Uganda - Agricultural Sector Management Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-6762-UG MEMORANDUM AND RECOMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN THE AMOUNT EQUIVALENT TO SDR 12.1 MILLION TO THE REPUBLIC OF UGANDA FOR THE AGRICULTURAL SECTOR MANAGEMENT PROJECT March 6, 1996 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$1.00 = Ush 1000 (Nov. 1995) Ush 1.00 US$0.001 SDR 1.00 = US$1.48649 Weights and Measures Metric Systems Government Fiscal Year July I - June 30 Abbreviations and Acronyms ADIS - Agricultural Data and Information Systems AGSEC - Agricultural Secretariat APC - Agricultural Policy Committee APRF - Agricultural Policy Research Fund ASIP - Agricultural Sector Investment Program BOU - Bank of Uganda CSR - Civil Service Reform EFMP - Economic and Financial Management Project EPRC - Economic Policy Research Center GOU - Government of Uganda ICBP - Institutional Capacity Building Project MAAIF - Ministry of Agriculture, Animal Industry and Fisheries MFEP - Ministry of Finance and Economic Planning MNRL - Ministry of Natural Resources and Land MOLG - Ministry of Local Government MPS - Ministry of Public Service PEC - President's Economic Council RC - Resistance Council LC - Local Council  FOR OFFICIAL USE ONLY REPUBLIC OF UGANDA AGRICULTURAL SECTOR MANAGEMENT PROJECT Credit and Project Summary Borrower: Government of I Iganda Implementing Agency: Ministry of Agriculture, Animal Industry and Fisheries (MAAIF), Ministry of Local Government (MOLG), and Ministry of Finance and Economic Planning (MFEP). Beneficiaries: Sectoral ministries involved in policy formulation and agricultural data collation and analysis, Local Governments, Government and non-Governmental Organizations. Poverty: Project supports the key elements of GOU's primary objective of poverty reduction by improving capacity to address poverty reduction issues, and enhancing efficient provision of public services. Amount: SDR 12.1. Million, (US$17.9 million equivalent). Terms: Standard, with 40 years maturity. Commitment Fee: 0.5 percent on the undisbursed credit balances, beginning 60 days after signing, less any waiver. Financing Plan: See Schedule A Economic Rate of Return: No ERR calculated, as project benefits are not readily quantifiable. Nevertheless, the linkage between project and macroeconomic setting, alternative project designs, fiscal impact, cost recovery and cost effectiveness of the project are analyzed Staff Appraisal Report: 14889-Ug Map: IBRD 24881R Project Identification No.: 37582 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 wiLhout World Bank authorization.  I  Memorandum and Recommendation of the President of the International Development Association to the Executive Directors on the Proposed Credit to the Republic of Uganda for an Agriculture Sector Management Project 1. I submit for your approval the following memorandum and recommendation on a proposed development credit to the Republic of Uganda for SDR 12.1 million (US$17.9 million equivalent) on standard IDA terns with a maturity of 40 years to help finance a project for agriculture sector management capacity building. Background 2. After a prolonged armed conflict, Uganda embarked upon an Economic Recovery Program in 1987. This was supported by an Economic Recovery Credit from IDA and resources from other donors. The IDA and the IMF also supported a structural adjustment program, which was successfully implemented. In the agricultural sector, rehabilitation and reconstruction of the war-affected regions of the country was carried out with the support of IDA and other donors. The IDA further supported the Government's efforts to improve agricultural production and marketing arrangements, focusing on strategic commodities such as coffee and cotton. Agricultural output, especially of food crops, has steadily increased, but the rate of growth has been slowing down as the limits set by existing income and technology levels are being approached. To extend the technology and income frontier, the support has expanded to national programs in the areas of research, extension and livestock subsector development, but the pace of progress is impeded by institutional capacity constraints. 3. Some of these constraints are common to all sectors of the economy, and the Government of Uganda (GOU) has undertaken initiatives to remove them. It has implemented projects and programs directed toward removing administrative weaknesses and strengthening core agencies of government. It has embarked on major civil service reforms and decentralization programs. These programs have been supported by structural adjustment and sector adjustment credits 4. On the other hand, there are institutional capacity constraints that are sector-specific and that have to be dealt with separately. Major constraints identified as specific to agriculture are the inadequate sector policy formulation and implementation capacity; ineffective management/operational systems for provision of public services in the sector; weak internal systems and procedures; poor agricultural information collation, analyses and dissemination capacity; and inadequate human resources development. The proposed project, thus, supports three broad areas, that would address these weaknesses prevalent in both the central agencies and local governments, namely: development of analytical capacity, management systems reform, and improvement of the agricultural information systems.  2 Project Rationale 5. Development of Analytical Capability. Three major chlanges in the last few years make sector analytic capability strengthening urgent. First. recent revisions in the Ministry of Agriculture, Animal Industry and Fisheries' (MAAIF's) and other public agencies' roles and functions (under the Civil Service Reform and Local Governments Statute, 1993), gives them a mandate for policy analyses and monitoring of the implementation. The interim arrangement for policy analyses and formulation through the Agricultural Policy Committee and its Secretariat (APC/AGSEC) has changed. The APC's role will be limited to coordination and harmonization of policy reforms and programs, and to the review of seztor strategies. It would rely on line ministries and agencies for analytic studies, surveys, and agricultural information. The line ministries and agencies are also expected to take initiative and come up with proposals that would improve sector performance and improve rural poverty. The full participation of the private sector in this process is also envisaged. Therefore, adequate capacity should be developed within MAAIF, other public agencies and the private sector to discharge these tasks effectively. On the other hand, district agricultural and rural development planning and implementation is now the responsibility of elected Resistance Councils and through them, local communities. This has created a need for district-level capacity to provide direction to agricultural and rural development. A process that would progressively build up a broad data base on district and community resources (human, physical). The linkages between the Districts and the Central Ministries, which are at present weak, need to be strengthened to fully utilize existing capacities at all levels. 6. Second, as Government involvement in production and marketing is eliminated, the role of MAAIF will be to address national level sectoral and intersectoral issues and to support and guide local government initiatives. Provision of information, support of policy formulation, and the provision of the regulatory framework will, inter alia, be the focus of the Ministry's activities. The basic thrust of these operations will have to be directed at supporting private sector involvement in agricultural development and improving public sector efficiency. 7. Third, GOU is interested in moving towards long-term strategic agricultural sector investment programs, and seeking donor assistance to finance these programs, which would extend over a number of years. The Government of Uganda has sought IDA's assistance for building the capacity of sector ministries and local governments to prepare and manage such a program. This proposed intervention is, therefore, a forerunner to an overall sector investment programming approach, and an instrument for strengthening the remaining core functions of the line ministries and other public agencies relevant to the agricultural sector. 8. Management Systems Reform. The Government of Uganda has embarked on a far reaching economic reform program, of which civil service reform (CSR) is an integral part. The introduction of a result-oriented management system into the civil service is part of the CSR, and the agriculture sector would be one of the few sectors where pioneering work in this regard would be carried out. In view of the size and importance of the sector, a high level of efficiency in resource utilization and in the delivery of services would be vital for growth of the economy. The focus on strengthening internal systems is necessitated by the large share of public recurrent  3 and capital budget and donor funded projects managed by the Ministry. Its accounts should be properly recorded and maintained; procurement has to satisfy government and donor procedures, and audit reports have to be submitted on time. However, institutional capacity to carry out these functions is limited and fragmented, resulting in considerable project implementation delays and mismanagement of financial resources. Because of the size of resources managed in the sector, an effort to bring about improvement in this regard, is needed within the Ministry. Another area of focus with regard to institutional strengthening is, staff training. There are significant weaknesses at all levels of the public sector in critical technical and managerial skills. Therefore, there is a need to develop a comprehensive human resources development program to address the current and future technical and managerial requirements of the agricultural sector. 9. Improving Agricultural Information. Improving the underlying agricultural statistical data base is critical for analytical work, policy formulation, private sector participation and monitoring sector performance. The agricultural sample census that was conducted in 1990/91 has not been released on grounds of an inappropriate sample frame, smallness of sample size and limited area coverage. The only valid census data available is the one conducted in 1963/64. Given the outdated information and the history of the country, this information is of little relevance today. Data such as, total production, area cultivated and yields are estimated today by working backwards from the household consumption data, a technique which has a lot of drawbacks and weaknesses. Furthermore, coordination of the functions of the various government institutions involved in agricultural statistics, namely, MAAIF, the Statistics Department of MFEP, and the Ministry of Industry and Trade (MIT), has to be strengthened. Their respective areas of responsibility are inadequately defined, and their agricultural statistics sections suffer from insufficient capacity. Project Objectives 10. The three broad objectives of ASMP are: (a) to enhance analytical capacity for policy formulation in the agricultural sector in general, and within MAAIF, in particular; (b) to improve the responsiveness, efficiency and effectiveness of the MAAIF in carrying out its redefined role in agricultural sector management, through reforming management systems and improving internal procedures; and (c) to strengthen agricultural information systems. Project Description 11. The objectives of the project would be pursued through three main components: (a) policy formulation and strategic planning; (b) management systems reform and training; and (c) agricultural data and information systems strengthening. These components are briefly described below. Policy Formulation and Strategic Planning (US$8.3 million.) 12. Support for this component would focus on the following four areas. The first would aim to strengthen analytical capacity to formulate agricultural policy and define strategic priorities within the agricultural sector in general, and the Agricultural Planning Department (APD) of  4 MAAIF, in particular. It would focus on building analytical capacity through providing selective technical assistance in policy and strategy formulation and analysis, financial analysis and business management, and production economics and farm management. Staff skills would also be strengthened through a limited number of advanced education fellowships in key capacity gap areas, and short courses in specialized skills and systems. Capacity building would be further facilitated through a twinning arrangement with the Makerere-based Economic Policy Research Center (EPRC), an autonomous institution engaged in policy related research. 13. Second, an Agricultural Policy Research Fund will be established to foster policy related analytical skills building and to contribute to deepening of understanding of policy related issues among a wide spectrum of agricultural sector stakeholders. The fund would be administered through the EPRC under an agreement which would, among other things, specify the procedures and the criteria to be used for approving grants. 14. The third area of focus would be to replace the discrete project approach with program development as the vehicle for promoting investment and growth in agriculture. A medium-term agriculture sector investment program (ASIP) would be prepared under the project. The ASIP preparation would be carried out in two phases. The first phase would define sector priorities and strategies and the roles of the various stakeholders in implementing these strategies. The second phase would identify and prepare a number of high priority subsector investment programs, according to the strategies articulated and approved in the first phase. 15. The fourth area of focus would aim to create district and sub-district level capacity to plan and implement agricultural development in accordance with community defined priorities. Districts would be assisted to develop a planning and implementation capacity through training of individuals and groups; and supporting plan formulation, that would be linked to the agricultural sector strategy and the ASIP. Management Systems Reform and Training (US$5.9 million) 16. This component would aim to enhance the performance of the key public institutions in the agriculture sector, by (a) improving internal systems; (b) reforming the management system, and (c) supporting demand-driven training. Managing the transition to a new role calls for reforming the internal administrative and management systems, including accounting and financial management, procurement, maintenance and asset management, internal audits, personnel management, and information management. The improvement of the respective systems would be designed through a series of studies that would, inter alia, critically examine the new structures and the information needs for various users, and design systems to meet these needs. In each case, the studies would develop a time bound implementation plan for the recommended systems, and would be designed to be compatible with the principles and needs of result-oriented management and sector investment programs. 17. The initial preparation for adoption of result-oriented management in a number of priority Ministries, including MAAIF, would be done under the Institutional Capacity Building Project (ICBP). Under ASMP, provision would be made for detailed preparation for, and transition to, the system within MAAIF and the districts. This is intended to maximize the effect of CSR and  5 facilitate a fundamental change in the institutional work culture, both at the center and districts. Furthermore, the adoption of this system of management would facilitate further rationalization of roles and functions within MAAIF. The clear definition of the sector strategy under ASIP and the role of MAAIF and other agencies under the CSR would allow senior management to define the priority activities, including what MAAIF should or should not be doing, and relationships between the Center and the districts. Under ROM, the Ministry and districts would focus on achieving assessable results and tying resource allocation to the achievement of these outputs. 18. The project would also introduce a demand-driven training scheme. Initially, a needs assessment study would be carried out to identifv the gaps in technical, implementation and management skills of senior and middle grade staff of MAAIF, other institutions participating in the implementation of ASMP and the district agricultural officials. The study would also develop a set of training modules that are appropriate to fill the skills gaps identified. 19. A key training activity for improving analytical, monitoring and implementation capacity would be a wider use of an in-service and on-the-job training schemes. The objective of these schemes would be to provide work-related, and comparatively low-cost training, and to act as a change agent for promoting improved work attitudes and discipline. The training under the scheme would focus on national and institutional needs, encourage group rather than individual training, bring local training institutions and their instructors in contact with current analytical needs and into an actual institutional context, and leave behind a capacity for follow-up after project completion. Agricultural Data and Information Systems Strengthening (US$3.6 million) 20. IDA's support for this component would strengthen and expand the country's agricultural, livestock and fisheries data base. The four main activities that would be supported under the component are: (a) the establishing of a Primary Agricultural Data Base at the national, district and community level; (b) the design and implementation of the Annual Agriculture Sample Surveys; (c) the preparation of a National Sample Census of Agriculture and Livestock; and (d) the design and implementation of the Integrated Fisheries Surveys. To support this component the project would finance training, short-term technical assistance, survey design, data enumeration, data processing and information dissemination. Project Cost and Financing 21. The preliminary project costs have been estimated at roughly US$19.9 million including physical and price contingencies. Base cost estimates are US$17.8 million. The foreign exchange component of the project is estimated at 54 percent of the total cost. Price contingencies are estimated at US$1.2 million, 7 percent of the cost, and is based on domestic inflation of 5 percent and foreign inflation (Value Index of Manufactured Exports) of 3.5 percent. The proposed IDA credit of US$17.9 million equivalent will finance 90 percent of the project costs net of taxes and duties over a five year period. The local contribution made by government would be for an estimated amount of US$2.0 million, or 10 percent of project cost.  6 Project Implementation 22. Separate project implementation units would not be created. The MAAIF, through the Agricultural Planning Department (APD), would be the main executing agency. Local governments will directly implement components designated for districts, and other agencies would use their existing structures for the implementation of their respective components. The GOU would set up an inter-ministerial Project Steering Committee (PSC) to guide overall implementation, including policy and resource allocation, monitoring implementation progress and resolving any major implementation issues. The PSC would be advised by a Project Management Committee (PMC), chaired by the Head, APD, and whose membership would include all officials responsible for implementing the various components and subcomponents of the project. Lessons from Previous Bank/IDA Involvement 23. IDA has financed several agricultural projects in Uganda. In several instances, project performance has been adversely affected by inadequate counterpart funding, inadequate salaries and incentives for staff, weak management and financial systems. The issue of counterpart funding is being resolved through the prioritization of public expenditures as core and non-core, and the salary and incentive issues through the civil service reform process. Support to line ministries to improve the capacity for policy analysis and formulation has been limited to date and, consequently, policy analysis and formulation remained weak. Support is now being directed to ministries and agencies who have the mandate and the appropriate institutional set-up to ensure sustainability. The IDA-supported Technical Assistance Projects in Uganda, Agricultural Sector Management Project I and II in Kenya, Agricultural Sector Management Project in Tanzania and other technical assistance interventions in the region have also provided useful lessons for the design of this project. The review of these and several other institutional development projects by the Bank's Operation and Evaluation Department shows that the "process" rather than the blueprint approach is the key for the success of most technical assistance projects. This approach is better equipped to: cope with uncertainties of the environment it is applied and enhance flexibility; nurture ownership and build commitment; and emphasize learning and capacity building. Based on these lessons of experience, the process approach is applied in the design of the proposed project with the aim to adapt objectives to changing circumstances. Other experiences incorporated in the project design include fostering government commitment and ownership, harnessing local/domestic capacities, and striving for improved project quality at entry into the portfolio. Country Assistance Strategy and Rationale for IDA Involvement 24. The project is consistent with the Bank's Country and Sector strategies. It is also consistent with the Country Assistance Strategy (CAS), discussed by the Board on June 1, 1995. The focus of the Bank's CAS for Uganda is to reduce poverty. One of the key elements of this strategy is to enhance the provision of public services, through appropriate measures such as capacity building, with emphasis on ensuring that the services reach the poor. The other is,  7 maximizing labor-intensive economic growth. Support under the proposed project is aimed at institutional capacity building in the agricultural sector, to address poverty reduction and growth issues through strengthening the public and private sector. Growth of the economy, particularly, growth in the agricultural sector, and the reduction of rural poverty would largely depend on the soundness of policies, strategies and programs that the Government would adapt in the medium and long-run. It would also depend on the capacity to carry out the policies and strategies. IDA's support to improve public and private sector capability to formulate strategic polices and programs would make a significant contribution to achieving the Government's objectives of growth and poverty reduction. IDA's involvement in the proposed project is also essential to address in a systematic manner both the institutional constraints (weak personnel, finance, asset management, poor information systems, weak implementation capacity, etc.) that on-going projects face, as well as to lay the foundation for future agricultural operations which would require a sound policy and regulatory framework in order to be implemented effectively. ASMP has strong linkages with all agricultural sector and institution capacity building operations of the Bank. It would improve overall agricultural sector policy formulation and implementation capacity, strengthen the management and administration of projects, assist the Government to move towards sector investment programming, and strengthen linkages with other sector. Agreed Actions 25. Prior to Negotiations, the Government issued a letter detailing its sector institutional development strategies, the role of MAAIF in the agricultural sector and MAAIF's mission statement. IDA also received a draft of the agreement between MAAIF and the Economic Policy Research Center (EPRC) outlining the administration of the APRF, a draft of the agreement between MAAIF and EPRC outlining the modalities of the twinning arrangement for technical assistance, and a draft Memorandum of Understanding between MAAIF and the MFEP, Department of Statistics for implementing the ADIS component. A draft of the Project Implementation Plan, including first year work plan and the requisite GOU's budgetary allocations have been made available for IDA's review and comment. 26. At Negotiations, the government's assurances were obtained regarding the following: (a) APD would finalize an annual work agreement, at the beginning of each fiscal year, with each of the three MAAIF Directorates and other relevant agencies, and the agreement would, inter alia, specify the principal assignments to be undertaken by APD and the related completion schedule; (b) ASIP Manager whose qualifications, experience and TORs would be satisfactory to GOU and to IDA would be appointed no later than thirty days after credit effectiveness, and the preparation, organization, management and timing of the ASIP would be as detailed in para. 4.7 and Annex 5 of the SAR; (c) the preparation of the guidelines for District Agricultural Development Plans would be completed no later than thirty days after project effectiveness, and the preparation of the District Agricultural Plans would be completed by the second year of the project; (d) the Agricultural Data and Statistics Sustainability Study would be completed by the end of project year two, under TORs and by consultants satisfactory to GOU and to IDA; (e) GOU and IDA would jointly conduct a mid-term review for the project within twenty four months of project effectiveness but not later than December 30, 1998; (f) MAAIF would recruit the financial, procurement, audit, and training officers no later than thirty days after project  8 effectiveness; (g) agreements between MAAIF and EPRC concerning the administration of APRF and the twinning arrangement, and between MAAIF and Statistics Department of the MFEP would be finalized no later than thirty days after project effectiveness; and (h) GOU would set up the Project Steering Committee and the Project Management Committee no later than thirty days after project effectiveness. 27. The GOU agreed on the following conditions of credit effectiveness: (a) completion of the baseline survey that would provide a basis for monitoring project impact; (b) filling of APD's vacant posts and new positions with adequately qualified staff; (c) taking steps, satisfactory to IDA, ensuring that all Districts will carry out the PADB survey; and (d) receipt by IDA of a revised Project Implementation Manual. 28. The GOU has further agreed on the following conditions of disbursement: (a) Training Fund - MAAIF would furnish a training needs assessment study satisfactory to IDA, and would appoint a training committee; and (b) Agricultural Policy Research Fund - EPRC would submit a model Grant Agreement, satisfactory to IDA, that would be entered with individuals/institutions that will carry our policy research. Environmental Impact 29. This capacity building project focusing on institutional and policy issues, has no direct impact on the environment. Therefore it is a "C" category project. However, by integrating environmental concerns in the process of policy and strategy formulation and implementation, as well as the capacity building in the institutions, the project could contribute to the use of Uganda's natural resources in an environmentally sustainable manner. Program Objective Categories 30. The project would foster public sector efficiency, and improved provision of services to the private sector by strengthening the policy analyses and formulation capacity, improving internal systems and procedures, and strengthening the agricultural information base. This in turn would improve the policy environment under which the private sector would participate. The project would also support human resources development in the agriculture sector. In general, the project supports key elements of the Government's primary objective of poverty reduction. Participatory Approaches 31. Project preparation followed a highly participatory process to ensure full Government ownership of ASMP. An inter-ministerial Project Steering Committee provided overall guidance for project preparation. Working groups and sub-groups, with members selected from MAAIF and other Government agencies, undertook the preparation of the project. RC members and district officials participated in the various forums organized by MAAIF to identify and discuss project concept. Local Governmnents, through a participatory rapid rural appraisal would continue to participate in the development of guidelines and the actual preparation of the district  9 plans and collection of agricultural statistics. The donor community in Uganda was briefed about the project, and their comments and participation solicited at various stages of project processing. Project Benefits 32. The project will support key elements of the Government reform agenda in the areas of civil service reform, decentralization, and agricultural reform and development. It also supports the key elements of GOU's primary objective of poverty reduction by improving capacity to address growth and poverty issues with proficiency, thereby, enhancing the provision of public services, and maximizing labor-intensive economic growth within the sector. The project would also assist the Government in setting the general framework for the strategic direction of the agencies involved in agriculture, and the strategic areas where the Government would like to see tangible results. Moreover, the project would ensure the strengthening of the capacity to provide a high standard of policy advice to the Government, improve the economic analysis of alternative policies and strategies, and forge partnerships with stakeholders through client focus and collaborative approach. 33. The following design decisions were made after careful examination of the alternatives. First, policy analytic capability would be shifted from where it was concentrated in the AGSEC of the APC to MAAIF, economic policy research centers such as EPRC, local governments and the private sector. This design strategy would ensure greater participation, take policy analysis closer to those who implement the policy and would ensure that the issues addressed are a priority at the time. Second, the administration and the supervision of research funds and research would be shifted to EPRC instead of MAAIF or the Agricultural Secretariat that in the past administered resources earmarked for similar purposes. This form of administration, in addition to being cost-effective, would enable the institution to attract the best people for the job, allow unbiased focus on key research areas, and would help avoid institutional rivalry and friction. Third, district agricultural plans, and statistical data collection would largely be the responsibility of local governments, thus, further strengthening district capacity and devolving decision making and implementation to the districts. Fourth, the design of the training program emphasizes on-the-job training, and would be work-related, district-oriented and internally focused. 34. Project impact on Government revenue is hard to estimate, and is complicated by the fact that it would stem from increased sector economic activities due to changes introduced by the project in the policy, regulatory and incentive framework. For instance, policy advice given to the Government, based on project-supported research and studies could bring about a positive change in the domestic business environment, and could result in an increase in the income of farmers and enterprises, as well as in Government revenue. Similarly, amendments of regulatory, infrastructural and institutional arrangements that are no longer cost-beneficial, and prejudicial to the performance of the agriculture sector could have major financial impact on the Government and sector stakeholders. It is, therefore, difficult to estimate the fiscal impact when  10 the kinds of policy issues to be dealt with and the changes to be introduced are not readily identifiable. 35. The savings to public expenditure will also be difficult to quantify. The implementation of the internal system improvement component alone would significantly reduce losses and expenditures arising from financial and asset mismanagement and could release funds for appropriate purposes. The rationalization of functions of MAAIF and streamlining of procedures would also result in cost savings. 36. Another project benefit would be the introduction and implementation of cost-recovery in MAAIF. The proposed result-oriented-management system and the improved financial management system would create the conditions necessary for putting in place a successful cost recovery scheme. The MAAIF would open up the traditionally state-provided services for competition. 37. Performance indicators that are considered relevant and practical for this project are developed and attached as Schedule B. The objective is to link project goals with outcomes. The indicators would allow a reasonable estimate of the attainment of the benefits anticipated from the project at different stages of implementation, and the sustainability of the operation. Sustainability 38. The project would be sustainable because the design is underpinned by a careful definition of the role of Government in agriculture and assignment of clear functions and responsibilities to the major stakeholders in the sector. The project further identified the critical support that stakeholders would need to effectively participate in sector development. It is also sustainable because it is consistent with GOU's policy of decentralization, civil service reform and economic liberalization. MAAIF, local governments and participating government agencies would be strengthened, and their capacity to provide essential services improved. The continuation of the activities initiated under the project should not be dependent on external financing, since both incremental recurrent and development expenditures could be met, partially, from internally generated earnings. Government agencies would gradually move into the provision of services that are demand-driven, and private sector participation would be encouraged. This would enable public agenci-s to be self-supporting, and to finance their operations on a sustainable basis, with little or no Government support. Project Risks 39. The project risks are largely associated with the Government reform programs that are presently under implementation. The assumption is that GOU's reform agenda would remain unchanged, and implementation progress would not be unduly delayed. The civil service reform program, particularly those aspects that deal with the introd'z_.- of a result-oriented management systems, improvement of civil service salaries 4 incentives, restructuring and defining role and functions of government agencies are critical. Implementation of the decentralization program is also necessary for effective implementation of the project.  I1 40. The first risk that the project would face relates to the ability of the government to attract competent Ugandans to participate in the implementation of the project. In the past, MAAIF could not attract qualified nor adequate numbers of staff due to inability to pay adequate compensation. The Government is addressing the problem by moving towards a minimum living wage, but it would take time before it reaches a level that could attract and retain professionals in the Ministry. Until the issue of staff emolument and incentive packages are resolved, the proposed project would assist the Ministry in attracting and retaining good staff through non- pecuniary incentives, such as the possibility of participating in challenging assignments, availability of developmental training opportunities, and operating in a much improved work environment. The project would also aim for limited short-term technical assistance in some critical areas where local expertise is lacking. 41. The second risk is the lack of commitment by the Government to support and strengthen line ministries and agencies to carry out their new mandates without being undermined by parallel institutions. One such institution in the past was the APC/AGSEC. Although it played a useful role, it has been mentioned as a cause for the weaknesses of line ministries and agencies in strategic planning and policy formulation. Since remedying this problem was a condition for negotiations, the GOU has redefined the future role and functions of the APC/AGSEC with the view to avoid duplication and to support capacity building in the line ministries and agencies. Through project supervision, the project would monitor the emergence of new arrangements that could undermine the objectives and operations of the project. Recommendation 42. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. James D. Wolfensohn President Washington DC March 6, 1996  12 Schedule A Project Cost (US$ '000) Components Local Foreign Total Foreign (%) A. Policy Formulation and Strategic Planning 4,118.6 4,173.1 8,291.7 50 B. Management Systems Reform and Training 2,283.1 3,590.8 5,873.8 61 C. Agricultural Data and Information System 1,738.8 1,876.5 3,615.3 52 Total Baseline Costs 8,140.4 9,640.4 17,780.8 54 Physical Contingencies 407.3 483.4 890.6 54 Price Contingencies 571.8 613.8 1,185.6 52 TOTAL COSTS 9,119.5 10,737.5 19,857.1 54 Note: Figures might not add due to rounding. Proposed Financing Plan (US$ '000) Source Local Foreign Taxes and Duties Total IDA 7,160.3 10,737.5 --- 17,897.8 GOU 1,185.3 -- 774.0 1,959.3 Total 8,345.6 10,737.5 774.0 19,857.1  13 Schedule B Page 1 of 4 Project Benefits and Cost The benefits of the project can not strictly be quantified. It would support key elements of the Government reform agenda in the areas of civil service reform, decentralization, and agricultural reform and development. It would have, inter alia, the following specific benefits: * support analytic skill building in MAAIF, and improve the efficiency and effectiveness of public services and regulatory functions in the sector; * prepare and implement an Agricultural Sector Investment Program; * assist in meeting the changing skill requirements of the sector through a comprehensive training scheme; * ensure availability of reliable and timely agricultural statistical data, and create capacity to collate, analyze and disseminate statistical data; * introduce a result-oriented management system, and improve internal systems and procedures that meet government and donor requirements; * introduce cost recovery mechanisms into the operations of the ministry; Total project cost for five years is US$19.9 million, of which: * total investment cost is US$15.4 million; * total incremental recurrent cost is US $4.5 million, 23 percent of the total cost; - IDA would finance about 69 percent of the incremental recurrent cost on a declining basis from 80% in Year 1 to 45% in Year 5. * the average annual recurrent budget implication during the project life is about US$0.9 million, and about US$0.4 million is the share of Government; * the recurrent cost requirement (after completion of implementation) for the continuation of some of the activities initiated during the project is estimated at about US $0.4 million per annum. The Government would have to continue to make capital expenditures for the training of new staff, data collection and surveys, studies, and replacement of facilities acquired through the project.  14 Schedule B Page 2 of 4 Financial Summary (US$ million) 1996 1997 1998 1999 2000 2001 2002 2003 Implementation Period Operational Period Project Cost Investment Cost 4.7 4.2 2.5 1.7 1.8 - - - Recurrent Cost 1.2 0.8 0.8 0.7 0.7 0.4 0.4 0.4 Total 5.9 5.0 3.3 2.5 2.5 0.4 0.4 0.4 Percentages Percentages Financing Sources IDA 92 93 87 83 77 - - - GOU 8 7 13 17 23 100 100 100 Total 100 100 100 100 100 100 100 100  UGANDA AGRICULTURAL SECTOR MANAGEMENT PROJECT OUTPUT INDICATORS Output Description 1996/97 1997/98 1998/99 1999/00 2000/01 1. Analytic Capacity Building 1.1 MAAIF APD Strengthening professional staff assignment 20 30 40 40 40 studies 5 15 30 30 30 socio-economic surveys 1 2 4 4 4 service contract signed & delivered 3 6 10 15 15 guidelines, manuals, procedures 2 5 7 7 5 1.2 Policy Research Fund contestable window output (policy paper) 3 4 4 4 2 capacity building window (policy paper) 5 10 15 15 15 1.3 Sector Investment Program strategy paper--discussion stakeholders complete strategy paper--GOU approval complete SIP--discussion with stakeholders start complete SIP--discussion with donors start complete SIP--GOU approval complete 1.4 District Planning guidelines preparations (districts) 39 district agricultural plans (districts) 19 20 2. Mgt Systens Reform & Strengthening 2.1 Internal Systems Improvement studies--financial, procurement, asset management, computerization complete implementation--financial, procurement, asset management, computerization start complete manuals--finance, procurement, audit, asset 5 management, personnel management doc. center--collection & catalogue preparation continue continue continue continue doc. center--facility procurement preparation complete e u, 2.2 Management systems reform e n rationalization of MAAIF/other agencies start continue continue (D D training in ROM--MAAIF staff 20 120 160 w g training in ROM--Districts staff 250 400 100 80 o X defining mission of work units, of total half half w_____  Output Description 1996/97 1997/98 1998/99 1999/00 2000/01 2.3 Training' needs assessment complete training--MA external--center 5 5 5 - training--MA internal--center 4 5 5 1 training--MA intemal--district 20 20 20 18 study tour--center 2 1 1 1 study tour--district 3 5 5 4 in-service training--center staff 15 120 160 170 80 in-service training--district 60 520 710 580 180 on-the job training--center staff 40 140 170 200 100 on-the-job training--district 140 280 240 140 other short courses--district 20 30 30 20 20 other short courses--center staff 2 5 5 5 5 3. Agricultural Data & Information System 3.1 Primary Agricultural Data workshop and orientation (participants) 40,000 field enumeration complete data entry verification complete data processing and tabulation complete report complete 3.2 Annual Agricultural Sample Survey field enumeration complete complete complete complete data entry and verification complete complete complete complete data processing and tabulation complete complete complete complete report complete complete complete complete 3.3 Preparation for National Sample Census census design complete questionnaire design complete specification for data editing complete 3.4 Integrated Fisheries Survey catch assessment (monthly summary report) 12 12 12 12 12 fish factor enumeration (report) I 1 ow > soci-economic survey (report) 1 I aquaculture survey (report) 1 1D 3.5 Agr. Statistical Abstract 1 1 1 l 1 4