Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 54187-UG

INTERNATIONAL DEVELOPMENT ASSOCIATION

INTERNATIONAL FINANCE CORPORATION

AND

MULTILATERAL INVESTMENT GUARANTEE AGENCY

COUNTRY ASSISTANCE STRATEGY

FOR

THE REPUBLIC OF UGANDA

FOR THE PERIOD FY 2011-2015

April 27, 2010 International Development Association Eastern Africa Country Cluster 1, AFCE1 Africa Region

International Finance Corporation Sub-Saharan Africa Department Multilateral Investment Guarantee Agency 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.

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Last Country Assistance Strategy: December 14, 2005 (Report No. 34310-UG)

CURRENCY EQUIVALENTS (as of April 22, 2010)

Currency Unit = Uganda Shilling US$1.00 = 2,068

ABBREVIATIONS AND ACRONYMS

AAA Analytical and Advisory Activities AF Additional Financing AfDB African Development Bank AIDS Acquired Immune Deficiency

Syndrome APL Adaptable Program Loan ATAAS Agriculture Technology and

Agribusiness Advisory Services Project CAADP Comprehensive African Agriculture

Development Plan CAE Country Assistance Evaluation CAS Country Assistance Strategy CEM Country Economic Memorandum COMESA Common Market for Eastern and

Southern Africa CPIA Country Policy and Institutional

Assessment CPPR Country Portfolio Performance Review CRW Crisis Response Window DAC Development Assistance Committee DANIDA Danish International Development

Agency DFID Department for International

Development (United Kingdom) DP Development Partner DPG Development Partners’ Group DPL Development Policy Loan DPO Development Policy Operation DRC Democratic Republic of Congo DSA Debt Sustainability Analysis DSIP Development Strategy and Investment

Plan DTM Data Tracking Mechanism EAAPP East Africa Agricultural Productivity

Project EAC East African Community EC European Community EITI Extractive Industries Transparency

Initiative EPDF Education Program Development Fund ESW Economic and Sector Work EU European Union FM Financial Management FSAP Financial Sector Assessment Program FTI Fast Track Initiative FY Fiscal Year

GAAP Governance and Anticorruption Action Plan

GAC Governance and Anti-Corruption GAVI Global Alliance for Vaccines and

Immunizations GDP Gross Domestic Product GEF Global Environmental Facility GFDRR Global Facility for Disaster Reduction

and Recovery GPF Governance Partnership Facility GPOBA Global Partnership for Output-Based

Aid GTZ German Agency for Technical

Cooperation HIPC Heavily Indebted Poor Countries

(Initiative) HIV Human Immunodeficiency Virus IBRD International Bank for Reconstruction

and Development ICR Implementation Completion Report ICT Information and Communications

Technology IDA International Development Association IDF Institutional Development Fund IDP Internally Displaced Person IEG Independent Evaluation Group IFAD International Fund for Agricultural

Development IFC International Finance Corporation IMF International Monetary Fund IP Implementation Progress IPCC Intergovernmental Panel on Climate

Change JAF Joint Assessment Framework JBSF Joint Budget Support Framework JICA Japan International Cooperation Agency JSAN Joint Staff Advisory Note KfW Kreditanstalt für Wiederaufbau

(Reconstruction Credit Institute) KIDDP Karamoja Integrated Disarmament and

Development Plan KIIDP Kampala Institutional and Infrastructure

Development Project LDPG Local Development Partners’ Group LRA Lord’s Resistance Army M&E Monitoring and Evaluation

MAAIF Ministry of Agriculture, Animal Industry and Fisheries

MDGs Millennium Development Goals MDRI Multilateral Debt Relief Initiative MDTF Multi-donor Trust Fund MIGA Multilateral Investment Guarantee

Agency MoFPED Ministry of Finance, Planning and

Economic Development NAADS National Agricultural Advisory Services

Project NDP National Development Plan NGO Non-Governmental Organization NORAD Norwegian Agency for Development

Cooperation NRM National Resistance Movement NWSC National Water and Sewerage

Corporation OBA Output-Based Aid ODA Official Development Assistance OECD Organization for Economic Cooperation

and Development PDO Project Development Objective PEAP Poverty Eradication Action Plan PEFA Public Expenditure and Financial

Accountability PEPFAR President’s Emergency Program for

AIDS Relief PER Public Expenditure Review PFA Prosperity for All program PFM Public Financial Management PMI President’s Malaria Initiative PPIAF Public-Private Infrastructure Advisory

Facility

PPP Public-Private Partnership PRG Partial Risk Guarantee (IDA) PRGF Poverty Reduction and Growth Facility PRSC Poverty Reduction Strategy Credit PRSP Poverty Reduction Strategy Paper PSA Production Sharing Agreement PSIA Poverty and Social Impact Analysis RVR Rift Valley Railways SADC South African Development

Community SDR Special Drawing Right SIDA Swedish International Development

Cooperation Agency SIP Small Investor Program SME Small- and Medium-scale Enterprise SSA Sub-Saharan Africa SWAp Sector-Wide Approach SWG Sector Working Group TA Technical Assistance TSDP Transport Sector Development Project UBOS Uganda Bureau of Statistics UJAS Uganda Joint Assistance Strategy UK United Kingdom UN United Nations UNICEF United Nations Children’s Fund UPE Universal Primary Education UPPET Universal Post-Primary Education and

Training US United States USAID United States Agency for International

Development WBI World Bank Institute WSP Water and Sanitation Program

IDA IFC MIGA Vice President Obiageli Katryn Ezekwesili Thierry Tanoh Izumi Kobayashi Director John Murray McIntire Jean Philippe Prosper Frank J. Lysy Task Team Leader Kundhavi Kadiresan /

Kathryn Funk Dan Kasirye Thomas A. Vis

COUNTRY ASSISTANCE STRATEGY FOR THE REPUBLIC OF UGANDA

Table of Contents

Executive Summary ................................................................................................................... i I. Country Context ..................................................................................................................... 1 

A. Political and Governance Context .................................................................................... 1 B. Economic Developments and Prospects ........................................................................... 2 

Poverty, Human Development, and Demography ............................................................. 4 Medium-Term Prospects ................................................................................................... 6 Debt Sustainability ........................................................................................................... 10 

C. Key Development Challenges ......................................................................................... 10 II. Government Program and Development Partner Support .................................................. 12 

A. Uganda’s Poverty Reduction Strategy ............................................................................ 12 NDP Objectives 1 and 2: Income, Equity, and Employment .......................................... 13 NDP Objective 4: Economic Infrastructure ..................................................................... 13 NDP Objectives 3 and 5: Human Capital Development and Access to Social Services . 14 NDP Objective 6: Science, Technology, Innovation, and ICT ........................................ 14 NDP Objective 7: Good Governance, Defense, and Security ......................................... 14 NDP Objective 8: Promote Sustainable Population, Environment, Natural Resources .. 15 

B. Development Partner Support ......................................................................................... 15 III. Implementation of the Uganda Joint Assistance Strategy and Lessons Learned ............... 17 

IDA, Trust Funds, and Analytical and Advisory Activities ............................................ 18 The International Finance Corporation ............................................................................ 19 Multilateral Investment Guarantee Agency ..................................................................... 20 Lessons Learned .............................................................................................................. 20 

IV. The World Bank Group Assistance Strategy ..................................................................... 21 A. The Framework for World Bank Engagement in Uganda .............................................. 21 B. IDA Resources ................................................................................................................ 23 C. CAS Outcomes and the Proposed Program of Support .................................................. 23 

CAS Instruments .............................................................................................................. 23 D. Strategic Objective One: Promote Inclusive and Sustainable Economic Growth .......... 27 

CAS Outcome 1.1: Improved conditions for private sector growth ................................ 27 CAS Outcome 1.2: Improved interconnectivity for regional integration ........................ 28 CAS Outcome 1.3: Increased productivity and commercialization of agriculture .......... 29 CAS Outcome 1.4: Increased sustainability of natural resource management ................ 30 

E. Strategic Objective Two: Enhance Public Infrastructure ................................................ 32 CAS Outcome 2.1: Increased access to electricity .......................................................... 32 CAS Outcome 2.2: Improved access to and quality of roads .......................................... 34 CAS Outcome 2.3: Increased access to and quality of water and sanitation services ..... 35 CAS Outcome 2.4: Improved management and delivery of urban services .................... 36 

F. Strategic Objective Three: Promote Human Capital Development ................................. 37 CAS Outcome 3.1: Improved access to and quality of education ................................... 37 CAS Outcome 3.2: Strengthened health care delivery .................................................... 38 

G. Strategic Objective Four: Good Governance and Value for Money .............................. 39 CAS Outcome 4.1: Strengthened management of financial and human resources ......... 39 

H. Strengthening Aid Effectiveness .................................................................................... 40 I. Implementing and Monitoring the Country Assistance Strategy ..................................... 41 

V. Risks and Mitigation ........................................................................................................... 43 

Boxes: Box 1: Uganda’s Prospects for Achieving the Millennium Development Goals by 2015 ........ 5 Box 2: Decentralization in Uganda ............................................................................................ 7 Box 3: Development of Oil Resources in Uganda ..................................................................... 9 Box 4: Gender Inequality in Uganda ....................................................................................... 13 Box 5: Uganda Joint Country Assistance Evaluation, 2001-2007 ........................................... 17 Box 6: Client Survey ............................................................................................................... 18 Box 7: A New Joint Budget Support Framework .................................................................... 27 Box 8: Climate Change in Uganda .......................................................................................... 32  Tables: Table 1: Key Macroeconomic Indicators, Uganda, FY 2005–2014. ......................................... 3 Table 2: Proposed Analytical and Advisory Activities, FY10 and FY11-15 .......................... 25 Table 3: Proposed IDA Financing, FY10 and FY11-FY15 ..................................................... 26  Annexes: Annex 1: Uganda Country Assistance Strategy Results Matrix .............................................. 45 Annex 2: Uganda at a Glance .................................................................................................. 53 Annex 3: Key Economic Indicators ......................................................................................... 56 Annex 4: Key Social Indicators ............................................................................................... 58 Annex 5: Key Exposure Indicators .......................................................................................... 59 Annex 6: Oil in Uganda ........................................................................................................... 60 Annex 7: Youth Employment in Uganda ................................................................................ 73 Annex 8: Operations Portfolio (IBRD/IDA and Grants) ......................................................... 75 Annex 9: Selected Indicators of Bank Portfolio Performance and Management .................... 76 Annex 10: Trust Fund Portfolio ............................................................................................... 77 Annex 11: CPPR Action Plan .................................................................................................. 78 Annex 12: IFC Investment Program ........................................................................................ 82 Annex 13: CAS Consultations ................................................................................................. 83 Annex 14: Governance Risk Assessment Matrix: Opportunities, Gaps, Planned Actions ...... 84 Annex 15: Summary of Non-Lending Services ....................................................................... 86 Annex 16: IDA Summary Program (FY11-FY15) .................................................................. 87 Annex 17: IDA Lending by Objective ..................................................................................... 88 Annex 18: Division of Labor with Development Partners ...................................................... 89 Annex 19: CAS Completion Report ........................................................................................ 90 

Map of Uganda: IBRD No. 33504R3

EXECUTIVE SUMMARY i. Political Developments. The National Resistance Movement, headed by Yoweri Museveni, took power in 1986, bringing about a period of political and economic renewal. Northern Uganda, however, suffered from two decades of war, until the Lord’s Resistance Army was pushed out of Uganda in 2005. Uganda has progressed towards multi-party democracy. President Museveni is likely to seek a fourth term in March 2011. ii. Economic Developments. Uganda has a record of prudent macroeconomic management and structural reform. Despite various exogenous shocks, annual GDP growth averaged 7 percent in the 1990s, and accelerated to over 8 percent from 2001 to 2008. Due to high population growth, real GDP growth per capita averaged only 3.4 percent over the 1990s, and just over 4 percent over the 2000s. iii. Poverty, Human Development, and Demography. The poverty rate fell from 57 percent in FY93 to 31 percent in FY06, although there is substantial and growing urban-rural and regional inequality. Uganda may reach at least two of the eight Millennium Development Goals by 2015—the country is close to halving poverty and addressing gender inequality, and has made progress towards many others. iv. Economic Prospects. Due partly to the global economic crisis, growth slowed in FY09 and is expected to remain below potential in FY10-11. Beyond the crisis, GDP growth is expected to remain robust, averaging about 7 percent from FY12 to FY14. Oil production will change Uganda’s economic outlook, but full-scale production is unlikely to begin before 2016. v. Development Challenges. To sustain high growth and structurally transform the economy, Uganda needs to address infrastructure bottlenecks, increase agricultural productivity and value addition, reintegrate northern Uganda, manage urbanization, and strengthen its human capital base. A rapidly growing population creates challenges for employment and service delivery. An overarching challenge is to improve governance and value for money, thereby enhancing service delivery and infrastructure investments, and to build a clear and transparent institutional framework to ensure that future oil revenues benefit the entire population. vi. Government Strategy. In February 2010, Uganda’s Cabinet approved a National Development Plan (NDP) covering FY11-15. The NDP’s main theme is Growth, Employment and Socio-Economic Transformation for Prosperity. The plan broadens the country’s development strategy from poverty reduction to structural transformation to raise growth and living standards. vii. Implementation of the World Bank’s Uganda Joint Assistance Strategy (UJAS). Executive Directors discussed the UJAS, the first joint multi-donor strategy of its kind, in January 2006. The UJAS Completion Report rates Bank achievements under the UJAS as moderately satisfactory. Lessons identified by the UJAS Completion Report and incorporated into the Country Assistance Strategy (CAS) are: (i) focus on fewer outcomes and ensure a clear results framework; (ii) strengthen support to improve governance and help the government identify and track governance indicators to guide governance interventions; (iii) link Poverty Reduction Support Credit reforms to sector strategies supported by sector operations; (iv) focus on developing on-the-ground mechanisms to improve aid coordination and alignment with national priorities, rather than on joint strategic documents; and (v) at

ii

project design stage, anticipate possible delays in credit effectiveness due to Uganda’s lengthy approval process. viii. CAS Objectives and Results. The World Bank Group’s Country Assistance Strategy (CAS), aligned with Uganda’s NDP, will support structural transformation of the economy. It provides a framework for World Bank Group support for five years (FY11-15). The CAS focuses on four strategic objectives and eleven outcomes:

Promote Inclusive and Sustainable Economic Growth. There are four outcomes: (i) improved conditions for private sector growth; (ii) improved interconnectivity for regional integration; (iii) increased productivity and commercialization of agriculture; and (iv) increased efficiency and sustainability of natural resource management.

Enhance Public Infrastructure. There are four outcomes: (i) increased access to electricity; (ii) improved access to and quality of roads; (iii) increased access to and quality of water and sanitation services; and (iv) improved management and delivery of urban services.

Strengthen Human Capital Development. There are two outcomes: (i) improved access to and quality of primary and post-primary education; and (ii) strengthened health care delivery.

Cross-cutting: Improve Good Governance and Value for Money. There is one outcome: strengthened accountability and efficiency of public financial and human resource management.

ix. Proposed CAS Program. IDA resources under the FY011-15 CAS are estimated at about SDR1.3 billion (US$1.97 billion equivalent). Development policy operations are expected to account for about one-third of annual IDA financing, as was the case during UJAS implementation. The Bank will prepare a CAS Progress Report in FY13, or earlier if required, to update and adjust the CAS program as needed. x. Partnership. Development partners (DPs) in Uganda continue to seek ways to further improve aid effectiveness. Recognizing the limitations of collective documents such as the UJAS, DPs are focusing on basket funds, sector-wide approaches, and new coordination mechanisms, such as the Joint Budget Support Framework. The Bank chairs the Local Development Partners’ Group, the apex DP forum in Uganda. xi. Risks. Risks for CAS implementation include the upcoming presidential and parliamentary elections; weak governance, especially in the context of future oil wealth; and exogenous risks, such as weather, international prices, natural disasters, and insecurity in neighboring countries. To mitigate risks, the CAS addresses inclusive growth and regional integration; energy and transport (the binding constraints for growth); human development; and governance and value for money.

COUNTRY ASSISTANCE STRATEGY FOR THE REPUBLIC OF UGANDA

I. COUNTRY CONTEXT

A. Political and Governance Context

1. Uganda has the typical characteristics of a “bottom billion” country. It is landlocked and, until recently, resource scarce, and neighboring countries are poor and many are prone to conflict. Uganda is also ethnically diverse, which increases a country’s risk of divisions and conflict.1

2. Following independence in 1962, the country experienced relative political and economic stability until a 1971 military coup by Idi Amin Dada. Violence and mismanagement reduced the country to a failed state with a collapsed economy. Political and economic turmoil continued from 1979 to 1985, with successive coups and a disputed election in 1980 that led to armed rebellions across the country.

3. The National Resistance Movement (NRM), led by Yoweri Museveni, took power in 1986, beginning a sustained period of economic and political renewal. During its first decade in power, the NRM focused on reconstructing the economy and establishing legitimate government. The government advanced pro-market reforms and political liberalization. Despite being landlocked and resource scarce, Uganda became one of the fastest growing countries in Africa. Donor assistance in support of reform grew to 52 percent of the annual budget in the early 1990s.

4. Northern Uganda is now secure; but it missed out on two decades of growth and poverty reduction. The Lord’s Resistance Army (LRA) waged a brutal war that displaced 1.86 million people and resulted in about 10,000 deaths. There have been no major security incidents since 2006; economic activity is now resuming and most internally displaced people (about 1.3 million) have returned to their villages. Pushed out of Uganda, the LRA now operates in the remote border area between Southern Sudan, northeastern Democratic Republic of Congo (DRC), and the Central African Republic. LRA leader Joseph Kony remains at large despite a 2005 International Criminal Court warrant for his arrest on 33 charges, including crimes against humanity.

5. There has been political stability and progress towards multi-party democracy. Uganda has not yet, however, experienced a change of power through elections. Following the promulgation of the 1995 constitution, non-party elections took place in 1996, providing President Museveni with his first elected term after ten years in office. He was reelected in 2001. Constitutional amendments approved by referendum in July 2005 introduced multi-partyism. At the same time the Uganda Parliament voted to lift presidential term limits. Multi-party elections were held in 2006; and President Museveni’s NRM Party won the election with 59 percent of the vote. President Museveni is expected to seek a fourth term in March 2011.

6. There is a perception of increasing corruption at all levels. Despite a strong anti-corruption legal framework, Uganda has struggled to translate its anti-corruption laws into practice. There have been four high-level corruption cases during the last two years, none of which has been

1 The 1995 Constitution of Uganda recognizes 56 indigenous peoples. However, according to the 2008 “State of Uganda's Population Report,” about 70 percent of the country's 29.6 million people are from the eight largest tribes: Baganda (south) with 17.3 percent; Banyankole (west) with 9.8 percent; Basoga (east) with 8.6 percent; Bakiga (west) with 7.0 percent; Iteso (east) with 6.4 pecent; Langi (north) with 6.1 percent; Acholi (north) with 4.7 percent; and Bagisu (east) with 4.6 percent.

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fully resolved so far. Local public opinion polls indicate that petty corruption is widespread and increasing. In addition, Uganda suffers from pervasive “quiet corruption”—the failure of public servants to deliver goods or services paid for by governments—such as unchecked teacher and health worker absenteeism.2 The perception of deteriorating governance is tarnishing Uganda’s image as a development model.

7. The recent discovery of oil brings both development opportunities and challenges. Global experience demonstrates that natural resource wealth in the context of poverty and weak institutions increases the probability of corruption, patronage, instability, and conflict. Whether Uganda’s oil is a blessing or curse depends largely on the establishment of an institutional framework that ensures fair and equitable distribution of resource rents and appropriate consideration of economic, social, and environmental issues.

B. Economic Developments and Prospects

Economic Developments

8. Over the past two decades, Uganda has established a strong record of prudent macroeconomic management and structural reform. Uganda was one of the first Sub-Saharan Africa (SSA) countries to embark on liberalization and pro-market policies in the late 1980s. Uganda was also one of the first SSA countries to adopt a policy of decentralization. Through the 1990s, the government maintained a stable macroeconomic environment and continued to undertake private-sector oriented reforms.

9. By 2006, Uganda had graduated into a mature reformer.3 Annual gross domestic product (GDP) growth rates averaged 7 percent in the 1990s and accelerated to more than 8 percent over the seven years to 2007/08. However, due to rapid population growth, real GDP growth per capita averaged only 3.4 percent in the 1990s and around 4 percent in the 2000s. (See Table 1; additional economic data can be found in Annexes 2 and 3.)

10. Macroeconomic stability and sound policies have helped sustain growth despite exogenous shocks. Conflicts in neighboring DRC and Southern Sudan constrained regional trade. Post-election unrest in Kenya in December 2007 resulted in temporary closure of the main trading route to Mombasa, underscoring Uganda’s vulnerability as a landlocked country. Uganda has also endured droughts, a severe energy crisis, and surges in food and oil prices.

11. Private investment and exports have been important drivers of growth; both almost trebled in real terms between FY01 and FY08. Private investments were mainly driven by construction of commercial and residential property. The rise in exports was led by fish, tourism, and oil re-exports (and, to a lesser extent, flowers, tobacco, and maize), rather than the traditional exports of coffee, tea, and cotton. Primary agricultural commodities still account for more than 50 percent of exports, and exports of food staples to the DRC, Kenya, Rwanda, and Southern Sudan have increased in recent years.

2 A 2010 World Bank report titled "Silent and Lethal: How quiet corruption undermines Africa's development efforts" contends that one of the main reasons behind Africa’s lagging economic development is poor service delivery resulting from quiet corruption. Quiet corruption is less visible than big-time corruption but occurs across a much wider set of transactions directly affecting a large number of beneficiaries and very often has deep long-term consequences on households, farms, and firms. 3 In 2006, Uganda graduated to an International Monetary Fund non-lending Policy Support Instrument.

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Table 1: Key Macroeconomic Indicators, Uganda, FY 2005–2014.

Indicator FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

---------------------Actual--------------------- Est. --------------Projected--------------

Population (millions) 28.7 29.7 30.6 31.7 32.7 33.8 34.9 36 37.2 38.4

Real GDP growth (%) 6.3 10.8 8.4 8.7 7.1 5.6 6.4 7.0 7.2 7.4

Real GDP per capita growth (%) 3.0 7.5 5.3 5.4 3.8 2.3 3.0 3.6 3.8 4.0

Government revenues (% of GDP) 12.2 12.5 12.6 12.8 12.5 12.5 13.1 13.5 14.0 14.4

of which grants (% of GDP) 7.5 5.4 4.5 2.7 3.4 2.4 1.8 1.8 1.6 1.4

Fiscal balance (recurrent only; % of GDP) -1.0 -0.6 0.4 0.3 1.2 0.8 1.6 1.9 2.4 2.9

Consumer price inflation (%) 8.0 6.6 6.8 7.3 14.2 9.5 4.1 5.2 5.3 5.2

Exports (% of GDP) 14.2 15.3 16.7 24.3 23.8 23.6 23.7 23.2 22.8 22.2

of which coffee (% of exports) 12.0 11.2 11.4 11.0 9.0 7.3 7.2 7.1 7.0 6.9

Imports (% of GDP) 24.9 28.4 30.1 32.0 35.3 33.6 34.5 33.9 32.6 31.8

Current acc. incl. grants (% of GDP) -1.4 -3.4 -3.9 -3.2 -4.3 -5.0 -5.6 -5.5 -5.2 -5.1

External debt (% of GDP) 56.0 53.6 18.3 17.7 19.6 20.1 23.3 25.7 26.3 26.4

Domestic debt (% of GDP) 9.2 8.7 9.3 10.7 8.4 7.6 7.0 6.7 6.6 6.5

Sources: Government of Uganda; IMF; Bank staff estimates.

12. The economy has undergone gradual structural transformation over the past two decades, but at an increasingly slower pace.4 As share of total output, services increased from 32 percent in 1990 to 48 percent in 2000 and to 52 percent in 2008. Industry as a share of total output increased from 11 percent in 1990 to 23 percent in 2000, but then remained almost unchanged at 26 percent in 2008. Over the same period, agriculture as a share of total output decreased sharply from 57 percent in 1990 to 30 percent in 2000 and to 23 percent in 2008.

13. Consistent with structural transformation, production is becoming spatially concentrated. The agricultural potential of northern Uganda has not been exploited due to twenty years of conflict. Higher value agricultural production is geographically concentrated in the southern, central, and western areas of the country. Modern sector economic activity is also geographically clustered around large towns and along transport corridors.

14. The labor market transition has lagged the structural change of the economy, as expected. Many economically active people are trapped in low productivity, low income activities due to both a poorly educated and rapidly growing (3 percent per annum) labor force. Agriculture and non-wage smaller enterprises employ the bulk of new entrants into the labor market.

15. In recent years, the government has shifted public expenditures towards addressing Uganda’s infrastructure constraints. The 2006 energy crisis, the deterioration of transport infrastructure, and analytical work highlighting binding constraints to growth led to a scaling up of infrastructure investments in the budget since FY 2008.

16. Uganda’s tax-to-GDP ratio is the lowest among East Africa Community (EAC) countries. Government revenue excluding grants amounted to 12.5 percent of GDP in FY 2009, compared to the EAC average, excluding Uganda, of 17.8 percent. Efforts to boost tax receipts have relied largely on improvements in revenue administration. The forthcoming introduction of a national identification system may also help reduce tax evasion.

4 Structural transformation typically involves: a falling share of agriculture in GDP and employment, a rising share of urban economic activity in industry and modern services, and migration of rural workers to urban settings.

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17. Uganda's economy was better positioned than many in Africa to weather the global economic crisis; but the impact of the crisis has become more apparent. Initially, Uganda’s economy showed resiliency due to strong fundamentals, prudent policies, comfortable reserves, and a sound and well regulated financial system. Exports, remittances, and foreign direct investment began to slow in late 2008, and the government responded with increased public investment expenditures as a fiscal stimulus. In FY09, GDP growth fell to 7.1 percent, only slightly short of the projected 8.0 percent. However, the fiscal stimulus package was less effective than anticipated: public investment expenditures fell substantially short of budget plans due to implementation constraints. 5 In FY10, GDP growth is expected to fall to 5.6 percent.

18. Uganda has taken further steps toward regional integration since signing the EAC treaty in 1999. Uganda was a signatory to the EAC Customs Union launched in January 2005, which aims to reduce non-tariff barriers and stimulate trade. An EAC Common Market protocol signed in November 2009 will allow for the free movement of goods, people, and services, increasing Uganda’s opportunities for regional trade and investment. Uganda has demonstrated its commitment to EAC integration by reducing tariffs, harmonizing standards, and supporting the establishment of the East African Legal Assembly. Uganda is also a member of the Common Market for East and Southern Africa (COMESA). The EAC, COMESA, and the Southern Africa Development Community are working to increase collaboration and launch a new East and Southern African Free Trade Area.

19. Since 1990, the Uganda Bureau of Statistics (UBOS) has improved the timeliness and quality of its data. Uganda has today one of the most professional and transparent statistical offices in Africa. With the support of the Bank and other development partners, UBOS is addressing its remaining weaknesses, which include agricultural statistics and data on businesses. UBOS recently completed an agricultural census, and will soon update its data on firms. During the CAS, the Bank will provide technical support to UBOS, including to field and analyze a new series of panel multi-purpose household surveys and prepare a new national statistics development plan.

Poverty, Human Development, and Demography

20. Uganda’s high economic growth rates have enabled substantial poverty reduction. The proportion of people living in poverty fell from 57 percent in FY93 to 31 percent in FY06. The decline in poverty, particularly from 2002 to 2006, can be attributed to higher crop prices, agricultural diversification, growth of non-wage non-farm employment (primarily household enterprises), and the creation of new wage jobs in urban areas, particularly Kampala.

21. However, there is substantial and growing urban-rural inequality and inequality between regions. The national Gini coefficient rose from 0.35 percent in 1997 to 0.41 percent in 2006, in part because Uganda’s growth path has created opportunities in urban areas of the center and west, while wide swaths in rural areas and the north and east were left behind. In particular, northern Uganda has the highest rate of income poverty at nearly 60 percent, and poverty reduction in north and north-eastern regions has only been marginal. The poverty headcount rate could have declined by a further six percentage points if inequality hadn’t widened. The end of conflict in northern Uganda provides opportunities for poverty reduction, although agricultural production has yet to reach levels adequate to lift households out of poverty.

5 The Eighth Poverty Reduction Support Credit (US$120 million, FY11) will help address implementation and absorptive capacity constraints, which in turn should allow the fiscal stimulus to be more effective. The Bank’s analytical work, including the recent Roads PER, also provides advice to reduce implementation constraints.

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22. Uganda is expected to reach at least two of the eight Millennium Development Goals (MDGs) by 2015 (see Box 1). The country is close on halving poverty and has made substantial progress towards universal primary education and in addressing gender inequality. Uganda may even achieve the targets for combating HIV/AIDS, malaria, and other communicable diseases ensuring environmental sustainability; and developing global partnerships. MDGs on reducing child mortality and improving maternal health are unlikely to be met. Uganda ranks 156 of 179 in the FY09 Human Development Index of the United Nations Development Program (UNDP). The government, with UN support, is preparing its third MDG Progress Report, ahead of the September 2010 UN summit.

Box 1: Uganda’s Prospects for Achieving the Millennium Development Goals by 2015

Goal 1: Eradicate extreme poverty and hunger

Likely. Uganda has made steady and impressive progress on poverty eradication. The number of households living in poverty has declined from 56 percent in 1992 to 44 percent in 1997, 38 percent in FY02, and 31 percent in FY06. Uganda is expected to exceed the target of 28 percent by 2015. The proportion of underweight children under five years fell from 25.5 percent in 1995 to 20.4 percent in 2006, but is still far from the target of 11.5 percent.

Goal 2: Achieve universal primary education

Possible. The introduction of UPE in 1997 led to a 132 percent increase in gross enrollment from 3 million children in 1996 to 7.5 million in 2006. In FY08, Uganda recorded a net enrollment ratio of 93 percent (91 percent for girls, 95 percent for boys). However, completion rates are low at 52 percent (FY09). Drop out and repetition rates need to be addressed or recent achievements will be reversed.

Goal 3: Promote gender equality and empower women

Likely. The ratio of girls to boys in primary (0.99), secondary (0.85) and tertiary (0.72) education institutions indicate progress in achieving gender equality in education, as does the ratio of literate women to men age 15-24 (0.84). In the current parliament, 89 of the 310 members are women, representing 29 percent of the legislative body, up from 18 percent in 1995.

Goal 4: Reduce child mortality

Highly unlikely. The infant mortality rate improved from 119 deaths per 1,000 live births in 1989 to 76 deaths in 2006 (compared to the MDG target of 31). The under-five mortality rate fell from 180 to 137 deaths per 1,000 live births during the same period (compared to the MDG target of 56).

Goal 5: Improve maternal health

Highly unlikely. The maternal mortality rate stagnated at over 500 deaths per 100,000 live births between 1989 and 2000. The estimated maternal mortality is 435 deaths per 100,000 live births (2006) against the MDG target of 131. On average, only 41 percent of all deliveries receive skilled attendance.

Goal 6: Combat HIV/AIDS, malaria, and other diseases

Possible. By reducing prevalence rates from around 20 percent in 1990 to 7 percent in 2008, Uganda has already achieved the MDG target for combating HIV/AIDS. Malaria remains the leading cause of morbidity and mortality in Uganda. As of 2003, there were 478 reported cases of malaria per 1,000 people. The MDG target for malaria could be achieved if the anti-malarial interventions continue to expand as planned.

Goal 7: Ensure environmental sustainability

Possible. Uganda has made progress in increasing access to safe drinking water. Access to clean water has improved to 65 percent against a target of 62 percent, but access to improved sanitation is only 68 percent against a target of 72 percent. There is persistent degradation of the country’s natural resources, including declining soil fertility; deforestation; decreasing fish stocks; and water pollution caused by discharge from industries and domestic waste. The forest cover in Uganda declined from 26 percent in 1990 to 18 percent by 2007. The proportion of titled land remains 13 percent, versus an MDG target of 25 percent.

Note: Data based on most recent local sources, and therefore not fully consistent with data in Annex 2.

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23. The government has sought to expand access to social services, especially education. Since the introduction of universal primary education (UPE) in 1997, net enrollment has increased to about 92 percent for boys and girls, although completion rates remain low at 52 percent. In 2006, Uganda launched a phased universal post-primary education and training program to absorb an increasing number of primary education graduates and improve the low secondary enrollment rates (27 percent in 2008). However, the Ministry of Education’s annual sector reviews and a draft parliamentary report reviewing the government’s free education programs warn that increases in enrollment are stressing existing school systems and facilities, negatively affecting educational quality.

24. Improvements in health care have been mixed. Malnutrition and maternal, child, and infant mortality have improved, but remain unacceptably high: nearly one in seven children die before age five; and one in five children under five years is underweight, down from one in four in 1995. Maternal mortality is among the highest in the world, linked to high fertility and poor pre- and post-natal care. There are high human capital losses due to morbidity and mortality from largely preventable and curable diseases and infections, such as malaria, HIV/AIDS, and tuberculosis.

25. Governance and capacity weaknesses hinder service delivery. Public expenditure reviews (PERs) in education (FY08) and health (FY09) have revealed high inefficiencies and wastage of public finances, particularly through high teacher and health care worker absenteeism rates and weak drug procurement and supply management. Low actual spending of budget allocations suggests challenges in complying with public financial management regulations, and there are frequent reports of misuse of public funds. Basic social services are delivered by local governments; thus, weaknesses in decentralization affect service delivery (see Box 2). There is a high administration burden at the district level, with wages consuming a large and increasing share of total expenditures, leaving insufficient funding for non-wage needs. The continued creation of new districts in Uganda is expected to exacerbate this situation.

26. Uganda’s population dynamics pose a challenge to development. It has the third highest total fertility rate in the world (6.7 births per woman according to government data). Population has doubled since 1988; and the median age is just above 15 years. Uganda is one of the few countries where the number of young-age dependents exceeds (by 10 percent) the number of working age individuals. This dependency rate makes it difficult to achieve sufficient per child investments in health and education, and also lowers the country's savings rate. It will be a challenge for the government to keep pace with the increasing demand for social services, let alone improve their quality. The lower savings rate is likely to translate into a lower investment rate.

Medium-Term Prospects

27. Partly as a result of the global economic crisis, real GDP growth is expected to increase only slightly to about 6.4 percent in FY11. IDA Crisis Response Window resources (US$70 million) will help the government maintain essential social expenditures, including for reproductive health.

28. Uganda’s medium-term growth prospects remain solid. Services will continue to be the main driver of growth, underpinned by sustained growth in communications and by growth in the transport sector as infrastructure improves and regional trade expands. Uganda has a comparative advantage in agriculture, which, if exploited, can contribute significantly to growth. Agricultural production in the north is expected to increase and regional demand for Uganda’s exports, particularly food, is likely to grow. As firms take advantage of the EAC, overall manufacturing, particularly agro-based manufacturing, is expected to increase. Overall GDP growth is expected to remain robust, averaging about 7 percent from FY12-14.

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Box 2: Decentralization in Uganda

Uganda was one of the first countries in Africa to embark on decentralization. Local governments are responsible for providing basic public services, such as primary education, primary health care, water and sanitation, feeder roads, and agriculture extension services; and line ministries are responsible for policies, standards, supervision, and oversight and training of local governments. There are three levels of local government: districts and cities; municipalities and city divisions; and towns and sub-counties.

Policy reversals over the last five years are hindering service delivery and value for money:

Near-elimination of local revenue base. Since the elimination in 2005 of the graduated tax, which provided local governments with 5 percent of their total revenue and was important for discretionary expenditures, local governments have become dependent on non-discretionary central government transfers for 98 percent of their budget, reducing accountability to local citizens.

Reduction in transfers to local government. Real per capita transfers from the central government to local governments fell by 13 percent from FY03 to FY08. Transfers to local governments as a percentage of public expenditure have declined from around 47 percent in FY02 to about 22 percent in FY09. Local governments are spending an increasing proportion of resources on non-discretionary wages and salaries.

Increased percentage of conditional grants. Tied sector conditional grants have increased as a percentage of total transfers from central to local government, from 65.5 percent in FY06 to about 95 percent in FY10, making it difficult for local government to plan for and respond to local demand and needs.

Creation of new districts. More than 25 new districts were created from 2004 to 2009, bringing the total to 90. The government continues to create new districts, purportedly to improve service delivery. In actuality, it increases the amount spent on salaries and administration costs, further reducing resources available for service delivery.

A possible new level of local government. A draft Regional Government Bill would create five regional governments, which would be responsible for regional hospitals, secondary education, coordination, monitoring and supervision of agriculture, and forest and land management.

Bank support to decentralization. The Bank is advising the government on the proposed regional governments and on local government financing, including own-source revenue, the intergovernmental fiscal transfer system, and possible borrowing. In addition, the Bank is supporting local government capacity building under the ongoing Local Government Management Service Delivery project.

29. Returning to and sustaining high per capita income growth in the medium and long term will require acceleration of structural transformation. The economy would have to transform from subsistence agriculture to commercial agriculture, from farm production to non-farm production, and from domestic markets to external markets. Non-farm activities in construction, trading, informal manufacturing, low-level agroprocessing, and retail services have provided sources of diversification of income, but need to be sustained to absorb the fast-growing labor force.

30. Accelerating structural transformation will require further addressing the infrastructure gap, especially in the energy and transport sectors. Better transport is needed to improve connectivity from producers to markets and to improve the mobility of the labor force; and industry needs reliable electricity. Better municipal infrastructure is needed to accommodate urbanization associated with structural transformation. The labor force will also need to be equipped with skills that meet the demands of a changing economic structure.

31. For public investments to succeed, governance and value for money need to improve. Waste and corruption threaten to undermine the quality and effectiveness of infrastructure investments and service delivery. Public investments are also facing constraints in absorption capacity and implementation, derailing the pro-growth fiscal stance. Uganda needs to strengthen capacity to plan and implement investments and build a culture of accountability, with an emphasis on eliminating waste. The country has made progress in strengthening procurement and public

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financial management (PFM) laws, systems, and regulations, but more work is needed to strengthen compliance. Improving efficiency of public spending is particularly urgent in the context of future oil revenues.

32. Oil production will change Uganda’s economic outlook, although it is too early for projections.6 Oil exploration companies have announced discoveries totaling at least 800 million barrels of oil reserves, an amount comfortably above the threshold for commercial development. Total basin potential is estimated at 2 billion barrels. Limited oil production could start as early as 2011 to be used for power generation. Full-scale production, which is not likely to begin before 2016, could reach 150,000 barrels per day or more for ten to twenty years. Production at these levels would generate revenues of over US$3 billion annually at today’s crude oil prices, of which more than half would accrue to the government as royalties and taxes. At these levels, Uganda, while significantly affected by oil, will not be totally dependent on oil revenues. Uganda would be in the company of countries such as Azerbaijan, Sudan, and Trinidad & Tobago, as opposed to classic petro-states such as Angola, Equatorial Guinea, and Nigeria. Although full-scale production is unlikely to be reached during this CAS period, the multi-billion dollar capital investment projects needed to develop the oil exploitation sector will impact the economy. (For more information on oil, see Box 3 and Annex 6.)

33. The government is preparing the institutional environment for oil production and revenue management, but much remains to be done. In January 2008, the government issued a National Oil and Gas Policy, which articulates a best-practice framework for managing petroleum resources for sustainable economic development. The policy calls for the establishment of several new institutions and structures, including: a Directorate of Petroleum to set and monitor policy; a Petroleum Authority to regulate the sector; a national oil company to hold the state’s direct investment in oil projects; and a Petroleum Fund under the management of the Central Bank to stabilize the revenue flow to the budget. The policy also calls for revising the petroleum law and corresponding regulations to handle the development and production of oil and gas, appropriately capture recent trends and best practice in the industry, and harmonize with a future revenue management law. The government is in the process of producing enabling legislation.

34. Oil brings opportunities and challenges. Oil production is likely to increase foreign direct investment and domestic revenue and increase energy supply. But it may also bring inflationary pressures, exchange rate appreciation, and new governance challenges. The so-called “Dutch Disease” effect may reduce the competitiveness of Uganda’s agricultural exports and complicate the country’s growth strategy, making value addition, export diversification, and manufacturing harder to achieve. The National Oil and Gas Policy emphasizes that oil revenue will be used for strategic public investments, which could help increase productivity in other sectors and offset Dutch Disease.

6 Given the uncertainty around timing and volume of oil production, the figures provided should be treated as illustrations of the possible impact of oil, not as projections.

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Box 3: Development of Oil Resources in Uganda

Oil Discoveries and Potential: Since 2006, UK-based Tullow Oil and its partner Heritage Oil have made a series of large oil discoveries in the Lake Albert Rift Basin in western Uganda. Tullow Oil estimates the total oil discovered at over 800 million barrels, and estimates total basin oil potential at 2 billion barrels.

This level of reserves would put Uganda into a peer group with Chad (0.9 billion barrels), Republic of Congo (1.9 billion), Equatorial Guinea (1.7 billion) and Gabon (3.2 billion), but far short of Angola (13.5 billion), and Nigeria (36.2 billion).

Oil Revenue: Peak production is likely to be about 150,000 to 200,000 barrels per day for 10-20 years. Based on the current fiscal system and assuming an oil price of US$75 per barrel, government revenue at peak production could be over US$2 billion per year. By way of comparison, government revenue in 2008 was US$2.6 billion and GDP was US$14 billion.

Timing: There is a high level of uncertainty regarding the time frame for reaching peak oil production and revenue generation. Huge investments in infrastructure—estimated at US$10 billion—will be needed to produce, transport, export, and refine the oil. Oil specialists estimate that peak production is likely to begin no earlier than 2016.

A first phase of limited production (perhaps 10,000 to 15,000 barrels per day) could begin in 2010-2012. Some limited quantities of natural gas could also be produced for a 50 MW power plant. Nevertheless, government revenue during this early production phase would be negligible.

Challenges: Development of Uganda’s oil will be complex for several reasons:

Oil characteristics: The oil is contained in low-pressure reservoirs, which will increase the complexity and cost of production facilities. While light and low in sulphur, the oil has high paraffin content. Pipelines will need to be heated for the oil to flow. Refineries will need expensive processing and treating capacity. Also, much of the oil extends offshore under Lake Albert. While initial production will take place on land, future developments will necessarily move offshore, resulting in increased cost, complexity, and environmental sensitivity. Some offshore fields may be uneconomic to exploit.

Environment: Strict environmental protection requirements will be needed: oilfields are located in and around Lake Albert and the Murchison Falls Conservation Area.

Production sharing contracts: Foreign investors hold their blocks by means of production sharing agreements (PSAs) signed with the government between 1997 and 2005. Under the PSAs, the private investors bear the cost and risk of exploration and development in exchange for a defined share of oil production in the case of success. To date, the government has not disclosed the terms of the PSAs, leading to criticism from NGOs and others.

Local communities: Addressing local community issues and compensation will pose a challenge given Uganda’s tradition of communal land ownership, unclear national land policy and regulation, and the possibility that speculators will attempt to profit from changes in land values.

Transborder issues: Transborder issues with the DRC, such as allocation of resources, transport, security, and environmental management, could give rise to difficult negotiations or even conflict given incomplete border demarcation and a history of difficult relations between the two countries.

Pipeline and refinery development: Pipeline and refinery development: Exporting oil would require construction of a 1,300 km export pipeline to an Indian Ocean port at a cost of some US$2-3 billion. A large domestic refinery would have a similar cost. Under either the export or refining option, forming the investment consortium and concluding the necessary commercial and financing agreements will be a complicated and time consuming process. Construction time for either the pipeline or the refinery would be roughly three years.

Bank Support: Given the many uncertainties at this stage regarding petroleum sector development, the Bank program will be necessarily flexible. All Bank analytical work under the CAS will take into consideration petroleum sector issues. Annual policy notes on the petroleum sector will provide just-in-time advice to the government on key topics. The Bank and government are discussing a possible Petroleum Sector Support Project (FY12). The Bank will provide further support during the CAS period as requested by the government and as more information becomes available on petroleum sector developments.

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Debt Sustainability

35. Uganda’s risk of debt distress is low, according to a recent update (March 2010) of the Joint IMF-World Bank Debt Sustainability Analysis. Its debt ratios have improved substantially due to the Heavily Indebted Poor Countries Initiative and Multilateral Debt Relief Initiative and to prudent macroeconomic management. The government plans to only gradually increase use of non-concessional borrowing to finance public infrastructure investments as they build debt management capacity. The analysis indicates that debt sustainability is sensitive to shocks, such as deterioration of economic growth. To minimize risk, the government needs to carefully select and implement public investment projects to accelerate economic growth at reasonable fiscal costs. The next Joint IMF-World Bank Debt Sustainability Analysis is planned for March 2011.

C. Key Development Challenges

36. Accelerating structural transformation. The country’s uninterrupted growth since 1987 has been a noteworthy achievement. However, the weak point of economic performance has been the limited shift from a low-productivity, primary-based economy to a high-productivity economy based on industry and services. The country’s high population growth rate makes structural transformation particularly urgent to create nonagricultural and higher-productivity jobs for one of the fastest growing labor forces in the world.

37. Alleviating infrastructure and other bottlenecks. Inadequate infrastructure, especially transport and energy, is Uganda’s binding constraint for growth and economic transformation. The government needs to identify and facilitate implementation of infrastructure projects that will induce private sector investment in new products, resulting in increased exports and new jobs. Also, the financial sector needs to deepen and contribute more to growth. Lending as a share of deposits remains low. Pension reform is needed to create longer-term private investment financing.

38. Raising agricultural productivity and value addition. The government needs to continue supporting technology adoption to reduce the gap between yields achieved in farm trials and average national yields, and also improve value chain linkages through promoting agro-processing and public private partnerships. It is increasingly recognized that other core public functions, such as animal and plant disease control, regulatory services, water for agricultural production, sector statistics, and monitoring and evaluation, require support to ensure enduring agricultural growth.

39. Managing urbanization for growth. The pace of Uganda’s structural transformation will also depend on the efficiency of its spatial transformation. Although Uganda’s current level of urbanization is low, the rate of urban growth is high—estimated at 5.9 percent annually. Further agglomerations of people and economic activity will accompany structural transformation. Uganda has an opportunity to proactively strengthen decentralization and urban management to maximize the economic opportunities inherent in urbanization.

40. Reintegrating the North. Spurring economic recovery in northern Uganda is important for growth and poverty reduction, as well as for political stability. Development challenges in the north are acute: the region has the highest incidence of female-headed households in the country at 31 percent; and the infant mortality rate was 106 per 1,000 live births in 2006, compared to the national average of 76. Yet, northern Uganda has high potential for agricultural production and exports, given its proximity to markets in the DRC and southern Sudan. Ongoing investments in infrastructure and improvements in service delivery coordinated through the government’s Northern Uganda Peace Recovery and Development Plan and the Karamoja Integrated Disarmament and Development Plan will help harness this potential.

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41. Addressing the demographic challenge. Uganda could generate a demographic dividend for economic growth by accelerating the transition from high to low fertility and mortality rates.7 To achieve this, Uganda would need to improve its policies to reduce fertility and child and infant mortality and increase access to and quality of education, especially for girls.

42. Addressing the youth challenge. Nearly 400,000 youth enter the labor force each year; and their absorption into the labor market will remain a challenge for the medium term. To assist youth transition to stable employment, it will be important to raise the primary completion rate to near 100 percent, improve employment opportunities in the wage sector, and support youth in their transition to employment in the non-wage sector. (See Annex 7 for a full discussion on the youth challenge.)

43. Arresting environmental degradation and natural resource depletion. Despite efforts to improve institutions for environmental management and sustainable use of natural resources, the depletion of Uganda's natural resources and degradation of the environment is constraining growth. There is a high level of deforestation, while household expenditures for charcoal and fuelwood, principal sources of energy, have doubled during the last 15 years. Fishery resources, an important export, are declining. Other renewable natural resources—water resources, wetlands, grasslands, farmlands, and biodiversity—are being similarly depleted. Climate change will further challenge natural resource management.

44. Addressing a weakening governance environment. Uganda improved the quality of governance in the early part of the decade by strengthening accountability sector institutions, introducing decentralization, and accelerating public sector and public financial management reform. However, despite considerable transparency and a strong anti-corruption legal framework, accountability and enforcement are low. According to a 2009 Africa Peer Review Mechanism Country Review of Uganda, petty and high-level corruption are prevalent and affect every institution in the country, and are most rife in procurement, privatization, administration of revenues and public expenditures, and public service delivery. Despite the government’s zero tolerance policy on corruption, few if any high-level officials involved in major corruption scandals have been tried, hindering attempts to raise the bar and address lower level corruption. Reinvigorating institutions and accountability systems, rethinking decentralization policies, in particular fiscal aspects, and re-launching stalled public service reform processes will be essential elements for the development agenda in the coming years, especially before oil revenues come on stream.

45. Avoiding the so-called “resource curse.” Uganda’s overriding development challenge is to manage its oil endowment for stability, prosperity, and sustainability. Success will depend largely on the government’s near-term policy decisions, especially regarding resource management, revenue management, and environmental management. Effective petroleum sector governance requires the establishment of a clear and transparent legal, regulatory, and policy framework. The government must also manage public expectations regarding the future benefits coming from oil production and take steps to assure that the oil-affected communities feel the development benefits of oil.

7 When the fertility rate falls and the youth dependency ratios declines, the workforce becomes relatively larger, opening a window for faster human capital development and economic growth—known as the demographic dividend.

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II. GOVERNMENT PROGRAM AND DEVELOPMENT PARTNER SUPPORT

A. Uganda’s Poverty Reduction Strategy

46. Uganda was the first country to prepare a comprehensive, participatory, and country-owned national development strategy in 1997, creating the model for the Poverty Reduction Strategy Paper. The 1997 Poverty Eradication Action Plan (PEAP) received international praise. It was revised and updated in 2000 (PEAP II) and 2004 (PEAP III). PEAP III was extended for two years, to June 2010, due to delays in preparing its successor.

47. In February 2010, the government finalized a new five-year (FY2011-2015) National Development Plan (NDP). The NDP’s main theme is “Growth, Employment and Socio-Economic Transformation for Prosperity,” marking a broadening of the country’s development strategy from poverty reduction, the focus of the PEAPs, to structural transformation to raise growth and living standards. It is the first in a series of six plans intended to transform Uganda over thirty years into a modern and prosperous country.

48. The NDP has eight objectives. These are: (i) increase household income and promote equity; (ii) enhance the availability and quality of gainful employment; (iii) enhance human capital development; (iv) improve the stock and quality of economic infrastructure; (v) increase access to quality social services, (vi) promote science, technology, innovation, and information and communications technology (ICT) to enhance competitiveness; (vii) strengthen good governance, defense, and security; and (viii) promote sustainable population and use of the environment and natural resources. In addition, the NDP identifies four priority areas for investment: infrastructure development; human resource development; critical production inputs; and science, technology, and innovation. The NDP identifies fifteen “national flagship projects” intended to address binding constraints to growth.

49. The NDP includes analysis of cross-cutting issues crucial to sustained growth, such as gender. It highlights gender inequalities, commits to mainstreaming gender-responsive development, and proposes strategies to address gender gaps (see Box 4). Other cross-cutting issues include: governance, urbanization and decentralization, climate change, and regional cooperation. The NDP also includes a detailed discussion by sector, including a situational analysis, constraints, objectives, and planned interventions.

50. The IDA-IMF Joint Staff Advisory Note (JSAN) considers both the macroeconomic framework and the sector-specific plans to be generally compatible with the government’s vision of structurally transforming the economy. The JSAN also notes that weak governance and exogenous shocks could affect implementation adversely. The JSAN recommends measures to strengthen the NDP and enhance its implementation, such as better prioritization; actions to make growth more inclusive; preserving space for private sector initiatives and strengthening the legal and fiscal framework for public-private partnerships (PPPs); and including indicators of improving public financial management and governance in the NDP monitoring and evaluation plan.

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Box 4: Gender Inequality in Uganda

Uganda’s constitution guarantees gender equality and includes a number of affirmative action measures; however, as noted in Uganda’s National Development Plan (NDP), gender perceptions and practices continue to perpetuate inequalities that hinder economic development. The NDP introduces a comprehensive framework for mainstreaming gender-responsive development within the country’s objectives. It is informed by the National Gender Policy (2007) and the National Action Plan on Women.

Based on the NDP’s gender analysis and the World Bank’s “Gender and Growth Assessment for Uganda” (2005), the key gender-based barriers to economic growth and poverty reduction are:

Women are marginalized in business ownership, skills development, access to financial resources, non-agricultural employment, and inheritance rights.

There is a marked gender gap in access to and control over productive resources. Women comprise 70 percent of the work force in agriculture but have unequal access to and control over productive resources, such as land, limiting their ability to move beyond subsistence agriculture.

Women have lower access to health and education services. There are gender disparities in primary school completion as well as secondary school enrollment. Only a third of girls enrolled in primary education continue in school to the age of 18, compared to half of boys

Early marriages and low girl primary school completion and secondary school enrollment are principal contributors to a high fertility rate and a high maternal mortality rate.

During the CAS period, Bank-financed operations will be designed to reflect differences in men’s and women’s needs and constraints to ensure equal participation and equitable distribution of benefits. The CAS includes specific interventions to address gender inequalities in business skill development, education, health care, and agricultural production. The CAS results framework includes gender-disaggregated indicators in these areas.

NDP Objectives 1 and 2: Income, Equity, and Employment

51. The NDP identifies eight primary growth sectors—agriculture, forestry, manufacturing, oil and gas, tourism, mining, ICT, and construction. The NDP calls for using national resources, better infrastructure, and development projects to ensure that all regions benefit from the growth of the national economy.

52. The private sector is constrained mainly by poor infrastructure and difficulty in accessing credit. The NDP notes that “Doing Business 2010” ranks Uganda 112th out of 183 countries. To improve conditions for private sector growth, the NDP calls for improving economic infrastructure, enhancing human capital development, strengthening competitiveness, and improving the private sector regulatory framework.

53. The NDP acknowledges agriculture as a key sector for growth, exports, employment, and food security. It provides the basis for growth in other sectors such as manufacturing and services. The NDP focuses on boosting agricultural production and productivity by increasing agroprocessing and strengthening policies and institutions.

NDP Objective 4: Economic Infrastructure

54. Recognizing that weak infrastructure is a binding constraint for trade and growth, the NDP gives priority to improving infrastructure, especially energy and transport. The road sector carries 96 percent of total cargo freight, but only 4 percent is paved. Railways carry only 3.5 percent of freight cargo and only 28 percent of it is functional. Only 11 percent of the population has access to electricity. The NDP identifies several flagship projects to address these gaps, including

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railway construction and rehabilitation, development of Kampala rapid transport systems, improvement of water transport on Lake Victoria, and construction of new hydropower plants.

55. The NDP also emphasizes the need to increase access to water for production. It notes the potential negative impact of climate change on agricultural yields. The construction of five large-scale irrigation systems is a national flagship project.

NDP Objectives 3 and 5: Human Capital Development and Access to Social Services

56. While some progress has been made in recent years, Uganda’s health outcomes remain poor, even in comparison to other SSA countries. The health sector suffers from inadequate funding, understaffed health centers, health worker absenteeism, and waste in drug supply. The NDP emphasizes preventive and curative care, while exploring synergies with other sectors, such as education and water and sanitation, to reduce preventable diseases. It also focuses on addressing performance gaps by tackling health care systems and management, strengthening human resource planning, ensuring availability of drugs, and expanding access to Uganda’s National Minimum Health Care Package.

57. Education has been a priority since 1997, when the government introduced universal primary education. The government launched a phased universal post-primary education and training program in 2006, and has launched reforms to address quality. Nevertheless, widespread absenteeism, inequitable teacher deployment, insufficient spread of instructional materials, and weak governance structures at the school levels hinder the quality of service delivery.

58. The NDP also identifies skills development as a priority. The NDP notes the rapidly growing labor force and the high level of drop-outs from primary and secondary schools. In response, the government intends to develop a national vocational program.

NDP Objective 6: Science, Technology, Innovation, and ICT

59. The NDP recognizes the role of science, technology, and innovation in growth and socioeconomic transformation. The NDP calls for the establishment of regional centers to adapt and promote new technology and provision of incentives to the private sector to encourage innovation. The government plans to improve ICT infrastructure by extending the national fiber-optic network to all districts and by introducing e-government services, including e-procurement.

NDP Objective 7: Good Governance, Defense, and Security

60. The NDP identifies the weak public sector as a major constraint to development. Institutional inefficiency and ineffectiveness resulting from poor planning and management and limited staffing lead to low absorption of public funds and poor delivery of services. The NDP also recognizes the devastating socio-economic effects of corruption. It notes that Uganda is ranked 130th out of 180 countries in Transparency International’s 2009 Corruption Perception Index, below many other African countries.

61. The NDP identifies a number of key actions to address institutional weaknesses and governance challenges. This includes using the NDP as a key document to ensure alignment with all sectors plans, improve policy coordination, introduce institutional performance contracts at all levels, improve human resource management of public servants, review pay and incentives systems, and improve coordination and cooperation with the private sector and civil society. The NDP aims to

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increase transparency and accountability by introducing value for money performance standards and performance budgeting in all sectors.

NDP Objective 8: Promote Sustainable Population and Use of Environment and Natural Resources

62. The NDP recognizes that current population trends pose challenges to future growth and structural transformation unless actions are taken to generate a population dividend. It notes that high fertility results from low levels of education, early child bearing, a low contraceptive prevalence rate of 24 percent, and a high unmet demand for family planning estimated at 41 percent. The NDP identifies several key areas for intervention: implementation of the national population policy (including mobilization of resources); increasing access to and availability of family planning and reproductive health care; and increasing enrollment of youth and adults in education and training programs to increase the availability of skilled labor.

63. Uganda’s natural resources and biodiversity are deteriorating due to population pressures and economic activity. The country has the sixth highest deforestation rate among 62 tropical countries—losing one quarter of its forests from 1990 to 2005. Fish production fell by 14 percent from 2004 to 2007, and biodiversity is declining. By 2017, Uganda could be a water stressed country. Recognizing the productivity effects on agriculture, industry, and fisheries, the NDP calls for restoring degraded ecosystems, ensuring sustainable management of environmental resources, increasing public awareness, and enforcing environmental laws and regulations.

B. Development Partner Support

64. Uganda is highly dependent on development assistance. Official Development Assistance (ODA) increased from US$192 million in 1986 to US$1.7 billion in 2007.8 Relative to GDP, total ODA to Uganda stood at 5 percent in 1986, peaked at 25 percent in 1992, and averaged 14 percent from 2004 to 2008. On-budget donor support amounted in FY08 and FY09 to about US$800 million per year; thus, donors finance around 30 percent of the government’s budget.

65. More than 40 bilateral and multilateral development partners (DPs) provide aid to Uganda; but only three DPs account for almost half of total ODA. The World Bank, the single largest financier, accounted for 19 percent of the US$7.3 billion disbursed from 2004 to 2008. The United States accounted for 18 percent; and the European Commission accounted for 10 percent. The number of small donors creates a challenge for lowering the transaction costs of donor assistance: 12 DPs accounted for 90 percent of ODA over the period; while 30 DPs accounted for the remaining 10 percent.

66. There have been efforts since the 1990s to improve donor harmonization. The government and DPs signed a set of Partnership Principles in 2003, which emphasized the government’s preference to use budget support as an aid modality. Over the last decade, in line with government preferences, DPs have shifted increasingly from project support to budget and sector support. In 2007, 66 percent of disbursed aid was provided as either general budget support or within program-based approaches, up from 50 percent in 2005.

8 ODA is measured by donors as expenditures that have as their main objective the promotion of the economic development and welfare of developing countries. What is classified as ODA to Uganda will not equal the amount received by the Government of Uganda.

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67. In 2005, seven DPs joined together to elaborate a Uganda Joint Assistance Strategy (UJAS) to support the government’s 2004 PEAP. Five additional DPs joined the UJAS framework in 2006, bringing the total number of UJAS partners to twelve.9 It was the first joint assistance strategy of its kind, representing a commitment among DPs to improve harmonization and aid effectiveness.

68. A review of the UJAS concluded that transaction costs were not reduced.10 The development of a joint assistance strategy was well intended, but in retrospect was neither a necessary nor sufficient condition for more effective aid. For example, while the UJAS outlined joint development partner commitments and aspirations to work more effectively towards the achievement of the PEAP goals and objectives, the UJAS was not effective as an operational tool during implementation. Consequently, UJAS partners and other DPs decided to engage with government on the development of on-the-ground mechanisms to improve aid coordination and alignment with national priorities, rather than on developing joint strategic documents.

9 The initial seven UJAS partners comprised: the African Development Bank, Germany, the Netherlands, Norway, Sweden, the United Kingdom, and the World Bank Group. Five DPs signed up to the UJAS in 2006: Austria, Belgium, Denmark, Ireland, and the European Commission. 10 “Review of the Uganda Joint Assistance Strategy – Current and Future Prospects,” January 2009, by Dr Alison Evans, Overseas Development Institute, London, and Peter Ssentongo, Centre for Performance Management and Evaluative Research, Kampala. The evaluation was financed by DFID and carried out in collaboration with UJAS partners and other DPs.

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III. IMPLEMENTATION OF THE UGANDA JOINT ASSISTANCE STRATEGY AND LESSONS LEARNED

69. World Bank Executive Directors discussed the Uganda Joint Assistance Strategy (UJAS) in January 2006 (Report number 34310-UG). Part 1 of the UJAS covered a joint DP assessment and strategy, and Part 2 covered the World Bank Group assistance program.

70. The UJAS adopted the five pillars of Uganda’s 2004 Poverty Eradication Action Plan (PEAP). These were: (i) economic management, with a focus on macroeconomic stability consistent with rapid private sector-led growth; (ii) enhancing production, competitiveness, and incomes; (iii) security, conflict resolution, and disaster management; (iv) good governance; and (v) human development. Within these five pillars, the UJAS identified 15 high-level strategic objectives, 40 outcomes, and 56 outcome indicators.

71. The UJAS Completion Report rates Bank achievements under the UJAS as moderately satisfactory. Pillar 1 (economic management) and pillar 3 (security, conflict resolution, and disaster management) were rated satisfactory; while pillar 2 (enhancing production, competitiveness, and incomes) and pillar 5 (human development) were rated moderately satisfactory. Pillar 4 (good governance) was rated moderately unsatisfactory. A Country Assistance Evaluation by the Independent Evaluation Group (IEG) rated World Bank support during the period 2000-2007 (covering the FY01-03 CAS and the first two years of the UJAS) as moderately satisfactory (see Box 5). In 2008, the Bank contracted a client survey to provide information on perceptions of the Bank’s work in Uganda, which revealed that most stakeholders surveyed would like the Bank to focus on infrastructure and play a leading role in fighting corruption (see Box 6). See Annex 19 for the full UJAS Completion Report.

Box 5: Uganda Joint Country Assistance Evaluation, 2001-2007

The World Bank’s Independent Evaluation Group (IEG) and the Operations Evaluation Department of the African Development Bank produced a Joint Country Assistance Evaluation (CAE) dated March 19, 2009, covering the period 2000 to 2007, corresponding to the FY01-03 CAS and the first two years of the UJAS.

IEG Findings. World Bank programs were substantially effective in decentralization, public sector reform, growth and economic transformation, education, and water and sanitation. IEG deemed that more could have been done to help counter the perception of increasing corruption, improve power supply, reduce transport costs, enhance agricultural productivity, and help with family planning and reproductive health. The CAE rated the overall outcome of World Bank support as moderately satisfactory.

IEG Recommendations and Corresponding Country Team Actions:

(i) Support the government in developing an analytical framework to guide governance reforms. Action: The Bank and DPs are developing a Data Tracking Mechanism.

(ii) Encourage and support government efforts to develop medium-to-long term master plans for infrastructure. Action: The Bank has supported a Power Sector Investment Plan; a National Transport Master Plan, including a Transport Master Plan for Greater Kampala Metropolitan Area; and a 15-year investment plan (2008 - 2023) for all modes of transport. The Bank will also support a Rural Electrification Strategy.

(iii) Encourage the government to coordinate ongoing monitoring and evaluation initiatives by its development partners to ensure reliable monitoring and evaluation (M&E) of its overall poverty reduction strategy. Action: The government, whose PEAP evaluation identified weak and uncoordinated M&E as a factor hindering policy evaluation and decision making, is drafting a national policy on public sector M&E to address legislative gaps, clarify roles and responsibilities, and enforce institutional accountability for service delivery.

(iv) Reinforce the effectiveness of general budget support as an instrument for minimizing transaction costs and facilitating the use of country systems. Action: The Bank and DPs have developed a Joint Budget Support Framework.

1/ Report Number 49395 dated August 11, 2009.

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Box 6: Client Survey

Methodology. From May to July 2008, about 550 stakeholders of the World Bank in Uganda were invited to provide their opinions on the Bank’s assistance to the country. 306 stakeholders (56%) responded to the survey.

Survey results:

Respondents across most stakeholder groups and all geographic locations believed that the Bank considered its top priority in Uganda to be ensuring macroeconomic stability consistent with rapid growth.

Respondents indicated that it would be most productive for the Bank to focus most of its resources on strengthening basic infrastructure.

Respondents felt that the Bank should play a leading role in fighting corruption (mean response rating of 5.2 on a 6-point scale, where 1 is “not at all” and 6 is to “a great degree”).

The majority of respondents felt that the Bank should be more involved in Uganda’s development strategies; 20% felt that the Bank is currently involved at an optimum level. Only 8% of respondents felt that the Bank should be less involved or should not be involved at all.

Respondents felt that the Bank’s policy and economic advice and financial resources were its greatest values. The Bank’s lending when others won’t, donor coordination, knowledge, and technical advice were also considered of great value.

Respondents felt that the Bank’s greatest weaknesses in its work in Uganda were imposing theoretical and technocratic solutions without regard to political and other realities and being too bureaucratic in its operational policies and procedures

Across all respondents, the Bank’s overall effectiveness in Uganda received a mean rating of 6.3 on a 10-point scale, with 1 being very unfavorable and 10 being very favorable. Ratings were highest from employees of ministries (7.0), local government (7.2), and other organizations (7.4) and lowest from nongovernmental organizations (4.9).

IDA, Trust Funds, and Analytical and Advisory Activities

72. World Bank Executive Directors approved about US$1.3 billion in IDA during the UJAS period (FY06-09) for seventeen operations. Budget support operations (Poverty Reduction Support Credits) amounted to US$460 million—35 percent of total lending.11

73. In terms of net commitments, the Uganda portfolio is the sixth largest in the Africa Region. As of end January 2010, there are sixteen IDA-financed operations with a net commitment amount of US$1.3 billion. In addition, there are five regional projects and an IDA guarantee of US$115 million for the Private Power Generation (Bujagali) Project.

74. The current sector distribution of IDA commitments reflects the government’s emphasis on infrastructure. About 68 percent of commitments are allocated to energy, mining, environment, urban development, and transport. About 22 percent are allocated to education and social development; 8 percent to finance and private sector development; and 1 percent to economic and public sector management.12 (Annex 8 provides a summary of the Operations Portfolio.)

75. Overall, project implementation performance has been satisfactory. The portfolio disbursement rate is 28.5 percent, versus the Africa Region average of 18.5 percent. There are one

11 The three PRSCs were: PRSC-5 in FY06; PRSC-6 in FY07; and PRSC-7 in FY08, which also provided funding for FY09 under an exceptional two-tranche design to align the PRSP with the Joint Budget Support Framework. 12 Uganda is currently in between PRSC cycles. When there is a PRSC in the active portfolio, the allocation to economic and public sector manager increases to about 9 percent.

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potential and two actual problem projects, resulting in commitments at risk of 4.9 percent, much less than the Africa Region average of 28 percent.13 IEG project ratings of projects exiting the portfolio have been largely consistent with Implementation Completion Report ratings. However, delays in IDA credit effectiveness caused by Uganda’s lengthy approval process have often resulted in cost overruns and project delays.14 Of the seventeen projects under implementation at the start of FY09, six had effectiveness delays of 200 days or more. On average, effectiveness took 185 days. (Annex 9 provides selected indicators of the Bank portfolio.)

76. Uganda benefitted during the UJAS from 48 trust funds providing nearly US$65 million in grants. Most were linked to lending operations. They focused mainly on: environment (GEF); renewable energy (GEF); demobilization and reintegration of ex-combatants (MDTF); avian influenza; sanitation and hygiene (WSP); monitoring and evaluation (IDF); and piloting output-based aid in health and water supply (GPOBA). (A list of active trust funds is shown in Annex 10.)

77. The Bank’s analytical and advisory activities (AAAs) underpinned investment operations and sector strategies, and informed the government’s reform path. Analytical work included the Country Economic Memorandum (CEM, FY07), which helped the government shift toward investments to accelerate economic growth and structural transformation. The CEM was followed by a strategically planned series of public expenditure reviews (PERs), focusing on education (FY08), health (FY09), and roads (FY10). The report “Public Finance Management in Uganda – a Platform Approach” (2008), including an assessment of fiscal decentralization and the PEFA Report (FY09) has informed the public finance management reform agenda. Other AAA includes: a Diagnostic Trade Integration Study, an Investment Climate Assessment, a Financial Sector Study, a Land Poverty and Social Impact Assessment, an Agriculture Sector PER, and a study on Regional Inequality.

78. A recent Country Portfolio Performance Review (CPPR) identified portfolio issues and actions to improve portfolio performance and disbursements. The CPPR, which concluded in February 2010, recommended actions to improve quality at entry; build project implementation capacity, especially procurement; reduce effectiveness delays; and increase attention to environmental and social safeguard issues. The full CPPR Action Plan is shown in Annex 11. A CPPR Progress Report is planned for September 2010.

The International Finance Corporation

79. IFC investment commitments over the CAS period (FY 2006-2009) amounted to US$201 million for eleven projects. Investments were mainly in the electricity sector (US$155 million) and the financial sector, especially for small and medium enterprises (SMEs), and telecommunications. Since 2006, the IFC has focused on intermediaries for SME finance, resulting in improved portfolio performance with negligible loss reserves. Currently, the portfolio amounts to US$193 million, the fourth largest country portfolio for IFC in Africa (see Annex 12 for additional details). IFC initiated 14 advisory projects during the period with a total value of US$7.6 million. In many cases, these advisory projects complemented investments to broaden development impact, for example supporting distributor networks and the Village Phone model with cell phone operators; working with banks to build capacity for SME lending, including facilities targeting women

13 Actual project projects have Project Development Objective (PDO) or Implementation Progress (IP) ratings of moderately unsatisfactory or lower. Potential problem projects are those with PDO or IP ratings of moderately satisfactory or higher, but have three or more risk flags. 14 Under Ugandan law, parliament approves each loan or credit.

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entrepreneurs, and expanding housing finance. Other areas included assistance to improve the investment climate, address constraints for businesswomen, promote foreign investment, and develop models for private participation in small-scale rural water and electricity provision. Uganda also benefited from IFC’s advisory work to structure the private concession for Kenya Railways, which was extended to incorporate Uganda Railways in a single concession.

Multilateral Investment Guarantee Agency

80. During the UJAS period, MIGA became increasingly involved in Bank group energy projects. MIGA is supporting Globeleq Holdings (United Kingdom) with a US$41 million guarantee of its investment in Umeme Ltd, the project company that has leased the electricity distribution grid of Uganda for 20 years. MIGA is also supporting Sithe Global (USA) with a US$115 million guarantee of its equity in Bujagali Energy Ltd. MIGA has a third guarantee in support of agribusiness. In all, MIGA’s portfolio of three guarantees has a combined gross exposure of US$158 million.

Lessons Learned

81. The CAS Completion Report identified the following key lessons, which are incorporated in this CAS:

(i) Focus on fewer outcomes and ensure a clear results framework. Typical of many early-generation results-focused CASes, the UJAS included an unrealistic number of outcomes (40) and indicators (56), which reduced the Bank’s strategic focus and ability to track its own effectiveness. In addition, both the UJAS and the PEAP had weak and incomplete results frameworks.

(ii) Strengthen support to improve governance and help the government identify and track governance indicators to guide governance interventions. Focus on country-specific actionable governance indicators rather than on perception-based and cross-country comparative indicators.

(iii) PRSC reforms should be linked to sector strategies and specific sector operations. Long-term sector reforms are best tackled when addressed simultaneously by a development policy operation and a sector specific operation.

(iv) Focus on developing on-the-ground mechanisms to improve aid coordination and alignment with national priorities, rather than on joint strategic documents. The development of a joint assistance strategy was well intended, but it did not increase aid effectiveness nor reduce transaction costs for the government or DPs.

(v) Anticipate at the project design stage the possibility of delays in credit effectiveness, due to delays in Uganda’s approval process. In addition, the Bank should ensure that government informs parliament about proposed projects at the appraisal stage, and puts in place a mechanism to track the approval process.

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IV. THE WORLD BANK GROUP ASSISTANCE STRATEGY

82. The CAS aims to support Uganda’s vision of structural transformation by selectively assisting the government in implementing the NDP. The CAS provides a framework for World Bank Group support to Uganda over five years, from FY11-15, in alignment with the five-year NDP.

A. The Framework for World Bank Engagement in Uganda

83. Align with national priorities. The CAS supports the implementation of the NDP and relevant sector strategies and regional strategies, such as the Northern Uganda Peace Recovery and Development Plan and the Karamoja Integrated Disarmament and Development Plan. CAS outcomes are a subset of NDP outcomes, focusing on areas where Bank interventions will contribute measurably to NDP outcomes. The Bank considered the views of a range of stakeholders during CAS preparation (see Annex 13, summarizing CAS consultations).

84. Maintain flexibility to mitigate risks. The first twelve months of CAS implementation will take place within a pre-election environment with inherent uncertainties and governance risks (see Section VI: Risks and Mitigation). The recent discovery of oil further increases political and governance risks. A CAS Progress Report will be prepared in FY13, or earlier if required, to update and adjust the CAS program as needed.

85. Continue to improve donor harmonization and reduce transaction costs for the government. Development partners in Uganda continue to seek ways to further improve aid effectiveness. Recognizing the limitations of the UJAS, DPs are focusing on basket funds, sector-wide approaches, and new coordination mechanisms, such as the Joint Budget Support Framework (see also Box 7), rather than on collective documents.

86. Strengthen strategic partnerships. The Bank will complement its core program by establishing strategic partnerships through single- and multi-donor trust funds and co-financing arrangements. This will enable the Bank to leverage its own resources and capacity for greater impact on the ground.

87. Enhance World Bank Group cooperation. The electricity sector is an example of close collaboration between IDA, IFC, and MIGA. IDA worked to restructure the sector and establish the framework for private participation; IFC helped to structure the Private Power Generation (Bujagali) Project, and IDA, IFC, and MIGA financing instruments were combined to realize the financing. The three Bank Group entities also provide joint support to the electricity distribution company, Umeme. During the CAS period, the World Bank Group will further enhance collaboration focusing on three areas: infrastructure (energy and transport); private sector development and business environment; and commercialization of agriculture.

88. Enhance regional integration. The number of regional projects has increased from one project in FY01 to an expected six projects by the end of FY10, reflecting an increasing emphasis on regional integration that will continue under the CAS. The proposed CAS program includes regional analytical work and projects to help Uganda increase growth through regional integration.

89. Strengthen institutional capacity. Lending operations will include components as needed to build or strengthen institutional capacity, including joint analytical work with local think tanks, research centers, and academia (such as the Economic Policy Research Center, Makerere University) to both support and strengthen them. Through an Institutional Development Fund grant (FY10,

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US$500,000), the Bank will also support the Diaspora Division within the Ministry of Foreign Affairs, which aims to use Uganda’s diaspora to build institutional capacity in energy, roads, and railways.

90. Strengthen attention to governance and value for money. Given its cross-cutting nature, governance and value for money is addressed under various CAS outcomes. A Governance Partnership Facility (GPF) Window 1 grant (US$1.48 million) will help intensify attention to governance and anti-corruption (GAC) under this CAS. A Governance Risk Assessment Matrix, which summarizes risks, opportunities, gaps, and planned actions, will be monitored during the CAS (see Annex 14). A core Bank governance team in the Uganda Country Office will meet periodically to assess GAC initiatives and adjust them as needed. GAC initiatives to be undertaken during the CAS include: 15

(i) Enhance the focus on governance in sector projects, using them as entry points. The Bank will undertake political economy analysis and sector GAC assessments to design customized approaches to addressing governance risks that impede outcomes. During FY10, a GPF Window 2 grant was used to undertake political economy studies of the health and agriculture sectors, and a GAC assessment of the health and roads sectors. The analyses informed sector dialogue, were integrated into project design, and were used to prepare Governance and Anti-corruption Action Plans (GAAPs) that were adopted by the corresponding ministries. A GPF Window 1 grant provides funds to continue this approach during the CAS period, including for energy (in the context of oil exploitation) and local government/decentralization (in the context of moves towards recentralization and increased challenges to effective service delivery). GAAPs will be reassessed after one year of implementation.

(ii) Continue to build demand-side mechanisms into project design. Five out of the sixteen ongoing IDA-financed investment projects already include demand-side mechanisms, such as citizen report cards. Demand-side mechanisms will be used during the CAS period whenever feasible. In addition, the Bank will test third-party monitoring of project implementation and results by a civil society organization.

(iii) Increase transparency and disclosure of project activities to encourage citizen monitoring. In response to views expressed at CAS consultations, the Bank will increase public communication to ensure that project beneficiaries have access to information about budgets, contracts, and expected results. The Bank will initiate this approach with selected operations: Agriculture Technology and Agribusiness Advisory Services; Health Systems Strengthening; and Northern Uganda Social Action Fund II.

(iv) Launch a Data Tracking Mechanism (DTM)—a GAC monitoring tool using actionable and country-specific indicators. The DTM was designed to use national data, such as reports of the Auditor General, the Inspector General, and the Budget Monitoring Unit. During a workshop in April 2010, government and DPs agreed to use the DTM to track corruption trends. The DTM will be managed by an independent research institute.

91. Mainstream gender within CAS outcomes. The CAS addresses gender concerns identified in the NDP, focusing on four areas: agriculture, girls’ education, private sector, and reproductive health, which are captured in the CAS Results Framework.

15 The Bank’s Country Team discussed GAC initiatives at a Governance Workshop in Kampala in December 2009.

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B. IDA Resources

92. IDA resources under the FY11-15 CAS are estimated at about SDR1.3 billion (US$1.97 billion equivalent). The CAS covers the last year of IDA15 (FY11), the three years of IDA16 (FY12-14), and the first year of IDA 17 (FY15). Uganda’s indicative IDA allocation in FY11 (before front-or back-loading in FY09-10) is SDR 252 million (about US$385 million equivalent). Given an expected slight back-loading of IDA resources in FY10, the available resource in FY11 is estimated to be SDR256 million (US$390 million equivalent). An estimated average annual allocation of about SDR 252 million (US$385 million equivalent) would also be available during each year in FY12-FY15, assuming that the IDA 16 and 17 replenishments will provide as much IDA resources as the IDA 15 replenishment. The estimates for FY11-15 are indicative only and can change depending on: (i) total IDA resources available; (ii) the country’s performance rating; (iii) the number of IDA eligible countries; (iv) the performance and assistance terms of other IDA-eligible countries; and (v) the terms of IDA’s assistance to Uganda (grants or credits), which are determined annually and based on the risk of debt distress. IDA allocations are made in SDRs based on performance, and the US$ equivalent is dependent upon the prevailing exchange rate. Uganda could also potentially access IBRD for enclave projects, such as rehabilitation and expansion of the railway network.

93. The government can increase its IDA allocation by improving its Country Performance Rating, as measured by the Country Policy and Institutional Assessment (CPIA) and a portfolio performance rating. Uganda performs better than average for IDA countries (and the Africa region) on economic management (macroeconomic, fiscal, budget, and structural management). However, Uganda performs average or below average on service delivery, public sector management, efficiency of revenue mobilization, quality of public administration, and transparency, accountability and corruption.

C. CAS Outcomes and the Proposed Program of Support

94. To support the NDP, the CAS will focus on three strategic objectives, one cross-cutting objective, and eleven outcomes. The relationship between CAS strategic objectives and outcomes is shown in Figure 1.

CAS Instruments

95. Analytical and advisory activities. AAA will include: core diagnostic economic and sector work (ESW); ESW to underpin lending; and technical assistance (TA) and just-in-time policy notes as requested. As done effectively under the UJAS, the Bank will use AAA to expose development bottlenecks. The Bank will also use AAA to underpin its enhanced engagement on governance issues. There will be increased emphasis on results-based AAA and on dissemination of ESW to generate political debate and stimulate demand for more efficiency. In undertaking AAA, the Bank will emphasize government ownership and donor partnership to ensure that findings are translated into actions and results. A tentative AAA pipeline is shown in Table 2 and Annex 15). A CAS Progress Report (FY13) will identify AAA for FY 2013-15.

96. IDA-financed operations. To achieve CAS outcomes, the World Bank will finance investment operations, adjustable program loans (APLs), development policy operations, regional operations, and additional financing to scale up successful interventions. A tentative lending pipeline is shown in Table 3 and Annex 16. IDA lending by CAS objective is shown in Annex 17. A CAS Progress Report will define the IDA portfolio for FY 2013-15 based on an updated analysis of needs and priorities.

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Figure 1: CAS Strategic Objectives and Outcomes

97. Budget support. Development policy operations are expected to account for about one third of IDA financing under this CAS, as was the case under the UJAS.16 PRSC-8, which is planned for early FY11, is the start of a new PRSC series within a Joint Budget Support Framework (see Box 7).17 The new series, PRSCs 8-11, will focus on improving efficiency and value for money in the delivery of core public services, recognizing that strengthened accountability and efficiency of public spending is critical for the effective utilization of future oil revenues. To this end, the PRSCs will support (i) effective delivery of healthcare, education, water supply and sanitation, and road construction and maintenance; and (ii) complementary reforms in procurement, budget planning and execution, public sector management, public financial management, and decentralization. The PRSCs will build on recent public expenditure reviews, which identified binding constraints to service delivery.

98. Trust Funds. Continuing the trend under the UJAS, trust funds are expected to grow in both volume and strategic importance during the CAS period. Two recently-approved trust funds provide cross-cutting support to NDP and CAS outcomes: a US$1.48 million grant for recipient-executed

16 The volume and nature of budget support will be reassessed, as needed, during the CAS period within the JBSF. 17 PRSC-8 was originally planned for Board delivery in late FY10, but has been shifted to FY11 due to delays in a prior action involving amendments to the procurement law.

CAS Strategic Objective 1: 

Promote Inclusive and Sustainable Economic 

Growth

CAS Outcome 1.1: Improved conditions for private sector 

growth

CAS Outcome 1.2: Improved 

interconnectivity for regional integration

CAS Outcome 1.3: Increased 

productivity and commercialization of 

agriculture

CAS Outcome 1.4: Increased efficiency and sustainability of natural resource management 

CAS Strategic Objective 2: Enhance Public Infrastructure

CAS  Outcome 2.1: Increased access to 

electricity

CAS Outcome 2.2: Improved access to and quality of roads

CAS Outcome 2.3: Increased access to and quality of water 

and sanitation services

CAS Outcome 2.4: Improved 

management and delivery of urban 

services

CAS Strategic Objective 3: Strengthen Human Capital Development

CAS Outcome 3.1: Improved access  to 

and quality of primary and post‐primary education

CAS Outcome 3.2: Strengthened health 

care delivery

•CAS Outcome 4.1: Strengthened accountability and  efficiency of financial and human resource management

CAS Cross‐Cutting Objective 4: Improve Good Governance and 

Value for Money

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activities under the Governance Partnership Facility will be utilized to enhance the focus on governance during the CAS period; and a US$12 million programmatic trust fund financed by the United Kingdom’s (UK’s) Department for International Development (DFID) will support the government’s implementation of the NDP. A third, multi-donor trust fund, is being established to undertake analytical activities related to the Joint Budget Support Framework (JBSF), thereby informing the dialogue with the government and providing a platform for harmonized DP positions. In addition, trust funds will provide cofinancing for Bank operations, such as the Northern Uganda Social Action Fund II and the Transport Sector Development Project. Trust funds, such as Global Partnership for Output-Based Aid (GPOBA) and the Netherlands Trust Fund Africa Renewable Energy Access Program, will also help pilot innovative approaches that can be scaled up under IDA-financed operations. The Water and Sanitation Program (WSP) will continue supporting sanitation and improving service delivery to the poor in urban areas.

Table 2: Proposed Analytical and Advisory Activities, FY10 and FY11-15

Fiscal Year Technical Assistance and Economic and Sector Work

2010

Joint Staff Advisory Note (JSAN) on PRSP PER: Strengthening the Impact of the Roads Budget TA: Governance and Anti-Corruption TA: PPP and Capital Markets

2011

PER: Public Investment Programming CEM Follow Up: Making Growth More Inclusive Water Country Assistance Strategy Financial Sector Assessment Program Policy Notes: Petroleum Sector Regional Integration, Trade, and Growth in the Great Lakes Programmatic TA: Governance and Anti-Corruption

2012

PER: Decentralized Service Delivery Youth Transition to Work Demography and Growth TA on Water for Production Tourism Policy Notes: Petroleum Sector Programmatic TA: Governance and Anti-Corruption

2013

PER (focus TBD) Agricultural Sector Review Policy Notes: Petroleum Sector Programmatic TA: Governance and Anti-Corruption

2014 CEM (focus on petroleum sector) PER (focus TBD) Programmatic TA: Governance and Anticorruption

2015 PER (focus TBD) Programmatic TA: Governance and Anticorruption

Note: A CAS Progress Report (FY13) will define the FY13-15 AAA program.

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Table 3: Proposed IDA Financing, FY10 and FY11-FY15

Fiscal Year Amount (US$ million)

Proposed Operation

2010

10 190 120 130 3.3

Regional: East Africa Agricultural Productivity (approved Nov. 12, 2009) Transport Sector Development (approved Dec. 10, 2009) Agriculture Technology and Agribusiness Advisory Services Health Systems Strengthening (includes $30 million CRW) Regional: East Africa Public Health Laboratory Networking

Total (FY10) 453.3* *Includes US$30 million Crisis Response Window (CRW) funds

2011

Subtotal (FY11)

120 100

90 120 430*

Poverty Reduction Support Credit 8 (PRSC 8) (includes $40 million CRW) PRSC 9 Electricity Sector Development Project Transport Sector Development Additional Financing *Includes US$40 million Crisis Response Window (CRW) funds

2012

Subtotal (FY12)

100 150 30

100 25 30 435

PRSC 10 Municipal Infrastructure Development Petroleum Sector Support (infrastructure for areas with oil resources) Power Sector Support Regional: East African Transport Links Regional: Communications Infrastructure Program

2013

Subtotal (FY13)

100 100

130 50 40 50 470

PRSC 11 Post-Primary Education APL II (incl. vocational training and skills dev.) Water Sector Development and Management Private Sector Competitiveness III Kampala Institutional and Infrastructure Development Project APL II Forestry/Natural Resource Management

2014

Subtotal (FY14)

100 50 130 115

40 435

PRSC 12 Agriculture Sector Support Transport Sector Development Project II Local Government Management and Capacity Building APL II Energy for Rural Transformation APL III

2015

Subtotal (FY15)

100 100 200

PRSC 13 Northern Uganda Integration and Growth

Total (FY11-15) 1,970

Notes: (1) IDA financing amounts are indicative only. (2) Additional financing (AF) for ongoing projects will be considered based on (i) IDA availability; and (ii) government

priorities and needs. Potential candidates for AF include: Private Sector Competitiveness II; Millennium Science; Local Government Management and Capacity Building APL I; and Public Service Performance and Enhancement Project.

(3) Regional projects are funded one-third from the country IDA envelope and two-thirds from the regional IDA envelope. The amounts shown above are those from the country IDA envelope only.

(4) A CAS Progress Report (FY13) will define the FY13-15 lending program. Budget support in FY12-15 depends on an assessment of country performance, including governance and anti-corruption.

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Box 7: A New Joint Budget Support Framework

The government and development partners (DPs) approved, for the first time, a Joint Budget Support Framework (JBSF) in October 2009, to reduce the transaction costs of budget support for the government, increase the predictability of disbursements, and create a stronger and more consistent policy dialogue that fosters mutual accountability in line with the Paris Declaration on Aid Effectiveness.

JBSF partners. There are 12 JBSF partners, three multilateral DPs (the African Development Bank, European Commission, World Bank), and nine bilateral DPs (Austria, Belgium, Denmark, Germany, Ireland, the Netherlands, Norway, Sweden and the United Kingdom). JBSF partners combined are expected to disburse over US$300 million per year, with the Bank accounting for about one third of the total.

JBSF governance structure. It is two tiered:

A DP Policy Committee meets regularly and engages with the government at an annual high-level forum;

At the working level, the JBSF Technical and Policy Dialogue Taskforce meets frequently to coordinate the design and implementation of the JBSF and conduct an annual assessment of performance.

A multi-donor trust fund managed by the Bank will be used to establish a Technical and Administrative Support Unit, to provide administrative support and generate high-quality technical and analytical work.

Joint Assessment Framework (JAF). The JAF is developed and agreed by the government and JBSF DPs, and is used by DPs to assess the government’s performance in agreed areas. The assessment of performance will form the basis for DPs’ disbursement decisions. The JBSF also ensures timely disbursement by DPs.

D. Strategic Objective One: Promote Inclusive and Sustainable Economic Growth

99. The Bank will focus on four outcomes to promote inclusive and sustainable growth. To improve conditions for the private sector, the Bank will support government efforts to improve land registry, streamline regulations, and deepen the financial sector. The Bank will also help Uganda maximize the benefits of regional integration, including by decreasing non-tariff barriers, such as transit time through the northern corridor. Bank support will help farmers adopt new technologies to increase yields and the share of production marketed, with outreach to female farmers to increase their access to advisory services. To address the sustainability of growth, the Bank will support improved land use management, reforestation, and promulgation of environmental regulations relating to oil and gas policy.

CAS Outcome 1.1: Improved conditions for private sector growth

100. Analytical underpinnings. An Investment Climate Assessment (FY09) based on a 2006 survey pointed to lack of electricity and cost and unavailability of financing as key business constraints. The Bank’s “Making Finance Work for Uganda” (FY09) explored issues relating to access to finance and development of term finance, highlighting the need for pension sector reform. Under the CAS, the Bank’s policy dialogue will support financial sector and pension system reforms to improve access to financial services, and the preparation and implementation of a financial market strategy. The Bank and IMF plan to undertake a Financial Sector Assessment Program (FSAP) in FY11 or FY12. A study on “Youth Transition to Work” (FY12) will use updated panel data and new quantitative data to analyze constraints faced by youth in making the transition to work and identify effective approaches to address these constraints, paying special attention to gender and post-conflict issues.

101. Expected results of IDA-financed operations. The ongoing Second Private Sector Competitiveness Project (PSCP II, FY05) aims to improve enterprise growth (including outreach to women entrepreneurs), business registration and licensing procedures, transparency and efficiency of land registry (including lowering the time it takes to register property), and access to financial services; and it supports the establishment of the Kampala Industrial Business Park. Under the

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CAS, additional financing (US$20 million, FY11) may be used to scale up the land registry component; and a planned PSCP III (US$50 million, FY13) will finance activities to increase tourism, youth employment, and exports of nontraditional commodities.

102. Expected results of regional operations. The Bank and the EAC Secretariat are discussing a first and second EAC Financial Sector Regionalization Project (EAC FSRP I, FY11, covering the first year; EAC FSRP II, FY12, covering years two through six) to establish a single market in financial services among EAC members, following up on the signature of the EAC Common Market Protocol in November 2009.

103. Expected results from trust funds. Trust funds will be used for targeted support linked to project outcomes. A grant from the DFID Trust Fund for NDP Support will help the government establish a new pension system regulatory framework, including a new Uganda Retirement Benefit Authority. A grant from the Public-Private Infrastructure Advisory Facility is financing technical support for the establishment of a PPP unit. The DFID Trust Fund may also be used to prepare a detailed work program for the new PPP unit and build its capacity, and to develop a more focused private sector competitiveness strategy and a system to monitor investment climate and doing business indicators.

104. IFC. IFC has provided lines of credit and advisory services to commercial banks for on-lending to SMEs, with a focus on expanding access to credit for women entrepreneurs, and has undertaken an advisory program to develop mortgage lending. In support of PSCP II, IFC is providing assistance on investment promotion and an investment climate reform program that covers licensing, regulatory reform, business taxation, and other areas tracked in the Doing Business indicators. IFC will assist viable investments in the Kampala Industrial and Business Park.

105. MIGA. During the CAS period, there will likely be opportunities for MIGA to support foreign direct investment in the agribusiness, manufacturing, services, and energy sectors. Projects will be supported on an as-needed basis. Given the typical size of transactions in these sectors, MIGA would likely support some of these projects under its Small Investor Program (SIP). At MIGA, SIP projects have individual (gross) exposures of less than US$10 million and are normally approved in less than two months given their streamlined procedures.

106. Development partners. DPs coordinate their activities through a Private Sector Development Working Group co-chaired by the Bank. DPs supporting private sector development include: the Danish International Development Agency (DANIDA), DFID, the European Commission (EC), the German Agency for Technical Cooperation (GTZ), Ireland, Norway, and the United States Agency for International Development (USAID).

CAS Outcome 1.2: Improved interconnectivity for regional integration

107. Analytical underpinnings. The Bank recently launched “Regional Integration, Trade and Growth in the Great Lakes Region of Africa” (FY11), financed mainly by a grant from the Multi-donor Trust Fund for Trade, to produce policy notes on measures to facilitate trade and increase future growth.

108. Expected results of IDA-financed operations. The ongoing East Africa Trade and Transport Facilitation Project (FY06) finances the construction of one-stop border posts between Uganda and Kenya and Uganda and Rwanda, which is expected to reduce the transit time through the Northern Corridor from Mombasa to Kigali. The project also supports the concessioning of the Mombasa to Kampala railway to a private operator and the preparation of a feasibility study to

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upgrade the Tororo–Pakwach line. The project will be restructured and may require additional financing. The Bank and IFC plan to work jointly with the EAC and the African Development Bank (AfDB) to help formulate regional regulatory and legal frameworks to facilitate sound railway operations. When a comprehensive railway plan for the EAC is completed, the World Bank Group could advise on prioritization and financing, including possible use of IBRD funds in addition to use of IDA resources and other World Bank Group resources. A proposed East Africa Transport Links (US$25 million for Uganda, FY12) will help improve Lake Victoria transit. Uganda is expected to join the Regional Communications Infrastructure Program (RCIP) (FY12, US$70 million, of which US$30 million from Uganda’s IDA allocation), which will provide funding for ICT infrastructure and various e-government activities to lower the cost of communications and improve transparency and efficiency of government services.

109. IFC. The Rift Valley Railways (RVR) line from Kampala to Mombasa was privatized in 2006 with advisory assistance from IFC. Two 25-year concessions were signed by the Governments of Kenya and Uganda and IFC subsequently provided loans to the concessionaire. However, owing to ongoing problems with RVR management and performance, IFC loans were not fully disbursed. IFC has worked to ensure the success of the concession, with the introduction of a new sponsor group which will inject additional equity and bring onboard experienced rail operators as managers. Once the restructuring is finalized, IFC will continue its financial support to the railways under the existing project, with MIGA willing to consider guaranteeing the equity investment. In telecommunications, IFC is supporting the East African Submarine Cable System to connect East African countries to the rest of the world via high bandwidth fiber optic cable.

110. MIGA. As part of its commitment to Africa's regional integration agenda, MIGA may be asked to provide guarantee support for the Kenya/Uganda railway, depending upon the pace of ongoing commercial negotiations. IFC and the Bank are already supporting this project with loans and guarantees, respectively, thus MIGA is working closely with both to ensure effective coverage.

111. Development partners. In the ICT sector, the Government of China is financing the development of the national ICT backbone network, the first phase of which was completed in 2008 although it is still not fully operational. The second phase is under implementation.

CAS Outcome 1.3: Increased productivity and commercialization of agriculture

112. Analytical underpinnings. The Sustainable Land Management PER (FY08) and the Agriculture PER (FY09) informed the Development Strategy and Investment Program (DSIP) of the Ministry of Agriculture, Animal Industry, and Fisheries. Following agreement on the DSIP, government and DPs signed the Comprehensive African Agricultural Development Program (CAADP) compact in March 2010. The DSIP provides the strategic framework for the Bank’s future lending. During the CAS, the Inclusive Growth ESW (FY11) will identify constraints to agricultural commercialization and inclusive agricultural growth. Once agricultural census results are available (FY13), the Bank will undertake additional AAA to inform lending and the policy dialogue. TA on water for agricultural production will be undertaken during the CAS period (FY13).

113. Expected results of IDA-financed operations. The Agriculture Technology and Agribusiness Advisory Services Project (ATAAS, US$120 million, FY10), building on the Second Agricultural Research and Training Project, which closed in June 2009, and the National Agricultural Advisory Service Project (NAADS), which closed in December 2009, will lead to increased agricultural yields and shares of farm production marketed. The ongoing Northern Uganda Social Action Fund II will complement ATAAS by helping IDP returnees and other vulnerable groups in northern Uganda re-start agricultural activity and become eligible for advisory services. The Bank and

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government are discussing a new project (US$50 million, FY14) to address other priority areas for public investment identified in the DSIP, which could include irrigation, animal health, pest control, food safety, and quality assurance.

114. Expected results from trust funds. The ATAAS will be supplemented by a US$7.2 million GEF grant to promote sustainable land management and help respond to climate change. In addition, a DFID Trust Fund grant of about US$1 million will provide TA for DSIP implementation.

115. Regional integration. In FY10, Uganda joined the East Africa Agricultural Productivity Project (US$30 million), which focuses on the regional aspects of agricultural research and technology promotion, complementing the ATAAS.

116. IFC. The Bank and IFC will work together to identify actions to promote more rapid commercialization of agriculture. Potential joint activities include: (i) input production (investments in domestic/regional fertilizer production, support to seed companies and agro-input providers, PPPs for provision of key inputs and services, and support to private sector investors on irrigation); (ii) output marketing (support to outgrowers and PPPs for storage facilities); (iii) processing/value addition (support for agri-business and expansion of PPPs in value chains); and (iv) exports (investments in exporters and support related to infrastructure, trade finance, and logistics/handling infrastructure).

117. Development partners. An Agriculture Sector Working Group plays a strong role in coordinating support for the agriculture sector, aligned with the CAADP. Both the ATAAS and the proposed Agriculture Sector Support Project are envisaged to be funded through a “basket fund” using a SWAp approach with other active DPs in the sector. Three DPs will together provide about US$41 million to the ATAAS basket: DANIDA (US$7 million), EC (EUR 15 million), and the International Fund for Agricultural Development (IFAD, US$14 million). In addition, DANIDA and USAID provide substantial off-budget support for commercializing agriculture.

118. Governance/value for money. GAC-related risks of ATAAS are high, given charges of misuse of funds under NAADS. Consequently, the government and IDA have designed ATAAS to strengthen management, enhance accountability, and minimize corruption risks. ATAAS includes a Governance and Anti-Corruption Action Plan. The Agriculture PER (FY09) included a value for money analysis that also informed the design of ATAAS.

CAS Outcome 1.4: Increased efficiency and sustainability of natural resource management

119. Analytical underpinnings. Oil and gas: The Bank will prepare just-in-time policy notes (FY11, FY12, FY13) on petroleum-related subjects and the experiences of other countries, which could include: fiscal federalism; establishment of a petroleum training center; oil production in environmentally sensitive areas; and development programs for local communities in oil-affected areas. Water resources: The Bank and the government are preparing a Country Water Resources Assistance Strategy (FY11) to identify entry points for Bank engagement in the water sector to reduce existing water-related vulnerability of the economy and enhance the positive impact of water on growth and poverty reduction. Follow-on TA during the CAS period will include support to the government for advancing its Water Strategy and Investment Planning (FY13), and mainstreaming climate resilience in water resources planning and management (FY14), building on earlier Bank work on water and climate change. Environment: A study on environment and growth—as a stand- alone ESW or to be included in the Inclusive Growth ESW (FY11)—will help identify environmental and natural resource management priorities as a basis for informing a possible Bank investment aimed at protecting and conserving natural resources including forestry.

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120. Expected results of IDA-financed operations. The broad-based Environmental Management and Capacity Building II (EMCBP II, FY01) helps establish the institutional and legal framework for national and local-level environmental management. Additional financing (FY09) is supporting afforestation, improved municipal solid waste, and the establishment of environmental standards for oil and gas exploration and production. The ongoing Sustainable Management of Mineral Resources Project (SMMRP, FY04) and additional financing (FY09) strengthens government capacity to manage the sector responsibly, supports artisanal and small-scale mining communities, and lays the foundation for future investment through high tech geological mapping and a modern transparent mining rights system. Based on the findings of the Country Water Resources Assistance Strategy and the government’s Water Resources Assessment and Strategy, the Bank and government plan to prepare a Water Sector Development and Management Project (US$130 million, FY13) to invest in strategic urban water supply and sanitation systems (see para. 140) and help the government operationalize water management zones. The Bank and the government are discussing possible IDA support for the petroleum sector, which could include support for towns and municipalities in the petroleum-affected area.

121. Carbon-finance operations. Uganda has developed about a dozen Clean Development Mechanism projects that bring global resources to mitigate climate change and support local sustainable development priorities. Uganda was one of the pioneering countries to develop a project with the Prototype Carbon Fund with the West Nile Electricity Project. Another carbon operation involves the management and composting of waste in several small, growing cities across the country. Uganda is also implementing a highly replicable community-based timber replanting project. Carbon resources can also help projects that use biomass co-generation to generate heat and electricity to supply the nation's electricity grid using renewable resources, such as bagasse generation from sugar mills.

122. Regional integration. Given the transboundary nature of Uganda’s water resources, there are numerous regional activities under the Lake Victoria Environmental Management Project (LVEMP) and the Nile Basin Initiative (NBI), in which Uganda has been involved for ten years. Work under the second phase of LVEMP (US$27.5 million to Uganda) includes strengthening institutional capacity for water and fisheries management, point source pollution control and prevention, and watershed management in the Katoga river catchment.

123. Development partners. The Bank works with a number of sector working groups on various natural resource management issues, including the Environment Sector Working Group and the Water Sector Working Group. The Bank has proposed the establishment of a Petroleum Sector Working Group to improve the flow of information and ensure harmonized DP support. Norway, the lead DP in the petroleum sector, is implementing a three-year US$15 million program based on three pillars: resource management, revenue management, and environmental management. The IMF is also providing support on petroleum revenue management; and the AfDB is providing support on infrastructure. The UN is currently developing a joint program on climate change.

124. Governance. The SMMRP is improving minerals sector governance by building institutional capacity and implementing a new mining cadastre system. There is now revenue transparency at the local level though publication of the share of royalty income to local governments. Revenue transparency at the macro level has been agreed to in principle but Uganda has not yet embraced the Extractive Industries Transparency Initiative (EITI) process as a means to achieve this. EITI would also provide a multi-stakeholder forum for more effective dialogue with civil society on both mining and oil revenues and sector concerns.

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Box 8: Climate Change in Uganda

Impact on Uganda: Uganda’s exposure to climate change risk is moderate. Models by the Intergovernmental Panel on Climate Change predict Uganda to get wetter and hotter. Climate change risks are associated mainly with increased frequency and severity of floods and droughts, and associated natural disasters, such as landslides, erratic rain and weather patterns, and spread of malaria to higher elevations due to increase in temperature.

The CAS will take a two-pronged approach to climate change: Consistent with the Africa Region Climate Change Strategy, the CAS will support actions that make Uganda’s economy more resilient to climate risks. Actions will comprise: (i) mainstreaming of adaptation to climatic changes in sector operations in key productive sectors; and (ii) targeted interventions for priority adaptation or mitigation issues (for example, in forestry or climate resilient infrastructure in Kampala). In addition, the Global Facility for Disaster Reduction and Recovery is financing regional technical assistance (Climate Observations and Regional Modeling in Support of Climate Risk Management and Sustainable Development Country: Eastern Africa) to help countries, including Uganda, better prepare in managing risks associated with climate change.

Adaptation: Adaptation will be mainstreamed through sector operations, including agriculture, transport, municipal infrastructure, and water resource and watershed management.

Mitigation: Mitigation of greenhouse gas emissions will target one of the most significant sources of greenhouse gas emissions in Uganda—deforestation and forest degradation—and will be implemented through a forestry or natural resource management operation and through support for renewable energy.

Coordination and technical assistance: An overwhelming number of donor initiatives on climate change and limited capacity of sector ministries to respond to climate change require both strengthened donor coordination and targeted technical assistance to the government. Both will be supported through the DFID Trust Fund for NDP Support and draw on recent work by GTZ to map climate actors in Uganda. The DFID Trust Fund for NDP Support and Country Environmental Analysis trust fund may also support studies on economic impacts of climate change and environmental degradation on Uganda to inform targeting of the investment interventions. In addition, the Uganda Water Resources Assistance Strategy will study climate change risks to water resources.

E. Strategic Objective Two: Enhance Public Infrastructure

125. The Bank will support Uganda’s effort to address its most binding constraint to growth—poor infrastructure. CAS interventions in the energy sector aim to reduce unmet demand for electricity and increase the rural population’s access to electricity, including through renewable energy. The CAS program also aims to increase the percentage of national roads in good condition, while rehabilitating key corridors that will help reintegrate northern Uganda and facilitate trade with neighboring countries; and it aims to increase the rural population’s access to all-season roads. Expected results in the water sector include increasing the percentage of the population with access to an improved water source, and the percentage of households with access to safe and effective sanitation. The Bank will provide support to strengthen institutions and improve infrastructure and services in cities and towns to facilitate spatial agglomeration needed for structural transformation.

CAS Outcome 2.1: Increased access to electricity

126. Analytical underpinnings. The government has pursued rural electrification in accordance with the Rural Electrification Framework (2001-2010). The government will prepare a new Rural Electrification Strategy (2011-2010) to accelerate access to electricity from the current low level. The Ministry of Energy and Mineral Development and the Bank will collaborate on a diagnostic study (possibly financed by the DFID Trust Fund for NDP Support) to inform the new Rural Electrification Strategy.

127. Expected results of IDA-financed operations. There is substantial World Bank Group support for energy, exceeding US$700 million including guarantees, which will continue under the CAS. The 250 megawatt Bujagali hydropower station, supported by IFC, MIGA, and an IDA Partial

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Risk Guarantee (PRG), is expected to be commissioned in April 2012. The ongoing Energy for Rural Transformation Program APL II (US$75 million IDA, US$8 million GEF, FY09), is part of a three-phase APL to expand rural electricity access from the current less than 5 percent to 10 percent (400,000 new connections) by 2015 in addition to supporting the development of at least 40 megawatts of renewable energy. The ongoing Power Sector Development Operation (US$300 million, FY07) is supporting short-term investments (emergency thermal generation and energy efficiency activities) to overcome power generation shortfalls and financing gaps so as to stabilize the sector in addition to sector policy changes needed to promote its sustained future expansion. An ongoing component of the Privatization and Utility Sector Reform Project (US$5.5 million IDA PRG, FY01) supports the concession of electricity distribution to Umeme.

128. The proposed Electricity Sector Development Project (US$90 million, FY11) will increase electricity supply by financing improvements to the transmission grid system. Additional power sector support (US$100 million) is programmed in FY12. The Energy for Rural Transformation Program APL III (US$40 million, FY14) will focus on implementing the new Rural Electrification Strategy to increase access to electricity and build necessary institutional capacity. Additional funds for ERT III may be leveraged from other DPs to increase the program’s scope. In addition, during the CAS period, the government may request World Bank Group support for one of the major hydropower projects identified as part of government long term sector strategy and cited as national flagship projects in the NDP.

129. Expected results from trust funds. The Energy Sector Multidonor Assistance Program (ESMAP) will support Uganda’s efforts to identify geothermal resources and prepare feasibility studies where possible. Under the Energy for Rural Transformation APL II, IDA and GPOBA funds will be used for an OBA scheme to increase energy access to poor households in rural and peri-urban areas. As part of the Netherlands Trust Fund for the Africa Renewable Energy Access Program, the Biomass Energy Initiative for Africa will finance two pilot projects in Uganda, one involving production of air-controlled top lit updraft stoves by local tinsmiths, and another to use fish waste to produce electricity for a local community. Finally, a Russian Energy for Small and Medium Enterprises Trust Fund is financing studies to assess barriers to private sector initiatives in the development of renewable energy.

130. IFC. In addition to the ongoing support to the Bujagali project, IFC has provided a US$25 million loan to Umeme, the private electricity distribution company, to improve the quality of its service and connect up to 20,000 new customers annually. The IFC loan contributes to Umeme’s US$50 million investment program for 2009 and 2010, which will enable Umeme to upgrade its existing equipment and provide new electricity connections. The company currently supplies power to over 300,000 customers.

131. MIGA. MIGA plans to continue supporting as needed its two guarantees in the energy sector: the Bujagali project guarantee and a US$41 million political risk guarantee to Umeme. Given MIGA’s upstream involvement in the sector and contacts with the energy investor community, it is likely that MIGA will be asked during the CAS period to provide additional cover for the Umeme project as well as cover for new power generation projects. MIGA is, in principle, prepared to extend additional guarantees, given the chronic power shortages in the country and the low rate of access to electricity.

132. Regional integration. The emerging East Africa Power Market offers a long-term opportunity for least cost power in eastern Africa. AfDB and JICA are financing electricity grid interconnections between Uganda-Rwanda and Uganda-Kenya. A planned East Africa Power Pool

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Project will support the development of the newly established Power Pool and further strengthen the backbone lines in Uganda, Tanzania, Kenya and Rwanda. In addition, the Nile Basin Initiative trust fund is financing feasibility studies for the Uganda-DRC and Uganda-Sudan transmission lines. Subject to the feasibility study recommendations, the regional program may support construction of the Uganda-DRC line.

133. Development partners. The key players in the sector include: the Norwegian Agency for Development Cooperation (NORAD), the German Reconstruction Credit Institute (KfW), Japan International Cooperation Agency (JICA), and AfDB – and have provided financing towards generation, transmission network development in addition to rural electrification and technical assistance and capacity building activities. To enhance the cooperation among the development partners and joint support to the sector, the Bank under the ongoing Power Sector Development Operation is supporting the set up and operation of the Energy Sector Working Group led by the Ministry of Energy and Minerals Development. The major objectives of the Sector Working Group are to: align the work within the energy and mineral development sector more closely with national priorities, and strengthen the cross-sectoral links between sector activities and other sectors by adopting a participatory and inclusive planning process.

134. Governance/value for money. The sector faces challenges arising out of the sector’s unbundling with increased private sector participation and relatively young institutions to plan, oversee, and regulate sector activities. Specifically, there are capacity gaps related to preparation of PPPs and negotiation and enforcement of Power Purchase and Concession Agreements. This has tended to dilute the perceived benefits of the ongoing PPPs in the generation and distribution activities. IDA, over the CAS period, will support development of the requisite framework and capacity in the areas of PPPs and project finance so as to leverage the available public financing and at same time ensure value for money.

CAS Outcome 2.2: Improved access to and quality of roads

135. Analytical underpinnings. A PER on Strengthening the Impact of the Roads Budget (FY10) recommends ways to improve the allocation of rural road budgets, and makes detailed recommendations in relation to national roads, including design, land take, procurement, and monitoring and evaluation, to improve value for money and absorption capacity.

136. Expected results of IDA-financed operations. The Government of Uganda has embarked on an ambitious program to scale up road sector investment and IDA is strongly committed to continuing its support. The ongoing Road Development APL III (US$107.6 million, FY05) is 94 percent disbursed and scheduled to close in FY11. Executive Directors approved the Transport Sector Development Project (TSDP, US$190 million) in December 2009 to pave sections of national roads to Southern Sudan (Gulu-Atiak) and north-eastern Democratic Republic of Congo (Vurra-Arua-Oraba), finalizing these corridors to neighboring countries and improving growth prospects in post-conflict northern Uganda. The TSDP is part of a sector-wide approach that finances a three-year (FY11-FY13) time slice of the government’s National Transport Master Plan. Under the CAS, additional financing to the TSDP (US$120 million, FY11) will finance the paving of Kamwenge-Fort Portal in eastern Uganda, complementing work financed by the AfDB, and will improve roads and drainage in Kampala. A second TSDP (US$160 million), planned for FY13 or FY14, will continue to finance the National Transport Master Plan, including phase 1 of the Kampala Bus Rapid Transit.

137. Expected results from trust funds. Through the DfID Trust Fund for NDP Support, the Bank will provide TA to the government on transport issues, including strengthening institutions and increasing absorption capacity.

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138. Development partners. In 2009, government and development partners established the first sector-wide approach (SWAp) for the road sector. As part of the SWAp, DANIDA, EC, and IDA provide coordinated institutional support for the road sector. The government and sector stakeholders hold annual Joint Transport Sector Review meetings and quarterly performance reviews to review progress against targets

139. Governance/value for money. There is growing negative public perception of road sector procurement and quality control. A GPF Window 2 grant financed a GAC diagnostic for the transport sector and the development of a Governance and Anti-Corruption Action Plan (GAAP) for the TSDP. A sector-wide GAAP for the transport sector is under preparation and will be a key element of future Bank support.

CAS Outcome 2.3: Increased access to and quality of water and sanitation services

140. Analytical underpinnings. The Bank has had a long standing engagement in the water supply and sanitation sector, supporting many of the key reforms that have led to the sector’s turnaround. A study on “Environmental Sanitation in Uganda: Addressing Institutional and Financial Challenges” (FY10) highlights the need to integrate budgets for sanitation and hygiene; address institutional bottlenecks that underlie sanitation and hygiene promotion; and remove institutional constraints that hinder solid waste management and drainage services. In FY11, the Bank will conduct a study of “Ten Years of Budget Support to Improve Rural Water Supplies and Sanitation in Uganda.”

141. Expected results of IDA-financed operations. Over the past decade, the Bank has mainly supported rural water supply and sanitation through the PRSC and the Northern Uganda Social Action Fund. A proposed integrated Water Sector Development and Management Project (US$130 million, FY13) will finance investments in water supply and sanitation in a number of priority towns and cities, including several of the municipalities included in the Municipal Development Program (FY12).

142. Expected results from trust funds. Two Output-Based Aid (OBA) water pilots will be completed within the CAS period: one involving small local private operators in small towns and rural growth centers, and the other involving expanding access to the urban poor through the National Water and Sewerage Corporation. Results so far have been encouraging; and the government and DPs are considering scaling-up OBA. During the CAS period, the WSP will provide TA for a large-scale rural sanitation program addressing the enabling environment, local government capacity building, and private sector participation. The WSP will continue to support the implementation of large-scale sanitation programs in districts and helping to deliver sanitation and improved water services to the poor in small towns.

143. IFC. Under the Small Scale Infrastructure Program in Water, IFC is providing advisory assistance to the Ministry of Water and Environment and selected local governments to establish PPP structures that encourage private water operators. The program is proceeding with a pilot in Busembatia, has developed a generic PPP contract for replication in other towns, and has conducted training for officials from 24 local governments. IFC is also working with Ugandan banks to stimulate interest in commercial financing for the private operators, which would complement concessional funding for a substantial portion of capital costs.

144. Regional integration. WBI has recently initiated steps to build a regional training hub in Kampala, around the Water Academy established with NWSC support. The intention is to develop a cadre of trained middle to senior managers in the region. Other related operations are the NBI and

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LVEMP (US$27.5 million to Uganda) which address water resources related issues, but include some element of water supply investments.

145. Development partners. The Bank is engaged in the Water Sector Development Group. This effort has largely been focused on ensuring the success of budget support mechanism including the PRSC. The Bank is working with ten other DPs to develop the PRSC and budget support mechanism. It is also working with the AfDB, KFW, EC and DFID to review options for support to NWSCs highly urbanized towns. UNICEF has a water and sanitation component as part of its “Keep Children and Mothers Alive” program.

146. Governance/value for money. WSP and the World Bank have supported a Water Integrity Scan, which has led to an Action Plan on Good Governance; and the GPF Window 1 grant will support its implementation. WBI is helping the government pilot community and citizen score cards to promote better governance.

CAS Outcome 2.4: Improved management and delivery of urban services

147. Analytical underpinnings. Cities Alliance is supporting the development of a national urban policy and strategic urban development plan, which will provide a framework for interventions in the urban sector.

148. Expected results of IDA-financed operations. The Bank is committed to long-term support for Kampala, secondary cities, and local governments through APLs. The ongoing Kampala Institutional and Infrastructure Development Project APL I (KIIDP, FY08) will improve urban planning and management in Kampala. The Transport Sector Development Project (TSDP, FY10) finances detailed designs for a Bus Rapid Transit in Kampala and provides support to establish a Metropolitan Area Transport Authority. Additional financing to TSDP (US$130 million, FY12) will provide further support for Kampala roads and drainage. A proposed Municipal Infrastructure Project (US$150 million, FY12) aims to improve management and accountability of thirteen secondary cities to enable urbanization and structural transformation.

149. Expected results from trust funds. A recently-approved Cities Alliance grant (US$4.2 million) for the government’s “Strategy for Transforming Settlements of the Urban Poor in Uganda” aims to help develop inclusive national urban development policies and strategies and begin improving urban institutions and management in five municipalities, laying the foundation for the proposed IDA-financed Municipal Infrastructure Project.

150. Development partners. The Bank is engaged in the Decentralization Sector Working Group, which also includes Belgium, the EC, Ireland, the Netherlands, and UNDP. The UNDP has provided US$250,000 to the government for urban sector baseline surveys, which will be used to formulate the national urban policy and strategy. JICA is working with the government to improve urban roads and traffic flow in Kampala.

151. Governance/value for money. The Bank has provided support for the development of a good governance and anti-corruption strategy at the local government level; and its implementation is supported by the Local Government Management and Service Delivery APL I. Under KIIDP, the Bank has introduced citizen report cards as a tool for designing and monitoring investment projects and to improve transparency and accountability to the citizens of Kampala.

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F. Strategic Objective Three: Promote Human Capital Development

152. The CAS supports higher access to and quality of education and health care to improve human development indicators and enable the transformation of the economy. In education, expected results are increased percentages of students reaching literacy proficiency in government-aided schools, and a higher average national gross enrollment rate for lower secondary education, both with particular attention to girls’ schooling, which is expected to lower the fertility rate and maternal mortality. To decrease maternal mortality, expected health care results include a higher percentage of deliveries taking place in government and private not-for-profit health centers and a higher contraceptive prevalence rate.

CAS Outcome 3.1: Improved access to and quality of primary and post-primary education

153. Analytical underpinnings. The Bank’s support is informed by the PER (2007), which focused on education. The ongoing Universal Post-Primary Education and Training Program APL I includes financing for analytical work to inform future policy and IDA support, such as double-shift instruction and public-private partnerships in the provision of lower secondary education.

154. Expected results of IDA-financed operations. The ongoing Universal Post Primary Education and Training Program (UPPET) APL I (US$150 million, FY09) supports expanded access to lower secondary education, including reforms to improve quality, efficiency, management capacity, and rationalize staffing. The UPPET also supports the preparation of a strategy for business, technical, and vocational education and training. UPPET APL II (US$100 million, FY13) will strengthen reforms to improve access to and quality of lower secondary education, leading to increases in gross enrollment from 28 percent to 40 percent by 2012, will provide strategic support for improving upper secondary education, and will help support the findings of the strategy for business, technical, and vocational education and training. The ongoing Millennium Science Initiative (US$30 million, FY07) supports high quality scientific research awarded through a transparent and competitive process, technology-based innovation and its adoption by the private sector, and an outreach program to support science education. The Bank could provide additional financing if requested to continue support for annual research grants. The Bank is also supporting education through multisectoral operations: the ongoing Local Government Management Support Project and Northern Uganda Social Action Fund II provide demand-driven financing at the local level to improve access to education, and the PRSC series focuses on improving public service delivery at the local government level, including quality of primary education.

155. Expected results from trust funds. Through the Education Program Development Fund, the Bank is supporting the government to refine and rationalize its Education Sector Strategic Plan and prepare a proposal for submission to the Fast Track Initiative Catalytic Fund to help meet the financing gap to achieve universal primary education.

156. Governance/value for money. The Education Sector PER and follow-up work, such as the Human Resource Management Actionable Governance Indicators study, highlighted sector governance challenges, including teacher absenteeism and difficulties in deploying teachers to rural and remote areas. An education sector governance diagnostic will be carried out to ensure that UPPET APL II addresses core governance issues.

157. Development partners: Uganda receives substantial support from DPs to improve access and quality of primary education, among these: UNICEF, EC, Ireland, Netherlands, UNFPA, and USAID. AfDB, Belgium, GTZ, JICA, and the Netherlands also support post-primary education, including technical and vocational education.

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CAS Outcome 3.2: Strengthened health care delivery

158. Analytical underpinnings. The Bank’s PER Fiscal Space for Health in Uganda (FY08) recommends ways to increase spending efficiency, especially by improving human resource management (health worker absenteeism is a major source of waste), strengthening procurement and logistics management of medicines and medical supplies, and better programming development assistance for health. The PER is informing the Bank’s health policy dialogue and underpins the lending program. During the CAS period, the Bank will help the Ministry of Health follow up the issues identified in the PER, including through a policy paper on human resources for health and policy notes on health financing.

159. Expected results from IDA-financed operations. The ongoing Local Government Management Support Project and Northern Uganda Social Action Fund II provide demand-driven financing at the local level to improve health care delivery, including by rehabilitating health centers. The Uganda Health Systems Strengthening Project (US$130 million, FY10), which will be presented to the Board together with this CAS, aims to strengthen national capacity to deliver essential health services, with a particular focus on reproductive health, targeting activities which have been shown to reduce maternal mortality and expanding access to family planning commodities and services. The project includes US$30 million in Crisis Response Window resources to safeguard public spending on reproductive health. The PRSC series and UPSPEP will complement the investment project by addressing cross-cutting barriers to improved service delivery, such as lack of supply management capacity, including procurement, poor human resources management and inadequate structures and capacity for the management of health facilities.

160. Expected results from trust funds. The ongoing OBA Reproductive Health Program Pilot in Western Uganda is expected to benefit 50,000 women by providing subsidized reproductive health services and another 15,000 individuals through treatment for reduction in sexually transmitted diseases. The Bank-administered trust fund, GPOBA (US$4.33 million) is working with KfW, which is implementing the scheme and is providing co-financing of about US$3 million.

161. IFC. Under the IFC Health in Africa Initiative, Uganda is one of five countries identified for a comprehensive policy assessment on the environment for private health care provision. This will be complemented by a market assessment providing information for banks and other financial institutions. Following completion of this advisory work, IFC also expects to identify investments in the health sector, including PPPs, either for direct investment or indirect support through the two equity funds IFC has established for health care investments in Africa, or lending from commercial banks with IFC backing.

162. Regional integration. The Regional East Africa Public Health Laboratory Networking Project (US$10 million for Uganda) will be presented to the Bank’s Executive Directors in May 2010, together with this CAS. It aims to help participating countries—Rwanda, Kenya, Tanzania, and Uganda—prevent and control the spread of communicable diseases in East Africa by sharing information, developing harmonized approaches, strengthening laboratories, and establishing a center of excellence in each county to provide regional leadership in a thematic area. The IGAD Regional HIV/AIDS Partnership Program (IRAPP) Support Project aims to increase preventive actions reduce misperceptions of cross border and mobile populations, refugees and surrounding host communities concerning HIV/AIDS prevention and mitigation and to establish a common and sustainable regional approach to supporting these populations in the IGAD states.

163. Development partners. DPs supporting the health sector coordinate their activities through the Health Development Partners Group. Belgium, DANIDA, DFID, Italy, and the Swedish

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International Development Cooperation Agency (SIDA) support the health sector through general and sector budget support. The US provides substantial support for health, especially through the President’s Emergency Program for Aids Relief and the President’s Malaria Initiative. Global health initiatives, including the Global Fund for AIDS, Tuberculosis and Malaria (US$300 million in grants) and Global Alliance for Vaccines and Immunization (US$162 million over 5 years) provide targeted support for HIV/AIDS, malaria, and immunization, although grants were suspended in 2005 over allegation of corruption. The suspensions have been lifted, but operations have not yet returned to normal. The UN family has a number of interventions under Outcome 3 of the UN Development Assistance Framework.

164. Governance. As part of the preparation of the Health Systems and Strengthening Project, the Ministry of Health developed and adopted a governance strategy and action plan, which emphasizes actions to strengthen health sector management functions and accountability and transparency in service delivery. The project has a strong emphasis on improving human resource and budget management, which are among the core challenges to effective service delivery. The project will support aspects related to strengthening logistics management for drugs, which should lead to improved drug availability and reduced wastage.

G. Strategic Objective Four: Good Governance and Value for Money

165. Strengthening value for money is critical for high-quality infrastructure investments and service delivery, and thus for structural transformation. It is especially important in the context of future oil wealth. Under the CAS, the Bank aims to strengthen accountability and improve public financial management (PFM), public procurement, and public sector management at both local and national levels.

CAS Outcome 4.1: Strengthened accountability and efficiency of public financial and human resource management

166. Analytical underpinnings. A study “PFM Reform in Uganda—A Platform Approach” (FY09) and a Public Financial Management Performance Report (PEFA Report, FY09) inform the PFM reform agenda. PFM and procurement reform are supported by the Financial Management and Accountability Program (FINMAP), a US$60 million basket fund financed by the government and six DPs. The Bank is leading a restructuring of FINMAP to better focus on service delivery. During the CAS period, FINMAP is expected to support the roll out of an integrated financial management system (IFMIS); improve program-based budgeting with procurement planning integrated in the budgeting process; strengthen accountability functions relating to internal audit, external audit, procurement, and the oversight committees of parliament; and ensure that the PFM system supports frontline service delivery. A pilot study on the use of Actionable Governance Indicators in human resource management informs the design of public service reforms. Programmatic TA on governance and anticorruption (FY11-15) will support key aspects of the public service reform agenda, focusing particularly on ways of introducing and sustaining performance management, addressing equity in service delivery, staffing of public service positions in rural areas, and tracking progress on public service reform through a regular update of Actionable Governance Indicators on Human Resource Management.

167. Expected results from IDA-financed operations. The Bank is supporting improved governance and value for money at both the local and national levels. Since 2000, the Bank has helped implement decentralization and build local government capacity and accountability to citizens. The ongoing Local Government Management and Service Delivery APL I (LGMSD, FY08), the Kampala Institutional and Infrastructure Development Project (FY08), and the Northern

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Uganda Social Action Fund II (FY09) support more effective local government management, including mechanisms to empower communities to demand better services from their local governments. The LGMSD APL I finances capacity building and the rollout of an IFMS to all districts and municipal governments to increase transparency and efficiency in public financial management and public procurement. A proposed second phase, LGMSD APL II (US$115 million, FY13), will ensure local government capacity to sustain transparent and accountable service delivery. The PRSC series (Pillar 2 – Good Governance) will provide complementary, cross-cutting support for decentralization by supporting transparent and efficient PFM and procurement, such as increasing the number of local governments publishing financial transfers and budgets from 53 percent to 90 percent by 2011. The ongoing Uganda Public Service Performance Enhancement Project (UPSPEP) supports the establishment of more transparent and efficient public service management systems, including an integrated payroll and personnel management system that will decrease ghost workers from 15 percent to 5 percent by 2013. The PRSC 8 (US$120 million, FY11) supports the adoption by 2011 of a public service pay system based on performance principles, increasing compliance with procurement audit recommendations and increasing the number of contracts with records that comply with public procurement regulations from 32 percent to 70 percent. The PRSC also supports piloting a procurement indicator framework to track compliance with the procurement law in 15 ministries or agencies, with further roll out expected under future operations. These indicators will inform the design of future public procurement reforms.

168. Expected results from trust funds. A Governance Partnership Facility Window 1 grant (US$1.48 million) will help reposition the Bank’s role on governance during the CAS period, by financing further work on the Data Tracking Mechanism, political economy and GAC diagnostics in various sectors, engagement with external stakeholders in implementing the GAAPs developed under the GPF Window 2 grant, and peer learning sessions for Bank staff.

169. Development partners. DPs are developing a common approach to addressing GAC issues, based on the OECD/DAC principles on constructive and collaborative engagement with government counterparts, in the context of the Accountability Sector Working Group, co-led by DFID and the World Bank. DFID is funding a capacity building program to strengthen accountability sector institutions (including an emphasis on demand side accountability) and the EC is financing civil society capacity building to enhance demand for good governance, particularly in relation to service delivery. The Bank's agreed role is to manage a participatory process to develop the Data Tracking Mechanism, an anti-corruption monitoring tool, to improve governance arrangements in investment projects and to think through the re-positioning process related to the reduced reliance of government on budget support.

H. Strengthening Aid Effectiveness

170. During the CAS period, the Bank will continue to promote donor harmonization and aid effectiveness. The Bank is the permanent chair of the Local Development Partners’ Group (LDPG), which is the apex development partner forum in Uganda. The LDPG and its sector/thematic groups provide a forum for development partner coordination and interfacing with the government. In addition, the Bank is the permanent co-chair of the Joint Budget Support Framework.

171. Under the LDPG, there are around 15 sector/thematic development partner groups (DPGs). The Bank chairs or co-chairs seven of the DPGs. The DPGs serve to form common positions and provide the LDPG with technical analysis feeding into policy dialogue with the government, and recent efforts have attempted to make the DPGs more results-focused. Each of the DPGs is mirrored by a government-chaired sector working group (SWG) or equivalent, with participation from the government, DPs, civil society, and other stakeholders. Most SWGs function

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as a practical forum for technical level discussions and elaboration of sector investment plans and strategies, thus providing a basis for coordinated DP-government interventions.

172. The government will adopt a new Partnership Policy to provide a contractual framework to advance the aid effectiveness agenda in Uganda. The NDP includes a section on government-DP relations, outlining key issues related to aid effectiveness and stating the government’s intention to adopt a new Partnership Policy addressing alignment of aid with national priorities and systems, transaction costs, coordination issues, predictability of aid flows, mutual accountability for development results, and partnerships beyond aid. The Partnership Policy is expected to play an important role for the management of aid over the medium term, as oil revenues gradually reduce the government’s reliance on external assistance.

173. The DPs undertake periodic division of labor exercises to encourage selectivity. The 2008 division of labor matrix is shown in Annex 18. Once the new Partnership Policy is adopted, it is expected that DPs will undertake a new division of labor exercise under government leadership. During the CAS period, the Bank will continue to encourage SWAps and joint supervision missions where relevant.

I. Implementing and Monitoring the Country Assistance Strategy

174. The Bank will begin using Uganda’s financial management (FM) systems for investment operations, in line with the Accra Agenda for Action and consistent with World Bank financial management policy. The Bank undertook an assessment in April 2010 to identify risks and mitigation measures. Uganda has already made a good start in the use of country FM systems, as currently all Bank-financed investment projects are incorporated in the annual budget and audited by the Office of the Auditor General. Under the CAS, use of country FM systems will be considered for each investment lending operation, taking into account the project’s nature and complexity and supplementary assessments of implementing ministry capacity.

175. The Bank will maintain a decentralized and high-capacity Uganda Country Office. Out of 11 operations (including the Bujagali Project and the Reintegration and Demobilization MDTF), 13 are supervised by Task Team Leaders based in the Country Office or neighboring country offices, and this will increase to 17 by the end of FY10. The Bank office includes the Cluster Leader for governance for Central and East Africa is based in Kampala and a local governance specialist. The Bank will establish a satellite office in Gulu, intended to be shared with the UN family, to strengthen on-the-ground supervision of programs in northern Uganda, deepen our dialogue with local government officials and other stakeholders, and improve our understanding of issues affecting the poorest part of the country. In total, the office currently comprises 81 staff and consultants.

176. The CAS Results Framework presents the results chain for the Bank’s program of support (see Annex 1). The framework uses Uganda’s NDP as its starting point, and narrows down the range of outcomes to those that the Bank can demonstrably influence over the CAS period. CAS outcomes will be monitored jointly by the Bank and the government over the CAS period. Also, the Bank will use the new Country Program Results Monitoring Tool to monitor portfolio impact and progress towards CAS outcomes. Since most of the new operations foreseen in this CAS will likely not finish implementation until after 2015, results during this CAS period will come mainly from existing operations and the quicker-disbursing interventions included in the CAS.

177. The Bank will carry out annual results-based CPPRs, building on the matrix of actions from the recent CPPR (see para. 78 and Annex 11).

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178. Trust funds are fully integrated in the CAS and will be managed accordingly. The Bank has already taken measures to integrate trust fund programs and budgets with Bank-funded programs and to ensure that trust funds are aligned with the CAS. Analytical work and policy notes funded by trust funds undergo the same rigorous review as Bank budget-funded analytical work; and trust fund-financed activities are implemented in accordance with the same fiduciary requirements as IDA-financed operations. The Country Management Unit has established a trust fund management team (including fiduciary and governance staff) to guide the use and management of the new programmatic DFID and JBSF trust funds.

179. The Bank will prepare a CAS Progress Report in FY13, or earlier if needed, to evaluate progress toward CAS outcomes and adjust strategy and program. The Progress Report will be completed after Uganda’s national elections in 2011, allowing consideration of new government policy. By FY13, there will be a clearer picture of the oil sector, which is likely to impact the Bank’s strategy and program. Adjustments to projects under implementation will be reflected in revised project results frameworks.

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V. RISKS AND MITIGATION

180. There are considerable risks for CAS implementation, especially in light of the March 2011 presidential and parliamentary elections and the recent discovery of oil. However, risks would be even higher if Uganda does not move forcefully down the path of structural transformation as required to increase growth, create employment for the growing labor force, and further reduce poverty and inequality, and if Uganda does not build the transparent and accountable institutional arrangements needed to manage future oil wealth.

181. Political risks are heightened by ethnic and regional divisions and by upcoming elections. Since independence, ethnic and regional divisions have contributed to conflict and influenced politics. While Uganda has made progress towards democracy, it has not yet established an enduring political process through which all groups, regardless of region or ethnicity, have a meaningful stake and can contest for power. In this context, governance and stability could deteriorate in advance of presidential and parliamentary elections in 2011. Civil disturbances resulting from clashes between the central government and the Buganda Kingdom in September 2009 have revealed some of the fractures in the political landscape.

182. There is a risk of policy reversals due to election pressures and when oil exploitation begins. Frustration over the slow pace of structural transformation could lead some policy makers to question pro-market policies and advocate for more state intervention. Also, as oil revenues come on stream, reliance on donor assistance and their economic advice may decrease.

183. The “oil curse” represents the most substantial risk. The discovery of a valuable natural resource in the context of poverty often increases the risk of conflict and poor governance. Even when countries stay at peace, resource wealth typically leads to reduced growth, because resource rents lead to increased patronage, negatively affecting governance and public investment. The more ethnically diverse the society, the worse the performance of a resource-rich democracy, because patronage is especially effective in ethnically diverse settings, and because oil can exacerbate existing ethnic and regional cleavages. To avoid the “oil curse,” Uganda must manage citizen expectations and establish an institutional framework that ensures transparent and accountable management of oil revenues for the benefit of all Ugandans.

184. Electoral pressures and oil wealth could exacerbate negative trends in governance. Corruption, both high-level and small-scale, is increasingly pervasive, affecting infrastructure investments; productive sectors, such as agriculture; and social services. A governance risk matrix has been designed to map these risks as well as risk mitigation strategies (see Annex 6). The Bank will conduct regular reviews of governance risks to adapt the CAS program as required, including the balance between budget support and investment lending.

185. Growing numbers of poor, uneducated, urban youth could create further challenges. With about half the population below the age of 15, Uganda has one of the youngest populations in the world. According to the Uganda Bureau of Statistics (2007) up to 58 percent of Uganda’s unemployed are youth with the greatest risk of unemployment being the educated youth entering the labor market for the first time. An estimated 490,000 youths enter the labor market annually, yet the formal sector (both public and private) creates only about 150,000 jobs each year. Unemployed youth or underemployed youth tend to degenerate into “discouraged workers” who can easily be mobilized for rebellion and social unrest. This was evident during the September 2009 riots, where the majority of those arrested for participating were unemployed youth. The World Bank will work closely with the Youth Unemployment Network to update the National Action Plan on youth unemployment for Uganda.

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186. As a landlocked country, Uganda is particularly affected by the security situation in neighboring countries. For example, political strife in Kenya following the controversial election disrupted Uganda’s key trade route, underscoring the need to develop alternative trade routes. Although the general situation in the region has improved, new or recurring conflicts are possible during the CAS period. The run-up or aftermath of the independence referendum in Southern Sudan in 2011 could affect the stability and security situation in Sudan and thereby regional trade and remittances. Lack of political stability in Southern Sudan could also provide an avenue for the return of LRA activities in northern Uganda. There is also the risk of refugees returning to Uganda into areas that are currently recovering from a long period of insecurity. The development of resources around Lake Albert could be a source of tension with neighboring DRC.

187. Other exogenous risks include weather and the associated impact on international prices for agricultural goods. Weather conditions, such as droughts, have a strong influence on the output of the agricultural sector and on the availability of hydroelectricity. Uganda is vulnerable to other natural disasters, such as earthquakes, floods, landslides, and storms, which are likely to increase as climate variability becomes more pronounced.

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Annex 1: Uganda Country Assistance Strategy Results Matrix

Country Long Term Strategic Development

Goals 18

Major Issues and Obstacles

CAS Outcomes Milestones Bank Group Program

Strategic Objective 1 : PROMOTE INCLUSIVE AND SUSTAINABLE ECONOMIC GROWTH Enhance the availability and quality of gainful employment (ii) % share of total national labor force employed (including under-employed) increased from 70.9% in 2009 Improving the stock and quality of economic infrastructure (iv) Ranking based on “doing business” survey improves from 112/183 in 2009 to 82/183 in 2015

Administrative requirements to establish a business are long, expensive and cumbersome

Inefficient administration and maintenance of the land registration

An outdated legal framework in selected areas

Time taken to register a property (land and buildings) (PSCP) Baseline: 77 days (DB 2010) Target: <3 days (2015)

Commercial laws revised increased from 21 in 2009 to 42 in 2011(PSCP) Enterprises sharing new formal businesses increased from 13,000 in 2009 to 15,000 by 2011 (PSCP) Business Uganda Development Scheme grants issued to firms increased from 901 in 2009 to 1,383 in 2012 (PSCP) Female beneficiaries of the Business Uganda Development Scheme remain above 40% through 2011 (PSCP) Land titles, cadastral sheets indexed and scanned increase from 15% in 2009 to 100% in 2011 (PSCP) Government land surveyed increase from 5% in 2009 to 100% in 2011(PSCP)

Ongoing Lending: PSCP II (FY05) SMMRP (FY04) + AF (FY09) IFC projects: Uganda Primary Mortgage Market InitiativeInvestment Climate Reform Program Investments/Advisory services to banks to expand SME lending Non-Lending: ICT Policy dialogue PPP and Capital Markets PER : Public Investment Programming Pipeline Lending: AF PSCP II (FY11) PSCP III (FY13) FSRP (FY12) Pipeline Non-Lending: FSAP (FY11) Tourism Development (FY12) Youth and Employment (FY12) Demography and Growth (FY11) Pipeline Trust Funds: DFID TF NDP Support

High transport and logistical costs in East Africa

Poor condition of transport infrastructure,

Underdeveloped transport and logistics

Transit time through the Northern Corridor from

Insurance policies of at least US$25 mil. will be issued by end project (RTFP) The EAC Customs Union is established and functions in an harmonized way by 2011 (EATTF) National cargo tracking system for Uganda is

Ongoing Lending: EATTF (FY06) RTFP (FY01) Pipeline Lending: EATLP (FY12) RCIP (FY12)

18 The objectives refer to the eight NDP objectives. Indicators are derived from the Development Indicators and Targets table (Table 4.15)

1.1 Improved conditions for private sector growth

1.2 Improved interconnectivity for regional integration

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Country Long Term Strategic Development

Goals 18

Major Issues and Obstacles

CAS Outcomes Milestones Bank Group Program

services Slow and costly

bureaucratic procedures dealing with imported and exported goods

Mombasa to Kigali (EATTF) Baseline: 19 days (2005) Target: 13.3 days (2011)

established by 2010 and linked to the regional system by 2011 (EATTF)

Non-lending: Regional Int., Trade and Growth in the Great Lakes Region (FY11) IFC: Investment/Guarantee for the Kenya-Uganda Railway EASSY cable project for ICT backbone

% share of agricultural sector in GDP decreases from 23% in 2009 to 21.4% in 2015 % of labor force in agricultural sector decreases from 73.3% in 2009 to 69.3% in 2015

Low agricultural productivity

Limited effectiveness of agriculture research and advisory services

Weak integration of small farmers into value chains

Increase of average agricultural income of rural households (in real terms) (ATAAS) Baseline: Ushs. 4,200,000 (2005) Target: Ushs. 5,040,000 (2015) Share of farm production marketed by NAADS targeted beneficiaries (ATAAS) Baseline: 25% (2005-08) Target: 45% (2015)

140 water infrastructure for production built or rehabilitated by 2012 (NUSAF) Increase in farm households using improved agricultural technology by type (from baseline in 2010 to target in 2012): (ATAAS)

- crops from 25% to 40% - livestock from 12% to 20%

Farm households accessing advisory services increased from 32% in 2010 to 38% in 2012 (ATAAS) Women accessing agricultural advisory services (from total number of direct project beneficiaries) increased from 49% in 2010 to 53% by 2012 (ATAAS) Challenge Fund for Agribusiness PPPs put in place by 2012 (ATAAS) Increase in research scientists working in regional research projects (percent of total research staff of RCoEs) from 5% in 2009 to 20% in 2012 (EAAPP) Increase in adoption of new varieties, breeds and management practices from 0% in 2009 to 12% in 2012 (EAAPP) Governance Anti-Corruption Action Plan under the ATAAS successfully implemented (yes/no)

Ongoing Lending: LVEMP (FY09) NUSAF II (FY09) EAAPP (FY10) Program for Control of Avian Influenza (FY08) EMCBP- SIL II (FY01) + AF (FY09) Pipeline Lending: ATAAS (FY10) Agriculture Sector Support (FY14) GEF: Sustainable Land Management (WSDMP) (FY13) NUIG (FY15) Non-lending: Inclusive Growth (FY11) Agriculture Sector Diagnostic Study (FY13) IFC: Investments for agribusiness IFC advisory services

1.3 Increased productivity and commercialization of agriculture

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Country Long Term Strategic Development

Goals 18

Major Issues and Obstacles

CAS Outcomes Milestones Bank Group Program

Promoting sustainable population and use of the environment and natural resources (viii) Proportion of ecosystems restored Level of management of environmental resources Forest cover increased from 13% in 2009

Low institutional capacity for sustainable natural resource based development and management of mineral resources

Undue interference in compliance with environmental laws and regulations

Insufficient water infrastructure and poor water management

Environment: Area brought under improved land use management in the Katonga river watershed (15,244 Km²) (LVEMP) Baseline: zero in 2009 Target: 50% by 2013 (7,622 Km²) Mining: Accuracy and transparency of mining licensing measured by zero unresolved complaints by 2011 (SMMRP)

Environment: Adoption of Lake Victoria basin-wide water and fisheries resources management frameworks by 2012 (LVEMP) Adoption of harmonized policies and regulatory frameworks for water and fisheries resources management in Lake Victoria (together with Kenya and Tanzania)by 2013 (LVEMP) Reduction in untreated effluent disposed into Murchinson Bay by targeted municipalities by 5% by 2012 (LVEMP) Area reforested increases from 445 hectares in 2009 to 2,000 hectares in 2011 (EMCBP) Two environmental regulations relating to oil and gas policy promulgated by 2011(EMCBP) Mining: Mining Cadastre and Registry system established by 2011 (SMMRP)

Creation of a computerized Environmental and Social Management Information System by 2011 (SMMRP) Licenses given to artisanal and small scale miners increased from 100 in 2003 to 300 in 2011 (SMMRP) Regular publication of mining sector revenues at both local and national level by 2011 (SMMRP)

Ongoing Lending: LVEMP (FY09) PAMSU (closing June 2010) EMCBP- SIL II (FY01) + AF (FY09) SMMRP (FY04) + AF (FY09) Trust Funds: GEF: PAMSU (FY03) BCF: Uganda Nile Basin Reforestation Ongoing Non-Lending: Country Water Resources Assistance Strategy (FY11) Pipeline Lending: Natural Resource Management/Forestry (FY13) WSDMP (FY13) Petroleum Sector Support (FY12) Pipeline Trust Funds: GEF: Sustainable Land Management Pipeline Non-lending: Environment and Growth (FY11) Policy Notes: Petroleum Sector (FY11 and FY12) TA on Mainstreaming Climate Resilience in Water Resource Planning and Management (FY14) TA on Advancing GoU Water Strategy and Investment Planning (FY13)

Strategic Objective 2 : ENHANCE PUBLIC INFRASTRUCTURE Improve the stock and quality of economic infrastructure (iv)

Lack of adequate and reliable power among top constraints to doing business in Uganda

Overall access (particularly in rural areas) to modern energy

Rural population with access to electricity (ERT) Baseline: 4% (2006)

250 MW of power generation capacity added from the Bujagali power station by 2012 (Bujagali) 30 MW of additional power generation from renewable sources by 2011 (ERT) Households connected to the extended grid

Ongoing Lending: PSDP (FY07) Priv. Power Generation (Bujagali) (FY07) ERT APL II (FY09) PUSRP (FY01) Trust Funds: Uganda West Nile Electrification

1.4 Increased efficiency and sustainability of natural resource management

2.1 Increased access to electricity

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Country Long Term Strategic Development

Goals 18

Major Issues and Obstacles

CAS Outcomes Milestones Bank Group Program

Power consumption per capita increased from 60 Kwh in 2009 Proportion of households accessing power from the national grid increases from 11% in 2009

services is low Performance and

financial viability of the power sector

Target: 10% (2015) Unmet demand (GWh/monthly) (PSDP) Baseline: 30 (2007) Target: 18 (2011)

increase from 151,000 in 2009 to 166,000 by 2011 (ERT) Households using solar PV systems increase from 12,000 in 2009 to 17,000 in 2011 (ERT) OBA mechanisms in place for rural electrification funding by 2011 (OBA) Sector investment plan developed by Quarter2 2010 (ERT) Electricity Regulatory Agency approving tariff adjustments according to Tariff Methodology by 2015 (PUSRP) Energy sector Governance and Anti-Corruption Action Plan developed by 2012

GEF: ERT (FY09) Grid-based OBA in Uganda IFC/MIGA: Investment/Guarantee to Bujagali Energy Ltd. Investment/Guarantee to Umeme

Pipeline Lending: Electricity Sector Development (FY11) ERT APL III (FY14) Power Sector (FY12) Pipeline Non-lending: Accelerated Rural Electrification (FY13)

Improve the stock and quality of economic infrastructure (iv) Proportion of paved roads to the total road network increase from 4% in 2009 Percentage of passenger traffic by rail increased from 3.5% in 2009

36% of national road network is in poor condition

Large part of the rural population do not have access to an all-season road

Road safety situation in Uganda has reached alarming proportions

Access of the rural population to all-season roads in the target area (TSDP) Baseline: 64 % (2009) Target: 90% (2014) National roads in poor condition (TSDP) Baseline: 36% (2009) Target: 15% (2014)

160 kms of national roads paved by 2013(TSDP) 70 kms of community roads built or rehabilitated by 2012 (NUSAF) Transport Policy updated by 2011 (TSDP) Transport Sector Data Management System (TSDMS) established by 2013 (TSDP) Road Safety Authority created and operational by 2011 (TSDP) Governance Anti-Corruption Action Plan for Transport sector successfully implemented (yes/no)

Ongoing Lending KIIDP (FY08) Road Dev APL III (FY05) TSDP (FY10) Pipeline Lending: AF TSDP (FY11) TSDP II (FY14) PRSC 8-13 (FY11-15) KIIDP II (FY13) Non-Lending PER : Roads (FY10)

Increase access to quality social services (v) Rural water coverage increased from 65% in 2009

Limited access to safe drinking water sources

Financing and maintenance of water-schemes

Limited access to adequate sanitation

Population with access to improved water source

150 water points built or rehabilitated by 2012 (NUSAF) 10,500 connections established through OBA by 2011 (GPOBA) Districts with operational CBMS Water User Committee increase from 40% to 60% by 2010

On-going Lending: KIIDP (FY08) NUSAF II (FY09) LVEMP (FY09) Trust Funds: OBA in Water Supply in Small Towns and Rural Growth Centers OBA Kampala Water Connections for the

2.2 Improved access to and quality of roads

2.3 Increased access to and quality of water and sanitation services

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Country Long Term Strategic Development

Goals 18

Major Issues and Obstacles

CAS Outcomes Milestones Bank Group Program

Urban water coverage increased from 66% in 2009

facilities (NUSAF) Baseline: 48.6% (2008) Target: 68% (2013) Households with access to safe and effective sanitation (PRSC 8) Baseline: 62% (2008) Target: 68% (2011)

(PRSC 8) Improved water sources that are functional at the time of spot checks increase from 82% in 2008 to 84% in 2011 (PRSC 8) Compost produced annually from municipal solid waste increase from 0 t in 2009 to 20,000 t in 2011 (EMCBP) Action plan on Good Governance successfully implemented (yes/no)

Poor IFC: Small Scale Infrastructure Advisory Program Pipeline Lending: PRSC 8-13 (FY11-15) Municipal Infrastructure Dev. (FY12) WSDMP (FY13) NUIG (FY15) KIIDP II (FY13) Non lending: Water Country Assistance Strategy (FY11) TA on Rural Sanitation Program WSP (FY14)

Improve stock and quality of economic infrastructure (iv) Proportion of population living in urban centers increased from 13% in 2009 Increase access to quality social services (v) Urban water coverage increased from 66% in 2009

Limited access to key urban services

High levels of traffic congestion in Kampala

Low operational capacity of Kampala City Council

Increase in public satisfaction in service delivery of key services in Kampala (from a baseline in 2009 to target by 2011) (a)Roads from 18% to 50% (b)Drainage from 22% to 31% (c)Solid waste from 44% to 60%

Drains improved, expanded and strengthened along 38 km of roads by 2010 (KIIDP) 38 kms of roads rehabilitated in Kampala by 2010 (KIIDP) Detailed bidding documents for Phase I of Bus Rapid Transport in Kampala completed by 2012 (TSDP) Share of Kampala City Council own source revenue spent on service delivery increased from 30% in 2009 to 34% in 2012 (KIIDP) Kampala City Council own source revenue increased from Ushs 22 billion in 2009 to Ushs 33.5 billion in 2012 (KIIDP) Building plan permit approval processing time in Kampala decreases from 1 year in 2009 to 60 days in 2012 (KIIDP) National Urban Policy developed by 2011 (Cities Alliance Grant)

On-going Lending: KIIDP (FY08) TSDP (FY10) Trust Funds: OBA Kampala Water Connections for the Poor Cities Alliances Grant Pipeline Lending: PRSC 8-13 (FY11-15) Municipal Infrastructure Dev. (FY12) WSDMP (FY13) KIIDP II (FY13) AF TSDP (FY11) TSDP II (FY14)

2.4 Improved management and delivery of urban services

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Country Long Term Strategic Development

Goals 18

Major Issues and Obstacles

CAS Outcomes Milestones Bank Group Program

Strategic Objective 3 : STRENGTHEN HUMAN CAPITAL DEVELOPMENTIncrease access to quality social services (v) Net enrolment rate in primary school increased from 93.3% in 2009 Net enrolment rate in secondary school increased from 23.5% in 2009 Net completion rate in secondary school (O level) increased from 35% in 2009 Pupil-Teacher ratio improves from 56:1 in 2009 Pupil-Classroom ratio improves from 78:1 in 2009

Improving quality of primary education is a challenge

High teacher absenteeism

Primary enrolment has improved significantly but secondary enrolment remains low

Lack of physical infrastructure at the secondary level

Lack of learning materials (text books, science laboratories, learning kits etc) in schools

Pupils reaching literacy proficiency in Government aided schools (PRSC 8) Baseline P6 total: 52% Baseline P6 girls: 53% (2008/9) Target P6 total: 57% Target P6 girls: 59% (2010/11) Average national Gross Enrollment for lower Secondary education (UPPET) Baseline: Boys: 28% Baseline Girls: 25% (2008) Target Boys: 42% Target Girls: 40% (2012)

Primary Teachers at task in the 12 worst off districts increased from 63% in 2009 to 75% in 2011 (PRSC 8) Customized Performance Targets are implemented in 12 districts by 2011 (PRSC 8) New teacher rationalization and deployment policies developed by 2011 (PRSC 8) 285 education facilities built or rehabilitated by 2012 (NUSAF) Secondary Secondary classrooms increased from 4,788 in 2009 to 9,881 in 2011 (UPPET) 1,7 million textbooks provided for Secondary education by 2011 (UPPET) Curriculum and assessment reform program for lower secondary in place by 2013 (UPPET) Higher Education 10 undergraduate programs created or upgraded by 2011 (4 new and 6 upgraded) (MSI) Education sector governance diagnostic carried out (yes/no)

Ongoing Lending UPPET (FY09) MSI (FY07) NUSAF II (FY09) LGMSDP (FY08) Pipeline Lending: UPPET APL II (FY13) NUIG (FY15) PRSC 8-13 (FY11-15) Pipeline Trust Funds: EFA-FTI

Increase access to quality social services (v) Infant mortality rate decreased from 76.0 in 2009 to 56.5 in 2015 Maternal mortality rate decreased from

High childhood and maternal morbidity and mortality rates

Inequality in health care service delivery is significant

Lack of qualified health personnel and high healthcare worker absenteeism rates

Frequent stock-outs of

Deliveries taking place in Government and PNFP Health Facilities (%) (HSSP) Baseline: 34% (2009) Target: 45% (2015)

Approved posts filled by qualified health workers increased from 51% in 2008 to 59% in 2011 (PRSC 8) Hospitals and HC IV offering comprehensive emergency obstetric care increase from 20% in 2010 to 30% in 2012 (HSSP) Health Facilities with Client Charters increase from 0% in 2010 to 30% in 2012 (HSSP) Health facilities without stock-outs of tracer

On-going Lending: UPSPEP (FY06) LGMSDP (FY08) HIV/AIDS Great Lakes Initiative (FY05)| NUSAF II (FY09) Trust Funds: OBA Uganda Reproductive Health

IFC: Advisory Services/Investments under

3.1 Improved access to and quality of primary and post-primary education

3.2 Strengthened health care delivery

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Country Long Term Strategic Development

Goals 18

Major Issues and Obstacles

CAS Outcomes Milestones Bank Group Program

435.0 in 2009 to 335.0 in 2015

drug supplies Contraceptive prevalence rate (HSSP) Baseline: 24% (2010) Target: 35% (2015)

medicines and supplies increases from 26% in 2009 to 30% in 2012 (HSSP) Satellite laboratories compliant with regionally harmonized SOPs increase from 0% in 2009 to 60% in 2012 (Regional TB Labs) 70 Health centers built and rehabilitated by 2012 (NUSAF) Governance strategy action plan under Health Systems Strengthening Project successfully implemented (yes/no)

Health in Africa Program Pipeline Lending: HSSP (FY10) East Africa Public Health Laboratory Networking (FY10) NUIG (FY15) PRSC 8-13 (FY11-15)

Strategic Objective 4 : IMPROVE GOOD GOVERNANCE AND VALUE FOR MONEYStrengthen good governance, defense and security (vii) Increased level of transparency in public institutions

Increased level of core sector capabilities

Weak transparency and accountability mechanisms pose increasing risks to service delivery

Serious weaknesses in procurement, financial management and control systems

Weak human resource management, and limited accountability of public officials

Lack of mechanisms for open engagement between communities, local government and national government to negotiate public-community partnerships and hold each other accountable

Financial Management: LGs publishing financial transfers and budgets at local level (PRSC 8) Baseline: 53% (2009) Target: 90% (2011) Procurement: Contracts with complete procurement records in compliance with PPDA regulations (by number) (PRSC 8) Baseline: 32% in (2009) Target: 70% (2011) Human Resources: Degree of discrepancy between staff paid through the payroll and actual staff, as revealed through inspections and payroll

Financial Management: LGs that have been computerized for at least one year completing bank reconciliation in at least 1 month increases from 70% in 2009 to 100% in 2011 (LGMSDP) Share of higher LGs registering at least 20% increase in own source revenue from baseline year 2005/6 increased to 40% by 2011 (LGMSDP) Kampala City Council overdue liabilities reduced from Ushs 3 billion in 2009 to Ushs 0.5 billion in 2012 (KIIDP) Procurement: Revisions of Procurement Regulations and Guidelines in line with the revisions to the PPDA Act by 2011 (PRSC 8) Standard Bidding Documents and Requests for Proposals based on the amended PPDA Act and Regulations prepared by 2011 (PRSC 8) Work plan, cash flow and procurement plan alignment rolled out to all ministries and local government and key information captured in a central database by 2011 (PRSC 8) Human Resources:

On-going Lending: LGMSDP (FY08) UPSPEP (FY06) NUSAF II (FY09) Emergency Demob. & Reintegration (FY08) KIIDP (FY08) Pipeline: LGMSDP APL II (FY14) PRSC 8-13 (FY11-15) NUIG (FY15) Municipal Infrastructure Dev. (FY12) KIIDP II (FY13)

Non-lending: PER: Decentralized Serv. Delivery (FY12) TA Governance and Anti-Corruption – yearly Governance Partnership Facility

Pipeline Trust Funds: DFID TF NDP Support TSUPU (FY10-13)

4.1 Strengthened accountablity and efficiency of financial and human resource management

- 52 -

Country Long Term Strategic Development

Goals 18

Major Issues and Obstacles

CAS Outcomes Milestones Bank Group Program

audits (UPSPEP) Baseline: 15% (2009) Target: 5% (2013) Accountability: Population satisfied with performance of local governments (as measured through the National service delivery survey) Baseline: 45.9% (2005) Target: 70% (2012)

Performance management system fully implemented in selected MDAs and Local Governments by 2013 (UPSPEP) Public Officers receiving annual training on priority aspects of the public sector reform agenda increase from 0 in 2009 to 600 in 2011(UPSPEP) LGs in Northern Uganda with at least 65% of the approved staffing filled increase from 35% in 2009 to 65% in 2011 (LGMSDP) New public service pay system based on performance principles by 2011 (PRSC 8) Accountability: Sub-counties with operational community level tracking systems increased to 60% in 2012 (NUSAF II)

List of Project Acronyms ATAAS Agriculture Technology and Agribusiness Advisory

Services DPO Development Policy Operation EAAPP East Africa Agricultural Productivity Project EATTF East Africa Trade and Transport Facilitation Project EATLP East Africa Transport Links Project EMCBP Environmental Management and Capacity Building ERT Energy for Rural Transformation FSRP Financial Sector Regionalization Project HSSP Health System Strengthening Project KIIDP Kampala Institutional and Infrastructure Development

Project LGMSDP Local Government Management and Service Delivery

Project LVEMP Lake Victoria Environmental Management Project MSI Millennium Science Initiative

NUIG Northern Uganda Integration and Growth NUSAF North Uganda Social Action Fund PAMSU Protected Areas Management and Sustainable Use Project PRSC Poverty Reduction Support Credit PSCP Private Sector Competitiveness Project PSDP Power Sector Development Project PUSRP Privatization and Utility Sector Reform Project RCIP Regional Trade Facilitation Project RTFP Regional Trade Facilitation Project SMMRP Sustainable Management of Mineral Resources Project TSDP Transport Sector Development Project UPPET Uganda Post-Primary Education and Training Project UPSPEP Uganda Public Service Performance and Enhancement

Project WSDMP Water Sector Development and Management Project

- 53 -

Annex 2: Uganda at a Glance

Uganda at a glance 2/25/10

Sub-Key D evelo pment Indicato rs Saharan Low

Uganda Africa income(2008)

Population, mid-year (millions) 31.7 818 973Surface area (thousand sq. km) 241 24,242 19,310Population growth (%) 3.3 2.5 2.1Urban population (% of to tal population) 13 36 29

GNI (Atlas method, US$ billions) 13.3 885 510GNI per capita (Atlas method, US$) 420 1,082 524GNI per capita (PPP, international $) 1,140 1,991 1,407

GDP growth (%) 9.5 5.0 6.4GDP per capita growth (%) 6.0 2.5 4.2

(mo st recent est imate, 2003–2008)

Poverty headcount ratio at $1.25 a day (PPP, %) 52 51 ..Poverty headcount ratio at $2.00 a day (PPP, %) 76 73 ..Life expectancy at birth (years) 53 52 59Infant mortality (per 1,000 live births) 82 89 78Child malnutrition (% of children under 5) .. 27 28

Adult literacy, male (% of ages 15 and o lder) 82 71 72Adult literacy, female (% of ages 15 and o lder) 66 54 55Gross primary enro llment, male (% of age group) 116 103 102Gross primary enro llment, female (% of age group) 117 93 95

Access to an improved water source (% of population) 64 58 67Access to improved sanitation facilities (% of population) 33 31 38

N et A id F lo ws 1980 1990 2000 2008 a

(US$ millions)Net ODA and official aid 113 663 845 1,728Top 3 donors (in 2007): United States 13 30 58 302 United Kingdom 7 35 217 167 European Commission 25 35 36 117

Aid (% of GNI) 9.2 15.7 13.9 14.3Aid per capita (US$) 9 37 35 56

Lo ng-T erm Eco no mic T rends

Consumer prices (annual % change) .. 45.5 5.8 3.5GDP implicit deflator (annual % change) 45.9 44.4 8.5 6.3

Exchange rate (annual average, local per US$) 1.0 319.6 1,512.0 1,720.4Terms of trade index (2000 = 100) .. 85 100 102

1980–90 1990–2000 2000–08

Population, mid-year (millions) 12.7 17.7 24.4 31.7 3.4 3.2 3.2GDP (US$ millions) 1,245 4,304 6,193 14,326 2.9 7.1 7.5

Agriculture 72.0 56.6 29.6 22.7 2.1 3.7 1.8Industry 4.5 11.1 22.9 25.8 5.0 12.1 10.2 M anufacturing 4.3 5.7 7.8 7.6 3.9 14.1 6.7Services 23.5 32.4 47.5 51.5 2.8 8.2 10.0

Househo ld final consumption expenditure 88.9 91.9 77.8 82.4 2.7 6.8 7.4General gov't final consumption expenditure 11.2 7.5 14.5 11.8 2.0 7.1 3.9Gross capital fo rmation 6.2 12.7 19.5 23.6 8.0 8.9 12.1

Exports of goods and services 19.4 7.2 10.6 15.6 1.8 14.7 12.4Imports of goods and services 26.0 19.4 22.5 33.4 4.4 10.0 11.4Gross savings -0.9 0.6 8.6 12.1

Note: Figures in italics are fo r years o ther than those specified. 2008 data are preliminary. .. indicates data are not available.a. A id data are fo r 2007.

Development Economics, Development Data Group (DECDG).

(average annual growth %)

(% of GDP)

15 10 5 0 5 10 15

0-4

15-19

30-34

45-49

60-64

75-79

percent of total population

Age distribution, 2008

Male Female

0

50

100

150

200

1990 1995 2000 2007

Uganda Sub-Saharan Africa

Under-5 mortality rate (per 1,000)

-3

0

3

6

9

12

15

95 05

GDP GDP per capita

Growth of GDP and GDP per capita (%)

- 54 -

Uganda

B alance o f P ayments and T rade 2000 2008

(US$ millions)

Total merchandise exports (fob) 456 1,787Total merchandise imports (cif) 1,043 2,912Net trade in goods and services -703 -2,102

Current account balance -644 -811 as a % of GDP -10.4 -8.2

Workers' remittances and compensation of employees (receipts) 238 489

Reserves, including go ld 719 2,673

C entral Go vernment F inance

(% of GDP)Current revenue (including grants) 10.8 13.0

Tax revenue 9.9 12.5Current expenditure 10.4 11.5

T echno lo gy and Infrastructure 2000 2008Overall surplus/deficit -13.2 -5.0

Paved roads (% of to tal) .. 23.0Highest marginal tax rate (%) Fixed line and mobile phone Individual 30 30 subscribers (per 100 people) 1 28

Corporate 30 30 High technology exports (% of manufactured exports) 4.3 10.6

External D ebt and R eso urce F lo ws

Enviro nment(US$ millions)Total debt outstanding and disbursed 3,497 2,249 Agricultural land (% of land area) 62 64Total debt service 74 74 Forest area (% of land area) 20.6 18.4Debt relief (HIPC, M DRI) 1,434 1,805 Nationally protected areas (% of land area) .. 31.9

Total debt (% of GDP) 56.5 15.7 Freshwater resources per capita (cu. meters) 1,498 1,273Total debt service (% of exports) 10.5 2.3 Freshwater withdrawal (billion cubic meters) .. ..

Foreign direct investment (net inflows) 161 788 CO2 emissions per capita (mt) 0.06 0.08Portfo lio equity (net inflows) 0 -32

GDP per unit o f energy use (2005 PPP $ per kg of o il equivalent) .. ..

Energy use per capita (kg of o il equivalent) .. ..

Wo rld B ank Gro up po rt fo lio 2000 2008

(US$ millions)

IBRD Total debt outstanding and disbursed 0 0 Disbursements 0 0 Principal repayments 0 0 Interest payments 0 0

IDA Total debt outstanding and disbursed 2,115 1,004 Disbursements 190 172

P rivate Secto r D evelo pment 2000 2008 Total debt service 9 8

Time required to start a business (days) – 25 IFC (fiscal year)Cost to start a business (% of GNI per capita) – 100.7 Total disbursed and outstanding portfo lio 36 73Time required to register property (days) – 77 o f which IFC own account 36 64

Disbursements for IFC own account 0 51Ranked as a major constraint to business 2000 2008 Portfo lio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account 6 0 Electricity .. 63.3 Tax rates .. 11.0 M IGA

Gross exposure 43 158Stock market capitalization (% of GDP) 0.6 1.2 New guarantees 0 115Bank capital to asset ratio (%) 9.8 10.3

Note: Figures in italics are for years o ther than those specified. 2008 data are preliminary. 2/25/10.. indicates data are not available. – indicates observation is not applicable.

D l t E i D l t D t G (DECDG)

0 25 50 75 100

Control of corruption

Rule of law

Regulatory quality

Political stability

Voice and accountability

Country's percentile rank (0-100)higher values imply better ratings

2008

2000

Governance indicators, 2000 and 2008

Source: Kaufmann-Kraay-Mastruzzi, World Bank

IBRD, 0

IDA, 1,004

IMF, 9Other multi-lateral, 560

Bilateral, 193

Private, 25

Short-term, 458

Composition of total external debt, 2008

US$ millions

- 55 -

Millennium Development Goals Uganda

With selected targets to achieve between 1990 and 2015(estimate closest to date shown, +/- 2 years)

Go al 1: halve the rates fo r extreme po verty and malnutrit io n 1990 1995 2000 2008

Poverty headcount ratio at $1.25 a day (PPP, % of population) 68.7 64.4 60.5 51.5 Poverty headcount ratio at national poverty line (% of population) .. .. 33.8 37.7 Share of income or consumption to the poorest qunitile (%) 4.9 7.3 6.0 6.1 Prevalence of malnutrition (% of children under 5) 19.7 21.5 19.0 ..

Go al 2: ensure that children are able to co mplete primary scho o ling

Primary school enro llment (net, %) 51 .. .. 95 Primary completion rate (% of relevant age group) .. .. 57 54 Secondary school enro llment (gross, %) 12 11 16 23 Youth literacy rate (% of people ages 15-24) 70 .. 81 86

Go al 3: e liminate gender disparity in educat io n and empo wer wo men

Ratio o f girls to boys in primary and secondary education (%) 82 .. 93 98 Women employed in the nonagricultural sector (% of nonagricultural employment) .. .. .. 39 Proportion of seats held by women in national parliament (%) 12 18 18 31

Go al 4: reduce under-5 mo rtality by two -thirds

Under-5 mortality rate (per 1,000) 175 164 149 130 Infant mortality rate (per 1,000 live births) 106 100 92 82 M easles immunization (proportion of one-year o lds immunized, %) 52 57 59 68

Go al 5: reduce maternal mo rtality by three-fo urths

M aternal mortality ratio (modeled estimate, per 100,000 live births) .. .. .. 550 B irths attended by skilled health staff (% of to tal) 38 38 39 42 Contraceptive prevalence (% of women ages 15-49) 5 15 23 24

Go al 6: halt and begin to reverse the spread o f H IV/ A ID S and o ther majo r diseases

Prevalence of HIV (% of population ages 15-49) 13.7 11.8 8.5 5.4 Incidence of tuberculosis (per 100,000 people) 163 319 340 330 Tuberculosis cases detected under DOTS (%) .. 60 51 51

Go al 7: halve the pro po rt io n o f peo ple witho ut sustainable access to basic needs

Access to an improved water source (% of population) 43 49 56 64 Access to improved sanitation facilities (% of population) 29 31 32 33 Forest area (% of to tal land area) 25.0 22.8 20.6 18.4 Nationally protected areas (% of to tal land area) .. .. .. 31.9 CO2 emissions (metric tons per capita) 0.0 0.0 0.1 0.1 GDP per unit o f energy use (constant 2005 PPP $ per kg of o il equivalent) .. .. .. ..

Go al 8: develo p a glo bal partnership fo r develo pment

Telephone mainlines (per 100 people) 0.2 0.2 0.3 0.5 M obile phone subscribers (per 100 people) 0.0 0.0 0.5 27.0 Internet users (per 100 people) 0.0 0.0 0.2 7.9 Personal computers (per 100 people) .. 0.0 0.2 1.7

Note: Figures in italics are for years o ther than those specified. .. indicates data are not available. 2/25/10

Development Economics, Development Data Group (DECDG).

Uganda

0

25

50

75

100

125

2000 2002 2004 2006 2008

Primary net enrollment ratio

Ratio of girls to boys in primary & secondary education

Education indicators (%)

0

10

20

30

2000 2002 2004 2006 2008

Fixed + mobile subscribers

Internet users

ICT indicators (per 100 people)

0

25

50

75

100

1990 1995 2000 2007

Uganda Sub-Saharan Africa

Measles immunization (% of 1-year olds)

- 56 -

Annex 3: Key Economic Indicators

EstimateIndicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

National accounts (as % of GDP)

Gross domestic producta

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Agriculture 21.7 19.7 18.5 17.4 16.9 15.8 16.1 15.5 14.3 17.9

Industry 25.7 26.7 27.4 27.7 27.4 28.1 27.4 27.4 27.3 32.4

Services 52.6 53.5 54.1 55.0 55.7 56.1 56.5 57.0 57.5 65.7

Total Consumption 87.5 87.8 87.5 81.1 83.5 87.0 85.1 82.6 81.2 80.0Gross domestic fixed investment 22.5 24.4 26.1 25.5 26.1 23.2 23.5 25.3 25.7 26.4 Government investment 4.9 5.2 5.3 4.9 5.4 5.6 6.4 7.7 7.8 8.1 Private investment 17.4 19.1 20.6 20.4 20.5 17.5 16.9 17.5 17.8 18.2

Exports (GNFS)b

14.2 15.3 16.7 24.3 23.8 23.6 23.7 23.2 22.8 22.2Imports (GNFS) 24.9 28.4 30.1 32.0 35.3 33.6 34.5 33.9 32.6 31.8

Gross domestic savings 12.5 12.2 12.5 18.9 16.5 13.0 14.9 17.4 18.8 ..

Gross national savingsc

22.3 18.9 20.9 21.0 20.8 22.4 22.9 27.1 28.5 29.3

Memorandum itemsGross domestic product 9,223 9,957 11,916 14,440 15,736 17,703 18,758 20,543 22,546 24,807(US$ million at current prices)GNI per capita (US$, Atlas method) 300 340 370 420 460 500 530 560 590 630

Real annual growth rates (%, calculated from 98 prices) Gross domestic product at market prices 6.3 10.8 8.4 8.7 7.1 5.6 6.4 7.0 7.2 7.4 Gross Domestic Income 6.4 11.4 9.7 9.5 1.6 6.4 6.6 7.2

Real annual per capita growth rates (%, calculated from 98 prices) Gross domestic product at market prices 3.0 7.5 5.3 5.4 3.8 2.3 3.0 3.6 3.8 4.0 Total consumption -0.6 1.9 7.8 4.7 -2.5 6.9 6.8 0.7 0.6 2.1 Private consumption -0.8 2.2 9.1 6.1 -2.2 8.8 7.7 0.8 0.7 2.0

Balance of Payments (US$ millions)

Exports (GNFS)b

1,209 1,543 2,009 3,156 3,753 4,171 4,442 4,764 5,130 5,519 Merchandise FOB 786 1,042 1,500 2,597 3,085 3,432 3,657 3,924 4,229 4,552

Imports (GNFS)b

2,208 2,670 3,325 4,624 5,557 5,953 6,476 6,963 7,361 7,886 Merchandise FOB 1,624 1,969 2,495 3,509 4,225 4,409 4,797 5,158 5,453 5,842 Resource balance -999 -1,128 -1,317 -1,468 -1,804 -1,782 -2,034 -2,199 -2,231 -2,367 Net current transfers 1,103 1,037 1,075 1,278 1,378 1,285 1,309 1,383 1,438 1,513 Current account balance -130 -335 -470 -469 -758 -942 -1,156 -1,246 -1,283 -1,396

Net private foreign direct investment 338 512 694 778 733 811 897 991 1096 1213.4 Long-term loans (net) 186 318 489 606 684 945 814 779 783 784.3 Official 164 248 389 369 388 672 550 728 728 728.0 Private 22 70 99 237 296 273 264 51 55 56 Other capital (net, incl. errors & ommissions) -151 -333 -31 -370 -496 -525 -494 -292 -317 -313

Change in reservesd

-242 -163 -682 -545 -163 -288 -60 -232 -279 -289

Memorandum itemsResource balance (% of GDP) -10.8 -11.3 -11.0 -10.2 -11.5 -10.1 -10.8 -10.7 -9.9 -9.5Real annual growth rates ( YR98 prices) Merchandise exports (FOB) 13.1 15.5 16.9 21.9 23.8 23.6 23.7 23.2 22.8 22.2 Primary .. .. .. .. .. .. .. .. .. .. Manufactures .. .. .. .. .. .. .. .. .. .. Merchandise imports (CIF) 17.6 19.8 20.9 24.3 26.8 24.9 25.6 25.1 24.2 23.5

(Continued)

Actual Projected

- 57 -

Annex 3: Key Economic Indicators (continued)

Actual Estimate ProjectedIndicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Public finance (as % of GDP at market prices)e

Current revenues 12.2 12.5 12.6 12.8 12.5 12.5 13.1 13.5 14.0 14.4 Current expenditures 13.1 13.1 12.2 12.5 11.3 11.8 11.5 11.5 11.5 11.6 Fiscal balance (excl. capital expenditures) -1.0 -0.6 0.4 0.3 1.2 0.8 1.6 1.9 2.4 2.9 Capital expenditure 7.9 6.3 6.5 5.9 6.8 6.1 7.4 8.7 8.7 9.0 Foreign financing 0.8 1.5 2.2 2.5 2.0 2.0 2.6 3.2 2.9 2.6

Monetary indicators M3/GDP 18.7 18.0 18.1 20.6 21.0 21.3 21.9 22.4 23.0 23.6 Growth of M3 (%) 8.7 16.4 17.4 31.1 25.0 19.3 13.7 15.6 15.9 16.0 Private sector credit growth / 5.4 11.6 10.3 24.0 17.1 9.8 7.2 7.7 7.6 7.6 total credit growth (%)

Price indices (YR98 =100) Merchandise export price index 120.3 160.7 163.0 233.3 258.5 280.1 286.4 298.1 311.0 324.4 Merchandise import price index 120.0 130.7 139.1 162.2 157.4 156.2 163.1 165.7 168.1 170.5 Merchandise terms of trade index 100.2 123.0 117.2 143.8 164.2 179.3 175.6 179.8 185.0 190.3

Real exchange rate (US$/LCU)f

20.8 20.4 21.0 20.2 21.5 21.7 21.7 21.7 ..

Real interest rates Consumer price index (% change in oeriod 8.0 6.6 6.8 7.3 14.2 9.5 4.1 5.2 5.3 5.2 GDP deflator (% change) -1.7 2.4 7.5 6.4 14.3 11.3 4.2 5.4 5.4 5.3

a. GDP at factor costb. "GNFS" denotes "goods and nonfactor services."c. Includes net unrequited transfers excluding official capital grants.d. Includes use of IMF resources.e. Consolidated central government.f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation.

- 58 -

Annex 4: Key Social Indicators

- 59 -

Annex 5: Key Exposure Indicators

Actual Estimated

Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total debt outstanding and 6040.0 6191.0 3861.0 4258.0 4154.8 4694.6 5510.5 6460.0 7172.5 7895.23

disbursed (TDO) (US$m)a

Net disbursements (US$m)a

346 214 467 173 369 542.5 645.4 766.8 722.6 744.082

Total debt service (TDS) 217.3 220.8 195.9 188.1 131.6 183.1 271.8 312.9 389.7 454.109

(US$m)a

1525.1 1983.6 2333.7 3710.0 4498.5 4946.0 5284.4 5669.0 6103.6 6566.16

Debt and debt service indicators

(%)

TDO/XGSb

396.0 312.1 165.4 114.8 92.4 94.9 104.3 114.0 117.5 120.2

TDO/GDP 56.0 53.6 18.3 17.7 19.6 20.1 23.3 25.7 26.3 26.4

TDS/XGS 18.0 14.3 9.8 6.0 3.5 4.4 6.1 6.6 7.6 8.2

Concessional/TDO 60.5 62.5 22.6 27.7 35.1 18.4 28.1 30.7 33.0 35.9

IBRD exposure indicators (%)

IBRD DS/public DS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Preferred creditor DS/public 92.4 88.8 87.6 89.6 91.2 91.4 100.0 100.0 100.0 100.0

DS (%)c

IBRD DS/XGS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

IBRD TDO (US$m)d

0 0 0 0 0 0 0 0 0 0

Of which present value of

guarantees (US$m)

Share of IBRD portfolio (%) 0 0 0 0 0 0 0 0 0 0

IDA TDO (US$m)d

3150 3297 743 957 1177 528.5 1050.9 1313.9 1534.2 1806.77

IFC (US$m)

Loans

Equity and quasi-equity /c

MIGA

MIGA guarantees (US$m)

a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short-

term capital.

b. "XGS" denotes exports of goods and services, including workers' remittances.

c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the

Bank for International Settlements.

d. Includes present value of guarantees.

e. Includes equity and quasi-equity types of both loan and equity instruments.

Projected

- 60 -

Annex 6: Oil in Uganda

I. INTRODUCTION

1. In recent years, there have been significant oil discoveries along the Albertine Rift in western Uganda. Reserves of at least 800 million barrels have been confirmed to date, and the basin is now believed to contain up to 2 billion barrels of oil. Even at conservative prices, oil revenue will be considerable, potentially doubling government revenue within 6-10 years and constituting an estimated 10-15 percent of GDP at peak production. However, oil price volatility will make revenue and budget management a persistent challenge.

2. Extensive exploration activities along Uganda’s Albertine Rift started in 2003-04. Currently, five of nine exploration areas are licensed to four companies. UK independent Tullow Oil is at the most advanced stage of exploration and currently holds three blocks that comprise multiple discoveries. Tullow is in the process of buying out its former partner Heritage Oil and is now seeking to form a joint venture with one or more major international oil companies that can bring capital and expertise to the projects as they move into the development phase.

3. Tullow has estimated that it could produce between 150,000 and 200,000 barrels per day over a 25-year production period. While timelines remain tentative, production is likely to be phased and will be driven by the pace of infrastructure development. Limited production of 10,000-20,000 barrels per day, primarily for domestic use, could start within two to three years, using trucking and railroad transportation. Full scale production could be reached in five to seven years, once downstream infrastructure is in place. Only at this stage would the government begin to realize significant revenue from oil production.

4. Oil production will require significant infrastructure development. Discussions about the downstream processing and export of oil are ongoing. The government favors the construction of a refinery in Uganda to serve the domestic and regional market. The oil companies are exploring a number of export options, including the construction of a pipeline through Uganda and Kenya to Mombasa and the possibility of exporting crude oil via rail and water through Kenya or Tanzania. Tullow is estimating an investment of several billion dollars over the next five to ten years to develop the requisite oil infrastructure. Regardless of the path chosen, large infrastructure programs could generate employment and other economic opportunities but will also put pressure on government regulatory and oversight systems.

5. The Government of Uganda is receiving support from Norway under an Oil for Development Program to improve the institutional framework for management of oil resources. In 2008, Uganda adopted a new National Oil and Gas Policy that reflects best international practices in all important respects and calls for the establishment of several new institutions and structures. These include a Directorate of Petroleum to set and monitor policy; a Petroleum Authority to regulate the sector; a national oil company to hold the country’s direct investment in oil projects; and a Petroleum Fund under the management of the Central Bank to stabilize the revenue flow to the budget. Important legal amendments and developments will be needed to implement the Oil and Gas Policy. Amendments to the Petroleum Act are being prepared, and revisions to the revenue code related to the fiscal regime for oil are under preparation. A division within the Ministry of Energy – the Petroleum Exploration and Production Department (PEPD) – has been established to manage developments in the petroleum sector. While these developments are welcome, it will also be vital to strengthen institutional capacity within respective ministries and agencies to make the policy and legal framework operational.

- 61 -

6. Uganda’s oil resources are located in ecologically sensitive and valuable areas; several of the exploration areas are within or border on national parks. The general framework for management of Uganda’s environmental resources is set out in the 1995 National Environment Act, which created the National Environment Management Authority (NEMA). This act also sets out the process by which companies are required to conduct Environmental Impact Assessments (EIAs), administered by NEMA. However, NEMA has little capacity to analyze EIAs and monitor the implementation of environmental requirements.

7. Oil prospects bring both opportunities and challenges. The economic impact of oil production could be profound, with dramatic increases in foreign direct investment and domestic revenue in the medium term and the possibility of reducing energy costs. But it may also bring inflationary pressures, exchange rate appreciation, and new governance challenges. The so-called “Dutch Disease” effect may impact the competitiveness of Uganda’s agricultural exports, and it is likely to make the country’s growth strategy – with an emphasis on value added, export diversification, and manufacturing – harder to achieve. This would threaten to increase, rather than decrease, the income gap. However, the government has indicated its intention to earmark oil revenue for strategic public investments, which could help to increase productivity in other sectors and thereby offset the effects of Dutch Disease.

8. Experience from around the world also suggests that natural resource discoveries commonly decrease government transparency and accountability and increase corruption, as the government becomes less dependent on the local tax base. While the 2008 National Oil and Gas Policy promises transparency and strong accountability measures for oil revenue, the government has not been very forthcoming to date with information about sector developments or the terms of the production sharing agreements with oil companies. This has raised public concerns about lack of transparency that are compounded by the government’s expressed reluctance to sign on to the EITI. The government also faces the difficult challenge of managing high public expectations of immediate social benefits stemming from the country’s oil riches. Public and political pressure, especially in the run up to the 2011 election, could fuel rapid and unsystematic public spending.

9. The government will also need to consider the impact of oil on other sensitive national issues, such as land policy, fiscal decentralization, and regional cooperation. The debate about land rights is becoming fiercer in the run up to petroleum production, and speculative land purchases in the oil rich regions have already begun. The recently enacted Land Bill revealed significant tensions between “indigenous” tribal claims to land and land rights for settlers or migrants. The benefits sharing arrangement between central and local government is also a thorny issue that has yet to be tackled publicly, and the government’s recent pattern of subdividing districts, often along ethnic lines, could intensify local political interests over national interests. The oil discoveries are primarily in poor and conflict prone regions, and thus tension over access to the oil benefits, be they revenue, jobs, or social benefits, threaten to fuel existing social fissures and local grievances. Local politicians and traditional leaders in oil rich regions are already advocating for more resources to be allocated to their respective communities. Furthermore, oil may impact external relations. The Ugandan and Congolese Governments have yet to fully resolve disputes about the border through Lake Albert, which caused a flare up in 2007.

II. PRODUCTION FORECASTS AND MACROECONOMIC EFFECTS

(i) INDICATIVE PRODUCTION AND REVENUE FORECASTS

10. Despite investor and government appetite for early revenue, full-scale production is likely to be reached only in 2016 or later, once downstream infrastructure in place. Although

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the pace of production ramp up will be governed by infrastructure (see Table 6.1), the duration of plateau production will depend on the ultimate quantity of reserves. At the current estimate of 800 million barrels of reserves, plateau production could be sustained for 10 years or so before natural field decline sets in. If the proved resource base expands to 1.2 billion barrels (not unreasonable given the 2 billion barrel total basin potential cited by Tullow and others) peak production could be maintained for 20 years or more. These two scenarios are presented for illustrative purposes in Figure 1. Given the level of uncertainty around timing and volume of oil production, the figures should not be treated as revenue projections, but merely as illustrations of the possible fiscal impact.

11. Using the indicative baseline reserve scenario of 800 million barrels, government revenue could double once peak production is reached and after investors recoup their costs. Using the current fiscal regime and a Brent price assumption of US$75 per barrel through the projection period, government oil revenue at peak production is estimated to gradually increase from US$1.6 billion to US$2.4 billion per year (see Table 6.2) over the peak production period (2016-2024). There is a lag between reaching peak production and peak revenue flows to Government of one to two years due to investor recovery of capital and operating costs.

Table 6.1: Plausible Oil Infrastructure Development and Production Path

Phase Approximate Timeframe

Commercialization Production (Barrels/day)

Phase 1 2010-2012 Intermittent trucking of oil from extended tests of a limited number of wells. Sales to small industrial or power gen. users

1,000 – 2,000

Phase 2 2013-2015 Expanded trucking operations and/or railroad. Sales to domestic refinery and power generator. Possible limited exports via railroad

10,000 – 20,000

Phase 3 2016+ Full scale export via export pipeline or domestic refinery

125,000 – 175,000

Figure 6.1: Example of Baseline and High-Case Scenario for Oil Production

 

-20 40 60 80

100 120 140 160

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2033

Oil Production ('000 barrels/day)

800 mil. Barrel Case 1.2 bil. Barrel Case

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(ii) MANAGING REVENUE VOLATILITY

12. Due to the volatility of oil prices, government oil revenue can be expected to vary enormously from year to year even under the stable production scenarios described above. Recent oil price experience confirms that prices can change by 50 percent or more from one year to the next. Short term price shocks can result in even sharper movements. At US$40 per barrel (roughly 50 percent lower than today’s prices), Uganda’s oil revenue would drop to US$800-900 million. If low prices were to occur during the startup period when investors are recovering their costs, government revenue could be depressed even further to US$400 million or so. Conversely, if prices increase to US$120 per barrel, government revenue could climb to well over US$4 billion per year. The likelihood that annual oil revenue could vary to such a degree, even under a stable production scenario, will present a persistent governance challenge for Uganda.

13. There is a need to protect the budget from potentially large fluctuations in oil revenue. If variations in revenue are allowed to spill into the fiscal operations, they are likely to adversely affect economic management, as they will undermine the medium term fiscal framework and frustrate investment planning. Windfall revenue may also fuel unsustainable recurrent expenditure. If oil revenue is shared with local governments, they could also destabilize local government financing. Regardless of the revenue sharing arrangements chosen, responsibility for stabilization of oil revenue should be managed by the central government, as local governments’ capacity to manage such mechanisms is limited.

Table 6.2: Government Revenue Indicative Central Scenario of 800 million barrels at US$75/Bbl

     

Year Oil Gross Capital & Investor Government

Production Revenue Operating Costs Cash Flow Revenue

'000 bpd US$ million US$ million US$ million US$ million

2010 ‐     ‐     200.0    (200.0)    ‐    2011 4.0     89.2     305.8    (236.5)    19.9    2012 10.0     223.0     314.6    (152.6)    61.1    2013 10.0     223.0     314.6    (152.6)    61.1    2014 15.0     334.5     521.9    (281.9)    94.5    2015 20.0     446.0     729.2    (411.1)    128.0    2016 135.0      3,010.7     897.1    864.5    1,249.1    2017 150.0      3,345.2     719.0    820.9    1,805.3    2018 150.0      3,345.2     319.0    805.6    2,220.6    2019 150.0      3,345.2     319.0    626.2    2,400.1    2020 150.0      3,345.2     319.0    596.2    2,430.1    2021 150.0      3,345.2     319.0    554.2    2,472.1    2022 150.0      3,345.2     319.0    528.7    2,497.6    2023 150.0      3,345.2     219.0    548.5    2,577.7    2024 150.0      3,345.2     219.0    544.3    2,581.9    2025 135.0      3,010.7     197.1    492.1    2,321.5    2026 113.4      2,529.0     165.6    418.8    1,944.6    2027 95.3     2,124.4     139.1    356.6    1,628.7    2028 80.0     1,784.5     116.8    303.6    1,364.0    2029 67.2     1,498.9     98.1    262.7    1,138.1    2030 56.5     1,259.1     82.4    228.4    948.3    2031 47.4     1,057.7     69.2    199.5    788.9    2032 39.8     888.4     58.2    175.2    655.1    TOTAL 45,240.9     6,961.8    6,891.1    31,388.0    Source: World Bank COCPO Estimates

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14. Appropriate legal arrangements and stabilization mechanisms as well as prudent fiscal management would help to shield fiscal operations against this variability. First, the legal and regulatory framework for oil revenue needs to include appropriate stability clauses that include capital recovery rules, income and withholding tax rates, royalty rates, and maximum rate in import duties. Second, a stabilization mechanism would be required to fix the amount of resources allowed to flow into the budget and the balance that can be saved/invested outside the government budget. In the National Oil and Gas Policy, the government has indicated its intentions to establish a Petroleum Fund to create a permanent source of wealth as a provision for intergenerational equity. However, the types of fund and management modalities have yet to be articulated. There are two main types of stabilization mechanisms: under a Stabilization Fund arrangement, a reference price for oil is established, and only the revenue from oil production evaluated at that reference price is transferred to the budget, while the rest is invested in the Fund. A Permanent Income Fund is used to invest oil revenue and channels only the interest rate revenue from the accumulated assets to the budget. Once the government has decided on the type of stabilization mechanism to use, it will need to select the operational modalities. If it is to be a Stabilization Fund, the reference price above which revenue is transferred into the budget will need to be specified. If it is to be a Permanent Income Fund, management and investment options for this fund (domestic or external) will need to be specified.

15. Fiscal prudence, as established over the past two decades, will help ensure that oil revenue is used productively. Given Uganda’s level of development, the demographic pressures of a fast growing young population, and the public’s anticipated gains from oil revenue, there will be strong social pressures to increase public spending on infrastructure, education and health services, and raise public service wages. Politicians will be hard pressed to show rapid dividends from the country’s oil wealth. The National Oil and Gas Policy emphasizes that oil revenue will be utilized not for consumption but for capital investment and infrastructure development. An effective process is to be established to evaluate investment proposals to be financed by the oil revenue based on forecast rates of return. Strengthened institutional capacity, rigorous budgeting processes, and strict controls will help safeguard these aims. Uganda may also want to consider the enactment of a Fiscal Responsibility Law, as has been done in several other countries, to reduce the discretionary power of using windfall revenue.

(iii) DOWNSTREAM PRODUCTION AND INFRASTRUCTURE CHOICES

16. Uganda’s oil reserves vastly exceed the amount that could be consumed domestically, or even regionally. Currently, Uganda consumes 13,000 barrels per day of petroleum products (fuel oil and distillates), and this figure reaches approximately 24,000 barrels per day if it includes demand from Rwanda, Burundi, and neighboring parts of eastern DRC. Regional demand is growing rapidly and could reach 50,000 barrels per day in 10-15 years.

17. Nevertheless, the government has declared its intent to refine all Ugandan crude within Uganda. While improving Uganda’s fuel supply security, a domestic refinery carries profound risk for Uganda. A world class refinery in a landlocked country with undiversified crude supply undoubtedly will face severe commercial challenges. Even a small-scale refinery tailored to Uganda’s domestic fuel needs will diminish the scale economies of export infrastructure without necessarily reducing domestic fuel prices. There will be a temptation to embed hidden fuel subsidies within a domestic refining entity. Reducing the price of crude oil feedstock to improve the profitability of the refinery would reduce the value of the upstream oil production ventures where large resource rents are set to be captured. However, the greater risk for Uganda is that protracted debate over domestic refining strategy will delay important export infrastructure decisions.

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18. Exporting oil would require the construction of a 1300 km export pipeline to an Indian Ocean port. The most likely route would be through Kenya to Mombasa following the route of the existing Kenya Pipeline, although port congestion in Mombasa is causing the oil companies to consider other routes, some of which would pass through Tanzania instead of Kenya. Whatever route is selected and whatever technology is used to assure flow (heating, dilution, or treatment), a complex 1300 km pipeline would probably cost US$2-3 billion to construct and result in a transportation tariff of US$ 8-10 per barrel. Forming the investment consortium for such a pipeline and concluding the necessary commercial and financing agreements would be a complicated undertaking. Access rules must be sorted out through policy and contract. Transit fees must be established between Uganda and Kenya through what could be a difficult treaty negotiation. Using the timeline of the Chad-Cameroon pipeline as a guide, these preconstruction activities could take three years or more to complete. Assuming a further three years for construction, the earliest that an export pipeline could enter service is 2016, and even this date carries substantial risk.

(iv) THE IMPACT OF “DUTCH DISEASE”

19. Among the other economic challenges, resource booms normally cause the currency to appreciate as demand increases. This causes prices for non tradable goods to rise and reduces productivity as factors shift to the non tradable sector and raise reallocation and transition costs, which makes temporary specialization very costly. Such a phenomenon, normally referred to as a ‘Dutch Disease’, materializes due a mismatch between demand and supply. Prices rise with increased demand only if supply does not expand to match the increased demand. Hence, the key point to emphasize is that although the economy’s capacity to absorb big oil revenue may have macroeconomic implications, capacity constraints are essentially microeconomic “supply side” phenomena.

20. Concerns about the “Dutch Disease” in Uganda are not new, given the country’s long history as a large recipient of external funding. In fact, Uganda already possesses some of the symptoms of Dutch Disease. There is a large and growing non tradeable, non agricultural sector, and costs of non tradeables are high. Nonetheless, the real exchange rate remains substantially more depreciated than in the mid-1990s despite a slight reversal from trend in recent years (and a slight slowing of real merchandise export growth). Given the expected appreciation of the currency that would come with sustained large foreign inflows from the oil, it will be important for the government to focus on other factors that determine export competitiveness. Uganda’s landlocked situation, high transport costs, high fuel costs, and poor electricity supply, are important considerations in this respect. It will therefore be important to use the oil revenue optimally to generate productivity gains and growth. The government may also want to consider how and if the country’s oil and gas resources can help to increase availability and reduce the cost of energy. While it is advisable to allow market forces to determine domestic pricing of petroleum products, it is nonetheless important to promote a competitive market so that any fall in crude oil prices are passed on to the consumers.

III. INSTITUTIONAL CAPACITY FOR EFFECTIVE MANAGEMENT OF OIL

RESOURCES

(i) LEGAL AND REGULATORY FRAMEWORK

21. Uganda’s existing legal framework for petroleum sector governance is focused on promotion and exploration activities and needs to be updated and expanded. Petroleum exploration and production activities in Uganda are governed by the Petroleum (Exploration and Production) Act, Chapter 150 of the Laws of Uganda 2000 (the “Petroleum Act”). This law permits the award of petroleum licenses to private entities under certain conditions and gives the mandate for

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directing the upstream petroleum sector to the responsible Minister, currently the Minister of Energy and Mineral Development. The Minister receives applications for any petroleum rights and is responsible for issuing, renewing, and revoking petroleum exploration and production licenses. The Petroleum Act also establishes the position of Commissioner for Petroleum Exploration and Development, who is responsible for carrying out petroleum exploration promotion, initiating petroleum legislation, and monitoring oil companies’ compliance with existing laws, regulations, and agreements. The Petroleum Act and corresponding regulations has served Uganda well during the promotion, licensing, and exploration phase but needs to be updated substantially to handle the development and production of oil and gas, appropriately capture recent trends and best practice in the industry, and harmonize with a future revenue management law.

22. The government’s overall policy on oil and gas exploration and production is laid out in the National Oil and Gas Policy for Uganda, adopted in 2008. This well crafted document reflects international best practices in all important respects. It declares Government’s intention “to use the country’s oil and gas resources to contribute to early achievement of poverty eradication and create lasting value to society.” It sets very high standards in the key areas of resource, revenue, and environmental management. It promotes measures to defend the non-oil sector against the onset of the “resource curse” and it commits Government to transparency and accountability in the management of oil revenues. Consistent with best practice, the policy calls for the establishment of three separate institutions to manage the sector: an oil and gas policy making and monitoring body within the Ministry (Directorate of Petroleum), an independent regulatory agency (Petroleum Authority of Uganda), and a separate commercial entity to hold Government’s direct participation in oil developments (the Uganda National Oil Company).

23. While there is broad recognition within the government of the need to enact a revenue management law, amend the Petroleum Act, update the regulations, and establish the new institutions called for in the policy, none of the necessary legislation has yet been brought forward.

(ii) TRANSPARENCY OF OIL SECTOR MANAGEMENT AND EITI

24. Although the government has stated its intention to manage the country’s oil resources with full transparency, implementation of such transparency measures has been limited to date. While not a sufficient precondition to ensure prudent resource management, transparency measures make it easier for civil society and the media to scrutinize performance in the oil sector and thereby hold the Government and private sector to account. Although the country’s national oil and gas policy calls for transparent resource management, Government has been reluctant to share information regarding contracts, and the terms of the Production Sharing Agreements (PSAs) signed have not been disclosed. Uganda has so far argued that this is not in the country’s commercial interest. The authorities have also expressed reluctance about joining EITI on the grounds that this initiative signals that the country in question has weak/nontransparent revenue management systems. While a case could be made for these arguments, Uganda’s deteriorating governance and international concerns about weak control of corruption should encourage Government do more rather than less to demonstrate a commitment to transparency and thereby encourage confidence in its oil management systems.

25. While the discussion on transparency has so far focused mainly on the disclosure or nondisclosure of PSAs, there are a number of other aspects of transparency in oil sector management that equally need attention. Of particular importance in this regard are the modalities for marketing the government’s share of oil production, an issue closely related to the question of ‘refinery vs. pipeline’. International experience shows that this is the aspect of oil sector management that is most prone to fraud and abuse of public resources.

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a. Transparency in commercialization operations: national oil company vs. international operators

26. Some of the greatest risks of opacity lie in the planned creation of a national oil company to hold the state’s direct interest in oil production projects and to market the state’s share of oil production. The experience of establishing and operating national oil firms in the African context has shown that these firms are often non transparent, inefficient and an instrument for patronage. While progress has been made in some countries in reforming national firms, experience shows that once such institutions get off to a bad start, it becomes hard or even impossible to make corrections along the way, as vested interests are notoriously difficult to dislodge. Success in some instances has been achieved by forcing the national oil company to adopt a purely commercial role rather than that of a de facto regulator. In Uganda the risks of mismanagement of marketing practices is exacerbated by the plans to build a refinery. International practice shows that transactions between national oil firms and state owned refineries are prone to price manipulation, often at the cost of the treasury and, by extension, the population.

27. Two alternative solutions can be proposed for addressing these risks. First, in case a national oil firm is created and charged immediately with oil marketing functions, there is a need to institute high levels of transparency in the operations of such structures from the start, as well as adhering to high professional standards. Measures worth considering to safeguard transparency include: i) having the accounts of the national oil firm or other structure charged with oil marketing audited by audit firms of international reputation; ii) ensuring publication of the findings of such audits, as well as of follow up actions taken by the structure; and iii) conducting regular reviews of marketing procedures. A further set of actions should focus on the choice of intermediaries in oil marketing. Setting criteria for choosing intermediaries and ensuring that national oil marketing structures deal only with firms of international reputation is an effective mitigating measure to prevent the kind of ‘insider trading’ that is one of the largest sources of revenue loss to oil producing countries.19 Lastly, the rapid development of training programs in the sector, as well as a bursary system that could have locals rapidly trained in the principles of oil sector management, would be essential to safeguard professional standards.

28. Second, a transition period could be agreed during which oil marketing operations of the state share of production would be contracted out to an international operator, under disclosed terms. This would allow Government to build up the capacity of the national firm and define transparent rules and procedures. The national firm would then take over the marketing tasks after this transition period.

29. Finally, in case a refinery option would be chosen, transparent and fully disclosed price setting mechanisms for the transfer of part of the state share to the refinery would need to be set.

b. Transparency in revenue generation and management

30. Transparency in the transfer of oil revenue from the marketing structure to government, as well on any taxes paid by international operators, is a further essential element.

19 Consisting of national oil trading structures trading with ‘front intermediaries,’ which basically are owned by related nationals, and thus lead to large revenue losses as oil is sold on unfavorable terms to maximize profits of the intermediaries.

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Apart from the creation of an EITI-like monitoring structure, the verification of oil sector revenue and their effective transfer to the Treasury will contribute further to a transparency agenda.

31. Government may consider internationally established “best practice” principles with regard to public disclosure of oil revenue. Regardless of whether or not the Government chooses to formally adhere to the EITI, it is advisable that EITI principles are respected in the way oil revenue is managed, as EITI principles have become a minimum standard for good management of oil revenue. Thus, it would be essential to institutionalize the following actions in a routine manner:

Disclosure by private firms operating in the oil sector of taxes paid to Government, and verification of receipt by Treasury;

Disclosure by the national structure in charge of oil marketing of revenue transferred to Treasury, and verification of receipt; and

Creation of a multi stakeholder structure, including members of civil society, to monitor revenue flows.20

c. Transparency in the use of revenue

32. Finally, a commitment to enhanced transparency in the use of oil resources is important, as experience shows that resources are squandered as often in the downstream process (investment project choices and procurement) as in the revenue generation process. The section on investment management (below) elaborates on this. In the context of oil, it will become even more important to ensure that measures related to the transparent selection of projects according to sound economic principles and transparent application of procurement rules are enforced.

(iii) ENVIRONMENTAL POLICY AND GOVERNANCE

33. Much of Uganda’s exploitable oil is located in ecologically sensitive and biodiversity rich areas, which poses a particular challenge for oil and gas exploration and development in Uganda. The Albertine Graben is the most species rich eco region for vertebrates in Africa. The principal threats to biodiversity in Uganda include habitat loss, modification, and alteration, including specifically oil exploration and production. Another complicating factor is that much of the oil is adjacent to or under the Albertine Lakes, which presents the threat of contamination of large water bodies.

34. The oil rich areas are also key ecotourism sites (for example, Murchison Falls National Park) with high tourism potential. Oil exploration and production activities could have a variety of negative impacts on the environment. They induce economic, social, and cultural changes through alteration in land use patterns, migration, and socioeconomic and cultural systems. They also increase liquid and gaseous waste streams, which may affect plant and animal communities due to changes in their environment through variations in water, air, and soil/sediment quality and through disturbance by noise, extraneous light, and changes in vegetation cover. These negative impacts need to be mitigated and addressed to ensure ecosystem integrity.

35. To minimize adverse impacts of oil exploitation on the environment, Uganda needs to update and strengthen its environmental laws and regulations, strengthen institutional capacity, and provide adequate resources to ensure enforcement. The environmental impacts of

20 This would constitute a “minimum package” but does not cover the full EITI menu, which also includes disclosure of PSAs.

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oil and gas exploration and development are regulated through the National Environment Act, Cap. 153, and related laws and regulations that prohibit degradation of the natural environment and protect biological diversity. Existing legislation, guidelines, and policies that enforce/provide for detailed requirements for environment pollution control are, however, inadequate for petroleum operations, and the existing legal framework (policies, laws and regulations) in other sectors needs to be updated, as well. Furthermore, human capacity and technical infrastructure in government agencies responsible for regulation are currently inadequate to handle upstream and downstream oil and gas impacts on the environment and require further strengthening. In addition, there is inadequate knowledge about the environment and possible environmental impacts of oil and gas exploration and development activities.

(iv) BUILDING DOMESTIC CAPACITY TO ENGAGE IN THE OIL SECTOR

36. Capacity building will be required to ensure that the oil sector has a transparent and effective management system and delivers employment opportunities to Ugandan nationals. Capacity is required in many forms, but crucial gaps include: negotiation capacity to ensure that PSAs are negotiated in Government’s favor; oil marketing capacity to ensure that state owned oil resources are sold at the proper market value; oil revenue forecasting and links to budgeting; and skills related to management of royalties from petroleum, oil and gas exploration and processing, natural resource management, and civic engagement with communities.

37. Government, through the Ministry of Education and Sports (MoES), plans to establish the Uganda Petroleum Institute as a constituent college of Busitema University for purposes of building capacity through vocational training in oil and gas industry trades. Courses will be given up to Crafts and Master levels (equivalent to Ugandan low and high level certificates) together with ordinary diplomas. Curricula development is underway, and MoES has articulated the need to support human resource development for faculty and infrastructure developments (laboratories, equipment, and workshop installations). MoES vehicles for promoting these needs include the Education Sector Consultative Committee and the Education Budget Working Group. Further, the faculty of science at Makerere University introduced a bachelor’s program in petroleum science in the academic year 2008/09. Quality delivery requires regular interface with oil sites and collaborative arrangements that provide staff with short term skills improvement programs. As part of the National Oil and Gas policy, Government plans to conduct a comprehensive assessment of capacity needs for all supporting institutions.

38. The plan to create a Petroleum Institute is an important step in the right direction when it comes to creating long term capacity. However, two complicating factors need to be addressed. Retaining graduates of such an institute at public service wage levels will prove difficult. This poses risks not only in terms of capacity gaps between the producing country and international operators, but also inside the national institutional system, as non public service institutions will be able to attract graduates while other institutions, such as the Ministry of Finance, may not. This puts Government at risk of being unable to control its own operators. Furthermore, while setting up a Petroleum Institute would address medium term expertise needs, it will not address critical short term requirements. Therefore, the creation of the institute should be accompanied by development of a limited bursary program (possibly supported by external partners) to deliver crash course type training to a small core group of experts.

39. Finally, it is important that capacity building is not just limited to government and parastatals but also benefits the broader civil society. Stimulating the development of expertise in civil society and oversight institutions is equally critical, and these institutions may not necessarily benefit from the institute. Thus, creating funding opportunities for NGOs and think tanks to

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strengthen their expertise on oil sector governance issues, for instance through a ‘development market place’ competitive mechanism of grant awards, would be an essential supplement to the creation of a National Petroleum Institute.

IV. OIL REVENUE AND COMMUNITY ISSUES

(i) OIL REVENUE AND INTER-GOVERNMENTAL FISCAL TRANSFERS

40. The government has yet to announce if and how oil revenue will be shared with local governments and how communities affected by oil production will be compensated. Experience from other countries in Africa, most notably Nigeria, has shown that the importance of revenue sharing arrangements between central and local governments and benefits that offset the adverse effects of oil production on local communities. These play a key role in ensuring social cohesion and a stable investment and production environment. Furthermore, pressures may arise across the country for increased budget allocations to local governments to satisfy high public expectations of benefits from oil production.

41. Uganda’s policy of decentralization is embedded in the Constitution and is one of the major policy reforms adopted by government in the 1990s. The policy transferred a number of service delivery mandates from the central to local governments. Today, basic services such as primary education; primary health care; water and sanitation; district, urban, community, and access roads; and agriculture extension are being provided by LGs. Given the LG’s weak revenue base and the recent abolition of the graduated tax, which was one of the major revenue sources for rural LGs, most service delivery mandates for LGs are being financed through transfers from central government. Despite an increase in the service delivery responsibilities of local governments and the creation of many new districts, the proportion of the budget allocated to local governments has been decreasing in recent years, which is reducing the efficiency of expenditure in the social service sectors. In anticipation of oil revenue, pressure is likely to mount on the central government to increase the share of the budget allocated to local governments.

42. Once the oil revenue comes on stream and more revenue becomes available to the government, it will need to address comprehensively the current debate about LG financing and propose a clear policy regarding intergovernmental fiscal transfers. Government is preparing to undertake a study to determine a holistic strategy for LG financing that will cover LG’s own source revenue and fiscal transfers. This study offers an opportunity for Government to investigate the impact of oil revenue on LG financing. Government also needs to address what direct benefit would accrue to the districts and communities from which the oil is being extracted, over and above the general resources being transferred to LGs through the IGFT. These transfers/benefits should be provided in an equitable manner that will ensure the unity and cohesion (not tensions and disintegration) of the country.

(ii) OIL AND LAND POLICY 43. To commence oil production, oil companies and the government will need to acquire land for oil production facilities and infrastructure. This requires adequate institutional provisions for land allocation, purchases and leasing arrangements. The Constitution of Uganda (1995) and the Land Act, Cap 227, vests all land in Uganda in its citizens under four tenure systems: (i) freehold, (ii) leasehold, (iii) mailo, and (iv) customary tenure. These systems provide the framework for protecting the rights of the citizens and ensuring they are not deprived of personal property without compensation. In essence, therefore, the legal framework exists for dealing with land matters in the event of oil discovery in any part of Uganda, namely: (i) compensation of individuals or communities

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in whose land oil is discovered, (ii) resettlement of individuals or communities in other areas to ensure safety from the vagaries of oil extraction, and (iii) providing for sharing oil proceeds in the short, medium, and long terms. However, following the discovery of large deposits of oil in the Western part of the country, it has become evident that the details of all these arrangements remain to be worked out. For example, there are no provisions for oil related matters in the ongoing consultations and drafting of the land policy, and a national resettlement policy remains to be developed. Furthermore, land policy in Uganda is a politically sensitive issue and bound up with regional and ethnic identity and politics.

V. PUBLIC INVESTMENT PLANNING

44. Resource rich countries have often fallen into a resource trap in which gross domestic income rises fast, while non resource related domestic output stagnates (see Collier and Goderis 2008). Uganda’s oil resources are a depletable resource, and consequently it is important for sustainable development that the rents from resource extraction lead to income from other activities as a means to overcome the resource trap. Therefore, the manner in which rents from oil are spent is critically important. Public policy in general and public investment programs in particular need to aim for the continuation of current non oil exports and facilitate the emergence of new export sectors given that oil revenue is most likely not sufficiently abundant to provide a permanent income stream (Page 2008).

45. Resource and non resource rich countries are increasingly recognizing the importance of public investment programs for building a more competitive and diversified economy. For example, the new public investment management systems introduced by Chile and South Korea to improve the efficiency of public investments have resulted in a more strategic selection of projects, a higher degree of completion, greater transparency in the project cycle, and enhanced integration of the capital and recurrent budgets.21 For the Government of Uganda to be able to prioritize public investments, it is important to have in place an institutional rule based process, which requires proper prior analysis of expected economic and social benefits of each public investment project.

46. It will be important to assess how effective the existing Public Investment Management system is in Uganda (see Box 1 on the various dimensions of public investment management system) and to address its shortcoming before the oil revenue starts flowing into the Treasury and the pressure to spend is there. Although some procedures are currently in place to guide the preparation of investment projects, these are different across ministries, and capacity in ministries to prepare, plan, and execute projects is weak. Not surprisingly, managing public investment is one of the most challenging aspects of public finance, as these challenges span from planning, both at the project and overall public investment budget level, to physical and financial execution of projects, including procurement, monitoring, and evaluation of impact of investments. Integrating the use of public private partnerships into the processes of selecting public investment projects is another critical challenge. Government of Uganda has realized that its public investment management system is in need of strengthening.

47. It is expected that an assessment of the current public investment management system will be undertaken this fiscal year and will lead to a comprehensive public investment management action plan. The action plan is expected to be a mix of policy and process reform and

21 For an overview, see Rajaram, Minh Le and Biletska (2008). A Diagnostic Framework for Assessing Public Investment Management. World Bank: Unpublished Background Paper for IDA Development Committee.

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technical assistance to build up the capacity to effectively manage Uganda’s public investment program.

Box 6.1: Main Elements of an Effective Public Investment Management System

Desirable Institutional Arrangement

Indicators

1. Strategic focus and preliminary screening

Existence of realistic national poverty reduction and development strategy (PRSP) and detailed strategies for key sectors with costing

All projects consistent with PRSP and corresponding sector strategy All projects meet test of being real investment rather than recurrent budget items

2. Formal and standardized project appraisal

Formal criteria for economic, social, and environmental cost/benefit analysis available

All projects in public investment program (PIP) are appraised (form and scale of appraisal adapted to project size and importance)

Adequate skills in project design and appraisal available

3. Clear roles and independent reviews in appraisal

Central unit for appraising complex and large projects Independent checks are conducted for all large and complex projects to ensure

objectivity in appraisal and clarity of implementation arrangements

4. Project selection aligned with budget process

Structured and credible medium-term fiscal framework establishes sector envelopes for public investments

Project selection process (steps 1-3 above) integrated with annual budget process O&M costs of existing and new investments fully budgeted for

5. Transparent and effective project execution

Published guidelines for financial and physical project implementation Financial execution respects PFM procedures Cost effective, competitive, and transparent procurement practices

6. Closely monitored, yet flexible implementation

Implementation reports for all major projects regularly published Flexible funding review process to allow for disbursement changes (or

cancellations) to adapt to changing circumstances Regular updates of C&B analyses Maintain accurate asset registers including asset values

7. Ex-post evaluation

Evaluation criteria built into the design of large projects Institutional arrangement in place for evaluating outcomes of large projects and

publishing results

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Annex 7: Youth Employment in Uganda 1. In 2005/06, Uganda’s labor force amounted to nearly 11 million people, of which 26 percent were less than 25 years old. Close to 400,000 youth enter the labor force every year. They face challenges in transitioning to stable employment that generates earnings high enough to meet their aspirations. This challenge is expected to grow with the projected increase in the number of youth to close to eight million by 2015. Major constraints to youth’s transition to stable employment are:

(i) Poor skills. In 2005/06, about half of the youth entering the labor market did not complete primary school. Opportunities in the non-farm sectors for those without complete primary education are very limited, especially for women. Vocational skill training for those with limited education is not widely available.

(ii) Poor opportunities leading to underemployment. Many adults are in stable but low productivity employment; but, especially in rural areas, they report working less than 40 hours a week, so they are underemployed. Nationally, 12 percent of the labor force is in this category, as is 20 percent of youth, especially youth in agricultural households.

(iii) High expectations. Many of Africa’s youth expect white-collar wage and salary jobs although most youth are not qualified and such jobs are scarce. Although Uganda grew at 12 percent per annum between 2003 and 2006, private wage jobs accounted for just 10 percent of total employment in 2006. Few youth graduate from school ready to create a business in Uganda’s rapidly growing informal sector; and most youth do not desire employment in agriculture, despite its commercial potential.

2. Structural factors such as the education deficit, the pace of economic development and demographic challenges (the labor force grows at 3 percent per annum), imply the problem of youth absorption into the labor market will remain a challenge for the medium term. However, measures can be taken to reduce the costs of youth transition to work. This requires both demand and supply side interventions that help youth’s transition to stable employment, taking cognizance of the characteristics of Uganda’s labor market in general and its youth in particular.

(i) Develop and implement polices to improve employment opportunities throughout the economy and labor market in the wage sector. Uganda’s NDP focuses on creating employment in small, medium, and large firms. Youth will benefit from these opportunities. The NDP also focuses on improving opportunities in agriculture through more capital and technology. If these initiatives are successfully implemented, youth with some education should be well-placed to take up the opportunities created in the agriculture sector and earn an adequate income.

(ii) Encourage non-farm self employment. Self employment in the informal sector has enormous potential for the economy. This sector has been the source of many productive opportunities with ability to provide stable employment and solid earnings. The number of non-farm household enterprises grew at an average of 8.6 percent per annum between 1992 and 2005. At this rate, approximately 25 percent of new jobs between 2015 and 2020 will be created in this sector. However, nearly 50 percent of household non-farm enterprises fail in their first three years. New entrants in this sector face high uncertainties and some may obtain lower income than they aspire. Strategies to increase opportunities and reduce risks

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are needed in this sector as part of overall strategies for local economic development. Increasing access to low cost banking services plays a key role.

(iii) Support youth in their transition to employment through programs that help youth identify opportunities and find support. Evaluation studies are ongoing for some projects in Uganda supported by the World Bank and non-state actors that have potential in this regard.

3. The strategy for this CAS includes supply side interventions to address the skills development and demand side interventions geared towards continued creation of private wage jobs, entrepreneurship training, supporting household enterprises in the non-farm sector to increase their incomes, increasing productivity in agriculture, public works and community programs that help youth identify opportunities and find support. Some of the on-going projects and AAA that address this issue and programs planned for the CAS are listed below.

4. Analyze constraints faced by youth in making the transition to work and identify most effective approaches to address these constraints.

Table 7.1—Uganda Youth Employment Programs Sector  Current Programs  Future Programs 

Financial Sector Development

Financial Sector DPO – To improve access to financial services

Private Sector Development

PSDP: Supports pilot informal sector training and its evaluation and entrepreneurship training

Implementation of pilot for Household Enterprises

Education UPPET –Supports the development of a Post Primary Education and Vocational Skills Development Strategy

Implementing the Vocational and Skills Development Strategy

Social Protection

NUSAF – Complete the randomized evaluation of the Youth Opportunities Program

Agriculture & Rural Development

Agriculture Sector Support Program – To improve productivity and commercialization of agriculture

Social Development

Emergency Demobilization & Re-integration Project (UgDRP) – Facilitates re-integration of former rebels, some of whom are youths, into civilian life through referral to jobs and training

Urban Development

Local Government Management and Service Delivery Project (LGMSD) and Kampala Institutional Infrastructure Development – Increases job creation by emphasizing on LG contracting to private sector to develop infrastructure.

Poverty Reduction and Economic Management

ESW on Labor Markets and Poverty, including a study on Raising Productivity and Reducing the Risk of Household Enterprises (jointly w/PSD).

ESW on Youth Transition to Work (qualitative and quantitative)

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Annex 8: Operations Portfolio (IBRD/IDA and Grants)

Closed Projects 91

IBRD/IDA *

Total Disbursed (Active) 497.99

of w hich has been repaid 0.00

Total Disbursed (Closed) 1,828.79

of w hich has been repaid 162.21

Total Disbursed (Active + Closed) 2,326.78

of w hich has been repaid 162.21

Total Undisbursed (Active) 804.28

Total Undisbursed (Closed) 0.28

Total Undisbursed (Active + Closed) 804.56

Active Projects

Project ID Project NameDevelopment

ObjectivesImplementation

ProgressFiscal Year IDA GRANT Cancel. Undisb. Orig.

Frm Rev'd

P069208 UG - Power Sector Dev. Project (FY07) S S 2007 300 91.5 39.1P073089 UG-EMCBP SIL 2 (FY01) S S 2001 37 14.3 -3.2 7.6P075932 UG-GEF PAMSU SIL (FY03) S S 2003 8 0.2 0.2P078382 UG-Kampala Inst & Infrast Dev Prj (FY08) S MS 2008 33.6 30.3 23.7P090867 UG-Local Govt Mgt Svc Del Pjt (FY08) S MS 2008 55 39.4 19.3P086513 UG-Millennium Science Init (FY06) S S 2006 30 17.3 1.1P079925 UG-Natl Re Dev TAL (FY04) MS MS 2004 30 8.5 1.4 0.4P065437 UG-PAMSU SIL (FY03) S S 2003 27 0.0 -3.5P110803 UG-Post Primary Educ & Trg APL-1 (FY09) S S 2009 150 154.7 0.0P050439 UG-Priv & Utility Sec Reform (FY01) MS S 2001 48.5 12.1 8.5 17.2 11.7P083809 UG-Priv Sec Competitiveness 2 MS MS 2005 70 47.4 42.5P050440 UG-Pub Serv Perform Enhance (FY06) MU MU 2006 70 51.2 17.6 57.9 2.1P074079 UG-Road Dev APL 3 (FY05) S S 2005 107.6 12.0 5.0 5.6P111633 UG-SEC N-Uganda SAF (NUSAF2) (FY09) S S 2009 100 87.3P112334 UG: Energy for Rural Transformation APL2 S S 2009 75 74.9 7.8P112340 UG: GEF Energy for Rural Transf. APL2 S S 2009 9 9.0 1.1P110207 UG:Program for Control of Avian Influ U U 2008 10 9.5 5.3P092837 UG:Transport Sector Development Project # # 2010 190 191.0Overall Result 1333.7 17 63.3 813.5 199.6 27.5

Regional projectsP063683 Regional Trade Facilitation S HS 2001 10 0.0P079734 East Africa Regional Trade and Transport MS MS 2006 199.02 121.6P080413 Great Lakes Initiative on HIV/AIDS MU MS 2005 20 2.1P100406 Lake Victoria Phase II APL 1 MS MS 2009 90 81.7P112688 East Africa Agricultural Productivity Programme MU MU 2009 94.56 94.6

Supervision Rating

Last PSR

As Of Date 3/9/2010

Operations Portfolio (IBRD/IDA and Grants)

Original Amount in US$ Millions Disbursements a/

Difference Between

Expected and Actual

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Annex 9: Selected Indicators of Bank Portfolio Performance and Management

Indicator 2007 2008 2009 2010Portfolio Assessment

Number of Projects Under Implementation a 18 17 16 16

Average Implementation Period (years) b 5.5 4.8 4.3 3.7

Percent of Problem Projects by Number a, c 0.0 29.4 12.5 12.5

Percent of Problem Projects by Amount a, c 0.0 20.6 14.8 2.2

Percent of Projects at Risk by Number a, d 11.1 35.3 12.5 18.8

Percent of Projects at Risk by Amount a, d 12.3 26.2 14.8 4.9

Disbursement Ratio (%) e 25.4 27.8 30.2 28.5Portfolio ManagementCPPR during the year (yes/no) No Yes No YesSupervision Resources (total US$) 1893 1950 1637 1224**Average Supervision (US$/project) 105 115 88 77**

Memorandum Item Since FY 80 Last Five FYsProj Eval by IEG by Number 77 9Proj Eval by IEG by Amt (US$ millions) 3,870.2 526.8% of IEG Projects Rated U or HU by Number 32.4 0% of IEG Projects Rated U or HU by Amt 35.5 0

a. As shown in the Annual Report on Portfolio Performance (except for current FY).b. Average age of projects in the Bank's country portfolio.c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IPd. As defined under the Portfolio Improvement Program.e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the

beginning of the year: Investment projects only.* All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year.** As of March 22, 2010

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Annex 10: Trust Fund Portfolio

TF050569 PCF-ERPA: Uganda West Nile Electrification Project 3,900 6 0% CARBON 12/31/2012 ENVCF UG-West Nile Electrification Recipient

TF051204GEF2: Protected Areas Management and Sustainable Use Project 8,000 7,790 97% GEF 6/30/2010 AFTEN

Protected Areas Management and Sustainable Use Project (FY03) Recipient

TF056783Strenghtening the Monitoring and Evaluation Syystem for the Poverty Eradication and Action Plan

495 447 90% IDF 12/25/2009 AFTRLIDF Strengthening M&E System (FY06) Recipient

TF056883 Uganda Nile Basin Reforestation Project 1,084 0 0% CARBON 12/31/2017 ENVCF Nile Basin Reforestation (FY06) Recipient

TF057882 Small Towns Water 1,069 608 57% GPOBA 12/31/2011 GPOBAOutput Based Aid - Uganda Water Small Towns Recipient

TF090755 Reproductive Health 4,300 1,039 24% GPOBA 12/31/2011 GPOBA Output Based Aid - Reproductive Health (FY08)

Recipient

TF091510 Kampala Water Connections for the Poor 2,527 167 7% GPOBA 12/31/2011 GPOBA Output Based Aid in Kampala-Water Connections

Recipient

TF091665Northern Uganda Peace recovery and Development Fund 1,657 495 30% DGF 6/30/2010 AFTSP

Northern Uganda Social Action Fund (NUSAF) (FY09) Recipient

TF092025Gender and Labor Force Participation Effects from the Uganda Citizen Report Card at community l l h h h

75 60 80% GENTF 12/31/2010 DRGPS Impact Evaluation of Citizen Report Card

Bank

TF092059 Support to Uganda Demobilization and Reintegration Project

340 257 75% FS-SP 6/30/2010 AFTCS UG-Emergency Demob & Reinteg. (FY08)

Bank

TF092061Emergency, Demobilization and Reintegration Project 2,850 2,850 100% FS-SP 6/30/2010 AFTCS

UG-Emergency Demob & Reinteg. (FY08) Recipient

TF092516 Africa Small and Medium Enterprises - Uganda 569 96 17% IFC 6/30/2010 CAFSF Bank

TF092903 Uganda: Recharching Fees for Lamps can Buy Hours of Solar Light

200 160 80% PPIAF 4/29/2010 PPIAF Recipient

TF092919 Avian and Huiman Influenza Preparedness and Response Project

2,000 0 0% AHI 6/30/2011 AFTAR Program for Control of Avian Influenza

Recipient

TF092991NUSAF Youth Opportunities Programme Impact Evaluation 335 190 57% SIEF 6/30/2010 HDNCE NUSAF School To Work Bank

TF093453 Bus Rapid Transit Conceptual Design 279 118 42% PPIAF 4/30/2010 AFTTR Road Sector Development Project APL 3 (FY05)

Bank

TF093559 Road Safety Managemenet Capacity Review 80 48 60% GRSP 4/30/2010 ETWTR Transport Sector Development Project (FY10)

Bank

TF093674 Renewable Energy - Powered Milk Coolers 200 100 50% GEFIA 10/1/2011 WBIIN Recipient

TF093863Techincal Assistance Support to Uganda Demobilization and Reintegration Project 300 45 15% FS-SP 6/30/2010 AFTCS

UG-Emergency Demobilization and Reintegration (FY08) Bank

TF094036 Employment, Poverty and Inequality in Uganda 150 53 35% BPRP 6/30/2010 AFTP2 UG-Poverty and Inequality Bank

TF094355SIEF Impact Evaluation of NUSAF Youth Opportuniteis Programme 100 10 10% GENTF 8/31/2010 HDNCE UG-NUSAF School To Work Bank

TF094484 Uganda: Energy for Rural Transformation II (GEF) 9,000 0 0% GEFIA 6/30/2013 AFTEG Energy for Rural Transformation APL2 (FY09)

Recipient

TF094527 Impact Analysis of Water and Sanitation Sector Policy and Investments in Uganda

108 32 30% WPP 6/30/2010 AFTU1 - HIS

Impact evaluation in Uganda Water Sanitation Sector

Bank

TF094543Water Impact Evaluation (Water Connections for the Poor) 123 0 0% SIEF 7/31/2010 GPOBA

Output Based Aid - Water Connections for the Poor Bank

TF094730Governance in the New Uganda CAS: Capturing Opportuniteis and Mitigating Risks 215 163 76% GPF 4/30/2010 AFTPR

Programmatic Governance Techincal Assistance Bank

TF095004Energy Sector Management Assistance Programme: Cities Alliance Reconnaissance Mission to Uganda

24 24 100% ESMAP 12/31/2009 ETWES Bank

TF095015 Readiness Preparation Proposal for Forest Carbon Readiness Facility (FCPF)

200 0 0% FCPFR 7/31/2010 AFTEN FCPF Readiness Grant Recipient

TF095318 Uganda - Damages, Losses and Needs Assessment (DaLA) Training

72 68 95% GFDRR 3/31/2010 AFTCS DALA Training Bank

TF095367 TA for Poverty Analysis for Uganda 100 33 33% BPRP 10/31/2011 AFTP2 Uganda Programmatic Poverty Bank

TF095382 Uganda - Education Sector Strategic Plan (ESSP) Support

275 237 86% FTIE 2/28/2010 AFTED Post Primary Education & Training APL-1 (FY09)

Bank

TF095575 Grid-Based Output Based Aid in Uganda - Energy Techincal Assistance

85 2 3% GPOBA 4/30/2012 AFTEG Energy for Rural Transformation APL2 (FY09)

Bank

TF095686 Uganda Secondary Cities Project - Setup 196 0 0% CITIES 12/31/2010 AFTUWCA-Uganda Secondary Cities Proj. StartUp Bank

TF095767 Reproductive Health Vouchers in Western Uganda Project

171 19 11% GPOBA 12/31/2011 AFTHE UG-GPOBA W3: Reprod. Health (FY08)

Bank

TF096312Uganda CAS Implementation: Repositioning the Bank's role on Governance 1,600 0 0% GPF 12/31/2012 AFTPR UG:Programmatic Governance TA Bank

TF096393 Trust Fund for Country Environmental Analysis 151 0 0% FS-SDN 4/30/2011 AFTEN Uganda Growth and Environment CEA

Bank

TF096396Program Management and Trust Fund Administration 889 0 0% UG-DP 6/30/2014 AFMUG

UK-DFID Trust Fund to Support GoU's NDP Bank

43,717 15,118 35%

Grant Closing

Date

( Figures in thousands of USD )

Total

Exec. ByProgram Source

Man. Unit

Project NameTrust Fund Trust Fund NameNet

Grant Amount

Funds Disb. to

DateDisb. %

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Annex 11: CPPR Action Plan Cross Cutting Issues

Issue Action By Date Status Resettlement Costs Amend Financing Agreements for projects for which RAP funds are not readily

forthcoming, i.e. compensation to be covered by the projects. WB Ongoing

Procurement Ensure that procurement is advanced while project is awaiting effectiveness to ensure head-start in implementation.

WB/GoU Ongoing

Continue procurement workshops for PIU staff at launch to inform of WB procurement policies/provide hands-on training.

WB Ongoing

Project Preparation Advances (PPAs) Task Teams to use PPAs to advance project preparation and reduce demand on BB. WB Ongoing Communications with GoU on status of portfolio (and impact on CPIA)

Project ratings (PDO/IP/sub-ratings) to be spelled out in Aide Memoires and transmittal letters.

WB Ongoing

Monitoring and Evaluation (M&E) Include CORE indicators and indirect/direct beneficiaries in ISRs. WB Next ISR Project Specific Issues

Action By Date Status PROGRAM FOR CONTROL OF AVIAN INFLUENZA

Project restructuring to better align project objectives and components with current situation and needs, including national and regional H1N1 initiatives.

WB 5/30/10

Extension of closing date to allow for sufficient time for implementation. Official request needed. GoU 3/31/10 MILLENNIUM SCIENCE INITIATIVE

Provide tighter scrutiny of financial budgets and allow for more flexibility on the amounts awarded. PCU Next mission Need to finalize M&E baselines and achievements to date before Additional Financing can be considered. WB Next mission For future rounds, evaluate grantee’s project management and planning capacity to ensure readiness for implementation (including procurement and FM).

PCU Next mission

To the extent possible, delegate procurement to grantees - progress on which should be included in quarterly reports. PCU Next mission Due to B rating for Environmental safeguards, include safeguards consultant on team. WB Next mission UGANDA POST PRIMARY EDUCATION AND TRAINING PROJECT

Due to the size and complexity of the text-book procurement package (US$27 million), this needs close follow up to ensure that the process is carried out in a proper and timely manner.

WB/PCU 4/30/10

Engage consultant to assist PCU in planning and implementation of civil works component. WB/PCU Next mission SUSTAINABLE MANAGEMENT OF MINERAL RESOURSES

Once reallocation exercise is finalized, consult with MEMD/MoF on options for additional funds. WB Next mission Finalize M&E framework. WB Next mission PRIVATE POWER GENERATION PROJECT (BUJAGALI)

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Action By Date Status Continued close follow up from the Bank task team on the MAP and to finalize outstanding issues. WB AfDB to resolve compensation issues as agreed. AfDB Regular updates on the Q&E section on the web-site. WB ENERGY FOR RURAL TRANSFORMATION APL 2

Continued focus on procurement activities to ensure momentum of project implementation. WB Ongoing Recruitment of a sociologist/anthropologist be undertaken to address the backlog of resettlement related activities. PCU Next mission Recruitment of an environmental specialist to strengthen capacity. REA Task team to closely follow overall staffing arrangements in the PCU and REA. WB POWER SECTOR DEVELOPMENT PROJECT

Regular updates of the power sector financial model and sensitivity analysis is required to provide a solid analytical basis for further sector investments.

GoU Bi-annually

Revise PDO to include support to Power Sector Development Plan and national data suppository on sector. WB Next Mission Sector working group to be established to ensure sector dialog and provide strategic support to GoU. WB Provide the Bank with (i) forecasted generation financing plan up to the expected date of Bujagali commissioning and (ii) forecasted energy supply balance up to the commissioning of the next major power plant.

UETCL Next Mission

Mitigation measure for households and the nearby school affected by the noise to be finalized. PCU Resettlement implementation completion report to be submitted to the Bank. PCU 3/30/10 PROTECTED AREAS MANAGEMENT & SUSTAINABLE USAGE PROJECT

Final supervision mission to ensure proper project closing. WB 3/10/10 Ongoing Initiate early delivery of Implementation Completion Report to provide key lessons. WB 11/30/10 Ongoing ENVIRONMENTAL MANAGEMENT AND CAPACITY BUILDING 2

Mission to ensure proper handover to CO based TTL by June 30, 2010. WB 5/31/10 Planned Amend environmental category from C to B and extend closing date by 12 months. WB 5/31/10 PRIVATE SECTOR COMPETITIVENESS PROJECT 2

Downgrading PDO and IP to Unsatisfactory. WB Next mission (4/6/10)

Letter sent to MoFPED on all issues

KIBP tender documents, including design of treatment plan, to be urgently designed and reviewed by Senior Technical Advisor.

UIA

Ensure that commercial legislation is enacted without further delays. MoFPED Ensure that activities under Uganda Registry Services Bureau (URSB) are fast-tracked (including hiring a change manager).

PCU

Ensure full compliance on environmental and social safeguards, including hiring of a social specialist. UIA Update procurement plan to revise dates for contract processes. PCU PRIVATIZATION AND UTILITY SERVICE REFORM PROJECT

Undertake a technical study to inform GoU of potential measures to further reduce losses. Unless done by GoU, hire consultant to undertake the analysis.

GoU/WB 5/31/10

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Action By Date Status Continuous updating of Sector Financial Model is necessary to provide analytical backing for sector investments with mid- and long-term implications. Unless done by GoU, hire consultant to undertake the analysis.

GoU/WB 5/31/10

Prepare 2 pager for CMU on means to ensure financial neutrality (retail tariff vs. loss reduction). WB 4/30/10 Technical/legal advice to help in negotiating concession agreement GoU/MoF PUBLIC SERVICE PERFORMANCE ENHANCEMENT PROJECT

Engagement at highest level of Government to ensure full buy-in and sufficient financing and to get implementation back on track.

MoPS/ MoFPED

Ongoing

Continue to provide TA to strengthen procurement function. Management to review the procurement plan on a regular basis to ensure that issues are addressed in a timely manner. An agreed action plan should be prepared and adhered to. The number of activities needs to be simplified.

MoPS Ongoing

Hire an administrator to provide support to task managers. PCU Next mission Improve coordination between IPPS and IFMIS through an MOU to ensure that pilot sites for IPPS are available and ready for construction.

MoFPED Next mission

Update the Abbreviated Resettlement Action Plan for the National Records Center and Archives to account for inflation of entitlements from 2005. If necessary, amend FA to have Bank cover resettlement funds.

PCU/WB Next mission

Review the M&E for the project and adjust indicators where necessary. WB Next mission TTL should ensure that the correct credit amount is reflected in Bank systems (affects IDA balance and portfolio indicators).

WB Ongoing

EMERGENCY DEMOBILIZATION AND REINTGRATION PROJECT

Keep MDTF open (even if no additional DP funds are added) as a rapid response funding mechanism should the political situation deteriorate.

WB 5/31/10

Close PRDP TF as no action done by OPM. WB 6/30/10 Letter sent to OPM

Prepare Q&E on Bank’s engagement in Northern Uganda for CAS discussion at the Board. WB 5/31/10 NORTHERN UGANDA SOCIAL ACTION FUND PROJECT 2

Ensure close coordination with OPM to facilitate implementation. WB Ongoing No replenishment of Designated Accounts unless 80% accounted for WB Ongoing The DFID Cofinancing Arrangement needs to be finalized and signed and the Development Credit Agreement amended to reflect the additional funds.

WB/DFID 3/30/10

Publish contracts at community level (contract, unit prices, name of contractor, etc). PCU Finalize the ToR for the auditors. PCU 2/28/10 ROAD DEVELOPMENT PROJECT PHASE 3

Ensure sufficient budget for FY2010/11 to enable completion of works. MoFPED 6/30/10 Early delivery of Implementation Completion Report (ICR) to provide lessons, particularly of provision of TA/institutional strengthening in the sector.

WB 10/30/11

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Action By Date Status KAMPALA INSTITUTIONAL & INFRASTRUCTURE DEVELOPMENT PROJECT

Advance MTR to June 2010 WB/KCC Next mission (April, 2010)

Reduce turn-around time for procurement submission to no more than 3 weeks. WB Amend FA to have Bank cover resettlement funds. WB Environmental safeguards training on relevant Uganda and IDA requirements PCU Prepare revised implementation and procurement plans to arrive as a realistic new closing date. PCU/WB Revise outcome indicators and targets for Component 2 as the ones related to secondary and tertiary drainage are no longer relevant.

PCU

Based on revised and realistic implementation and procurement plans, Government request for an extension of the project closing date.

GoU

LOCAL GOVERNMENT MANAGEMENT AND SERVICE DELIVERY PROJECT

Increase LDG from the current UGS65 billion/annum to UGS100 billion. MoFPED Next mission Develop a strategic plan to build and maintain LG staffing levels. MoLG Engage on additional funding to cover cost overruns to the civil works (US$6.5 million). MoLG/

MoFPED

Secure needed funds for implementation of the Good Governance and Anti-Corruption Strategy. Secure acceptable documentary evidence of ownership of land to enable works to move forward. MoLG Work with counterpart/provide assistance in strengthening procurement function. WB LAKE VICTORIA ENVIRONMENTAL MANAGEMENT PROJECT 2

Follow up on effectiveness issues in Uganda with Attorney General and Parliament. WB Ongoing Follow up on legal covenant on mechanism for monitoring water releases. WB EAST AFRICA TRADE AND TRANSPORT FACILITATION PROJECT

Fast tracking of OBSB and weigh bridge components. Closely monitor implementation of Recovery Action Plan, including improved coordination and approval within GoU system, to ensure timelines are maintained, including a number of large procurement processes that will help speed up disbursements.

WB

Railway concession: Close follow up with government required to ensure progress. Need to consider if all indicators can be achieved. Continuous follow up with IFC on concession negotiations is required.

WB/IFC

Review M&E framework with regard to updating closing dates. PCU/WB Revised project costs: Follow up with counterparts to ensure additional funding is secured to address increased project costs.

PCU

Safeguards: Need for clarification regarding implementation and management of RAP. REGIONAL TRADE FACILITATION PROJECT

Complete impact assessment. PCU Follow up with ATI on membership expansion and recruitment of CEO. WB Agree on follow up on communication issues. WB/AfDB

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Annex 12: IFC Investment Program

2007 2008 2009 2010*

Commitments (US$m)Gross 169.90 3.16 35.60 3.00Net** 158.40 3.16 35.60 3.00

Net Commitments by Sector (%)GUARANTEE 1.51 100 15.74 100LOAN 75.76 77.24QUASI LOAN 22.73 7.02Total 100 100 100 100

Net Commitments by Investment Instrument (%)Guarantee 1.51 100 15.74 100Loan 75.76 77.24Quasi loan 22.73 7.02Total 100 100 100 100

* As of March 31, 2010** IFC's Own Account only

Committed Disbursed Outstanding

FY Company Loan Equity**Quasi Equity *GT/RM

Participant Loan Equity

**Quasi Equity *GT/RM

Participant

1992 Aef clovergem 0.84 0 0 0 0 0.84 0 0 0 02007 Bujagali energy 100 0 30 0 0 55.25 0 30 0 02007 Celtel uganda 16.29 0 0 9.36 16.29 0 0 0 9.362007 Orient (U) 0 0 0 5 0 0 0 0 0 00 Dfcu bank 7.86 0 3 0 0 7.86 0 0 0 02008 Stanbic Bank (Celtel) 0 0 0 2.05 0 0 0 0 0 02009 Pine 2.5 0 2.5 0 0 0 0 0 0 02009 Umeme 25 0 0 0 0 5 0 0 0 0

Total Portfolio: 152.49 0 35.5 7.05 9.36 85.24 0 30 0 9.36

** Quasi Equity includes both loan and equity types.

UgandaCommitted and Disbursed Outstanding Investment Portfolio

As of 2/28/2010(In USD Millions)

* Denotes Guarantee and Risk Management Products.

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Annex 13: CAS Consultations 1. The World Bank carried out CAS consultations with stakeholders in Kampala in December 2009 and March 2010. The stakeholders emphasized a role for the Bank in addressing the following challenges: commercialization of agriculture, infrastructure development, skills gaps, population growth, youth unemployment, and governance and anti-corruption.

2. Private sector representatives emphasized the difficult business environment due to high power tariffs, lack of effective transport opportunities, corruption, and the lack of skilled labor. Participants advised the Bank to focus on infrastructure, commercialization of agriculture, and improved access to finance. On the knowledge agenda, the private sector would welcome research on low-cost power generation, migration, and measures to improve vocational skills training and literacy skills. Further, the private sector would welcome a tougher stance on governance and anti-corruption.

3. Civil society organizations (CSOs) highlighted the following key issues: education and technical skills, youth unemployment, urbanization and associated challenges, infrastructure development and regional inequalities. Representatives would welcome a more prominent Bank role in oil management, governance issues, support to commercialization of agriculture and land reform, and access to energy for all. The Bank was also encouraged to provide more information about projects, enhance its communication strategy, and involve CSOs as partners in promoting the value for money agenda. Representatives recommended that the Bank should maintain focus on poverty reduction and apply more conditionality in its dialogue with the government.

4. Government representatives recommended that the Bank focus on transport infrastructure, including railways, energy, and the commercialization of agriculture. The Bank was encouraged to assist the government in addressing the demographic challenge, youth unemployment, and reproductive health. Participants emphasized the importance of the value for money agenda to reduce waste and corruption in service delivery, supporting vocational and technical skills training, tackling rapid urbanization, supporting regional trade, and addressing gender inequalities. Some participants were of the view that the Bank should be more selective and focus on infrastructure.

5. Members of Parliament encouraged the Bank to provide support to commercialization of agriculture, energy infrastructure, education including vocational training, addressing the demographic challenge, and knowledge products in the area of employment. They recommended that the Bank focus its lending on a few sectors. Finally, they highlighted the need to ensure equity amongst project beneficiaries and encouraged support to Parliament to strengthen its oversight role.

6. Development partners recommended a strengthened Bank role in the following areas: financial services, commercialization of agriculture and land issues, population and employment generation, good governance and public sector management, health and climate change. In addition, they recommended that the Bank contribute to analytical work highlighting how DP interventions contribute to alleviate bottlenecks towards achievement of the MDGs.

7. Country team governance consultations recommended using projects as entry points to enhance governance in sectors and piloting interventions on enhanced transparency and third party monitoring. The country team emphasized the need to be modest in expectations given the political economy challenges, upcoming elections, potential for government to be less responsive to advice given prospects of oil, continued weaknesses in institutions, and limited citizen engagement.

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Annex 14: Governance Risk Assessment Matrix – Opportunities, Gaps, and Planned Actions

Risks

Opportunities Gaps Planned Actions

1. Procurement Capacity constraints

in implementing agencies.

Proposal to introduce unrestricted use of “force account” increases opportunities for corruption.

Limited compliance with Procurement Law.

Ongoing legal reforms to establish an independent procurement complaints handling mechanism.

Regular value for money audits to be initiated by Office of the Auditor General (OAG) in a number of sectors.

Enhanced capacity of Public Procurement Disposal Act (PPDA) to conduct procurement audits.

Establishment of Procurement Performance Measurement System (PPMS) by Government.

World Bank -funded project GAAPs to serve sector entry points for procurement reforms.

Development partner dialogue on procurement reforms through Joint Budget Support Framework (JBSF).

Systematic approach to identifying weaknesses at sectoral/ institutional level

Increasing interference could weaken PPDA capacity to withstand political pressure

Force account (FA) issue raises questions about commitment to competition; but GoU could limit FA through regulations

Strengthen and enforce procurement planning as a condition for budget release [under JBSF and PRSC dialogue].

Scale up procurement audit efforts in particularly problematic institutions (e.g. health and agriculture, perhaps water).

Strengthen data sources and capacity for reporting on procurement issues in a systematic manner.

Commit to project-specific procurement actions impacting on sectors through the GAAPs.

Scale down budget support in preference for projects.

2. Corruption Increased impunity

leading to public apathy.

Loss of government and donor funds at all levels.

High cost of doing business, slowed economic growth.

Commitment and political will in MoFPED and OPM. 2011 elections to be debated on issues of good

governance. Increased exposure through Public Accounts

Committee probes, recovery efforts, judicial actions, sanctions, and media reports.

Government commitment to self assessment through value for money audits, BMAU processes, and development of the Data Tracking Mechanism (DTM).

Name and Shame initiative by CSOs (ACCU). Capacity development support to OAG from NAO

(UK).

Inadequate data sources facilitate dialogue.

Anticipated oil revenues could outstrip Auditor General capacity to audit.

Weak enforcement of AG/PAC, BMAU, IGG and other recommendations on corruption.

Weak institutional capacity of anti-corruption agencies.

Support development of the Data Tracking Mechanism for tracking corruption trends.

Commit to development partner joined up action against corruption.

Influence OAG work plan and reporting including VFM reviews

Support development of OAG capacity to deal with oil issues

Development of PAC public relations capacity and greater use of special reports.

Address potential oil sector-related corruption through engagement on EITI-type actions.

CSO/NGO mobilization and capacity building. 3. Clientelism Diversion of

government funds. Inequitable

distribution of resources and economic development.

Citizen dissatisfaction seen in increasing demands for action from opposition.

Increased attention to accountability for service delivery through performance contracting.

Development partner dialogue under JBSF and PRSC on increased accountability and performance management.

Enhanced media reporting on corruption cases at both political and technical level.

Inadequate systematic follow-up of reports of Commissions of Inquiry increasing impunity.

Increasing self censuring of media to avert clamp down.

Collective action with DP heads focusing on specific issues.

Third party monitoring of Bank-funded programs. Include IEC component in Bank funded projects.

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Risks

Opportunities Gaps Planned Actions

FINMAP II support to OAG, AG and demand side accountability.

4. Weak public sector-management

Unclear accountability structures.

Ineffective supervision and enforcement of decisions and sanctions.

Plan to enhance capacity of inspectorate departments across government,

JBSF commitment by government to review HR systems and process.

FINMAP for strengthening financial management systems

World Bank support to public sector reform and JBSF policy dialogue on public sector reform.

Capacity of inspectorates very weak both in terms of manpower and resources.

Inadequate financing for public sector reform.

Program of professional development support to accounting officers.

Use project GAAPs to introduce sector-wide initiatives on performance management.

Use of human resource actionable governance indicators to identify key bottlenecks and track progress on their removal.

5. Diversion of money from purpose

[includes districts, subcounty, or budget discipline, poor initial planning, and plans that are impossible in practice]

Government commitment to self assessment through reports from the OAG (Audit), Accountant General, Internal Audit Reports, and BMAU which provide information on percentage of resources diverted from purpose.

OPM to establish monitoring framework using JBSF indicators.

DFID proposed support to BMAU. NPA proposal to have the subcounty as the center for

funding, moving away from the district level.

Not all local government finance and revenues are captured at the center.

District development plans not plugged into central government plans and budgets.

Ineffective use of punitive sanctions.

Strengthen capacity of CSO engagement in key MDG sectors-

Strengthening CS engagement in the oil sector. Development partner dialogue under JBSF and

PRSC on comprehensive use of administrative sanctions.

6. Wage bill control and ineffective pay reform measures

Both high level and low level corruption.

Open engagement on issues of pay reform across the board.

Increased demand for better service delivery linked to pay drawing from institutions like OAG and National Water and Sewerage Corporation.

WB - Integrated Personnel and Payroll System (IPPS) - cleaning up the pay roll.

Issues of actual pay not on the table for discussion.

Realistic engagement on issues of pay and pay reform as a critical entry point in addressing corruption and poor performance.

7. Weak civil society Challenge of capture. Challenge of

resources. Limited entry points

for citizen engagement.

Local umbrella organizations such as ACCU and Regional Anti-Corruption Initiatives (e.g. in Rwenzori (RAC), Teso (TAC), monitor corruption trends.

Engagement of CSOs in key health and transport sector as part of GAAPs,

Government commitment to bring CSOs on board under NDP.

Norway to fund CSO engagement in oil sector.

CSO capacity to systematically engage on key issues, e.g. on impact of oil.

Absence of CSOs in key forums, e.g. sector working groups in roads, health, and oil sectors.

Capacity building of CSOs, particularly on oil sector management (through a development market place- type initiative)

Engagement of CSOs in policy dialogue at the various sector forums

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Annex 15: Summary of Non-Lending Services

Product Completion FY Cost (US$000) Audience a Objective b

Recent completionsCountry Economic Memorandum 2007 1,378 G, D, B, P KG, PS, PDPublic Expenditure Review (education) 2008 654 G, B, D KG, PSFinancial Sector Study 2009 175 G, B, D KG, PSPublic Expenditure Review (agriculture) 2009 141 G, B, D KG, PSPEFA Indicator Update 2009 1 G, B KG, PSInvestment Climate Assessment 2009 146 KG, PSPoverty and Inequality Study 2009 353 G, D, B, P KG, PSPublic Expenditure Review (health) 2009 424 G, B, D KG, PSTA - Governance and Anti Corruption 2010 G, B, D KG, PSTA- PPP and Capital Markets 2010 G, B, D KG, PS

PlannedPublic Expenditure Review (roads) 2010 G,D, B, P KG, PS, PDWater Country Assistance Strategy 2011 G, B, D KG, PSCEM Follow up: Making Growth More Inclusive 2011 G, B, D, P KG, PSDemography and Growth 2011 G, B, D, P KG, PS, PDEnvironment and Growth 2011 G, B, D, P KG, PS, PDFSAP 2011 G, B, D, P KG, PS, PDPolicy Notes: Petroleum Sector 2011 G, B, D, P KG, PSRegional Integration, Trade and Growth in Great Lakes Region 2011 G, B, D, P KG, PSPER: Public Investment Programming 2011 G, B, D, P KG, PSTA - Programmatic Poverty Support 2011 G, B, D, P KG, PSTA - Governance and Anti-Corruption 2012 G, B, D, P KG, PSPER: Decentralized Service Delivery 2012 G, B, D, P KG, PS, PDYouth and Unemployment 2012 G, B, D, P KG, PS, PDTA: Water for Production 2012 G, B, D, P KG, PS, PDTourism study 2012 G, B, D, P KG, PS, PDPolicy Notes: Petroleum Sector 2012 G, B, D KG, PSTA: Governance and Anti-Corruption 2012 G, B, D KG, PSPolicy Notes: Petroleum Sector 2013 G, B, D, P KG, PSAgricultural Sector Review 2013 G, B, D, P KG, PSPER (Focus TBD) 2013 G, B, D, P KG, PS, PDTA: Governance and Anti-Corruption 2013 G, B, D KG, PSCEM (focus on petroleum sector) 2014 G, B, D KG, PS, PDPER (Focus TBD) 2014 G, B, D, P KG, PS, PDTA: Governance and Anti-Corruption 2014 G, B, D KG, PS

a. Government, Donor, Bank, public dissemination.

b. Knowledge generation, public debate, problem-solving.

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Annex 16: IDA Summary Program (FY11-FY15)

Fiscal year Project US$(M)Strategic Rewards

(H/M/L)Implementation

Risks (H/M/L)

2010 Agricultural Technology and Agribusiness Advisory Services 120 M H

Health Systems Strenghtening Project 130 H M

Transport Sector Development Project 190 H M

Regional - East Africa Agriculture Productivity Project 10 M H

Regional - Eastern Africa Health Laboratory Netw orking Project 3.3 M M

Result* 453.3

2011 PRSC 8 120 M M

PRSC 9 100 M M

Electricity Sector Development Project 90 M L

Transport Sector Development Project Additional Financing 120 M L

Result 430

2012 PRSC10 100 M M

Municipal Infrastructure Development 150 M M

Pow er Sector Support 100 H M

Petroleum Sector Support 30 H M

Regional - East Africa Transport Links 25 M M

Regional - Reg. Communications Infrastructure Program 30 H M

Result 435

2013 PRSC11 100 M M

Water Sector Development and Management Project 130 H M

Private Sector Competetiveness III 50 H M

Forestry/Natural Resource Management 50

Kampala Institutional and Infrastructure Development APL II 40

Post Primary Education APL II 100 M L

Result 470

2014 PRSC12 100 M M

Transport Sector Development Project II 130 H M

Local Government and Capacity Building APL II 115 M MAgriculture Sector Support 50

Energy for Rural Transformation 40 H M

Result 435

2015 PRSC13 100 M MNorthern Uganda Integration and Grow th 100 H MResult 200

Overall Result (FY11-15) 1970

* Includes $70m Crisis Response Window (CRW) funds

** Covered by JICA.

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Annex 17: IDA Lending by Objective NDP Objectives CAS Outcomes Project Financial Year 2010 2011 2012 2013 2014 2015 Totals22 CAS Strategic Objective 1: Promote inclusive and sustainable economic growth 365

Enhance the availability of gainful employment (ii) Improving stock and quality of the economic infrastructure (iv) Enhancing human capital development (iii) Promoting sustainable population and use of environmental and natural resources (viii)

1.1. Improved conditions for private sector growth

Private Sector Competiveness III 50

50

1.2 Improved inter connectivity for regional trade

East Africa Transport Links 25 55

Regional Communications and Infrastructure Project 30

1.3 Increased productivity and commercialization of agriculture

Agriculture Technology and Agribusiness Advisory Service

120

50 Regional East Africa Agriculture Productivity Project 10 Agriculture Sector Support 50

1.4 Increase efficiency of natural resource management

Natural Resource Management and Forestry 50

210 Petroleum Sector Support Project 30

Water Resource and Management Project 130 CAS Strategic Objective 2: Enhance Public Infrastructure 770

Improve the stock and quality of economic infrastructure (iv)

2.1 Increased access to electricity

Electric Sector Development Project 90

230 Energy for Rural Transformation III 40

Power Sector 100

2.2 Improved access to and quality of roads

Transport Sector Development Project 190

250 TSDP Additional Financing 120

Transport Sector Development Project II 130

Increase access to quality social services (v)

2.3 Increased access to and quality of water and sanitation services

Municipal Infrastructure Development project

150 290

Northern Uganda Integration and Growth 100 2.4 Increased access to and quality of key urban services

Kampala Institutional and Infrastructure Development Project APL II

40

CAS Strategic Objective 3: Strengthen Human Capital Development 100

Increase access to quality social services (v)

3.1 Improved access to quality of primary and post-primary education

UPPET APL III 100 100

3.2. Strengthened health care delivery Health Systems Strengthening Project 130 East Africa Public Health Laboratory Networking 3.3

CAS Strategic Objective 4: Good Governance and Value for Money 735

Strengthen Good Governance, defense and security(vii)

4.1. Strengthened accountability, procurement and management of financial and human resources

LGMSDP APL II 115

115

PRSC 8 120 620

PRSC9 - PRSC13 100 100 100 100 100 Grand Total 453.3 430 435 470 435 200 1970

22 Includes FY11-FY15 only.

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Annex 18: Division of Labor with Development Partners

Lead Role in Sector  Active Engagement in Sector Planning New Engagement Leaving Sector

Future Lead Role Active Engagement in Subsector Funding of a sector programme

Sectors and subsectors

Active DPs in  FY2008/091

Sector Lead in FY  2008/2009

Active Engagements in  Sector

Active Engagements in  Subsector

Planning new engagements

Funding of a Sector Programme

Leaving  Sector

AfDB

IMF

World Bank EC

Austria

BelgiumDenmarkFrance

Germany

IcelandIreland

ItalyJapan*

NetherlandsNorwaySweden UK

USAUNAIDS*UNDP*UNEP*UN‐FAOUNFPA

UNHCR*UNICEFUN‐IDO*UN‐IFADUNIFEM

*UN‐OHCHRUN‐W

HO*

World Food  Program

me

1. Security 3 0 1 2 0 0 1

2. Roads and Transport 5 1 3 0 2 1 1 8/9 10 9/10  

3. Agriculture 13 3 6 4 0 0 3 8 9

4. Education 11 2 5 3 1 0 2 10/11 8 9/10

5. Health 16 2 10 2 0 1 3 10 9+9/10 10/11

6. Water and Environment

6.1 Water and sanitation 8 1 7 0 1 2 11/12 10/11 8/9 9/10

6.2 Environment/Climate change 7 1 6 0 1 0 8/9 12/13

7. Justice, Law and Order 10 1 7 2 0 2 1 10/11 8/9

8. Accountability 6 0 4 2 0 3 0 10/11

8.1 Public Financial Management 3 3 0 3 0 0 0

8.2 Anti Corruption 3 1 0 1 0 0 0

9. Tourism, Trade and Industry 8 0 5 3 1 2 2 9 11

10. Information, Communication and Technology 3 1 1 1 0 1 0 10‐14

11. Energy and Mineral Development 6 1 4 1 1 2 1 8 9/10

12. Lands and Housing 3 0 2 1 0 1 0

13. Social Development 11 0 7 4 1 0 0

14. General Public Administration 2 0 1 1 0 0 1

15. Public Sector Management

15.1 Decentralisation 6 1 5 0 0 3 9/10 9 13 8/93

15.2 Public Service Reform 4 1 3 0 0 1 8/9

16. Parliament 5 0 3 2 0 0 0 9/10 9/10

Cross cutting issues

5.CC HIV/AIDS 18 1 9 8 0 0 0 8/9 8/913.CC Gender 10 1 7 2 0 1 0 8/9

DP active in sectors in FY2009/111 8 1 17 9 2 4 7 4 3 4 7 8 7 2 7 8 9 11 1 13 1 8 8 5 8 6 3 1 7 3 8

Sector Lead  1 0 4 2 1 0 2 0 2 0 3 1 0 1 2 1 1 2 1 3 1 0 0 0 0 0 0 1 0 0 0

Active Engagements in Sector 5 0 12 3 1 2 2 0 0 0 2 4 5 1 3 2 3 6 0 4 0 3 4 1 4 0 1 0 3 2 7

Active Engagements in Subsector 1 1 1 2 0 0 3 1 1 4 2 3 2 0 2 4 2 2 0 4 0 5 4 0 3 6 2 0 4 1 1

Planning new engagements 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 1 0 1 0 0 1 0 0 0 0 0 0

Funding of a Sector Programme 1 0 0 2 0 2 0 3 0 0 0 0 0 0 0 1 0 0 0 1 0 0 0 4 0 0 0 0 0 0 0

Leaving Sector 0 0 0 0 2 2 3 0 2 0 4 0 0 0 0 2 2 1 0 0 0 0 0 0 0 0 0 0 0 0 01 Active DPs in FY2008/09: includes engagements in all sector, subsectors and cross cutting issues: lead DP in FY2008/09 and future lead DPs, active in sector and subsector. 2  UNCDF are not resident and their engagement as subsector lead is therefore stated under UNDP.3 The DPs in the Accountability sector will be represented by the chair of the PFM group under the LDPG and by the chair of the Anti Corruption group under the PDG.

*   For DPs with * information on concentration in sectors refers to the years 2008/09 except when specified otherwise

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Annex 19: CAS Completion Report

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Annex 19: CAS Completion Report  Period Covered: FY2006‐FY2009 Document Date of the 2005‐2009 UJAS: December 14, 2005 Board Approval Date: January 17, 2006 CAS Completion Report by: Kasper Dalsten (AFMUG) and Jonas I. Parby (AFCTZ) 

EXECUTIVE SUMMARY 

1. The CAS Completion Report  (CAS CR) covers  the  four­year FY2006­09 Uganda  Joint Assistance  Strategy  (UJAS).    The  UJAS  was  aligned  with  the  five  pillars  of  the  Government  of Uganda’s  Poverty  Eradication  Action  Plan  (2004):  i.  economic  management;  ii.  enhancing production,  competitiveness  and  incomes;  iii.  security,  conflict‐resolution  and  disaster‐management; iv. good governance; and v. human development.  

2. Of  the  15  PEAP/UJAS  high­level  strategic  objectives  included  in  the  CAS  results framework, three were achieved, eight were partially achieved, three were not achieved, and for one strategic objective  it was not possibly  to assess progress.   Bank contributions  to  the achievement of the strategic objectives were rated satisfactory in four cases, moderately satisfactory in  another  four  cases,  moderately  unsatisfactory  in  six  cases,  and  unsatisfactory  in  one  case.  Therefore, Bank contributions  to achievement of  strategic objectives  included  in  the CAS  is  rated moderately satisfactory.  

3. While  Bank  interventions  were  generally  implemented  successfully,  they  did  not match  the CAS program,  which  covered  all  five  pillars  of  the  PEAP,  15  strategic  objectives,  40 outcomes, and 56 outcome indicators.  In addition, the CAS results framework was never refined as intended,  thus  lacking  an  operational  framework  for  Bank  contributions  to  the  PEAP  outcomes.  Consequently, the CAS suffered from lack of focus and from being over‐ambitious. 

4. The Bank delivered a  larger  lending program with  fewer projects than projected  in the  CAS.    Apart  from minor  gaps  in  project  preparation  and  supervision,  the  quality  of  project implementation, outcomes and portfolio performance was generally satisfactory and cost effective. The Bank delivered more IDA support to the energy, education and social protection sectors, and less  through PRSCs  and  to  the  transport  sector  than planned;  however,  this  in part  reflected  the Bank’s  flexibility  in  responding  to  changing  client  priorities.    While  portfolio  performance  was satisfactory,  there  is  still  room  for  improvement  in  addressing  quality  of  project  preparation, addressing effectiveness delay issues, and ensuring efficient project implementation.   

5. The  Completion  Report  identifies  a  number  of  lessons  learned  to  be  taken  into account  when  formulating  the  next  Country  Assistance  Strategy  for  Uganda.    The  most important of these are the following: 

i. A joint strategy, elaborated with other development partners, is neither a necessary nor  a  sufficient  condition  for more  effective  aid.    Rather  than  spending  resources  on elaborating  a  joint  strategy,  efforts  should  be  devoted  to  developing  an  operational framework  for  alignment  with  the  national  development  strategy,  allowing  for  dynamic changes, and for harmonization and coordination amongst development partners.  The Joint Budget Support Framework (JBSF), and the GoU’s Aid Policy currently under  formulation, are examples of operational frameworks, although lack of government ownership may be a challenge. 

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ii. Full alignment with an  incomplete and/or  irrelevant national development strategy should be avoided.    A  careful  assessment  of  the  completeness,  ownership,  and  strategic relevance of Uganda’s new National Development Plan should guide the formulation of the next CAS for Uganda. 

iii. The impact of a CAS may be reduced in cases where there is no or limited selectivity.  The Bank should consider focusing its lending operations in a limited number of sectors. 

iv. Credible,  concise  and  realistic  results  frameworks  for  the  CAS  and  for  individual projects are essential for planning, monitoring and budgeting purposes, including realistic targets for PRSCs with their relative short life‐cycle. 

v. Successful reforms depend on strong sector  involvement and ownership.   Therefore, reforms  supported  under  PRSCs  should  be  linked  to  sector  strategies  or  specific  sector investment  operations.    A  corollary  to  this  insight  is  that  long  term  sector  reform  issues should  not  be  addressed  exclusively  through  APLs  or  SILs.    In  addition,  government leadership is a prerequisite for effective reform in any sector. 

vi. The Bank should develop a country­focused set of actionable governance  indicators (e.g. compliance with rules and laws) for specific sectors to enable tracking of progress on the governance and anti‐corruption (GAC) agenda in the next CAS. 

vii. Delays  to  effectiveness of  lending operations have  affected  the performance of  the Bank portfolio negatively throughout the CAS period.  These delays should be addressed by  ensuring  early  involvement  of  relevant  stakeholders,  including  Parliament,  at  project design and appraisal stages.  

6. Box  1  below  summarizes  performance  of  the  Bank  and  the  Government  over  the  CAS implementation period. 

Box 1: Bank and Government Performance during Uganda CAS Implementation, FY2006­09 What did the Bank do well?  Quality and impact of analytical work: ESWs (CEM, PERs) had significant impact as evidenced in policy 

priorities of GoU and in subsequent lending operations. 

Supporting government reforms: sector dialogues led to reforms in some sectors (e.g. in roads, education) but not in other sectors (e.g. health, agriculture). 

Using PRSCs to address policy reforms with cross sectoral importance. 

Post conflict development: the Bank played an important role in supporting GoU with post conflict rehabilitation of northern Uganda. 

Portfolio performance relatively good and disbursements higher than the Africa region average. 

What did the Bank not do well?  Limited results focus: the Bank elaborated a joint assistance strategy in the spirit of the Paris 

Declaration.  But the CAS was of limited operational value because of a weak results framework.  For example, indicators were often irrelevant to planned Bank interventions; targets were too ambitious; data for indicators was not available or not observed frequently enough to measure progress; or change in indicators could not be attributed to Bank interventions.   

Limited selectivity: the Bank was engaged in almost all sectors of the PEAP.  Alignment with the government strategy does not imply that the Bank needs to have an active lending portfolio in all areas. 

Limited focus on the governance agenda: the Bank lacked a clear focus for interventions to address governance challenges and did not make much progress on advancing public service reform, good governance and accountability. 

‐ 92 ‐  

What did the Government do well?  Maintenance of stability and growth: the Government managed to maintain macroeconomic stability 

and continuous growth with prudent fiscal policies.  

Realignment of budget priorities towards infrastructure, in line with CEM and PER recommendations. 

Suggesting and pursuing policy reforms in complex areas, including the roads and energy sectors. 

Effectively achieved stability in northern Uganda. 

What did the Government not do well?  PEAP as planning tool: the Government did not use the third PEAP as the central framework for policy 

making, budgeting, implementation and review in the CAS period. 

Limited results focus: no clear results framework to measure progress of PEAP implementation. 

Implementation challenges: lack of effective coordination and clear division of labor between main actors (MoFPED, OPM, NPA) led to weak implementation of the PEAP. 

Inequality: the Government did not adequately address inequality, as evidenced by poverty headcounts in the north and northeast. 

Effectiveness delays were a recurrent problem during the CAS period, mainly due to long parliamentary approval processes and lack of sufficient consultations between the Bank, relevant government institutions and Parliament. 

I.  INTRODUCTION 

7. This  Country  Assistance  Strategy  Completion  Report  (CAS  CR)  assesses  the effectiveness of the FY2006­09 Joint Assistance Strategy for the Republic of Uganda (Report No. 34310‐UG; December 14, 2005), henceforth referred  to as  the UJAS when covering  the entire Joint Assistance Strategy, or the CAS when referring to the Bank‐specific part of the UJAS.1   

8. The purpose of this report is to assess the overall performance of the UJAS and the Bank’s contribution  to  development  results  in  Uganda,  and  to  present  a  set  of  lessons  for  future  Bank assistance to Uganda. 

9. The Uganda CAS for FY2006­09 consists of a  joint part (the UJAS) and a Bank Group specific assistance program.  This Completion Report considers achievements against both parts.  At  the  time  of  drafting  the  Joint  Assistance  Strategy,  UJAS  partners  consisted  of  five  bilateral development  partners  (Germany,  the  Netherlands,  Norway,  Sweden,  and  the  UK),  the  African Development Bank, and the World Bank Group.   Subsequently,  in 2006, another five development partners (Austria, Belgium, Denmark, Ireland, the European Commission) signed up to the UJAS. 

10. There was no CAS Progress Report  (PR).   UJAS partners did not prepare a  Joint CAS PR because of limited interest in re‐opening the UJAS to lengthy re‐negotiations.  Bank staff considered preparing a Bank‐specific CAS PR in FY08 and early FY09, but decided against it on the basis that a new CAS would be prepared in FY09, leaving little time between the two documents.  However, the Government eventually delayed the preparation of the NDP by two years, thereby delaying the CAS. In hindsight, the Bank should have prepared a CAS PR regardless of the timing in order to sharpen the results framework and realign Bank interventions. 

                                                             1 The main sources for the Completion Report are the following:  i. the Independent Evaluation Group (IEG) Uganda Country Assistance Evaluation (CAE), 2001‐07 (Report No. 49395, dated August 11, 2009); ii. the UJAS Review (report financed by the UK Department for International Development, DFID; final report dated January 20, 2009); iii. Implementation Status Reports (ISRs) and Implementation Completion Reports (ICR); iv.  IEG reviews of ICRs; v. the draft Country Results Management Review (CRMR); vi. the Evaluation of the Implementation of the Paris Declaration in Uganda (Office of the Prime Minister, Uganda, May 2008); vii. the Independent Evaluation of Uganda’s Poverty Eradication Action Plan (Oxford Policy Management, July 2008); and viii. inputs from the Uganda Country Team. 

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11. The PEAP, the UJAS, and the Bank specific assistance program had inadequate results frameworks.    The  UJAS  took  the  principle  of  strategy  alignment  with  the  national  planning framework too far.  Full alignment with (a sub‐set of) an inadequate PEAP results framework meant that also the UJAS results framework was inadequate, as outlined in more detail in paragraphs 23‐25  below.    With  an  unclear  results  framework  for  Bank  interventions  and  attributions,  the evaluation of performance in this Completion Report has had to deviate from simple comparisons of  status with  targets  and an assessment of  attribution,  as baselines,  targets,  status of  indicators, and planned interventions are often unclear from the CAS results framework. 

12. The remainder of this report is organized as follows: 

Part  II  outlines Uganda’s  long  term development objectives  and  the alignment of  the UJAS/CAS with those objectives. 

Part  III  reports  on  progress  towards  PEAP/UJAS  outcomes  and  assesses  to  which extent progress can be attributed to Bank interventions. 

Part IV assesses Bank portfolio performance over the CAS period. 

Part V summarizes  lessons  learned and highlights  issues  that should be addressed  in the new CAS for Uganda. 

II.  UGANDA’S LONG TERM DEVELOPMENT OBJECTIVES 

13. Three  successive  Poverty  Eradication  Action  Plans  (PEAPs,  Uganda’s  Poverty  Reduction Strategy Paper, PRSP) have guided the Government of Uganda’s (GoU’s) policies since 1997.   The first PEAP (PEAP‐97), pre‐dating the series of PRSPs, covered the period 1997‐2000.  The revision in 2000, the PEAP‐00, covered the period 2000‐03, while the third, PEAP‐04,  initially covered the period FY2005‐08, but was extended first to the end of FY09 and subsequently to the end of FY10. 

14. The UJAS, as well as the Bank Group specific assistance program, were both aligned with  the  five  pillars  of  the  PEAP­04:  i.  economic  management;  ii.  enhancing  production, competitiveness  and  incomes;  iii.  security,  conflict‐resolution  and  disaster‐management;  iv.  good governance; and v. human development.   

15. While the long term strategic goals for Uganda have not changed per se since the UJAS was prepared,  the  2004  PEAP  became  increasingly  irrelevant  in  the  political  landscape  since  the elections  in  2006.    The  three  successive  PEAPs  were  all  formulated  in  a  no‐party  environment.  Since  the  2006 multiparty  elections,  the  Government  has  increasingly measured  its  own  success against  objectives  set  out  in  the  National  Resistance  Movement  (NRM)  manifesto  (launched  in January 2006) and against sector specific policies and plans.   

16. In  retrospect,  the  PEAPs  and  the  UJAS  should  have  focused  more  on  productive sectors.   While  the  two  first  PEAPs  provided  adequate  frameworks  for  poverty  reduction  in  an economy still  recovering  from an extended period of  civil wars,  further sustainable  reductions  in poverty  reduction  are  dependent  on  addressing  binding  constraints  in  the  economy.    This  was highlighted  in  the  Country  Economic  Memorandum  (2007)  as  well  as  in  the  PEAP  evaluation (2008).   

17. The PEAP­04 and the UJAS would have benefitted from earlier delivery of the Country Economic Memorandum.  The CEM was delivered in 2007, eleven years after the previous CEM for Uganda.    Thus,  the  Bank missed  an  opportunity  to  provide  inputs  for  a  better  prioritized  PRSP.  When  several  of  the  CEM  conclusions  began  to  be  reflected  in  the  national  budgets,  the  PEAP became increasingly irrelevant as the overall guiding framework for the budget. 

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18. The UJAS was  one  of  the  first  joint  assistance  strategies  elaborated.    UJAS  partners deserve  credit  for  effectively  bringing  together  a  majority  of  the  most  important  development partners  in  Uganda  in  an  attempt  to  improve  aid  effectiveness  by  strengthening  harmonization between partners as well as alignment with the PEAP.   However,  the UJAS was centered on three principles, which were at best only partially  realized.2    In hindsight,  therefore,  the UJAS could be said  to  be  premature.    For  example,  while  the  UJAS  outlined  joint  development  partner commitments and aspirations to work more effectively towards the achievement of the PEAP goals and objectives, the UJAS was not effective as an operational tool during implementation.   Further, the  extended  deliberation  period,  and  associated  transaction  costs,  meant  that  the  UJAS  was practically dated by the time it was published, by being fully aligned with a national development strategy which had lost its relevance.  The expected complications associated with a revision of the UJAS meant  that  it was never revised  in  light of  the changed environment.   There was also some disappointment on DP side that GoU showed limited interest in engaging with UJAS partners over UJAS implementation and other efforts towards improved aid effectiveness.  In practice, therefore, the  joint  strategy  had  limited  operational  importance  amongst  partners,  and—according  to  the UJAS review—appears not to have reduced transaction costs associated with aid on either GoU or development partner side. 

19. The  UJAS  was  weak  in  its  analysis  of  political  economy  issues  and  in  outlining credible  responses  to poor governance.    The  joint  analysis  and  joint  risk  assessment  point  to rampant  corruption  and  state  that  “[t]he Government  has  failed  to  successfully  prosecute  a  single high­profile  case  of  corruption…”.    At  the  time  of  drafting,  UJAS  partners  were  well  aware  that increased political patronage could undermine the effective implementation of the PEAP.   Yet, the UJAS response amounts to little more than dialogue, capacity building, and strengthening of public financial management and procurement processes.   Elaborating a systematic approach  to dealing with governance risks within the Bank’s mandate may also have been hampered by the decision to formulate a joint strategy with agencies having different mandates from the Bank. 

20. The UJAS outlined joint financing scenarios (low case, base case, high case) intended to provide  a  coordinated  response  to,  for  example,  GoU  failure  to  improve  governance  and  public financial  management,  based  on  a  UJAS  assessment  framework.    The  assessment  framework, however, depended on the annual PEAP Review which never transpired as intended, partly because of  the  PEAP’s  incomplete  results  framework.    Consequently,  the  joint  financing  scenarios  were never  implemented  as  intended,  as  demonstrated  by  three  UJAS  partners’  decisions  to  divert assistance away from budget support in response to the 2006 elections. 

21. The Bank’s lending program was generally relevant to Uganda’s officially stated long term development objectives.  As would be anticipated, projects delivered towards the end of the CAS period were increasingly not foreseen at the time the CAS was drafted (see Figure 4 on page 113).  More importantly, projects delivered deviated from planned projects, cf. Figure 1 and Figure 2 below, where commitments are broken down by pillar and by sector board.3  Thus,  

i. PRSCs were  reduced  from  $600m  to  $460m.    Combined with  the  increase  in  the  overall program  from  $1,000m  to  $1,287m,  PRSC’s  share  of  overall  new  lending  in  the  period declined from the planned 60 percent to 36 percent;  

                                                             2 The three strategic principles for the UJAS are: i. a country‐owned and country‐led PEAP [in hindsight not the case]; ii. more effective collaboration among development partners [realized] and with the government [not realized as witnessed by GoU’s limited appetite for engaging with UJAS partners]; iii. focus on results and outcomes [never realized given the inadequate and poorly monitored PEAP results framework]. 3 The base‐case lending program for the CAS included a number of projects with no allocations (see CAS Annex B3, p. 91).  Therefore, some “new” operations, such as the NUSAF‐2 project, were in fact anticipated at the time of CAS formulation, only under another name and with no indicative allocation.  

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ii. delivered  commitments  under  pillar  2  almost  doubled  to  $470m  compared  to  the  plan ($260m), mainly due  to  the new $300m Power Sector Development project and delays  to planned road projects; 

iii. NUSAF‐2  ($100m) was  not  anticipated  and  explains  the  difference  between  planned  and delivered projects under pillar 3/social protection; 

iv. delivered  commitments  under  pillar  4  were  reduced  as  the  Public  Service  Performance Enhancement (UPSPEP) project was reduced from $70m to $23m; 

v. the non‐planned $150m Post‐Primary Education and Training (UPPET) project explains the significant increase in delivered commitments under pillar 5/education. 

Figure 1 – Planned and Delivered Commitments by 

PEAP/UJAS Pillar, FY2006‐09 

Figure 2 – Planned and Delivered Commitments by 

Sector Board, FY2006‐09 

Note: Technically, PRSCs are under the Public Sector Governance Board.  However, due to the prominent role of PRSCs in the 

lending program in Uganda, PRSCs are presented as a separate category. 

 

22. This  deviation  between  planned  and  delivered  commitments  could  be  interpreted  in different ways: with GoU priorities changing, the Bank was merely responding to client demands; the change in client demands was a response to a highly relevant non­lending program; or the deviation could be an indirect response to what was perceived as an increasingly inadequate CAS.    While flexibility in the lending program may have been the second‐best response to an inadequate CAS,  the absence of a  formal realignment of  the CAS in response to a CAS Progress Report meant that  interventions  delivered  in  the  latter  part  of  the  CAS  period  lacked  a  strategic  framework guiding interventions.  Having said that, all of the projects delivered were aligned with the strategic objectives included in the CAS. 

III.  PROGRESS AGAINST CAS OUTCOMES 

23. The assessment  in  this  section  focuses on progress against  the outcome  indicators and  intermediate  results  outlined  in  the UJAS  (Appendix  1  of  the  CAS:  World  Bank  specific program).   The PEAP Results  and Policy Matrix was organized around  the  five pillars mentioned above, 15 strategic objectives, 51 outcomes, and 76 outcome indicators.   The World Bank specific program of the UJAS was directly aligned with 15 of these strategic objectives, 40 of the outcomes, 

0

100

200

300

400

500

600

Pillar 1 (PRSCs)

Pillar 2 Pillar 3 Pillar 4 Pillar 5

US$m

Planned Commitments Delivered Commitments

0

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200

300

400

500

600

ARD ED EMT ENV PS PRSCs SP TR UD

US$m

Planned Commitments Delivered Commitments

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and 56 of  the outcome  indicators.4    In  addition,  the Bank  specific program  included a number of qualitative and quantitative intermediate results, which are a sub‐set of policy actions in the PEAP Result and Policy matrix.  With these limitations in mind, Annex 1 provides a summary of progress against the 56 indicators included in the Bank specific program. 

24. Assessing progress  against  CAS  outcomes posed  two main  challenges:  i.  the PEAP  results matrix was  never  completed;  ii.  the  Bank  specific  program did  not  provide  a  clear  link  between interventions and results.  Baselines and/or targets were missing for at least 31 indicators (41%) in the PEAP.   Alignment with an  incomplete  framework meant  that also  the CAS results matrix was incomplete.  In addition, there was no clear link from Bank interventions and strategies/actions to anticipated  intermediate  results and progress on  the outcome  indicators.   Because  the  indicators chosen were those of the PEAP, attribution of Bank interventions could not always be assessed.5 

25. The Bank  specific part of  the UJAS  recognized  the  lack of  an adequate  results  framework against which the contribution of Bank interventions to PEAP outcomes could be assessed.6  Yet, the UJAS  results  framework  was  never  refined  as  intended.    With  those  limitations  in  mind,  the following sections consider to which extent Bank interventions during implementation of the UJAS contributed to the outcomes as intended. 

26. Bank contributions to the achievement of the strategic objectives were rated satisfactory in four cases, moderately satisfactory in another four cases, moderately unsatisfactory in six cases, and unsatisfactory  in  one  case.    Therefore,  Bank  contributions  to  achievement  of  strategic  objectives included  in  the  CAS  is  rated  moderately  satisfactory.    A  summary  of  CAS  outcomes  and  Bank contributions is provided in Box 2. 

Box 2: Highlights of CAS Outcomes and Bank Achievements by Pillar Pillar 1: Macroeconomic Stability Consistent with Rapid Private­Sector Led Growth: Satisfactory  Macroeconomic stability continued to improve during the CAS period, following the trends of the 

preceding decade. Almost all targets were achieved. Growth rates remained high throughout the period, the fiscal deficit was reduced beyond target, government revenues increased slightly, and credit to the private sector increased. 

Policy dialogue, mainly through the PRSC instruments, and robust recommendations from analytical work successfully contributed to a prudent fiscal and overall sound macroeconomic policy framework. 

Pillar 2: Enhancing Production, Competitiveness, and Incomes: Moderately Satisfactory  Limited progress was made towards the outcome of increased private sector competitiveness, although 

access to micro‐finance increased significantly.   

The lack of a clear policy, strategic and institutional framework for the agriculture sector hampered overall progress, despite the Bank’s contributions to research and advisory services.  

Road infrastructure improved and the Bank played a major role in establishing the Road Development Fund, which is essential for sustainability of road sector investments.  Access to electricity more than 

                                                             4 The results matrix for the Bank specific program of the UJAS has in some instances listed outcomes as strategic objectives rather than following the distinction between strategic objectives and outcomes in the PEAP results framework.  While the one‐to‐one relationship between indicators in the PEAP and the UJAS is maintained, headings and groupings in Annex 1 differ slightly from Appendix 1 of the CAS. 5 The targets that were specified in the PEAP were for FY08.  With full alignment of the results framework, UJAS targets were also for FY08, even though the UJAS covered FY2006‐09.  Dates for status of indicators are provided in Annex 1.  In any case, it is the trend in indicators, rather than specific value in a single year, that matters for an assessment of progress towards targets as outlined in the PEAP/UJAS. 6 UJAS, Part 2, paragraph 20: “In operationalizing the UJAS, the Bank in collaboration with the government and other development partners will further refine its results framework presented in appendix 1.  This framework will establish a more direct link between specific PEAP goals to government–led outcomes, and the contribution of Bank outputs to these outcomes.” [Emphasis added]. 

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Box 2: Highlights of CAS Outcomes and Bank Achievements by Pillar doubled, but still only 8% of Ugandan households have access to mains power.

Management of natural resources did not improve.  Deforestation, depletion of fish stock and declining soil fertility remain major challenges. 

Pillar 3: Security, Conflict­Resolution, and Disaster­Management: Satisfactory  The negative socio‐economic effects of the conflict in northern Uganda were reduced significantly due to 

the cessation of Lord’s Resistance Army (LRA) hostilities.  This is reflected in the reduced number of casualties from conflict, the reduced number of Internally Displaced Persons (IDPs), and the increase in the number of former rebels and their collaborators resettled, having received amnesty. 

Uganda has a strengthened policy framework to address conflicts and disputes as well as regional disparities as reflected in the Peace Recovery and Development Plan (PRDP) and the Karamoja Integrated Disarmament and Development Plan (KIDDP). 

The Bank played a major role towards these achievements, mainly through interventions availing access to improved social services for almost half the population of IDPs in northern Uganda. 

Pillar 4: Good Governance: Moderately Unsatisfactory  Uganda has not witnessed progress in terms of tackling corruption, improving public sector 

management or improving the justice sector, with almost all indicators showing lower scores compared with the baseline year.  Policy dialogue under the PRSC process as well as Bank‐funded operations were not able to provide significant momentum to the public service reform agenda, including good governance and reduction of corruption.   

Pillar 5: Human Development: Moderately Satisfactory  In the education sector, indicators on enrollment and coverage show improvements, but major 

challenges remain with respect to completion rates. 

Uganda has seen some progress in fighting HIV/AIDS and malaria, increasing immunization rates and in reducing infant mortality.  However, the health sector still faces significant challenges, as witnessed by high maternal and child mortality rates.  

Coverage and access to water and sanitation have increased, but at a slower speed compared to earlier periods. 

 

27. The  World  Bank’s  Independent  Evaluation  Group  (IEG)  and  the  Operations  Evaluation Department  of  the  African  Development  Bank  produced  a  Joint  Country  Assistance  Evaluation (CAE) dated March 19, 2009, covering the period 2000 to 2007.  The CAE assessed Bank support to Uganda under the FY01‐03 World Bank Country Assistance Strategy and the first two years of the UJAS.  Main findings of the CAE are provided in Box 3. 

Box 3: Uganda Joint Country Assistance Evaluation, 2001­2007 According to the CAE, the World Bank programs were effective in the areas of decentralization, public sector reform, growth and economic transformation, education, and water and sanitation. IEG found that more could have been done to help counter the perception of increasing corruption, improve power supply, reduce transport costs, enhance agricultural productivity, and help with family planning and reproductive health. The CAE rated the overall outcome of World Bank support moderately satisfactory. 

IEG Recommendations: 

Support GoU in developing an analytical framework to guide governance reforms. 

Encourage and support GoU efforts to develop medium‐to‐long term master plans for infrastructure. 

Encourage GoU to coordinate ongoing monitoring and evaluation initiatives by its development partners in order to secure reliable monitoring and evaluation of its overall poverty reduction strategy. 

Reinforce the effectiveness of general budget support as an instrument for minimizing transaction costs and facilitating the use of country systems. 

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28. The remainder of Section III assesses performance against CAS outcomes.   Normally, such an assessment would evaluate performance outcome by outcome.  However, with 40 outcomes and 56 outcome indicators, such an approach would lose sight of the bigger picture.  The performance assessment is therefore organized around the five pillars and 15 strategic objectives, with reference made to specific outcomes and outcome indicators where this is relevant.  A complete overview of performance by outcome indicator is provided in Annex 1. 

PILLAR 1: ECONOMIC MANAGEMENT 

29. Fiscal  consolidation, macroeconomic  stability,  and  significant  debt  relief  helped  foster  an environment  conducive  to  a  growing  private  sector.    While  challenges  remain,  the  strategic objective was generally achieved.  The single strategic objective was highly relevant for the country and as a prerequisite for the success of other Bank interventions. 

Table 1 – Summary Assessment of Bank Contribution to the Strategic Objective under Pillar 1 

PEAP/UJAS Strategic Objective  Result  Bank Contribution 1.1: Macroeconomic Stability Consistent with Rapid Private‐sector Led Growth 

Achieved Satisfactory 

 

30. While it is difficult to attribute macro‐level effects to specific Bank interventions, it is fair to say that the Bank contributed positively and satisfactory to the relatively good performance under Pillar 1.   Policy dialogue  in connection with  the PRSC series entailed agreement with GoU on  the MTEF,  annual  budget  executions  were  closely  monitored,  and  Poverty  Action  Fund  (PAF) expenditures consistently exceeded 95 percent of appropriations (although public administration expenditures  exceeded  the  budget).    Further,  PRSC  prior  actions  underpinned  public  financial management reforms, as further detailed in Box 4. 

Box 4: The PRSC Series in Uganda The World Bank has been applying Poverty Reduction Support Credits in Uganda since 2001.  While the PRSC1‐3 series mainly focused on poverty reduction through human development improvements, PRSC4‐7 increasingly focused on supporting the growth agenda as a means to reduce poverty.  PRSC4‐7 thus focused more on macroeconomic management, public financial management reforms, reforms to improve the business environment for the private sector, and reforms for increased efficiency in service delivery. 

The PRSCs supported an expansion of service delivery and led to an increase in poverty‐reducing expenditures.  The expansion was largely pro‐poor and equitable, but was offset by poor quality of service delivery, governance and human resource challenges, and limited impact on outcome indicators.  However, the PRSCs proved useful for addressing cross‐cutting issues, which explains the expansion of the PRSCs’ policy action agenda. 

Despite the above achievements, providing assistance through PRSCs in Uganda also entailed a number of challenges.  For example, PRSCs did not facilitate governance reform, as the direct links between Bank support and outcomes were not clear, as evidenced in disconnects between short term prior actions and long term objectives.  Further, the PRSCs proved inadequate in dealing with specific health sector issues, for example addressing human resource management issues as an impediment to effective service delivery. Therefore, long term sector reforms are often better addressed simultaneously by development policy lending and a sector specific operation supported by the Bank or another development partner.  

 The use of a results matrix as a performance framework has tended to create contradictory incentives. The GoU sought to establish modest performance targets (especially with respect to governance), while the Bank would push for more ambitious targets.  This led to dialogue giving too much attention to the details of the assessment process rather than policy reform dialogue.  

Finally, PRSCs suffered from a lack of clear and measurable outcomes, and an often rather weak connection between policy actions and monitorable indicators in the PRSC matrices themselves. These challenges should be addressed under the new PRSC8‐10 series.

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31. As outlined  in Table 2, progress on outcome  indicators were generally met save  for a  few exceptions.  Targets were all realistic if not slightly unambitious in some instances. 

Table 2 – Progress on Outcome Indicators under Strategic Objective 1.1 

PEAP/UJAS Outcome Indicator  Baseline  (2002/03) 

Target  (2007/08) 

Status  Year/Source 

Fiscal deficit (% of GDP)  11.3% 8.2% 5.1% FY08; IMF Revenues (% of GDP)  12.0% 13.2% 12.8% FY08; IMF Expenditures (% of GDP)  23.9% 21.8% 17.9% FY08; IMF CPI inflation  5.7% < 5.0% 7.3% FY08 average; BoUCredit to private sector (% of GDP)  7.1% 10.4% 11.2% FY08; IMF NPV of external debt (% of exports)  305.0% 238.0% 46.7% 2007; IMF/WB DSA

 

32. While the fiscal deficit was reduced to 5.1 percent of GDP, this was largely a result of poor performance  related  to  government  expenditure  as  well  as  revenue  mobilization.    Government revenues reached only 12.8 percent of GDP, against the rather unambitious target of 13.2 percent of GDP  by  2007/08.    While  tax  administration  has  been  modernized,  low  revenue  mobilization remains a  challenge.   The  largely  informal  local business  sector  remains outside  the  scope of  tax collections and the majority of taxes collected are still trade related.  Government expenditures were reduced  beyond  target,  largely  as  a  result  of  limited  absorption  capacity  hampering  the  planned increase in development spending.  

33. Although  core  CPI  inflation  reached  12.1  percent  by  end  June  2008,  and  the  average  for FY08 reached 7.3 percent, this was largely attributed to the domestic energy crisis exacerbated by high international commodity prices, and core CPI inflation had reduced to less than six percent by early  2010.    The  fiscal  stance  and  prudent  monetary  policy  kept  inflation  at  reasonable  levels without crowding out private sector finance.  Credit to the private sector increased to 11.2 percent of GDP against a target of 10.4 percent by the end of FY08.  The growth in private sector lending is attributed to prudent monetary and fiscal policies as well as increased competition in the financial sector.   External debt was reduced  to 46.7 percent of exports,  easily  surpassing  the  target of 238 percent,  largely due to debt relief under  the HIPC and MDRI  initiatives.   Since MDRI, government borrowing has been underpinned by a Debt Strategy (2007) underscoring fiscal consolidation and limits new borrowing to concessional terms, except for infrastructure development.  

34. Policy dialogue, mainly through the PRSC instruments, and robust recommendations  from analytical  work  have  contributed  to  a  continued  prudent  fiscal  and  macroeconomic  policy framework  in  Uganda.    Focus  on  spending  on  public  administration,  efficiency  in  use  of  public resources highlighted by the PERs, and improving procedures for public procurement, to an extent helped  curtail  expansion  of  spending  in  non‐productive  areas.    Re‐orientation  of  the  budget towards addressing infrastructure constraints is attributed to the CEM and the PER on fiscal policy for growth.  According to the Diagnostic Trade Integration Study (2006), Bank support to the URA Customs Modernization Program (under the East Africa Trade and Transportation Project) helped improve  efficiency,  reduced  the  scope  for  corruption,  and  eased  cargo  tracking,    exchange  of clearing  information,  and  revenue  collection.    The  Bank  contributed  to  increased  private  sector access to credit through the Second Private Sector Competitiveness project (PSCP‐2).  This project provided  technical  assistance,  training,  information  campaigns  and  support  to  business development services via support to the Private Sector Foundation Unit. 

35. Progress on CAS outcomes under Pillar 1 are sustainable as witnessed by Uganda’s ability to weather  the  impact of  the global  financial crisis.   Future progress depends on Uganda’s ability  to address road and energy infrastructure bottlenecks in particular and how successful the value‐for‐

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money  in  service  delivery  agenda  is  being  pursued.    The  management  of  potentially  significant revenues from oil extraction poses an emerging challenge to macroeconomic stability. 

PILLAR 2: ENHANCING PRODUCTION, COMPETITIVENESS, AND INCOMES 

36. Under Pillar 2 of the CAS, the Bank sought to contribute to seven strategic objectives and 14 outcomes, measured  by  20  outcome  indicators.    Several  indicators  are missing  baselines  and/or observations making it futile to assess performance based on the outcome indicators only.  Rather, an assessment of progress towards each strategic objective, and the Bank’s attribution, is provided in the following. 

37. Most  of  the  PEAP/UJAS  strategic  objectives were not  achieved  or  only  partially  achieved.  Despite  this,  Bank  interventions  had  a  positive  impact  towards meeting  the  strategic  objectives, although links between interventions and outcomes and strategic objectives are not always clear.  Delays  to  effectiveness  and  implementation,  poor  follow‐up  on  lessons  learned,  inadequate attention  to  institutional  weaknesses  and  trying  to  achieve  too  much  means  that  the  Bank contribution to the strategic objectives included in the Bank specific results matrix under Pillar 2 is rated moderately satisfactory.7 

Table 3 – Summary Assessment of Bank Contributions to Strategic Objectives under Pillar 2 

PEAP/UJAS Strategic Objective  Result  Bank Contribution 2.1: Increased and more efficient private sector production Partially

achieved Moderately satisfactory

2.2: Increased and more efficient agricultural production Not achieved Moderately satisfactory2.3: Increased and sustainable fisheries production Partially 

achieved  Unsatisfactory 

2.4: Increased and more efficient production of non‐agricultural goods and services 

Partially achieved 

Moderately unsatisfactory

2.5: Strengthened infrastructure in support of increased production of goods and services 

Partially achieved 

Moderately satisfactory

2.6: Strengthened ENR management regime in support of sustainable production of goods and services 

Not possible to assess 

Moderately unsatisfactory

2.7: Strengthened financial sector in support of increased production of goods and services 

Achieved Satisfactory 

 

Strategic Objective 2.1: Increased and more Efficient Private Sector Production 38. Some progress was made towards increased private sector competitiveness.  Private sector investment rose only marginally, but value of exports exceed even  its FY14  target.   On  this basis, strategic  objective  2.1 was partially achieved.    Bank  interventions were  relatively  successful,  but suffered  from delays  in  implementation  and  did  not  quite match  the  ambitious  agenda  for  Bank contributions as set out under SO2.1.  For example, absolute performance against the Ease of Doing Business  indicators  improved only marginally, while  relative performance gradually deteriorated.  On that basis, Bank contributions to SO2.1 are rated moderately satisfactory.  

39. Bank  lending operations under  SO2.1  consist  of  a Regional  Trade Facilitation Project  and the  Second  Private  Sector  Competitiveness  Project  (PSCP2).    The  former  successfully  set  up  the African  Trade  Insurance  Agency,  facilitating  international  trade  by  providing  insurance  against 

                                                             7 Note that it is possible for the PEAP/UJAS strategic objective to not have been achieved, yet the Bank’s contribution positive (MS or S), as long as the Bank’s contributions match the ambitions set out in the CAS.  This apparent disconnect is a result of “over‐alignment” with the PEAP results matrix and does not necessarily reflect poor Bank performance in the individual operations.  

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political  risks.    The  latter  has,  among  other  things,  successfully  contributed  to  improved  GoU‐private  sector  dialogue  via  the Presidential  Investors’  Round Table.    Other  achievements  include support to the establishment of  the  land and company registries and the credit reference bureau.  Financial deepening efforts were further supported by the IFC’s mortgage support program.    

40. Non‐lending  activities  under  SO2.1  included  three  major  pieces:  Diagnostic  Trade Integration  Study  (DTIS),  Options  for  Strengthening  the  East  African  Community’s  (EAC)  Trade Integration,  and  the  Investment Climate Assessment.   Common  to  these  studies  is  that  they need closer review and follow‐up actions to achieve an impact.   In addition to these analytic pieces, the Bank  provided  on‐the‐ground  advice  to  the  GoU  on  private  sector  related  issues.    Among  other things, the Bank served as a member on the steering committee for a revision of the GoU’s Medium Term Competitiveness Strategy. 

Strategic Objective 2.2: Increased and more Efficient Agricultural Production 41. The agriculture sector grew at an average annual rate of just 1.1 percent from FY03‐FY08, significantly  lower  than  the  PEAP/UJAS  target  of  +3.8  percent.8    While  several  other  outcome indicators  with  respect  to  agricultural  output  and  land  titling  were  formulated,  these  indicators were not monitored and data are not readily available.  On this basis, SO2.2 was not achieved.   

42. Bank  interventions  (the  National  Agricultural  Advisory  Services  Project  (NAADS),  the Second  Agricultural  Research  and  Training  Project  (ARTP2),  and  PRSC  support  to  the  Plan  for Modernization of Agriculture (PMA)), contributed towars policy reforms in the sector (fulfillment of prior actions for the PRSC credits), sustaining a liberal trade and pricing policy, availing investment resources,  and  provision  of  knowledge  and  advice.    In  particular,  Bank  interventions  provided support to the following intermediate results: i. establishment of the National Agricultural Research System (NARS); and ii. Expansion of the NAADS program to cover all sub‐counties.  Other aspects of the agriculture agenda were addressed by other development partners (e.g. agricultural marketing, livestock  services,  regulatory  services,  oilseeds  development,  rural  roads,  fisheries  etc.)    Thus, despite the strategic objective not being achieved, Bank interventions largely delivered what they set out to do.  Consequently, Bank contribution to SO2.2 is rated moderately satisfactory. 

43. During the period, the Government pursued a liberal price and trade policy that supported the agriculture sector.  Domestic prices for agricultural and food products were in line with border prices adjusted to marketing costs.    In contrast  to Kenya, where the state actively  intervenes  into grain marketing  through  the National Cereal  and Produce Board  (NCPB),  and  to Tanzania, which bans  the  export  of  maize,  the  trade  policy  in  Uganda  remained  liberal,  with  the  Government pursuing outward‐oriented policies through and beyond the EAC customs union.  

44. A common weakness of the Bank’s interventions in the agriculture sector has been the lack of a clear government policy framework regarding the roles of the public vs. the private sector and overlaps in various programs.  Initially, the PMA was the agreed framework for the PEAP.  Over the past couple of years, however, new initiatives for rural development have been introduced, namely the Rural Development Strategy (RDS) and Prosperity for All (PFA).   These programs have almost identical objectives and overlapping mandates.  In addition, recent government interference in the sector may be motivated by political patronage considerations  rather  than ensuring  the  strategic objective  is met.   With  unclear  and  potentially  parallel  implementation  arrangements,  leading  to significant duplication of efforts and wastage of development resources, there is an urgent need for the  Government  to  clarify  its  policy  and  institutional  framework  to  facilitate  a  coordinated approach to meeting the strategic objective.  Recognizing the need for a clear policy framework, the 

                                                             8 The growth rate of the agriculture sector over the period is disputed.  Whatever the correct growth rate is, it is likely to be unimpressive and below the target of more than 3.8 percent per annum. 

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Bank,  together  with  other  development  partners,  is  currently  engaged  with  the  Government  to address these concerns in the Development Strategy and Investment Plan (DSIP) for 2009‐2014. 

45. Non‐lending  activities  in  support  of  SO2.2  consisted  of  the  PER  on  Sustainable  Land Management and an Agriculture Sector PER.  The findings of this analytical work has already been feeding  into  the  preparation  of  the  next  phase  of  support  to  National  Agricultural  Research Organisation (NARO) and NAADS, preparation of a project with the Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) to support core public functions, and the finalization of the DSIP.  

46. The major lessons to be learned for the next CAS are the following.  First, despite the critical role  in  supporting  technology  generation  and  dissemination,  it  is  critical  to  support  other  core mandates of MAAIF under the proposed DSIP, such as animal and plant disease control, regulatory services, water for agricultural production, sector statistics and monitoring and evaluation, etc. to support  agricultural  growth,  including  the  desired  impact  of  research  and  advisory  services.  Second,  cross‐sectoral  support  is  required  to  enhance  lasting  agricultural  growth.    Better  rural roads, greater access  to electricity and communication  infrastructure, more and better marketing infrastructure,  and  better  access  to  finance  in  rural  areas  are  urgently  needed  to  complement agriculture‐related policy and lending activities of the Bank.  Third, an increasingly important factor for agricultural development in Uganda is the recent surge in regional trade, notably with southern Sudan and Kenya.9  Agro‐processing is another critical area for future support, but its success will ultimately  depend  on  whether  concerted  efforts  on  supporting  rural  infrastructure  and  private sector  development  are  made  to  enhance  pro‐poor  agricultural  growth.    Finally,  for  sustainable impact  in  the  agriculture  sector,  and  to  support  commercialization  of  agriculture  in  Uganda,  the articulation of a clear policy, strategic and institutional framework is a must. 

Strategic Objective 2.3: Increased and Sustainable Fisheries Production 47. The fishery sector showed rapid growth rates with the value of fish exports increasing from $88m in 2003 to $124m in 2008, after peaking at $146m in 2006.  While no indicator is assessing the objective of sustainable fisheries production, annual fish catch was 15% lower in 2007 than in 2004.  This reflects the continued depletion of fish stocks as a result of overfishing and use of illegal fishing gears that end up catching immature fish, which in turn undermines the sustainability of the fishery sector and fish exports.  On that basis, SO2.3 is only partially achieved. 

48. The PEAP/UJAS outcome indicators for SO2.3 were included in the Bank specific program, but the Bank has had neither lending nor non‐lending operations supporting this objective over the CAS period.  The regional Lake Victoria Environmental Management Project (LVEMP) closed at the onset  of  the  CAS  and  the  follow‐on  project,  LVEMP‐2,  will  only  become  effective  in  FY10.    This demonstrates  that CAS alignment with a government’s development plan should  include a higher degree  of  selectivity  rather  than  uncritically  copying  objectives,  outcomes  and  indicators.  Therefore,  under  this  strategic  objective,  the  CAS  was  neither  relevant  nor  realistic,  and  Bank contribution is rated unsatisfactory. 

Strategic Objective 2.4: Increased and more Efficient Production of Non­agricultural Goods and Services 49. The PEAP/UJAS outcome indicators chosen to monitor progress against SO2.4 were mostly inadequate.  Several baselines, target values, and statuses are missing, making it difficult to evaluate progress  towards  the outcomes, cf.   Annex 1.   That said,  some progress was observed.   Thus,  the number of  tourists visiting Uganda  increased by 65% over  the period considered,  thus exceeding the target by a wide margin.  Further, the contribution to GDP from mining and quarrying increased by 33 percent in real terms over the period consider.   On that basis, SO2.4 was partially achieved.  

                                                             9 Uganda’s official exports to Sudan increased eleven‐fold from $22.7m in 2004 to $245.9m in 2008. 

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Bank interventions were fairly successful but suffered from slow implementation, partly as a result of poor stakeholder participation at project design stage (PSCP‐2).  Thus, the Bank’s contribution is rated moderately unsatisfactory.  

50. Bank  interventions  consisted  of  three  projects  carried  over  from  the  previous  CAS,  the PSCP‐2,  the  Protected  Areas  Management  and  Sustainable  Use  (PAMSU)  project,  and  the Sustainable  Management  of  Mineral  Resources  Project  (SMMRP).    There  were  no  non‐lending activities  in  direct  support  of  SO2.4  and  no  new  lending  operations  were  approved  in  the  CAS period under review.   

51. Achievements of the PSCP‐2 include the reduced time to register a property; reduced time to  register  a  business;  new  business  registrations;  and  support  to  MSMEs  under  the  Business Uganda Development Scheme (BUDS).  Other components are performing unsatisfactory, including the Kampala Industrial Business Park, and monitoring of project implementation suffers from poor availability  of  data  on  the  chosen  intermediate  outcome  indicators.    The  PAMSU  project  has suffered  significant  delays  in  implementation  but  is  showing  progress  towards  objectives.  Development  outcomes  of  the  SMMRP  are  mostly  satisfactory  if  delayed  and  the  project  faces challenges over extension and additional financing, which was not yet approved by the end of FY09.  

Strategic Objective 2.5: Strengthened Infrastructure in Support of Increased Production of Goods and Services 52. Bank support to infrastructure over the CAS period was aligned with outcome indicators for road conditions, rural access to electricity, and freight carried by rail, cf. Annex 1.  Limited progress and  some  deterioration  was  registered,  although  the  indicator  for  roads  in  good  condition fluctuates  and  improved  in  the  latter  period.    Thus,  SO2.5  was  only  partially  achieved.    Bank interventions  in  the  infrastructure  sector were  largely  successful,  but  delays  to  implementation, and timing and sequencing of interventions, could have been better.  Bank contribution to SO2.5 is thus rated moderately satisfactory. 

53. Bank  interventions  in  the  roads  sector  consisted  of  three  phases  of  the  Road Development Program (RDP1‐3)  amounting  to $263m,  the Road Sector  and  Institutional Support Project (RSISP), and the East Africa Trade and Transport Facilitation Project (EATTFP).  The RDPs contributed to establish and/or upgrade a network of urban and rural roads, backed by analytical work on the transport sector strategy, on environmental policy, and on management and financing.  Besides  improving  access  to  rural  and  economically  productive  areas,  the RDPs  contributed  to  a reduction  in  average  travel  time  and  transport  and  vehicle‐operating  costs.    Although implementation  of  the  RSISP  has  suffered  from  significant  delays,  the  project  has  largely  been successful.   Thus, Uganda National Roads Authority was established and operational  as of  July 1, 2008; the Road Fund Act was approved by Parliament in June 2008 and gazetted in October 2008; and the role of the Ministry of Works and Transport (MoWT) was redefined towards a regulatory and planning body. The EATTFP contributed  to  the establishment of  the EAC Customs Union and reduced transit times for cargo traffic at border posts in the region. 

54. Bank interventions contributed to improvements in the roads sector.  Despite this success, a number of  important  lessons have  been  learned, notably with  regards  to  the Adaptable Program Loan (APL): i. with the RDP phases being implemented in parallel, it was not possible to incorporate lessons  learned  from one phase  in  the design of  the  following;  ii.  intermediate  triggers should be defined  in  support  of  steps  needed  to  implement  the  reform  program;  iii.  establishment  of  new institutions  is  a  lengthy  process;  and  iv.  it  proved  difficult  to  agree  with  the  Government  on  a comprehensive  long  term  reform  program,  calling  into  question  the  appropriateness  of  the  APL modality in this sector. 

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55. In  addition  to  the  lessons  learned,  future  Bank  interventions  in  the  roads  sector  should explicitly  seek  to  address  the  Government’s  limited  absorptive  capacity  in  infrastructure investments and address the relatively high unit costs of road construction and rehabilitation. 

56. The energy sector was the largest area of Bank interventions during the CAS period.  Three projects were carried over and are now closed or fully disbursed: the Power Project 4 (PP‐4), the Energy  for Rural Transformation Project  (ERTP),  and  the Privatization and Utility  Sector Reform Project (PUSRP).10  The $300m Power Sector Development Project (PSDP) and the Bujagali Private Power Generation guarantee were delivered in FY07. 

57. The  PEAP  recognized  that  energy  supply  is  critical  for  production,  competitiveness,  and incomes.    In 2002/03, only 3% of Ugandan households  in rural areas and 8% in urban areas had access to grid electricity, while the rest relied on biomass and other renewable energy.  Uganda has large  energy  potential,  notably  hydroelectric  power  potential,  and  the  Bank  CAS  supported  the Government’s strategy to develop new energy resources.  Accordingly, operations (PUSRP) focusing on improving the financial viability of the sector were implemented. 

58. In  addition  to  financial  viability  of  the  sector,  there was  a  strong  focus  on  expanding  the quantity  and  quality  of  power  (PP‐4,  PSDO,  Bujagali),  as  well  as  on  increasing  access  (ERTP).  Strategically,  the  investments  served  to  bolster  Uganda's  private  sector  led  and  commercially oriented energy sector structure and supported both long term generation development (PP‐4 and Bujagali) and interim generation (PSDP).  The Bank collaborated closely with other members of the Bank  Group  (IFC,  MIGA)  and  other  development  partners.    The  Bank  actively  supported  the creation  of  an  Energy  Sector  Working  Group  (with  government  and  development  partner participants) and has sown the seeds for a coordinated, collaborative future investment program by financing the preparation of a Sector Investment Plan.   

59. Achievements  include  the  following:  i.  through  the  ERTP,  the  Bank  introduced  a  cross‐sectoral approach for access expansion, providing key stakeholders in the health, education, water, agriculture, and local government sectors a direct role in planning and implementing their energy investments; ii. the PP‐4 made major contributions to improve energy supply and strengthened the borrower’s capacity to manage reform, privatization and development in the power and petroleum sub sectors;  iii. PUSRP contributed  to an  improved regulatory  framework and  investments  in  the distribution network are taking place.  In addition, initiatives to reduce technical and non‐technical power losses were launched; iv. PSDP successfully contributed to the significant reduction in power rationing, in light of delays to the Bujagali dam; v. the Bujagali hydro power project is expected to provide least‐cost power generation capacity that will eliminate power shortages at the time of its commissioning.11 

60. Looking forward, the key area of emphasis will be access expansion and the generation and transmission investments needed to support it.   There will also be an increased focus on regional aspects  of  energy development,  including  regional  interconnections  as  part  of  the  emerging East Africa  power  market,  and  also  assessment  of  domestic  generation  as  it  relates  to  the  regional market. 

61. The main lessons learned are that policy reforms should not be combined with SILs as this tends to delay project implementation.  An example is inclusion of sector reforms in PP‐4 leading to commitments beyond the control of  the  implementing agency, such as the completion time of  the Bujagali hydro power project, and reduction of distribution network  losses.   These sector reform issues would  be  better  addressed under  the PRSC policy  dialogues.    From ERTP,  general  lessons 

                                                             10 The Privatization and Utility Sector Reform Project is technically not closed, as there is still a contingent credit. 11 For details on the Bujagali Inspection Panel case, see Box 5 on page 116. 

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learned include the need for assessment of potential private sector investments in rural energy as well  as  taking  into  account  institutional  capacity  of  implementing  agencies  at  the  project  design stage. 

62. Bank interventions in the railway sector consisted of two IFC loans ($10m and $22m) to Rift  Valley  Railways  (RVR)  to  finance  capital  expenditures  for  the  rehabilitation,  operation,  and maintenance of the railway.  The IFC has also acted as an advisor to the Governments of Kenya and Uganda  regarding privatization of  the  joint Kenya‐Uganda  railway  line  (see  also paragraph 155).  However,  since  RVR  has  experienced  severe  financial  and  operational  difficulties  as  a  result  of mismanagement,  and  the  much  poorer  than  expected  condition  of  rolling  stock  and  tracks, disbursement of  the  larger of  the two IFC  loans  is pending restructuring of RVR.   These activities will carry over to the new CAS and results will only be realized then. 

Strategic Objective 2.6: Strengthened Environment and Natural Resource (ENR) Management Regime in Support of Sustainable Production of Goods and Services 63. Incomplete  data  on  baselines,  target  values  and  status  makes  it  impossible  to  assess  to which  extent  SO2.6  was  achieved.    Bank  interventions  did  contribute  to  their  stated  objectives.  However,  with  none  of  the  PEAP/UJAS  indicators  monitored  and  with  the  ENR  sector‐wide approach (SWAp) dropped, Bank contribution to SO2.6 is rated moderately unsatisfactory. 

64. Bank lending operations in support of SO2.6 consisted of the Protected Areas Management and  Sustainable  Use  Project  (PAMSU)  and  the  Second  Environmental  Management  and  Capacity Building Project  (EMCBP‐2).   Both projects were carried over  from previous CASs and both were extended, with EMCBP‐2 receiving additional  financing.   Bank  interventions did contribute  to  the strengthening of  institutional  capacity  of  the main  regulatory bodies  in  the ENR  sector  including NEMA, UWA and UWEC.  The Bank also contributed to the preparation and launching in 2008 of the ENR Sector Investment Plan.  However, the ENR SWAp was dropped because of little interest from the Government.  

65. Lending  operations were planned  to  be  complemented  by  analytical work  on  the  linkage between  natural  resource management,  growth  and  poverty  reduction  in  Uganda;  however,  this ESW was never finalized and thus had negligible impact. 

66. A major lesson learned is that environmental issues and concerns, including climate change, are  closely  linked  to  sustainable  natural  resource management.    In  the  rush  to  get  quick  results from national  development  efforts,  this  factor  is  normally  relegated  to  a  secondary  issue.    To  be effective  and  achieve  the  desirable  results,  sustainable  ENR  programs  need  better  integration  in other development efforts to have the desired impact. 

Strategic Objective 2.7: Strengthened Financial Sector in Support of Increased Production of Goods and Services 67. Micro  finance  institutions  (MFIs)  served  4.3m  clients  in  2008,  almost  a  five‐fold  increase over just five years.  The single outcome indicator under SO2.7 thus exceeded the target and, by that measure,  the  objective was achieved.    Bank  interventions  actively  supported  SO2.7  and  are  thus rated satisfactory. 

68. Bank lending operations  in support of SO2.7 consisted of PSCP‐2 (see paragraphs 34, 51).  Non‐lending operations in support of a strengthened financial sector included a number of studies related to remittances, strengthening of the financial sector and associated reforms.  These enabled stakeholders to focus on policy issues and provide a framework on the way forward.  For example, work is being done to reform the pension sector and the anti money laundering bill is being tabled to Parliament. 

   

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PILLAR 3: SECURITY, CONFLICT‐RESOLUTION AND DISASTER‐MANAGEMENT 

69. Under  the single strategic objective under Pillar 3,  the Bank aimed at  contributing  to  two outcomes measured by three outcome indicators.  Most indicators did not have any baseline values, but with targets indicating trends only, it was still possible to assess progress. 

70. Improvement in the security situation in northern Uganda was reflected in progress on all outcome indicators under Pillar 3.  The number of IDPs was reduced by 66% (almost 1.2m people returned from IDP camps), the number of casualties as a result of the conflict was reduced, 95% of former  rebels  and  their  collaborators  were  resettled  (having  received  amnesty)  and  economic activity  in  formerly conflict affected areas  increased.   Consequently,  the strategic objective under Pillar 3 was achieved.   Bank support under Pillar 3, while aided by positive external  factors, was successful  in  supporting  improved  livelihoods,  the  return  of  IDPs,  and  reintegration  of  ex‐combatants.  Therefore, Bank contribution under pillar 3 was assessed as satisfactory. 

Table 4 – Summary Assessment of Bank Contribution to the Strategic Objective under Pillar 3 

PEAP/UJAS Strategic Objective  Result  Bank Contribution 3.1: Protection of persons and their property through elimination of conflicts and cattle rustling, resettlement of IDPs, and strengthened disaster management 

Achieved Satisfactory 

 

71. Bank Support under Pillar 3  consisted of  both  lending and non‐lending products,  the key projects being  the Northern Uganda Social Action Fund (NUSAF) project and support  to Amnesty Commission  through  the Multi‐country Demobilization  and Reintegration Program  (MDRP).    The key  non‐lending  products  were  the  Northern  Uganda  PER  and  a  study  on  northern  Uganda  on “Land Policy and the Return to Peace”.   

72. Given the importance of external factors in achieving the outcomes, it is difficult to attribute progress to Bank interventions.  Nonetheless, it should be acknowledged that Bank alignment of the CAS with Pillar 3 of the PEAP was highly relevant and timely.  

73. The  support  provided  to  the  Uganda  Amnesty  Commission  through  the  Bank‐managed Multi‐Country  Demobilization  and  Reintegration  Program  (MDRP)  contributed  to  the  return  of former rebels to civilian life.  The Northern Uganda Social Action Fund (NUSAF) was able to allocate resources increasingly to areas where displaced people (IDPs) returned when the security situation allowed, following the initiation of peace talks between the GoU and the LRA.  

74. The peace talks initiated in mid 2006, starting with a cessation of hostilities in August 2006, contributed significantly to the increased security in northern Uganda.  That in turn led to increased economic  activity  and  trade,  incentives  for  IDPs  to  return  to  their  original  settlements,  and  a reduced number of casualties as a result of the conflict. These were positive exogenous factors that contributed  to  the achievement of CAS outcomes and cannot be attributed  to Bank  interventions.  The Government deserves credit for having included security and conflict resolution as a separate pillar  in  the  PEAP‐04.    Similarly, UJAS partners’  decision  to  include Pillar  3  and  align  operations with  the strategic objective paved  the way  for  support  to  recovery and development efforts with the cessation of hostilities.  

75. The combination of one major lending operation (NUSAF) and a few smaller operations and non‐lending products, notably the northern Uganda PER (NUPER) and the study on the implications of  resettlements, was  appropriate  in  supporting  GoU  in  the  effort  to  reduce  poverty  in  northern Uganda and improve the security situation in the region.   The Bank was particularly successful  in contributing to improved livelihoods among households in northern Uganda: forty‐seven percent of the population in northern Uganda, against a target of thirty percent, has improved access to social 

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services  through  NUSAF,  and  the  MDRP  provided  reinsertion  support  to  almost  15,000  former rebels and their collaborators.  The NUPER provided key inputs to GoU and development partners in assessing the status and the gaps in resource flows from the central government, humanitarian and  development  partners  to  northern  Uganda,  as well  as  the  allocations  of  expenditures  in  the region.  It also provided timely recommendations for the elaboration of the PRDP by GoU.  

76. Aid coordination in northern Uganda remained a challenge throughout the CAS period, not least in the process of development partners switching their focus from humanitarian assistance to development  and  rehabilitation  efforts.    With  GoU‐elaboration  of  a  strategic  framework  for recovery and development in northern Uganda, the PRDP, aid coordination is improving. 

77. The implementation of NUSAF demonstrated that communities in a post‐conflict are able to identify, plan, manage,  and monitor  social  investments well  suited  to  their needs;  thus,  even  in a fragile environment, the right project design may contribute to improved bottom‐up accountability. 

PILLAR 4: GOOD GOVERNANCE 

78. Under Pillar 4 of the CAS, the Bank sought to contribute to six outcomes under two strategic objectives, measured by seven outcome  indicators.   Several  indicators are missing data making  it difficult  to  assess  performance  based  on  the  outcome  indicators  only.    Rather,  an  assessment  of progress towards each strategic objective, and the Bank’s attribution, is provided in the following. 

79. Limited progress was recorded under Pillar 4.  For example, there is a general perception of growing corruption and the Government has failed to pursue any of several high‐profile corruption scandals during the CAS period.  While to a certain extent this may be attributed to external factors, the ambitious Bank agenda under Pillar 4 was not  followed up with appropriate  instruments and interventions.    Consequently,  the  Bank’s  contribution  under  Pillar  4  is  rated  moderately unsatisfactory. 

Table 5 – Summary Assessment of Bank Contributions to Strategic Objectives under Pillar 4 

PEAP/UJAS Strategic Objectives  Result  Bank Contribution 4.1: Strengthened legal and justice systems Partially

achieved Moderately unsatisfactory

4.2: Strengthened public sector management and accountability  Not achieved Moderately unsatisfactory 

Strategic Objective 4.1: Strengthened Legal and Justice Systems 80. Some progress was made on indicators towards the targets under SO4.1, although none of the targets were actually met.  On that basis, SO4.1 was only partially achieved.  Bank contributions did not match the ambitious objective and is therefore rated moderately unsatisfactory. 

81. The Bank’s  contribution  towards SO4.1  consisted of PRSC policy dialogue and  the  second Private Sector Competitiveness Project (PSCP‐2).  These interventions contributed to the setting up of the Anti‐Corruption Division of the High Court, improvements in the commercial court system to reduce the case backlog and improved access to justice. 

82. The Bank also worked on a knowledge product,  the Legal and  Judicial Sector Assessment.  An unfinished draft was initially prepared by the end of FY05.  It was subsequently updated in FY08 and was circulated internally, but has yet to be disseminated to the Government.   The knowledge product  was  intended  to  inform  the  sector  dialogues  and  Bank  interventions  going  forward.  However,  significant  delays meant  that  the  assessment  had negligible  impact  and  the  rather  late internal  circulation  meant  that  there  was  a  gap  in  informing  policy  dialogue  and  Bank interventions. 

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83. A well‐functioning justice,  law and order sector (JLOS) is an important complement to the effectiveness of  other Bank  interventions.    Looking  forward,  therefore,  the Bank  should  consider providing  support  to  the  sector  beyond  the  PRSC  policy  dialogue,  coordinated  with  support provided by other development partners. 

Strategic Objective 4.2: Strengthened Public Sector Management and Accountability 84. Progress on outcome indicators under strategic objective 4.2 showed limited progress short of  targets or deterioration.    Indicators  related  to  corruption and  local  government  revenue, have worsened since  the baseline year.   Consequently, SO4.2 was not achieved.    In addition,  the Public Service  Reform  Program  (PSRP)  did  not  achieve  the  expected  results,  e.g.  failure  to  implement results‐oriented  management  in  the  public  sector.    Although  semi‐external  factors  such  as effectiveness  delays  partly  explain  the  Bank’s  limited  contributions  to  SO4.2,  overcall  Bank contributions to SO4.2 are rated moderately unsatisfactory.  

85. Bank  lending  operations  in  support  of  public  sector  management  and  accountability included the second Economic and Financial Management Project (EFMP‐2) and the second Local Government Development Project (LGDP‐2), both carried over from previous CASs.   

86. In  the  area  of  local  government  development,  the  Bank  used  a  combination  of  policy dialogue  through  the  PRSCs  and  investment  lending  under  LGDP‐2  to  assist  the  Government develop,  publish  and  roll‐out  the  Harmonized  Participatory  Planning  Guide  (HPPG)  to  improve planning and budgeting at local governments (LG); implement the Fiscal Decentralization Strategy; and the restructuring and support to the Local Government Service Commission to recruit new staff to  operationalize  the  new  local  government  structures.    The  Bank  also  contributed  to  ensuring compensation of LGs for taxes abolished. 

87. The  EFMP‐2  successfully  contributed  to  improve  government  planning,  budgeting  and financial management.   Effective since FY00,  the project achieved most of  its  results prior  to  this CAS period.  Three other projects (KIIDP, LGMSDP, UPSPEP) were approved during the CAS period, but  did  not  reach  effectiveness  until  November  2008.    Thus,  those  projects  did  not  deliver  any results in the period under review. 

88. The Public Expenditure and Financial Accountability (PEFA) assessment highlighted several challenges relating to enhancing transparency in budget execution.  These issues are being followed up with the PRSC‐8 operation, and the PEFA assessment provided insights to the design of the Joint Assessment Framework under the Joint Budget Support Framework.   

89. Bank  support  towards  improved  accountability  suffered  from  the  lack  of  studies  on accountability  and  corruption  to  inform  PRSC  policy  dialogue,  even  if  the  issue  was  covered indirectly  in  PERs  (e.g.  absenteeism  and  other  waste  in  the  education  and  health  sectors).    For example,  baselines  on  locally  relevant  actionable  governance  indicators  need  to  be  established prior to inclusion as prior actions in PRSCs. 

90. In  order  to  support  strengthened  public  sector  management  and  accountability  in  the future,  the  Bank  must  adopt  a  clearer  framework  with  actionable  governance  indicators  and tracking mechanisms in support of the GAC agenda under the new CAS.  Not least in the run up to general  elections  in  2011,  the  Bank  will  need  to  consider  its  role  vis‐à‐vis  other  development partners with respect to advancing the GAC agenda in Uganda.  

   

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PILLAR 5: HUMAN DEVELOPMENT 

91. The  Bank  CAS  program  under  Pillar  5  included  14  outcomes  measured  by  20  outcome indicators  grouped  under  four  strategic  objectives  relating  to  education,  health,  water  and sanitation, and empowered communities.  As is the case for other pillars, several indicators did not have a baseline and/or where not monitored. 

92. Bank  interventions  under  this  pillar  consisted  of  lending  through  PRSCs,  stand  alone projects, and non‐lending (e.g. PERs focusing on health and education, and water sector reviews).  The PRSCs were the main vehicle to support specific actions under the human development pillar.   

Table 6 – Summary Assessment of Bank Contributions to the Strategic Objectives under Pillar 5 

PEAP/UJAS Strategic Objectives  Result  Bank Contribution 5.1: Better educated Ugandans  Partially 

achieved Satisfactory 

5.2: Healthier Ugandans  Partially achieved 

Moderately unsatisfactory

5.3: Improved access to safe water supply and sanitation Partially achieved 

Moderately satisfactory

5.4: Revitalized community development function Not achieved Moderately unsatisfactory 

93. Performance under Pillar 5 was mixed.   Only two out of 14 outcomes were fully achieved, eight outcomes were partially achieved, while four outcomes were not achieved.  In particular, the health  sector  and  community  development  saw  limited  progress.    The  Bank  made  significant contributions  towards  the progress  in education and water and sanitation  through  lending, PRSC policy dialogue and through analytical work. However, support to the human development agenda through  PRSCs  in  some  cases  proved  ineffective  in  targeting  systemic  impediments  in  service delivery  within  the  sectors.  On  that  basis,  Bank  contribution  under  Pillar  5  is  rated  moderately satisfactory. 

Strategic Objective 5.1: Better Educated Ugandans 94. Progress was recorded on several of the PEAP/UJAS indicators for education.  Particularly, the  target  for primary  enrollment was  surpassed, while  the  target  for  secondary  enrollment was almost  met.  Primary  completion  rates  remain  low  (47%)  and  did  not  meet  the  target  (69%).  Results  for  post  primary  enrollment  and  completion  rates  as  well  as  tertiary  enrollment  were slightly below target.   

95. Uganda  has  made  progress  towards  MDG‐2  (primary  school  completion)  in  terms  of reaching full enrollment, but low completion rates continue to pose a challenge for the outcomes in education.   Relatively high  rates of  girls  to boys at  all  levels of  education  indicate  that Uganda  is making progress  in  achieving gender  equality  in  education  (MDG‐3). Yet,  challenges  remain with regards  to  low  completion  rates  and  substandard  quality  of  primary  and  secondary  education, including high rates of absenteeism of teachers and increasing pupil‐teacher ratios.   On this basis, SO5.1 was only partially achieved. 

96. Through  the PRSCs,  the Bank provided support  to  the education sector  reforms  including undertaking the primary education curriculum review process and contributing towards sustained resource  flows  to  the  sector. The  focus on  supporting GoU  in  improving  the quality  of  education rather than just expanding coverage was a step in the right direction.   Other  lending included the Millennium  Science  Initiative,  which  led  to  some  improvements  in  the  quality  of  science  and engineering  graduates,  science  and  technology  research,  and  coordination  of  growth‐oriented science initiatives.  In addition, the Makerere Service Delivery Pilot Project, which was undertaken 

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in  partnership  with  the  Rockefeller  Foundation,  supported  local  government  capacity  building undertaken  by  universities  as  well  as  reform  of  education  and  training  activities  at  Makerere University.  The project succeeded in establishing partnerships between universities on curriculum reform and provided training to more than 2,000 academic and local government staff.   

97. Among the analytical work undertaken,  the PER 2007 pointed to  inefficiencies  in primary education such as  teacher absenteeism,  inefficient  teacher deployment, and underfunding of non‐wage expenditures in public schools.   Subsequently, the Bank initiated institutional support to the Directorate  of  Education  Standards  to  strengthen  teacher  supervision  systems  through partnerships with the Ministry of Local Government.  

98. The  combined  lending  and  non‐lending  Bank  activities  under  SO5.1  were  relatively successful, not only in implementing the strategies laid out in the CAS, but also through the policy dialogue with  GoU  in  terms  of  identifying  core  problems,  initiating  and  sequencing  reforms  and addressing  quality  issues  in  the  education  sector.    On  this  basis,  the  performance  of  the  Bank  is rated satisfactory. 

99. Bank  interventions  in  the  education  sector  in  the  next  CAS  should  focus  on  quality  of education, partnerships with the private sector to reduce the cost of education service delivery, and efforts  to  track and address education unit  costs and quality gaps.   Further,  interventions should include  strategies  for  school‐to‐work  transition  and  skills  training  (Business,  Technical  and Vocational Education and Training). 

Strategic Objective 5.2: Healthier Ugandans 100. Only limited progress against the PEAP/UJAS outcomes were recorded under SO5.2, partly explained by  the  limited  availability  of  frequent data.   Maternal  and  child mortality  rates  remain high and HIV/AIDS prevalence rates, which saw sharp reduction in the 1990s, recently  increased.  At  the  current  pace,  Uganda  is  unlikely  to  meet  MDG‐4  (child  mortality)  and  MDG‐5  (maternal health),  but  will  most  likely  achieve  MDG‐6  (combat  HIV/AIDS,  malaria).    However,  the  health sector indicators could be argued to be too high‐level, unrealistic to meet over the short period, and difficult to monitor on a timely and regular basis.  Further, an increase in HIV/AIDS prevalence rate could reflect that more people now have access to ARVs even if the incidence is declining.   

101. The sector faces a number of major challenges: governance and accountability problems are rampant,  as  demonstrated  with  the  two  cases  of  misappropriation  of  funds  from  vertical  funds (GAVI and Global Fund); population growth continues to increase the demand for health services; and  the  sector  allocation  from  the  national  budget  is  declining.    Together,  these  challenges contributed  to  the  poor  results  recorded  in  the  sector,  which  is  therefore  assessed  to  be  only partially achieved.  

102. Bank assistance towards SO5.2 was mainly provided in the form of: i. support through the PRSCs;  ii.  the Uganda AIDS Control  Project  (UACP);  and  iii.  economic  sector work  in  the  form of annual health sector reviews, the 2008 health sector PER, and the Health Systems Support report.  While  providing  analytical  advice  and  support  to  the  Health  Sector  Investment  Plan,  Bank interventions  were  not  fully  effective  in  achieving  the  targets  set  and  actions  planned,  which, among other things, included support to reproductive health, family planning, malaria control, and provision  of  skilled  health  workers.    On  that  basis,  Bank  performance  is  rated  moderately unsatisfactory. 

103. Through a combination of analytical work and the PRSCs, the Bank was partially effective in shaping  the policy dialogue and agenda,  including  support  to human  resources management  and procurement  reforms.    The  2008  health  sector  PER  documented  widespread  waste  and absenteeism  in  the  sector  and  highlighted  resource  gaps,  and  the  policy  recommendations  now 

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provide  the  foundation  for  sector  reforms  and  a  Bank  project  currently  under  preparation  to support  health  systems  strengthening.    Further,  the  CEM  successfully  put  the  issue  of  high population growth rates on the domestic policy agenda by adopting an indirect approach of looking at the economic and fiscal consequences of unchecked population growth.  

104. The  Uganda  AIDS  Control  Project  supported  capacity  building  at  central,  district  and community  level  and  played  an  important  role  in  shaping  the  Government’s  response  to  the epidemic, but most results were achieved under the previous CAS. 

105. Lessons  learned  from  the  CAS  highlight  that  PRSCs may  not  always  provide  the  optimal instrument  for  addressing health  specific  problems,  and  the CAS program  for  the  sector was not realistic  and  commensurate with  the  interventions undertaken.   This was particularly  true when GoU’s priorities during CAS  implementation changed  towards productive  sectors.    In  response  to this and to GoU demands, the Bank is now preparing a standalone health sector project.   

106. Looking  forward,  population  is  likely  to  play  a  prominent  role  in  the  GoU’s  NDP,  which should be reflected in the next CAS.  However, rather than a stand‐alone issue, population should be embedded in a broader cross‐sectoral framework looking not just at health and family planning, but also focusing on youth unemployment, skills training, and public service delivery. 

Strategic Objective 5.3: Water and Sanitation 107. While  some  progress  in  water  and  sanitation  were  noted,  the  results  fell  short  of  the PEAP/UJAS  targets.   Nevertheless,  the  improvements  indicate  that Uganda  is on  track  to meet or even  exceed  the  corresponding MDG  targets,  e.g.  proportion  of  population  having  access  to  safe water  facilities  (target:  62%;  status:  65%)  and  sanitation  facilities  (target:  72%;  status:  68%).  Significant  progress  was  recorded  on  improved  water  facility  maintenance  and  the  target  was almost  achieved.    On  the  other  hand,  the  lack  of  progress  in  sanitation  provision  and  hygiene mitigation had negative effects on achievement of MDGs  in  the area of  infant,  child and maternal mortality.    On  this  basis,  SO5.3  was  partially  achieved.    Bank  interventions  were  generally successful,  as  interventions  were  able  to  address  sector  wide  challenges  such  as  an  insufficient regulatory  framework  as  well  as  coordination  of  efforts  between  ministries.    Therefore,  Bank contribution is rated moderately satisfactory. 

108. The Bank provided support to the water and sanitation sector via  lending through PRSCs, NUSAF, output‐based aid pilot projects to improve access to piped drinking water in small towns, and analytical work.   The Bank also provided support through the Water and Sanitation Program (WSP), focusing on strengthening the sanitation interventions of GoU.  WSP contributed to raise the profile  of  sanitation  in  the  second  Health  Sector  Strategic  Plan  (HSSP‐II)  and  in  the  PEAP‐04, leading to a better integration and efficient use of resource at district and sub‐district levels.  

109. Through  policy  dialogue,  the  Bank  highlighted  the  importance  of  hygiene  and  sanitation interventions, functionality of water facilities, value for money, better resource allocation between sectors,  sector  capacity  building,  integrated  water  resources  management,  equity  issues,  and governance  issues  in  the  sector,  and  linkages  to  the  Ministry  of  Health.    The  PRSC  and  SWAp processes supported the development of improved and more specific sector plans.  Through PRSC prior  actions,  debt  of  the  National  Water  and  Sewerage  Cooperation  (NWSC)  was  written  off, making NWSC more attractive for private financing.  Further, the Bank assisted the Government in creating  additional  pro‐poor  services  and  the  NWSC  created  a  pro‐poor  unit.    In  addition,  the recommendations  of  a  study  on  governance  issues  and  service  delivery  in  the  sector  informed sector planning and the draft National Development Plan.  

   

‐ 112 ‐  

Strategic Objective 5.4: Community Development 110. The Bank’s support towards SO5.4 was an integrated part of the PRSC series.  In addition to lending, the Bank developed a policy note on Civic Engagement and Social Accountability.  

111. PEAP/UJAS targets were not achieved and only saw very limited progress.  Thus, community development workers and community development management committees were not  increased in numbers, capacity and management as planned.  Bank contributions did not match the intended objectives and is rated moderately unsatisfactory. 

112. As  much  as  policy  reforms  were  expedited  and  completed  during  the  CAS  period,  only limited progress was noted on actual implementation of policies.   Thus, the National Gender Policy was  approved  in  2007,  but  the  policy  has  yet  to  be  implemented;  the  Equal  Opportunities Commission  was  established  in  2007,  but  has  yet  to  be  operationalized;  the  Community Mobilization  and  Empowerment  Strategy  was  only  partly  implemented;  and  the  Community Development Policy was never finalized. 

113. A number of factors have contributed to the lack of progress under this strategic objective: i. the Ministry  of Gender,  Labour  and  Social Development  is  very  resource‐constrained;  ii.  political support  for  implementation  of  the  national  gender  policy  remains  vague;  and  iii.  the  increased number  of  districts  have put  districts  and  sub‐counties  under  increased  fiscal  pressure.   Despite these challenges, Uganda launched gender budgeting as a cross‐cutting issue in the national budget process in 2009. 

114. The PRSCs, mainly  focusing on macro  level reforms across  financial and social sectors, do not  seem  to  have  been  the  best  available  instrument  for  influencing  change  regarding  the community development component of the PEAP.  In retrospect, using the existing interventions on decentralization and public sector reforms could have provided a much more direct and possibly more effective intervention. 

115. The  policy  note  on  institutionalizing  Civic  Engagement  and  Social  Accountability  for improved  development  outcomes  provided  specific  recommendations  to  GoU  on  harmonizing collaboration for improved social accountability.  Some of its recommendations (e.g. elaboration of NGO  policy  and  an  NGO  quality  assurance  certification mechanism) were  since  taken  up  by  the Government and stakeholders, but otherwise the note suffered from lack of follow up in the policy dialogue and lack of interconnection to other sectors and operations.  

IV.  BANK PORTFOLIO PERFORMANCE 

VOLUME, LENDING AND COSTS – IDA 

116. The CAS projected new  IDA  commitments  to  reach $1,000m over  the FY06­09 CAS period.   By the end of FY09, actual new IDA commitments amounted to $1,287m, cf. Annex 2 and Figure 3.  The increase in total commitments was largely due to the record amounts raised for IDA‐15 and to Uganda’s consistently high performance in CPIA ratings.12  The PRSCs were reduced from $600m to $460m over the CAS period.  Combined with the increase in the overall program, PRSC’s share of overall new lending in the period declined from the planned 60 percent to 36 percent.13  

                                                             12 Uganda scored 3.9 in the IDA Resource Allocation Index every year from 2005‐08, consistently higher than the IDA borrowers’ average of 3.3. 13 PRSCs 5‐8 were planned as single‐tranche one year operations each amounting to $150m.  PRSC5 and PRSC6 were reduced by $40m in total, mainly due to limited follow‐up on prior actions by the Government.  The planned PRSC7 and PRSC8 were merged in a dual‐tranche two‐year operation amounting to $200m (PRSC7).  See also paragraph 135 below. 

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117. Nineteen projects were planned for delivery during the CAS period of which only ten were  delivered.14    However,  seven  new  projects,  including  two  regional  projects  and  three additional  financing  operations,  were  delivered  over  the  period,  bringing  the  total  number  of projects delivered to 17, cf. Figure 4.  A number of projects slipped one or two financial years, partly because  preceding  projects  in  the  same  sector  experienced  implementation  delays  (e.g.  local government and energy). 

Figure 3 – Commitments and Disbursements, FY06‐09  Figure 4 – Planned and Actual Lending Program, FY06‐09 

 

118. Allocations by sector and pillar of delivered projects deviated substantially from the planned lending program.   As detailed in paragraphs 21 and 22, commitments to projects in the energy, education and social protection sectors significantly exceeded planned commitments, while delivered commitments for PRSCs, public sector and the transport sector were lower than planned.  

119. Total projects under implementation during this period averaged 18 projects (only IDA credits),  with  an  average  total  commitment  of  $1,276m.    World  Bank  Group  disbursements  to Uganda during the CAS period amounted to $754m, in addition to IFC and MIGA guarantees, loans and equities amounting to $164m and $171m respectively. 

120. The project portfolio  consisted of  twenty­two  IDA  lending operations at  the end of FY09  (including  four  regional  projects  and  one  guarantee),  of which  12 were  projects  approved during  FY2006‐09.    According  to  ISRs,  fourteen  projects were  rated  satisfactory,  five moderately satisfactory, one unsatisfactory, while two projects were not yet effective.  

121. A total of fourteen projects closed from FY06­FY09, cf. Annex 5.15    ICRs were available for eleven of the projects that exited the portfolio, but only nine of these were reviewed by IEG, cf. Annex 6.16  IEG rated outcomes of five projects (56%) satisfactory, two projects (22%) were rated moderately  satisfactory,  while  two  projects  were  rated moderately  unsatisfactory.    These  ratings were generally  in accordance with ICR ratings, although there were three disconnects, where IEG rated outcomes  lower  than  the  ICRs.17   Bank performance, borrower performance, and quality of Bank  supervision  were  generally  rated moderately  satisfactory  or  satisfactory  by  IEG  with  two 

                                                             14 Excluding the Private Power Generation Guarantee (Bujagali). 15 This excludes two GEF projects: Lake Victoria Environment and Energy for Rural Transformation. 16 At the time of CASCR finalization, ICRs were available for NUSAF and ERT, but no IEG reviews were yet available. Both projects were rated Satisfactory. A joint ICR is under preparation for the PRSC 5‐7 series; thus, individual ICRs are not available for PRSC5 and PRSC6. 17 Disconnects for the three projects are generally related to overambitious development objectives and targets, and indications of performance targets not having been met. 

0

50

100

150

200

250

300

350

400

450

2006 2007 2008 2009

US$m

Planned Commitments Delivered Commitments Disbursements

0

1

2

3

4

5

6

2006 2007 2008 2009Planned projects Delivered projects

Of which new projects Of which additional  financing

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exceptions.    IEG  ratings  of  quality  at  entry  reveal  some  weaknesses,  notably  because  of  poor monitoring  and  evaluation  (M&E)  quality  ratings.    The  main  problems  with  M&E  quality  were related  to  inadequacies and  lack of  indicators and baselines at design stage,  limited  follow up on indicators during implementation, and insufficient utilization of M&E systems in terms of tracking project outcomes.  

122. Key  lessons  learned  from projects  completed and evaluated during  the CAS period include the following: 

i. APL  phases  should  be  executed  sequentially  and  not  simultaneously  to  allow  systematic integration of lessons learned from one phase to the next. 

ii. Well‐designed  risk  assessments  and  results  frameworks  are  crucial  for  success  in implementation and lack of these may hamper project outcomes. 

iii. When undertaking institutional reforms, it is crucial to take into account the existing level of capacity  and  adequately  account  for  it  through  provision  of  technical  assistance.    In addition,  project  designs  should  be  realistic  with  respect  to  institutional  reform achievements and consider phasing of reforms and associated projects. 

iv. The Bank should consider restructuring projects showing significant implementation delays. 

v. Regional  projects  require  strong  emphasis  on  clarity  of  project  objectives,  M&E frameworks, governance and management systems, and clear accountability structures.   

123. These  recommendations  have  subsequently  been  addressed  through  the  introduction  of standardized M&E reviews of all new project packages, application of coherent and sequenced APL phases,  and  undertaking  restructuring  or  comprehensive  reviews  of  operations  that  are significantly delayed  (e.g. UPSPEP).   The challenges  identified should be closely monitored under the new CAS. 

124. The  disbursement  rate  averaged 24.3%  over  the  period  reflecting improvements  in  FY08  and  FY09.    The disbursement rate for Uganda compares well with  the  regional  average of  21.9% over  the same period.    In a historical perspective,  the Bank  increased  its  total  commitments  in Uganda  to  an  all  time  high  of  more  than $1.4bn  in  FY09  (cf.  Figure  5).    At  the  same time,  the number of national  IDA operations were reduced from 23 projects in FY01 to 16 by  the  start  of  FY10,  thus  indicating  a  trend towards  fewer,  larger  projects.    Absolute disbursements  reached  an  all  time  high  in FY09,  although  disbursements  relative  to commitments only recently reached previous highs.   

125. The average age for projects closed during the CAS period was 7.4 years (excl. PRSCs and GEF), compared to the regional average of five years.  Further, only one of the projects exiting the  portfolio  during  the  CAS  period  (excl.  PRSCs)  did  not  extend  the  closing  date.    This  reflects delays to effectiveness and underestimation of implementation times.      

Figure 5 –  Commitments and Disbursements FY90‐09 

 

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126. Project portfolio performance has been satisfactory overall, cf. Annex 4.   From FY06‐FY09,  five  to  thirty‐five  percent  of  projects were  at  risk  and  six  projects were  rated  as  problem projects.   The main reasons  for problem status were effectiveness delays,  implementation delays, and  slow  disbursements.    All  problem  projects  improved  their  status  quickly  due  to  proactive interventions  from project  teams, as evidenced by high pro‐activity rating.   The (revised) realism index stood at 71 percent by the end of FY09, compared to  the 43 percent average  for  the Africa Region. 

127. Project  preparation  and  supervision  costs.    Project  preparation  costs  (IDA  only) averaged  $329,000,  compared  to  the  regional  average  of  $478,000,  over  the  period.    Average supervision cost per project amounted to approximately $108,000, on par with the regional average of $103,000.   There  is  evidence  that  the  supervision budget provided was  sufficient  and ensured good quality project supervision.  However, a safeguards review of the portfolio completed in FY09 indicated  that while  safeguards  risks  are  generally managed well  in  the  portfolio,  some  projects suffer  from  limited  and  inconsistent  supervision  of  safeguards  issues,  especially  for  social safeguards (see also paragraph 135). 

128. Effectiveness  delays.    At  the  end  of  FY09,  ten  of  the  projects  in  the  Uganda  portfolio experienced effectiveness delays between eight and twenty‐nine months.18  Effectiveness delays are usually caused by delays  to Parliamentary approval, a  requirement  for  IDA credits  in Uganda.    In most  cases,  delays were due  to  inadequate  consultations between  the  implementing  government agencies  and  Parliament,  through  the  various  stages  of  project  preparation.    In  many  cases, effectiveness  delays  increased  the  risk  of  subsequent  implementation  difficulties  and  need  for thorough review or restructuring, as project relevance, priorities and appropriateness of design are likely to decline over time.  However, given that parliamentary approval is required for all credits in Uganda,  projects  under  the  new  CAS  should  anticipate  effectiveness  delays  in  the  project implementation plan and  task  teams  should encourage  involvement of major  stakeholders  at  the design stage.  

129. Economic rate of return for investments.  Among projects evaluated by IEG, assessments of economic rate of returns (ERR) were carried out for five projects.19   Findings show that all five projects  had  an  ERR  within  the  margin  planned  from  the  outset,  with  four  projects  showing  a higher ERR than anticipated. 

130. M&E issues at national, CAS and project level.  The Government focused on building the necessary  capacity  for  monitoring  and  evaluation  of  the  PEAP  through  the  development  and implementation of  the National  Integrated Monitoring  and Evaluation  Strategy  (NIMES).    Several mechanisms were put in place including the creation of the National M&E Technical Working Group to coordinate and improve the quality and use of M&E across Government, and the organization of an Annual Policy Implementation Review (APIR) process to assess progress in the implementation of  the PEAP.   However, major  challenges  in  tracking  the progress  on PEAP/UJAS  indicators  (and thus the CAS indicators) appeared during CAS implementation, due to lack of baselines, timeliness, and  frequency  of  indicators.    At  the  project  level, monitoring  progress  on  outputs  and  outcomes remains a challenge.  Monitoring and evaluation assessments and training were undertaken during the  CAS  period,  and  project  teams  were  advised  to  retrofit  their  results  frameworks  to  refine objectives and indicators, and improve project M&E systems.  However, for a few projects or APLs with  several  phases  (designed  prior  to  the  CAS  period  assessed),  shortcomings  regarding  the quality of the results frameworks were still observed, according to IEG ICR evaluations.                                                              18 Of the 17 national projects under implementation at the start of FY10, only seven were declared effective within the required 90 days from signing of the financing agreement. 19 Second Local Government Development Project, Second Economic and Financial Management Project, Roads Development Phase 1 and 2, and Power Project 4. 

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131. Only one Country Portfolio Performance Review  (CPPR)  took place during  this CAS period in December 2007.20  The CPPR contributed to improved project performance and dialogue with the Government.   The Joint Portfolio Review of December 2007 identified weaknesses of the Bank’s  portfolio  in  Uganda,  remedies,  agencies  responsible  for  actions,  and  a  timeline  for implementation.    The  weaknesses  identified  included:  i.  inadequate  project  identification, preparation and designs; ii. shortcomings in quality of results frameworks; iii. procurement delays; iv.  inefficient  and  expensive  services  of  the  Bank  of  Uganda  (the  central  bank);  and  v.  local knowledge and insights are often disregarded by the Bank.  The CPPR pointed to five key areas that need continuous follow up:   i. compliance with project readiness criteria; ii. more effective project management;  iii.  improved procurement management;  iv.  accelerated  implementation of  an  anti‐corruption framework; and v. strengthening M&E and results management in the Government and the  Bank  ISR  process.    Project  coordination  units  were  set  up  within  relevant  government ministries,  and  they  regularly  discuss  cross‐cutting  project  implementation  issues  and  follow‐up actions  from the CPPRs.   The Bank has  increased  focus on governance and anti‐corruption (GAC) both at project  level,  sector  level  and  the national  level.    Still,  the Bank could have done more  to follow up on the recommendations from the CPPR and review progress against the action plan.  

132. A Gender Audit of the country portfolio was completed in June 2007.   The audit revealed that  while  almost  a  third  of  the  Bank  projects  active  at  the  time  directly  addressed  the  most pressing gender  issues  in  the  country,  a  large number of projects do not  systematically  integrate gender concerns  in  their design. The Gender Audit Report provided recommendations on gender awareness  and  capacity  building  among  project  staff,  application  of  gender  analysis  in  project design  and  implementation  (including  M&E  frameworks)  and  strengthening  institutional accountability  for gender mainstreaming  in Bank operations (including representation on project beneficiary groups,  integration  in PAD, and use of gender disaggregated data). Recommendations were followed up in subsequent operations where relevant. 

133. Financial Management. Ratings for safeguards and fiduciary aspects were satisfactory and no  projects  had  any  substantial  issues  to  be  raised  regarding  safeguards  and  fiduciary  issues. However, a few cross‐cutting issues in financial management are affecting implementation: i. Bank of Uganda’s (BoU) services are not  fully satisfactory.   A  few projects still  receive bank statements with errors and there are instances of delays in crediting funds disbursed by the World Bank to the projects’ special accounts.  BoU is at an advanced stage in procuring a new banking software system to address this issue; ii. Internal audits.  Most projects that are mainstreamed within ministries do not have their activities integrated into work plans of internal audit units to review their internal control systems and ensure their adequacy.  The Office of the Auditor General, in collaboration with the Bank, conducts annual financial audits and issues management letters to accompany the audits, highlighting  the  internal  control and accountability  issues  therein.    In case of  risks  identified and requiring value for money or forensic audits, these are also commissioned. 

134. The implementation of procurement streamlining has significantly progressed during the CAS period, but a number of challenges remain.  The focus on building a regulatory framework and the  assignment  of  an  additional  Procurement  Specialist  at  the  World  Bank  Country  Office strengthened procurement management in the Bank’s portfolio in Uganda.  However, procurement delays  for many  projects  have  resulted  in  late  delivery  of  the  required  items  (goods, works  and consulting services) to the intended beneficiaries, particularly in infrastructure sectors. Such delays slow  down  project  implementation  and  are  due  to  a  combination  of  factors,  including:  i.  weak project  management  oversight  and  procurement  capacity  among  project  staff;  ii.  challenges associated with  the unique and  innovative nature of  some contracts,  e.g.  in  the energy sector;  iii. inadequate  technical  skills,  and  iv.  poor  project management.  The Bank will  continue  to  address                                                              20 Previous CPPRs in Uganda were completed in 2001 and 2005. A new CPPR for Uganda was completed in early CY10. 

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these  challenges  through  support  via  specialists  based  in  the  country  office,  hiring  of  additional consultants for complex projects, and introducing performance evaluation of project managers and coordinators to improve results. 

135. The  safeguards portfolio  review  carried  out  in  FY09  found  environmental  and  social risks of the portfolio well managed, with a high degree of compliance with the safeguards policies. The  shortcomings  identified  through  the  review  included:  i.  weak  capacity  in  some  counterpart agencies;  ii.  environment  assessment  mis‐categorization  of  several  projects;  and  iii.  safeguards understaffing,  although  capacity  to  manage  safeguards  in  country  was  enhanced  by  posting additional  safeguards  staff  in  the  Country  Office.    It  was  also  observed  that  while  safeguards concerns are included during project preparation, there is limited supervision and follow up during implementation,  partly  due  to  understaffing.    On  the  social  safeguards  side,  lack  of  a  national resettlement policy continues to pose a challenge. 

136. In  conclusion,  the  Bank  delivered  a  larger  lending  program  with  fewer  projects  than projected in the CAS.  Apart from minor gaps in project preparation and supervision, the quality of project  implementation,  outcomes  and portfolio performance was  generally  satisfactory  and  cost effective.  The  Bank  delivered  more  IDA  support  to  the  energy,  education  and  social  protection sectors, and less through PRSCs and to the transport sector than planned; however, this was partly explained  by  the  Bank’s  flexibility  in  responding  to  changing  client  priorities.    While  portfolio performance  was  generally  good,  there  is  still  room  for  improvement  in  addressing  quality  of project preparation and effectiveness delay issues, and ensuring efficient project implementation. 

 

Box 5: Bujagali Inspection Panel Case One major safeguard issue during this CAS was the Bujagali Inspection Panel Case. Responding to a request in March 2007 from the National Association of Professional Environmentalists (NAPE), a Ugandan non‐governmental organization, the Inspection Panel investigated the World Bank’s compliance with its operational policies on potential environmental, economic, and social impacts.  The Panel found the Bank in compliance with several policy provisions, including assessing project impacts on fisheries, establishing a dam safety panel, issuing land titles to project‐affected people, and completing a baseline hydrologic data series.  It also found a number of cases of non‐compliance such as assessments of project alternatives and cumulative impacts, exclusion of Lake Victoria from the project’s area of influence, and in the assessment of project costs, risks, and impacts on electricity tariffs.  The Panel commended the Bank for its work on conserving the Kalagala Falls area as an environmental offset to the Bujagali project, responding to the Panel’s earlier investigation. On December 12, 2008, the Board of Directors discussed the Inspection Panel Report and the Management Response to the report.  The Board noted that the Bank should remain engaged in Uganda’s energy sector, and some Board members expressed that the Bujagali project was an example of an improved World Bank Group approach to infrastructure projects, and a commitment to address associated economic, environmental, and social dimensions of development projects.  Members eventually approved the range of actions set forth in the Management Response and the additional actions that management intends to undertake in view of the Inspection Panel investigation and Board deliberations.21 

 

 

                                                             21   The Bank team agreed on a Management Action Plan that includes: timely implementation of a sustainable management plan for Kalagala Falls; updating and implementation of a cultural property management plan; and undertaking an enhanced socio‐economic study to support and fully achieve livelihood restoration.  Management will undertake these actions in consultation with the Government of Uganda, affected people and the project sponsor.  In addition, management will develop guidance on how to address environmental and social safeguard issues in legacy projects that suffer from interruptions in implementation, such as in the Bujagali project.  The Management Action Plan is currently being implemented. 

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IDA NON‐LENDING 

137. The CAS contains two different sets of projections for ESW delivery: one indicates 27 ESWs to be delivered over the period while the other mixes TAs, ESWs, and technical memoranda such as the  JSAN and DSAs.   This makes  it difficult  to accurately assess  the delivery of ESWs against CAS targets. However, a manual count indicates that a total of 20 ESWs and three TAs were planned for the  CAS  period,  while  at  the  end  of  the  CAS  period,  a  total  of  20  ESWs  and  nine  TAs  had  been delivered. 

138. There were some delays in delivery of AAA, as shown in Figure 6 and in Annex 3, with 12 of  the planned ESWs delivered  in  the latter part of the CAS period.  In addition, some ESWs  were  not  produced  as  outlined  in  the CAS,  and  several  ESWs  not  included  in  the original CAS were delivered.   Two ESWs were dropped  after  having  incurred  significant costs.    In  some  cases,  delays  in  delivery may have  a  negative  impact  on  the  impact  of  the analytical  work  and  also  provides  a  weaker foundation  for  lending  operations  meant  to follow up on ESWs.  

139. ESWs conducted during the CAS period have  generally  been  relevant  and  of  high quality.22    Improvements  can  be  made, however,  in  timing, dissemination  (especially of ESWs with cross‐sectoral  relevance), planning of the  output,  and  coordinating  with  Government  and  other  development  partners.    The  Country Economic  Memorandum,  along  with  the  Public  Expenditure  Reviews  of  2007  and  2008,  helped shape the policy dialogue with the Government and assisted in identifying priorities and strategic directions for GoU and Bank interventions.   This is evidenced by the CEM and PERs being cited in various GoU policy and planning documents.  

140. Nine TAs funded by the Bank budget were completed during this CAS.  Technical assistance was mostly provided to complement existing operations and often focused on one particular event or product,  including Presidential  Investor Round Table events,  technical reforms, and support to policy  reforms  (PRDP,  ICT  Policy).    Future  CASs  would  benefit  from  a  clear  outline  of  timing, content and priority of TAs.  

141. The  relevance and  timeliness of ESW vis‐à‐vis  the dialogue with  the  client,  as well  as  the direct  impact of ESW  findings and  recommendations on policy  reforms,  are both  indications  that the  non‐lending  program was  performing well,  despite  some  products  that were  not  sufficiently followed up in the client dialogue, and some planned ESWs not delivered. 

IDA INSTRUMENTS 

142. As described in detail in earlier sections, the PRSCs showed declining performance over the CAS period.   For example the slow progress on reforms under the  latest PRSC7 indicates that the speed and effectiveness of implementation of the PRSCs and prior actions have been reduced. 

                                                             22 No formal evaluations or reviews have been carried out of ESWs on Uganda completed FY06‐FY09. 

Figure 6 – Delivery of Economic Sector Work, FY06‐09 

 

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143. The relatively high number of APLs in projects delivered during the CAS period (five out of 17)  is  a  sign of  the willingness and  interest of  the Bank and GoU  to engage  in phased,  long‐term reform programs in the energy, transport, and education sectors. 

144. During  this  CAS,  Uganda  also  scaled  up  the  implementation  efforts  by  piloting  Output Based Aid in several projects.   This has proven to be a successful endeavor in terms of delivering results, as further outlined in Box 6. 

Box 6: Output­Based Aid in Uganda:  Targeting Support to Reach the Poor Output‐Based Aid (OBA) involves performance‐based subsidies that are channeled through a service provider after the provider has delivered pre‐agreed outputs to targeted populations.  This is intended to increase transparency and the efficiency in use of funds.   

In no other IDA country has this results‐based public funding targeting mechanism been used more widely than in Uganda.  Implementation of these OBA schemes began during the CAS period. 

The ICT component of ERT I included $10.5m in OBA subsidies contributed by IDA with the objective to accelerate access to voice telephony in rural areas, provide internet access in district headquarters, and establish rural multipurpose tele‐centers at schools and hospitals.  The project has largely been considered a success, with coverage expanding (e.g. over 10,000 public and private phones installed in previously un‐served sub‐counties), and average cost per minute of various services in rural areas decreasing by almost 50%. 

On energy, ERT I and ERT II both include OBA programs to increase rural electrification.  While ERT I focused on (largely GEF‐funded) off‐grid photo‐voltaic systems funded through an OBA approach, ERT II includes grid and mini‐grid based expansion to poor households through an OBA subsidy. 

On health, KfW and GPOBA jointly funded an OBA scheme of $7.3m ($4.3m through the Bank‐administered GPOBA grant). This scheme aims to provide 110,000 safe deliveries and provide treatment for 35,000 patients with sexually‐transmitted diseases.  The first healthy babies were delivered under this scheme in FY09. 

On water, a $3.2m grant was provided by GPOBA to improve access to piped drinking water in small towns.  The project involved competitive bidding by local private operators, which resulted in clear efficiency gains including several “zero subsidy” bids whereby the lowest bidder plans the required expansion through private financing recouped through the tariff.  In 2008, a $2.6m GPOBA grant was provided to the NWSC, for expansion of pro‐poor yard taps and stand‐posts into slum and peri‐urban areas of Kampala to be spearheaded by NWSC's Urban Pro‐Poor Branch.  By FY09, over 25,000 residents in Greater Kampala received improved access through the scheme. 

Valuable lessons have been learned, not only for Uganda, but for the WBG more widely, including: 

For OBA to work, service providers must have access to affordable finance to “pre‐finance” output delivery.  More work is needed in this area, especially in IDA countries. 

OBA schemes in basic services involve working with local private (including NGO) providers; sufficient time and capacity building must be considered, especially with pilots.  

Bank fiduciary systems can work with OBA, but greater knowledge sharing is needed. 

TRUST FUNDS 

145. The CAS  did  not  include  a  description  of  the  application  and  strategic  use  of  trust  funds, despite the portfolio containing several  large trust  funds at  the beginning of  the CAS period.   The following is therefore based on an assessment of trust funds implemented during the CAS period. 

146. Over  the  CAS  period,  the  Uganda  program  included  disbursements  from  48  trust  funds (including IFC trust funds) providing more than $47m in grants, cf. annex 7.  More than half of the trust funds were Bank executed, but in terms of volume, 91 percent of the trust fund commitments 

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and  disbursements  were  recipient  executed.  The  majority  of  trust  funds  were  closely  linked  to lending operations and thus aligned with the Government’s priorities.  

147. Trust funds focused mainly on: i. environment and sustainable energy (GEF); ii. piloting of output‐based  aid  in  health  and  water  supply  (GPOBA);  iii.  support  through  the  MDRP  to demobilization  and  reintegration  of  ex‐combatants  from  the  conflict  in  northern  Uganda;  iv. support to prepare Uganda’s response to avian flu; and v. support to strengthening the monitoring and evaluation system of the PEAP.   Trust funds also contributed to the completion of various AAA during  the CAS period,  including  the CEM and  the  report on Land Policies  in northern Uganda,  a study on sanitation, a Poverty and Inequality study, and a NUSAF Impact Evaluation report.   

148. Projects  that  integrated major  trust  funds  in  design  and  implementation  include  LVEMP, ERT I, NUSAF, Emergency and Demobilization and PAMSU. Of the trust funds closed, five were rated by  implementation completion memoranda or  ICRs.   Three were rated moderately satisfactory  in development  outcome,23  and  two  were  rated  satisfactory.24    Assessments  did  not  reveal  cross cutting  lessons  learned  in  terms  of  the  use  of  trust  funds,  but  focused  on  the  effectiveness  and outcomes within each project.  

149. Looking forward, the new CAS should ensure that trust funds are integrated in the strategic framework, including the results framework, for Bank assistance to the country, both on the lending and the non‐lending side.  

REGIONAL PROJECTS, TRUST FUNDS, AND AAAS 

150. While acknowledging the importance of regional integration for Uganda’s development, and including  regional  projects  as  part  of  the  lending  program,  the  CAS  did  not  in  detail  assess  the implications  of  and  opportunities  for  regional  integration  and  how  to  address  this  strategically under the CAS; nor did the CAS include regional indicators in the results framework.  

151. During the CAS period, there were five regional operations involving Uganda.  Commitments amounted to $475m, of which IDA contributions from Uganda amounted to $55m, cf. Annex 2 and Annex 8.  During the CAS period, one regional project closed (LVEMP), two projects were approved (East  Africa  Trade  and  Transport  Facilitation  Project  and  LVEMP‐2),  one  project  slipped  (East Africa Regional Power Project) and one was dropped (RCIP).  By the end of FY09, one project was rated satisfactory and the other three were rated moderately satisfactory.   Two additional regional operations  including  Uganda  are  in  the  pipeline  for  FY10  (East  Africa  Agriculture  Productivity Project and East Africa Health Systems Strengthening), and at  least another two regional projects are in the pipeline for FY11‐13.   

152. Three  regional  trust  funded  projects  were  implemented  in  the  areas  of  agriculture, HIV/AIDS,  and  water  resources.  In  addition,  various  trust  funded  projects  supporting  activities under  the Nile Basin  Initiative  amounting  to more  than $66m were  implemented during  the CAS period, including training, capacity building and institutional support (cf. Annex 10).  

153. Three regional ESWs and two regional TAs were delivered during the CAS period, mainly in the areas of supporting EAC integration (cf. Annex 9).   

                                                             23 GEF Lake Victoria Environmental Management Project; Strengthening Civil Society and Government Partnership in monitoring Public Expenditure (IDF); and Amnesty Commission Special Project For Repatriation, Rehabilitation, Resettlement and Reintegration of Reports in Uganda (MDRP). 24 GEF Energy for Rural Transformation and PRSP‐Uganda; Capacity Building For Decentralized Community Based Participatory Development Planning and Budgeting. 

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154. While  achieving  results,  regional  operations  have  been  facing  significant  implementation challenges due to coordination complexities both in projects and in handling many different clients simultaneously. This has often resulted in delays to project  implementation and in preparation of new  projects.    Considering  the  importance  of  regional  integration,  these  challenges  need  to  be addressed under the new CAS. 

MIGA, IFC AND WBI 

155. Over  the  CAS  period,  IFC  focused  on  development  of  financial  markets,  infrastructure, agribusiness, support to the privatization program, and MSME development jointly with the World Bank.  The total IFC portfolio for Uganda as of August 2009 amounted to $202m, of which support to  the Bujagali Hydro Power Project  is by  far  the  largest activity  ($130m loan).    IFC committed a $25m  loan  to Umeme,  the Uganda  electricity distribution  company,  to  assist  its  expansion  of  the distribution network, increase connections and reduce technical losses.  Uganda is one of the pilot countries in the IFC/IDA MSME initiative, which supports access to finance, business development services, and business enabling environment.  IFC has also acted as an advisor to the Governments of  Kenya  and  Uganda  regarding  privatization  of  the  joint  Kenya‐Uganda  railway  line,  and committed  $32m  for  the  railways  concession.  This  initiative  has  not  been  completed  and  is expected to be carried forward under the next CAS as part of a wider regional strategic engagement on infrastructure development in East Africa, including railways.  IFC provided technical assistance to local banks to develop housing finance skills and provided $16m loans to assist the growth of the mortgage and term finance  for SMEs, of which $2m was dedicated to women entrepreneurs.    IFC also  provided  trade  finance  support  to  Orient  Bank  and  a  risk  sharing  facility  to  a microfinance institution to access funding from Citibank. 

Box 7: Summary of IEG Evaluation of IFC Activities in Uganda 1999­200825 Between 1999 and 2008, IFC invested $187m in 10 projects in Uganda, including, power, telecommunications, financial sectors and small investments in agribusiness and education. IFC’s main contribution has been in telecommunications where it helped restructure the sector and expand access to mobile communications. In addition, IFC provided assistance to the government to improve or create regulations in insurance, leasing and mortgage sectors and helped its clients to introduce new financial products. However, limited success was seen in the power sector, improving SMEs’ access to financing and developing housing finance. IFC’s experience in Uganda was characterized by strong government commitment to policy and institutional reform, a judicial mix of advisory services and investments and a close and well established relationships between IFC staff and clients. 

The main challenges for IFC going forward are: i. to promote more broad‐based growth by increasing its support for non‐financial sectors; ii. to maintain its support of the financial sector so that banks develop capacities to lend to SMEs and promote other underserved segments of the economy.  IEG recommends that IFC: i. finds new ways to reach small businesses; ii. remains engaged as an advisor in privatization transactions for a period after completion of the initial transaction; iii. considers the establishment of a field presence in smaller, high risk countries that have undertaken significant reforms and established favorable business environments; and iv. capitalizes on new opportunities presented by increasing south‐south investment flows. 

 

156. MIGA’s  portfolio  in  Uganda  consists  of  three  projects  for  which  the  Agency  has  issued guarantees to investors incorporated in Bermuda, Luxembourg and St. Kitts & Nevis.  The projects are in support of the agribusiness and infrastructure sectors in Uganda and have a combined gross exposure of $158m.  MIGA continued the cooperation through a technical assistance program with the Uganda  Investment Authority  (UIA)  to  identify  new projects.   MIGA has worked  consistently 

                                                             25 Cf. chapter 8 in the IEG joint Country Assistance Evaluation, Uganda 2001‐2007. 

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with  Uganda  Investment  Authority  on  various  capacity  building  programs  over  the  years.  In addition,  Uganda  is  one  of  the  countries  covered  by  MIGA’s  Africa  enterprise  benchmarking program,  a  program  which  is  linked  to  the  Bank’s  investment  climate  assessment.  Building  on enterprise benchmarking program results, MIGA is working with UIA to secure donor funding for an investment outreach program. 

157. Uganda  continues  to  be  an  active  participant  in  WBI  programs,  averaging  over  800 participants annually over the past  five years.   Multi‐year activities will continue  in such areas as support  to  oversight  institutions  (media  and  parliament)  and  economic  competitiveness  (public private partnership and financial sector management).  In addition, in FY09, WBI has implemented activities  in  local  governance, water  and  rural  development,  science,  technology  and  innovation, carbon  finance,  south‐south  dialogues  with  Brazil  on  cluster  development,  and  climate  change. Regional  programs  in  areas  such  as  health  and  climate  change  have  also  been  attended  by participants from Uganda. 

158. Coordination between  the Bank,  IFC,  and MIGA  should  be  improved during  the new CAS.  Several  of  the  key  challenges  facing  Uganda,  notably  infrastructure  investments,  deepening  of financial markets, commercialization of agriculture and water and sanitation, provide opportunities for the three institutions to complement each other in providing support to the client. 

CLIENT SURVEYS 

159. A Client Survey was completed in 2008.   The survey had 306 respondents and a response rate  of  56%,  with  respondents  representing  government  officials,  media,  private  sector,  civil society, developments partners etc.   A  large majority of  respondents  think  the Bank considers  its primary  priority  in  Uganda  as  ‘ensuring macro‐economic  stability  consistent with  rapid  growth’, followed  by  infrastructure,  private  sector  growth,  and  strengthening  public  sector management.  This is well aligned with identified development priorities in Uganda.  However, when asked which areas  the  Bank  should  focus  on  in  Uganda,  stakeholders  point  to  infrastructure,  agriculture, community empowerment, and private sector growth before identifying ensuring macro‐economic stability consistent with rapid growth.  

160. Outside of government, stakeholders are not positive about the Bank’s effectiveness in the country.  While in some areas (e.g. infrastructure, growth and agriculture) the Bank’s work is highly appreciated, stakeholders are less positive in the areas of governance, corruption and empowering communities.    These  findings  suggest  that  the  Bank  needs  to  become  more  effective  at demonstrating and communicating results achieved in Uganda. 

COUNTRY DIALOGUE AND AID COORDINATION 

161. The Bank enjoys a strong policy dialogue with the Government, underpinned by the Bank’s analytical work and significant engagement in key sectors for development.   This is demonstrated by  government  requests  for  sector  investment  lending  operations  in  areas  covered  by  public expenditure reviews.   In addition, the Bank is frequently called upon to provide brief policy notes and other inputs to the ongoing policy debate. 

162. As  chair  of  the  development  partner  coordination  and  harmonization  forum,  the  Local Development Partners’ Group, the Bank contributes to constructive dialogue between development partners as a group and the Government.  With more than 40 development partners (DPs) active in Uganda and DPs contributing significant amounts to the government budget and as a share of GDP, the  development  partner  coordination  apparatus  is  rather  large.    Nonetheless,  sector  dialogues 

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between the Government, development partners and other stakeholders are formalized through a range of sector working groups, technical working groups etc. 

163. The WB is working closely with the Government and other DPs in designing a Joint Budget Support Framework (JBSF) that is aligned to the budget cycle and sector processes. At the core of this is a multi‐annual Joint Assessment Framework (JAF) focusing on efficiency in public spending and enhanced service delivery, in support of the Government’s own value for money agenda. 

164. While GoU‐DP dialogue at sector/thematic levels is generally rather constructive, it could be strengthened at the higher level.  In particular, there is scope for improving the effectiveness of aid if  the  Government  took  leadership  in  outlining  rules  and  guidelines  for  the  provision  of development assistance and the role and responsibilities of DPs in the country.  With the support of development  partners,  the  National  Development  Plan  has  a  chapter  on  the  Government’s  Aid Policy, which is intended to provide the foundation and framework for improved aid coordination.  With DPs signing up to GoU’s Aid Policy, it will practically replace the need for a UJAS‐2. 

165. The most  recent Paris Declaration Monitoring Survey  (2008)  refers  to Uganda as a  front‐runner on aid effectiveness.   Although there is room for improvement, progress is recorded on all Paris Declaration indicators.  The Ownership dimension of the Paris Declaration scores the highest mark  (High)  of  the  five  dimensions,  for  the  PEAP’s  role  as  an  operational  strategy.    Given  the arguments put forward in this report, with the PEAP having become a largely irrelevant framework for  policy  implementation,  the  basis  for  this  rating  is  not  entirely  clear.    Nonetheless,  the  main lesson learned in the area of country dialogue and aid coordination is that the Bank should critically assess to what extent the new National Development Plan provides a reliable framework for policy implementation in Uganda before the next CAS is uncritically aligned with the NDP.  While this may not be fully known at the time of drafting the new CAS, the CAS Progress Report must assess this issue and, if necessary, realign the CAS at that stage. 

V.  LESSONS LEARNED AND ISSUES TO BE ADDRESSED BY THE NEXT CAS 

General Lessons and Issues to be Addressed 166. A joint strategy, elaborated with other development partners,  is neither a necessary nor a sufficient condition for more effective aid.   Rather than spending resources on elaborating a  joint strategy, efforts should be devoted to developing an operational framework for alignment with the national  development  strategy,  for  allowing  dynamic  changes,  and  for  harmonization  and coordination  amongst  development  partners.    The  Joint  Budget  Support  Framework  (JBSF) currently being finalized is an example of such an operational framework. 

167. Full alignment with an incomplete and/or irrelevant national development strategy should be avoided.  A careful assessment of the completeness and strategic relevance of the new National Development  Plan  should  guide  the  formulation  of  the  next  CAS  for  Uganda.    While  a  full assessment of the relevance of the new  

168. The impact of a CAS may be reduced in cases where there is no or limited selectivity.   The Bank  should  consider  increased  focus  in  a  limited  number  of  sectors.    Due  to  inertia  in implementation of the ongoing portfolio, greater selectivity will not be achieved from the beginning on the new CAS.  Yet, rather than ensuring Bank presence in each and every sector, selectivity might improve the effectiveness of the program, possible combined with AAA in sectors where no lending is taking place. 

169. Credible,  concise  and  realistic  results  frameworks  for  the CAS and  for  individual  projects are  important  for  planning,  monitoring  and  budgeting  purposes,  including  realistic  targets  for 

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PRSCs  with  their  relative  short  life‐cycle.    If  links  between  the  results  framework  of  individual projects  and  the  CAS  are  not  established,  operations  are  unlikely  to  contribute  effectively  to  the CAS’ overall objectives. 

170. Successful  reforms  depend  on  strong  sector  involvement.    Therefore,  reforms  supported under  PRSCs  should  be  linked  to  sector  strategies  or  specific  sector  investment  operations.    A corollary to this insight is that long term sector reform issues should not be addressed exclusively through APLs or SILs.   Reforms may still be pursued through the PSRCs  in areas where the Bank does not have  lending operations,  as  long as  sector challenges are effectively addressed by other development partners. 

171. Delays to effectiveness (notably Parliamentary approval) have affected the performance of the  Bank  portfolio  throughout  the  CAS  period.    These  delays  are  largely  considered  to  be exogenous; if that is in fact the case, they should at least be anticipated at the project design stage.  In addition, the Bank should encourage early involvement of relevant stakeholders during project design. 

172. On lending types and policy reforms: i. the Bank should avoid implementing phased APLs in parallel,  to  allow  for  incorporation  of  lessons  learned;  ii.  policy  reforms  should not be  combined with SILs as this tends to delay project implementation. 

173. To maximize the impact of the Bank’s non‐lending activities, all ESWs will need a plan and a budget for dissemination activities, as well as a plan for follow‐up to the conclusions reached and advice provided. 

174. Portfolio  performance  reviews  are  only  useful  to  the  extent  that  follow‐up  actions  are agreed to, followed up and eventually implemented.  A more careful approach to the design of CPPR events is needed in order to increase relevance of reviews and ensure timely implementation. 

Sector Specific Lessons and Issues to be Addressed 175. For  continued  successful  economic  management,  focus  on  binding  constraints  to  future growth needs to be maintained.  With continued pressure on social services from the rapidly rising population,  increased efficiency  in service delivery and a reduction of public administration costs are  key  components  to  be  addressed.    Oil  revenue  management  poses  another  risk  (and opportunity) for continued macroeconomic stability.  

176. The success of direct Bank involvement in the agriculture sector will depend on a credible policy  and  institutional  framework  for  the  sector,  which  remains  outward‐oriented  and  is  not influenced by political patronage considerations.  Further, progress in the agriculture sector needs a  cross‐sectoral  approach  including  better  rural  roads,  greater  access  to  electricity  and communication infrastructure, more marketing infrastructure and better access to finance in rural areas. 

177. The  Bank  will  need  to  address  the  Government’s  limited  absorptive  capacity  in infrastructure investments and address the relatively high unit costs of roads to  justify continued lending  to  the  sector.    Therefore,  in  the  next  CAS,  the  Bank  should  be  looking  at  how  the Government  can  enhance  the  effectiveness  and  transparency  in  the  use  of  funds  allocated  to  the infrastructure sector. 

178. Environment and natural resources programs need better integration in other development efforts  to  reach  desirable  and  sustainable  results,  but  this  may  not  necessarily  involve  Bank interventions in case other DPs are active in the area. 

179. The  Bank  must  adopt  a  clearer  framework  with  actionable  governance  indicators  and tracking mechanisms in support of the GAC agenda under the new CAS.  Not least in the run up to 

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general  elections  in  2011,  the  Bank  will  need  to  consider  its  role  vis‐à‐vis  other  development partners with respect to advancing the GAC agenda in Uganda. 

180. Lessons from the CAS highlight that PRSCs may not always provide the optimal instrument for addressing health specific problems.  Further, the CAS program for the sector was not realistic and commensurate with the interventions undertaken. 

181. Addressing  the  population  issue  should  be  embedded  in  a  broader  cross‐sectoral framework  looking  not  just  at  health  and  family  planning,  but  also  focusing  on  youth unemployment, skills training, and public service delivery. 

182. The PRSCs, mainly  focusing on macro  level reforms across  financial and social sectors, do not  seem  to  be  the  best  available  instrument  for  influencing  change  regarding  the  community development  component  of  the  PEAP.    In  retrospect,  using  the  existing  interventions  on decentralization and public sector reforms could have provided a much more direct and possibly more effective intervention. 

   

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Acronyms AAA  Analytic and Advisory Activities AF  Additional Financing APIR  Annual Policy Implementation Review APL  Adaptable Program Loan ARD  Agriculture and Rural Development (sector board) ARTP‐2  Second Agricultural Research and Training Project ARVs  Antiretroviral drugs BoU  Bank of Uganda BUDS  Business Uganda Development Scheme CAE  Country Assistance Evaluation CAS CR   Country Assistance Strategy Completion Report CAS PR  Country Assistance Strategy Progress Report CAS  Country Assistance Strategy CEM  Country Economic Memorandum CIFA  Country Integrated Fiduciary Assessment COMESA  Common Market for Eastern and Southern Africa CPI  Consumer Price Index CPIA  Country Policy and Institutional Assessment CPPR   Country Portfolio Performance Review CSO  Civil Society Organization DHS  Demographic and Health Survey (2006) DPL  Development Policy Lending DSA  Debt Sustainability Analysis DTIS  Diagnostic Trade Integration Study EAC  East African Community ECOWAS  Economic Community of West African States ED  Education (sector board) EFMP‐2  Second Economic and Financial Management Project EMCBP‐2  Second Environmental Management and Capacity 

Building Project EMT  Energy, Mining and Telecommunication (sector board) ENR  Environment and Natural Resource ENV  Environment (sector board) ERL  Economic Recovery Loan ERR  Economic Rate of Return ERT  Energy for Rural Transformation ESW  Economic Sector Work FIRST  Financing Sector Reform and Strengthening Initiative FY  Fiscal Year (WB, GoU: July 1 – June 30) GAC  Governance and Anti‐Corruption GAVI  Global Alliance for Vaccines and Immunizations GDP  Gross Domestic Product GEF  Global Environment Facility GoU  Government of Uganda GPOBA  Global Partnership on Output‐Based Aid HIPC  Heavily Indebted Poor Countries HPPG  Harmonized Participatory Planning Guide ICA  Investment Climate Assessment ICR  Implementation Completion Report ICT  Information and Communication Technology IDA  International Development Association IDP  Internally Displaced Person IEG  Independent Evaluation Group IFAD  International Fund for Agricultural Development IFMIS  Integrated Financial Management Information System IMF  International Monetary Fund ISR  Implementation Status Report JARD  Joint Annual Review on Decentralization JSAN  Joint Staff Assessment Note KfW  Kreditanstalt fur Wiederaufbau KIIDP  Kampala Institutional and Infrastructure Development 

Project LG  Local Government LGDP‐2  Second Local Government Development Project LGMSDP  Local Government Management and Services Delivery 

Project LRA  Lord’s Resistance Army LVEMP  Lake Victoria Environmental Management Project M&E  Monitoring and evaluation MDG  Millennium Development Goal MDRI  Multilateral Debt Relief Initiative 

MDRP  Multi‐Country Demobilization and Reintegration Program 

MDTF  Multi‐Donor Trust Fund MFIs  Micro Finance Institutions MIGA  Multi Investor Guarantee Agency MoWE  Ministry of Water and Environment MoWT  Ministry of Works and Transport MSMEs  Micro‐, Small‐, and Medium‐sized Enterprises MTEF  Medium Term Expenditure Framework NAADS  National Agricultural Advisory Services Project NARO  National Agricultural Research Organisation NARS  National Agricultural Research System NEMA  National Environment Management Authority NIMES  National Integrated Monitoring and Evaluation 

Strategy NPV  Net Present Value NUPER  Northern Uganda Public Expenditure Review NUSAF  Northern Uganda Social Action Fund OBA  Output‐Based Aid PAF  Poverty Action Fund PAMSU  Protected Areas Management and Sustainable Use 

Project PEAP  Poverty Eradication Action Plan PEFA  Public Expenditure and Financial Accountability PER  Public Expenditure Review PFA  Prosperity for All PFM  Public Financial Management PHRD  Policy and Human Resource Development Fund  PIC  Public Information Center PIRT  Presidential Investors Round Table PMA  Plan for Modernization of Agriculture PP  Power Project PPAR   Project Performance Assessment Report PRDP  Peace Recovery and Development Plan (for northern 

Uganda) PRSC  Poverty Reduction Support Credit PRSP  Poverty Reduction Strategy Paper PS  Public Sector (sector board) PSCP‐2  Second Private Sector Competitiveness Project PSFU  Private Sector Foundation Unit PSIA  Poverty and Social Impact Analysis PSRP  Public Service Reform Project PUSRP  Privatization and Utility Sector Reform Project RDP  Road Development Program RDS  Rural Development Strategy  ROSC  Report on the Observance of Standards and Codes RSISP  Road Sector and Institutional Support Project RVR  Rift Valley Railways SACCO  Savings and Credit Cooperative Organization SIL  Specific Investment Loan SMMRP  Sustainable Management of Mineral Resources Project SO  Strategic Objective SP  Social Protection (sector board) SWAp  Sector‐Wide Approach TA  Technical Assistance TAL  Technical Assistance Loan TR  Transport (sector board) UACP  Uganda AIDS Control Project UBOS  Uganda Bureau of Statistics UCSCU  Uganda Cooperative Savings and Credit Union UD  Urban Development (sector board) UJAS  Uganda Joint Assistance Strategy UPPET  Uganda Post Primary Education and Training UPSPEP  Uganda Public Service Performance Enhancement 

Program  URA  Uganda Revenue Authority UWA  Uganda Wildlife Authority UWEC  Uganda Wildlife Education Centre WB  World Bank WSP  Water and Sanitation Program 

‐ 127 ‐  

Annex 1: Summary Table of the Uganda CAS Completion Report (UJAS 2006­09) UJAS Outcomes, Indicators, Targets 

Status at Target Date (FY2008)26 

Bank Specific Inter‐mediate Results27  

Progress on PEAP outcomes and Bank Contribution 

Strategies and Actions 

Bank Group Assistance 

Lessons Learned

Pillar 1: Economic Management  Bank Contribution: Satisfactory Strategic Objective 1.1: Macroeconomic Stability Consistent with Rapid Private‐sector Led Growth 

  Result: Achieved  Bank Contribution: Satisfactory 1.1.1  Fiscal deficit reduced from 11.3% of GDP to 8.2%  

Fiscal deficit reduced to 5.1% of GDP (IMF; FY2008) 

Uganda Revenue Authority modernized (IT, tax admin processes and methods) by 2007 

Agreement on MTEF 2006/2007‐2008/2009 and annual budgets  

PAF expenditures and donor projects  consistent with PEAP priorities  

Reduce government’s fiscal deficit to reduce issuance of treasury bills thus freeing up resources for private sector lending.  

Pension system reform 

Progress: Macroeconomic stability maintained and almost all targets met.  PAF expenditures consistent with PEAP priorities. 

Bank Contribution: PRSC prior actions underpinned public financial management reforms. Policy dialogue mainly through the PRSC instruments and robust recommendations from analytical work contributed to a continued prudent fiscal and overall macroeconomic policy framework in Uganda.  

Discussions on reforms of the pension system were initiated, but no major reform was completed.  

Improved revenue mobilization and PFM 

Reinforcing of struc‐tural and institutional reforms through PRSCs 

Financial systems reforms (including microfinance) 

Improvement of the investment climate 

Reduce infrastructu‐re and other export, growth bottlenecks 

Support for improved debt sustainability 

Appropriate mix of grants/credits in all Bank operations 

Lending 

PRSC 5‐7 

Private Sector Competitiveness 2 

 

AAA 

PER 2007 (Education) 

PER 2008 (Health) 

CEM 

PEFA 2009 

PSIA studies 

(a) Strong analytical work should continue to provide the basis for policy dialogue. Each sector needs to focus on efficiency to derive value for money in public spending and allow for improved prioritization within government. 

1.1.2  Increase dome‐stic revenue from 12% of GDP to 13.2% 

Revenues increased to 12.8% of GDP (IMF; FY2008) 

1.1.3  Reduce public exp. from 23.9% of GDP to 21.8% 

Public exp. reduced to 17.9% of GDP (IMF; FY2008) 

1.1.4  Inflation main‐tained below 5.0% 

Inflation at 7.3% (BoU; FY08 average) 

1.1.5  Private sector credit up from 7.1% of GDP to 10.4% 

Private sector credit increased to 11.2% of GDP (IMF; FY2008) 

1.1.6  Reduce ratio of net present value of external debt/exports from 305% to 238% 

Net present value of external debt/exports reduced to 46.7% (IMF/WB; 2007) 

Pillar 2: Enhancing Production, Competitiveness, and Incomes Bank Contribution: Moderately satisfactory Strategic Objective 2.1: Increased Private Sector Competitiveness 

  Result: Partially achieved  Bank Contribution: Moderately satisfactory 2.1.1  Private sector investment rises from 17% of GDP towards 21% by 2013/1428 

Private sector investment at 18.2% of GDP (IMF; FY2008) 

National trade policy implemented by 2006 

World Trade Organi‐zation Bill submitted to Parliament by mid‐2006 

 

Progress: Some.  WTO Bill gazetted in preparation for submission to Parliament in 2008. Matrix to operationalize National Trade Policy was developed. 

 

Improve investment climate through sup‐port to the Medium Term Competitive‐ness Strategy 

 

Lending 

Regional Trade Facilitation project 

East Africa Trade and Transport Facilitation   

(a) The Bank should support the GoU in institutionalizing PPP with a legal framework.  

  

  

  

                                                             26 Data on status are the latest available for the target date (2007/08) or as indicated. 27 A subset of policy actions from the PEAP Policy Matrix. However, as raised in the main text, these were not consistently tracked, monitored or revised to reflect Bank interventions. 28 Medium target was planned to be developed, but this was never done. 

‐ 128 ‐  

UJAS Outcomes, Indicators, Targets 

Status at Target Date (FY2008)26 

Bank Specific Inter‐mediate Results27  

Progress on PEAP outcomes and Bank Contribution 

Strategies and Actions 

Bank Group Assistance 

Lessons Learned

2.1.2  Value of exports increases from 12.1% of GDP to 16.1% by FY1436 

Value of exports at 17.7% of GDP (IMF; FY2008) 

Taxation and licensing policies and practices streamlined by mid‐2006 

Bank contribution: African Trade Insurance Agency established; GoU‐private sector dialogue supported (PIRT); support to establishment of the land and company registries and the credit reference bureau.  Financial deepening efforts supported by IFC’s mortgage support program. 

Support measures to reduce costs of doing business 

Strengthen regional integration 

Support to the national trade policy and integration 

AAA

Diagnostic Trade Integration Study 

Options for Strengthening EAC Integration 

Investment Cli‐mate Assessment 

(b) The Bank should support capacity building in public sector institutions involved in facilitating private sector development. 

Strategic Objective 2.2: Increased and more Efficient Agricultural Production 

  Result: Not achieved  Bank Contribution: Moderately satisfactory 2.2.1  Agric. production growth rate of above 2003 value of 3.8% 

Average growth rate FY2003‐08 was 1.1% (NDP draft) 

NARS established by 2006 

NAADS extended to: 499 sub counties/37 di‐stricts by 2006; 640/45 by 2007; 900/53 by ‘08 

National land policy: consultations under‐taken by mid‐2006; cabinet approval by mid‐2007; implemen‐tation by mid‐2008 

Licensed private forest plantations covering: >10,000ha by mid‐2006; >15,000ha by mid‐2007; >25,000ha by mid‐2008 

Progress: Low agricultural growth rate.  Several outcome target indicators were not monitored and data not readily available. 

Bank contribution: Sector policy reforms (PRSC prior actions), provision of investment resources and knowledge and advice. Reforms were not fully successful in creating a harmonized institutional framework for interventions.  Bank interventions also provided support to: i. establishment of the NARS; and ii. expansion of the NAADS program to cover all sub‐counties.  

Support to the implementation of the PMA 

Removal of con‐straints to agriculture and non‐farm private sector performance 

Support country wide scale up of NARS and NAADS 

Support to national resource regulatory agencies and development of an adequate policy framework 

Lending 

NAADS 

Agricultural Research and Training 

Avian Flu 

 

AAA 

Agriculture PER 

Sustainable Land Management 

East Africa Regional Grain Trade 

(a) Support to animal and plant disease control, re‐gulatory services, water for production, sector statistics and M&E crucial to increase agric. growth  

(b) Cross‐sectoral support required to complement policy and lending activi‐ties of the Bank: rural roads, access to electricity, communication, marke‐ting infrastructure and finance in rural areas are urgently needed.  

(c) Regional trade should be integrated in projects and analytical work  

2.2.2  Proportion of marketed agric. output grows from 20% to‐wards 70% by FY14 

Not monitored 

2.2.3  Proportion of total value of agric. output exported rises 

Not monitored 

2.2.4  Proportion of households with land titles for agriculture production increases from < 1% to 1.5% 

Not monitored 

 

2.2.5  Proportion of households with gene–ral land titles increa‐ses from 12% to 17% 

Not monitored 

Strategic Objective 2.3: Increased and Sustainable Fisheries Production 

  Result: Partially achieved  Bank Contribution: Unsatisfactory 2.3.1  Fishery sector growth rate above 2003 value of 3.8%   

Annual growth rate at 7% (UBOS29; average 2003‐08) 

National Fisheries Authority established by mid‐2006 

Progress: Rapid sector and export growth rates, yet unlikely to be sustainable.  National Fisheries Authority was not established.    

Support initiative to improve regional sustainable natural resource 

N/A  N/A 

                                                             29 Unless otherwise indicated, “UBOS” refers to the UBOS 2009 Statistical Abstract. 

‐ 129 ‐  

UJAS Outcomes, Indicators, Targets 

Status at Target Date (FY2008)26 

Bank Specific Inter‐mediate Results27  

Progress on PEAP outcomes and Bank Contribution 

Strategies and Actions 

Bank Group Assistance 

Lessons Learned

2.3.2  Value of fish exports rises above 2003 values of US$88 million 

Value of fish exports at US$124m (UBOS; 2008) 

Bank contribution: Neither lending nor non‐lending support to SO2.3, although it was inclu‐ded in the Bank specific program. 

management (fisheries, wetlands, mining, forests) 

Strategic Objective 2.4: Increased and more Efficient Production of Non‐agriculture Goods and Services 

  Result: Partially achieved  Bank Contribution: Moderately unsatisfactory 2.4.1  Proportion of value of production of MSMEs increases   

Not monitored 

 

Incorporation of strate‐gy for MSMEs in revised Medium Term Competi‐tiveness Strategy  

National Tourism Stra‐tegy and Business Plan: developed by 2006; Implemented by 2007. 

Mining Regulations Bill: Cabinet approval by 2006; Parliament enact‐ment by 2007; Imple‐mentation by 2008 

Progress: Some, on those outcome indicators that were available.  

Bank contributions: Bank interventions contributed to several outcomes, including reducing the time to register a property; time to register a business; new registrations; and support to MSMEs under the Business Uganda Development Scheme (BUDS).   

N/A  Lending 

Private Sector Competitiveness 2 

Sustainable Management of Mineral Resources Project 

 

AAA 

N/A 

 

N/A 

2.4.2  Less time spent by MSMEs in obtaining licenses 

Not monitored 

 

2.4.3   Increased number of tourists visiting Uganda 

Increase from 512,000 (2004) to 844,000 (2008) (UBOS) 

2.4.4  Increased contribution to GDP from mining and quarrying  

GDP contribution increased by  33% in real terms from FY05‐FY08 (UBOS) 

Strategic Objective 2.5: Strengthened Infrastructure in Support of Increased Production of Goods and Services 

  Result: Partially achieved  Bank Contribution: Moderately satisfactory 2.5.1  Proportion of national roads in good condition rises from 75% to 100% 

65% of unpaved and 71% of paved natio‐nal roads were in fair to good condition (UNRA; 2008) 

Maintenance of 18,000km/Rehabilita‐tion of 1,500km of district roads by mid‐2006 

Uganda National Roads Authority:  statute enacted by mid‐2006; operational by mid‐2007 

Rural electrification schemes under various donor projects implemented throughout UJAS period 

Progress: Limited progress and some deterioration registered (the roads indicator fluctuates every year partly due to weather impact).   

Bank contributions: In the road sector, the Bank contributed to establish and upgrade network of urban and rural roads.  RDPs contributed to a reduction in average travel time and transport and vehicle‐operating costs.  Further, the Bank provided support to the establishment of the Uganda National Roads Authority. 

Support road rehabilitation, maintenance, and upgrading 

Support private power generation investment plan 

Support the multi‐donor regional power program 

Support the railway concessioning process 

Lending 

Transport: 

Road Development Projects 1‐3 

Road Sector Institutional Support  

IFC Loans to Rift Valley Railways 

East Africa Trade and Transport Facilitation Project  

(a) Implement projects in sequence to include lessons learned 

(b) Intermediate triggers should be defined to im‐plement reform program;  

(c) APL may not be appro‐priate instrument in roads sector (difficult to agree with GoU on compre‐hensive reform program) 

(d) Bank interventions in the roads sector should explicitly seek to address the Government’s limited 

2.5.2  Proportion of rural households with access to electricity increases from 3% to 8% 

8% of rural house‐holds with access to electricity (UBOS 2007 Household Survey; 2007) 

2.5.3  Freight carried by rail rises from 863,000 tons per year to 1,565,000 tons per year 

Freight carried by rail decreased to 585,000 tons in 2008 (Uganda Railways Cooperation) 

‐ 130 ‐  

UJAS Outcomes, Indicators, Targets 

Status at Target Date (FY2008)26 

Bank Specific Inter‐mediate Results27  

Progress on PEAP outcomes and Bank Contribution 

Strategies and Actions 

Bank Group Assistance 

Lessons Learned

At least 30 megawatts renewable energy:   ‐ connected to main grid by end‐2007  ‐ supplying the main grid by end‐2008 

In energy, Bank operations were successful in contributing to improved financial viability, expanding the quantity and quality of power as well as increasing access to electricity.  

Bank interventions in the railway sector (two IFC loans) did not progress due to severe financial and operational difficulties as a result of mismanagement at RVR.  

Energy:Power Project 4 

Power Sector Dev’t Project 

Privatization and Utility Sector Reform Project 

Energy for Rural Transformation 1  

Bujagali Private Power Generation Guarantee 

absorptive capacity in infrastructure invest‐ments and address the high unit costs of roads. 

(e) In energy, policy reforms should not be combined with SILs as this tends to delay project implementation. Sector reforms better addressed under the PRSC dialogues. 

Strategic Objective 2.6: Strengthened Environment and Natural Resource Management Regime in Support of Sustainable Production of Goods and Services 

  Result: Not possible to assess  Bank Contribution: Moderately unsatisfactory 2.6.1  Increase in proportion of forest land covered by sustainable forest management plan from 2‐3% 

Not monitored  Preparation of interim business plan for ENR by 2006; integration of the ENR sector invest‐ment plan (SIP) into the budget by 2007; imple‐mentation of the ENR resources SIP by ‘08 

Districts/sectoral agen‐cies mainstream envi‐ronmental concerns in policies and programs: 14/15 by mid‐2006; 28/25 by mid‐2007;  36/30 by mid‐2008 

Progress: Incomplete data on baselines, target values and status makes it difficult to assess to which extent this SO was achieved. 

Bank contribution: Bank lending operations in support of this objective contributed to the strengthening of institutional capacity of the main regulatory bodies in the ENR sector including NEMA, UWA and UWEC.   

Support national regulatory agencies 

Lending 

Protected Areas Management and Sustainable Use  

Environmental Management Capacity Building 

Lake Victoria Environmental Management 

AAA 

Governance of NRM (dropped) 

(a) Environmental issues and concerns, including climate change, are closely linked to sustainable natural resource management.  To be effective and achieve the desirable results sustainable, ENR programs need better integration in other development efforts to have the desired impact. 

 

2.6.2  Proportion of wetlands with sustainable manage‐ment plan increased from 7.5% to 20% 

Not monitored 

2.6.3  Decrease in environmental degradation 

Not monitored 

Strategic Objective 2.7: Strengthened Financial Sector in Support of Increased Production of Goods and Services 

  Result: Achieved  Bank Contribution: Satisfactory 2.7.1  Increase in number of clients served by micro finance institutions (MFIs) from 900,000 by end 2003 

4.3 million clients by end 2007 (Uganda Microfinance Industry Assessment, 2008) 

MFIs supported for rural outreach and capacity building between 

Business Culture Fund to improve business and financial skills in rural areas established  

Progress: MFIs served 4.3m clients in 2008, almost a five‐fold increase over just five years.   

Bank contributions: PSCP‐2 and analytical work (remittances, sector reforms etc.) in support of a strengthened financial sector  

  LendingPrivate Sector Competitiveness 2 AAA ROSC; Financial Sector Study;  UK‐Uganda Trade Corridor

 

‐ 131 ‐  

UJAS Outcomes, Indicators, Targets 

Status at Target Date (FY2008)26 

Bank Specific Inter‐mediate Results27  

Progress on PEAP outcomes and Bank Contribution 

Strategies and Actions 

Bank Group Assistance 

Lessons Learned

Pillar 3: Security, Conflict Resolution and Disaster Management Bank Contribution: Satisfactory Strategic Objective 3.1: Protection of Persons and their Property through Elimination of Conflicts and Cattle Rustling, Resettlement of IDPs, and Strengthened Disaster Management  

  Result: Achieved  Bank Contribution: Satisfactory 3.1.1  Reduced number of civilian casualties from conflict (killed, wounded, abducted) (no baseline) 

Since mid‐2006 there have hardly been any direct civilian casualties of insurgency conflict in Uganda itself 

Program for reintegra‐tion of ex‐combatants into civilian life developed by 2006 

National policy on con‐flict prevention deve‐loped by 2006 and implemented by 2007 

National Security Policy operationalized by 2006 

Joint defense review with EAC conducted by 2007 and recommendations implemented by 2008 

National Policy on IDPs translated and distributed by 2006 

Social and economic reintegration plan for IDPs coordinated and monitored by 2008 

Database on IDPs developed by mid‐2006 

Progress: Significant progress reflecting the improvement in the security situation in northern Uganda.  Increased economic activity in the region. 

Bank contributions: The Bank interventions were successful in contributing to improved livelihoods among the affected households in Northern Uganda, providing reinsertion support to ex‐combatants, and providing recommendations for the GoU on status and gaps on resource flows to the North, as well as recommendations for the PRDP. The intermediate results linked to policy reforms, defense reviews and proved to be outside the influence and control of the Bank and unrelated to operations, although the Bank played an important role in the development of PRDP. 

Support dialogue between the government and LRA 

Support implementation of the 2004 Defense Review 

Support for demobilization and reintegration 

Support for return of IDPs in the North 

Support for child victims, IDPs, and refugees 

Development of local monitoring capacity 

Integration of disaster preparedness and mitigation measuring in existing frameworks 

Lending 

Northern Uganda Social Action Fund 

Emergency Demobilization and Integration  

 

AAA 

Land PSIA (Northern Uganda) 

Northern Uganda Public Expenditure Review 

 

3.1.2  Increased number of returnees/reporters that are resettled (peak IDP camp population: 1.86m by end 2005) 

By May 2009, 67% of the peak IDP camp population had returned to village of origin, while 13% were in transit sites (UNHCR). 

By late 2007, 95% of reporters (total 15,310) were resettled (WB project reports) 

3.1.3  Reduced number of internally displaced people (IDPs) 

Number of IDPs in camps or transit sites reduced from 1.84m (end 2005) to 622,000 (May 2009) (UNHCR) 

Pillar 4: Good Governance  Bank Contribution: Moderately unsatisfactory Strategic Objective 4.1: Strengthened Legal and Justice Systems 

  Result: Partially achieved  Bank Contribution: Moderately unsatisfactory 4.1.1  Reduced crime rate from 30  (incidents per 10,000 people) to 20  

Crime rate at 23  (Uganda Police Force: Annual Crime Report; 2008) 

Strengthen and decentralize Justice, Law and Order institutions to improve access to justice 

Progress: Some, but none of the targets were met.  General perception of growing corruption and GoU failure to pursue high‐profile corruption cases.  

Support widening access to justice 

Support to Justice, Law and Order sector 

Lending 

PRSC 5‐7 

Private Sector Competitiveness 2 

The Bank must adopt a clearer framework with indicators and tracking mechanisms in support of the GAC agenda under the 

‐ 132 ‐  

UJAS Outcomes, Indicators, Targets 

Status at Target Date (FY2008)26 

Bank Specific Inter‐mediate Results27  

Progress on PEAP outcomes and Bank Contribution 

Strategies and Actions 

Bank Group Assistance 

Lessons Learned

4.1.2  Decreased growth rate of commercial court case backlog from 30 (per month) to 10 

Commercial court case backlog growth rate at 17 (per month) (Annual Progress Re‐port for JLOS; 2007) 

throughout UJAS period

Promote coordination initiatives among Justice, Law, and Order Sector institutions throughout UJAS period 

Five commercial laws passed by Parliament by mid‐2006 

Bank contributions: Support to the setting up of the Anti‐Corruption Division of the High Court, improvements in the commercial court system, and improve overall access to justice.  However, projects were delayed and achievements did not match the Bank’s ambitious program. 

AAA 

Legal and Judicial Sector Assessment  

new CAS.  In the run up to general elections in 2011, the Bank will also need to consider its role vis‐à‐vis other development partners with respect to advancing the GAC agenda in Uganda. 

4.1.3  Businesses satisfied with com‐mercial courts increa‐ses from 30% to 70% 

61% of businesses satisfied with commercial court system30  

Strategic Objective 4.2: Strengthened Public Sector Management and Accountability 

  Result: Not achieved  Bank Contribution: Moderately unsatisfactory 4.2.1  Proportion of ministries/LGs preparing regular financial statements in accordance with financial regulations (from 51% to 100% by 2013/2014) 

71%  timely submis‐sions for FY08 (97% of central govern‐ment institutions; 59% of LGs) 

Reorganization of Acc. Gen.’s Office by 2007 

All LGs prepare financial statements for FY06  

IFMIS to 10 agencies, LGs by ‘07, all agencies and more LGs by ‘08 

Leadership Code Act (revised) presented to Parliament by mid‐2006 

Verification of asset de‐clarations by ministers  

Strategic plan for natio‐nal statistical system adopted by 2006 

100% of PEAP indicators reported by mid‐2008 

Application of HPPG: mechanisms for monit‐oring developed by 2006; monitored by ‘08 

Fiscal Decentralization Strategy rolled out to LGs Operationalization of new LG structures (2006) 

Progress: Uganda experienced an increase in the perception of corruption, evidenced by several large scale cases. LG revenues deteriorated as the Graduated Tax was abolished.  An increased number of LGs prepared financial statements in accordance with financial regulations. 

Bank contribution: Improved Government planning, budgeting and financial management, and assisted Government to develop, publish and roll‐out the HPPG, implement the Fiscal Decentrali‐zation Strategy; and contributed to ensuring compensation of LGs for taxes abolished.  

Bank support towards improved accountability suffered from the lack of studies of accountability and corruption to inform PRSC policy dialogue, even if the issue was covered indirectly in PERs.  

Support implementa‐tion of the IFMIS in government 

Assess quality, coverage and efficiency in services 

Implementation of National Strategy to Fight Corruption  

Support to accounta‐bility CSOs and media 

Support implemen‐tation of the Public Service Reform Program (2005‐09) 

Support CSOs in policy engagement 

Enhance LG financial, institutional and human capacity 

Support to decentra‐lization policy 

Lending 

PRSC 5‐7 

Economic and Financial Manage‐ment Project 2 

Local Government Development Project 2 

Public Performance Enhancement 

 

AAA 

PEFA 

Civic Engagement and Social accountability 

(a) Long term engagement for continuity and convergent of Bank and development partner support is critical for governance reforms. The Bank has been engaged in decentralization/LGs in Uganda since 2000. For Bank to be effective, it needs to use a combination of Bank instruments (PRSCs, Investment lending, AAA) simultaneously and in a complementary manner. 

(b) Bank support towards improved accountability suffered from the lack of studies of accountability and corruption to inform PRSC policy dialogue, even if the issue was covered indirectly in PERs.  

4.2.2  Decreased perceived incidence of corruption (measu‐red by National Integrity Survey) from 32% to 12% 

Perceived incidence of corruption increased across sectors (National Integrity Survey III; 2008) 

4.2.3  Higher proportion of public satisfied with public service delivery 

35.3% of public satisfied with public service delivery (Na‐tional Service Deli‐very Survey; 2008) 

4.2.4  LG revenue as share of LG Budget increased from 6% to 9%31 

LG revenue as share of LG Budget at 4% (JARD; 2008) 

                                                             30 National Integrated Household and Business Survey on Demand, Use and Access to JLOS Services in Uganda; 2007. 31 Medium target was planned to be developed, but this was never done. 

‐ 133 ‐  

UJAS Outcomes, Indicators, Targets 

Status at Target Date (FY2008)26 

Bank Specific Inter‐mediate Results27  

Progress on PEAP outcomes and Bank Contribution 

Strategies and Actions 

Bank Group Assistance 

Lessons Learned

Pillar 5: Human Development  Bank Contribution: Moderately satisfactory Strategic Objective 5.1: Better Educated Ugandans 

  Result: Partially achieved  Bank Contribution: Satisfactory 5.1.1  Increased primary net enroll‐ment from 87%/86% (boys/girls) to 90%  

Primary enrollment at 95.3%/91.4% (boys/girls)32  

Curriculum development for primary education: finalized by mid‐2006; roll out implementation by mid‐2008 

Minimum primary teachers’ wage level: enhanced towards UGX 200,000/month by 2006; reached by 2008 

60 seed secondary schools constructed by mid‐2008 

Improved curriculum emphasis for science and technology in tertiary education by mid‐2007 

Progress: Satisfactory progress was noted for education, and several targets were met (enrollment). Low completion rates remain a problem due to high dropout rates. 

Bank contributions: Overall, the Bank successfully contributed to progress in the sector, including curriculum development for lower primary teacher salaries increase, construction of seed secondary schools, and improved curriculum emphasis for science and technology. The PER 2007 helped identify crucial gaps and challenges in the sector and provided important input to the policy dialogue with GoU in terms of how to address weaknesses. 

Support Education Investment Plan (ESIP) 

Support the implementation of the Higher Education Strategic Plan 

Lending 

PRSC 5‐7 

Makerere Pilot Decentralized National Service Delivery 

Millennium Science Initiative 

Post Primary Education and Training Program 

 

AAA 

PER 2007 (Education)  

Bank interventions in the education sector in the next CAS should focus on quality of education, ensure clear measurement of learner proficiency, support partnerships with the private sector to reduce the cost and increase efficiency of education service delivery, and efforts to track and address education unit costs and quality gaps. Further, interventions should include strategies for school‐to‐work transition and skills training. 

5.1.2  Increased pri‐mary completion rate from 60%/44% (boys/ girls) to 74%/64% 

Primary completion rate at 50%/44% (boys/girls)  

5.1.3  Increased post primary gross enrollment rate from 20%/17% (boys/girls) to 30%/25% 

Post primary gross enrollment rate at 27.9%/22.4% (boys/girls) 

5.1.4  Increased completion rate of senior 4 rate from 20%/17% (boys/girls) to 26%/23%  

Senior 4 completion rate increased to 23% (gender specific data not available) 

5.1.5  Improved tertiary enrollment from 4% to 5.5% 

Tertiary enrollment increased to 5% 

Strategic Objective 5.2: Healthier Ugandans 

  Result: Partially achieved  Bank Contribution: Moderately unsatisfactory 5.2.1  Reduced Infant Mortality Rate from 88 to 68 

Infant mortality rate (per 1,000 live births) at 76 (DHS33; 2006)  

Continued joint implementation of the Revised National Framework for HIV/AIDS throughout UJAS period 

Indoor residual spraying 

Progress: Uganda did not achieve significant progress on most of the health indicators during the UJAS period and only few PEAP outcome targets were met. Maternal mortality as well as child morality remains high. At 

Support to reproductive health, family planning, malaria control, community health services, and the provision of skilled 

Lending 

PRSC 5‐7 

HIV/AIDS Control Program 

 

 

(a) PRSCs may not always provide the optimal instrument for addressing health specific problems, and the CAS program for the sector was not realistic and 

5.2.2  Lower maternal mortality rate (per 100,00 deliveries) from 505 to 354 

Maternal mortality rate (per 100,00 deliveries) at 435 (DHS; 2006) 

                                                             32 Data for SO5.1 are from the Joint Education Sector Annual Review Report for 2007/08. 33 Demographic and Health Survey. 

‐ 134 ‐  

UJAS Outcomes, Indicators, Targets 

Status at Target Date (FY2008)26 

Bank Specific Inter‐mediate Results27  

Progress on PEAP outcomes and Bank Contribution 

Strategies and Actions 

Bank Group Assistance 

Lessons Learned

5.2.3  Population un‐dernourished redu‐ced from 19% to 5% 

16% of population undernourished (DHS; 2006) 

strategy: finalized by mid‐2006; implemented by mid‐2007  

Emergency obstetric care strategy imple‐mented by mid‐2007 

Human resource policy for health care staff finalized and implementation initiated by mid‐2007 

the current pace, Uganda is unlikely to meet MDG 4 (child mortality) and 5 (maternal health), but will most likely achieve MDG 6 (combat HIV/AIDS, malaria).  

Bank contribution: Bank interventions were not fully effective in achieving the targets set and actions planned, which, among other things, included support to reproductive health, family planning, malaria control, and provision of skilled health workers. 

health workers 

Support for the implementation of the “Three Ones” (one national HIV/AIDS coordination authority, one agreed HIV/AIDS framework, and one M&E framework) through the National Strategic Framework for HIV/AIDS 

Support to Health Research 

AAA 

CIDA Health Systems Support 

PER 2008 (Health) 

commensurate with the interventions undertaken. This was particularly true when GoU’s priorities during the CAS changed towards productive sectors. In response to this and to GoU demands, the Bank is now preparing a standalone health sector project.  

(b) It is important to set realistic indicators and targets; often the tendency is to select outcome indicators that are upstream in the result chain and cannot be directly influenced through the interventions  

5.2.4  Reduced HIV prevalence rate from 6.2% to 5% 

7.0% HIV prevalence rate (AHSPR34; 2007/08)  

5.2.5  Increase in utilization of out‐patient department (OPD) from 0.9% 

OPD utilization stagnant at 0.8 (AHSPR; 2008/09) 

5.2.6  Approved posts filled by formally trained health workers (from 68% to 90%) 

56%35 of approved posts (AHSPR; 2008/09) 

5.2.7  Increased in facilities without any drug stock outs36 

from 40% to 60% 

26% of facilities without drug stock outs (AHSPR; 2008/09) 

5.2.8  Deliveries in health care centers from 24.4% to 50% 

40% of deliveries in health care centers (AHSPR; 2007/08) 

5.2.9  Demand for family planning services met37 

Demand met reduced from 27% to 24% (DHS; 2006) 

5.2.10 Children immunized (DPT3) from 83% to 90% 

5.2.10 85% children immunized (DPT3) (AHSPR; 2008/09) 

   

                                                             34 Annual Health Sector Performance Report 2009. 35 Staffing norms were revised upwards in 2006/07. 36 Chloroquine, fansidar, measles vaccine, Depo Prevera, ORS, and cotrimaxole. 37 Medium target was planned to be developed, but this was never done. 

‐ 135 ‐  

Strategic Objective 5.3: Improved Access to Safe Water Supply and Sanitation 

  Result: Partially achieved  Bank Contribution: Moderately satisfactory 5.3.1  Increased percentage of population using safe water from 55%rural/65% urban to 90% rural/100% urban 

Rural 63%, Urban 61% (Water and Environment Sector Performance Report 2009) 

3,700 new water systems serving 950,000 people in rural areas throughout UJAS period 

In small towns: 3,500 new water connections by 2006; 4,000 by 2007 

In large towns: 12,500 new water connections/ 133 new sewerage connections by mid‐2006; 13,000 new water connections/139 new sewerage connections by mid‐2007; 13,500 new water connections/ 146 new sewerage connections by mid‐2008 

Progress: Some but short of UJAS/PEAP targets. However, Uganda is on track to meet or exceed water MDG targets. 

Bank contribution: Support through the PRSCs to LGs helped exceed CAS targets (protected springs, boreholes drilled and new wells constructed). Specific outcomes were achieved, including reaching almost two million additional people in rural areas with water connections, achieving higher than planned results in new number of connections in rural and urban areas, and introducing debt write off for National Water and Sewerage Cooperation.  

  Lending 

PRSC 5‐7 

AAA 

Sanitation Study 

(a) Need for additional focus on Northern Uganda: The Bank should support GoU in undertaking increased capacity building for service delivery and infrastructure development in the North.  

(b) A clear budget line for sanitation is needed in the national budget to address increasing demand and insufficient resource availability. The pro‐poor strategy should be implemented and progress reported.  

5.3.2  Improved percentage of population using sanitation facilities from 56% rural/65% urban to 80% rural/100% urban 

Rural 62%, urban 74% (Water and Environment Sector Performance Report 2009) 

5.3.3  Increased percentage of rural water and sanitation facilities functional from 70% to 85% 

82% rural water and sanitation facilities functional (Water and Environment SPR 2009) 

Strategic Objective 5.4: Revitalized Community Development Function 

  Result: Not achieved  Bank Contribution: Moderately unsatisfactory 5.4.1  Increased number of filled community development (CD) worker posts (from 732 base case) 

888 community development worker posts filled (FY2009) 

Community mobilize‐tion and empowerment strategy operationalized by mid‐2006 

Equal Opportunities Commission: Policy submitted to cabinet by mid‐2006; Established by mid‐2007 

National Gender Policy submitted to cabinet by mid‐2007 

Progress: Limited progress on one indicator although less than 50% of established posts are filled. No real progress towards strategic objective. 

Bank contribution: Bank contributed to this outcome through PRSC policy dialogue. Only limited progress was noted in actual implementation of policies, mainly due to financial constraints and administrative delays.  

Mainstream social development and protection concerns across health, education and water & sanitation 

Assist the implementation of orphans and vulnerable children policy and the community empowerment and mobilization strategy 

Lending 

PRSC 5‐7 

 

AAA 

Civic Engagement and Social Accountability 

(a) PRSCs not optimal instrument for supporting CD interventions. Integration of CD in a wider set of Bank interventions more feasible and relevant. 

(b) The Bank should con‐sider whether, in the con‐text of prioritization of interventions, it is relevant to commit itself to subsectors such as CD. 

5.4.2  Proportion of functional community management 

committees38 

Not monitored 

 

                                                             38 No baseline available. 

‐ 136 ‐  

    

Annex 2: Planned Lending Program and Actual Deliveries FY06-FY09 (including regional projects)

FY Projects in CAS Plan TypePlanned

IDAActual

IDAResult

US$ (m) US$ (m)2006

Millennium Science Initiative SIL 20 30 Actual

Poverty Reduction Support Credit 5 (PRSC-5) DPL 150 135 Actual1

Public Service Enhancement Reform (UPSPEP) SIL 70 23 Actual2

Thermal Power Generation SIL 0 0 DroppedEAC Transport/Trade (Regional) SIL 10 9 ActualRegional Communications Infrastructure (Regional) SIL 0 0 DroppedSubtotal FY06 250 197

2007Kampala Institutional Infrastructure and Development Project APL 30 34 Actual (FY08)Local Government Management and Services Delivery Project APL 50 55 Actual (FY08)

Poverty Reduction Support Credit 6 (PRSC-6) DPL 150 125 Actual1

Lake Victoria Environmental Management Project 2 (Regional) APL 20 9 Actual (FY09)Private Power Generation SIL 0 0 DroppedPower Sector Development Project SIL 300 New

Private Power Generation (Bujagali) N/A 0 New3

Subtotal FY07 250 5232008

National Roads Management SIL 50 0 DroppedEnergy Rural Transformation 2 APL 50 75 Actual (FY09)Poverty Reduction Support Credit 7 (PRSC-7) DPL 150 200 Actual

Community Development Fund APL 0 0 Dropped4

Agriculture Research & Training (Additional Financing) AF 12 NewProgram for Control of Avian Flu ERL 10 NewSubtotal FY08 250 297

2009

Roads Development 4 APL APL 50 0 Dropped5

Poverty Reduction Support Credit 8 (PRSC-8) DPL 150 0 Moved to FY10Natural Resource Management SIL 20 0 DroppedEast Africa Regional Power Project (Regional) SIL 30 0 Slipped to FY10Sustainable Management of Mineral Resources (Add. Financing) AF 5 NewPost Primary Education and Training Program APL 150 NewNorthern Uganda Social Action Fund 2 (NUSAF-2) SIL 100 NewEnvironmental Management Capacity Building II (Add. Financing) AF 15 NewSubtotal FY09 250 270

TOTAL (FY2006-09)6 1,000 1,287

Notes: = New project not originally in the CAS

1 PRSC-5 and PRSC-6 were reduced due to concerns about continuous overruns on public administration budget.2 UPSEP was reduced from $70m to $23m following restructuring.

4 Community Development Fund was converted into NUSAF-25 Roads Development Phase 4 was dropped and integrated in the Transport Sector Development project scheduled for delivery in FY10.

3 Private Power Generation was an IDA guarantee of $115m provided as part of the wider investment in Uganda's energy sector.

6 The CAS 2006-2009 stated that all allocations will be determined annually on the basis of the performance based allocation system. The above is a presentation of planned versus final commitments during the CAS period.

‐ 137 ‐  

 

Annex 3: Planned Non-lending Program and Actual Deliveries FY06-09

FY Analytic and Advisory Activities in CAS Plan Type Result

2006Diagnostic Trade Integration Study (DTIS) ESW ActualFinancial Sector Follow up ESW ActualCountry Economic Memorandum ESW Actual (FY07)Land Poverty and Social Impact Analysis (PSIA) - Northern Uganda ESW Actual (FY08)Public Expenditure Review ESW DroppedPoverty Social Impact Assessment (PSIA) - Local Tax Reform ESW DroppedPRSP/Poverty ESW DroppedTanzania/Uganda Harmonization Policy Note ESW DroppedDebt Sustainability Analysis (DSA) DSA ActualUganda Insolvency ROSC ROSC ActualOptions for Strengthening EAC's Trade Integration TA Actual (FY08)Pedagogy Assessment (TA) TA Actual

2007Public Expenditure Review (Education) ESW ActualCIDA Health Systems Support ESW ActualCountry Portfolio Performance Review CPPR Actual (FY08)Investment Climate Assessment (ICA) ESW Actual (FY09)Country Integrated Fiduciary Assessment (CIFA) ESW Integrated into PEFAESW Private Sector Development ESW Integrated into ICAFinancial Sector Strategy ESW DroppedPRSP/Poverty ESW DroppedNorthern Uganda Public Expenditure Review (PER) ESW ActualInvestor Round Table TA ActualNorthern Uganda Conflict Management TA Actual

2008Public Expenditure Review (Health) ESW Actual (FY09)Financial Sector Strategy ESW Actual (FY09)Poverty and Inequality - Sharing Growth ESW Actual (FY09)Governance of Natural Resource Management ESW DroppedSustainable Land Management PER ESW ActualCountry Economic Memorandum - Follow up ESW ActualSanitation ESW ESW ActualCivic Engagement and Social Accountability ESW ActualUK-Uganda Trade Corridor ESW Actual (FY09)Investors Round Table (TA) TA Actual (FY09)Uganda Pension Reform (TA) TA Actual

2009Public Expenditure and Financial Accountability (PEFA) Assessment ESW ActualAgriculture Sector Public Expenditure Review ESW ActualHuman Development Report ESW DroppedLand and Irrigation (FY08) ESW Slipped to FY10Support to Post-primary Education (TA) TA ActualJustice Sector Assessment (TA) TA ActualTechnical Support to Northern Uganda (TA) TA Actual

Notes: = New deliverable not originally in the CAS

‐ 138 ‐  

    

Annex 4: Selected Indicators of Bank Portfolio Management and Performance (FY06-09)

Indicator 2006 2007 2008 2009Number of Projects under Implementation* 21 18 17 16Average Implementation Period (years) 4.4 5.5 4.8 4.3Realism 100% 0% 83% 100%Number of Problem Projects 1 0 5 2Ratio of Problem Projects 5% 0% 28% 13%Proactivity 80% 100% 0% 100%Commitments at Risk 8% 12% 27% 15%Number of Projects at Risk 1 2 6 2Ratio of Projects at Risk 5% 11% 35% 18%Number of Risk Flags 8 28 23 28Number of Overage Projects 1 3 1 3Disbursement Ratio 22% 25% 28% 30%Ratio of Projects with Slow Disbursement 19% 11% 18% 19%

Portfolio Management 2006 2007 2008 2009Country Portfolio Performance Review No No Yes NoSupervision Resources ($, '000) $2,309 $1,893 $1,950 $1,637Average Supervision Cost per Project ($, '000) $110 $105 $115 $88

Memorandum Items Since FY80 FY 06-09Project evaluations by IEG (number) 77 9Projects evaluated by IEG (amount, $ millions) 3,839 527IEG-evaluated Projects rated U or HU (number) 32% 0%IEG-evaluated Projects rated U or HU (amount) 36% 0%

Notes:* Excludes regional projects U: Unsatisfactory HU: Highly Unsatisfactory

‐ 139 ‐  

      

An

ne

x 5

: P

roje

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th

at

Ex

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d t

he

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an

da

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‐ 140 ‐  

     

An

ne

x 6

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alit

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En

try

‐ 141 ‐  

      

An

ne

x 7

: A

cti

ve

Tru

st

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nd

s F

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ex

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‐ 142 ‐  

  

  

  

Annex 8: Regional Projects FY06-FY09

All Countries

(US$m)

Uganda (US$m)

Uganda - Lake Victoria Management Project (LVEMP 1) 43.6 16.6 16.6 FY97 12/31/053A - Trade Facilitation Project SIL (FY01) 122.5 20.0 20.0 FY01 6/30/113A - HIV/AIDs Great Lakes Initiative APL (FY05) 20.0 N/A N/A FY05 10/31/10East Africa Trade & Transport Facilitation Project (FY06) 199.0 26.4 8.8 FY06 9/30/11Lake Victoria Management Project (LVEMP 2) 90.0 27.5 9.2 FY09 6/13/13Total 475.1 90.5 54.6

Project Name

Net Commitment Uganda IDA Allocation

(US$m)Approval

Closing Date

Annex 9: Regional AAA involving Uganda, FY06-FY09*

Output Task Name Delivery Countries Involved

ESW East African Community Strategy FY06 EAC CountriesESW East Africa Financial Integration FY06 EAC Countries

TA Regional Multi-Disciplinary Center of Excellence (RMCE) FY07Mauritius/COMESA and SADC countries

ESWStrengthening Food Security in Southern and Eastern Africa through Trade Liberalization and Regional Integration

FY09EAC, COMESA, SADC countries

TACOMESA and ECOWAS Infrastructure Fund Structure and Management

FY09COMESA countries, ECOWAS Countries

* Not included in UJAS/CAS

Annex 10: Regional Trust Funds FY06-09*

Project NameRegional

Organization Supported

Net Commitment for All Countries

(US$m)Approval

Inter-Governmental Authority on Development (IGAD) Regional HIV/AIDS Partnership Program

IGAD 14.5 FY07

Nile Basin Initiative NBIMDTF activities and

IDA investments**

MDTF to support agricultural research through ASARECA ASARECA*** 50.0 FY08

Africa Agricultural Marketing Program COMESA 3.8 FY08

* Not included in UJAS/CAS ** Approval year depends on sub-project

*** Association for Strengthening Agricultural Research in Eastern and Central Africa

Breakdown of Nile Basin Initiative involving Uganda

Project NameRegional

Organization Supported

Net Commitment for All Countries

(US$m)Approval

Nile Transboundary Environmental Action Project NBI 17.0 FY03

Institutional Strenghening and Scaling Up NBI 3.3 FY03

Applied Training NBI 14.5 FY04

Socio-Economic Development and Benefit Sharing NBI 6.5 FY06

Nile Basin Initiative Institutional Strenthening Project NBI 24.0 FY09

Regional Agricultural Trade and Productivity Project NBI 1.0 FY09

BundibugyoBundibugyo

BushenyiBushenyi

IbandaIbanda

KiruhuraKiruhura

NtungamoNtungamo

HoimaHoima

IgangaIgangaBusiaBusia

SironkoSironko

BugiriBugiri

KabaleKabale

KamuliKamuliKaliroKaliro

ButalejaButaleja

BudakaBudaka

KayungaKayungaKyenjojoKyenjojo

KapchorwaKapchorwa

BukwoBukwo

KaseseKasese

KisoroKisoro

KitgumKitgum

KumiKumi

KaberamaidoKaberamaido

LiraLira

LuweroLuwero

NakasekeNakaseke

NakasongolaNakasongola

MasakaMasaka

KamwengeKamwenge

KalangalaKalangala

MasindiMasindi

MbararaMbarara

KanunguKanungu

MorotoMoroto

NakapiripiritNakapiripiritKatakwiKatakwiAmuriaAmuria

MoyoMoyo

KibaleKibale

PallisaPallisa

SorotiSoroti

FortFortPortalPortal

AruaArua

JinjaJinja

BubuloBubulo

MbaleMbale

TororoTororo

GuluGulu

NebbiNebbi

ApacApac

AmolatarAmolatar

MubendeMubende

RukungiriRukungiri

IsingiroIsingiro RakaiRakai

SembabuleSembabule

MpigiMpigi

MukonoMukonoMityanaMityanaWakisoWakiso

KibogaKiboga

KotidoKotido

KaabongKaabongAdjumaniAdjumani

YumbeYumbeKobokoKoboko

KilakKilak

MarachaMaracha

OyamOyam

DokoloDokolo

BusikiBusiki

BulisaBulisa

AbimAbim

KAMPALAKAMPALA

MO

YO

ADJU

MANI

SIRONKOSIRONKO

KA

YUN

GAA

KABA

ROLE

SEMBABULE

KISOROKISORO

KANUNGUKANUNGU

RUKUUN

GIRRI

KAPCHORWAKAPCHORWA

BUKWOBUKWO

MASINDIMASINDI

HOIMAHOIMA

KASESEKASESE

KABALEKABALE

KIBOGAKIBOGA

MITYANAMITYANA

KIBAALEKIBAALE

MUBENDEMUBENDE

MPIGIMPIGI

MBARARAMBARARA

IBANDAIBANDAKIRUHURAKIRUHURA

ISINGIROISINGIRORAKAIRAKAI

MASAKAMASAKA

NTUNGAMONTUNGAMO

BUSHENYIBUSHENYI

APACAPAC

AMOLATARAMOLATAR KABERA-KABERA-MAIDOMAIDO

KAMULIKAMULI

GULUGULU

NEBBINEBBI

LUWEROLUWERO

NAKASEKENAKASEKE

IGANGAIGANGA

KALIROKALIRO

KALANGALAKALANGALA

MUKONOMUKONO

JINJAJINJA

KUMIKUMI

KATAKWIKATAKWIAMURIAAMURIA

MOROTOMOROTO

SOROTISOROTI

PALLISAPALLISA

MBALEMBALEBUDAKABUDAKA

MANAPWAMANAPWA

LIRALIRA

K I T G U MK I T G U M

ARUAARUA

KOTIDOKOTIDO

KAABONGKAABONG

TOROROTORORO

KAMPALAKAMPALA

YUMBEYUMBEKOBOKOKOBOKO

PADERPADER

MAYU

GE

MAYU

GE

BUG

IRIBU

GIRI

WAKISOWAKISO

KAMWENGEKAMWENGE

KYENJOJOKYENJOJO

NAKAPIRIPIRITNAKAPIRIPIRIT

NAKASONGOLA

BUNDIBUGYOBUNDIBUGYO

BUSIABUSIA

MARACHAMARACHA

AMURUAMURU

OYAMOYAM

DOKOLODOKOLO

ABIMABIM

BULISABULISA

NAMU-NAMU-TUMBATUMBA

BUTALEJABUTALEJA

Ora

Alb

ert

Nile

Achwa

Victoria Nile

Oko

k

Locho

man

Siti

Nkusi

Kafu

Katonga

To To FaradjeFaradje

To To JubaJuba

To To LodwarLodwar

To To BeniBeni

To To BuniaBunia

To To BeniBeni

To To NyakanaziNyakanazi

To To KisumuKisumu

To To NakuruNakuru

To To KigaliKigali

To G

oma

To G

oma

Margherita PeakMargherita Peak(5110 m)(5110 m)

Mt. Elgon (4321 m)Mt. Elgon (4321 m)

DEM. REP. DEM. REP. OF CONGO OF CONGO

S U D A N S U D A N

K E N Y A K E N Y A

K E N Y A K E N Y A

TANZANIA TANZANIA TANZANIA TANZANIA

RWANDA RWANDA

To To Faradje Faradje

To To Juba Juba

To To Lodwar Lodwar

To To Beni Beni

To To Bunia Bunia

To To Beni Beni

To To Nyakanazi Nyakanazi

To To Kisumu Kisumu

To To Nakuru Nakuru

To To Kigali Kigali

To G

oma

To G

oma

Margherita Peak Margherita Peak (5110 m) (5110 m)

Bundibugyo

Bushenyi

Ibanda

Kiruhura

Ntungamo

Hoima

IgangaBusia

Sironko

Bugiri

Kabale

KamuliKaliro

Butaleja

Budaka

KayungaKyenjojo

Kapchorwa

Bukwo

Kasese

Kisoro

Kitgum

Kumi

Kaberamaido

Lira

Luwero

Nakaseke

Nakasongola

Masaka

Kamwenge

Kalangala

Masindi

Mbarara

Kanungu

Moroto

NakapiripiritKatakwiAmuria

Moyo

Kibale

Pallisa

Soroti

FortPortal

Arua

Jinja

Bubulo

Mbale

Tororo

Gulu

Nebbi

Apac

Amolatar

Mubende

Rukungiri

Isingiro Rakai

Sembabule

Mpigi

MukonoMityanaWakiso

Kiboga

Kotido

KaabongAdjumani

YumbeKoboko

Kilak

Maracha

Oyam

Dokolo

Busiki

Bulisa

Abim

KAMPALA

MO

YO

ADJU

MANI

SIRONKO

KA

YUN

GA

KABA

ROLE

SEMBABULE

KISORO

KANUNGU

RUKUN

GIRI

KAPCHORWA

BUKWO

MASINDI

HOIMA

KASESE

KABALE

KIBOGA

MITYANA

KIBAALE

MUBENDE

MPIGI

MBARARA

IBANDAKIRUHURA

ISINGIRORAKAI

MASAKA

NTUNGAMO

BUSHENYI

APAC

AMOLATAR KABERA-MAIDO

KAMULI

GULU

NEBBI

LUWERO

NAKASEKE

IGANGA

KALIRO

KALANGALA

MUKONO

JINJA

KUMI

KATAKWIAMURIA

MOROTO

SOROTI

PALLISA

MBALEBUDAKA

MANAPWA

LIRA

K I T G U M

ARUA

KOTIDO

KAABONG

TORORO

KAMPALA

YUMBEKOBOKO

PADER

MAYU

GE

BUG

IRI

WAKISO

KAMWENGE

KYENJOJO

NAKAPIRIPIRIT

NAKASONGOLA

BUNDIBUGYO

BUSIA

MARACHA

AMURU

OYAM

DOKOLO

ABIM

BULISA

NAMU-TUMBA

BUTALEJA

DEM. REP.OF CONGO

S U D A N

K E N Y A

K E N Y A

TANZANIATANZANIA

RWANDA

Ora

Alb

ert

Nile

Achwa

Victoria Nile

Oko

k

Locho

man

Siti

Nkusi

Kafu

Katonga

Lake Vic tor ia

LakeEdward

LakeGeorge

LakeKwania

Lake Kyoga

LakeSalisbury Lake

Opeta

Lake

Albe

rt

To Faradje

To Juba

To Lodwar

To Beni

To Bunia

To Beni

To Nyakanazi

To Kisumu

To Nakuru

To Kigali

To G

oma

Margherita Peak (5110 m)

Mt. Elgon (4321 m)

30°E

4°N

2°N

0°

4°N

2°N

0°

32°E 34°E

32°E 34°E

UGANDA

0 25 50 75

0 25 50 75 Miles

100 Kilometers

IBRD 33504R3

AUGUST 2008

UGANDA

DISTRICT CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

DISTRICT BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.