Uganda - Northern Reconstruction Project

Document of 1The World Bank FOR OFFICIAL USE ONLY MICROFICHE COPY Report No. 10411-UG Type: (SAR) ReportNo. 10411-UG TSCHANNER,/ X34079 / J10079/ AF2IN STAF'F APPRAiSAL REPORT REPUBLIC OF UGANDA NORTHERN RECONSTRUCTION PROJECT APRIL 6, 1992 Infrastructure Operations Division Eastern Africa Department This document has a restridted distribution and may be used by recipients only in the performance of their offilcial duties. Its contents may not otherwise be disclosed without Wotid Bankc authorizatikon.  CURRENCY EOUIVALENTS Currency unit = Uganda Shilling (U Sh) US$1.00 U Sh 1000 (February 1992) U Shl = US$0.001 SDR1 = US$1.38104 (March 4, 1992) US$1.00 = SDR 0.7241 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ADP - Agriculture Development Project CAP - Community Action Program CTB - Central Tender Board CMEU - Coordination, Monitoring and Evaluation Unit DANIDA - Danish International Development Agency ERP - Economic Recovery Programme of GOU FY - Fiscal Year of the World Bank Group, unless stated otherwise GDP - Gross Domestic Product GON - Government of the Netherlands GOU - Government of Uganda IBRD - International Bank for Reconstruction and Development ICB - International Competitive Bidding IDA - International Development Association LCB - Local Competitive Bidding MLHUD - Ministry of Land, Housing and Urban Development MAAIF - Ministry of Agriculture, Animal Industry and Fisheries MOES - Ministry of Education and Sports MOH - Ministry of Health MOLG - Ministry of Local Government MOWTC - Ministry of Works, Transport and Communications MPED - Ministry of Planning and Economic Development MWEMEP - Ministry of Water, Energy, Minerals and Environment Protection NGO - Non-Governmental Organization NRP - Northern Reconstruction Project OPM - Office of the Prime Minister PAPSCA - Program for the Alleviation of Poverty and the Social Costs of Adjustment PIU - Project Implementation Unit PPF - Project Preparation Facility RC - Resistance Council/Committee UNDP - United Nations Development Programme UNICEF - United Nations Children Fund UPTC - Uganda Pcsts and Telecommunications Corporation WDD - Water Development Department of MWEMEP GOVERNMENT FISCAL YEAR July 1 - June 30  FOR OFFICIAL USE ONLY REPUBLIC OF UGANDA NORTHERN RECONSTRUCTION PROJECT TABLE OF CONTENTS CREDIT AND PROJECT SUMMARY. .... ........ ii I. BACKGROUND ........................... 1 A. Introduction .......................... 1 B. Economic Overview ..................... 1 II. THE NORTHERN RECONSTRUCTION PROGRAM ... 3 A. Present Situation in the North ............... 3 B. The Government's Program ..... ........... 4 Hi. BANK SIRATEGY AND ASSISTANCE .... ....... 6 IV. THE PROJECT ............................ 10 A. Objectives ........................... 10 B. Project Description ....... .............. 10 V. PROJECT COST AND FINANCING ....... ....... 18 A. Project Cost .......................... 18 B. Financing .......................... 20 VI. PROJECT ADMINISTRATION ....... .. ........ 22 A. Implementation ........................ 22 B. Procurement ......... ................ 25 C. Disbursements ........ ................ 29 D. Special Account ....................... 29 E. Auditing ............................. 31 VI. WOMEN IN DEVELOPMENT ...... ............ 32 VDI. ENVIRONMENTAL ASPECTS ...... ........... 34 IX. BENEFFIS AND RISKS .. ................. 35 A. Benefits .35 B. Economic Analysis for Highways .35 C. Risks .35 X. AGREEMENTS REACHED AND RECOMMENDATION 37 This document has a restricted distribution and may be used by recipients orly in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  ANNFXS: 1. List of Members of the Appraisal Mission 2. Government's Priority List of Projects 3. Summary of Project Costs and Financing 4. Agriculture - Cost Estimate and Implementation Schedule 5. Community Action Program - Description of Component 6. Education and Training - Cost Estimate and Implementation'Schedule 7. Highways - Cost Estimate, Implementation Schedule, and Economic Analysis 8. Telecommun!cations - Cost Estimate and Implementation Schedule 9. Urban - Cost Estimate and Implementation Schedule 10. Water Supply and Sanitation - Cost Estimate and rmplementation Schedule 11. Project Administration (CMEU) - Cost Estimate and Description 12. Amounts and Methods of Procurement 13. Disbursements 14. Consultants' Services and Technical Assistance 15. Key Performance Indicators 16. Project Supervision Plan 17. Documents in Project File MAP: IBRD No. 23506 This report is based on thefindings of a Bank appraisal mission whlci visited Uganda in September 1991. Mr. Gerhard Tschannerl, Senior Municipal Engineer and Task Manager (AF21IN), was the mission leader. AnnexI contains the list of the 17 members of the appraisal mission and their specdalization and sector assignments. Mmes. Alcira Kreimer (ENVPR) and Katrine Salto (PHR1D) and Mr. Alberto Harth (AFJIN) were the peer revewers. Mmes. Janine Littleford and ErlUnda Maliksi provided secretarial support in the preparation of the report. Mr. Stephen J. Weissman and Mr. Francis X Cola,o are the managing Division Chief and Department D.rector, respectively, for the operation.  REPUBLIC OF UGANDA NORTHERN RECONSTRUCTION PROJECT BASIC DATA GNP per capita (1990) US$ 220 Land area (total) 236,000 sq. km. Population (1991 preliminary) 16.6 million Rural population as % of total 92% Average annual growth of population (1980-91) 2.5% Life expectancy at birth (1989) 49 years Adult illiteracy (1985) Female 55% Total 43%  - ii - REPUBLIC OF UGANDA NORT7ERNV RECONSTRUCTION PROJECT CREDIT AND PROJECT SUMMARY Borrower. Republic of Uganda Benefidar,: Uganda Posts and Telecommunications Cor noratior ,1IPTC) for a portion of the credit Amwnt: SDR 51.9 million (US$71.2 million equivalent) ICrm=: Standard IDA Terms with 40 years maturity Relending Terns: US$11.5 million would be relent tc UPTC to reestablish a telecommunications link from Kampala to Gulu and related works for 20 years, including 5 years grace, at an interest rate of 7. 73 percent per annum, with UPTC bearing the exchange risk. Proe Obetyues The proposed project would provide assistance for t)e. .a uction and Desca;Ripn: of the northern region of Uganda, consisting of the wa- :iged Districts of Apac, Gulu, Kitgum, Kumi, Lira, P-llisa an. Soroti and including some activities in the former West Nile Region composed of the districts of Arua, Moyo, and Nebbi. As a consequence of about 15 years of civil disturbances, the aFea haJ suffered not only a high loss of life but also the destruction of essential infrastructure and a precipitous decline in social services. Moreover, it has yet to receive development assistance comparable to that provided in Southern Uganda. The proposed project would provide support for the short and medium-term reconstruction of essential economic and social infrastructure for the resumption of productive activities in the Region. It would contribute to poverty alleviation and address the particular concerns of women. It would provide assistance in seven sectors: agriculture, education, feeder roads, highways, telecommunications, urban, and water supply and sanitation. It would also include a Community Action Program providing a socialfundfor community- initiated micro projects in Arua, Moyo, and Nebbi Districts and assistance to strengthen the capacity of local government agencies to plan and manage the long-term reconstruction and rehabilitation program. It would begin the process of reducing the historical economic disparity between the north and tl a south, thus increasing the potentialfor sustained peace and a consequent reduction in defense expenditures, which is a major objective of the Government's Economic Recovery Programme.  - lli - &asft~: The project would b.enefit the population in the poorest and most war- dcvastated districts in Uganda, which has so for gained very little from the recovery progra.2. The north, with the exception of the arid region in the north-east, was considerable agricultural potential. Relatively small investments In essential infrastructure, social services, and support to agriculture would remove the major bottlenecks to the resumption of productive activities and will begin to alleviate poverty. The project would support the Government's long-term nation-building objectives by contributing to overall economic growth, reducing the economic dispary between the north and the south of the country, increasing the potentialfor sustained peace in the region, and allowing for a reduction in defense expenditure. Women would in particular benefit through the integration of their concerns into the relevant proJect components. As a result of this project, additional donor contributions to the reconstruction effort are expected to materialize. Firs, although the security situation in the north has inproved considerably in the last couple of years, small groups of armed bandits remain in Kitgun, Gulu and Soroti Disticts. The projea was designed with sufficientflexibility to allow some degree of reallocation of resources between districts and sectors. The priority to be given to different geographical areas in the implementation of some project components would therefore be periodically adjusted, to minimize risks to personal safety and to ensure that all projea components can be effectively implemented and adequately supervised. Scond. the investments - in both physical structures and institutional reforms - may not be adequately maintained after the completion of the project. This issue would be addressed through community involvement in construction and maintenance wherever appropriate. It would also be addressed through the choice of technologies to make operation and maintenance more affordable to the communities and more suitable for community participation. lhLrd. the risk that the Government may not have sufficient capacity to implement the project in the north in a timely and efficient manner is being minimized by prc viding institutional support (including a Central Monitoring and Evaluation Unit), the use of experienced implementation units in the line ministrie;, and involvement of qualffied non-governmental organizations and the private sector.  - iv - EslitNed Component as % of Loaa Forei en otal Total V--US$ million- (1) Agriculture 1.8 3.3 5 1 6 (2) Community Action Program 2.1 4.1 6.2 7 (3) Education and Training 3.7 6.5 10.2 12 (4) Feeder Roads 2.8 5.9 8. 7 10 (5) Highways 5.2 20.4 25.6 31 (6) Telecommunications 1.6 10.2 11.8 14 (7) Urban 1.7 5.2 6.9 8 (8) Water Supply and Sanitation 1.4 4.2 5.6 7 (9) Project Administration 1.6 0.7 2.3 3 (10) Project Preparation Facility 0.4 1.1 1.5 2 Total Base Cost 22.3 61.6 83.9 100 Contingencies: Phvuical 1.5 4.9 6.4 , - 2.2 5.7 7.9 5. 3.7 10.6 14.3 T0rAL PROJkCT COST * 26.0 72.2 98.2 RFoandr: % of Local Foreign Total Total 'US$ million)- IDA 10.4 60.8 71.2 72 Government of Uganda 10.1* - 10.1 * 10 Government of the Netherlands 2.2 4.2 6.4 7 DANWA 3.3 7.2 10.5 11 Total 26.0* 72.2 98.2 * 100 * Includes taxes estimated at $2.26 million equivalent. Est*nated IDA D&sbu=ements: MDA, scal yea:- ED.Y FY94 E5 FY96 FY97 EY2 &2 US$ million Annual 2.3 6.8 9.1 21.2 18.1 12.1 1.6 Cumulative 2.3 9.1 18.2 39.4 57.5 69.6 71.2 Ecoaglk Rate gf Return: 24 percent for the highways component JIRD No. 23506  REPUBLIC OF UGANDA NORTHERN RECONSTRUCTION PROJECT I. BACKGROUND A. Introduction 1.01 The Government of Uganda ((OU) has requested assistance from the Bank and other donors for the reconstruction of the northern region of Uganda, consisting of seven Districts severely affected by the war: Apac, Gulu, Kitgum, Kumi, Lira, Pallisa and Soroti and three Districts in the north-west: Aura, Moyo and Nebbi, comprising the former West Nile Region, which have suffered from past neglect. As a consequence of about 15 years of civil disturbances, the area has suffered a high loss of life, the destruction of essential infrastructure, and a precipitous decline in social services. Despite the devastation, the region has yet to receive development assistance comparable to that provided to Southern Uganda. The historical economic disparities between the north and south have been widened by the war, threatening the long-term political and social integrity of the Nation. The economic recovery in the north, where insecurity has persisted and normal development activity has not been possible, has been unable to match the six to seven percent growth in GDP of the south since 1937. Over the last year security has improved in much of the north with many rebel groups surrendering and refugees returning to their land to resume cultivation. B. Economic Overwiew 1.02 The political turmoil and economic decline in the country during the last twenty years have resulted in a severe decline in the living standard of the vast majority of Ugandans. At independence (1962), Uganda was the envy of its neighbors, with one of the strongest, most promising economies in Sub-Saharan Africa. Favored with good climate and fertile soil, the agricultural sector was self-sufficient and generated adequate foreign exchange. The industrial sector, though small, supplied the economy with basic inputs and consumer goods and contributed foreign exchange through the export of textiles and copper. Uganda's transport system was regarded as one of the best in Sub-Saharan Africa and included access to an effective network of railway, port and airline facilities. With an established administrative network and infrastructure, Uganda's health services had developed into one of Africa's best. Although school enrollment was considered to be low, the country had developed a reputation for quality education at all levels. The years immediately after independence demonstrated the country's economic potential: real GDP grew by 5.8 percent per annum from 1962 to 1970, with per capita GDP increasing at least 3 percent per annum. 1.03 The period of political unrest that started in 1970 radically reversed the economic and social progress attained to that point. SI 11ed personnel fled the country, the parastatal sector grew bloated with confiscated industries, some of which had already been abandoned prior to confiscation, and professional standards within the public service eroded. The breakup on the East African Community in 1977 accelerated the decline, since the Community had provided a thriving market for Uganda's industrial exports and a reliable access route to foreign trade. Further damage was caused by the destruction and looting that occurred during the 1978/79 war. 1.04 When the National Resistance Movement took over the Government in January 1986, it inherited a Nation torn by ethnic and religious conflicts and an economy  -2- shattered by years of civil war, political instability and physical insecurity. Severe macro- economic imbalances fuelled inflation and contributed to an acute foreign exchange scarcity. Real GDP had declined by a cumulative 14 percent in t' preceding 15 years, the greater part of the nation's major trunk roads and vehicle fleet had been lost, and industrial enterprises lay abandoned. Even the remarkably resilient agricultural sector had been disrupted in some areas as farmers fled their farms in search of refuge. The total exttrnal debt service laid claim to more than one-half of export earnings. 1.05 Uganda's once impressive social infrastructure also lay devastated by war and lack of maintenance. By 1985, Goverranent expenditure on education and health, in real terms, amounted to 27 percent and 9 percent respectively of the 1970's levels. This resulted in a massive disruption to the provision of essential services with predictable consequences. Although school enrollment continued to grow throughout the period of economic decline, educational facilities deteriorated substantially and this, combined with a lack of teaching/learning materials, Inter alia, resulted in an increase in the illiteracy rate, particularly that of children (that is, a substantial decline in the quality of education). Outbreaks of waterborne and water-related diseases accelerated as a result of the lack of maintenance of handpumps fitted on boreholes, one of the major improved sources of water in the rural areas, and other sources including springs and dug wells. Various programs in enviromental health were discontinued. Measles became the leading cause of child deaths in hospitals and deaths from other preventable diseases, such as whooping cough, more than doubled. A dramatic deterioration of the health situation occurred with the rapid spread of the Acquired Immune Deficiency Syndrome (AIDS), starting in the mid-1980's. 1.06 Under the administration of the National Resistance Movement, peace and security were gradually restored in the country, permitting a resurgence of economic activity. In 1987 the Government introduced its Economic Recos ery Programme (ERP), which included policy reform and rehabilitation investments. Its principal objectives are to promote economic rehabilitation and growth, to restore internal financial stability and lower inflation, and to reduce the imbalance in the external accounts, particularly through the expansion of non-traditional exports. Since the program was introduced in FY88-91, real GDP growth has averaged about 6 percent per annum and inflation has declined sharply, from 243 percent in FY88 to about 39 percent in FY91. The economy has continued to face severe external payments pressures, however, mainly due to the dramatic fall in international coffee prices and recently the decline in coffee production. A number of policy initiatives undertaken recently by the Government (including exchange rate measures, actions to raise prices and lowe: dhe tax burden for coffee producers), together with increased financial assistance from donors, have helped ease the pressure on the balance of payments.  -3- I. THE NORTHERN RECONSTRUCTION PROGRAM A. Present Situation In the North 2.01 The Goverunent's "Northern Uganda Reconstruction Programme" is intended to cover primarily the districts of Apac, Gulu, Kitgum, Kumi, Lira, Pallisa, and Soroti. 1/ The region covers about 1/3 of the total area of the country with a population of about 4 million people, of which 85% is rural. The average family size is 6 to 7 persons, increasing as one goes northwards. There are an estimated 500,000 farm families in the region, most of them small farmers and fishermen. Agriculture, livestock rearing, and fishing are the main activities in the region. Cassava, finger millet, maize, soybeans, pigeon pea, and sesame are the leading staple foods. Cotton is widely grown as a traditional cash crop r ebacco mainly in the western part of the area. Traditionally, livestock production xr inportant economic activity in the area. Ox-cultivation has been particularly important in Soroti and some other parts of the region. However, civil strife and cattle rustling have reduced the number of -nimals from 1.3 million heads to less than 300,000 heads. Fishing is limited to areas arou. lakes Kyoga and Kwania. Poultry and pigs are becoming important sources of protein for the majority of people in the region. 2.02 Since 1986, the region has been plagued by waves of insecurity which have resulted in many people being displaced and much of the of economic infrastructure destroyed. Insecurity has produced social and economic isolation, driving away many able people and keeping outsiders away. Thousands of children have not been able to attend school, and overcrowding and poverty and have led to ill heelth and increased mortality. The incidence of AIDS has increased Aharply. Petty crime and personal insecurity make it difficult for individuals to safeguard their property and to carry out their business, while social breakdown has increased the number of births out of wedlock, often to very young women. A large population of widows and orphans lives in poverty and deprivation. The urban and rural infrastructure, seriously neglected since 1972, has deteriorated further. Roads are overgrown, administrative centers and local markets are deserted, urban and rural water supplies have collapsed, hospitals and rural health units hardly function unless supported by missions or external Non-Govermnental Organizations (NGO's), and schools have been stiipped of furniture and books. Small scale agriculture has regained its vitality, but production has been seriously undermined by the loss of draft animals, the closure of markets, lack of implements and inputs, and the incidence of cassava mosaic disease, which is threatening food security in some areas. 2.03 The magnitude o' ;. v problem to be solved is staggering. Almost all the feeder roads need major repair. Primary schools everywhere have viztually no furniture, books or trained staff. Only c x.-nority of rural boreholes are functioning and all the urban water systems, with the except of Pallisa, are inoperative. Public dispensaries are universally run down and understaffed; most of the staff are demoralized and moonlight in private facilities. There is a severe lack of equipment and materials of all sorts, including agricultural implements and inputs. [/ Some development activities are also planned for three Districts of the former West Nile Region: Arua, Moyo, and Nebbi, which have not been ravaged by the latest war, but nevertheless lag seriously behind the south in development.  -4. 2.04 The affected districts have been to a large extent cut off from the rest of the country since the end of 1986, with the result that line ministry officials have had very limited access to their field staff. It has been difficult for government programs and projects to be implementei 'n the area, especially where ambushes by rebels and bandits were common. Resistance Council (RC) Chairmen have been threatened and in some cases harmed ty the rebels, and local authorities have only been able to rdise tiny amounts of revenue because of the poverty of the pt-lulatiorA and the breakdown of marketing, transport, and revenue collection. Many local posts have gone unfilled a id many officials have been unable to get out into the field to do their jobs. Government staff stationed outside district headqudrters, like health workers and teachers, have continued to do their jobs, but for inadequate wages which are usually months in arrears. Funu.ng of inputs from ministries have virtually dried up, with the exception of vaccines and drugs from the Essential Drugs Programme. Donors have not been ab: to mount significant support under the circumstances, so that almost no projects of signitic;nce, with the exception of some trunk road rehabilitation, ihave been carried out. 2.05 Consequently, the local administrative structures (that is, district administrations and the RC's) and NGO's have carried out most of the economic and humanitarian activities in the region. Local administrations have maintained law and order in areas of relative peace. A few traders have continued to market crops and have supplied farmers with essential inputs. 2.06 Much of the development work in the region has been carried out by external and internal NGO's. The International Service Volunteer's Association (AVSI), an Italian NGO, has run prograns in Kitgum ' icluding rehabilitation of the major hospital, the district Farm Institute ana the, repair of rural boreholes. ACCORD and Vision Terudo has e conducted training and rural development activities in the west (Gulu) and east (Kumi) of the region. The larger expatriate NGO's including AVSI, Save the Children's Fund, Oxfam and World Vision have been involved in relief interventions of various kinds. Some agencies were originally external, but now are effectively local, like Oxfam and the Catholic and Protestant churches. The churches have maintained standards of health care in their hospitals and health centers, while many small NGO's, usually with an evangelical Lase, have provided services and developed small projects. 2.07 Since 1988 there has been marked improvement in the security situation, starting with Apac and Lira Districts and the urban areas of the remaining districts. As a result, displaced people have been resettled and emergency relief distributed to the needy, orphans and widows. Agricultural production has resumed and substantial marketable surplus has found its way to Kampala and abroad. There has been a large growth in the sale of sesame seed, potatoes and cassava from favored parts of the region since 1989. B. The Government's Program 2.08 The economic situation in the north continues to lag behind that of central and southern Uganda. The Government hopes to reverse this trend through the implementation of a comprehensive development program, with external support. Its aim is to rebuild infrastructure, strengthen local government and wommunity organizations, reestablish an effective private trading and small manufacturing sector, develop vocational and academic skills, expand agricultural production, and, perhaps most important of all, eliminate insecurity  -5 - and restore legality. The Government's "Northern Uganda Reconstruction Programme" (the Program) is designed to address all of these problems either directly or indirectly, although it will only be able to deal with the most urgent and accessible of them in the next few years. 2.09 In the beginning of 1991 the Government, through the initiative of the Minister of State Resident in the North, established a Task Force, consisting of representatives from the different line ministries, parastatals, and the Office of the Prime Mmiister, and chaired by the Chief Economist of the Ministry of Planning and Economic Development, to prerare a comprehensive program for the reconstruction of the north. The Task Force produced a request for assistance entitled "Proposal for the Northern Uganda Reconstruction Programme", which was endorsed by the Council of Ministers. This document was presented to the identification missiona_ in April 1991 and served as the basis for preparing the oroposed project. The Government proposal, which contains detailed descriptions of 20 projects with a brief characterization of the implementing mechanisms, totals US$179 million (see Annex 2). Although a time frame for she completion of the Program was not specified, the document implies a short impleraentation period. The Government considers the Program the basis for its efforts to bring the northern region into the mainstream of economic development, including the restoration of social services and a reduction in the disparity between the north and south. Such a development is expected to contribute significantly to increased security in the area and to a reduction in defense expenditures. 2.10 The Government presented the appraisal mission with a "Progress Report on the Northern Reconstruction Programme' in September 1991, which is an update of the previous Govermnent proposal for a comprehensive program. The proposed project is made up of those parts of the program which are of the highest priority and which could be carried out in a relatively short time period, given the limited implementation capacity and the remaining threat of insecurity in some areas of the north. Joint miesion of thc World Bank, Government of the Netherlands, and UNDP  -6 - m. BANK STRATEGY AND ASSISTANCE 3.01 The Bank will continue to play a leading role in assisting the Government to design and implement its 'Economic Recovery Programme" (ERP), with a view to moving the economy towards sustainable long-term economic growth and high employment. To help achieve this objective, the Bank will assist the Government to mobi'ize the financial resources needed to support the country's development effort. A primary goal of the Government's strategy in the near term is to shift the emphasis from security, stability and rehabilitation, on which significant progress has been made, to the achievement of an economic environment conducive to economic growth, private sector development and poverty reduction. While the program will continue to stress stabilization, increasing emphasis will be placed on economic policies and programs designed to provide the incentives and institutional framework needed for growth, export and output diversification, and a shift to less capital and import intensity of production. An important objective of the program will be to reduce poverty by generating high employment and incomes and by the development of selected interventions. Government institutions are to be strengthened in order that essential government services are adequately provided, particularly to the poorer segments of society. For the medium-term, the emphasis will be on the key growth sectors of agriculture and industry, while continuing to support the infrastructure and social sectors, all of which have a direct impact on the efficiency of the productive sectors. The prospects for sustained long-term growth in Uganda are critically dependent upon the elimination of the underlying constraints to development. Support for human capital development and institutional reforms are also key elements of the Bank's assistance strategy. 3.02 The principal elements of the Bank's overall .uuntry strategy will be to support efforts to: a. maintain macro-economic 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 of 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 (in priority over expansion of cultivation), and to slow the rapid rate of population growth; and e. to improve external aid mobilization and coordination.  - 7 - 3.03 IDA and the IMF supported an initial effort at economic stabilization and recovery during the early 1980's. In lune 1981, the Government adopted a comprehensive "Recovery Programme." IDA committed the Reconstruction II and m Credits in 1982 and 1984, respectively, and also an Industrial Rehabilitation Credit (1982) and an Agricultural Rehabilitation Credit (1983). These credits financed imports and reinforced policy measures adopted under the IMF agreements and institutional development efforts under IDA and UNDP technical assistance projects. Initial experience was encouraging, both in terms of stabiliation and recovery of output. However, in 1984 the economic program went off track, and security conditions began to deteriorate once again. Inflation accelerated to 125 percent in 1985, and the recovery effort was overwhelmed by the intensiflcation of civil strife. 3.04 Since resuming lending to Uganda in FY87 under the Government of the National Resistance Movement, IDA has provided 24 credits totalling US$852.4 million. Of this amount, three IDA credits, four supplements, and two African Facilty Credits totalling US$357.0 million (or 42 percent of Uganda's lending program for FY87-91) were in the form of quick-disbursing assistance in support of the ERP (para. 1.06). The latter included the Economic Recovery I Credit in FY89 and the Economic Recovery II Credit in FY90 (both of which had supplemental credits as well), and the Agricultural Sector Adjustment Credit in FY91. Not included in the above total is the first Structural Adjustment Credit and an Enterprise Development Cred,t, designed to assist with the privatization program, which were approved recently. Through a technical assistance credit, which started in 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. They have improved productive capacity and bolstered basic social services. 3.05 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 by the economic and sector work over the past few years. The sector work prepared during that period has covered the industrial and financial sectors, transport, the private sector, and key export- oriented crops. The macro economic 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 resource constraints under which Uganda will operate for years to come. 3.06 The Government has begun to address the problems affecting the civil service. A recent study culminated in the Report of the Public Service Review and Reorganization Commission, which made a number of far-reaching recommendations for improvements. A drastic reduction in the size of the service through the elimination of unneeded staff categories and a reduction in the number of ministries was initiated in July 1991. This will help produce a streamlined and more rational civil service structure with the potential for improved performance and will also yield savings that could be used for improved incentives and for increased operations and maintenance costs. This effort, which is being supported by IDA and several donors, will be reinforced by the technical assistance programs and should lead to a significant increase in administrative capacity in the medium term. 3.07 Bank strategy in regard to poverty in Jganda is to work with other donors and NGO's to provide short-term assistance to the most vulnerable groups in the population, while initiating the longer-term actions needed to restore basic social services and achieve  -8 - sustained growth and employment to alleviate poverty. A Program for the Alleviation of Poverty and the Social Costs of Adjustment (PAPSCA) was designed to provide support to the very poorest in Ugandan society and to mitigate the adverse effects of adjustment on the poor; it became effective in June 1990. 3.08 IDA-assisted projects which are closely related to the Northern Reconstruction Project (NRP) include the following. The aims of the Agriculture Development Project (Credit No. 1539-UG) which has been recently extended for two years, that is until March 1993, would be pursued beyond the project's closing date as a component of the proposed project. The Third (now closed) and Fourth Highway Projects (Credits No. 1445-UG & 1803-UG) were designed to support the rehabilitation and maintenance of roads and the development of the local construction industry. The Second Telecommunications Project (Credit No. 1991-UG) was designed to assist in essential rehabilitation of the telecommunications system. The Fourth Education Project (Credit No. 1965-UG) is intended to maintain the momentum of the Government's educational rehabilitation efforts and to ensure its sustainability. The First Health Project (Credit No. 1934-UG) is assisting in the rehabilitation of a selected number of hospitals and health centers, to strengthen preventative health programs, and to ensure the long-term sustainability and viability of the health care and child delivery systems. The Alleviation of Poverty and the Social Costs of Adjustment Project (PAPSCA, IDA Credit No. 2088-UG) addresses Uganda's most pressing short-term social development concerns, in particular for the most vulnerable population identified as the poorer groups among the rural population in various parts of the country and the urban poor. Others include the Second Water Supply Project (Credit No. 2124-UG) and the First Urban Project (Credit No. 2206-UG). The IDA assisted NRP would complement these projects with emphasis on the northern region through a multi-sector approach. 3.09 Progress in the implementation of the above projects has been reasonably good. Lessons learned which have been taken into consideration in the design of the project include: the need for specific arrangement and a conditionality on the timely availability of counterpart funds; and the need to define clearly institutional arrangements by the time of appraisal, including the job description of all new positions and the identification of likely candidates for the national posts. The experience of the Bolivia Emergency Social Fund Project a/ and similar projects, some of which have been assisted by NGO's or bilateral donors, was used in the design of the Community Action Program component of NRP. 3.10 The experience with the PAPSCA Project is probably the most relevant to NRP, which has shown that the implementation arrangements of such projects should be clearly defined, particularly the specification of the responsibilities for procurement and disbursement, ani that undue complexity should be avoided. As with the PAPSCA Project, the primary responsibility for implementation of the different sectoral components of NRP lies with the respective line ministries, where experienced project implementation units exist in most cases. The individual sector components are largely self-standing, and it is therefore unlikely that coordination problems would arise. 2/ The experience is evaluated in a report by Steen Jorgensen, et aL, Easing the Poor Through Economic Crisis and Adjustment, The Story of Bolivia's Emergency Social Fund, Latin America and the Canbbean Technical Department Regional Studies Program, Report No. 3, The World Bank, Washington, DC, May 1991.  .9 - 3.11 The implementation of the PAPSCA Project was substantially behind schedule during the first 18 months, mainly due to (i) delays in tle formation and staffing of the Project Monitoring and Coordinating Unit - to be addressed in NRP through a Condition of Effectiveness; (ii) slow progress in the signing of contracts between NGO's and the Government - to be addressed in NRP through dated covenants for the timely preparation of draft agreements with NGO's; (iii) lack of familiarity with World Bank procurement guidelines - to be addressed in NRP through the preparation of standard procurement documents and a project launch workshop; (iv) inadequate coordination between the various Goverunent agencies involved and NGO's in the preparation of procurement documentation - to be addressed in NRP through the creation of the CMEU in the Office of the Prime Minister; and (v) lack of counterpart funding from the Government for the first two years - to be addressed in NRP through assistance to the Government in the preparation of budget estimates of annual counterpart fund requirements, to be discussed in the annual Implementation Review Workshop. Since mid-1991, substantial progress has been made with implementing the PAPSCA Project, particularly concerning the performance of NGO's, procurement, and measurable progress in the districts.  - 10- IV. THE PROJECT A. Objectives 4.01 Project C)jectives. The main objective of the Northern Reconstruction Project (NRP) is the short and medium-term reconstruction of essential economic and social infrastructure in secure areas of the north4/ to restore the economic productivity of the region. This would begin the process of reducing the historical disparity between the north and the south of the country, thus increasing the potential for sustained security and for a reduction in defen-se expenditure (which is a major objective of the ERP). It would contribute to poverty alleviation and address the particular concerns of women. The project would also strengthen the capacity of local government agencies to plan and manage the reconstruction and rehabilitation program and to increase their capacity to maintain the physical and institutional infrastructure. Longer-term reconstruction and capacity building would be included in future sector investment projects, some of which are now under preparation. The proposed project would primarily address the most urgent needs fcr reconstruction while at the same time laying the foundation for longer-term economic and social development in the future. A successful beginning to northern reconstruction, with the participation of the Government of the Netherlands and DANIDA in the project together witih IDA, is expected to attract the participation of other donors in the financing of future projects in the north. B. Project Description 4.02 The NRP would include activities in eight sectorb which, even though not directly linked with one-another in the project, form an integral approach to economic and social development: increased production is expected to be achieved mainly through the provision of agricultural inputs; improvement in urban and rural markets, combined with the rehabilitation of feeder roads and parts of the national highway system, would facilitate the marketing of agricultural outputs; a beginning would be made in the restoration of the telecommunications service; and social welfare would be improved through programs for the provision of education and training and water supply and sanitation. The project would also include a Community Action Program (CAP), utilizing a social fund to finance micro- projects, identified and implemented through community initiative, for self-help activities such as improvements in education, health care, village access roads, and water supply. Two of the components would be wholly financed by other external assistance agencies as grants: the CAP by the Government of the Netherlands and feeder roads by DANIDA. A Coordinating, Monitoring and Evaluation Unit (CMEU) located in the Office of the Prime Minister (OPM) in Kampala (paras. 4.26, 6.02 and 6.03), would be responsible for coordination and reporting, including oversight over the implementation of CAP. The line ministries would be responsible for implementation of their specific sector components (paras. 6.05 to 6.07). Annex 3 provides a summary of project cost estimates by sector. A description of the sector components follows. I/ 4/ The project area consists primarily of seven districts: Apac, Gulu, Kitgum, Kumi, Lira, Pallisa, and Soroti. Some activities would also be carried out in the former West Nile Region, composed of Arua, Moyo, and Nebbi Districts. S/ Worling papers containing details of project description, cost estimates, and implementation armngements for each component have been deposited in the project file, listed in Annex 17.  - 11 - Agriculture ($6.2 miillion) 4.03 The agricultural component would essentially be a continuation of the on- going restructured Agriculture Development Project (ADP), jointly financed with the International Fund for Agricultural Development (IFAD 11 and Credit 1539-UG), which was restructured and extended for a period of two years up to March 1993, after which time the implementation of the agriculture component of the NRP would begin. While the ADP is carried out in the north and east of the country, the agricultural component of the NRP would concentrate on the northern region. The component would comprise: (a) agricultural inputs, consisting of farm implements, seeds, agro-chemicals, veterinary drugs and equipment, fishery inputs and equipment, tsetse control inputs and construction materials for stores, to be distributed through co-operative stores, women's groups (para 7.06), sub-county administrations and selected retailers; (b) an agricultural extension program developed in conjunction with adaptive research; (c) adaptive research on topics that respond to farmers' needs, test research results on farmers' fields, and create linkages between research and extension; (d) assistance to the livestock sector by developing a sustainable approach to restocking the project area with cattle and distribution of veterinary drugs and tsetse control inputs; (e) a rural credit fund, following arrangements established under the restructured ADP, which would provide $1.4 million credit for an additional 3,000 small holders and entrepreneurs, some of which would be channeled through cooperative societies; and (f) agricultural input management and coordination, and monit6ring and evaluation. Annex I contains the cost estimates and an implementation chart. 4.04 Imnlementation would be the responsibility of the existing Project Management Unit for the ADP, established in the Ministry of Agricu'lwre, Animal Industry, and Fisheries (MAAIF) for the administration of the ADP. The fisheries sub-component would be implemented by the Fisheries Department of the MAAIF. 4.05 It was agreed during negotiations that the Government would carry out the rural credit scheme, similarly to the provisions made in the restructured ADP, with the assistance of a financial intermediary satisfactory to IDA, and in accordance with satisfactory procedures, terms and conditions including (i) a loan limit of U Sh3,000,000 to any member of a cooperative society or group, (ii) an interest rate which would be positive in real terms as determined from time to time by the Bank of Uganda, (iii) repayment not exceeding 12 months for working capital loans and 24 months for development loans, and (iv) adequate collateral to ensure prompt payment of the loan principal and all charges accrued thereon. It was also agreed during negotiations that the remaining undisbursed funds from the ADP, Cr. 1539-UG, would be utilized first before withdrawAls would be made for the agriculture component of the NRP. Conditions of disbursemenl against this component would be that the Government would provide IDA with overdue audited accounts required under the Development Credit Agreements for the Agriculu ral Development Project (IDA Credit 1539- UG) and the Southwest Region Agriculture Rehabilitation Project (IDA Credit 1869-UG), both for FY91. Community Action PLrogram ($6.4 million) 4.06 The Community Actiorn Program (CAP) would utilize a social fund to finance small-scale community projects. It would be demand driven and would be a fast and flexible  - 12 - financial instrument operated and controlled on the district level to provide support for: (a) the implementation of micro-projects identified and implemented by local communities in the spheres of social infrastructure, training, and income and employment generation; and (b) institution building from local communities up to the district level to provide a way in which communities could identify their priorities and formulate them for joint action with the district authorities. CAP would be limited under this project to the three Districts of Arua, Nebbi and Moyo in the former West Nile Region. A CAP unit would be established in each district, adequately staffed and equipped. After an initial review and screening of the micro-project applications by the district CAP staff, micro-projects would be submitted to a District Development Sub-Committee for approval. Subsequently, the district CAP unit would sign an agreement with the applicant and with the district line ministry representative responsible for the sector into which the approved micro-project falls. To ensure proper implementation of the CAP program, communities as well as the CAP units would seek the technical support of line ministry officials, NGO's, and technical assistance personnel. The presence of district line ministry officials in the selection committee is expected to strengthen overall coordination with other projects and sectoral programs. Preferential treatment would be given to projects initiated by women's groups (para. 7.07). Annex 5 contains a description of the proposed component. 4.07 Implementation of this component would be the overall responsibility of the CMEU, which would guide the establishment of the procedures and the creation of the organizational arrangements, establish guidelines, and monitor the implementation by the districts (para. 6.02). The actual implementation would be the responsibility of the district administrations (para. 6.08) 4.08 Financin, of CAP. The Government of the Netherlands (GON) has agreed in principle to wholly finance this component on a grant basis to the Government of Uganda. The financing would include specialists to assist in the implementation of CAP, consisting of an advisor (3 years) to the CMEU and three district CAP Unit advisors (3 years each). It was agreed during negotiations that GOU will sign a grant agreement with the Government of the Netherlands for the Conununity Action Program by not later than February 28, 1993. Education and Training ($12.3 million) 4.09 This component would consist of the following: (a) Integrated Teacher Training ($3.2 million). Through this component the teaching skills of about 3,000 unqualified primary school teachers would be upgraded, using a combination of specially designed home study modules and short-term face-to-face tutoring during school holidays. (b) Technical Training ($1.0 million). A limited supply of basic equipment, tools and teaching/learning materials (i.e. text books and teaching manuals) would be provided to six technical schools and four technical institutes, including the rehabilitation of about six workshops and construction of four new workshops to improve the teaching environment (only materials to be provided, with construction done on a self-help basis by students and instructors of the institutions). (c) Primary Schools ($8.1 million). This consists of the rehabilitation and/or replacement of about 1,860 primary school classrooms (the equivalent of 266 seven-classroom primary schools (through self-help by the local communities), supply of furniture, and teaching/learning materials. To improve sanitary conditions, primary schools would be selected for the construction of pit latrines and, where suitable water sources exist, the rehabilitation of boreholes and/or spring protection. The equivalent of 166 primary  - 13 - schools under this component would utilize roofing sheets provided by GOU from existing stock in the project area (para. 5.06). Annex 6 contains detailed cost estimates and implementation schedules. 4.10 Implementation of the Integrated Teacher Training sub-component would be the responsibility of the Ministry of Education (MOES) through its Project Implementation Unit (PIU), which was established in 1983 to implement the IDA-financed bhird Education Project and all subsequent IDA-financed education projects. The PIU is also implementing the education component of PAPSCA. The PIU would be assisted by a consultant, proposed to be Action Aid, an international and locally registered NGO presently financing and administrating a similai program on a smaller scale in one district. Action Aid would recruit and provide administrative support to the specialists who wo)uld report to MOES. Procurement for goods and other services would be the responsibility of the MOES/PIU. Implementation of the Technical Training and the Primary School sub-components would be the responsibility of the PIU of MOES. MOLG would assist MOES in the implementation of the primary school sub-component. 4.11 ITe Government would furnish IDA with (a) the terms and conditions under which the consultants would provide services to MOES for the integrated teacher training sub- component, including recruitment of specialists, satisfactory to IDA, aad the list or urgently needed equipment and transport, and sign the agreement with an appropriate organization (proposed to be Action Aid) by October 31, 1992; and (b) the list of institutions selected to receive assistance for technical training and the rehabilitation or construction of primary schools, and with a list of goods to be procured, by December 31, 1992. Feeder Roads ($10.5 m) 4.12 The rural feeder roads component would comprise the following: (i) Rehabilitation of about 270km of priority feeder roads in the seven districts listed below, to be executed by contractors: (a) Apac-Loro Road (36km) Apac (b) Paboo-Ceri Road (43km) Gulu (c) Kitgum Matidi-Kalongo Road (44km) Kitgum (d) Ngora-Mukongoro Road (26 km) Kumi (e) Dokolo-Abako-Aloi Road (52km) Lira (f) Pallisa-Gogonyo Road (29km) Pallisa (g) Serere-Kasilo-Kaguara Road (40km) Soroti (ii) Operational support for the rehabilitation and/or improvement of some 600km of priority feeder roads over a period of two years by three mobile rehabilitation units set up under the project to undertake these works; (iii) Provision of essential additional workshops and road equipment and tools for the efficient operations of (ii) above; (iv) Consultant services for the management of the operations of three mobile rehabilitation units, and supervision of the contract works; and  - 14 - (v) !"upport to the districts for feeder road maintenance and spot improvement by provision of essential light equipment, tools, and training. 4.13 Iftlementatin would be the responsibility of the Engineering Department of the Ministry of Local Government (MOLG), with support fiorn the District Works Departments and RC's. MOLG is assisting the District Works Departments in setting up a maintenance system in their areas, which involves the employment of one "length person"6/ per kilometer of feeder road under the local RC. 4.14 DANIDA has agreed in principle to finance this component on a grant basis and fielded an identification mission in February 1992. DANIDA plans to appraise the component in August 1992 and to present it to its board in December 1992. 't was agreed during negotiations that GOU will sign a grant agreement with DANIDA for the feeder roads component by not later than March 31, 1993. Highways ($30.2 million) 4.15 This would include the rehabilitation of roads in the national highway network which are located in the north and which are not yet included in other projects. Because all these roads except one are expected to carry relatively light traffic in the near future, and because of the high cost of upgrading them to paved standards, they would only be rehabilitated and regravelled. The roads include: (a) rehabilitation, as needed, and regravelling of: (i) Atiak-Moyo (92 km), (ii) Gulu-Acholibur (81 km), (iii) Soroti-Lira (113 km), and (iv) Kumi-Serere-Soroti (78 km); and (b) rehabilitation, as needed, and resealing of the Kafu-Karuma section (93 km) of the Kampala-Gulu Road; and (c) consultant services for supervision of the construction of these roads. Annex 7 contains details of cost estimates and an implementation schedule. 4.16 Implementation would be the responsibility of the Ministry of Works, Transport and Communications (MOWTC), which has been responsible for the implementation of previous IDA-financed highway projects and is presently responsible for the implementation of the Fourth Highway Project. 4.17 It was agreed during negotiations that the Government would by not later than four months before the beginning of each fiscal year over the period FY94 to FY98 review with IDA the budgetary requirements and the proposed budgetary allocation for road maintenance. A condition of disbursement would be for the Government to provide IDA with the audited accounts required under thte Development Credit Agreement for the Fourth Highway Project (IDA Credit 1803-UG) for FY88, FY89, FY90, and FY91.