Uganda - Public Enterprises Project

~----- - I Document oi i : ^ . ^ The World Bank FOR OFFICIAL USE ONLY Report No. 7280-UG STAFF APPRAISAL REPORT THE REPUBLIC OF UGANDA PUBLIC ENTERPRISES PROJECT October 14, 1988 Industry and Energy Operations Division Eastern Africa Department ITlis documeot has a rsicted dkbVodon and may be used by ripimb ooly in the pedomamo of |their oilh dudies Its contcils my not otbese be dbkdosed wftwt Wodd Ban aud eon.  CURRENCY EQUIVALENTS Currency Unit - Uganda Shillings (rSh) USh 1.00 - USS 0.00667 1/ SDR 1.00 - USS 1.280 2/ US$ 1.00 - SDR 0.780 2/ GOVERNMENT FISCAL YEAR Juiy 1 - June 30 ABBREVIATIONS AND ACRONYMS DIC Divestiture Implementation Coumittee ICB International Competitive Bidding MOF Ministry of Finance MOIT Ministry of Industry and Technology NYTIL Nyanza Textile Company PEC President's Economic Advisory Council PIE Public Industrial Enterprise PIES Public Industrial Enterprise Secretariat PPF Project Preparation Facility UDC Uganda Development Corporation SARAP Public Sector Administrative Reform and Planning Study SCD Statutory Corporations Division 1/ After the currency reform and exchange rate adjustments of July 1, 1988. 2/ As of August 31st, 1988.  FOR OMCIAL USE ONLY UGANDA PUBLIC ENTERPRISES PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. CREDIT AND PROJECT SUAIARY . . . . . . . . . . . . . . . . . . . . . . iii I. BACKGROUND . . . .. . . . . . . . . . . . . . . . . . . . . '. Introduction . . . . . . . . . . . . . .*. . . . . . . Overview of the Economy .......... . . l....... 9.1 II. SECTORAIL CONTEXT . . . . . . . . ... .2 Strategy for Public Enterprise Reform . . . . . . . . . . . . . . . 3 Institutional Strengthening . . . . . . . . . . . . . . . . . . . 4 Administrative and Policy Reforms and Planning . . . . . . . . . . 4 Public Industrial Enterprises .. . .5 Management Audits and Management and Technology Contracts . . . . 6 Implementing the Divestiture Program . . . . .. . . . . . . 6 Industrial Sector Institutional Framework . . . .. . . . . 7 Public Industrial Enterprise Secretariat . . . . . . . . . . . . 7 Uganda Development Corporation . . . . . . . . . . . . . . . . . 7 Key Parastatals . . . . . . . . . . . . ... 8 III. PROJECT OBJECTIVES AND DESCRIPTION . . . . . . . . . . . . . . . 9 Sector Administrative Reform and Planning Study . . . . . . . . . . 9 Statutory Corporations Division. . . . . . . . . . . . . . . . . . .10 Public Industrial Sector Enterprise Secretariat . . . . . . . . . .10 Uganda Development Corporation . . . . . . . . . . . . . . . . .12 Management Audits, Management and Technology Contracts for PIEs. . .14 Divestiture Support Services . . . . . . . . . . . . . . . . . . .15 * Diagnostic Studies and Improvement Plans . . . . ... . .16 Project Mar2gement Support . . . . . . . . . . . . . . . . . . . . 17 IV. PROJECT COST, FINANCING AND PROCUREMENT . . . . . . . . .17 Assumed Annual Inflation Rates . . . . . . . . . . . 17 Estimated Costs . . . . . . . . . . . . . . . . . . . . . .....18 Financing Plan . . . . . . . . . . . . . ... . . . . . . 18 Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Disbursements . . . . . . . . . . . . . . . . .....20 Accounts and Audit ..21 NOTE: This report is based on the findings of the appraisal mission of May 1988, comprising Mr. Ken Newcombe, Mission Leader, Mrs. Anne Vaughn, Country Officer, and Mr. Ian Knapp, Public Sector Management Specialist. This document has a restricted distribution and .nay be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - il - V. PROJ3CT IPLEMHNTATION . . . . . . . . . . . . . . . .20 Project Managment and Policy Review Arrangements . . . . . . 20 Project Monitoring and Evaluation. . . . . . . . . . .. . . 22 Roles and Responsibilities for Project Implementation . . . . . . .22 VI. BENEFITS, JUSTIFICATIONS AND RISKS . . . . . . . . ........ . 24 VII. AGREEMENTS AND RECOMMENDATION . . . . . . . . . . . . . . . . . . .24 Dated Covenants . . . . . . . . . . . . . . . . . . .25 Recommendation . . . . . . . . . . . . . . . . . . .26 ANNEXES I Ministry of Industry and Technology plus UDC Owned and/or Mana%ed Companies II Management Audits and Rehabilitation Measures for Manufacturing Industr6es III Categorization by Government of Uganda of Public Enterprises to be Divested, Retained or Liquidated IV Divestiture Design Study Terms of Reference V Diagnostic Studies of Key Public Enterprises VI Diagrammatic Representation of Project-Related Decision Making and of IDA Assistance VII Indicative Timetables for Implementation of Divestiture and Liquidation Program, PIES and UDC Components, and SCD Components VIII Teos of Reference for Public Sector Administrative Reform and Planning Study (SARAP) IX Terms of Reference for Statutory Corporations Division, Ministry of Finance X Summary of Costs XI Estimated Schedule of Disbursements XII Staffing Plans for PIES and SCD XIII Divestiture Implementation Committee Terms of Reference MAPs IBRD 18540R  - iii - UGANDA PUBLIC SECTOR ENTERPRISES PROJECT Credit and Summary Borrowers The Republic of Uganda Implernting Agency: Ministry of Finance Credit Amount: SDR 11.70 million (US$15 million) Terms: Standard IDA terms Proiect Loiscriptions The project would strengthen the Government's capacity to undertake a program of parastatal reform. Project components will ;,nable the Government to: i) pursue a defined program of divestiture and liquidation of industrial public enterprises; ii) generate a short term supply response from the manufacturing sector through well targeted management and technology service assistance to retained industrial parastatals; iii) prepare a comprehensive program for rationalization for the rest of the parastatals; v) defineva longer-term policy, legislative and administrative framework for the sound management of the public enterprise sector, and to assist the Government to define its role vis-a-vis the private sector; vi) provide assistance Co the Statutory Corporations Division (SCD), Ministry of Finance, to enable it to monitor parastatal financial performance and budgetary implications and to coordinate the implementation of the proposed project. Proiect Benefits and Risks The project would contribute to sustained economic recovery by improving efficiency and productivity in the administration of the public enterprise sector and management of key parastatal enterprises; by increasing local resource mobilization through increasing capacity utilization and debt service capability of industrial enterprises and by improving pricing, billing and collection for public service enterprises; and by increasing private sector participation in manufacturing enterprises. The major risks are unexpected irternal differences regarding the extent of divestiture and the ultimate level of Government participation in commer- cially-oriented activities. However Government's attempts to engage all major interest groups in decision-making regarding public enterprise sector restructuring and divestiture augurs well for the implementation if an eventual consensus position acceptable to IDA.  - iv - Economic Rate of Returns Not applicable. Estimated Costs Local Foreign Total ---- (thousand US$) ----- Ministry of Industry Public Industrial Ent.Secretariat 742 2,907 3,649 Uganda Development Corporation 501 2,140 2,641 Sub-Total : 1,243 5,047 6,290 Ministry of Finance Statutory Corporations Division 268 2,122 2,390 Sector Administrative Reform Study 108 500 608 Diagnostic Studies 489 3,007 3,496 Project Management Assistance 175 188 363 Sub-Total 1040 5,817 6,857 Enterprise Rehab. and Divestiture Management Audits and Contracts 2,327 2,640 4,967 Divestiture Services 0 1,000. 1,000 Sub-Total 2,327 3,640 5,967 Total Project Costs (Excl.Dut/Taxes) 4,610 14,504 19,114 Duties and Taxes 234 0 234 Total (including Duties & Taxes) 4,844 14,504 19,348 Financins Plan LIocal Foreign Total (millions US$) ----- IDA 0.5 14.5 15.0 Government 4.3 ---- 4.3 Total 4.8 14.5 19.3 Estimated Disbursements: IDA Fiscal Year 1989 1990 1991 1992 1993 1994 1995