Uganda - Third Technical Assistance Project

Document Of The World Bank FOR OMCAL USE ONLY C+Z /C75,-~~~~~~. CGr- Reput No. 7221-UG STAFF APPRAISAL REPORT THE REPUBLIC OF UGANDA THIRD TECHNICAL ASSISTANCE PROJECT July 26, 1988 Country Operations Division Eastern Africa Department lis docomen has a tmbicted disributionnd may be ued by redpien ody in fte perfomance of tdhr offiial dutles. Its owtets may not otherwise be dicosed without World Bank auhorition.  CURRENCY EQUIVALENTS Currency Unit - Uganda Shillings (USh) 150.001 USh 1.00 - US$ 0.0067 SDR 1.00 - US$ 1.31062 USS 1.00 m SDR 0.7630 GOVERNMENT FISCAL YEAR July 1 - Ji-ae 30 This report is based on the findings of the appraisal mission of February 1988 comprising Mrs. Anne Vaughn, Mr. K. Ikramullah and Mr. Gosta Westring. Mr. Glynn Cochrane, Consultant, also contributed to the work of the mission. 1 After the currency reform and exchange rate adjustments of July 1, 1988. 2 At June 30, 1988.  FOR OFFICIAL US ONLY UGANDAs THIRD TECHNICAL ASSISTANCE PROJECT ABBREVIATIONS AND ACRONYMS SIDA Canadian International Development Agency CTB Central Tender Board FIS Financial Information System EAU Economic Analysis Unit, Ministry of Finance ERP Economic Recovery Program LCB Local Competitive Bidding MPED Ministry of Planning and Economic Development MPSCA ' Ministry of Public Service and Cabinet Affairs PIES Public Industrial Enterprise Secretariat PPF Project Preparation Facility UCS Uganda Computer Services UNCTAD United Nations Commission on Trade and Development UNDP United Nations Development Programme This document hss a restricted distributon sad may be used by recipients only in the pefomance of their official duties. Its contents may not otherwise be disclosed without World Bank authoration.  UGANDAs THIRD TECHNICAL ASSISTANCE PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. I. BACKGROUND 4 A. Introduction 4 B. Overview of the Economy 4 II. SECTORAL CONTEXT 5 A. Experience under Previous Technical Assistance Credits 6 B. UNDP Planning Assistance Projects 8 C. Other Public Sector Management Activities 8 D. Government Accounts and Financial Information 9 System E. The Budget Process 10 F. Government Procurement Functions 10 G. Management of the Recovery Process 11 III. PROJECT OBJECTIVES AND DESCRIPTION 12 A. Financial Information System 13 B. Budget Reform 14 C. Rationalization of Government Procurement 14 D. Special Advisory Services 15 E. Statistics Rehabilitation 16 F. Policy and Planning in the Agricultural Sector 17 IV. PROJECT COSTS, FINANCING AND PROCUREMENT 17 A. Project Costs 18 B. Financing Plan 18 C. Procurement 18 D. Disbursements 19 E. Accounts and Audit 19 V. PROJECT IMPLEMENTATION 19 VI. BENEFITS AND RISKS 20 VII. AGREEMENTS 21 ANNEXES 1. Project Activities by Responsibile Institution 2. Project Costs by Category 3. Training Summary 4. Terms of Reference MAP 18540R  UGANDA THIRD TECHNICAL ASSISTANCE PROJECT Credit Summary Borrowert The Republic of Uganda Credit Amounts SDR 13.8 million (US$18.0 million equivalent) Terms: Standard, with 40 years maturity Proiect Description: The project would begin the rehabilitation of the Government's essential administrative and management functions in the key economic ministries and increase the Government's capacity for scund financial management and economic analysis. It will include components designed to: a) restore the computerized Government accounting system and develop an integrated financial information system; b) strengthen the Government's budeet process; c) rationalize the Government's procurement process; d) develop the requisite data base for the implementation and monitoring of the economic recovery process and subsequent development programs; e) support a program to encourage the return to government service of highly qualified expatriate Ugandans; and f) provide logistical support and advisory services in support of critical economic recovery program tasks. The six-year project would finance both local and international consultants, in-country and overseaa training, resettlement costs for returning Ugandans who will take up key positions in the government service, office equipment, vehicles and operating and maintenance costa. Overall project coordination and administration would be provided by the Ministry of Planning for Economic Development which has effectively carried out this function under the First and Second Technical Assistance projects. A parallel project, financed by the UNDP, is providing support to economic planning.  -2- Estimated Costs (USS '000 Local Foreign Total A. Financial Irformation System 779.1 2,482.7 3,261.8 B. Budget Reform 143.8 2,035.4 2,179.2 C. Economic Analysis Unit 264,2 337.9 602.1 D. Statistics Rehabilitation 288.1 1,244.7 1,532.8 E. Implementation of ERP 73.4 4,406.6 4,880.0 F. Supplies DirectoratelCTB 188.7 3,254.3 3,443.0 G. Agricultural Secretariat 114.8 1.734.6 1,879.4 Baseline Costs 1,882.1 15,496.2 17.378.3 Physical Contingencies 70.6 1,196.3 1,266.9 Price Contingencies 2,671.9 1,762.3 4,481.5 Total Project Costs 4.671.9 18,454.8 23,126.7 FinancinR Plan Local Foreign Total IDA 1.5 16.5 18.0 CIDA .0 2.0 2.0 Government 3.0 -- 3.0 Total 4.5 18.5 23.0 Estimated Disbursements: (US$ million (IDA FY) 1989 1990 1991 1992 1993 1994 1995 Annual 0.6 3.6 4.8 4.5 2.6 1.5 0.4 Cumulative 0.6 4.2 9.0 13.5 16.1 17.6 18.0  -3- Proiect Benefits and Risks: The Project would help the Ugandan Government remove major institutional obstacles to effective implementation of the recovery program and start a process of rehabilitating the administrative infrastructure and institutional environment essential to sustain economic recovery. The major risks associated with the project are the difficulty of sustaining institutional reforms in the face of inadequate civil service remuneration, and resistance to reform on the part of government staff who benefit from the current lack of fiscal discipline and budgetary control. To offset these risks, the present Government has initiated a number of measures to reduce the size of the civil service, to restore discipline, and to increase wages for remaining employees. Intensive local and foreign training exercises are included in the project to enhance operational skills, motivate staff, and support effective operations of the improved financial management and information system. Improvement of working conditicns through the provision of adequate supplies and logistical support under the proposed project will also increase morale and productivity in the units affected. Economic Rate of Return: Not applicable.  UGANDA THIRD TECHNICAL ASSISTANCE PROJECT STAFF APPRAISAL REPORT I - BACKGROUND Introduction 1. The project originated from a Government request for assistance in support of their efforts to carry out an extensive program of economic recovery. During a preliminary mission in March 1987, an assessment was made of the Government's institutional capacity to implement the recovery program and to sustain the recovery process. The project was prepared by the Government with the assistance of two preparation missions, in HaylJune 1987 and October/November 1987, and appraised in February 1988. The major policy actions to be taken by Government were agreed in the context of the Policy Framework Paper and the Economic Recovery Credit (Credit 1844-UG) and are incorporated in the Economic Recovery Program President's Report. A Project Preparation Facility (PPF) of USS 600,000 was approved in April 1988. PPF funding is being used to provide start-up assistance to the Economic Analysis Unit in the Ministry of Finance, for preparatory studies related to public enterprise reform, and for initial operations of an Open General Licensing System which will help optimize the allocation of foreign exchange. Overview of the Economy 2. At independence, in 1962, Uganda had one of the strongest and most promising economies in Sub-Saharan Africa. With favorable climatic and soil conditions, the agricultural sector was able to provide ample food to feed the population as well as generate foreign exchange. The industrial sector, although small, supplied the economy witb- basic inputs and consumer goods and contributed foreign exchange through exports of textiles and copper. Despite the disadvantage of being a land-locked country. Uganda shared access to an effective network of railway, port and airline facilities through common services with Kenya and Tanzania. Its abundant potential for hydro-electric development was already being harnessed. 3. The initial yeare after independence clearly demonstrated the economic potential of the country. Real Gross Domestic Product (GDP) grew by 5.8 percent per annum from 1963 to 1970, the country maintained a reasonable savings rate permitting the implementation of an investment program without undue pressure on domestic prices or the balance of payments, and export earnings were more than adequate to cover import requirements. However, starting in 1970, a decade of political turmoil and gross economic mismanagement radically changed the situation. Real GDP declined by about 20 percent during the 1972-1978 period and an era of extensive economic, social and political disruption culminated in the 10?9 war.  4. In the 1981-84 period following the overthrow of the military regime, the Uganda Government made positive progress towards economic recovery. From mid-1984, however, there was a marked deterioration in economic performance and a worsening of the political situation. In January 1986, the National Resistance Army, after a brief but intense war, took control of the country, but persistent political destabilization coupled with the pursuit of inappropriate economic policies continued to inhibit the revival of the economy. Sirce 1986, the Uganda Government has taken major steps to re-establish peace and security and to rehabilitate the economy. In March 1987, the Government agreed to the first year of an economic program to be supported under the Structural Adjustment Facility and an action program to revitalize the recovery process supported by an Economic Recovery Cred3.t. Subsequently, the Government initiated a series of policy measures including appropriate exchange rate and pricing policies and measures to restore price stability and limit the budgetary deficit. 5. The objective of the Government's Economic Recovery Program is to achieve a rapid overall economic recovery and set the stage for sustained economic development. More specifically, the program aims at restoring price stability in the economy and a sustainable balance of payments position, improving capacity utilizstion in the productive sectors, rehabilitating existing infrastructure and the installed capacity, restoring adequate incentives to producers through appropriate pricing policieR and the use of markets, and improving public sector resource mobilization and allocation. ;I - SECTORAL CONTEXT 6. The sustainability of the Government's economic recovery program will depend, in part, upon the administrative capacity of the public sector -- and particularly the core ministries; i.e. Finance, Economic Planning and Development and Public Service -- to implement policy decisions, monitor and analyze their impact, and recommend corrective measures when required. The public sector, however, has been weakened by years of political instability and economic decline. Although the Government has been able to retain a core of well-educated, competent mid-level staff in spite of inadequate salary levels and an unstable political environment, lack of basic equipment and supplies, the destruction of buildings and loss of vehicles, and the inability to restore discipline have led to a breakdown of most of the fundamental systems for the maintenance of orderly government. 7. The institutional decline has had a particularly serious impact on the core economic agencies which are the agencies with primary responsibility for implementation and follow-up of the wide-ranging economic reform program. The restoration of the Government's administrative and management capacity will entail a sustained effort over a relatively long term. The dilemma faced by the Government in implementing the economic recovery process is that improved functioning of the public sector is, to a large extent, dependent upon the anticipated benefits of the recovery itself (i.e. adequate public sector salaries, availability of complementary inputs), while implementation of the recovery program makes immediate and heavy demands upon its existing management capacity. Therefore, the Bank Group strategy for strengthening public sector management in Uganda is to restore the essential functions and  - 6 - processes in the Ministries of Finance and Planning and Economic Development through the provision of technical assistance in the short-term while, at the same time, establishing the foundation fcr the longer-term development and reform of government institutions. 8. Restoration of the Government's capacity to formulata and implement its development program and to carry out the basic administrative and management functions of sound government will requires a) the ability to sustain political and economic stability over a long period, and b) implementation of a broad program of public sector reforms aimed at re- establishing the efficient operations of government in a cost-effective manner. The present Government has been successful in restoring relative peace and stability to the country and has undertaken a number of measures to stabilize the economy. However, the virtual collapse of the public sector institutions as functioning agencies over the last two decades, presents the Government with a formidable task of reconstruction and reform of the entire public sector. The first priorities of such a program must be to: (a) restore discipline, accountability and efficiency in the public sector; (b) improve public sector resource mobilization and allocation; (c) improve the quantity and quality of information available for analysis and decision making in the financial and economic spheres and strengthen the capacity to utilize this information effectively and; (d) restore effective expenditure controls and reduce the drain on the Government's budget of inefficient and non-productive activities. The Ministries of Finance, Planning and Economic Development, Public Service and Cabinet Affairs as well as the Bank of Uganda will have the primary roles in initiating, guiding and monitoring economic recovery and development. The three ministries will also have the leadership role in initiating the necessary reforms in the public sector as a whole. Thus, rebuilding the capacity of these ministries is crucial to both the economic recovery program and to the longer term rehabilitation of the public sector. Experience Under Previous Technical Assistance Credits 9. The First Technical Assistance Project (Credit 1077-UG) for USS 8.0 million was appraised at a time when the Government of Uganda was embarking upon a rehabilitation program to revive the economy after the fall of the Amin regime in 1979. The primary objectives of the project were to assist the Government in preparing rehabilitation and development projects. In order to respond to pressing needs for a broad range of rehabilitation requirements, the project was designed as a technical assistance fund to be allocated according to an agreed procedure as specific needs were identified and suLbprojects prepared and submitted for appro7al.  10. In spite of the marked deterioration in political stability which slowed subproject implementation and disbursements, the project succeeded in establishing a strong pipeline of new investment and rehabilitation projects which were closely linked to the Bank's lending program. The institution building objectives, however, were not achieved. The capacity of individual agencies to prepare and of MPED to review and analyze subproject proposals remained weak with no substantial improvement during the project period. 11. The Second Techltical Assistance Project (Credit 1434-UG) for approximately US$ 15.0 million retained the flexible deeign of the first, while placing a greater emphasis on institutional development and strengthening of the core ministries. The project supported the establishment of the Agricultural Secretariat in the Bank of Uganda and financed the Secretariat's Agricultural Task Forces which were responsible for formulating recommendations on agricultural pricing and for preparing a comprehensive and systematic agricultural development strategy which would serve as a framework for government and donor investment. The Agricultural Secretariat now plays a major role in planning and policy formulation in the agriculture sector and is highly regarded both within Government and by the donor agencies. Support for the work of the Agricultural Secretariat will be continued under the proposed project. 12. The Second Technical Assistance project elso initiated a statistical rehabilitation program which will establish basic economic statistics and the infrastructure required to collect them. The statistics rehabilitation program was more seriously affected by the security problems than were other aspects of the planning assistance program. Lack of safe access to many parts of the country prohibited the carrying out of routine statistical surveys and the hazards of travel between the Statistics Department in Entebbe and Government ministries in Kampala hampered access even to the data produced as the by-product of administration. As a result, implementation of the statistics project was delayed by more than two years and basic data on the ecenomy is still not available to decision makers. Dramatic improvements in the security situation have now made it possible for the Statistics Rehabilitation program to go forward. A Household Budget Survey is being undertaken and a five-year work program for the Statistics Department has been agreed which is expected to bring about a significant improvement in knowledge of the performance of Uganda's economy and its principal sectors. 13. The project also initiated a public service improvement program under the leadership of the Ministry of Public Service and Cabinet Affairs. The program was intended to strengthen the capacity to MPSCA to carry out its personnel management functions and to improve the administrative management services within Government ministries and departments. Under this program, a review of functional and staff requirements has been launched which will encompass those ministries employing 60 percent of government employees. This basic information will -ovide the basis for subsequent programs to streamline the civil service -nd limit the wage bill. Progress under this program has been slow, with initial implementation of the work program delayed by about two years, primarily as a result of the civil war in 1985 and subsequent changes in Government which made it difficult to reach a consensus on the direction of reform in the public sector.  The UNDP Plannina Assistance Proiects 14. Support for the Ministry of Planning and Economic Development has been provided since 1979 by UNDP under a project executed *7v the World Bank. Although security problems and the unstable political environment delayed its full implementation until July 1985, the project has had a significant and positive iapact on the capacity of MPED for planning and monitoring of the economy. Under the project, systems for monitoring the implementation of approved development programs, budgets and projects were established, a medium-term development program was prepared, and systems for identification and evaluation of projects as well as criteria for priority ranking of projects were initiated. 15. The assistance to MPED will be continued for an additional four years and will extend support to the planning process from plan preparation to plan implementation. This will entail making the medium-term plan operational through the development of annual plans; undertaking aid monitoring as the basis for monitoring of annual and medium-term plans; and strengthening of the planning units in the line ministries to enhance their capacity to undortake sectoral analysis and to prepare sector inputs to the planning documents. Other Public Sector ManaRement Activities 16. It is clear that technical assistance alone cannot solve the fundamental problems faced by the Ugandan Civil Service today. While the Government's remuneration to its employees has been claiming an increasing share of its total budget, salary levels in the civil service are extremely low, resulting in a demoralization of c! - servants and a deterioration in their performance. Technical assistance -dn and is being provided to assist the Government to carry out a review of its various functions, to define what constitutes the core services and to recommend how these can best be carried out. However, major changes in recruitment, termination and wage policies will also be required if the Government is to succeed in its efforts to restore discipline, accountability and efficiency in the public sector. In this regard, a number of measures have been taken or are under consideration within the context of the adjustment measures under the Economic Recovery Credit includingt (a) a census of the civil service which was carried out by the Government and which provided, for the first time, detailed information of the numbers of employees by type (i.e., regular civil service, daily wage workers, temporary employees), by ministry, by educational level, etc. The census results will be used to address both short and longer term reform issues; (b) a review of the present real value of salaries, allowances and fringe benefits combined leading to a structured progression toward a more eq4itable and transparent system;  - 9 - tc) preparation of an action plan for the gradual red'ction of temporary staff and group employees (staff of these types represent approximately 50 percent of government employees) over a three year period; (d) revision and streamlining of recruitment procedures to prevent a recurrence of unplanned civil service expansion. 17. The Government also intends to -undertake a program to reduce the financial losses of its public sector enterprises through a program of divestiture, liquidation and restructuring starting with industrial sector public enterprises. Technical assistance for the establishment of a Public Industrial Enterprise Secretariat (PIES) to carry out this program and financing for the first nine months of PIES operations is being provided under the Second Technical Assistance Credit. A complementary project has been appraised for IDA financing, the Public Enterprises Project, which will continue the support of PIES operations and define and commence implementation of a broader program of public sector enterprise reform. 18. The on-going and proposed activities described above are aimed at public sector management reforms in a number of important areas, i.e. planning, civil service, and public enterprises. However, institutional weakness on the financial management side have not been adequately addressed. Because of its central role in macro-economic and financial policy-making, the capacity of the Ministry of Finance for policy analysis and formulation as well as its administrative capacity to implement policy decisions effectively is crucial to the recovery process. The generalized institutional decline which has affected all aspects of government has not spared the financial agencies -- the Ministry of Finance and the Bank of Uganda. Here, as elsewhere, there has been a severe drain of qualified staff, loss of discipline, and a collapse of basic systems essential for managing the country's financial resources. 19. As a result, the government accounting system is no longer functioning and accurate information on expenditures is not available on a timely basis, the budgetary process is inadequate as are links between Government's capital and recurrent expenditures, and the capacity for policy analysis and formulation is weak. Although the Ministry has introduced a number of measures to control expenditure, it has been unable to halt the unsustainable drain on the Treasury resulting from the losses of inefficient and non-viable public enterprises and from the excessive decentralization and lack of control of government's procurement practices. Similarly, the Bank of Uganda is experiencing serious problems in effectively managing the exchange controls and its external debt management functicns. Government Accounts and Financial Information System 20. The Government has agreed with the IMF on deficit reduction targets and has taken the initial steps to restore financial discipline in the public sector. In the longer term, homver, additional measures will be necessary to increase revenue yields, stabilize central government expenditure, and institute a strict monitoring system with regard to the budget. All these measures require timely and accurate information on expenditures and revenue and the abi'ity to access this information on demand.  _ 10 _ 21. The Government Accounting System and financial information system as a whole has collapsed. The Government Accounting System has uot produced a balance sheet or p:ocessed an annual closing cycle for sixteen years. System balances are mostly inaccurate, resulting in the maintenance of parallel manual books and controls. The revenue collection departments are experiencing similar problems as tax records, assessments, tax rosters and collections are maintained manually with resultant errors, operational delays and non-collection of taxes. Similarly, the Bank of Uganda is experiencing serious problems in effectively managing the exchange controls, banking, monitoring of balances at correspondent banks, reconciliation of public sector financial positions with the Ministry of Finance, and external debt management functions due to inadequate systems and automation tools. 22. The Treasury has purchased a mainframd computer to replace its now defunct hardware and has started the process of re-computerizing the Government Accounting System. However, no prioritized implementation program has been developed, staff are inadequately trained, and the system is not yet functioning properly. Furthermore, other urgent requirements such as information needs of the revenue generating departments in order to increase the collection rate and improve compliance have not yet been addressed. The Budgetarv Process 23. The budget should be the Government's principal tool for ensuring that development policies are translated into concrete actions and outputs. Serious weaknesses in the budgetary process, however, limit the effectiveness of the budget both as an instrument to implement Government policies and as a mechanism for expenditure control. At present, allocations to all ministries are decided on the basis of historical trends, not on the basis of a review of each item's contribution to sectoral goals. In order to keep within agreed budgetary ceilings when revenues fall short of expectations, reductions are made across-the-board and not on the basis of priorities or a distinction between "core, and "non-core" items. The practice of presenting the recurrent budget, development budget and revenue estimates separately further hinders rational analysis of budget submissions. Lack of coordination in the planning and execution of recurrent and development expenditures results in insufficient funding for operating costs associated with development projects leading to costly delays and slowing the recovery process. Inadequate data systems hinder the Ministry's ability to closely monitor budgetary developments during the fiscal year and, as a consequence, potential problem areas are not detected early enough to permit corrective action to be taken on a timely basis. Government Procurement Functions 24. An important area where budget reduction and cost savings are necessary and feasible is that of government procurement of supplies and equipment which presently consumes a large percentage of the recurrent budget without providing adequate supplies for efficient operations. Government procurement and supplies management has steadily deteriorated since 1975. Inadequate funds for supplies, maintenance and repair of  - 11 - facilities, intermittent looting and vandalism during times of war and civil unrest, poorly trained and constantly shifting staff, a tolerated disregard for established rules and procedures have led to the complete breakdown of the government's supply and procurement functions. There is a lack of control over government supplies, regulations and policy directives are not enforced. Excessive decentralization of purchasing has resulted in rapidly escalating costs, unavailability of essential goods and supplies, and duplication of non-priority items. A general lack of control and failure to maintain records has greatly increased the ease of misappropriation, a situation which is exacerbated by poor working conditions and low staff morale. 25. The Government agency with primary responsibility for the supervision and enforcement of procurement regulations is the Central Tender Board. The CTB is an autonomous body chaired by the Deputy Minister of Finance. Prior approval of the Board is, in principle, required before any government department can enter into contracts for supplies or services above a certain limit. Under the Amin regime, the authority of the CTB was subverted and tender board regulations were no longer enforced. In subsequent years, the CTB lost many of its experienced staff, tender board regulations were not up-dated and no procedures were establi'hed for tendering and evaluation in a highly inflationary environment. As a result, the small number of remaining staff were quickly bogged down in renegotiating contracts as inflation made existing bids untenable. Delays in processing through the CTB resulted in a proliferation of procurement without CTB authority. Furthermore, the lack of audited government accounts after 1972 rendered many of the regulations virtually unenforcable. 26. The Ugandan Government has long recognized the need to improve the procurement, control and storage of government supplies. Beginning in 1980, a series of studies were carried out to analyze the problem and to make recommendations for improvement. Although these studies consistently recommended the creation of a central Supplies Directorate, the curbing of excessive decentralization of procurement, and the re-establishment of the authority of the Central Tender Board -- recommendations which were accepted in principle by successive governments -- little positive action was taken and the government's procurement services continued to deteriorate. 27. The present Government, which came to power in 1985/86, has for the first time, taken the initiative in undertaking widespread reforms, including the reform of government procurement. It has demonstrated its commitment to the reform of the procurement system by replacing corrupt and incompetent officials and approving the establishment of a Supplies Directorate. Technical assistance has been requested to establish the Directorate on a sound and efficient basis, and to strengthen the capacity of the Central Tender Board to fulfill its oversight and regulatory functions. Management of the Recovery Process 28. In order to improve the capacity of the Ministry of Finance to carry out the research and analysis in policy areas critical to the recovery process, an Economic Analysis Unit was established in January 1987  _ 12 - reporting directly to the Minister of Finance. This Unit is responsible for reviewing monthly trends in revenue and expenditure and to update the fiscal year forecast in an objective fashion which will allow spending to be adjusted in line with overall deficit targets if revenues fall short of budgeted amounts. The unit also monitors all Government accounts in the Bank of Uganda and carries out special research assignments in financial and economic areas under the direction of the Minister of Finance. The Economic Analysis Unit is currently staffed by an Economic Adviser and four ! research assistants, all from Makerere University. The Minister of Finance intends to increase the staff strength in the Unit to nine and to recruit short-term consultants with specialized knowledge not currently available in the public sector. 29. Many qualified and experienced Ugandans who have the requisite expertise to make a significant contribution to the country's recovery program are now expatriates, having left Uganda during the long period of instability and civil strife. With the return of relative peace and security, a number of expatriate Ugandans are prepared to return and serve under the present government. However, many have lost their homes as well as land and small businesses which can provide the necessary supplement to inadequate government salaries. To ensure that as many as possible of the Government's skill requirements can be filled by Ugandans, the Government intends, with assistance from the proposed project, to attract highly qualified Ugandans from abroad by paying travel costs and a resettlement allowance for those prepared to take up permanent positions in government and to facilitate the contracting of Ugandan consultants for short term assignments related to the implementation of the recovery program. III - PROJECT OBJECTIVES AND DESCRIPTION 30. The proposed project, together with the on-going and proposed activities in public sector management, will assist the Government to implement the agreed adjustment measures which are essential for the success and sustainability of the economic recovery program. It will also initiate a public sector reform program which addresses the key management and administrative functions and the linkages between them which are fundamental for efficient and effective government. It will also provide a vehicle for ensuring that the necessary linkages between the various functions are in place. The objectives of the project are to: (a) establish and institutionalize data collection and analysis in the Ministry of Finance and the Bank of Uganda; (b) improve the budgeting process to enable it to function as the Government's primary tool for translating policy initiatives into actions and to eliminate wasteful expenditure; (c) strengthen the capacity for financial and economic policy formulation in the Ministry of Finance; (d) rationalize the Government's procurement process to reduce costs; and (e) provide long and short-term advisory services for the implementation and monitoring of the Government's Economic Recovery Program, with a special emphasis on encouraging qualified Ugandans currently outside the country to return in order to undertake these tasks. Details of proposed project components are as follows:  - 13 - Financial Information System - FIS ($4.2 million) 31. The proposed project would finance a program to restore the computerized government accounting system and to expand the system to include customs and tax revenue information, external debt, foreign assistance, and Bank of Uganda operations. In devising the program, the existing hardware and data processing staff resources will be utilized to the extent possible. Local consultants will be employed in support of the program to enhance local expertise and provide a conduit for continuing assistance. The program provides for six major activities over a four-year period: a) Requirements Definition Study and development of an information technology strategy to be carried out by a management/data processing consulting firm. This is a preliminary study to determine priority information requirements, define data linkages, recommend packaged software solutions to minimize costs and implementation time frames, and design the implementation program. It is to be financed from the on-going Technical Assistance Credit in order to permit immediately commencement of the implementation phase upon effectiveness of the Third Technical Assistance Credit. Satisfactory completion of the Study will be a condition of disbursement for the balance of the FIS component. b) Extensive training for staff of the Ministry of Finance, Bank of Uganda, the Uganda Computer Services, the Treasury and the Auditor General's office in various computer-specific disciplines, systems and procedures. The training will comprise seminars, courses, workshops, and fellowships. A substantial allocation for this activity has been made to ensure improvement in skills and adequate motivation for government staff to effectively contribute to the implementation of the new financial management processes. c) Services of an implementation specialist for a three year period to support and guide the overall automation exercise and provide on-the-job training to supplement the formal training programs. d) Acquisition and implementation of application software packages or, where required, custom-developed systems. This will be accomplished through a mix of local consultants and the providers of the financial management software and ensure continuity and long-term technical support. e) Procurement and installation of a mini-computer and appropriate software at the Bank of Uganda to support its foreign exchange controls and operations; research into public expenditure trends and indices, and its administrative and financial management functions. This capability would interconnect with the Ministry of Finance systems for reconciliation and timely expenditure authorizations, as well as with the recently installed UNCTAD external debt system. f) Additional memory, disk storage and telecommunication capabilities for the mainframe computer as well as micro-computers and related software required to extend the budgeting, revenue and expenditure monitoring fumctions to the sector ministries.  - 14 - 32. As indicated above, financing of the initial study (estimated cost US $200,000) is being sought under the on-going Technical Assistance Project. Budget Reform (USS 2.8 million) 33. The project will assist the Government to develop procedures for effective linkages between the planning and budgeting process to ensure that the Budget is consistent with the Plan and that the current and development budgets are adequately integrated. Specifically, the project will provide assistance to the Ministry of Finance to: (a) establish clear, coordinated objectives and priorities for recurrent and development expenditures over a three year horizon that are consistent with overall Government policies; (b) develop a budget format that emphasizes the results of public expenditure as well as the inputs; (c) allocate funds and manpower on the basis of priorities and performance; (d) introduce performance indicators; (e) development of a training system which supports the budgetary reform exercise. 34. The project will finance the services of two Budget Specialists and short-term consultants over a three-year period (86 m/m) as well as vehicles and office equipment. Training activities would include the development of a training system for budget work based on the needs of selected ministries. Standardized training materials will be developed and tested and the new materials and procedures will be transferred to the appropriate government training institutions. Rationalization of Governm.ent Procurement Functions (USS 4.3 million) 35. The proposed project will provide assistance to: a) implement the government's decision to establish the Supplies Directorate with an appropriate organizational structure, legal status and budgetary base; b) provide management services and training of supply staff during the first three years of operations; c) strengthen the oversight and regulatory functions of the Central Tender Board; and d) establish a computerized and comprehensive supply management information system. 36. The Government intends to request financing under the on-going Technical Assistance II (Credit 1434-UG) for the services of a Procurement Expert to clarify the roles of the Central Tender Board and the Supplies Directorate, revise existing procurement regulations to take into account the new Directorate, analyze the options with regard to the appropriate and feasible extent of centralization and, to recommend the appropriate division of responsibilities between the Directorate and other agencies involved in procurement. Initially, the Directorate of Supplies is expected to be responsible for the procurement of an agreed list of common use items; e.g. building materials, vehicle spare parts, office equipment, furniture and supplies and government stationery. Central procurement of such items will permit the Government to take advantage of the cost savings arising from bulk purchase and, in addition, to import directly from suppliers rather than procurement through local traders at a considerable mark up.  - 15 - 37. Agreement with the Bank on the proposed work program, the list of common use items to be procured centrally, and prec'dures for financing procurement by the Directorate are conditions of di ursement for this component. Once this agreement has been reached, the following activities would be financed under the projects I. Strengthening of the Central Tender Board a) advisory services to formulate and monitor public procurement regulations; b) fellowships for the staff of the Board; c) preparation of manuals and teaching material to serve for the training and guidance of all Government staff concerned with procurement; d) material support for Board operations. IT. Support to the Directorate of SupFlies a) advisory services on procurement and supplies management including the introduction of improved, standardized methods and documentation; b) fellowships and specialized in-country seminars for Directorate staff; c) material support for purchasing operations (including vehicles, telecommunication, micro-computers and office equipment); d) studies concerning options for storage and distribution of common use items. 38. In order to carry out the work program outlined above, the project will finance a team of advisors and short-term consultants (178 mlm) including specialized training staff to conduct in-country procurement and supplies management workshops and seminars. Financing will be made available for the local costs of approximately 25 local workshops and up to fifteen short-term training programs abroad for staff of the Directorate and the Central Tender Board. In addition, material support in the form of micro-computers, software, photocopiers, and vehicles required for the functioning of the Directorate will be provided. Special Advisory Services for the Economic Recovery Program (USS 7.1 million) 39. The successful implementation of the Economic Recovery Program will depend upon the capacity of the core economic ministries to analyze problems, recommend corrective actions and implement these recommendations. While civil service reform and economic recovery are eventually expected to allow the Government to attract and keep the talent it needs, it is clear that public sector salaries will not become competitive for many years. To overcome this manpower constraint during the recovery period, the  - 16 - Government will have to attract qualified people from outside the civil service to carr) out special studies and analyses related to all aspects of the recovery program. 40. A first step in this direction has been taken by the Ministry of Finance by the creation of the Economic Analysis Unit (EAU) in the Ministry with staff recruited from Makerere University. In order for the Unit to operate effectively and achieve its objectives, it urgently requires operational and logistical support including office machinery, micro- computers, and vehicles as well as duty incentives and internal travel allowances for EAU staff (all staff in the Unit are employed under standard civil service terms and conditions). The Ministry of Finance will also need to recruit, on a short-term basis, experts with specialized knowledge to assist in monitoring economic performance and advise on adjustments in economic policies required in light of new developments to ensure the achievement of economic objectives. Funds will be made available under the proposed project for the temporary services of Ugandan specialists currently employed in the private sector, whether in Uganda or abroad, as well as international consultants as required. The project will also finance vehicles, office equipment including computers as well as the operation and maintenance costs of this equipment. Staff allowances for up to nine EAU staff will be financed for a three-year period, after which it is expected that the analysis and advisory functions of the EAU will be absorbed into the existing ministerial structure. 41. In support of the Government's efforts to encourage the return of expatriate Ugandans, the proposed project would finance the resettlement costs associated with returning Ugandans who will take up Government positions of direct relevance to the recovery program. The criteria for eligibility would be based on the qualifications of the individual concerned and the position to which he would be assigned. Returnees would be reimbursed for travel costs and receive a lump-sum settling-in allowance not to exceed US$ 2,000 equivalent. Approximately US $ 250,000 will be allocated under the project for this purpose. 42. In addition to the relocation assistance, the project would finance advisory services of up to two years duration for Ugandan consultants presently employed in the private sector or abroad to provide technical assistance in those sectors which the government has identified as having the highest priority for the recovery program and to assist the key ministries in carrying out their roles in the implementation of the program. If Ugandans with the necessary experience and qualifications were not available, international consultants could be employed under this component. Terms of reference, contractual arrangements and the selection process would be acceptable to the Association. Statistics Rehabilitation Program (US$ 2.1 million) 43. The Second Technical Assistance Project (Credit 1434-UG) is financing the first phase (covering the first two years) of the Statistics Rehabilitation Program. The first priority in the work program will be given to collection of all data that are by-products of administration. The census of industrial production, economic and functional classification of government accounts and collection of price statistics will also be undertaken in Phase I. Once basic and reliable data have been collected,  _ 17 - Phase II (covering the following three years) will follow with work on the preparation of the basic National Accounts tables. Project inputs will include financing of the Co-Director of the Statistics Department, a contract with an appropriate "twinning agency' for short-term consultants and training, equipment, and logistical support. Policy and Planning in the Agriculture Sector (USS 2.5) 44. An Agricultural Secretariat was established in 1983 with IDA financing from an Agricultural Rehabilitation Project. The functions of the Secretariat were to formulate, coordinate, direct and review key policies and programs in the agricultural sector. Since its inception, the Secretariat has played a key role in policy formulation and planning in the agricultural sector. Under the Government's current Rehabilitation and Development Plan, the Agricultural Secretariat is Pxpected to play a very _rucial role in providing symmetry in pricirg, planning, resource allocation, execution and monitoring of activities in the sector. In order to maintain the capacity of the Secretariat in light of continuing shortage of experienced local staff, technical assistance will be required for an additional four years. 45. The proposed project will finance the services of an Agricultural Economist, Financial Analyst and Economist/Statistician for an additional three years (108 m/m), short-term consultants both local and international for special reviews and studies related to policy analysis (58 m/m) and vehicles, office equipment and computer consumable materials to enable it to perform the following duties: a) monitor sectoral performance including policy and institutional constraints; b) review sectoral and commodity strategies and priorities; c) administer policy studies for specific subsectors; d) undertake regular reviews of farmers' incentives and propose producer prices; e) plan and monitor agricultural input requirements; f) monitor and evaluate agricultural projects; g) oversee the collection of agricultural statistics to improve the basis for sectoral planning. IV - PROJECT COSTS. FINANCING AND PROCUREMENT 46. Total project costs are estimated at US$ 23.0 million. The estimated foreign exchange cost is US$ 18.5 million, or 80 percent of total costs. Base cost estimates are in July 1988 prices and converted into US dollars using an exchange rate of US$1.0 - USh 150. Approximately US$ 600,000 will be used to repay the PPF advance. Physical contingencies amounting to 5 percent of equipment costs and 10 percent of the cost of consultants are included. Annual inflation rates have been estimated as follows:  -18 - Assumed inflation rates (percent per annum) 1989 1990 1991 1992 1993 1994 1995 Local 60 34 17 10 10 10 10 Foreign 3 3 3 4 4 4 4 A summary of cost estimates is presented in Table 1.1 below. Details on project costs are given in Annex II. Estimated Costs (US$ '000 Local Foreign Total A. Financial Information System 779.1 2,482.7 3,261.8 B. Budget Reform 143.8 2,035.4 2,179.2 C. Economic Analysis Unit 264.2 337.9 602.1 D. Statistics Rehabilitation 288.1 1,244.7 1,532.8 E. Implementation of ERP 73.4 4,406.6 4,880.0 F. Supplies Directorate/CTB 188.7 3,254.3 3,443.0 G. Agricultural Secretariat 114.8 1,734.6 1,879.4 Baseline Costs 1,882.1 15,496.2 17.378.3 Physical Contingencies 70.6 1,196.3 1,266.9 Price Contingencies 2,719.2 1,762.3 4,481.5 Total Project Costs 4,671.9 18,454.8 23,126.7 Financing Plan 47. The proposed IDA credit of SDR 13.8 million (equivalent to US$ 18.0 million) would finance approximately 78 percent of project costs; this would cover approximately US$ 16.5 million of foreign costs and US$ 1.5 million of local costs. Costs for local staff salaries, office space and support, and renovation and upgrading of the UCS computer room will be borne by the government. CIDA is expected to co-finance the project through a grant of US$ 2.0 million for the second phase of the Statistics Rehabilitation component. UNDP intends to provide approximately $2.9 million for a parallel project to strengthen the Ministry of Planning and Economic Development. The World Bank will act as Executing Agency for the UNDP project. Procurement 48. 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. contracts for up-grading of computer hardware and supplerentary hardware and software for the Financial Information System would be awarded on the basis of international competitive bidding in accordance with World Bank Guidelines. Contracts for furniture, equipment'and vehicles would be awarded on the basis of international competitive bidding except those which cannot be grouped into contracts valued at US$100,000 or more. Such items would be procured through LCB up to an aggregate of US$500,000. Minor items costing $20,000 or less (e.g. office supplies, computer software) would be procured by prudent shopping up to a limit of US$400,000.  - 19 - Procurement Method and Disbursementsl (USS million) Procurement Method ICB LCB Other N.A. Total Computers and peripherals 0.8 0.8 (0.8) (0.8) Civil Works 0.05 0.05 (0.0) (0.0) Vehicles and office equipment 0.3 0.5 0.2 10.0 (0.3) (0.2) (0.2) (0.7) Supplies, packaged software 0.2 0.2 (0.2) (0.2) Technical Assistance 14.5 14.5 (12.0) (12.0) Training 3.7 3.7 (2.8) (2.8) Resettlement Costs 0.35 0.35 (0.35) (0.35) Allowances 1.4 1.4 (0.85) (0.85) Counterpart salaries 0.4 0.4 (0.0) (0.0) Operations and Maintenance 0.6 0.6 (0.3) (0.3) TOTAL 1.1 0.55 0.4 20.95 23.0 (1.1) (0.2) (0.4) (16.3) (18.0) 1Amounts in parentheses are IDA-financed. Disbursements 49. The Credit is expected to be fully disbursed in 6.5 years. Due to the aevere disruptions in past project activities during periods of instability and civil war, there is no standard disbursement profile on Uganda. The average profile of 6.5 years for technical assistance projects in the Africa region as a whole has been taken as a guideline in this case. The proceeds of the Credit would be disbursed against: 100 percent of the cost of consultants, local or foreign, 100 percent of foreign expenditures and 80 percent of local expenditures for training, equipment, vehicles office supplies and materials; 90 percent of operating and maintenan expenditures for all vehicles and office machinery purchased from the  - 20 - proceeds of the credit; 100 percent of expenditures for resettlement costs of expatriate Ugandans; 85 percent of staff allowances with the exception of allowances fcr the Economic Analysis Unit staff for which disbursement will be made against 100 percent of staff allowances for a period of three years with the Government assuming the full cost thereafter; and 100 percent of repayment of the PPF. 50. A Special Account of up to $700,000 would be established in US dollars in a commercial bank, through the Bank of Uganda. The account would be operated and maintained on terms and conditions acceptable to IDA. The Account would be managed by the Project Coordinator in MPED and would be replenished by IDA on the basis of regular monthly applications which would be submitted promptly after Bank statements had been received from the commercial account and satisfactorily reconciled. Payments against contracts of less than $20,000, training programs, allowances and vehicle operating expenses would be documented through stztements of expenditure with the underlying documentation held available locally for inspection by IDA supervision missions. All other expenditures would be fully documented for prior approval by IDA. Accounts and Audit 51. The Government would maintain separate accounts for all expenditures funded under the Credit. The project accounts would be audited annually by independent auditors satisfactory to IDA, including an audit of statements of expenditure. The audit reports, of such scope and in such detail as IDA shall reasonably request, would be submitted to IDA no less than six months following the end of the Government's fiscal year. V - PROJECT IMPLEMENTATION 52. Responsibility for coordination and overall project administration will rest with the Ministry of Planning and Economic Development. A project coordinator has been appointed and will be responsible for: (a) compilation and submission to IDA of semi-annual progress monitoring reports; (b) disbursement and preparation of claims for reimbursements; (c) monitoring and management of Special Account; (d) assisting in and monitoring tlhe procurement of goods and services to be financed under the credit; (e) clearance of contracts, bidding documents, short lists, letters of invitation, proposal evaluations, etc. with the Association; and (f) monitoring project implementation and assisting implementing agencies resolve bottlenecks in project implimentation.  - 21 - 53. Although overall project administration would be done by the Ministry of Planning and Economic Development, each project component would be implemented directly by the agency or department concerned. The Ministry of Finance will assign a Team Leader/Task Manager for each of the major project components; i.e. the Financial Information System, the budget reform exercise, the Supplies Directorate, and the Economic Analysis Unit. In the case of the FIS, the Team Leader would chair a Steering Committee representing the needs and interests of the major data users and suppliers. The Team Leaders would work in close collaboration with the Project Coordinator in MPED and submit to MPED a semi-annual progress report for inclusion in the overall report to the Association. 54. Agencies requesting support from the special studies and advisory services component would submit their proposals to MPED through the Project Coordinator for the approval of the Review Committee. The Review Committee would be chaired by the Permanent Secretary, MPED and include the Secretary to the Treasury, the Permanent Secretary, MPSCA, the Project Coordinator, and a representative from the requesting agency. A similar procedure would be followed with regard to applications for resettlement grants for returning Ugandans. All proposals for advisory services and resettlement grants would be submitted to the Association for prior approval and allocation of funds under the credit. VI - BENEFITS AND RISKS 55. The Project addresses a major concern shared by the Association and the other donors which have allocated substantial resources for Uganda's Economic Recovery Program; i.e. the administrative and managerial capacity of the government to implement the extensive and complex action programs necessary for the success of the recovery effort. The Project will strengthen the core ministries through technical assistance and a program to attract expatriate Ugandans back to their country to contribute their skills ard experience to national reconstruction and recovery. It will help the Ugandan Government to remove the major institutional obstacles to effectivc implementation of the recovery program and start a process of rehabilitating the administrative infrastructure and institutional environment fundamental to efficient and effective government. The major risks associated with the project are the difficulty of sustaining institutional reforms in the face of inadequate civil service remuneration, and resistance to reform on the part of those who benefit from the current lack of fiscal discipline and budgetary control. To offset these risks, the present Government has initiated a number of measures to reduce the size of the civil service, to restore discipline, and to increase wages for remaining employees. Improvement of working conditions tbrough the provision of adequate training, supplies and logistical support under the proposed project will also increase morale and productivity in the units affected. VII - AGREEMENTS 56. The project supports the policy actions which have been agreed in the context of the IDA Economic Recovery Credit. Covenants to ensure effective implementation would be:  - 22 - (a) The Government will continue to maintain the position of Project Coordinator within MPED and ensure that such position is filled by a suitably qualified Administrative Officer; (para. 52); (b) The Ministry of Finance will appoint team leaders to coordinate MOF's responsbilities with regard to the implementation of each of the following project activities: Financial Information System, Budget Reform, Procurement Rationalization and Economic Analysis Unit (para. 53); (c) The Ministry of Finance will establish a FIS Steering Committee representing the needs and interests of the major data users and suppliers. The Team Leader selected for the FIS will act as Chairman of this committee (para. 53); (d) A Review Committee to be chaired by the Permanent Secretary, MPED will be established to review all proposals for payment of relocation grants to expatriate Ugandans and proposals for special advisory services. All proposals supported by the Review Committee will be submitted to the Association for review and final approval (para. 54); (e) The Government will submit to the Association semi-annual reports on project progress (para. 53.a). (f) The Government will have secured financing of not less than US$ 2.0 million for the Statistics Rehabilitation component by June 30, 1989. The following would be conditions of disbursement: (a) for the Supplies Directorate Component until IDA shall be satisfied, after an exchange of views, on the detailed work program for the Supplies Directorate including the division of responsibilities between the Central Tender Board and the Directorate, the extent of centralization, and initial budget for the Directorate; (b) for the Financial Information System Component until completion of the Requirements Definition Study for the Ministry of Finance and Bank of Uganda. 57. Subject to the above provisions, the proposed project would constitute a suitabl.e basis for an IDA Credit of SDR 13.8 million (US$18.0 million equivalent) to the Government of Uganda.  Annex I Page 1 of 4 KEY PROJECT ACTIVITIES Ageney Activity Responsible Output/Dendlino Outcome A. Financial Informtton System Ministry of Finance and Bank of Uganda 1. Request financing for require- Ministry of Fi ance and (June 1966) Funds available for initial study. definition study for ministryns WPED computerized financial manag e nt system. 2. Select consultants and carry out Ministry of Finance Contract signed (7/68) Study and prioritized requirments definition study. Implementation plan availablo. Study completed (2/69) Proposals can be invited for imploentation progrm. 3. Requirement definition study for Bank of Uganda Study completed (2/89) Priority requirements determined. Bank nf 'iganda operations. Desirable linkages to Treasury system identified. 4. Select consultants for lplementation Ministry of Finance Contract sIgned (3/B9) Impl_mentation can begin. and support of overall automtion xerci so. S. Acquisition and testing/modificatlon Ministry of Finance Software selected (7/09) Finance hs *ppropriate oft- of software packages. wre to implement priority programs. 6. Procurement of computer hardware Bank of Uganda Software available (11/69) Bank of Uganda has integrated and appropriate soft-ware package Installed and operational suits of packaged software for for Bank of Uganda. (/90) accounting, exchange controls and other priority uun as determined by requirement study. 7. Implementtion of system tncluding Ministry of Filnnco Syst e in us In sccord- Ministry of Finance has timely generl ledger, budgeting, accounts once with phas d program information for revenue/expendi- receivable/payable, incom tax and (Start 8/89; Complot ture estimtion and financial inland revenue. 11/93) mnagement decisions. 8. Acquisition of dditional mmory Ministry of Financ (October 1990) Hardware available for full disk storage and sicrocomputers, Implomntation of automation exercise. 9. Training for Uganda Computer Ministry of Finance Progrnm available (19/09) Understanding of the usse and Services, Treasury and Auditor Seminars/workshops to be limitations of system, capacity General's office In computer conducted throughout to provide required report on a specific systems and procedures. project period. timtly besis without external assistne.  Annex I Page 2 of 4 Agency Activity Rsonsiblo Output/Doodling Outcome B. t3udsat Reform Ministry of Finance 1. Sel ct conoult nts for detalIed Minlstry of Finance Contract signed 9/S8. Study carriod out. Dot iled work design of budgetary reform program. progrm pre_red. 2. Establish budget reform working Ministry of Finance Staff selected and Mechanism to coordinate budget group. n gned 9/88. rform exreri In plac. a. Preparation of procedureso accout- Working Group Procedures established Linkges betwen planning nd bilitiws, tilefrmes for Integrated 12/88 budgeting established. annual planning and budgeting exercise. 4. Improve revenue est;mtion procedures Ministry of Finance Start 12/88 ReIlstic bais for setting to provide basis for determination of expn diture ceilIngs. expenditure ceilings. S. Revielon of budget formt and Ministry of Finance NM budget format 12/S9 Comprhensive and Integrated reclasific ation ofI ine itetm. and Working Group budget document produced. Budget formt permite evaluation of expenditure performnc. 8. Design and Implementation of budget Working Croup Flrst worksbop ready for Incred capecity of line workshops for 4 to 6 spending ministries preentation start of FY89 ministries to prepere on budget preparatlon and appraisl of budget exorcise. prioritized budgets. expenditure performanc. 7. Initiation of medium-term financial Ministry of Finance Flrst MTFP FY91 Govt has a functioning ach- plane in coordination with national anim to guide budget in support planning exercise, national policies. C. Government Procuremnt Ministry of Finan and Central Tender Board (CTh) 1. Requet financing for prepartion Ministry of Finance and WED (June 1988) Financing availablo for initial of neessry docmnts to effect n- reiew and prearation of work procurement centralization mesures. 2. Carry out review and prepare Ministry of Finance Draft regulations and Ministry has regulations work necessry documentation for estblish- work progrm (9/88) progrm and st of initial ment of Central Supplies Directorst. local financing requirements required to establish Directorate. S. Selection of consultants for Ministry of Finance and Short list agred (11/S8) Work progrm can be implemented. Supplies Directorate and CT. C1B LOI sent (11/SO) Contract signed (2/S9) Consultants fielded (38/9)  Annex I - a- Page 3 of 4 Agency Activity Resoonsible OutputiD.adlIn. Outcom 4. Implement program for Supplies Directorate Fi rot phas of program Coemon use Items procured and centralization of procuremnt, storage complote (2/91) Second distributed on schedule. Signifi- and distribution of coeron us Items. phase complete (1/93) cant savings through bulk purchaa- ing directly from supplioro. S. Establish proper competitive bidding CT8 Statutes and regulations Gov't has competitive bidding pro- proceduros. enacted (21/91) cedures which protect its interests and which are acceptablo to donors. 3. Introduce standardized methods, Supplies Directorate Supply manual (6/91) Improved planning for tie;ly classification and coding of all Catalog (8/91) ordering and distribution. mterials. Computerized supply Improved security and reduced management system (1/92) cota. 7. Training in supplios management, Supplies Directorate Program available (6/89) Improved procurement practices. stock control, procurement, warehousing, Workshops and sminars Redue d reliance on technical distribution, and use of computer software. conducted throughout assistance. D. Statistics Rehabilitation 1. Review progress and results achieved WED Revised work progrom Initial surveys completed and under first phase of statistics progrm prepared and agreed (1/9C) resulta analyzed. Preparation and revise work progrm as noeded. of basic tables of the national accounts can begin. 2. Request allocation of funds UPED Request approved (2/9a) Funds available for Phane I n to initiate Phase II of Statistics work progrm. Rehabilitation program. 3. Prepare National Accounts and WPED Thre basic tables for Data available for soundly-based establish system for annual updating. national accounts prepared macro-economic analyss. (2/91) 4. Collection and analysis of dat MPED Data base expanded and Statistics Department has the for national agricultural survey (with updated. Staff trained capacity to prepare national FAO) and census of industrial production. and experienced in all accounts and undertake routine Update consumption and price aspects of statistics statistical surveys without statistics, work program. recourse to external assistance. 0. Management of the Econeomc Recovery Prcas Economic Analysis Unit Ministry of Finance 1. Request financing under PPF Ministries of Finance Request approved (1/8E) Economic Analysis Unit has means for lo rational and logistical and Planning Funds deposited In to carry out and expand its work support to Unit and open special special account (2/88) program in support of the ERP. account. 2. Recruitment of national Ministry of Finance All national staff Economic Analysis Unit has the staff and consultants. Prepar recruited (8/88) capacity to carry out reserch TOR, select, and negotiate into financial and economic areas contracts. to facilitate policy formultion.  Annex 1 Page 4 of 4 4 4- Agency Activity Responsible Output/Deadline Outcome Bank of Uganda Research Department, Bank of Uganda 1. Request financing under PPF Bank of Uganda and MPED Request approved (8/88) Funds available to recruit. for consultant to assist with operation of the Open Ceneral Licensing System. 2. Select consultant and Bank of Uganda Contract signed (8/88) Expert assistance available negotiate contract. to implement the OGL system. 3. Establish objective and officioe,4 Bank of Uganda System in place (12/87) Central Bank has the capacity system for votting price quotations To be expanded quarterly. to optimize allocation of foreign Imported under OCL system. exchange. Recovery of production in essential industries facilitated. 4. Work program of 'he Abricultural Bank of Uganda Work program completed Cov't has permanent capacity to Seeretariat on-going. 12/92 formulate, mc'nitor and coordinate policies and progroms in the agricultural sector. OUmr coansltancle. 1. Propare TOR, Identify consultant, Requesting ministry through Contracts signed as required Key ministries have necessary sup- clear with IDA, negotiate and sign MPED throughout project period. port to implement and monitor contract. recovery program.  - 27 - ANNEX II Page 1 of 1 UGANDA THIRD TECHNICAL ASSISTANCE SUMMARY PROJECT COSTS BY CATEGORY (USE '000) X Foreign X Total Base Local Foreign Total Exchange Cots I. INVESTMENT COSTS A. EqUIPMENT 76.1 1,689.4 1,764.6 go 10 B. CIVIL WORKS 17.7 19.0 U8.7 62 0 TOTAL INVESTMENT COSTS 92.8 1,708.4 1,801.2 88 10 Physical Contingencies 6.6 88.4 91.9 94 1 Price Conttngencleo 188.6 161.7 298.2 64 2 TOTAL INCLUDING CONTINGENCIES 234.8 1,966.5 2,191.3 89 13 IS. RECURRENT COSTS A. CONSULTANTS 11,099.0 11,099.0 100 64 B. LOCAL CONSULTANTS 650.4 650.4 4 C. TRAINING 186.7 2,860.9 2,627.6 93 1S D. RESETTLEMENT 60.0 125.0 176.0 71 1 E. ALLOWANCES 610.7 610.7 4 F. SALARIES 280.4 280.4 1 F. OPERATION AND MAINTENANCE 81.1 202.8 288.9 71 2 TOTAL RECURRENT COSTS 1,789.3 13,787.7 15,677.0 90 00 Physical Contingencies 65 1,109.9 1,174.9 94 7 Price Contingencies 2,682.7 1,600.6 4,188.8 go 26 TOTAL INCLUDING CONTINGENCIES 4,487.0 16,498.2 20,985.2 79 122 TOTAL PROJECT COSTS 4,671.8 18,454.7 23,126.6 80 135  Annex III Page 1 of 3 -28 - UGANDA THIRD TECHNICAL ASSISTANCE PROJECT TRAINING PROGRAMS The project provides for extensive training programs for staff in the targetted ministries. Most of this training will take place in-country in the form of seminars, work-shops and practical, job-related exercises. Thus, while approximately US$ 3.2 million is budgeted specifically for fellowships and seminars, a significant amount of the man/month time shown under the category short-term consultants for disbursement purposes, will be utilized to conduct the local seminars and workshops and should thus be considered as training activities. A summary description of the training activities related to each project component in included below. Financial Information System (PIS) The FIS component provides training for staff of the Ministry of Finance, Bank of Uganda. and the Auditor General's Office in various computer-specific disciplines, systems and procedures. On-the-job training will be the responsibility of the consultant's Implementation Special' t who will have the dual responsibility of managing the introduction of the FIS and of training, guiding and directing data processing and user staff in the implementation, operation and up-dating of the system. In addition to the on-the-job training provided by the Implementation Specialist, the project will finance formal training both in Uganda and abroad for the following categories of staff: managers and supervisors; accountants and auditors; data processors, data entry and clerical staff. A detailed training program will be finalized by the consultants who are undertaking the preliminary Requirements Definition and Automation Strategy Study. The tentative training program and approximate number of participants is outlined below: 1) 3-month fellowships for data processing staff (14) 2) 1-month formal training for D.P. staff (16) 3) 1-week local course on Introduction to data processing (40) 4) 4-week local course of Programming Language and and Utilities (20) 5) 2-week local course on Application System software (23) 6) 1-week local course on data entry proficiency techniques (24) 7) 3-day seminar for FIS user supervisory staff (70) 8) 2-day seminar for accountants and auditors (50) Procurement Rationalization A detailed training program on procurement and supplies management is to be prepared by the consultants for review by April 1989. Approximately half of the technical assistance to be provided to the Supplies Directorate and the Central Tender Board will be in the form of training, including the preparation of training materials. Each of the  Annex III -29- Page 2-of 3 project activities related to the Supplies Directorate will consist of three stages -- design, training and implementation. Thus, for example, a classification system for all materials will be introduced, local workshops on use of the system will be presented to all concerned staff, the system will be then be implemented under the guidance and supervision of the consultant, and one-day follow-up workshops will be presented as necessary to ensure smooth system implementation and transfer of skills. Financing will be provided for 10 two-week workshops to be presented locally for approximately 20 participants each. In addition, short-term fellowships will be arranged for up to ten Supplies Directorate staff, covering the subject areas of computerized supplies management, stock control, international competitive bidding procedures, bid evaluation and contract negotiation. Following the revision and updating of the procurement regulations, the consultants for the Central Tender Board will prepare manuals and teaching materials for the guidance of all Government staff concerned with procurement. The staff of the CTB, with assistance from the consultants, will prepare and carry out a series of 15 procurement seminars for up to 25 participants each. The seminars will be based on the materials prepared under the project and will focus primarily on understanding and interpretation of the new procurement and financial regulations and guidelines. Periodic training in procurement regulations and practices will become an on-going function of the CTB which is expected to continue after the project period. The project also makes provision for five short-term fellowships for staff of the CTB. Budget Reform Of the US$2.7 million estimated for the budget reform exercise, approximately US$ 1.0 million is specifically allocated for training. This includes up to 60 man/months of fellowships over a five-year period to up- grade the skills of budget officers. The major training effort, however, is to be focussed on the budget exercise in the form of in-country seminars timed to coincide with the budget cycle and in which concerned stafff from each of the spending ministries would participate. The seminars would be used to launch the annual budget exercise and, once the budget is approved, to review the process with the aim of introducing improvements in the next budget cycle. The seminars and follow-up workshops are to be conducted over a four-year period. In addition to the amount specifically budgeted for training, the budget for short-term consultants includes the consultants who wiu. design and conduct the budget exercise seminars and are, thus, considered as a part of the training effort. A similar series of seminars and workshops (financed from the UNDP planning assistance project executed by the World Bank) will be designed around the annual planning cycle for the staff in the planning units of the sector ministries. An important objective of these complementary and concurrent seminars is improved integration of the planning and budgeting process. Statistics Rehabilitation The Statistics Department intends to enter into a twinning arrangement with a statistical organization in an industrialized country. The selected organization will be responsible for organizing and carrying  Annex III Page 3 bf 3 - 30 - out various statistical surveys, including the training of staff in survey techniques. Staff of the Statistics Department will be sent to the Headquarters of the "twin" organization for periods of one to three months practical training in addition to participation in the workshops which are to be presented in-country each year of the project period. Approximately US$ 1.3 million has been allocated for this purpose. Other Proiect Related Training Activities Agricultural Secretariat: 3 short-term fellowships/study tours Agricultural Policy and Pricing Methodology Economic Analysis Unitt 2 fellowships, post graduate training in Economics Implementation Assistance to ERP: 6 short-term fellowships (unspecified)  - 31 - ANNEX IV Page 1 of 9 UGANDA THIRD TECHNICAL ASSISTANCE PROJECT TERMS OF REFERENCE DEPUTY COMMISSIONER/TREASURY OFFICER OF ACCOUNTS MINISTRY OF FINANCE Titlet Deputy Commissi er/Treasury Officer of Accounts Location: Ministry of Finance Duration: Two years The Deputy Commissioner will hold an operational position in the Treasury Department reporting to the Commissioner of Accounts. He will be responsible for all day-to-day operational activities of the Treasury including the clearing of government checks, work on treasury bills, government securities, Treasury main clearance account, consolidated fund accounts. He will also be responsible for advising on suitable on-going training programs for government accountants. In addition to routine tasks and response to special requests for assistance from the Commissioner and Secretary to the Treasury, the Deputy Commissioner will: 1. ensure compliance with instructions for the use of the Vote Book for control of expenditures; 2. ensure systematic recovery of advances from the Treasury Main Clearance Account; 3. improve procedures for timely reporting of government accounts; 4. improve procedures for processing of government checks, including preparation of guidelines to ensure close coordination among Treasury officers and strict examination of supporting documents; 5. support the Treasury program for the computerization of government accounts; 6. recomend measures to improve accounting for grant aid and assist in implementation of agreed measures; 7. recommend measures to curb irregularities and malpractices in project accounts. 8. revise and up-date Treasury Accounting Instructions.  - 32 - ANNEX IV Page 2 of 9 UGANDA THIRD TECHNICAL ASSISTANCE PROJECT TERMS OF REFERENCE Positiont Industrial Engineering Advisor for Operation of Open General Licensing System Locations Bank of Uganda Duration: One year During registration and vetting of applications for inclusion on the Open General Licence, together with its operation, a number of inter- related actions, information recording and analysis are necessary to ensure a functional, objective and fully effective control system. Taking into account these criteria and the manual forms already created, the following terms of reference are to be carried out by the Industrial Engineering Advisor: 1. Maintain and circulate to relevant Ministries a specific schedule of approved materials included in the OGL using extended (six digit) SITC codes; 2. Validate all applications from companies for inclusion in OGL ensuring an objective assessment of every application; 3. Ensure all materials requested by companies for inclusion in OGL are a legitimate import for the manufacturing process; 4. Maintain an efficient system of price monitoring for all raw materials imported under OGL investigating any price variation in excess of +5Z; 5. Compare and report adverse variation of projected and actual conversion of raw materials to finished product exceeding +5z; 6. Prepare and circulate a weekly, monthly and quarterly report of the actual financial commitment under OGL; 7. Operate an effective system to monitor the change in value of inventories of the OGL registered companies investigating and reporting on any changes in excess of 1OX for a particular product; 8. Develop and maintain a management system to provide an economical and efficient method of recording, monitoring and reporting on the OGL operation; 9. Establish staffing levels and operational hierarchy for the OGL section of the Bank of Uganda;  _ 33 - ANNEX IV Page 3 of 9 10. Devwlo.t frow -l'C: initial manual system, a personal computer baszect c'rztrol y/aterm using database and spread sheet program; 11. Establish li; with the Ministry of Industry, Trnaiury, Customs and - ise commercial banks, OGL registrants, and other relevan* bodies. Qualifications A suitable consultant will have a wide experience of industrial manufacturing processes, material requirements, planning, organization and methods. Experience in procurement and inventory control in manufacturing companies is also required together with computer literacy. As L'U assignment will require considerable liaison with Government, banking and business sectors, the ability to operate without personal conflict a.d promote harmonious relations will be important.  - 34 - ANNEX IV Page 4 of 9 UGANDA THIRD TECHNICAL ASSISTANCE PROJECT TERMS OF REFERENCE MINISTRY OF FINANCE CONSULTANCY ON BUDGET REFORM Titles Consultancy Services for Budget Reform Locations Ministry of Finance Durations 3 months (Consultant input - 6 man/months) The consultants will carry out a comprehensive review of the Government's budgeting procedures and budget format including: 1. review of budget structure, including budget categories, methods of preparation of recurrent and capital budgets and linkages between the two; 2. methods and capacity to adequately forecast likely amount of available resources both for current budget year and estimation for future years; 3. capacity to assess cost of policy decisions concerning such issues .a wage increases, subsidies, domestic borrowing, etc.; 4. procedures for initiating annual budget cycle including preparation of budget guidelines, coordination with MPED and Public Service Commission; 5. capacity of spending ministries to prepare budget submissions, adequacy of existing procedures including coordination with the Ministry of Finance; 6. review of financial instructions and standing orders to ensure that there are no hindrances to budgetary reform exercise; 7. procedures for budget releases, data required to permit budget releases and capacity to analyze information provided; 8. review of current staffing in terms of numbers, relevant experience and qualifications. In light of this review, the consultants will recommend appropriate measures to introduce budget reforms, including changes in structure, organization, procedures, and staffing. The consultants' report will be submitted to Government for review within 45 days of the start of the assignment. The consultants' report will be submitted to the Bank and  - 35 - ANNEX IV Page 5 of 9 to the Government for review and comment. Following agreement on the recomuendations and the incorporation of any necessary modifications, the consultants will prepare a detailed action program to implement the reforms. The action program, which will be submitted three months from the start of the assignment, will include priorities, time scale, costs, technical assistance and training requirements.  - 36 - ANNEX IV Page 6 of 9 UGANDA THIRD TECHNICAL ASSISTANCE CREDIT TERMS OF REFERENCE AGRICULTURAL SECRETARIAT Titles Agricultural Economist Location: Agricultural Secretariat. Bank of Uganda Duration: Three years The Agricultural Economist will act as a member of a multi- disciplinary team and be assigned specific duties from time to time by the Agricultural Policy Committee and the Director of the Agricultural Secretariat. He will work closely with the national Agricultural Economist assigned to the Agricultural Secretariat in carrying out the following activitiess 1. Undertake regular studies to assess the true costs of production processing and marketang of major export crops in Uganda (coffee, tea, cotton, tobacco and food crops) including estimates of tax subsidies, the degree to which. farmers use hired labor and purchase inputs and draft animal power and other forms of mechanization in the production of major export crops; 2. Review periodically producer prices and incentives for major export crops relative to competing crops and consumer commodities and prepare pricing proposals with recommendation as to the ways in which the unit costs can be reduced and efficiency increased in production, processing and marketing of the major export crops; 3. Carry out sectoral,sub-sectoral and commodity studies on on- going basis and advise the Agricultural Policy Committee in formulating strategies, priorities ar.d policies for resource allocation and development; 4. Undertake regular review of commodity outlook, price and market prospects for major agricultural commodities to provide analytical basis for government's agricultural pricing and marketing policies; 5. Carry out special studies including comparative advantage, feasibility studies, farm model/efficiency studies, etc. to provide basic data and assist in agricultural project planning tasks;  - 37 - ANNEX IV Page 7 of 9 6. Provide technical and analytical support to APC commodity sub-committees (coffee, cotton, tea, food crops, livestock, etc.) to monitor and evaluate sub-sectoral performance and constraints and devise appropriate strategies and policies.  - 38 - ANNEX IV Page 8 of 9 UGANDA THIRD TECHNICAL ASSISTANCE PROJECT TERMS OF REFERENCE AGRICULTURAL SECRETARIAT FINANCIAL ANALYST Title: Financial Analyst Location: Agricultural Secretariat, Bank of Uganda Duration: 3 years The Financial Analyst will work closely with the Ugandan Financial Analysts assigned to the Agricultural Secretariat as a part of a multi- disciplinary team and will be involved in all the tasks assigned to him by the Agricultural Policy Committee and the Director of the Agricultural Secretariat. The Financial Analyst will also be responsible for the following: 1. To analyze periodically the processing and marketing margins of major crops and advise the Agricultural Policy Committee on the cost effective measures to reduce cost and increase efficiency in crop processing and marketing; 2. To prepare regular reviews/assessments of the price structure of major export crops with a view to ensure appropriate incentives to producers and processors. He will also analyze the foreign exchange and budgetary implications of such a review/proposal; 3. To critically analyze and review the budget and performance of processors and marketing boards and to advise the Agricultural Policy Committee on budgetary and financial policies relating to the operation of the agricultural parastatals (CMB, LMB, PMB, UTA, UTGC, etc.). He will advise these parastatals on financial matters with emphasis on increasing their capacity to allocate, administer and utilize local and foreign currency resources; 4. To project crop finance and working capital finance requirements of different agricultural sub-sectors, both at the macro and micro levels and advise on the most efficient and economic system of crop financing arrangements; 5. To be involved, as part of the multi-disciplinary team, in sub-sector studies and assist in the formulation and financial appraisal of investment projects. To advise the APC on the financial viability of major investment projects in the agricultural sector; 6. To monitor and review resources allocated to the agricultural sector.  - 39 - ANNEX IV Page 9 of 9 UGANDA THIRD TECHNICAL ASSISTANCE PROJECT TERMS OF REFERENCE AGRICULTURAL SECRETARIAT ECONOMIST/ STATISTICIAN Titles Economist/Statistician Locations Agricultural Secretariat, Bank of Uganda Duration: 3 years The duties and responsibilities of the Economist/Statistician in the Agricultural Secretariat will be as followss 1. To provide the data base for the Agricultural Secretariat and to develop the computerized data base; 2. To collect and reconcile data from primary and secondary sources and analyze the data for use by other units of the Agricultural Secretariat, and to prepare policy papers to enable the Agricultural Policy Committee to monitor the performance and prospects of the agricultural sector; 3. To develop methods of data analysis; i.e., statistical, economietric. mathematical, etc. to facilitate quick analysis of data for economic modelling and policy analysis; 4. To collect data on cost/price relationships for use in costs of production and pricing, and for any specific requests by the Agricultural Policy Committee; 5. To make projections on demand and supply for Uganda's agricultural commodities with specific reference to inter- regional deficits and surpluses, food balance sheets and exportable surpluses, and to advise the APC on the policy implications (e.g. barter trade, internatioral trade and other bilateral arrangements); 6. To work closely with the Farm Hanagement Unit in the Ministry of Agriculture in construction and up-dating of farm models for analysis of regional costs of production and use of technological inputs and labor; 7. To participate in the Steering and Technical Committees of the National Agricultural and Livestock Census, and the Household Budget Survey in devising, testing and implementing the basic surveys and annual surveys for strengthening the statistical basis for sectoral planning.  3s'~~~~~~~~~~~~~' ''.,g S U D A N / UGANDA t RajorRoads A ROT - Moior Roods Ay - KI TOUMVff\ ITU KOT/g7 _ Roilroods } C Ah-2g t <, >KroumI | -3- - Rivers J KOTIDO I a * District Capitol$ District Boundaries Intmrnational Boundari.- o 2s 5O 75 100 KILOMITEIS o 20 io oo tilLC5 ) 4 M/L S APAC. 2 (~~~~~~~~~~~~~~~~~~~~~~~APA% 2d . ft / ,' IVD, / H O M *- aesnoc-APNRA 1*LUER~ jtI j MP/GpRuNO - ( --LrO ~~~~~~~