Uganda - Third Education (Rehabilitation of the Education Sector) Project

Document of The World Bank FOR OFFICIAL USE. ONLY Report No. P-3456-UG REPORT AND RECOMMENDATIONS OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT IN AN AMOUNT EQUIVALENT TO US$32 MILLION TO THE REPUBLIC OF UGANDA FOR A THIRD EDUCATION PROJECT February 1, 1983 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Uganda Shilling (USh) US$ 1.00 = USh 100.0 (First Window) USh 1.00 = USh 250.0 (Second Window) USh 1.00 US$ 0.01 (First Window) USh 1.00 = US$ 0.004 (Second Window) On August 23, 1982, the Goverrnent introduced a dual exchange rate coupled with a 5% devaluation of the official (First Window) exchange rate. The exchange rate in the Second Window is market determined through weekly auction and subject to fluctuations; it has steadily fallen from USh300 to the Dollar in August 1982 to USh250 to the Dollar in mid-November made at the First Window rate, which is applicable to all external assistance projects. GLOSSARY OF ABBREVIATIONS DEO -- District Education Office MOE - Ministry of Education NTC - National Teachers College (secondary) PLE - Primary Leaving Examination PIU - Project Implementation Unit TTC - Teacher Training College (primary) UCC - Uganda College of Commerce UTC - Uganda Technical College Government of Uganda Fiscal Year July 1 - June 30  FOR OFFICIAL USE ONLY UGANDA THIRD EDUCATION PROJECT CREDIT AND PROJECT SUMMARY BORROWER: Republic of Uganda BENEFICIARY: Ministry of Education AMOUNT: SDR 29.1 (US$32.0) million eqjuivalent TERMS: Standard PROJECT The project would consist of the provision of text and library DESCRIPTION: books, teachers guides and instruction supplies, roofing material, equipment for science laboratories and home economics classes, spare parts, tools and typewriters for technical instruction for about: - 5)000 primary schools; - 180 secondary schools; - 30 primary teacher training colleges; and - specialized institutions, like the National Teachers College, Technical Institutes and Colleges, and the Uganda College of Commerce; and - Makerere University The project would further ir.clude studies about: (i) the quantitative and qualitative aspects of post-primary technical education; (ii) the sources and uses of funds in Uganda's education system; and (iii) teacher supply/demand based on medium-term projections. The risks affecting the impLementation of the project have to do with the unsettled security situation of the country. A strong technical assistance team would help implement the project, especially the logistics of distribution of the educational material to the intended end-users. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - ESTIMATED US$ million COSTS:* Category Local Foreign Total 1. Civil Works, Furniture, Books, Equipment and Vehicles (a) Primary Education 0.38 11.82 12.20 (b) General Secondary Education - 6.17 6.17 (c) Primary Teacher Training - 0.83 0.83 Colleges (d) Specialized Institutions - 0.95 0.95 (e) Makerere University 0.44 2.11 2.55 (f) District Education Offices - 0.30 0.30 Sub-Total (1) 0.82 22.18 23.00 2. Technical Assistance 0.11 0.99 1.10 3. Professional Services 0.04 0.16 0.20 4. Transport of Goods 0.62 3.54 4.16 5. Project Administration 0.02 0.19 0.21 6. Studies - 0.30 0.30 Total Base Cost 1.61 27.36 28.97 7. Contingencies (a) Physical 0.14 0.71 0.85 (b) Price Increase 0.31 3.87 4.18 Sub-Total (7) 0.45 4.58 5.03 Total Project Cost (1-7) 2.06 31.94 34.00 FINANCING ---------- US$ million ---------- PLAN: Local Foreign Total IDA Credit 0.06 31.94 32.00 Government 2.00 - 2.00 Total Project Cost* 2.06 31.94 34.00 ESTIMATED US$ million ----- DIBSURSEMENTS: IDA Fiscal Year: FY84 FY85 FY86 Annual: 10.40 16.50 5.10 Cumulative: 10.40 26.90 32.00 RATE OF RETURN: Not applicable APPRAISAL REPORT: No. 4113-UG of January 25, 1983 *Taxes and duties are negligible.  REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS DN A PROPOSED CREDIT TO THE REPUBLIC OF UGANDA FOR A THIRD EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed credit of SDR 29.1 (US$32.0) million equivalent to the Republic of Uganda on standard IDA terms to help finance the rehabilitation of parts of the Ugandan educational system. PART I - THE ECONOMY 1, 2. An economic mission visited Uganda in August 1981 and its report, entitled "Uganda - Country Economic Memorandum" (Report No. 3773-UG) dated March 31, 1982, has been distributed to the Executive Directors. 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 favorable climate (with twvo rainy seasons in most parts of the country); fertile soils; a well-established indigenous smallholder sector producing a widening range of export crops (coffee, cotton, tea, and tobacco) and an ample domestic food supply; a small industrial sector contributing exports of textiles and copper; a well-developed transport infrastructure; an exportable surplus of hydroelectricity; and one of the most advanced education systems in East Africa. Uganda's complement of skilled and trained manpower was greater than that of either Kenya or Tanzania. With those two countries it shared well-developed services: the railways, ports, airline, posts and telecommunications. These favorable initial conditions, combined with competent economic management, resulted in a steady 2% per year growth in per capita GDP (1963-70), and an average savings rate of 13%, which in turn permitted a nigh level of investment without inflationary pressure. A balance of payments current account surplus was maintained in most years, and central government revenue increased faster than recurrent expenditure, contributing a significant proportion of development outlays. 4. Uganda's political situation was less felicitous. Long-standing conflicts between the largest single kingdom (Buganda), the other kingdoms and the rest of the country continued during the 1960s, and became further complicated by ideological and social rivalries. This led to increasing dependence on the military, and in 1971, a coup by the army brought a military regime to power. / This part is essentially the same ar, the corresponding part in the President's Report for the Agricultural Rehabilitation Project, dated February 1, 1983.  -2- 5. From 1971 to 1979, (the year when the military government fell), the economy declined drastically. GDP stagnated and per capita incomes fell. Deterioration occurred in almost every sector of the economy. Savings and investment, exports and government revenues declined in real terms. Government and balance of payments deficits increased, arrears were accumulated and blackmarketing and corruption flourished. Only subsistence agriculture continued growing in response to both food security needs and the curtailment of earning opportunities in the monetized sectors. The coffee boom in 1977 provided temporary respite and for a time imports reco- vered. But by 1979, the combined impact of the previous years depre- dations and the damage and looting during and after the war had reduced the economy of Uganda to ruins. Crops were damaged, livestock killed, many buildings and factories gutted and portable goods of all kinds -- ranging from school books and office records to tools, equipment and vehicles -- ,were stolen (frequently to be smuggled into neighboring countries). 6. A Commonwealth team of experts that reviewed the Ugandan economy in May 1979 recommended a rehabilitation program of administrative and policy reform supported by the infusion of foreign exchange. The reforms proposed included: the raising of agricultural producer prices and the relief of bottlenecks in the transport and marketing systems; the strength- ening of foreign exchange budgeting and import licensing; a moratorium on parastatal and cooperative indebtedness to enable banks to advance import credit while this indebtedness was being studied; and the relaxation of price controls coupled with either devaluation or a combination of foreign exchange auctions and higher taxes. 7. Until 1981, no action was taken on any of these proposals, except the raising of agricultural producer prices, the value of which was soon wiped out by inflation. This failure to undertake policy and administra- tive reform, coupled with continuing political instability, drought, the 1979 oil shock and world recession led to even more rapid declines in out- put and incomes from 1979 to 1981 than had occurred previously. Taking the deteriorating terms of trade into account, per capita income in 1980 was some 27% below its 1978 level. Although there has probably been some reco- very in 1981, especially in the agricultural sector, average incomes are still depressed. Capital productivity is severely constrained by inade- quate maintenance, a drying-up of raw material and spare part supplies, and the looting of workshops and tools during and after the war. 8. By 1981, the estimated volume of merchandise imports was 30% below the 1978 level (and nearly 60% below the 1970 level). This was de- spite an increase in official grant and loan disbursements from US$63 million per year in 1977-78 to US$200 million per year in 1979-81, an in- crease in payment arrears of US$140 million during 1979 and 1980 and a US$100 million drawdown of gross foreign exchange reserves. The main factors responsible for this were a sharp fall in export volumes during 1980 (part of a long-term decline evident since the early 1970s) and a deterioration in the terms of trade by 55% from 1978 to 1981. Capital flight, though unquantifiable, was probably substantial and imports may aLso have been under-recorded. The severity of the present balance of pay- ments constraint highlights both the difficulty and critical importance of foreign exchange management, in particular the need to scrutinize carefully the Government-s own import requirements. The Government is taking steps to improve its procedures for foreign exchange allocation.  - 3 - 9. Uganda's external debt was inadequate'ly monitored and controlled during the 1970s, and it is therefore difficult to present clear data. The World Bank's estimates, based on data from the Uganda Treasury and the Bank of Uganda, show total external debt outstanding of US$920 million at the end of 1981, of which US$620 million was disbursed. IBRD's share of this was 4.2% while 9.9% was due to IDA. Official development loans account for less than two-thirds of outstanding debt. The balance is from private sources or war-related commitments to Tanzania and Zambia. A large part of the debt is in arrears: some US$84 million of debt outstanding at the end of 1981 was principal arrears. (Total arrears, including short-term debt and current payments are estimated at US$ 150 million at the end of 1981:. The debt service ratio was moderately high for a low-income country at 17.5% at the end of 1980, but rose sharply to more than 50% in 1981. Furthermore, more than one-third of debt otutstanding and disbursed at the end of 1981 was to have fallen due over the next two years. Successive meetings of the Paris Club in November 1981 and December 1982 rescheduled obligations of US$12 million falling due in 1981/82 and US$22 million in 1982/83. Rescheduling of debts owed to non-participants in the Paris Club (accounting for US$ 118 million of principal repayments in 1981/82 and about US$106 million of total debt service in 1982/83) has been carried out on comparable terms. The Government's Program 10. The Government's primary goal is to restore law and order, a basic prerequisite for future economic progress. Second only to this, how- ever, is the goal of rehabilitating the directly productive sectors, with- out which, the Government recognizes, there can be no economic development, nor expanded social services. The first step towards rehabilitation was the introduction of a. financial program for 1981/82, supported by a 13- month stand-by arrangement (SDR 112.5 million) with the IMF, as well as by the release of the balance (US$75.0 million) from the First IDA Reconstruc- tion Credit. A second stand-by arrangement for 1982/83 (another SDR 112.5 million) was approved by the IMF in August 1982. These two programs are intended to stabilize the economy and eventually revive investment and pro- duction through restoring a measure of confidence in the currency, reducing price distortions and improving fiscal and monetary discipline. In partic- ular, since mid 1981, the Government has taken the following actions: (a) it devalued the official value of the Ugandan shilling by approximately 92%, from USh8 to the US dollar in April 1981 to around UShlOO by August 1982. In addition, the Bank of UJganda has now opened a second window, where foreign ex- change will be more freely traded in an auction system. The rate established at the second window has steadily fallen from USh300 to the US dollar in August to USh250 by mid November 1982; (b) it raised the official producer prices for major export crops by 400%-700% and retail prices for petroleum products by 1430%-1900%. Similar acjustments have also been made in public utility tariffs. Most other price controls have been removed (although in practice, many goods are still sold through parastatals at belc,w market prices);  - 4 - (c) it rationalized the taxation structure by converting import duties and some excise duties to an ad valorem basis, and raising the effective tax rates on a number of major revenue-producing items. In the 1982/83 budget, government employees were exempted from PAYE (in lieu of wage and salary increases) and the incidence of personal income tax was reduced; (d) it agreed to ceilings -- subsequently met for 1981/82 -- on government borrowing and domestic credit expansion; and (e) it introduced a more realistic and flexible interest rate structure. 11i. It has now been more than a year since the first measures under the IMF programs were introduced, and the initial impact on economic per- formance has generally been favorable. First and foremost, there has been a significant increase in official purchases of coffee, the major export crop, from 98,000 tons in 1980/81 to 165,000 tons in 1981/82. A large pro- portion of this growth probably came from reduced smuggling and farmers' stocks, rather than increased production. But, even so, it enabled 'Uganda to meet its ICO export quota for the second year in a row, and provided a major source of budgetary revenue. Second, there are indications that out- put of other products is beginning to recover. Cotton production, for ex- ample, is expected to more than triple to nearly 20,000 tons in the 1982/83 marketing year. Output from a number of key industries also rose signifi- cantly during 1981 (admittedly from a very low level of capacity utiliza- tion): cement by 8%, matches by 13%, textiles by 14%, sugar by 24%, ciga- rettes by 27%, and blankets by 142%. As a result overall GDP is estimated to have grown by 8% in 1981 and is expected to rise again by at least 5% in 1982. Finally, the impact of the program on consumer prices has been mod- erated somewhat by the fact that many goods were already being sold at in- flated "magendo" prices. Prices did rise sharply in May and June 1981 (re- flecting in large part the increases in administered prices), and there has been a resurgence of price inflation around the Kampala area in recent months, apparently due to the impact of security and transport bottlenecks. Howiever, the available data indicate a significant decline in the overall inflation rate from around 100% per annum during 1979-81 to 50% in 1982. Even so, real wages remain extremely low. The minimum wage, which was raised by more than 100% in August 1981, still only buys the equivalent of about six kilograms of sugar or three bars of soap per month at prevailing market prices. Civil service salaries are so low that, despite subsidized housing and other benefits, officials are forced to pursue other occupa- tions. The removal of price controls and privileged access to limited sup- plies of goods has probably resulted in hardship for certain groups, possi- bly including some poorer ones. While wage and salary restraint is surely necessary, the success of the program will also depend on its maintaining a minimum standard of living and adequate work incentives. 12. The Government's Recovery Program, released in April 1982, is in- tended to provide a broader framework for the development of the economy over the next two years. This Program includes proposals for further policy and institutional reforms as well as a project-specific investment plan for 1982/83 and 1983/84. The total size of the investment plan is  -5- about 80% in foreign exchange. This cost is barely one-third of the original project submissions, and could hardly be cut further without Jeop- ardizing the Program's modest goals. The basic strategy of the Recovery Program is also well suited to present conditions in Uganda, focussing on the short-term revival of the economy's productive sectors, and was strong- ly endorsed by the Consultative Group meeting held in May 1982. While the Program recognizes the importance of social sectors, on both humanitarian and development grounds, actual allocations to these sectors have been sharply curtailed, pending progress on rebuilding the productive base of the economy. In all sectors, priority is given to rehabilitation and im- proved utilization of existing capacity, with expansion limited to certain well-defined areas, such as production of agricultural implements and bal- ancing 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 intcreased export performance or judicious import substitution. The Recovery Program also reiterates the Government's intention to encourage the development of a "mixed economy", by allowing former owners to reclaim their property or claim compensation, and by inviting private investment in a numaber of areas. 13. While there are important areas in which further steps are needed, a decisive start to recovery has now been made. With the exception of some export crop prices, which will require adjustment, the major policy changes needed have been made. Now, the mnain areas of action are largely institutional and will necessarily take tilne to implement. Moreover, the Government has responded promptly to the evolving situation by continuing the process of price adjustment and by initiating a number of institutional changes in the key areas of foreign exchange management, budgeting and planning. The Program itself and the Government's evolving policies merit support and encouragement. Sectoral Priorities 14. Economic revival will depend on increasing production levels, es- pecially exports. This entails the highest priority initially being given to export crop production, to the supporting transport and communications infrastructure, and to the production of besic consumer goods, building ma- terials and agricultural requirements by the industrial sector. Other sectors, especially the social sectors, also require urgent rehabilitation. But in the near future, the rehabilitation of these sectors must be limited to the extent of their potential contribution in the shorter term to the recovery process. Improvements in medical. services, the repair of damaged classrooms and the rehabilitation of hazardous urban water systems, for ex- ample, may be expected to provide an important, if unquantifiable incentive to producers. 15. Agriculture dominates the Ugandcn economy, providing livelihood to 90% of the population and supplying alTmost 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  - 6 - 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 serious food shortages in rec:ent years as a result of low rainfall and insecurity. 16. The rehabilitation of agriculture is the top priority for Uganda's economic recovery. Coffee, cotton, tea, and tobacco exports could all grow rapidly within the next three years (although the previous peak levels are not likely to be reached until later in the 1980s). In addi- tion, food exports to neighboring countries are a distinct possibility. The revival of cotton and other agricultural production would also supply some domestic industrial needs. The central constraint to recovery is the incentive system. Prices for export crops must be remunerative, the effi- ciency of the marketing system must be improved, and payment to farmers must be prompt. Closely related to this is the supply of inputs, imple- ments, 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. 17. 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, since 1971, the per- formance of the sector has been disappointing. Now, many industries have closed down while others continue to operate at very low levels of capacity utilization. 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 could well re-emerge as the foreign exchange situation improves. These include: shortages of qualified managerial and technical expertise, problems of creditworthiness (resulting from ownership uncertainty, financial indisci- pline, and, more recently, the impact of the 1981 devaluation on costs), and over-expansion and political interference in the management of the parastatal sector. As noted above, the Government has now declared its in- tention to follow a "mixed economy" strategy, with only essential public services reserved exclusively for the public sector. In other areas, domestic and foreign private enterprise 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 res- tored through increased tariffs, asset revaluation and injections of new capital. However, the modalities for this restructuring process are still to be worked out. 18. Uganda's transport system, formerly one of Africa's best, deteri- orated rapidly during the 1970s for the same general reasons outlined earlier: the departure of skilled personnel, political interference, and inadequate 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 transport system thus becomes a key requirement. 19. Energy use in Uganda 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 ex- pensive fuels (such as petroleum products) and to secure long-term export agreements with neighboring countries. Petroleum imports are likely to remain a major drain on the country's foreign exchange for the foreseeable future. The Government has taken decisive action to curb consumption and smuggling through the recent increases in retail petroleum prices. How- ever, the effective control of petroleum marketing and costs remain with the oil companies. A major source of energy for domestic heating and cook- ing is woodfuel, and thus concern is mounting that uncontrolled development of charcoal and firewood will eventually deplete the most accessible forest resources and lead to further soil erosion Froblems. The Bank Group is un- dertaking an energy assessment for Uganda tc, identify major institutional and policy issues in the sector and provide a basis for pending investment decisions. Assistance Needs 20. If recovery is to be sustained in 1983, Uganda's merchandise im- ports must rise at least 40% over 1981 levels, to about US$570 million in current prices, with most of the increase aLlocated for inputs and spare parts for agriculture, industry and transport, and for basic consumer goods. Over the subsequent two years, impoirts are expected to increase less rapidly, by about 5% per annum, since 1here appears to be ample scope for reestablishing domestic supply sources and reducing the import content of production. If these higher import leveLs can be financed and if pro- gress continues on the economic management and institutional issues dis- cussed earlier, GDP could grow at 5-6% per annum on average from 1982 to 1985, with monetary agriculture and industry as the leading sectors. 21. The other major claim on available foreign exchange is debt ser- vice. Principal repayments are projected to total US$191 million in 1983 and US$40 million in 1984. Invisibles may be expected to be a net drain on foreign exchange during the 1980s, even if there is some revival in tourism. Uganda also should provide for a reduction in arrears and some buildup of external reserves. The total financing requirement -- for mer- chandise imports, invisibles and reserve accumulation -- is expected to be US$0.75 billion in 1983, rising to US$1.0 billion by 1985. 22. Exports can be expected to make an important contribution towards meeting this requirement. For the next twc. to three years at least, agri- cultural exports will be the key to recovery. Provided prices are remuner- ative, marketing becomes more efficient and the supply of agricultural inputs and consumer goods improves, merchandise exports could grow by about 9% per year on average from 1982-85. Although high rates of growth in all of the main agricultural exports (coffee, cotton, tea, and tobacco) can be  -8- expected, coffee will remain dominant for some years. Beyond 1985, the prospects for other exports, including maize, groundnuts, animal feed, hides and skins, copper, cobalt and cotton textiles are promising, provided the exchange rate is maintained at an appropriate level. 23. Over the next three years, some US$470-560 million per year over and above export earnings will be needed to meet requirements. If official grant and loan commitments are maintained in real terms and disbursements and debt service follow a normal pattern, these could provide some US$330 million per year on average. A further US$70 million (net) per year could be available from the IMF, if Uganda remains eligible for further resources under future stand-by arrangements. This leaves about US$110 million per year over the next three years to be met from new resources. 24. Uganda will not be able to finance this gap on commercial terms. If the amount needed were borrowed at 11.6% for nine years, with four years of grace (terms far better than those available on the market at present), Uganda's debt service ratio, including IMF obligations, would remain around 40% through 1985, and reach 69% by 1990. Some short-term non-concessional borrowing may prove una-voidable, given the bunching of principal repay- ments, but care must be taken to ensure that the resulting debt burden is manageable. Without additional external financing, GDP growth would have to be cut to levels that would allow no significant recovery in per capita terms. Uganda will therefore need additional financing on concessional terms to achieve its much-needed recovery. This financing will, moreover, have to be fast-disbursing, in the form of balance of payments support or projects which focus on immediate and urgent requirements. New investment for the next three years and-possibly longer must be limited to urgent rehabilitation needs. 25. The participants at the Consultative Group meeting endorsed the Recovery Program, both as a framework for government action and as a vehicle for mobilizing and allocating external assistance. However, many donors indicated that any additional support would be conditional upon an improvement in the internal security situation in Uganda. The resultant delays in finalizing new aid commitments, coupled with a deterioration in market conditions for Uganda's major export crops, has meant that there is likely to be a shortfall in the resources required to fully implement the first year of the Recovery Program. This will force rephasing of the planned investments from 1982/83 to 1983/84, some additional spillover into 1984/85, and possibly an extension of the recovery period into 1985/86. Nevertheless, the Recovery Program remains an extremely useful summary of the Government's immediate priorities, and the Bank Group's lending program for the next two to three years would be designed taking these priorities into account. PART II - BANK GROUP OPERATIONS 2_ 26. 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 2/ This Part is essentially the same as Part II of the President's Report for the Agricultural Rehabilitation Project, dated February 1, 1983.  - 9 - 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 has benefitted from 10 loans totalling US$244.8 million which have been 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 summary statements and notes on the execution of ongoing projects. 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 197:2 before construction began. IFC approved a new investment in the Toro and l4ityana Tea Company in November 1982. 27. There was EL hiatus in Bank Group operations from 1971 until February 1980, when a Reconstruction Program 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 is also acting 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. By the end of September 1982 US$67.0 million had been disbursed, the balance being fully committed. Commitments have started under the Second Reconstruction Credit of US$70.0 million equivalent (No. 1252-UG), approved in May 1982. In addition, the Associ- ation has provided UJS$56.0 million through a Technical Assistance Credit (No. 1077-UG), a Water Supply Engineering Credit (No. 1110-UG), a Phosphate Engineering Credit (No. 1228-UG), and an Industrial Rehabilitation Credit (No. 1248-UG). There has been continued progress in the implementation of the Technical Assistance Project. The first sub-projects have been com- pleted and disbursements have commenced. Several large sub-projects are under consideration and it is likely that the credit will be fully com- mitted before the erA of FY83. Disbursements under the Water Supply Engineering Credit are continuing and they have started satisfactorily under the Phosphate Engineering Credit; thiere are none yet under the Indus- trial Rehabilitation Credit. The Bank Group also administers an Agricul- tural Reconstruction Program of US$20.0 million equivalent financed by the International Fund for Agricultural DevelDpment. In the immediate future, Bank Group operations will remain focussel on rehabilitation projects. The emphasis will shift gradually into traditional projects in agriculture, industry, transport and energy sectors. Rehabilitation projects are under preparation for agriculture, telecommunications, and roads. 28. 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 (SecM80-364). 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 'nstitutions -- 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 Medial:or's proposals. Negotiations started in December 1981 in Arusha, cont-inued in April 1982 in Jinia, in  - 10 - September 1982 in Nairobi, and in December 1982 in Kampala. The discus- sions have meanwhile passed the fact finding stage and are now focussing on details of a division formula for assets and debts. While it is generally accepted that both location of assets and the principle of equal rights of all former EAC partners should be taken into account, the weight to be attributed to these principles from case to case remains the major issue in the continuing negotiations. PART III - THE EDUCATION SECTOR Background 29. The education system of Uganda, though once well-functioning and well-organized, has suffered with the rest of the Ugandan economy the ravaging effects of a decade of economic decay and political instability. Despite continuing and severe problems, the Ugandan education system remains viable, with an administrative structure established prior to the military regime, functioning regional offices and school inspectorate, and a centralized examination system. Enrollments in and expenditures on edu- cation have grown substantially since 1970. This reflects the high prior- ity attached to education by the public, and its perceived economic and social returns even under the present circumstances. Continuing expansion has, however, been possible only at the expense of quality at all levels of the education system. The pressures of increased enrollments, combined with years of extreme neglect of the physical inputs needed for the edu- cational process, have resulted in conditions of deprivation and decay in all parts of the system. Substantial rehabilitation is now urgently required if earlier educational standards are to be regained. Government Policies for Education 30. The Government's policy for arresting further decay, and sub- sequently for re-initiating the positive development of the education sys- tem, is divided into two phases. The first is an urgent program for general rehabilitation and for assurance of minimally adequate conditions of instruction. This is to be followed, at a later stage, by renewed efforts toward improved curricula, teacher training and additional emphasis on technical and agricultural studies. These latter developments will be studied and integrated into a comprehensive long-term sectoral plan. Mean- while, the need for immediate physical rehabilitation looms large. The Government seeks to meet these requirements through reconstruction (repair, re-furnishing, re-equipping and re-stocking with textbooks and other instructional materials of schools) to inhibit further deterioration, re- activation of overseas training programs, and rehabilitation of Makerere University. In the longer term, the Government seeks to establish free primary education, at least for the first four grades, and to consolidate its policy of compulsory agricultural and technical classes in all second- ary schools, in the context of reforms to be considered by a proposed edu- cation policy review commission.  Description of the Education System 31. The structure of formal education comprises four stages. The first level consists of seven years of primary education, with current enrollments at about half the corresponding age group. Of those who com- plete primary school, about a quarter enter secondary school for the initial four year course ("O-level"), a technical school for a three year course, or a four-year teacher training colLege. Following "O-level" examinations, about 40% continue into the two-year advanced course ("A-Level"), a Grade III teacher training college for two years, a techni- cal institute, or one of various training programs sponsored by a govern ment department. Those who complete the "k-level" course may continue to Makerere University. Other options for post-secondary education, with varying levels of entry according to the coarse, are the Uganda Technical College, the National Teachers' College and the Uganda College of Commerce. 32. Primary Education. In 1980, about 1.3 million students were recorded by the Planning and Statistics Office of the Ministry of Education (MOE) as enrolled in Government-aided primary education. Of these, 43% were girls. This enrollment was accommodated in some 4,300 schools and served by about 38,400 teachers, 30% of them female. The 1980 primary level enrollment represents a doubling of the 1969 enrollment of slightly over 600,000, for an annual average rate of growth in enrollment of 6.7%. In addition, there were approximately 80,000 students enrolled in some 800 private primary schools in 1980. 33. At the primary level repetition is low except in the final two primary grades. The primary school leaving examination (PLE) is of crucial importance to the availability of future academic opportunity. The PLE is uniform throughout the country, carefully controlled, and centrally graded. Primary teachers are trained at two levels: a four-year course following primary education and a two-year course following the four-year lower secondary course. In 1980, there were 23 teacher training colleges (TTCs) for the first level of training and 4 each for the second level and in-service training. 34. Secondary General Education. The total enrollment recorded in the 177 government-aided general secondary schools for 1980 was 73,100 (4.5% of the 13 through 18 year age group),, of which 29% were girls. In addition, enrollments in private schools st:ood at 22,000 in 1979. New schools are mostly lower secondary schools spontaneously created by local groups which tend to be small, poorly equipped and staffed, and comprise at most studies up to "O-level". Training for secondary school teachers is offered by the National Teachers College (NTC) in two and three year courses. A total of 373 students were enrolled in the 1979/80 academic * year, 24% of whom were female. In addition, the University offers pedagog- ical training in conjunction with its undergraduate courses. Enrollment in such courses in the 1980/81 academic year was 620 (27% female). 35. Post Secondary Education. Make-rere University, the first university to be established in Eastern Africa, was for many years recognized throughout the world for the quality of its staff and teaching programs. Today, it is characterized by increased enrollments and deter- iorated physical conditions. Expansion of enrollment, from about 1,800 in  - 12 - 1969 to some 4,000 in 1980, has been achieved mainly through overcrowding of the existing facilities. The physical condition of the University has suffered from neglect over the past dozen years: library books and other valuable properties have been damaged by water or pilferage, student living quarters have fallen into decay. The instructional staff available for duty is well below the required level. 36. In addition to post-secondary level courses at the University and the NTC, advanced level instruction is available at the Uganda Techni- cal College (UTC) and the Uganda College of Commerce (UCC), with enrollment of about 600 each in 1979/80. The UTC provides courses in engineering, science, mathematics, industrial ceramics and technical teacher training. At the UCC courses are provided in the fields of marketing, professional studies, secretarial studies and hotel and institutional catering. 37. Technical and Other Types of Education. Technical education at the secondary level is provided at ten technical schools, four technical institutes under the MOE and under the sponsorship of various organi- zations. The technical schools (1980 enrollment of 2,300, with 11% female) offer three year courses in masonry, carpentry, electrical installation, plumbing, metal work and motor vehicle maintenance, pottery, tanning and shoemaking, and tropical agriculture. The effectiveness of the technical schooLs is reduced at present by a lack of supplies needed for practical studies. In addition, the utility of these courses as a practical edu- cational alternative leading to the production of graduates with readily marketable skills has not been well established. The technical institutes offer a two-year course at the upper secondary level, plus a third year advanced course for a small number of students. Enrollments in 1980 totalled 1,150, of which only 10 were females. Training for teachers of vocational and technical subjects is provided through a two-year course at the N1'C and by a one-year course at the UTC. Previous Bank Group Lending for Education 38. Bank Group education operations in Uganda began in 1967, but stalled after 1971, because of the Government's lack of an appropriate development program and a sound economic policy. At the end of the 1978- 1979 war, the Bank Group reinitiated its involvement in education through the First Reconstruction Credit (Cr. No. 983-UG) out of which US$2.5 million was allocated to replace looted and destroyed educational materials and equipment. Also, about US$350,000 have been disbursed from the Techni- cal Assistance Project (Cr. No. 1077-UG) for preparatory work for this project. 39. The First Education Project (Cr. No. 101-UG), approved in April 1967, in an amount of US$10 million equivalent, assisted in the expansion of general secondary education. The project provided for physical facili- ties, including student hostels, staff housing, furniture and equipment to accommodate 11,800 secondary school students. The project was completed in June 1973, some 18 months after the original closing date. A project com- pletion report was issued in October 1975 and a Project Performance Audit Report (No. 1456) in February 1977. These reports concluded that suitable physical facilities were fully and economically provided under the pro- ject. However, the project schools suffered under-utilization, owing  - 13 - mainly to the shortage of teachers of practical subjects due to Govern- ment's failure to train the required numberi of teachers, and also to the unforeseen departure of expatriate teachers. The shortcoming of concen- trating projects on physical infrastructure and not incorporating educa- tional inputs as an integral part of the project, an element common to many projects in the early years of Bank Group lending to education, was evident in this project. The issue was addressed in the Second Education Project. 40. The Second Education Project (Cr. No. 258-UG), approved in June 1971, in an amount of US$7.3 million equivalent, was designed to assist in meeting manpower needs in the technical, agricultural and medical fields, and most importantly in providing urgently needed teachers. The project as appraised included extensions, furniture and equipment for two teacher training institutions (and equipment for a third institution), four upper secondary schools, five technical secondary schools, two agricultural col- leges, three new district farm institutes, a vocational training center, a medical tutor training college and a nurses' and midwives' school. In addition, 80 man-years of specialist services and 18 man-years of fello-e- ships in fields related to the project institutions were included. 41. The implementation of this project encountered serious difficul- ties, many of them originating in the general socio-economic conditions prevailing in the country at that time. Iwo postponements of the closing date were approved and the project was firally closed in December 1981. During implementation, the extension of the five technical schools was held in abeyance by the Bank Group, because of the Government's decision to change the programs and objectives of the schools. UlJtimately, they were deleted from the project. The implementat:ion of the technical assistance components for teacher training and educational planning worked reasonably well, while those for vocational training and health education were not implemented, either because of delays or as a result of deletion of the related physical facilities. The fellowslhip component was satisfactorily implemented and most of the students who b3enefited from this program are occupying the positions for which they we:e trained. A project completion report, which is under preparation, is ex?ected to provide a more detailed assessment of the effects of this project. 42. Lending Strategy. The Bank Groap's lending strategy in the edu- cation sector is to assist the Government in initiating the rapid rehabili- tation of educational services throughout the formal system, including the University. The stress is not on new capacity but on rehabilitation, and maintenance aimed at helping existing institutions to regain their instruc- tional capacity. The immediate goal for lending to Uganda's education sec- tor is thus aimed at reviving its effectiveness and minimal standards of quality, rather than at expansion or innovation. The project fits within this strategy. It would include studies relating to teacher supply, tech- nical education and education finance which, combined with a proposed edu- cation sector memorandum, would set the ground for future Bank Group assistance and policy dialogue in the sector. These could address further quality improvements of the education anc training system and could include support for curriculum development, teacher training, education planning, and strengthening the administrative and financial management capacity of the system at all levels. Finally, the determination of manpower require-  - 14 - ments, while strictly outside the purview of the education sector, will ultimately be needed if the sector is to meet its employment oriented goal s. PART IV - THE PROJECT Background 43. The project was prepared by the Government of Uganda with assis- tance from UNESCO and the Association. Subsequent surveys financed under the Technical Assistance Credit (Cr. No. 1077-UG) helped to identify more precisely those items included in the project for rapid and equitable improvement of the deteriorated quality of education. Negotiations were held in Washington in January 1983. The Government Delegation was led by Professor I. N. Ojok, Minister of Education, and included represen- tatives from the Ministries of Finance, and Planning and Economic Develop- ment. A Staff Appraisal Report No. 4113-UG of January 25, 1983, is being distributed separately, a credit and project summary is at the beginning of this report, and Annex III lists supplementary project data. Project Objectives 44. The project would assist the Government in its urgent task of re- habilitating part of its education system in a manner consistent with its recovery program and with the system's assessed implementation capabili- ties. The project would also limit to a minimum Government's future re- current expenditures. Instructional conditions would be restored to as adequate a level as possible across all schools and at Makerere Univer- sity. To secure the equitable and prompt distribution of goods to be pro- vided countrywide to their final users, and to provide training for local counterparts, a team of specialists would help to implement the project. Finally, the project is intended to assist the Government in improving the management, control and planning of operations in the education sector. Project Components 45. Primary Education. This component includes text and library books, limited roofing materials and instructional supplies needed to re- habilitate about 5,000 primary schools. Specifically, textbooks, teachers guides, auxiliary source books and library books would be supplied, based on selections and lists prepared by a team of Ugandan educators according to esitablished curricula and instructional needs. The extent to which stu- dents must share books will be determined by the quantities of student books which prove to be obtainable within the project budget, as allocated to the schools by the Project Implementation Unit (PIU) according to cri- teria satisfactory to the Association (Section 3.01 (b) of the draft Devel- opment: Credit Agreement). To identify ownership, the books would receive suitable markings and would remain the property of the educational institu- tions concerned. Roofing sheets would be supplied to those schools which the MOE's survey prove to be most in need of repair. Installation of the  - 15 - roofing would be the responsibility of school authorities, with the help of local volunteer labor, consistent with customary practice in Uganda. Supervision of the delivery and appropriate use of all materials would be done by the PIU (see paragraph 59). 46, General Secondary Education. Allocations to 177 secondary schools would be based on a MOE survey simiLar to that undertaken for the primary schools and the same selection procedures for the teaching equip- ment and instructional material would be applied. Specifically, equipment and supplies needed for practical work in szience and home economics courses and other subiects such as arts, crafts and music would be pro- vided, In the case of some secondary schools, self-contained mobile labo- ratories for basic science would be supplied, two per school. In other schools, where higher secondary-level courses are taught, equipment and supplies would be provided to make the existing laboratories fully opera- tional. Also, equipment such as typewriters, duplicators, locked cupboards and filing cabinets, and other non-consumable items would be provided to support administrative offices of those secondary schools recently con- verted to Government-aided status. 47. Primary Teacher Training Colleges and Specialized Institutions. Books, equipment and supplies similar to those specified above for general secondary schools would also be supplied tc the 33 primary teacher training colleges (TTCs) which now operate in Uganda. In support of science in- struction in the TTCs, two mobile laboratories would be provided, one for basic science and the other for biological/agricultural science. Home eco- nomics equipment and additional teaching aAds in addition to a slide pro- jector and two cassette recorders for each TTC would be supplied to assist in training teachers for art, geography, mathematics and physical educa- tion. In addition, five educational instit:utions providing specialized education at the upper secondary and post secondary level would be assisted through provision of text and library books, basic workshop equipment, spare parts and tools to allow a resumption of practical training. 48. Makerere University. For the University with its enrollment of over 4,000 students in residence, the project would provide library books identified by a staff librarian who participated in the book selection team (see paragraph 45). Tn addition, it would include limited rehabilitation of the halls of residence, since to varying degrees, all fourteen student residential structures (including eight main dormitories, with their exten- sions and annexes) require rehabilitation. 49. The TJniversity has a well organized system of maintenance. How- ever, the prolonged unavailability within the country of construction materials and spare parts, as well as the lack of foreign exchange for their importation, has limited the amount of maintenance work which could be ,performed during the last decade. The Government would make available the necessary inputs to the University to resume proper maintenance of existing structures and continue with this task (Section 4.03 of the draft Development Credit Agreement).  - 6 - 50. District Education Offices (DEO). The 33 DEOs can hardly operate because of lsack of the most essential equipment: typewriters, copying machines, etc. Also9 the school inspectors (about 135) operating from such offices are unable to visit all schools, for lack of vital transportation, Thus, in order to assist the MOE in improving education administration and control0 the project would provide t:he DEOs with limited office equipment and motor bicycles (for the use of inspectors). Supp:ly and Del ivery 51, Tkhe timely supply and safe delivery of all the items described above is clearly a major requirement of the ptoject. The problems of dis- triblution and the conditions of insecurity prevailing within the country were identifled during the preparation of tne project and a strategy worked out to mini,mize the risks involved in the physical delivery of the goods to be provided. The supply and delivery would be carried out by the PIU, which would be strengthened by about 9 man-years of consultant services (Section 3.02 (a) of the draft Development Credit Agreement, and paragraph 59), The component would also include office furniture and equipment, including a small computer and vehicles necessary for the operation of the PIU. The specialists would also be responsible for establishing an infor- mation system for carrying out supply and delivery operations and mainte- nance programs after the project is completed. A comprehensive plan for the provision and distribution of educational material, including its fi- nancing9 and a system for the maintenance of the institutions under MOE would result from this work and be furnished to the Association by June 30, 1985 (Section 4.04 of the draft Development Credit Agreement). The consul- tants would further prepare manuals on maintenance and train MOE staff in appropriate maintenance procedures. Although the establishment of a com- prehensive maintenance program would be beyond the financial scope of the project, the setting up of a centralized information center on maintenance and supplies is expected to help identify priority needs in the sector. It could become the first step in an overall record keeping system relating to the needs of each school. It could record matters such as school fees and contributions, visits by inspectors and students' examination performance. This information would be extremely useful for improving the planning and management of the education system Special Studies 52. There are a number of areas within the education and training systemt where a revision of present policies is urgently required, and where future Bank Group assistance would strongly depend on Government actions to address these matters. Specific studies geared to provide an in-depth analysis of problems and to make specific recommendations for resolving them would be included in the project. 53. Technical Education. In this study major emphasis would be placed on post-primary technical education, There are indications that graduates from the technical schools are ill prepared for the job market and are encountering problems in securing employment. The study would cover both quantitative and qualitative aspects. It would assess curri-  - 17 - cula, teachers' and trainers' qualifications and performance, availability of jobs and skills required, and cost recovery issues. It would make pro- posals for adjusting technical and vocational education to make It consist- ent with labor demand. 54. Education Financing. The problems related to the financing of education (including private contributions), the shortage of resources available, the distribution (including school maintenance needs) and management of such resources, and equity Issues would be reviewed in de- tail. A comprehensive system of education financing would be proposed to correct the anomalies of the present one. 55. Teacher Supply and Demand. With rapidly increasing student en- rollments, the gap between the demand for teachers and the rate of produc- tion of graduates by teacher training inst:itutions is widening. A study to address these problems would include an inventory of the existing sltuation at all levels, medium term demand projections and a proposal for a fully costed program to reduce gradually the present gap, while also coping with future expansion. 56. To carry out these studies, for which the MOE would have a lead- ing role, one or more advisory committees would be established including, as appropriate, representatives of the Ministries of Education, Finance, Planning and Economic Development, individuals and representatives of rele- vant institutions. The Government agreed to establish the committees by not later than three months after the date of credit effectiveness (Section 3.04 of the draft Development Credit Agreement) and to ensure that the com- mittees provide satisfactory terms of reference and timetables to carry out the studies. The project would finance the services of consultants, their transport and travel, and other foreign exchange costs necessary to carry out the studies. The Association would be informed on the composition of the committees, approve the terms of reference for the studies, and the appointment of consultants in accordance with the Bank Group's "Guidelines for the Use of Consultants", dated August 1981, and, periodically, review the progress and finidings of the studies. Also, by an appropriate date to be determined in the terms of reference, the conclusions and recommend- ations of the studies would be furnished. Tne Association would review and comment upon these results, and the Government would thereafter present their plans to implement the recommendations. The Government would provide the necessary local physical facilities and staff support for carrying out these studies. Project Cost and Financing 57. The total project cost is estimated at US$34.0 million equiva- lent, with a foreign exchange component estimated at US$32.0 million equiv- alent. Taxes are negligible, since all Ltems imported specifically for the project would be exempt from custom duties and taxes. The proposed IDA Credit of SDR 29.1 (US$32.0) million equLvalent would finance the entire foreign exchange component (94% of total project cost). The Government's counterpart funds of US$2.0 million equivalent would be phased over the three-year implementation period. An estimated maximtm contribution of US$0.8 million equivalent would be required in any Government fiscal year. Both the project capital costs and the incremental operational costs would  - 18 - be borne the MOE, which would implement the project. Recurrent expendi- tures generated by the project after completion would be minimal and mainly for maintenance of furniture and equipment. Thus, the project, consistent with the country's rehabilitation priorities would also be consistent with the projected financing capacity of the central Government. 58. Cost estimates for rehabilitation work at Makerere University are based on similar works being carried out at Naguru Police College and Kibuli Training Center, both within Kampala and financed by the British Overseas Development Administration. Since construction activity is virtu- ally at a standstill in Uganda due to the lack of foreign exchange, compar- isons are very limited. Costs of equipment, didactic materials and vehi- cles are based on prevailing international prices, while costs of text and library books are based on preliminary lists prepared by MOE with the assistance of consultants, and on detailed price quotations from numerous international publishers. The technical assistance component in support of project implementation consists of about 110 man-months of consultant ser- vices, estimated at an average crst of US$10,000 per month. Professional services equivalent to about 60 man-months of architectural, engineering and quantity surveying services are estimated at an average rate of US$5,500 per man-month based on 15% of construction costs (10% architects' fees, 5% quantity surveyors fees). For physical contingencies, 10% has been added to the base cost of civil works, professional services, trans- port and project administration; and 5% to the base cost of vehicles, tech- nical assistance and studies. No physical contingency allowances have been included for furniture, books, equipment and supplies because quantities are expected to be adjusted to remain within the global budgetary alloc- ation. Estimated price increases have been applied at the following annual rates: 1983 1984 1985 Foreign 8.0% 7.5% 7.0% Local 15.0% 9.0% 8.0% The local price increases are based on recent trends and forecasts from Government agencies, as well as the private sector for civil works, furni- ture, fuel, etc. These rates have been reviewed by Bank Group staff and have been found appropriate. Price escalation for foreign goods and ser- vices represent the most recent projections of world price increases. Project Implementation 59. The project would be completed in about three years. The MOE would administer the project through a Project Implementation IJnit (PIU) to be established within the Ministry (Section 3.03 and Schedule 4 of the draft Development Credit Agreement). This PIU would consist of a Project Director, who would be a senior officer of the MOE, a qualified team of specialists, to be engaged under a single contract, and qualified and experienced officers from the MOE assigned as counterparts to the members of the consultant team, who would thus provide continuity for possible future work for the PIU. The consultant team would include a deputy direc- tor, a procurement manager (two counterparts anticipated), a distribution manager (two counterparts anticipated), an accountant (two to three  - 19 - counterparts anticipated), and a training officer, who would ensure that the training responsibilities of the members of the consultant team are properly carried out. The consultants would be selected in accordance with the Bank Group's "Guidelines for the Use cf Consultants". An outline for their terms of reference has been agreed upon. The appointment of the Pro- ject Director, with appropriate experiencE and qualification satisfactory to the Association, would be a condition of project effectiveness (Section 5.01 of the draft Development Credit Agreement). 60. Surveys of existing conditions, drawings and other preparati:n work for the rehabilitation of the halls of residence of Makerere IJnivar- sity have been carried out by architectural/engineering consultantsap- pointed by the University, under conditions mutually acceptable to the Bor- rower and the Association, and financed ulnder the Technical Assistance Cre- dit. For the remaining preparation work and supervision during the actual rehabilitation stage, consultants would be selected and appointed on terms and conditions satisfactory to the Association (Section 3.02 (b) of the draft Development Credit Agreement). 61. Reporting and Evaluation. Progress reports on implementation would be submitted to the Association by the PIU on a quarterly basis. Not later than three months after the credit closing date, the MOE would provide the Association with a report evaluating initial operations, the execution, costs and benefits of the project, and the performance of the Government and the Association, including lessons learned during implement- ation (Section 3.06 of the draft Development Credit Agreement). Procurement 62. Contracts for civil works, furriiture, books, equipment and vehi- cles would be awarded on the basis of international competitive bidding (ICB) in accordance with the Bank Group