Uganda - Agricultural Extension Project

Docuinent of The World Bank FOR OFFICIAL USE ONLY Report No. 10904-U( STAFF APPRAISAL REPORT REPUBLIC OF UGANDA AGRICULTURAL EXTENSION PROJECT SEPTEMBER 3, 1992 Agriculture and Environment Operations Division Eastern Mrica Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Uganda Shillings (USh) US$1 = USh 1,100 (June 1992) WEIGHTS AND MEASURES Metric System GOVERNMENT FISCAL YEAR July 1 June 30 ABBREVIATIONS AND ACRONYMS ADP - Agriculture Development Project APC - Agriculture Policy Committee ARTP - Agricultural Research and Training Project ASAC - Agricultural Sector Adjustment Credit BOU - Bank of Uganda CIR - Country Implementation Review CTB - Central Tender Board DAO - District Agriculture Officer DAP - District Action Plan DFI - District Farm Institute ERP - Econormic Recovery Program EFMP - Economic & Financial Management Project FAO - Food and Agricultural Organization FEW - Field Extension Worker GDP - Gross Domestic Product GOU - Government of Uganda HARE - Headstart Agricultural Research and Extension Program IDA - International Development Association IFAD - International Fund for Agricultural Development ISNAR - International Service for National Agricultural Research LCB - Local Competitive Bidding MAAIF - Ministry of Agriculture, Animal Industry and Fisheries M&E - Monitoring and Evaluation MFEP - Ministry of Finance and Economnic Planning MIS - Management Information System MOA - Ministry of Agriculture MPS - Ministry of Public Service MU - Makerere University NAEP - National Agricultural Extension Plan NARO - National Agricultural Research Organization PAPSCA - Project for Alleviation of Poverty & Social Costs of Adjustments PER - Public Expenditure Review PPF - Project Preparation Facility RELC - Research Extension Linkage Committee SAC - Structural Adjustment Credit SMS - Subject Matter Spxialist SOE - Statement of Expenditure SWRARP - South West Region Agricultural Rehabilitation Project T&V - Training and Visit USAID - United States Agency for International Development  FOR OFFICUIL USE ONLY REPUBLIC OF UGANDA AGRICULTURAL EXTENSION PROJECT Table of Contents Page No. Credit and Project Summary ........................................ i L.BACKGROUND ,.. ............. .. ........ 0 ......@e** 1 A. Economic Setting .1 B. Major Development Issues ..................................... 2 C. General Institutional Issues. 2 D. Bank Assistance. 3 E. Lending Program and Economic and Sector Work. 4 F. Implemenitation Experience and Lessons Learnt ........................ 6 G. Rationale for IDA involvement. 7 II. THE AGRICULTURAL SECTOR ........................... ... ... . . 8 A. Salient Features. 8 B. Recent Performance ......8..................... 8 C. Sectoral Objectives. 9 D. Growth Sources and Constraints .10 E. Public Expenditures and Sectoral Management .11 F. Sectoral Development Strategy .12 II. AGRICULTURAL EXTENSION AND RELATEDISSUES.............. 13 A. Background ..13 B. Institutional Issues ..14 C. Extension Issues, Experiences, and Strategy ..15 D. Agricultural Research and Available Technology ..18 E. Researc,i-Extension Linkages ..19 F. Agricultural Training and Education ..20 G. Role of Women in Agriculture ..21 H. Agricultural Producer Organizations ..22 I. Rural Marketing and Finance .......... ........................... 23 This report is based on the findings of an appraisal mission which visited Uganda in May 1992. The mission consisted of V. Mackrandilal (Sr. Economist/Task Manager), S. Bhattacharya (Sr. Procurement Specialist), U.K. Srivastava (Consultant, Management and Institutional Specialist) and V. Jayaraman (Consultant, Financial Analyst). Contributions based on previous missions were also made by V. Venkatesan (Sr. Extension Specialist) and E. Quisumbing (Research Specialist). The peer reviewers were S. Bekure (Sr. Agricultural Economist) and J. Kampen (Sr. Agriculturist). Messrs. J. Shivakumar and F.X. Colaco are the managing Division Chief and Department Director, respectively, for this operation. Mmes. Gunawardane, Naldo, Bekker, and Mudd provided assistance in computing and document processing. 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.  IV. THE PROJECT ........... *.............................. 24 A. Project Origins and Objectives .24 B. Summary of P'roject Components .25 C. Detailed Features .26 D. Project Costs and Financing .28 E. Disbursement .34 F. Accounting, Auditing, and Reporting .35 V. ORGANIZATION AND IMPLEMENTATION ARRANGEMENTS .............. 36 A. Overall Arrangements .36 B. Extension Arrangements .36 C. Arrangements for Improvements in Training Capacity and Skills .38 D. Management Arrangements .39 E. Actionrs for Women and Young Farmers .40 VI. BENEFITS, JUSTI I CATION AND RIUANS.. SK. . S........... .......... 42 A. Main Benefits and Beneficiaries .42 B. Economic Justification .42 C. Sustainability and Financial Implications for Government .43 D. Project Risks .44 E. Environmental Impact .44 VII. ASSUIRANCES AND RECOMMENDATION ....... . ........ 44 A. Agreements and Assurances Obtained .44 B. Recommendation .46 List of Annexes 1. (a) Cost Tables (b) Estimated Disbursement Schedule 2. Technical Assistance 3. (a) Available Technology and Extension Potential (b) Agro-Ecological Zones 4. (a) Extension: Progressive Coverage of Districts and Counties (b) Extension Training (c) Extension Terms of Ref4rence 5. (a) Management Structure and Systems of MAAIF (b) Management Development Programs (c) Management Terms of References 6. (a) Financial and Accounting Systems (b) Financial Officer- Terms of Reference 7. (a) Procurement Schedule (b) Procurement Specialist- Terms of Reference (c) Civil Works Supervision Terms of Reference 8. (a) Monitoring and Evaluation System (b) Key Indicators (c) Terms of Reference- Monitoring and Evaluation Specialist 9. Project Supervision and Implementation Schedule 10. Economic Analysis 11. Documents Available in Project File Chart 1: The Unified Extension Service Map No: IBRD 24007: Project Districts  REPUBLIC OF IJGANDA UGANDA AGRICULTURAL EXTENSION PROJECT (AEP) Credit and Project Summary Borrower: Government of Uganda (GOU) Benericiaries: Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) Amount: SDR 11.0 million (US$ 15.79 million equivalent) Project Objectives: The broad objectives of the project are to address the urgent needs for disease control and yield improvements and build capacity to deliver and support effective extension services. The project would aim to improve in 16 selected districts: (a) efficiency in the delivery of extension services; (b) skills of extension agents and farmers; and (c) adoption of improved techniques by farmers. The project would also improve efficiency in management services in MAAIF to support the delivery of extension and ensure its sustainability. The lessons and experiences of the project in implementation and impact would provide the basis for the design of national extension services. Project Description: The project would provide assistance for: (a) Strengthening of the delivery of extension services through the provision of transport, equipment, rehabiiitation of facilities, and incremental operating costs; (b) Improvements in training capacity and skills through (i) provision of equipment, supplies, facilities and transport for regular in-service training of extension staff and periodic farmer training at the District Farmer Institutes (DFIs), with the involvement of research staff; (ii) rehabilitation, curriculum development and upgrading of staff capabilities at Bukalasa Agricultural College and (iii) demonstrations at the DFIs and farmer-managed trials in their own fields; (c) Strengthening of management systems in MAAIF through (i) training in management and team building for staff at headquarters and in the project districts; (ii) staff training and consultancy services to improve financial management, procurement and budgetary procedures; (iii) operational support for monitoring and evaluation of extension activities; and (iv) improved office facilities; and (d) Studies on (i) the rationalization of the training institutes and colleges of MAAIF; (ii) the efficiency and impact of alternative technology transfer mechanisms; (iii) a Mid-Term Review and assessment; and (iv) the design of a follow-on project. Project Benefits: The improved delivery of extension services is expected to improve crop and livestock husbandry practices and technology adoption among small farmers. These improvements in turn are expected to lead to increased agricultural production and exports, and higher incomes for smallholders. Risks: The project is subject to institutional, financial and macroeconomic risks. Safeguards against institutional and financial risks have been included in project design. Considerable resources are devoted to human resource development and the strengthening of management capacity and processes. Risks of delays and dilution of focus would be addressed through dated action plans and through regular monitoring of tangible benchmarks of operational improvements and effectiveness of research/extension linkages. Financial risks would be minimized through the phased approach, local cost financing by IDA  v ii and efforts at rationalization of public expeniditures. The macroeconomic risks are being addressed by the adjustment operations (SAC and ASAC) which are aimed at ensuring that unfavorable market prices. lack of inputs and other factors are not constraining farmers' incentives !o apply new technology. Project Costs: aL Component Local Foreign Total % Foreign % Total (US$ million) Exchange Base Cost A. Delivery of Extension 4.81 3.28 8.09 41 54 B. Extension Training 2.Ob 3.08 5.14 60 34 C. Management Systems 0.77 0.77 1.54 50 10 D. Studies 0.13 0.11 0.24 45 2 TOTAL BASE COSTS 7.77 7.24 15.01 48 100 Physical Contingencies 0.83 0.80 1.63 49 11 Price Contingencies 0.63 0.48 1.11 43 7 TOTAL PROJECT COSTS 9.23 8.52 17.75 48 118 a/ Numbers niay not add due to rounding. Flnancing Plan: Local Foreign Taxes Total --;tS$ ~Million - IDA 7.27 F _ - 15.79 GOU 1.74 0.00 0.22 1.96 TOTAL 9.01 8.52 0.22 17.75 Estimated IDA Disbursements: IDA Fiscal Year 93 94 95 96 97 98 US$ Million Annual 2.24 4.89 4.26 2.05 1.56 0.79 Cumulative 2.24 7.13 11.39 13.44 15.00 15.79 Economic Rate of Return: Not applicable Map No: IBRD 24007: Project Districts  REPUBLIC OF UGANDA AGRICULTURAL EXTENSION PROJECT I. BACKGROUND A. Economic Setting 1.1 Uganda is well-endowed with natural and human resources, but its economy has been devastated by nearly two decades of political instability, economic mismanagement, and internal discord. In addition to the ample availability of fertile land and favorable climatic conditions for agricultural growth, it had a relatively well-developed manufacturing sector and an effective transp system. The agricultural sector accounts for about 60 percent of Gross Domestic Product (GDP), provides over 95 percent of the country's export earnings, and is a major source of government taw revenue. 1.2 The initial years after independence clearly demonstrated the economic potential of the country; the average growth of GDP was close to 6 percent annually from 1963 to 1973, and price were relatively stable. However, starting in 1970, political turmoil and economic mismanagement radically changed the situation, and real GDP declined about 20 percent during the 1970s. In early 1981 the Government initiated a recovery program, with considerable assistance from donors, including the World Bank and the International Monetary Fund (IMF). The recovery was short liv and the renewed cycle of instability beginning in 1984 led to an escalation in expenditures, acceleration in inflation, overvaluation of the exchange rate, and an absolute decline in GDP. Eventually the economy came to a standstill in the wake of a military coup, followed by civil war. 1.3 The National Resistance Movement Government, which assumed power in January 198$ inherited an extremely poor infrastructure, a grossly under-utilized manutaci.ring sector, rampant inflation and a huge external debt with a total debt service of more than half the 1984/85 export earnings. With a gradual return to political normalcy, the Government initiated an Economic Recovery Program (ERP) in 1987 with assistance from the IMF, IDA and other donors. 1.4 Continued support for the ERP is being provided under the Structural Adjustment Credi (SAC), approved in November 1991. The SAC focusses on structural adjustment while continuing emphasize stabilization. The two main areas of focus are: (a) the removal of remaining constraints the private sector and the creation of an environment in which private initiative can flourish and Uganda's comparative advantage can be realized; and (b) the improvement in the effectiveness of th Government. 1.5 The performance of the economy under the ERP has been good. GDP has increased at over 6 percent per annum, albeit from a low base, and per capita income has increased at 3.5 perce per annum. Imports increased at the beginning of the period, with improved access to donor funde foreign exchange, and then levelled off, constrained by the decline in the value of exports. As of 1986 the price of coffee, Uganda's main export, has dropped sharply on international markets. For this reason, the balance of trade has gone deeply into deficit. Uganda's imports of goods and non factor services in FY 91 were US$674 million, against exports of US$216 million.  -2- B. Major Development Issues 1.6 Uganda faces major structural, institutional, and fir,ancial problems that must be addressed during the next three years. First, underlying structural problems, principally in the financial and coffee sectors, continue to impede stabilization. Second, although government expenditures have increased somewhat in recent years, government revenues are still very low (16 percent of GDP). As a result, resources for economic and social services remain inadequate. Thus, increased efforts to strengthen revenue mobilization are a prio;iry. Third, while the ERP has succeeded in reducing Inflation, more has to be done to reduce inflat.onary pressures, Fourth, the sharp decline in the export prices of coffee during the past two years and the increase in petroleum prices following the Gulf War highlighted once again Uganda's vulnerability to adverse external developments. Its export base must be diversified. Fifth, a stepped-up program of institutional strengthening, including parastatal and financial sector reforms, is required. Sixth, a major reform of the civil service is urgently needed to achieve a streamlined, efficient, effective, and manageable service. These issues are being addressed in the policy framework of Government's Economic Recovery Program for the next three years as well as in IDA's assistance strategy. The policy dialogue in key areas, namely, financial intermediation, public expenditures, civil service reform, export diversification, and environmental management, is being deepened through economic and sector work. Implementation of policy reforms in these and ancillary areas would be supported through structural and sectoral adjustment lending. Government's continued efforts to rc)habilitate the country's infrastructure and essential public services will be assisted through direct investment lending. C. General Institutional Issues 1.7 Uganda's history of recent turmoil has left the country with very weak institutions. The civil service, as the main employer in the formal sector, has grown in size beyond the needs of the country and its ability to support it and is characterized by inefficiency, lack of financial discipline, and obsolescence. This is due in part to a breakdown in discipline, very poor incentives, and a history of politicization. Support institutions like the university and the training and research agencies have deteriorated dramatically since their heyday after independence, and are neither self-reliant nor financially viable. Many major banks and other financial institutions are close to insolvency. During the last few years, donor agencies and IDA have assisted Government in undertaking a number of measures to bring about urgent reforms in these institutions, but the efforts have fallen far short of a comprehensive and sustained program of institutional reform. The institutional development strategies have relied largely on short-term foreign expertise, in the form of technical assistance and ad hoc overseas training, and while vital progress has been made in propping up key operating systems in important agencies, this has been at the cost of perpetuating dependency. This dependency has been reinforced by an uneven practice of salary subsidies by donors, provided to make up for the unacceptably low levels of public sector remuneration. 1.8 The Government recognizes the weaknesses of Ugandan institutions and has demonstrated its commitment to tackle the problems. A candid report of the Public Service Review and Reorganization Commission provided the basis for the recently announced reduction in the number of ministries and self accounting units, from 46 to 23 and continued reductions in the size of the civil service. The Government has also established a secretariat to develop a national capacity building plan to strengthen Ugandan self-reliance, and produce the managers, professionals and technical staff required to improve both public and private sector performance. However, completion cf a comprehensive and systematic institutional reform program will be a complex and long-term process.  -3 - Action 5 being initiated with IDA support (paras. 1.17 and 1.18) with the key agencies that carry greatest responsibility for economic and financial management and development planning, and which in a strergthened condition can le" the larger civil service reform program. Strengthening these core agencies the recentvy amalgarrated Ministry of Finance and Economic Planning (M_FEP), the Ministry of Public S vice (MPS), and the Bank of Uganda (BOU), is also critical to the achievement of the policy goals of the ERP, including the SAC, and to the implementation of sectoral policy and investment operations. In the meanwhile, interim measures such as contractual appointment and field and travelling allowances are necessary in order to implement sectoral projects. The terms and conditions of these contractual arrangements and the levels of allowances have been set by Government, in consultation with the donors. D. Bank Assistance 1.9 The Bank will continue to play a leading role in assisting the Government to design and implement the ERP to move the economy towards sustainable long-term growth, and to mobilize the required financial resources to support the Government's development program. The Bank undertakes this role by backing up policy dialogue with economic and sector work, designing a lending program that combines adjustment and investment lending in a balanced manner, and improving aid coordination. 1.10 The overall crjective of the Bank's assistance strategy for Uganda is to shift the emphasis from short-term objectives of security, stability and rehabilitation to the achievement of an economic environment conducive to poverty reduction through the promotion of long-term sustainable growth and improved basic living conditions. The overall approach will be to strengthen essential government institutions, policies, and functions in a manner that will create a favorable climate for a private sector response in both agriculture and industry and improve the delivery of essential social services. 1.11 The principal elements of the Bank's overall country strategy will be to support efforts to: (a) maintain macroeconomic stability through improved revenue collection, the establishment of a unified, market-determined exchange rate system, enhanced monetary restraint, and increased resources for key economic and social sectors through a reallocation of budget expenditures; (b) improve the climate for private investment and production through deregulation, privatization of public enterprises, strengthening ef the financial sector, rehabilitation and expansion of basic infrastructure, and improvement of essential support services, such as agricultural research and extension; (c) enhance the country's human resource base by strengthening the education system and basic health services; (d) develop and implement programs to arrest the environmental degradation that is occurring, with special efforts to reverse the depletion of the country's rain forests, to increase the intensity of cultivation on existing farmlands (with priority over expansion of area cultivated) and to slow the rapid rate of population growth; and  4 - (e) improve external aid mobilization and coordination. E. Lending Program and Economic and Sector Work 1.12 The cumulaive total of Bank Group lending to Uganda to date stands at US$1.68 billion. Of this amount, six IDA credits, five supplements and two Africa Facility Credits totalling US$676.1 million have been in the form of quick-disbursing assistance, including an Agricultural Sector Adjustment Credit (ASAC) in FY91. The current portfolio consists of 27 projects totalling US$1.16 billion, of which six projects totalling US$228 million are *n the agricultural sector. Through a technical assistance credit (FY89), IDA has strengthened the administrative and institutional capacity of the key ministries responsible for implementing the recovery program. Other credits have assisted in the rehabilitation of Uganda's essential infrastructure, while others have improved productive capacity and bolstered basic social services. The reccitly approved SAC (FY92) continues qi'ick- disbursing support to the Recovery Program while focussing on removal of constraints on the private sector and improving the efficiency of Government. 1.13 Over the next three years, the Bank's economic and sector work program and its lending operations will be used to implement the strategy articulated above. The lending operations will build on a foundation of knowledge that has been established y our economic and sector work over the past few years. The sector work prepared during that period has covered the industr:al and financial sectors, transport, the private sector, the agricultural sector and key export-oriented crops. The macroec.,nomic measures needed for laying the basis for sustainable long-term development have been identified in a similar manner, with particular attention to a study of public expenditure, which has been identified as an area of maximum priority, given the extreme resou.ce constraint under which Uganda will operate for years to come. A second Public Expenditure Review (PEk), was carried out in FY92, aimed at improving public expenditure management. The Bank recently completed a paper setting out an export diversification strategy for Uganda. 1/ Pending the overall restructuring of the financial sector, which will be supported by a planned FY93 financial sector adjustment operation, the Enterprise Development Project (EDP), FY92, provides for pre-shipment export financing as part of a package of initiatives towards the export diversification objective. Measures needed to support continued growth in agriculture have been identified in the recent agriculture sector memorandum 2/ Building on the agriculture sector study, an investment operation in FY95 will support continued liberalization and restructuring of production, processing and export marketing for cotton. The proposed project, AEP, will help improve extension support to agriculture. It will be followed shortly by the recently appraised Agricultural Research and Training Project. Building on transport sector work, a transport sector rehabilitation project will help improve transport capacity and efficiency. An Export Development Project in FY95 will help create an enabling environment for non-traditional exports through incentive policies and financing for production and marketing. 1.14 The Bank's activities in the human resource field would aim at improving access to basic social services. Education V will focus on basic education and Health II will continue efforts to strengthen basic health services. Education V is based on several sub-sectoral studies which have 1/ The World Bank, UGANDA: Export Diversification Strategy, Eastern Africa Department, July 3, 1991. 2I The World Bank, UGANDA: Agriculture Sector Memorandum, Report No. 10715-UG June 8, 1992.  -5 - influenced the development of the Ministry of Education's Five-Year Investment Program (1992-97). Both operations will be linked to the human resources study started in FY92. A women In development issues paper has identified key aspects of the status of women which need priority attention, and will provide the basis for their integration into other aspects of the Bank's human resources and agriculture work programs. 3/ An AIDS project in FY93 will help strengthen the capacity of the Government to deal with the multiple economic and social aspects of the impact of the disease; it will build on recently completed sector work. 4/ A small-towns water supply project, also scheduled for FY93, will aim at an improvement in overall access to safe water in the country. 1.15 With regard to poverty allevton, the Bank's assistance strategy has the following four elements. First, the above lending program in promoting growth and diversification, will offer opportunities for productive use of labor, including that available within the poorer groups of society. The broad participation of smallholder farmers in the production of both food and export crops means that the benefits of agricultural growth are distributed to the rural poor. Second, through the dialogue on the public expenditure program the Bank will support increased expenditure allocations for basic social services in the health and education sectors. Third, to enable public institutions to effectively expand the delivery of such services, the Bank, through policy dialogue and lending, will support the strengthening of social sector ministries. Finally, the Bank is supporting the Government's special program for the alleviation of poverty and social cost of adjustment. A program for the alleviation of poverty and the social costs of adjustment (PAPSCA) was designed to provide some support to the poorest in Uganda society, and also to mitigate the adverse effects of adjustment on the poor. It was put into effect in 1990, and will continue to be under implementation for the next several years. Poverty and growth issues will be the focus of the forthcoming country economic memorandum (FY93). 1.16 While the pressure on the environment is not as high in Uganda as in other Sub-Saharan countries, it is increasing and needs to be addressed to sustain economic growth. The Bank supports the preparation of the Government's Environmental Action Plan, including the strengthening of public institutions involved in environmental management and monitoring. As a first step, the Bank will provide technical assistance to help the Government establish an appropriate institutional and legal framework for environmental protection and to develop cost-effective information systems to meet priority needs of resource users, planners, and decision makers. The Bank also supports the development of research capacity in environmental policy at Makerere University in Kampala. 1.17 Institutional weaknesses limit the Government's ability to implement the policy agenda and impede project implementation. Issues of capacity building and institutional reform therefore figure prominently in the dialogue and planned lending operations. The Bank's strategy is to address central policy measures in the context of structural adjustment lending. Complementary assistance to improve the government's capacity for economic and financial management and implementation of reforms at the sectoral level will be provided through technical assistance as part of freestanding operations or attached to individual sector operations. Also, a major study is being carried out to guide the development of an action plan to remove constraints within the civil service to the effective The World Bank, UGANDA: Women in Development: Current Issues and Agenda for Further Research, Population and Human Resources Division, Eastern Africa Department, June 28, 1991. 4/ The World Bank, UGANDA: The Economic Impact of AIDS, Population and Human Resources Division, Eastern Africa Department, June 28, 1991.  - 6 - use of available talent, prepare a medium and long term training program to address key skill gaps, and elaborate a strategy and framework for future Bank initiatives in capacity building. 1.18 The recenly approved Economic and Financial Mvanagement Project (EFMP) addresses problems in the core agencies involved in economic and financial management and which are expected to play key roles in the overall public service reform programs (para. 1.8). Significant resources will be allocated to the building of capacity in the Ministry of Finance, the Ministry of Planning and Economic Planning, and the Bank of Uganda to strengthen their effectiveness in the formulation and implementation of economic policies for development. Building on sector work started in FY92, an institutional development project in FY94 will address broader issues of capacity building, including training in such areas as economics, accounting and auditing, and continuation of civil service reform. Aid Coordination 1.19 An important part of the Bank's activities over the next three years will be to help strengthen and coordinatc donor support to Uganda's reform efforts. Through the framework of the Special Program of Assistance (SPA) and through the Consultative Group (CG) process (with CGs planned every 12 to 18 months). The capacity of the Resident Mission has been expanded to increase contacts with the donors and to assist the Government with implementation issues. F. Implementation Experience and Lessons Learnt 1.20 Implementation of IDA-financed projects, which had slowed down during the civil disturbances in 1985 and 1986, has shown a steady improvement with the return of peace and stability to much of the country. Disbursements rose to US$