Uganda - First Urban Project

Document of The World Bank FOR OFFICIAL USE ONLY c1e. 2Z 06 - U Repcert No. 8921-UG STAFF APPRAISAL REPORT UGANDA FIRST URBAN PROJECT DECEMBER 3, 1990 Infrastructure Operations Division Eastern Africa Department This document has a resticted dibon and may be used by recipients only in the perfonnmce of their officiual duties. Its contents may not othenrise be disclosed without World Bank authrzaion.  UGANDA FIRST URBAN PROJECT CURRENCY EQUIVALENT ZMay 1, 1990) Currency Unit - Uganda Shilling (U Sh) US$1.00 = U Sh 400 U Sh 1.00 - US$0.0025 SDR 1.00 = US$1.38 FISCAL YEAR Government, NWSC July 1 to June 30 KCC October 1 to September 30 WEIGHTS AND MFASURES Metric System ABBREVIATIONS AND AC'ONYMS AfDB = African Development Bank DANIDA = Danish International Development Agency EDF = European Development Fund EEC = European Economic Community ERP = Economic Recovery Program GOU = Government of the Republic of Uganda GTZ = Gesellschaft fuer Technische Zusammenarbeit ICB International Competitive Bidding IPA = Institute of Public Administration KCC = Kampala City Council LALF = Local Authorities Loan Fund LCB = Local Competitive Bidding LGRC = Local Government Resource Center MEP = Ministry of Environment Protection MLG = Ministry of Local Government MOHUD = Ministry of Housing and Urban Development MPED 8 Ministry of Planning and Economic Development NDF = Nordic Development Fund MWMD = Ministry of Water and Mineral Development NWSC = National Water and Sewerage Corporation PCU = Project Coordination Unit PPD = Physical Planning Department RDC = Reconstruction & Development Corporation RDP = Rehabilitation & Development Program RWSG - Regional Water and Sanitation Group (Nairobi) TID = Training and Institution Development ULC = Uganda Land Commission UNCHS = United Nations Center for Human Settlements UNDP = United Nations Development Program UTB = Uganda Tender Board WHO - World Health Organization WDD = Water Development Department  FOR OMCIAL USE ONLY UGANDA FIRST URBAN PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page CREDIT AND PROJECT SUMMARY . . . . . . . . . . . . .. . . . . ... . i-i I. COUNMRY BACKGROUND A. Geography, Climate, Population, Resources . . . . . . . . 1 B. Economic Performance . . . . . . . . . . . . . . . . . . . 1 II. THE URBAN SECTOR A. National Context to Urban Development . . . . . . . . . . . 3 B. Current Urban Conditions . ................... . 4 C. Government Strategy for the Urban Sector . . . . . . . . . 8 D. Previous Sector Activities .. ........ ...... 9 E. Rationale for IDA Involvement . . . . . . . . . . . .. .. 10 III. THE PROJECT A. Origin and Preparation . . . .11 B. Objectives . . . . . . . . . . . . . . 11 C. Description . . . . . . . . . . . . . . . . . . . . . . 12 D. CostsFnni . . . . . . . . . . . . . . . . . . . . . . . . .17 E. Financing . . . . . . . . . ....... . . . . . . . . . 19 IV. PROJT I- PLEM1NTATION A. Th%. Borrower and On-Lending Arrangements . . . . . .20 B. Institutional Arrangements for Implementation . . . . . . .21 C. Procurement . . . . . . . . . . , . . . . . . . . . .21 D. Disbursement . . . . . . . . . . . . . . . . . . . . 23 E. Implementation Schedule . . . . . . . . . . . . . . .24 F. Land Acquisition and Plot Allocations . . . . . . . . . . .24 G. P:oject Monitoring, Accounting and Auditing . . . . . . . .25 V. ANALYSIS OF IMPLEMENTING AGENCIES A. Kampala City Council . . . . . . . . . . . . . . . . . . .26 B. Ministry of Local Government . . . . . . . . . . . . . . .30 C. Physical Planning Department . . . . . . . . . . . . . . .30 D. Institute of Public Administration. . . . . . . .31 E. Project Coordination Unit.. . . . . . . . . . . . . . . . .32 This report Is based on the findings of an Appraisal Mission consisting of Mr. R. seardmore (Task Manager), Me. Hayley Corts (Senior Economist), Meere. S. di Zitti (Urban Planner/Consultant), F. Fisher (Institutional Development Specialist/Consultant), S. Keith (Property Tax Speciois t/ Consultant), S. Jacobi (Water Speteltiet, RASO Nairobi) and K. Kuhlmann-Caplto (Financial Analyst/Consultant - OTZ) who vi ... ed Uganda In may 10. Mr S. Shantaram was responsible for report procssing. The prinecpal reviewrs were Messrs. C.E. Madavo (Diroctor, Eastern Africa Department), F. Loethem (Project Advisor, AF2), Jonathan C. Brown (Division Chief, AF2 Infrastructure Operations Division), and J. Wright (Lead Advisor, INURD). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  VI. FINANCIAL ANALYSIS OF KAMPALA CITY COUNCIL A. Psst and Present Financial Performance . . . . . . . . . . 33 B. Recent Improvements in General Accounting . . . . . . . . . 37 C. Financial Forecasts. . . . . . . . . . . . . . . . . . 37 D. Project Cost Recovery. . . . . . . . . . . . . . . . . . . 39 S. Affordability . . . . . . . . . . . . . . . . . . . . . . . 41 VII. ECONOMIC ANALYSIS A. Primary Project Justification . . . . . . . . . . . . . . . 43 B. Economic and Other Benefits .. . . . . . . . . . . . . . 44 C. Impact on Women . . . . . . . . . . . . . . . . . . . . . . 47 D. Environmental Impact . . . . . . . . . . . . . . . . . . . 47 E. Community Participation . . . . . . . . . . . . . . . . . . 48 F. Project Risks . . . . . . . . . . . . . . . . . . . 48 VIII. AGREEMENTS REACHED AND RECOMMENDATION A. Actions Already Taken . . . . . . . . . . . . . . . . . 49 B. Agreements Reached during Negotiations . . . . . . . . . . 49 C. Recommendation . . . . . . . . . . . . . . . . . . . . . . 51 ANNEXES 1 - Kampala Urban Markets Rehabilitation Program 2 - Rehabilitation of Kampala's Refuse Collection and Disposal System 3 - Kampala Street Rehabilitation and Maintenance Program 4 - Strengthening Urban Investment Planning Capacity 5 - Provision of Serviced Residential Land 6 - Rehabilitation of Valuation and Rating in Kampala 7 - Institutional Development of Local Government Bodies 8 - Terms of Reference for Key Technical Assistance Personnel 9 - Rural Water Supply Project Preparation Activities 10 - Details of Procurement Methods 11 - Schedule of IDA Disbursements 12 - Project Implementation Schedule 13 - Project Supervision Plan 14 - KCC's Past and Projected Financial Performance 15 - Economic Rate of Return and Sensitivity Analysis 16 - Selected Documents in Project File CHARTS 1 - KCC: Organization Chart 2 - PCUt Organization Chart MAP: IBRD No. 22472  UGAJDA FIRST URBAN PROJECT Credit and Prolect Summary Borrowers The Republic of Uganda implementing rampala City Council (MCC) Agencies and Ministry of Local Government (MLG) Beneficiaries: Physical Planning Department (PPD) of Ministry of Housing & Urban Development Institute of Public Administration (IPA) Credit Amount: SDR 20.7 million (US$28.7 million) Credit Terms: Standard IDA terms with 40 years maturity On-lendint Proceeds to KCC in the form of i) a grant of US$4.5 million Term:s and ii) a loan of US$21.2 million at 2Z interest rate to be repaid over 25 years, including five years grace. Proiect The proposed Project would support the Government's efforts Descriptiont to decentralize the responsibility for the planning, design and management of urban services to local authorities while assisting with reconstruction of the country after a period of political instability, social strife and physical destruction. The Project would achieve the following objectives: i) improve living conditions and alleviate poverty in Kampala by restoring key infrastructure services; ii) support the development of decentralized local urban management by strengthening the revenue base, financial management and technical capacities of XCC and by improving the ability of central government to assist local authorities to increase their revenue base and strengthen financial management; iii) strengthen the country's capacity to manage the process of urban land development; and iv) promote sound cost recovery policies and practices. The Project includes support for: i) the rehabilitation of urban markets, streets and drains, refuse collection and disposal; ii) the servicing of land for residential development; iii) the preparation of up-to-date mapping and a strategic urban development plan for Kampala; and iv) technical assistance and training for MCC, MLG and PPD staff. Proiect Risks: The main risks affecting the Project concern the effectiveness of the two key implmenting agencies, ICC and MLG, given that they are emerging from a long period of institutional deterioration. KCC is facing a shortage of qualified staff and political constraints to rapid  - il - increases in municipal taxes, rates and charges. The Ministry suffers from low salary levels and overall central government budgetary constraints. However, KCC has made dramatic progress in the past year in recruiting qualified staff and increasing revenue. The proposed components of technical assistance and training in this Project, together with macro-economic measures designed to continue overall economic recovery supported by IDA restructuring operations, are expected to mitigate these risks. Estimated Costs: Item Local Foreign Total ------US$ million------ Infrastructure Rehabilitation 4.1 12.4 16.5 Urban Mapping and Planning 0.2 2.3 2.5 Kawaala Sites and Services 1.0 3.2 4.2 Technical Assistance and Training (KCC) 0.4 3.0 3.4 Technical Assistance and Training (MLG) 0.7 0.8 1.5 Project Preparation 0.1 2.1 2.2 Total Base Costs 6.5 23.8 30.3 Physical Contingencies 0.7 2.2 2.9 Price Contingencies 1.2 4.1 5.3 Total Project Costs 8.4 30.1 38.5 Financing Plan: IDA 2.6 26.1 28.7 NDF 1.1 3.5 4.6 GTZ 0.1 0.5 0.6 Government 4.6 0.0 4.6 Total 8.4 30.1 38.5 Estimated Disbursements: Bank FY 91 92 93 94 95 96 97 98 Annual 1.8 2.9 4.8 6.7 6.5 4.3 1.2 0.5 Cumulative 1.8 4.7 9.5 16.2 22.7 27.0 28.2 28.7 Economic Rate of Return: 242  - 1 - I. COUNTRY MCKGROUND A. Geography. Climate. Population. Resources 1.01 Uganda is a landlocked country bounded by Kenya, Tanzania, Rwanda, Zaire and Sudan. It covers an area of approximately 241,000 sq.km. of which about 20 percent consists of numerous waterways, swamps and lakes, most notably the Nile and its source, Lake Victoria. Most of Uganda is on a plateau, with about 80 percent at an altitude of 1000-1500 m. 1.02 The altitude contributes to Uganda's pleasant climate. There is little seasonal variation in temperature because of its position astride the ecuator. Mean maximum temperatures range from 200C at night to 35*C during the day, mean minimum temperatures from 8