.6% per annum over the subsequent five years. Thes. projections assume a steady improvement In the internal security situation and continued progress on economic reforms. However, 2he viability of this scenario is also critically dependent on the availability of foreign ex- change to finance recurrent imports and priority rehahilitacion projects. Although the recent recovery in export performance is expected to contlnue, the current account deficit stays around Its present level in real terms for the remainder of this decade. This has major implications for external financing requirements. (a) Commitment levels are required to increase by about one quarter during 1984 to US$430 million and then to continue rising with international inflation (i.e., constant in real terms) through 1990. As debt relief and private loans are expected to fall, other forms of external assistance will have to increase by as much as two thirds during 1984. (b) The composition of commitments is as important as the levels themselves. Under Ugandan conditions, balance of payments support will continue to be essential for at least the next two to three years. However, project aid will become Increasingly important during the second half of the decade and even has a role to play in the short term, provided it is consistent with the rehabilitation priorities in the Recovery Program. Technical assistance, while not as large in dollar terms, is important for improving public administration and making other forms of aid effective. (c) The net benefit to Uganda of higher commitments could soon be eroded if they are not provided on concessional terms. This does not preclude the possibility of utilizing some -mercial bank loans or suppliers' credits for projects which generate substan- tial net foreign exchange earnings to cover debt obligations. However, arrangements which involve prior claims on foreign ex- change, such as coffee barter deals, should generally be avoided. On the Ugandan side, efforts are underway to strengthen aid coordination and administration. In particular, the Government has allocated responsibility for coordinating aid mobilization, signing aid agreements and authorizing disbursements, and monitoring aid utilization and project implementation. Appropriate staff, facilities and technical assistance might need to be provided to the responsible units, so that they can operate effectively. 17. Uganda's external debt outstanding and disbursed had reached an estimated US$620 million by the end of 1982. Of this amount, 4.0% was due to IBRD (for Uganda's notional share of EAC loans) and 15.5% to IDA.  - 9 - Fortunately for Uganda, the terms of new aid commitments since 1979 have been highly concessional, with about half being grants and the balance of loans having a grant element of 60%. However, other debt obligations, such as war-related assistance and IMF purchases, have helped to raise the overall debt service ratio to around 50% during 1981-83. Under the base-case scenario in the Country Economic Memorandum, the debt service ratio is projected to fall back to 40% in 1984 and 32% by 1990. This, however, is still cause for concern. Further, the down-side risks are very real: Uganda's export structure is still heavily dependent on coffee, earnings from which could be constrained by further quota restrictions and unfavorable price movements; the Government may find it difficult to reduce the import requirements of security-related activities; and adequate amounts of assistance, on concessional terms, may not be forthcoming to support the recovery effort. This outlook reinforces the importance of external debt management. Progress has been made over the past year in improving debt recording and an External Debt Management Office has been established. The real priority now is to develop an appropriate borrowing program for Uganda and ensure that it is adhered to by centralizing the authority to contract debts. PART II - BANK GROUP OPERATIONS 18. Bank Group operations in Uganda began with an IBRD loan of US$8.4 million for hydroelectric power development in 1961. Between 1967 and 1971 Uganda received seven IDA credits totalling US$48.0 million for projects in education, roads and agriculture (tea, tobacco and beef ranching). In addition, Uganda benefitted from 10 loans totalling US$244.8 million which were extended for the development of the common services and the East African Development Bank operated jointly by Kenya, Tanzania and Uganda through their association in the former East African Community (EAC). Annex II contains a summary statement of Bank Group operations. IFC's first investment in Uganda, in a textile company, was sold to the Government in 1970. The second, to help finance two lodges in the national parks was cancelled in 1972 before construction began. IFC approved new investments in the Toro and Mityana Tea Company and in the Lugazi Sugar Factory in FY83. 19. There was a hiatus in Bank Group operations from 1971 until February 1980, when a Reconstruction Program Credit of US$72.5 million (including a participation of US$17.5 million by the Netherlands) and an EEC Special Action Credit of US$20.0 million were approved (Nos. 983/983-1-UG and 54-UG). The Association also acted as Administrator of a Can$3.0 million grant from the Government of Canada and of a US$5.0 million program loan from the OPEC Fund. The Reconstruction Credit originally experienced delays and disbursements were slow; it is now fully disbursed. About 26% of the Second Reconstruction Credit of US$70.0 million equivalent (No. 1252-UG), approved in May 1982 has been committed. In addition, the Association has provided US$178.0 million through the First Technical Assistance Credit (No. 1077-UG), a Water Supply Engineering Credit (No. 1110-UG), a Phosphate Engineering Credit (No. 1228-UG), an Industrial Rehabilitation Credit (No. 1248-UG), an Agricultural Rehabilitation Credit (No. 1328-UG), a Third Education Credit (No. 1329-UG) and a Posts and  - 10 - Telecommunications Rehabilitation Credit (No. 1367-UG). Progress in the implementation of the First Technical Assistance Project is discussed in detail below (see paragraphs 32-36). 20. A comparison with other portfolios in the Eastern Africa Region indicates that the disbursement rate in Uganda has been higher than in the Region, ranging as a proportion of outstanding commitments from 43% in FY80 to 30% in FY83 (compared with 19% and 262 in the same years for the Region as a whole). Disbursements under the Water Supply Engineering Credit are continuing and have started satisfactorily under the Phosphate Engineering Credit. There are no disbursements yet from the Industrial Rehabilitation Credit due to the time needed to appraise sub-projects in detail. Progress under the Agricultural Rehabilitation Project is good and disbursements are satisfactory. The two credits for the Third Education, and the Posts and Telecommunications Projects have been declared effective recently; disbursements have not yet commenced under these credits. 21. The Bank Group also administers an Agricultural Reconstruction Program (INo. 80-UG) of US$20.0 million equivalent financed by the Inter- national Fund for Agricultural Development and a UNDP financed Planning Assistance Project (UGA/79/011) (see paragraphs 30-31). In the immediate future, Bank Group operations will remain focussed on rehabilitation pro- jects. Besides a Third Reconstruction Credit, rehabilitation projects are under preparation for roads, power and water supply. The emphasis will shift gradually into traditional projects in the agriculture, industry, transport and energy sectors. 22. The developments affecting the East African Community (EAC) were outlined to the Executive Directors in a memorandum dated December 29, 1977 (R77-312) and in a statement made on May 6, 1980 (SecM8O-364). One of the positive results of the ongoing mediation effort has been the Partner States' decision, taken upon the Mediator's recommendation, that the East African Development Bank - one of the former Community's institutions -- should continue, and a revised charter to this effect has been enacted. The three Governments commented on the Mediator's proposals for the three Partner States during their meeting In Nairobi in July 1981, and decided to commence negotiations based on the Mediator's proposals. Negotiations which started in December 1981 and continued through 1982 and 1983 focussed on details of a division formula for assets and debts. While it was generally accepted that both location of assets and the principle of equal rights of all former BAC partners should be taken into account, the weight to be attributed to these principles was a major issue. On November 15 and 16, 1983 the negotiations culminated in a meeting of the three Heads of State in Arusha in which full agreement was reached on all outstanding issues, including the prominent weighting question. The agreement follows the recommendations of the Mediator and provides equity shares of 42% for Kenya, 32 X for Tanzania, and 261 for Uganda. As a result of this formula, Kenya and Tanzania have excess assets over their equity shares, while Uganda has a shortfall. The Presidents agreed therefore that Kenya and Tanzania will pay compensation to Uganda. The method of payment of this compensation is to be worked out at the ministerial level by March 31, 1984.  - 11 - PART III. THE NEED FOR TECHNICAL ASSISTANCE 23. The Government has made considerable efforts over the past three years to improve its economic performance. However, given the severe erosion of the country's productive base and infrastructure during the 1970s, much remains to be done before Uganda's recovery can be considered complete. As indicated earlier, the principal elements for recovery are the policy reforms started in mid-1981, and the rebuilding and strength- ening of the institutional structure of the Government. The need for tech- nical assistance arises out of the loss of much of Uganda's skilled and trained manpower during the 1970s and the shortage of specific skills in the areas critical to recovery. 24. The Government in its efforts to achieve recovery has to work with an administrative machinery that has been seriously affected by abuse and neglect for close to ten years. The civil service's internal situation is characterized by: manpower constraints in the higher levels and an expansion in the lower levels; financial constraints; low pay and low staff morale; weak management and organizational problems; poor records and data systems; inadequate training and broken down equipment. The Government appointed a Public Service Salary Commission which reviewed these issues. Its report, presented to the Government in November 1982, is still under review within the Government. In the interim, the Government increased average wages for civil servants by 20% in April 1983 and by another 50% in July, and imposed a partial freeze on declared vacancies. Some improvement in the statistical services is evident and a start is being made- on job evaluation in the public service. However, the major issues indicated above have not yet been comprehensively tackled. Technical assistance will help define the approach to be taken, in conjunction with the recommendations of the Bank Group Public Administration mission and various sector missions which studied the agriculture, transport, education and energy sectors, urban development and the health and nutrition situation. The respective memoranda are in various stages of preparation and will be discussed with the Government in the next few months. All reports deplore the effects of the above outlined situation in their respective sectors and reiterate the critical shortage of trained personnel. A common theme is the recommendation to alleviate the difficulties which face Uganda's economy by providing technical assistance and training. 25. The status of planning illustrates the situation. Overall planning responsibility rests with the Ministry of Planning and Economic Development (MPED). However, NPED's ability to carry out its functions is limited. The few skilled staff in the Ministry are fully occupied with a multitude of ad hoc tasks with the result that neither macroeconomic planning nor project appraisal and monitoring are carried out effectively. At the same time, most sector ministries have no or only a few skilled planners and therefore cannot prepare sector policies and investment projects. Combined with MPED's lack of planning capability, the result is a general absence of sector policy development and planning, and project preparation.  - 12 - 26. Similarly, there are no, or only a few, accountants in the ministries. The Government accounts are therefore in a poor state and have not been audited since 1973/74. As a result expenditure control is extremely difficult; accountability for the use of public funds cannot be ensured and essential information on the use of fuads is lacking. Accounting in the parastatal sector, which is of major importance to the economy, has broken down too; many public enterprises have not produced accounts for many years. Reliable statistics are also lacking. While some ministries and agencies prepare some statistical information, the Statistics Department in MPED has not been able to produce the statistical data required for monitoring economic developments. 27. The Government's activities have been uncoordinated vis-a-vis aid donors. Three ministries, (Finance, MPED, and Foreign Affairs), and the Bank of Uganda have offices concerned with aid coordination. There is an overlap of functions and a diffusion of responsibilities. There is no effective system to collect data about donor aid programs and procedures. To remedy this situation the Government has now decided to give overall responsibility for aid coordination to the Ninistry of Finance and has appointed a Permanent Secretary for Aid Coordination who will be supported by about six staff members. 28. The Recovery Program places heavy emphasis on strengthening the central 'control' ministries (Finance, MPED, Public Service and Cabinet Affairs, Local Government, and the Office of the President). This effort is central to the Government's strategy for improving its ability to manage the economy. A start already has been made with the UNDP - Planning Assistance Project (see paragraph 30) which is intended to help to strengthen NPED, and in the Second Reconstruction Program (Cr. No. 1252-UG) which initiates measures to strengthen the Government'6 capacity to formulate and implement policies and programs in those areas which are critical for the country's economic recovery. As part of this effort, the Government, with the help of IMF advisers and Bank staff, has prepared a program to strengthen the Ministry of Finance, and a major study of the accounting situation of key parastatals (see paragraphs 41 and 42). The project would assist in these areas. 29. The project would thus continue the support provided by the Bank Group and other donors to address critical manpower constraints through technical assistance. Bilateral donors have been a source of technical assistance to Uganda, mostly in the years immediately after the war in connection with food aid or disaster relief. In subsequent years, funds have been provided, but mainly for project preparation and only in small amounts. Other sources of technical assistance have been the EEC, UNICEF, and UNDP, the former two with respect to specific project activities, the latter also providing general technical assistance through one of their projects, the UNDP-financed Planning Assistance Project (UGAl79/011) which is being executed by the Bank (see paragraph 30 below). UNDP has provided a total of about US$36.6 million for technical assistance over the past five years. This is about 2Z of total aid commitments to Uganda. However, UNDP funds are now becoming more scarce. The Government therefore, requested the Association to finance high priority requirements for technical assistance in the area of economic management.  - 13 - The UNDP Planning Assistance Project 30. To address one area of weak ecoaomic management, UNDP agreed to provide US$2.5 million for a Planning Assistance Project to help strengthen MPED. The UNDP Project signed in January 1982, after a one year preparatory period, finances seven experts (two macroeconomists, three sector economists and two statisticians) and short-term consultants, together with training and equipment to support MPED. The Project's objectives are to strengthen MPED's capacity to monitor the implementation of the Government's Recovery Program and to develop a medium-term development program consistent with available resources. However, implementation of the Project has been slow. In addition to the security and housing situations, which make life and work in Uganda difficult and frustrating, recruitment has been hampered by slow decision-making in Kampala. The difficulties facing this Project were discussed at a tripartite review between the Government, UNDP and the Bank in early November 1983 at which it was agreed that the objectives of the Project are still valid, if not more so in view of MPED's continuing weakness. 31. During the review, the terms of reference for some of the expert positions included in the UNDP Project were redefined, which, together with the gradual improvement in living conditions in Uganda, should alleviate recruitment difficulties. Moreover, agreement was reached to place greater emphasis on short-term experts who by and large have proven easier to recruit. Should renewed efforts by the Bank to recruit the necessary team prove fruitless, other means of recruitment including the use of a consulting firm or an international organization such as the Commonwealth Fund for Technical Cooperation (CFTC) would be considered. The Government has also agreed to act more expeditiously on appointment proposals. It has further been agreed that MPED needed to take urgently steps to strengthen its own capabilities including implementation of long delayed recruitment and promotion plans. Moreover, agreement has been reached on a training program for staff of MPED and the planning units of sectoral ministries. Once these changes have been implemented, MPED would be in a better position to fulfill its statutory responsibilities. The First Technical Assistance Project 32. As an early part of its efforts to assist the Government to strengthen the planning capacity of ministries and other agencies and to help prepare and implement projects, the Association made available a credit of SDR 6.4 (US$8.0) million equivalent in December 1980 (Cr. 1077-UG). The credit was to be allocated in agreement between the Government and the Association for specific sub-projects. These were to be prepared by Government ministries, parastatal enterprises or other public and private entities, then reviewed and evaluated by MPED before being presented to a Review Committee. All sub-projects costing US$10,000 or more required prior approval of the Association. Implementation of sub-projects is the responsibility of the respective ministries and agencies while NPED is required to report on progress to the Association. 33. After a slow start, the first major sub-project was approved in February 1982. As the procedures were established, the pace of approvals increased and the credit is now fully committed as follows:  - 14 - (a) about 30Z for project preparation, mainly for the Third Education Project and the proposed Third Highway Project; (b) about 68% to support institutions involved in key areas of economic development through: (i) long-term experts supplementing existing manpower as in the Agriculture Secretariat (which is responsible for providing the economic and analytical basis for policy-making in the agricultural sector, including pricing, marketing and resource allocation), or in the Central Tender Board (to help improve procure- ment practices and procedures which have been identified as deficient under the Second Reconstruction Program); and (ii) short-term assignment of experts to fulfill specific tasks such as helping MPED to up-date the Recovery Program, the 1Ministry of Finance to improve and centralize the Government's accounts; and (c) about 22 for training, mainly for individual fellowships at various training institutions abroad. A complete list of sub-projects financed under the Credit is given in Annex IV. All sub-projects are either completed or well underway. Implementation through vasrious experts and consulting firms has been satisfactory. 34. Disbursements follow the course of the sub-projects some of which require two years or more to implement. The credit is expected to be fully disbursed by the original closing date of December 31, 1985. 35. Experience with sub-project preparation and review has been mixed. All sub-projects which were finally approved by the Association were prepared by Bank staff in the course of sector work or project preparation. Sub-projects which were prepared without involvement of Bank staff show that the capacity of the proposing agencies to prepare, and of MPED and the Review Committee to subsequently review and analyze them, needs to be improved. It is expected that the revised UNDP-financed Planning Assistance Project will strengthen MPED to help it to fulfill its tasks under the project. In addition, the proposed project addresses this problem through phasing arrangements under which short-term experts would be hired to prepare sub-projects in appropriate cases (see paragraph 52). Nevertheless, the Association would have to continue to devote considerable efforts to the review of sub-project proposals. 36. The training component of the First Technical Assistance Project has met with limited success. Only about one eighth of the funds originally allocated for training have been finally committed for training purposes, mainly for individual fellowships at various training institutions abroad. While the courses taken have undoubtedly been relevant to the work performed by the individuals, the effectiveness of this kind of training remains doubtful in the Ugandan context and is in any  - 15 - case difficult to measure. The design of the project takes this experience into account (see paragraph 48). 37. Despite these weaknesses, the First Technical Assistance Project proved to be a flexible and effective instrument to help meet a broad range of urgent technical assistance requirements, most of which were not foreseen at the time of appraisal. However, while obvious needs are being met, many remain to be addressed and new requirements are continually being identified by the Government in the course of the Recovery Program's implementation, Bank economic, sector and project work, and the work of other agencies. Although there are other sources of technical assistance, including UNDP, the Bank Group is particularly well placed to provide this kind of broad and flexible assistance because of the range of its experience which is made available to Uganda in the course of sub-project preparation and approval. As a multilateral institution it is also better suited to provide technical assistance in sensitive areas such as economic management and public administration. PART IV - THE PROJECT 38. The project was appraised in April 1983 and negotiations were held in November 1983 in Washington; the Ugandan Delegation was headed by Mr. J.W. Okune, Permanent Secretary in the Ministry of Planning and Economic Development and included representatives of the Ministries of Finance and Justice. A Credit and Project Summary is at the front of this report and Annex III contains supplemental project data. Objectives and Description 39. The objectives of the project are to: (a) strengthen the Government's economic decision making, planning, project preparation and implementation capabilities through external assistance; and (b) transfer skills to Ugandans through training. 40. To achieve these objectives the credit would finance high prior- ity sub-projects selected in agreement between the Government and the Association. They would address the most important areas of the Govern- ment's economic management. Sub-projects would have to be consistent with the Government's Revised Recovery Program for 1983-85. As a matter of priority, they would concentrate on: (i) the Ministries of Finance, Planning and Economic Develop- ment, and Public Service and Cabinet Affairs to improve their capacity to manage the Ugandan economy; (ii) sector ministries to strengthen their planning and project preparation capacities; and (iii) the Institute of Public Administration to enhance its ability to provide training in Uganda.  - 16 - Assistance to Central Ministries 41. The Ministry of Finance already receives technical assistance from the IMF through an expatriate expert who is acting am Deputy Commissioner of the Budget Department. CFTC assists the Income Tax and Customs Departments and Uganda Computer Service (which Is part of the Ministry). However, the Ministry needs further assistance and has thus requested help to strengthen the Government's accounting system and procedures, the first phase of which has been approved under the First Technical Assistance Project (see Annex IV). Recruitment efforts are underway for two accountants, one to act as Deputy Commissioner, Treasury Officer of Accounts and the other to head the Inspectorate Section of the Treasury Department. Their terms of reference (see Annex VII) include preparation of a comprehensive program for improving the management and organization of the Accounting Department which would be financed as a second phase from the credit. 42. According to the program as agreed under the Second Reconstruction Program, the Ministry of Finance has requested assistance by consultants to reconstruct the accounts (or where appropriate prepare statements of affairs) of a number of important parastatal organizations including the agricultural marketing boards, the public service corporations, financial companies and major production companies. Terms of reference for this work (Annex VI) have been agreed and negotiations are underway with the selected consulting firm. The study would be undertaken in two phases: during the first (diagnostic) phase, the work to be done under the second (substantive) phase would be more clearly defined and a detailed work program prepared. The first phase would be financed under the First Technical Assistance Project (see Annex IV), while financing of the second phase would come from this project. 43. The rehabilitation of the Statistics Department in MPED has high priority. The first task of the statistical adviser, financed under the UNDP Planning Assistance Project (see paragraph 30), will be to help prepare a comprehensive rehabilitation program suitable for financing under the project. 44. The Bank's Public Administration mission (see paragraph 24) has prepared recommendations designed to strengthen the Ministry of Public Service and Cabinet Affairs and the Office of the President. Technical assistance would support the mission's recommendations, including a review of ministerial functions, efficiency audits, improved personnel management and salaries. The mission's report and recommendations will be discussed with the Government and details of a sub-project would then be agreed. Assistance to Sector Ministries and other Technical Assistance Needs 45. The Government has decided to establish new planning units or strengthen existing planning units in all sector ministries and several ministries have prepared sub-project proposals for technical assistance to help their efforts. Terms of reference for one of these advisers to the Ministry of Animal Industries and Fisheries are in Annex VIII. Similarly, the Bank's Energy Assessment mission (see Energy Sector Report, No. 4453-UG, of July 1983) discussed with the Government the recruitment of an  - 17 - energy planner who would review proposals for an energy department in the Ninistry of Power, Posts and Telecommunications (MPPT), prepare a program for implementing institutional reforms and develop job descriptions for manpower requirements. His terms of reference are currently under preparation and would include, in turn, preparation of a proposal for a follow-up assignment as well as terms of reference for an energy adviser who would provide technical support in moaitoring energy trends and developments, and advise on policies and programs for the energy sector (power, petroleum and wood resource management). 46. While efforts are made to strengthen the central ministries and the planning units of the sector ministries there are many tasks that need to be carried out urgently and for which technical assistance is required. These include preparation of projects included in the Recovery Program and implementation of ongoing projects. A number of proposals for feasibility, rehabilitation and capacity utilization studies in industry, mining, agriculture and transport have already been presented to MPED and are being reviewed; several proposals for assistance in project implementation have also been prepared. Other technical assistance needs arise out of the Energy Sector Report (No. 4453-UG of July 1983), other sector reports and ongoing Bank Group financed projects. The credit would be available to finance high priority studies and technical assistance needs of this kind. Assistance to the Institute of Public Administration (IPA) 47. The Institute of Public Administration (IPA) would be rehabilitated. The Institute, founded in 1968, is intended to be the Goverinment's high level training institution for the public service. After several successful years, the quality of its instruction has suffered because of budgetary constraints and low morale both among its staff and trainees. Although the Institute appears to have escaped large-scale looting during and after the war, it suffers from a small and shrinking cadre of experienced trainers, lack of books and teaching materials and deteriorating physical facilities. The first phase of assistance designed to make IPA an effective teaching institution would follow the proposals prepared by the Bank's Public Administration mission. Subsequently, a comprehensive rehabilitation program would need to be prepared and could be presented to external donors for financing. Assistance in Training 48. Training under the project would take three forms: (a) Sub-projects designed to strengthen ministries or other organizations would include, as appropriate, provision for training, mainly in Uganda, specifically geared to the objectives of the sub-project. (b) Freestanding training sub-projects could be designed to upgrade the skills of an individual or a group of individuals either from one organisation or representing one professionel category. Such training proposals would form part of comprehensive training programs for the organization or organizations involved on the basis of which the Association would give its approval (see Annex V/Part B (c)).  - 18 - (c) Training courses in various aspects of the project cycle to be held in Uganda would be arranged; EDI and/or ESAMI could help organize and run such courses. In view of the experience under the First Technical Assistance Project preparation of training proposals could be phased, if necessary, like other sub-projects. Implementation of training proposals could be sub-contracted or "twinning" arrangements made, i.e. an expatriate partner organization found which would advise on and subsequently implement a single training proposal or entire training programs. Such "twins" could be universities, other institutions with training capabilities acceptable to the Association or similar operating entities such as Electricity Boards or even ministries. Training could be in the form of fellowships, special courses and - most important - on the job in Uganda or at a "twin's" headquarter. Organization and Implementation 49. MPED is responsible for coordinating the selection of projects for inclusion in the Recovery Program and the development budget, and for coordinating externally provided technical assistance. It was chosen to administer the first Technical Assistance Project because of its responsibilities and should continue with the administration of the second project. Its weaknesses have been addressed under the Second Reconstruc- tion Program and with renewed efforts to implement the UNDP-financed Planning Assistance Project its capacity to administer the second project should be greatly enhanced. 50. Under the first project, a senior economist in MPED was appointed project coordinator. This position, with the same terms of reference (Annex V/Part A), would continue to be filled under the project by a suitably qualified senior official (Section 3.04(b)(i) of the Development Credit Agreement). However, since this has not proved sufficient under the first project, it has been agreed with the Government that an expatriate adviser would be employed by June 30, 1984 to assist MPED in carrying out its technical assistance coordination functions, including the overall implementation of the project (Section 3.03(b) of the Development Credit Agreement). One of his tasks would be to closely liaise with the Project Coordinator. 51. Sub-project proposals would be prepared by Government ministries, parastatals or other Government agencies or the private sector following the same procedures as under the First Technical Assistance Project (see Annex V/Part C). Due to the weakness of preparation work, as shown under the first project, sub-projects would be phased in appropriate cases and assistance provided through consulting firms or short-term experts to help with sub-project preparation. The Project Coordinator would review the proposals, together with appropriate staff of MPED's sectoral planning department, and summarize the conclusions of the review in a report to be submitted to the Review Committee for final approval. The Review Committee, made up of the Permanent Secretary of MPED, the Secretary of the Treasury and officials from MPED and other Ministries and agencies, would continue within MPED (Section 3.02(c)(i) of the Development Credit Agreement). Its terms of reference are in Annex V/Part B. All sub-project proposals would be submitted to the Association for prior  - 19 - approval and allocation of funds under the credit (Section 3.02(d) of the Development Credit Agreement). 52. Sub-projects would be implemented by the minLstry, parastatal organization or enterprise concerned in accordance with the approved pro- posals. Counterpart staff are expected to be assigned to the various sub- projects prior to the employment of consultlng firms or experts (Section 3.03(f) of the Development Credit Agreement). Implementation arrangements for any sub-project could include where appropriate "twinning' with or sub-contracting to organizations acceptable to the Association to provide advice, operating assistance and training. Fellowships for study abroad would be administered with the assistance of the Office of Project Execution of UNDP or a similar organization under a contract acceptable to the Association. Sub-project accounts, which would be audited, would be maintained by the Implementing agencies (Section 4.01(a) of the Development Credit Agreement). MPED would monitor project implementation, including disbursements, and report to the Association regularly. Cost and Financing 53. The total project cost would be about US$17.1 million. The credit would finance all foreign exchange cost or 88X of total cost. The Government would contribute the remaining US$2.1 million. Internationally recruited consulting firms and experts would be exempted from identifiable taxes and duties. Costs of locally hired consulting firms and experts, of equipment and vehicles have been estimated taking account of local taxes; disbursements have been calculated accordingly (see paragraph 55). The approximate project budget is provided in the Project and Credit Summary at the front of this report. 54. Sub-projects would be undertaken by long- or short-term expatriate advisers or consulting firms, and include equipment and training. The estimated average cost per man-month including allowances, international travel and subsistence is about US$10,000 for individually hired experts and US$15,000 for foreign consulting firms. The terms and conditions for study abroad, if any, would be those of fellowships financed by UNDP. Local costs would consist of counterpart staff salaries, office space and support. These costs would be borne by the Government and the implementing agencies. The credit is expected to be fully committed by December 31, 1985, and the project completed by December 31, 1987. The closing date would be June 30. 1988. Procurement and Disbursement 55. Consultants and experts to be financed under the project would be selected and hired in accordance with the Bank Group's Guidelines for the Employment and Use of Consultants (Section 3.03(c) of the Development Credit Agreement). Procurement of equipment and supplies would be in accordance with the Bank Group's Procurement Guidelines and would be awarded on the basis of Limited International Tendering procedures. Contracts estimated to cost less than US$15,000 would not attract international interest and would be awarded on the basis of the Central  - 20 - Tender Board procedures (Schedule 3, Part B of the Development Credit Agreement) which require that all purchases exceeding USh 200,000 (equivalent to about US$700) for any single ministry In any fluancial year be made on the basis of either competltive biddlng or at least three quotations from different suppliers and be approved by the Central Tender Board. The credit would be disbursed against 1OOZ of foreign expenditures for internationally recruited, and 70X of locally recruited consultLng firms and experts; 1002 of foreign expenditures and 90X of local expenditures of equipment and vehicles; and lOOZ of the cost of trainlng. All expenditures would be fully documented. Benefits and Risks 56. The project would assist the Government to address some of the major weaknesses in its capacity to manage and rehabilitate the economy. If the project helps to reconstruct the accounts of major parastatal organizations and recommends ways to improve their financial management, the Government's control and supervision over their activities would be improved. Accurate Government accounts in the Ministry of Flnance and vital statistical information in MPED would be important prerequisites of sound Government economic management. Policy formulation and project preparation would be isproved through various forms of assistance expected to be provided under the project. Publlc administration would also be Improved through the assistance to the Ministry of Public Service and Cabinet Affairs, and especially through the improvement of IPA. Finally, the pipeline of development projects suitable for external financing would be Improved through the carrying out of feasibility and other studies. 57. The main risk facing the project is possible delays resulting from the Government's weak administrative apparatus which hampers decision making. However, the project's objectives are directly geared to this risk. The experts to be hired would help to lay a basis through Improved management, data collection and feasbillty studies for the Goveroment's decisions. A second risk is the difficulties specifically encountered In recruitment of long-term experts, due to the difficult living conditions and security problems in the country. The project Is therefore designed to break subprojects, where appropriate, into phases utilizing sore short-term experts which are easier to hire. In addition, sub-project implementation would be sub-contracted to consulting firms or other appropriate organizations which are in a better posltion to recruit and hire expatriates than the Government. The risks are thus satisfactorily addressed. PART V - LEGAL INSTRUMENTS AND AUTHORITY 58. The draft Development Credit Agreement between the Republic of Uganda and the Association and the Recommendation of the Committee provided for in Article V, Section I(d) of the Articles of Agreement are being distributed to the Executive Directors separately. 59. Special conditions of the project are listed in Section III of Annex III to this report. 60. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association.  - 21 - PART VI - RECONMENDATION 61. I recommend that the Executlve Directors approve the proposed credit. A. W. Clausen President Attachments By Ernest Stern December 5, 1983 Washington, D.C.  BEST COPY AVAILABLE -22- Page lo 5 mu (IMOUBMw. att )U6 1:1k IIU$RT tUN t$JW MIIILeIMUH Iiaeoeat Iu07ied RHINTIJT AIINCA B. OF StAHARA AFItA N. UPSAA TUTAL 11, RJIICULfURAL 63.3 68.6 104.0 IP NUo CITA (ONO ., .. lII.,a 1b4. lAi, 61135 WIUIMPYOU N CAPITA (XU RAN r OF COAL IQUIVAI.RT) 39.0