56818 FAST TRACKBRIEF April 13, 2009 The IEG report "Uganda Country Assistance Evaluation, 2001-07," was discussed by CODE on April 13, 2009 Uganda Country Assistance Evaluation, 2001-07 The World Bank and the African Development Bank programs in Uganda over 2001-07 were delivered under the FY01-03 WB Country Assistance Strategy, the 2002-04 AfDB Country Strategy Paper, and the Uganda Joint Assistance Strategy. These strategies focused on promoting governance, growth, and human development, and were pursued through a net commitment of $2.1 billion by the International Development Association (FY01-07) and $732 million equivalent (2002-07) by the African Development Fund. The World Bank's assistance strategies showed strong client orientation and were aligned with Uganda's poverty reduction strategy. The programs were substantially effective in decentralization, public sector reform, growth and economic transformation, education, and water and sanitation. 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 AfDB's assistance was also relevant and aligned with the government's development goals. Its support substantially achieved its objectives for decentralization, public sector finance, growth and economic transformation, improved competitiveness, agriculture, and water and sanitation, as well as education and health. There were some shortcomings in the assistance provided for power and roads and in reducing corruption. The International Finance Corporation's (IFC's) main contribution has been in telecommunications, in addition to playing a substantial role in providing assistance for institutional and regulatory reforms in leasing and in supporting the supply response to these reforms. Limited impact was seen in small and medium enterprise (SME) access to finance, despite significant joint effort with the World Bank. IEG recommends that the World Bank support the development of an analytic framework to guide Uganda's decisions on governance reform; encourage and help the government in developing medium-to-long-term master plans for infrastructure; and assist in coordinating ongoing monitoring and evaluation initiatives through a single framework. OPEV recommends that the AfDB relocate sector specialists closer to the client; seek deeper engagement in a limited set of priorities; and undertake regular (perhaps joint) analytic work and project self-evaluation to underpin its strategy and project assistance. It is recommended that both banks reinforce the effectiveness of general budget support as an instrument for minimizing transaction costs and to facilitate the use of country systems. T his report evaluates World Bank and African Development Bank assistance to Uganda during 2001-07. The motivation to undertake a joint evaluation was the two bank's shift to a common The World Bank and AfDB together disbursed about $1.9 billion ($1.6 billion from the International Development Association and $282 million from the Africa Development Fund), constituting about 29 strategic framework, the Uganda Joint Assistance percent of total overseas development assistance to Strategy (UJAS), to guide the formulation and delivery of Uganda during calendar years 2001-06. Commitments their programs. Under a common strategic framework of IDA credits and grants totaled $2.1 billion during joint evaluation is, in principal, more cost effective than FY01-07, about 40 percent of which was budget the equivalent separate evaluations, since at least some support provided through Poverty Reduction Support aspects of the evaluation can be done together, which Credits. Apart from a single Poverty Reduction also reduces government transaction costs. Support Loan of UA40 million, the AfDB focused on investment projects, with total commitment of UA492 The evaluation discusses the outcome of the support of million, or $732 million, during 2002-07. each bank, then rates each independently, noting that the two banks: are of different size, capacity, and institutional The World Bank also carried out an extensive program setting; and have programs that were not implemented of analytic and advisory activities (AAA) dominated by jointly but in parallel, although they regularly engaged diagnostic economic and sector work (ESW), most with one another as development partners. The outcome notably annual Public Expenditure Reviews. Although ratings for the two institutions are therefore not these had significant impact, the relevance of the Bank's comparable and should not be used to imply that one AAA could have been enhanced with studies focusing on institution did "better" than the other. anti-corruption, civil service reforms, and population growth, and with more timely coverage of growth issues, Country Background as was done in the 2007 Country Economic With a population of 29.9 million (2006 estimate) and Memorandum. The AfDB delivered a few pieces of per capita income of $300 (Atlas method, 2006), Uganda analytic work, but depended largely on the World Bank is considered one of the world's poorest countries; it is and other development partners for such analysis. ranked 154 out of 177 countries by the UN Human Development Index (2007). Assessment of the World Bank's Contribution Uganda emerged from civil war in 1986 with an economy shattered by misrule and conflict. The new The overall outcome of the Bank's support is rated government's post-conflict program was directed at moderately satisfactory. This reflects the combined economic rehabilitation and stabilization and resulted in ratings for the relevance of objectives, design factors, a per-capita growth rate of 3.3 percent in the 1990s, a choice of instruments, and efficacy. On relevance, the rate that exceeded the average for Sub-Saharan Africa. Bank's strategies and supporting programs showed Sound macroeconomic policies contained debt and strong client orientation and emphasized technical stabilized prices, and poverty rates declined (the head- quality, especially the analytic work and project count ratio of poverty fell from 56 percent in 1992 to 34 preparation that underpinned its interventions. percent of the population in 2000). Moreover, by addressing complex policy and institutional development issues in governance, growth, and human development, the level and scope of support was World Bank and AfDB Assistance comparable to what the Bank provided to countries with Assistance during the period 2001-07 was delivered development needs similar to Uganda's. Although it is under the FY01-03 World Bank Country Assistance not possible to evaluate the efficiency of the Bank's Strategy (CAS), the 2002-04 AfDB Country Strategy support, the resources were used to meet the targets Paper (CSP), and the first two years of the UJAS, 2005- proposed in the CAS and reflected the objectives 2009. All the strategy documents emphasized the outlined in the CAS. The AAA was cost-effective and promotion of good governance, support for growth and complemented the lending program, and portfolio poverty reduction, and the enhancement of service performance was close to the Bank's average. delivery in education, health, and water and sanitation. While the CAS and CSP were aligned with Uganda's The Bank's assistance was substantially effective and Poverty Eradication Action Plan (PEAP, the title of its achieved its objectives for decentralization, public sector Poverty Reduction Strategy Paper), the UJAS was also reform, growth and economic transformation, education, the mechanism for enhanced donor alignment on a and water and sanitation. Public sector reform, including common set of priorities. financial management and accountability reforms, supported by general budget support and capacity- building, helped enhance institutions and service delivery 2 in rapidly expanding local government structures. Along with special emphasis of empowering women with the International Monetary Fund and other entrepreneurs. During this period, IFC invested US$178 development partners, the Bank's policy dialogue helped million in 10 projects in Uganda, encompassing power, the government maintain a prudent fiscal stance telecommunications, financial sectors and small throughout the period, although analytic work on the investments in agribusiness and education. slow-down of growth was not timely. Support for education and health helped to increase coverage, IFC also undertook advisory services operations that improve access, and establish a framework for better focused predominantly in infrastructure (52%) and service delivery. access to finance (33%). These operations supported privatizations, large infrastructure projects, Bank support achieved modest outcomes in key areas of telecommunications, small and medium enterprise the government's poverty reduction agenda. The support (SME) growth, access to finance for woman was not fully successful in helping to counter the entrepreneurs and mortgage finance. perception of increasing corruption, promoting a competitive business environment through improved Assessment of IFC's Contribution supply of power and reduced transport costs, enhancing IFC's main contribution has been in telecommunications agricultural productivity, or helping with family planning where it helped restructure the sector and expand access and reproductive health. to mobile communications. In addition, IFC played a substantial role providing assistance to institutional and Assessment of the AfDB's Contribution regulatory reforms in leasing and supported the supply The overall outcome of AfDB's support is rated response to these reforms by helping clients introduce moderately satisfactory. This rating should be considered new financial products in the market such as: (i) against a backdrop of AfDB's limited resource base, its pioneering of the leasing industry in Uganda, (ii) strategic selection of areas in which to intervene, and the introduction of mortgage programs, (iii) introduction of role played by other development partners. The AfDB trade finance program; and (iv) piloting a program aligned its strategies with the PEAP and provided targeting women's access to finance. In these instances, selective assistance by complementing the activities of IFC's additionality was in the provision of long term other development partners, including the World Bank. finance and expert advice in business development which However, the efficiency of resource use on targets set in were critical in mitigating the risks of entering new the CSP was lower than expected given the long project untested sectors. Despite significant joint efforts with the effectiveness and gestation periods, which tended to Bank, the desired results in the energy sector have yet to impede the timely realization of project benefits. be seen. Limited impact was seen in SMEs access to finance and in developing housing finance, despite AfDB's assistance was substantially effective in achieving reforms in these areas. Factors of success included: its objectives for decentralization, public sector reform, sustained involvement in priority sectors such as energy, growth and economic transformation, improved telecom, and financial services; a government committed competitiveness, agriculture, water and sanitation, and to policy and institutional reform; and a close and well- health and education. The AfDB complemented the established relationship with clients. efforts of other development partners, notably the World Bank, in supporting decentralization through capacity Alignment and Harmonization building and institutional support. Its assistance was particularly important in improving access to potable Although aid alignment and harmonization were not water supply through its small-town and rural water explicit aims of any strategy, they were important drivers projects, as well as to mental health, primary health care, for the support provided by the two banks. Alignment and education services. Its diversified approach to behind a common set of priorities was facilitated by the agriculture through support for fisheries and livestock is first PEAP in 1997, in which the government likely to improve rural incomes. In other areas, AfDB's encouraged the development of sectorwide approach support was less effective: for example, its anti- (SWAp) arrangements and the introduction of general corruption efforts need refocusing and quality issues in budget support, which includes sector budget support, healthcare and primary education need to be addressed. support notionally earmarked to the poverty action fund, and support not earmarked to any sector, such as IFC's Assistance Poverty Reduction Strategy credits and loans. Further progress on alignment occurred when a group of seven IFC's activities in Uganda covered the period between development partners, including the World Bank and 1999 and 2008. IFC's set of objectives included support the AfDB, completed the UJAS in 2005. That document for the development of infrastructure, financial and included a common policy matrix corresponding to the social sectors, and the growth of small scale enterprises, results matrix in the PEAP. 3 While the PEAP and the UJAS have facilitated the For the World Bank, given that the program adoption of common development priorities among implementation was reasonably on target, commitments development partners, the alignment process has led to a reflected the objectives of the program, analytic work large number of sectoral working groups, which--at least relatively cost effective and portfolio performance was in the view of some--is negating the anticipated close to the World Bank average, it may be concluded reduction in transaction costs for the government and its that resources were adequately directed to their intended partners. In addition, the UJAS partnership, while it has use. World Bank assistance could continue to: increased its membership to 11, is still small relative to the 42 development partners providing assistance to Support government efforts to develop an analytic Uganda. So, while the UJAS has been a major move in framework to guide decisions on governance reforms. the right direction, it would benefit from clarification of Such a framework will help define the causal links the main principles underlying the partnership along the between various interventions and expected outcomes lines of the 2005 Paris Declaration of Donor related to improved governance. Harmonization and Aid Effectiveness. With the help of development partners, encourage The aid harmonization mechanism in Uganda is also and support government efforts to develop medium- making progress. With general budget support to-long-term master plans for infrastructure currently accounting for about half Uganda's official development in order to promote private sector development assistance, the use of country systems for participation, competition, and regulatory reform. procurement and other processes is expanding. Encourage the government to coordinate ongoing monitoring and evaluation initiatives by its Progress notwithstanding, development partners' mix of development partners in order to secure reliable aid delivery mechanisms still varies widely. Some, such monitoring and evaluation of its overall poverty as Ireland and the United Kingdom, have moved reduction strategy. predominantly toward budget support, while others, such as Germany, provide only a small portion of their For the AfDB, concern with program effectiveness assistance as budget support. The World Bank has could be raised given the long project effectiveness and markedly shifted emphasis toward budget support, but gestation period, which could reduce the timely outcome still provides almost half of its support through projects. of project benefit. In this respect, the AfDB could: The AfDB provided one round of budget support through the Poverty Reduction Support Loan (in 2002). Strengthen presence by relocating sector specialists to However, because of restrictions on procurement of the country in order to raise its profile and improve items from non-AfDB member countries, the AfDB policy dialogue. This is particularly important in the was unable to participate in SWAps and continued to areas where the AfDB plans to stay engaged. To provide almost all its support through projects. avoid spreading staff too thinly, one option may be to deploy sector specialists to regional hubs. Overall, while efforts at alignment and harmonization have been substantial, both UJAS (on alignment) and Use limited resources more effectively by seeking the procedures around the general budget support deeper engagement in a limited set of areas. instrument (on harmonization) need further refinement Undertake regular (perhaps joint) economic and in order to attract increasing participation from all sector work and project self-evaluation to underpin development partners. The World Bank and the AfDB, strategy and project assistance. along with other multilateral institutions, can lead in this area. For both: Recommendations Seek to reinforce the effectiveness of general budget support as an instrument for minimizing transaction Two sets of separate recommendations are provided: one costs and facilitating the use of country systems, as for the World Bank and the other for the AfDB. The channeling funds through the recipient country's third recommendation applies to both banks. They build institutions helps strengthen the governance on the recommendations provided in the 2001 IEG and structures and capacities and facilitate aid the 2004 OPEV Country Assistance Evaluations. The harmonization. This will require a greater focus on review notes that the recommendations in both reaching agreement with other UJAS members on a documents were not fully implemented, especially those joint budget support mechanism and assisting the with respect to the World Bank taking a stronger stance government in budget prioritization, monitoring, and on governance and the AfDB deepening its ESW. evaluation. 4 About Fast Track Briefs Fast Track Briefs help inform the World Bank Group (WBG) managers and staff about new evaluation findings and recommendations. The views expressed here are those of IEG and should not be attributed to the WBG or its affiliated organizations. Management's Response to IEG is included in the published IEG report. 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