Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 35847-UG

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 22.0 MILLION (US$33.6 MILLION EQUIVALENT)

TO THE

REPUBLIC OF UGANDA

FOR THE

KAMPALA INSTITUTIONAL AND INFRASTRUCTURE DEVELOPMENT ADAPTABLE PROGRAM LOAN (APL) PROJECT

IN SUPPORT OF THE FIRST PHASE OF THE

STRATEGIC FRAMEWORK FOR REFORM FOR KAMPALA URBAN DEVELOPMENT PROGRAM

September 12,2007

AFT: Water and Urban 1 Eastern Africa Country Cluster 1 AFRICA

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. I ts contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS (Exchange Rate Effective July 3 1,2007)

APL CFAA CPAR CTB DE0 DPP DWD EA ECOSAN EFMP ERR EMP FA FINMAP FMM FRAP GAC GIS GOU IAF ICT IDA IFMS IFR IG IGG ISR KCC KFRAP KIIDP KUSIP KUTIP LCA LGA LGDP LGFAR

Currency Unit = Uganda Shillings (USh) Ush 1 = US$O.O005

US$ 1.53 = SDR 1

FISCAL YEAR July 1 - June 30

ABBREVIATIONS AND ACRONYMS

Adaptable Program Loan Country Financial Accountability Assessment Country Procurement Assessment Report Central Tender Board District Environment Officer Director of Public Prosecutions Directorate of Water Development Environmental Analysis Ecological Sanitation Project Economic and Financial Management Project Economic Internal Rate of Return Environmental Management Plan Financing Agreement Financial Management and Accountability Project Financial Management Manual Financial Recovery Action Plan Governance and Anti-Corruption Global Information System Government o f Uganda Inter Agency Forum Information, Communication and Technology International Development Association Integrated Financial Management System Interim Financial Report Inspectorate of Government Inspector General of Government Implementation Status Report Kampala City Council Kampala Financial Recovery Action Plan Kampala Institutional and Infrastructure Development Project Kampala Urban and Improvement Project Kampala Urban Traffic Improvement Plan Leadership Code Act Local Government Act Local Government Development Program Local Government (Financial and Accounting) Regulations

FOR OFFICIAL USE ONLY

M&E MOFPED MOLG MTEF NCRP NEMA NGO NPV O&M OAG PCU PDE PDO PDU PEAP POCA PPDA PPO RAP SFR S I L SPSCP TOR UFUP UJAS URA UTODA WID WRD WSSP

Monitoring and Evaluation Ministry of Finance, Planning and Economic Development Ministry of Local Government Medium-Term Economic Framework Nakivubo Channel Rehabilitation Project National Environment Management Authority Non-Governmental Organization Net Present Value Operations and Maintenance Office of the Auditor General Project Coordination Unit Procuring and Disposal Entity Project Development Objective Procurement and Disposal Unit Poverty Eradication Action Plan Prevention o f Corruption Act Public Procurement and Disposal of Public Assets Authority Principal Procurement Officer Resettlement Action Plan Strategic Framework for Reform Specific Investment Loan Second Private Sector Competitiveness Project Terms of Reference Uganda First Urban Project Uganda Joint Assistance Strategy Uganda Revenue Authority Uganda Taxi Operators and Drivers Association Wetlands Inspection Division Water Resources Department Wetlands Sector Strategic Plan

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

Vice President: Obiageli K. Ezekwesili Country Director: John Murray McIntire Sector Manager: Jaime M. Biderman

Task Team Leader: Solomon Alemu

UGANDA

Kampala Institutional and Infrastructure Development APL 1 Project

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE ................................................................. 3 Country and sector issues .................................................................................................... 3

Rationale for Bank involvement ......................................................................................... 4

Higher level objectives to which the project contributes .................................................... 5

1 . 2 . 3 .

B . PROJECT DESCRIPTION ................................................................................................. 6 Lending instrument ............................................................................................................. 6 Program objective and phases ............................................................................................. 6

Project development objective and key indicators .............................................................. 7

Project components ............................................................................................................. 7

Lessons learned and reflected in the project design ............................................................ 9 Alternatives considered and reasons for rejection ............................................................ 10

1 . 2 . 3 . 4 . 5 . 6 .

C . IMPLEMENTATION ........................................................................................................ 10 1 . Partnership arrangements (if applicable) .......................................................................... 10

2 . Institutional and implementation arrangements ................................................................ 10

3. Monitoring and evaluation o f outcomeshesults ................................................................ 12

4 . Sustainability ..................................................................................................................... 12

5 . Critical risks and possible controversial aspects ............................................................... 13

6 . Credit conditions and covenants ....................................................................................... 14

. . .

D . APPRAISAL SUMMARY ................................................................................................. 14 1 . Economic and financial analyses ...................................................................................... 14

2 . Technical ........................................................................................................................... 15

3 . Fiduciary ........................................................................................................................... 15

4 . Social ................................................................................................................................. 17

5 . Environment ...................................................................................................................... 18

6 . Safeguard policies ............................................................................................................. 19

7 . Policy Exceptions and Readiness ...................................................................................... 21

Annex 1: Country and Sector or Program Background ......................................................... 22

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 26

Annex 3: Results Framework and Monitoring ........................................................................ 27

Annex 4: Detailed Project Description ...................................................................................... 30

Annex 5: Project Costs ............................................................................................................... 35

Annex 6: Implementation Arrangements ................................................................................. 36

Annex 7: Financial Management and Disbursement Arrangements ..................................... 38

Annex 8: Procurement Arrangements ...................................................................................... 49

Annex 9: Economic and Financial Analysis ............................................................................. 62

Annex 10: Safeguard Policy Issues ............................................................................................ 71

Annex 11: Governance and Anti-Corruption (GAC) Action Plan ......................................... 82

Annex 12: Project Preparation and Supervision ..................................................................... 96

Annex 13: Documents in the Project File ................................................................................. 97

Annex 14: Statement of Loans and Credits .............................................................................. 98

Annex 15: Country at a Glance ............................................................................................... 100

MAP: Non-Bank Map o f Uganda

UGANDA

KAMPALA INSTITUTIONAL AND INFRASTRUCTURE DEVELOPMENT APL PROJECT

IN SUPPORT OF THE FIRST PHASE OF THE

STRATEGIC FRAMEWORK FOR REFORM FOR KAMPALA URBAN DEVELOPMENT PROGRAM

PROJECT APPRAISAL DOCUMENT

AFRICA

AFTU 1

Date: September 12,2007 Country Director: John McIntire Sector Managermirector: Jaime M. Biderman

Team Leader: Solomon Alemu Sectors: Roads and highways (40%); Flood protection (3 5%); Sub-national government administration (25%) Themes: Municipal governance and institution building (P) Environmental screening category: Partial Assessment

Project ID: PO78382

Lending Instrument: Adaptable Program Loan

For Loans/Credits/Others: Total Bank financing (US$m.): - First Phase: 33.6

- Second Phase: 40.0 - Third Phase: 17.4 estimated total US$91 .O million equivalent

Indicative Financing Plan Implementation Period

IDA Y O GOU Total Commitment I US$m 1 I US$m 1 US$m 1 Date Closing Date

APL 1 Credit APL 2 Credit

33.6 37 3.5 37.1 01/01/2008 12/3 1/20 10 40.0 44 4.0 44.0 01/01/2011 12/3 1//2014

APL 3 Credit Total

17.4 19 1.5 18.9 0 1 / O 1 /20 1 5 12/3 1 /20 17 91.0 100 9.0 100.0

FY Annual Cumulative

implkmentation ofthe SFR.- Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical

-

2008 2009 2010 2011 2.70 16.70 10.20 4.00 2.70 19.40 29.60 33.60

Annex 4 Component 1 : Support to KCC and i t s stakeholders to refine and expand the SFR into a comprehensive approach to municipal development, consonant with Kampala’s central role in the nation’s economic and political l i fe. Component 2 : Provide city wide infrastructure and services improvements. Component 3 : Support to KCC on project implementation and the establishment and implementation o f a comprehensive monitoring and evaluation system. Which safeguard policies are triggered, if any? Ref: PAD 0.6, TechnicalAnnex 10 Environmental Assessment (OP4.0 1) Involuntary Resettlement (OP4.12) Natural Habitats (OP 4.04) Significant, non-standard conditions, if any, for: Ref: PAD C.6 Loadcredit effectiveness: 1. Execution of a Subsidiary Agreement between the Government and KCC. 2. KCC to establish a Procurement and Disposal Unit. Covenants applicable to project implementation: 1. Mid-Term Review: MOLG will conduct a mid-term review of KIIDP by April 30,2009. 2 . Procurement: KCC will carry out an independent procurement audit. 3 . Safeguards: KCC will open and operate an Escrow account for the implementation of the RAP.

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A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

1. Kampala i s the capital city o f Uganda with a population o f about 1.8 million and an annual demographic growth rate of about 3.9%, well over the national rate of about 3.3%. It i s estimated that the city’s population will reach 2.4 million by 2012. The 2002 Uganda population and Housing census indicated that about 50% of Uganda’s urban population lives in Kampala. The next largest urban center i s less than 10% of the size of Kampala in population. It i s the hub o f the country’s economic, political, and administrative activities. While accurate data on the spatial distribution of economic activity in Uganda are not available, it i s estimated that about 80 percent of the country’s industrial and services sectors are located in Kampala and the city now generates over 50 percent o f Uganda’s GDP.

2. The economic future o f Uganda i s thus intrinsically related to the performance o f Kampala as a locus o f productive activity and investment. This, in turn, relies on the city’s ability to provide the services and infrastructure on which organizations (public and private) and residents rely. There i s also evidence to suggest that urban economic growth in Uganda (and elsewhere in SSA) i s disproportionately effective in reducing poverty. Over the period 1992 to 02/03, when the Uganda national poverty headcount dropped by about a third, the corresponding drop in urban areas was over a half (from 28% to 12%) even during a period o f relatively high rural-urban in-migration.

3. Unfortunately, Kampala’s delivery capabilities have not kept pace with its economic and demographic growth. Over time, infrastructure and service-delivery in key sectors (roads; drainage; solid waste; markets) have deteriorated, and the Kampala local authorities (Kampala City Council and five Divisions) which have primary responsibility in these areas have encountered serious deficiencies in the organizational, management, financial and human resource capacities to meet the current infrastructure and service-delivery needs o f the city. Water supply and sewerage are managed by a parastatal utility (NWSC) and are not under the direct responsibility o f KCC. I t has also become clear that there i s a fundamental lack o f vision and o f public service orientation.

4. Various attempts have been made to deal with these problems, the most significant of which have been supported by the Bank. The Bank funded Uganda First Urban Project (UFUP) (1991) focused on infrastructure investment with limited effort being made to strengthen Kampala City Council’s (KCC) organizational capacity. In November 1996, a proposal was made by KCC for a more fundamental reform o f local government in Kampala by formulating the “Strategic Framework for Reform” (SFR). The SFR focused on three broad areas o f reform for achieving real changes in performance: (i) restructuring KCC through organizational reforms aimed at changing the administrative structure to improve efficiency and rationalizing (down sizing) staff; (ii) service delivery liberalization by means o f privatization, contracting out, outsourcing and divesting services, facilities or assets to enhance private sector participation in service delivery; and (iii) financial and fiscal reform aimed at establishment of efficient and transparent budgeting, revenue enhancement, effective expenditure and budget control, and staff performance improvement. The SFR was launched by KCC in January of 1997, with a strong element of local ownership, which had been developed through consultation with relevant stakeholders including the Council, KCC management, the KCC labor union, and representatives o f the public. A number o f measures including testing alternative service delivery mechanisms (contracting out works and services), rationalizing the workforce, and improving financial and budgetary management were initiated. The IDA-financed projects that followed Local Government Development Program (LGDP I, Cr. 3295- UG, implemented during 2000-2004) and the Nakivubo Channel Rehabilitation Project (NCRP, Cr. 3203- UG, implemented during 2000-2004) supported the implementation o f SFR. With staff and council changes since 1997, KCC’s commitment to the SFR seems to have diminished.

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5. Under the above two projects, a number o f positive results have been achieved: (i) enhancement of KCC’s ability to implement and manage complex contracts and large civil works; (ii) alternative service delivery - increased the role of the private sector in service delivery and changed the role of KCC from a provider to an enabler of services; (iii) increased competence and capacity o f KCC staff in project planning, works supervision and project management; (iv) revaluation o f al l properties in Kampala; and (v) improved financial management and budget formulation. KCC has also benefited from being a pilot center for the Government’s Integrated Financial Management System (IFMS) implemented under the IDA financed Second Economic and Financial Management Project (EFMP 11). These outputs have required steady support from the PCU and consultants outside of KCC’s normal organizational structure. These successes are unlikely to be sustained or integrated into KCC’s operations without additional support and deep commitment to mainstreaming the approaches and capacities that underpin these successes. Despite the efforts made in the implementation o f the SFR, the progress o f organizational reforms has not been as fast as earlier envisaged at the time of the formulation of the SFR. This i s compounded by the extremely weak financial position of the city. The implementation of the SFR has largely focused on development of strategies, and systems and procedures in al l facets of KCC operations including development of accurate information and data on revenues, manpower, financial situation, contracting out revenue assessment and collection, reliable and accurate budgeting, expenditure control, institutional restructuring, and ICT development and applications. While progress has been achieved in these areas, the intermediate results will need to be carried forward and brought to maturity through institutionalization and application of the strategies, systems and procedures to KCC’s day-to-day operations. A comprehensive recommitment to, and expansion of, the SFR principles i s necessary.

6. The Government of Uganda recognizes the need to broaden and deepen the SFR reforms undertaken by KCC to date. Upon closure o f the NCRP and LGDP I, under which Kampala received invaluable support, the Government developed a concept paper for a follow on project for Kampala and requested IDA for support. KCC on its part had carried out a review of the achievements o f implementation o f the SFR up to 2004, and had developed a revised SFR 11. The SFR I1 aims at consolidating KCC’s achievements during implementation o f the first SFR, with a 20 15 vision statement. KCC’s vision 20 15 - “a secure, economically vibrant, well managed, sustainable and environmentally pleasant city that would be enjoyable by residents and visitor”. SFR I1 aims to achieve its vision through two pillars - Good governance and good urban management. Strategies to be implemented are: institutional policy formulation and enhanced performance; organizational reform through implementation of a new organizational structure that focuses on core functions; implementation o f a financial recovery action plan with transparent budgeting, expenditure control and increasing revenue; and improved service delivery through enhanced private sector participation, adequate resource allocation for 0 & M and effective contracts management.

7. In response to the government request for a follow on operation to support the SFR 11, the Bank took note o f the achievements scored under the previous Bank support, reviewed the risks and adopted the APL lending instrument as appropriate to achieve the institutional reforms which are key to sustained service delivery and as an exit strategy in case commitment to reforms dissipates. Project preparation activities leading to pre-appraisal were made conditional on KCC taking key measures to demonstrate commitment to the reforms. These are detailed in B5 below and demonstrate the commitment o f KCC to the reform.

2. Rationale for Bank involvement

8. The Bank has been supporting Kampala City since the late 1980s through three operations - UFUP, NCRP, and LGDP I. The gains that have been made under these projects are described in A1 above. With support under these projects KCC has started implementation of some aspects o f the reforms but i s still lacking in areas of profound institutional reforms and financial sustainability. The rationale for

4

the Bank’s support to Government through this project i s to consolidate the gains made so far and place Kampala on a solid foundation for sustained service delivery. The gains that have been made, but not yet consolidated over the past few years, also provide powerful support for an operation o f this type. With additional external assistance, there i s a real prospect that these gains will coalesce into stronger, sustainable city government structures; if support ceases now, there i s a real prospect that the progress achieved to date will unravel. I t i s thus proposed that this project functions both as a more concentrated/comprehensive effort to promote the institutional and fiscal strengthening of city government than previous efforts, as well as an exit strategy for the Bank.

9. Governance and Anti-Corruption (GAC) reforms. In order to improve governance and fight corruption, the GOU has implemented major reforms at the central level and local government level with a number o f achievements although some challenges still remain to be addressed. These reforms include strengthening o f existing oversight institutions and setting up new ones, enhancing the legislative framework, improving financial management and procurement and the increased collaboration with civil society organizations. The reforms carried by government to fight corruption have yielded fruits as revealed by the reduction o f incidences of bribery, progress in the implementation o f the Leadership Code Act, 2002, actions taken on commission of inquiries reports/recommendations, and further legal reforms to fight corruption.

10. With respect to Kampala, an assessment o f the KCC GAC risk shows that although council has made progress in the area of enhancing transparency and accountability in the service delivery process, Le. informing the citizenry of i t s planned activities and projects including publicizing the annual budget, and establishing a Council’s Stakeholder Forum, efforts still need to be stepped up. This i s KCC’s initiative intended to allow stakeholders participation in the oversight of service delivery processes and to provide a platform for the continued engagement o f the public and increase ownership and sustainability of endeavors.

11. Despite the above positive initiative, KCC has not yet fully customized nor implemented the strategy for mainstreaming ethics and integrity in LGs’. The Government i s the process of reviewing this strategy along side the main National Strategy to Fight Corruption Rebuild Ethics and Integrity in Public Offices. Furthermore, l i t t le progress has also been made to implement the KCC code of conduct for councilors, members of Commissions, Boards and committees of council. The KCC customized staff regulations 2003 are yet to be fully implemented. There i s still political interference in the service delivery process, weak internal control systems and a weak governance regime. This i s directly impacting on the potentially high risk areas of procurement, financial management and public disclosure (efforts to promote transparency and accountability) and subsequently affecting KCC’s image in the eyes of the public. Consequently, in order to mitigate the risks to the project, the oversight function of the MoLG in the implementation of the project will be enhanced as detailed in Annex 7-Financial Management and Annex 8-Procurement. A detailed GAC action plan i s also prepared by KCC/MoLG (see Annex 11 for details). This action plan will be reviewed and made consistent and synchronized with the GAC framework and action plan for Local Governments which i s being prepared by Ministry of Local Government.

3. Higher level objectives to which the project contributes

12. In 2005, seven major Uganda’s development partners developed a Uganda Joint Assistance Strategy (UJAS) that i s centered on three principles: supporting implementation of the country owned and led revised PEAP to achieve the MDGs, collaborating more effectively among the development partners

’ The Strategy to Mainstream Ethics and Integrity in Local Governments in Uganda(2004) developed by Government to complement the National Anti Corruption Strategy(2004-2007)

5

and with the government, and focusing on results and outcomes. UJAS partners have agreed to focus their support on the implementation of the PEAP in general, but will focus on certain areas judged to be especially important for achieving the PEAP's overarching strategic results. These areas are: (i) strengthening the budget process and public sector management; (ii) promoting private sector development and economic growth; (iii) strengthening governance; (iv) improving education and health outcomes; and (v) promoting the resolution o f the conflict in the north and fostering the social and economic development of the region. The project will clearly contribute to the first three strategic results.

13. In terms o f the PEAP, the project supports Pillar 1 (Growth) and Pillar 4 (Governance). The Bank has included the project (planned to be effective in FY 2008) as one o f i t s instruments to support the UJAS.

B. PROJECT DESCRIPTION

1. Lending instrument

14. The lending instrument chosen for the IDA support i s an Adaptable Program Loan (APL) to provide phased support for the implementation o f KCC's long-term development program that will require step-by-step policy reform and institutional development. The project i s designed to support the implementation of the SFR I1 and it will comprise o f a logical sequence of sector policy enhancement, institutional development and improvement in service delivery through investment activities.

2. Program objective and phases

Program Phases

Years Program Objective

Develop a strong governance and management capacity in KCC to enhance service delivery and economic development

(a) Triggers

Phase 1 (Initiation)

2008-2010 Development Objective

Improved institutional efficiency o f KCC through the implementation o f the SFR

New organizational system operational Establish and implement a formal public consultation process

recovery action plan (FRAP)

for infrastructure

the infrastructure rehabilitation and maintenance

Implementation o f financial

Comprehensive O&M plan

Effective implementation o f

Phase I1 (Transition)

201 1-201 4 Development Objective

Extending coverage and quality o f service delivery and deepening institutional reform

Implement high priority infrastructure investments to support city economic development and PEAP goals

implementation o f the FRAP, O&M plans and quality control systems for infrastructure Institutionalize the public consultation process and incorporate feedback into annual work plans

Continuation o f the

Phase 111 (Sustained Implementation

Development Objective Consolidate institutional development and enhance enabling environment for economic development

2015-201 7

6

Program Phases

Development Objective

Staffing completed, codes

Years Program Objective Development Objective Development

Infrastructure investments KCC i s bankable/ Objective

(b) Benchmarks

Phase 1 (Initiation) I Phase I1 (Transition) I Phase I11 (Sustained I Implementation

2008-2010 I 2011-2014 I 2015-2017

o f conduct enforced, a performance based compensation system implemented and HR information system developed Citizens score card updated annually, media strategy implemented and budget and development planning consultation carried out Reduce the stock o f overdue liability from Ushs 8 billion to Ushs 3 billion and increase own source revenue from Ushs 22 billion to Ushs 30 billion Provision and release o f adequate O&M budget and quality control system in place and operationalized for both O&M and new

selected based on sound appraisal and public consultation Quality assurance system i s operational Financial restructuring completed, O&M operational Customer care desk operational HR information system fully implemented

construction

creditworthy Publidprivate partnership institutionalized Goodurban management and governance

3. Project development objective and key indicators

15. The project development objective (PDO) i s to improve institutional efficiency of KCC through implementation of the SFR 11. Achievement of the PDO wil l be measured in terms o f the following monitoring indicators: (i) reduce overdue liabilities from Ushs 8 billion to Ushs 3 billion; (ii) the share of KCC own source revenue spent on service delivery increase from 10% to 30%; (iii) increase in KCC own source revenue from Ushs 22 billion to Ushs 30 billion; and (iv) increase in public satisfaction in service delivery in the following areas: roads from 18% to 50%, drainage from 22% to 3 1%, and solid waste from 44% to 60%.

4. Project components

16. The Phase I project wi l l comprise of three components that are aligned to support the implementation of the SFR 11: Component 1 wil l focus on institutional development activities that support organizational development and governance, the implementation of the Financial Recovery Action Plan, and actions to enhance effectiveness of service delivery. Component 2 wil l finance infrastructure mainly focusing on rehabilitation o f high priority infrastructure which were identified as critical to maintaining the productivity and welfare o f the City and that the proposed activities are ready for implementation; and Component 3 wi l l support project management and M & E activities. The objectives o f the physical investments are the preservation o f the current assets and arrest the deterioration of the assets. I t wi l l enable KCC to be functioning capital city and position i tse l f to attract investors.

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17. Component 1 - Institutional Development (USg5.8 million). This component will assist KCC and its stakeholders to refine and expand the SFR I1 into a comprehensive approach to municipal development, consonant with Kampala’s central role in the nation’s economic and political l i fe. Activities will include: (i) developing and beginning to implement a long-term vision for the city, including an effective development plan, which identifies the steps to be taken in the near and medium term to achieve that vision with specific annual milestones; (ii) implementing a financial recovery plan designed to place KCC and i t s divisions in a sound and sustainable financial condition; (iii) creating and implementing a comprehensive organizational development strategy, based on financial sustainability, the capacity to sustain O&M of infrastructure and services, and on the clear and enforceable separation o f council’s role o f policy-making and oversight from staffs management role; and (iv) introducing and sustaining mechanisms to improve the transparency and accountability of KCC, including the development and ongoing implementation of an effective and meaningful communication strategy between KCC and i t s stakeholders. Technical and financial support will also be provided to ensure that an effective collaborative process i s put in place to identify barriers to competitiveness and to address these appropriately, in order to improve the ability o f the private sector (formal and informal) to contribute to economic development and poverty reduction in Kampala.

18. Sub-components and activities

(A) Support to Organizational Development and Governance. The objective of this sub- component i s to develop a comprehensive approach to municipal development, consonant with Kampala’s central role in the nation’s economic and political l i fe. The project will support activities in the following areas: (i) human resource management and training; (ii) general administration; (iii) education; (iv) gender welfare and community services; (v) planning and M&E; (vi) communication strategy; and (vii) environmental management.

(B) Support to Financial Recovery. The objective o f this sub-component i s to implement a detailed financial recovery plan designed to place KCC on a sound financial position by the end o f the program. The first phase (APL1) focuses on: establishing a solid institutional and organizational base and capacity for management of KCC’s revenues and expenditures; immediately curbing the deficit; and reducing the stock of overdue liabilities. This objective can be fulfilled via implementing a detailed Kampala Financial Recovery Action Plan (KFRAP) that has been developed during project preparation and adopted by a l l layers o f KCC. The successful execution o f the KFRAP requires deep-rooted changes and institutional capacity building in three areashbcomponents: (i) enhancing revenue management capacity; (ii) enhancing expenditure management capacity; and (iii) establishing a framework for the reduction, and control of expenditures.

(C) Strengthening Service Delivery. This sub-component will provide support to strengthen KCC’s capacity in service delivery. The project will support activities in the following areas: (i) public health and environment; (ii) quality assurances for infrastructure; (iii) urban planning and land management; (iv) information and communication technology; and (v) environmental monitoring and preparation o f environmental studies.

19. Component 2 - City Wide Infrastructure and Services Improvement (US$28.5 million). This component will support activities aimed at improving the provision o f critical services to the city. The investment in infrastructure and service improvements will address the following five priority areas which are critical for public confidence and which will contribute to the economic and commercial development of the city: (i) drainage system improvement - flooding from primary and secondary channels has been a major problem in Kampala. I t has adversely impacted on the property values, disruption o f commercial and industrial activities, traffic and damage to road infrastructure; (ii) traffic management - improved urban traffic management would reduce travel time and vehicle operating cost. I t would also reduce road

8

accidents in the city which are very high; (iii) road maintenance and upgrading - maintenance o f roads would also reduce travel time and vehicle operating cost; (iv) solid waste management - under the solid waste management, support under the project would be only for the expansion of the landfill, installation of a landfill gas collection and flaring system at the existing landfill, and design of a new landfill site that i s yet to be identified. The funds to be acquired by KCC from sale of flared methane through a separate Emission Reduction Purchase Agreement (ERPA) with the Carbon Fund will be used for enhancing the solid waste collection in the city that has been privatized; and (v) urban markets infrastructure - the investment provided for market infrastructure will consist o f access roads, lighting, and sanitation to selected markets. This component will also support the implementation of the Resettlement Action Plan.

20. Component 3 - Project Implementation, Monitoring and Evaluation (US$2.8 million). This component will encompass the management activities associated with the implementation o f the project, the establishment and implementation of a comprehensive monitoring and evaluation (M&E) system and the preparation of the next phase of the project. Activities will include: (i) project implementation support; (ii) preparation and follow up on the annual citizen’s report card; and (iii) staff and councilor survey.

5. Lessons learned and reflected in the project design

2 1. Lessons learnt from previous projects include: (i) institutional reform requires considerable political will and should be carried out in a sustainable manner; (ii) projects with an institutional change focus that also include infrastructure investments must be carefully designed to ensure appropriate sequencing and incentives to achieve institutional reforms; and (iii) project ownership reflected in participatory design and implementation arrangements that integrate with core functions are key to success. The APL instrument was selected for the project to ensure that institutional reforms are given prominence with limited investments for rehabilitation and maintenance provided. The triggers for proceeding to Phase I1 focus mainly on achievements o f the reforms during implementation o f Phase I. To enhance ownership, the selection and scoping of the project components was carried out with full participation o f the key staff of KCC across a l l directorates.

22. The project preparation was pre-conditioned to KCC taking certain initial measures towards implementation o f the SFR to enable KCC to demonstrate i t s commitment to the reform agenda encapsulated in the SFR 11. The measures taken by KCC during project preparation include:

0

0

0

0

0

0

23.

Formal approval of the SFR 11;

Approval o f the Codes of Conduct for both Councilors and staff;

Completion of the valuation rolls for al l properties in the city and institutionalizing issuance o f demand notes before the end o f the first quarter of the FY;

Preparation of a Financial Recovery Action Plan and setting up of a Revenue Task Team;

Began the implementation o f the restructuring proposed under SFR 11, KCC i s now rationalized under 6 Directorates instead of the original 9, and approved the retrenchment o f redundant staff which i s underway (the severance payment for retrenched staff i s to be paid under funding from LGDP I1 project); and

Contracts for outsourcing revenue collection and management o f infrastructure have been reviewed and 7 model contracts prepared.

To enhance civil society participation, the project will, under Component 1, support the establishment of a Stakeholders Forum for-active participation in the budgeting process and prioritization

9

of infrastructure investments, and under Component 3 an annual Citizen’ Report Card will be conducted and executed.

6. Alternatives considered and reasons for rejection

24. The team considered and rejected a development policy design for the project. Although such an approach would have been appropriate from IDA’S perspective to enhance the progress on certain policy reforms but it may not have been a robust choice capable o f ensuring an acceptable level o f predictability o f financing for basic services in an environment already marked by a number o f sources o f uncertainty. The development policy design was also rejected because it would not have provided the opportunity for detailed project implementation support as i s possible under investment lending. The support i s necessary, especially for the provision o f technical assistance to the Kampala City Council and i t s divisions. Given these various considerations, in particular the heightened requirements in terms of fiscal reporting, transparency and downward accountability measures, an Adaptable Program Loan (APL) instrument has been deemed appropriate for the proposed operation.

25. With respect to the lending instrument, the GOU had originally requested support for a project o f about US$98 million, mainly focusing on infrastructure, to be implemented over a 5 year period. Given the need for institutional reform required to place Kampala on a firm ground both in terms o f financial management and governance, a three phased, 10 year Adaptable Program Loan (APL), with Phase I to be a 3 year project, i s proposed by the Bank and accepted by the government. The Phase I project will support the implementation of the SFR I1 through financing o f institutional development activities, limited investment in infrastructure rehabilitation, and support to project implementation and M & E. This approach allows for a built-in incentive for implementation o f the reforms since moving form one phase to the next i s possible only upon fulfilling appropriate triggers, and also provides an exit strategy in case KCC falters in its commitment to reform and the triggers are not met.

C. IMPLEMENTATION

1. Partnership arrangements (if applicable)

2. Institutional and implementation arrangements

26. The institutional arrangements for project implementation will be as per the government structure. At the central level, the MoLG, MoFPED, and the Office of the Auditor General shall be responsible for ensuring that project resources are budgeted for and disbursed within the national MTEF, and that project accounts are audited.

27. KCC under MoLG will be responsible for the overall implementation of the project. KCC has implemented IDA projects before, that is, Uganda First Urban Project, Nakivubo Channel Rehabilitation Project and a component of the Local Government Development Program. The MoLG has received considerable support from the LGDP projects for i t s institutional reform and capacity building.

28. During project execution, KCC shall coordinate project implementation and manage:

(a) procurement, including purchases o f goods, works, and consulting services; (b) project monitoring, reporting and evaluation; (c) contractual relationships with IDA and other co-financiers; (d) financial management and record keeping, accounts and disbursements; and (e) environmental and social issues.

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29. related to the implementation of the project.

KCC will also constitute the operational link to the IDA and Government of Uganda on matters

30. The Permanent Secretary (PS), MoLG, will be the Accounting Officer for the project, assuming the overall responsibility for accounting for the project funds. The Town Clerk o f KCC will report to the Accounting Officer on matters concerning the accountability o f KIIDP funds.

Financial Management

3 1. financial management i s weakened by the following salient feature:

Details o f the financial and disbursement arrangements are provided in Annex 7. The project

. The management letter issues raised by the external audit report as o f 30 June 2004 showed that the internal control systems in relation to mainly revenue collection needed to be improved. With the strengthening o f the Internal Audit Department it i s hoped that the monitoring and enforcement o f stronger internal control systems should improve hence improving on the KCC internal control systems. . The Local Government (Financial and Accounting) Regulations (LGFAR), 2007 will be used as the Financial Management Manual (FMM) but it falls short when it comes to donor specific accounting policies and procedures. As a mitigating measure, the donor specific accounting policies and procedures e.g. on financial reporting and auditing have been included in the Project Implementation Plan.

32. The overall project implementation period for APLl i s three years. KCC will be the executing agency for KIIDP and shall have overall responsibility for accounting for project fimds and coordinating activities under the project. In line with the proposed mainstreaming of tasks currently being carried out by the Project Coordination Unit (PCU) into the various departments in KCC, an SFR Core Team will provide the necessary technical support during Phase 1 o f KIIDP. This i s consistent with lessons from OED evaluation o f where PIUs should be closely integrated into line ministries with other public entities o f the borrower countries, leveraging on available resources (of existing agencies) rather than setting them up as independent units and having them operate autonomously. The SFR Core Team will also act as an interface with the Bank to ensure that KIIDP i s implemented as per the IDA/GOU protocol agreement. The SFR Core Team will assist in the preparation of work plans, budgets, progress reports, and coordination o f the overall implementation of the project.

Procurement

33. A summary of the description of the project’s procurement management i s provided in section D3 o f the PAD. A Procurement Capacity Assessment was carried out for KCC and the report i s provided in Annex 8. The Procurement Risk Assessment carried out indicates that the overall risk i s rated as high given that procurement activities will be mainstreamed within both the KCC and MoLG structures. Procurement will be processed by the Procurement and Disposal Unit (PDU) which i s being set up in KCC under the Local Government (Amendment) Act, 2006, and finalized by the MoLG PDU. The assessment reviewed the organizational structure for implementing the project and the interaction between the borrower staff responsible for procurement at both KCC and MoLG. The key issues and risks concerning procurement for implementation of the project have been identified and mitigation measures suggested were discussed at the financing negotiations. The agreed measures will be monitored closely.

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Project Implementation Plan (PIP)

34. A draft Project Implementation Plan (PIP) has been prepared, and it includes a description o f implementation and monitoring arrangements, that spells out the sequence of a l l project activities, a Financial Management Plan, and an overall Procurement Plan.

3. Monitoring and evaluation of outcomeshesults

35. In line with the intention and design of KIIDP as a mainstream program, most o f the routine M&E data will be made available through mainstream data collection to be performed by the Economic Planning Department in KCC. Under Component 3, Kampala City Council’s Economic Planning Unit will be supported to: (i) establish a monitoring baseline; (ii) develop a council-wide M&E system which responds not only to World Bank project requirements but which can also enable KCC to monitor and evaluate progress towards fulfilling goals and targets laid out in the Kampala Strategic Framework for Reform (SFR2) and the council’s overall mandate; and (iii) prepare at least two annual M&E reports and which can inform the council and its executives on progress towards meeting the goals adopted under the SFR2 as well as meeting the M&E requirements o f the KIIDP.

Environmental and Social Management

36. Under the project, the District Environment Officer (DEO) located in KCC, will be responsible for coordinating the implementation of the Environmental Management Plans as well as the training activities and wetland management plans as outlined in the Project Implementation Plan. To facilitate this work, the DE0 will work closely with the relevant personnel at NEMA, WID, DWD, the Ministry o f Works, Housing and Communication, the Uganda Police, the Traffic Department, and the Uganda Taxi Operators and Drivers Association (UTODA).

4. Sustainability

37. KCC has sustained an intense policy dialogue with IDA, and taken actions required on key issues during preparation of the Project. Beyond this political commitment, however, sustainability remains critically dependant on the availability o f adequate resources and their appropriate deployment for O&M o f municipal assets. KCC has started the implementation o f the restructuring plan developed as part o f the implementation of its Strategic Framework for Reform. This has led to rationalization o f the various directorates and also to the retrenchment o f excess s ta f f (severance packages to be paid from funds made available under a local government development project - LGDP 11). The ground work for improvement in revenue has been laid in the past two years through revaluation of all properties in the city. This has resulted in increase in the number of properties in the valuation rol l by over 100% and in quadrupling o f the potential revenue from property tax. The performance o f existing outsourcing contracts in revenue collection and management infrastructure has been reviewed during project preparation and model contracts have been developed to make sure that the PPP works effectively and leakages in revenue are minimized. Recent revenue trends indicate that own source revenue has increased by about 10% from FY 04/05 to 05/06. The SFR I1 targets an increase of revenue by about 40% by 20 10. To institutionalize improvement in revenue collection and sustain the growth, KCC has established a Revenue Task Team to coordinate revenue collection. KCC has developed Financial Recovery Action Plan. An ongoing reform in the fiscal management system in the country (implementation o f an IFMS under EFMP 11, o f which KCC i s one o f the pilot local governments) i s supportive o f improvement in efficiency of budget allocations, expenditure monitoring and accountability. The communications, knowledge-sharing, and the inclusive arrangements for project implementation will strengthen demand for sustainable results.

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38. A recent development o f relevance to sustainability i s an amendment to the Constitution that was passed in September 2005, recognizing the special status o f Kampala as the capital o f Uganda and that it shall be administered by the Central Government. The Bil l to operationalize the Constitutional Amendment No. 9/2005 has been submitted to Cabinet. The proposed Bill i s intended to consolidate the management and administration of Kampala City. I t i s expected that the Bill will be presented to the Parliament before the end of 2007, and may possibly be enacted during 2008.

National-Local performance contract to deliver on the agreed milestones. Semi-annual ministerial review o f performance contract.

5. Critical r isks and possible controversial aspects

Moderate

Risk I Risk Mitieation Measure I Risk ratine

Development o f specific triggers to demonstrate commitment. Monitoring and reporting by KCC and civil society on

To project development objective 1

Moderate

Lack o f effective support from national government for fundamental change in KCC.

Failure to develop and implement an effective fiscal discipline in KCC.

progress.

plan. 0 Development and implementation o f a fiscal recovery High

KCC’s failure to develop and maintain a commitment to a viable vision and strategy for reform.

To Component Results Delays in the implementation of the new procurement provisions in the Local Government (Amendment) Act, 2006 leading to delays in procurement o f works and services Failure in timely implementation of the Resettlement Action Plan

Lack of capacity in Directorates to carryout project implementation activities effectively

KCC i s in the process o f creating a PDU in compliance with the new Act and wil l be supported by experienced staff from the Core Team The MoLG PDU wi l l provide quality assurance to the KCC PDU and all contracts wi l l be adjudicated by the MoLG Contracts Committee. RAP costs included in project costs to be financed by GOU/KCC Sensitize stakeholders to support RAP

directorates, and Core Team in place to provide support Ensure clear definition and allocation o f roles within directorates Training o f key staff in procurement & contract management

Moderate

0 Ensure component managers in place for all participating High

Moderate

Inappropriate budget and resource allocation.

Change in current policies/Acts by central government that would affect Kampala’s ability to implement the SFR.

Civi l society participation in budgeting and resource allocation process. Adequate maintenance plan & expenditure for the investments. Measuring & benchmarking cost o f service delivery Sensitize central government departments and parliament about SFR and the project

0

Moderate

High

Accounting KCC i s using the LGFAR, 2007 which falls short on donor specific accounting policies and procedures specifically on financial reporting and auditing requirements. As a mitigation measure, these specific requirements have been included in the Project Implementation Plan.

Moderate

The overall risk rating is moderate.

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Credit conditions and covenants 6.

39.

40.

D.

1.

41.

Conditions of Eflectiveness:

(i) Execution o f a Subsidiary Agreement between the Government and KCC. (ii) KCC to establish a Procurement and Disposal Unit with functions, staffing, and resources

satisfactory to the Association.

Others:

(i) Monitoring and Evaluation: KCC will submit semi-annual progress reports to IDA. (ii) Mid-Term Review: M O L G will conduct a mid-term review o f K I IDP by April 30,2009. (iii) KCC to open and operate an Escrow Account in the Bank o f Uganda for the implementation

o f the RAP. (iv) KCC will carry out an independent procurement audit annually.

APPRAISAL SUMMARY

Economic and financial analyses

KIIDP with a total base cost o f US$33.3 mill ion includes three components: (i) Institutional Development (US$5.5 mil l ion or 16.0% o f the total project cost); (ii) Citywide Infrastructure and Improvement Services (US$25.1 mill ion or 76%); and (iii) Project Management, Monitoring and Evaluation and Civi l Society Participation (US$2.7 mill ion or 8%).

42. Component 2: Citywide infrastructure and Services Improvement represents over 76% o f the project base cost o f US$33.3 million. It has four subcomponents: (i) Drainage works (US$8.7 million); (ii) Urban traffic improvements (US$13.9 million); and (iii) Solid waste management (US$1.5 million); and, market infrastructure (US$l.O million). The other two components totaling US$8.2 million or 24% provide the necessary conditions o f realizing the benefits o f the investments under component 2 on a sustainable basis.

43. Overall. For the base case, the overall Net Present Value o f the f i rst two sub component o f Component 2 (above) i s UShs.15,829 mill ion and i ts ERR 22%. The result appears robust. A 15% increases in total costs and 15% total benefits result in NPV o f UShs. 11,395 mill ion and ERR 16%.

44. Drainage. The main benefits o f the drainage are both quantifiable and non-quantifiable. Among the quantifiable are: savings from prevention o f road damage, property and structures, additional income from rentals, etc. The cost-benefit evaluations o f the drainage subcomponent (US$8.7 million) consisting o f several drainage systems provided a Net Present Value o f UShs 4,251 mill ion and ERR o f 16.8%. The result i s again robust. A joint 15% increase in total baseline cost and 15% total benefit results in NPV o f Ushs. 1,677 mill ion and ERR o f 13.1 % .

45. Urban Traffic improvement. The urban traffic improvement subcomponent main benefits are the savings to be made by road users in vehicle operating costs, passenger time costs and accident costs. An economic analysis was done for the each road section. The N e t Present Value o f urban traffic improvement subcomponent i s estimated at UShs 17,296million and the ERR estimate i s 32%. The result i s again i s robust. A joint 15% increase in total baseline cost and 15% total benefit results in NPV o f UShs. 10,250 mill ion and ERR 23%.

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46. Market Infrastructure Works. A financial and an economic analyses of Market Infrastructure Works (US$l .O million) - road construction, drainage and sanitation works would be carried out in three o f the 5 candidate markets (Kibuli, Kalenve, Kasubi and Kawempe and Mbuya). The financial rate o f return shows that a l l except Mbuya have financial rate of return of 14%; and a payback period between 5 and 6 years. The economic rate of return for the urban markets infrastructure i s 14% and the NPV at 12% discount rate i s Ushs 1323.9. An increase in cost of 15% and a simultaneous decrease o f benefits o f 15% results in EIRR of 12% and NPV of Ushs 38.95 million, indicating that this planned investment too i s economically justifiable.

47. Solid Waste Management. This subcomponent i s to develop a 6 acre land adjacent to the existing site; provision of a landfill gas collection and flaring system at the exiting landfill site; and preparation of design for the development o f the new landfill site to be implemented during Phase I1 of the program. In the short run there i s no alternative than expanding the existing site. The cost-effective way o f meeting the short-term needs of KCC in solid waste management i s implementing the proposed program.

2. Technical

48. Two major strategic studies were carried out under Nakivubo Channel rehabilitation project. These are the Kampala Drainage Master Plan and the Kampala Urban Traffic Improvement and Road Maintenance Plan - two key areas of high priority in the development o f the city. These two areas were selected because flooding and traffic congestion are the two most serious impediments to economic activity in Kampala. The employed consultants were qualified international consultants procured competitively and their various outputs were rigorously reviewed. Under these studies, investments were prioritized to address immediate and short term needs in close consultation with the Divisions. Detailed designs including draft bidding documents were prepared for the immediate priority interventions both for drainage, and urban traffic management and roads upgrading and maintenance so that implementation can commence as soon as the project becomes effective. Any adjustments that may be necessary will be made by the technical staff of KCC and the supervising consultants who will be selected on a competitive basis. The other two areas of high priority for Kampala are improvement of markets and management o f solid waste. Markets improvement studies were carried out during project preparation and the high priority markets identified for implementation. With respect to solid waste management, while the collection o f solid waste in the city has been privatized, the existing disposal facility (landfill) has capacity to serve only for next few years. The Phase I project will support limited activities to prolong the l i f e o f the exiting landfill, while a feasibility study and designs will be carried out for a new site to be acquired by KCC. KCC continues to carry out timely maintenance o f the infrastructures built and rehabilitated under previous projects. The financial recovery action Plan developed during the preparation of the project has taken the need to allocate adequate resources for O&M into account.

3. Fiduciary

Financial Management

49. The Country Financial Accountability Assessment (CFAA) carried out by IDA in 2004 shows that Government of Uganda has made substantial progress in improving its Public Financial Management Systems since the last CFAA undertaken in 2001. The fiduciary risks associated with poor budget formulation and budget preparation processes have reduced. In terms of appropriate legislation and regulatory frameworks, significant progress has been made to ensure that the risk associated with lack o f clear rules and regulations has been reduced. Also more useful information i s provided in the annual accounts. However risks remain in terms o f enforcement of procurement and payroll rules and procedures; completeness of data on debt; effective independent oversight, and timeliness and

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effectiveness o f legislative and public scrutiny. The impact o f the CFAA i s that Government o f Uganda has come up with a strategy to mitigate these country level issues, by designing a Financial Management and Accountability Project (FINMAP) whose objective will be to address the CFAA action plan issues formulated within the Country Integrated Fiduciary Assessment (CIFA) action plan matrix and improve on Uganda’s Public Financial Management - Performance Measurement Framework indicators developed by the PEFA Secretariat. The FINMAP i s to be supported by a number of development partners including the World Bank that form the Public Financial Management Donor Group.

50. The project’s transactions will be managed within the existing set-up in Kampala City Council (KCC). The Director Finance of KCC shall be in charge o f maintaining the books o f accounts and records of the KIIDP with the assistance of the Project Accountant and an Accounts Assistant. The Project Accountant will report to the Director Finance o f KCC or to one of the two Deputy Directors o f Finance to whom authority will be delegated. The accounting unit i s computerized and using Sun Accounting Software. The Local Government (Financial and Accounting) Regulations (LGFAR), 2007 will be used as the Financial Management Manual (FMM) but because the LGFAR falls short o f donor specific accounting policies and procedures e.g. on financial reporting and auditing, this will be mitigated by their inclusion in the Project Implementation Plan. The project’s financial statements will be audited in accordance with statutory requirements, and suitable Terms o f Reference will be developed.

51 Actions outlined in the Financial Management Action Plan will be undertaken by the project to strengthen the financial management system. The action required to be done before effectiveness o f the Credit i s approval by IDA of the Project Implementation Plan that will supplement the LGFAR 2007 on donor specific accounting policies and procedures where the LGFAR falls short o f meeting these requirements. This action was achieved and therefore removed as a condition of effectiveness. The Interim Financial Report (IFR) formats were agreed during negotiations. The other condition that will strengthen the financial management system and should be done within six months after credit effectiveness i s agreeing the terms of reference for the external auditor to ensure the project accounts are audited and submitted to the Bank in time.

52. staffing arrangements are maintained throughout the l i f e o f the project.

In order to ensure that the project i s effectively implemented, KCC will ensure that appropriate

53. The conclusion of the assessment is that the financial management arrangements for the project have an overall risk rating o f moderate which satisfies the Bank’s minimum requirements under OPA3P10.02 and are adequate to provide, with reasonable assurance, accurate and timely information on the status o f the project required by IDA. With the implementation of the action plan, the financial management arrangements will be strengthened.

Procurement

54. The 2004 Country Procurement Assessment Report (CPAR) indicates that the Public Procurement and Disposal of Public Assets Act, 2003, (the Procurement Act) in Uganda i s a good law but there are some provisions o f the Act that may be subject to abuse and are therefore, highlighted here. The provisions in question are: (i) negotiations with the best evaluated bidder. This practice i s not appropriate, except for consulting services contracts, and for contracts procured through direct contracting; (ii) the use o f the merit point system of evaluation i s not restricted to evaluation o f consultants’ proposals. This system i s inappropriate in the evaluation of bids for goods and works contracts; (iii) each Procuring and Disposal Entity (PDE) i s allowed to pre-qualify suppliers on an annual basis and bidding opportunities are not open to al l pre-qualified providers but to only a few firms (at least three) at a time on rotation basis. Such a system does not ensure fairness and i s open to abuse by both the prequalified firms and the PDEs; and (iv) use of the micro-procurement method for each contract

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estimated to cost the equivalent of $1,100 or less. Micro-procurement i s by definition, Direct Contracting, or Single Source Selection, which should be used on exceptional basis with adequate justification and prior approval.

55. The bulk o f the procurement activities under the proposed operation will be carried out by the KCC which i s a local government, and therefore whose procurement structures are provided for under the Local Government (Amendment) Act, 2006 with additional oversight by the MoLG as detailed in Annex 8. The act harmonized the procurement systems and practices o f the local governments with those at the centre. KCC i s yet to fully comply with the Act, and the Procurement Management Capacity Assessment (PMCA) that was carried out on KCC, and MoLG has identified four areas to address in order to ensure satisfactory implementation o f project procurement: (i) Inadequate change and transition management and inadequate communication between KCC and MoLG PDUs; (ii) Limited skills and experience in procurement and contracts management; (iii) Inadequate Procurement Data Management System (PDMS); (iv) Inadequate procurement planning; and (v) Inadequate procurement capacity due to the redeployment o f the staff who have gained experience in the management of procurement in previous Bank financed projects outside the new procurement and disposal unit (PDU) yet to be established. Based on the above weaknesses, the risk associated with the ability o f KCC and MoLG to manage procurement under the project i s rated HIGH.

56. The agreed measures for mitigating the high risk to procurement under the project, include: (i) complying with the Local Government (Amendment) Act, 2006, and establishing a PDU with qualified staffing without delay; (ii) sensitizing the councilors on the new procurement system and management of the transition from the old to the new procurement law; (iii) establishing satisfactory PDMS at both KCC and MoLG; (iv) training the User Departments on their role in the procurement function; (v) targeting the support o f the Core Team comprised of staff with procurement experience from previous Bank financed projects; (vi) following an overall project procurement plan satisfactory to IDA; and (vii) providing procurement training to meet identified need. The Project Implementation Plan containing a comprehensive section on procurement arrangements under the project, including the actors, roles and responsibilities, templates and standard bidding documents, and the procurement plan was approved by IDA during negotiations. The establishment o f PDU in KCC with functions, staffing and resources satisfactory to IDA will be a condition of effectiveness.

4. Social

57. The development objective o f the project i s to improve institutional efficiency o f KCC through the implementation of the SFR. The key social issue therefore i s to ensure that this i s done in a socially sustainable and inclusive manner. The project’s planned social development outcomes o f greater empowerment and social inclusion are that investments identified, prioritized and funded for improvement by Kampala City Council have been done so in a participatory, transparent and more accountable manner by the use of the existing Harmonized Participatory Planning Guidelines (HPPG) for Local councils, a framework formulated and promoted by both local authorities and civil society in Uganda. In the same way, gender and other concerns like those for the most vulnerable groups like the disabled, etc, that are target groups for the services to be improved shall be addressed through the same participatory processes during implementation. Ministry o f Local Government therefore has taken a lead in assisting Kampala promote community driven development through participatory planning, implementation, monitoring and evaluation.

58. The design o f this project including the refining of specific features has benefited from a number o f studies done and stakeholder workshops held on challenges facing Kampala. One such study i s the Kampala Citizens Report Card which obtained feedback on key public services that included roads, transport and solid waste management, and made suggestions for improvement. I t i s imperative therefore

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that mechanism for seeking citizens’ feedback on city wide investments in the areas o f drainage, roaddtraffic management and solid waste management are part of the implementation guidelines for this project. This i s expected to help improve transparency and accountability of KCC to the citizens of Kampala, while at the same time providing opportunity for the citizens to monitor project impacts and exercise their rights and responsibilities.

59. Similarly, under KIIDP, the social issue related to maintaining or improving livelihoods o f the project affected persons during the improvement o f city wide infrastructure has been addressed in the most participatory and inclusive manner. A Resettlement Action Plan (RAP) has been prepared and its implementation will help fulfill the obligations of the Directorate of Community Services in KCC, o f which among others i s to mobilize and empower communities for development. Consultations with the project affected people, local leaders and government agencies, were at the centre of the preparation of the RAP, and will continue during implementation. The consultations processes included community meetings, interviews and focus group discussions in which concerns regarding loss of land and its value, transparency in compensation, etc, were raised. The RAP indicates details of how resettlement and negative impacts will be minimized, the provisions made for disturbance and non measurable losses, the valuation considerations to ensure fair, adequate and timely compensation, and the management of the entire process including the responsible agencies. Ministry of Finance, Planning and Economic Development i s responsible for the budget required to implement the resettlement process and actions.

60. The political economy currently in Uganda may undermine the projects development objectives. However risk management actions have been incorporated in the project upfront. These include wider outreach and information dissemination regarding project objectives, activities and resources, which imply intense IEC project activities and community participation in decision making at a l l phases o f investments and services improvements.

5. Environment

6 1. Under the KIIDP, environmental issues related to the strengthening of environmental management capacity and protecting the public’s health from environmental risks and pollution are o f critical importance. Mitigation and monitoring measures have been included in the project’s Environmental Management Plan (EMP) with a view to: (i) assist KCC’s District Environment Officer in the fulfillment of hidher responsibilities (i.e. managing the boundaries o f wetlands and related settlements, monitoring the implementation of the EM?, coordinating the implementation o f parts of the Wetlands Sector Strategic Plan 200 1-201 0 as well as environmental contributions to the Kampala Structure Plan 2007-201 7 under the KIID Project) by providing environmental training to relevant KCC staff and the necessary equipment such as office furnishings, field operations equipment for sampling and monitoring; (ii) prevent erosion and subsequent pollution o f waterways and water bodies, including neighboring wetlands, as well as accidents and unauthorized access to the current land fill site and the extension site during and after decommissioning by providing the requisite fencing; and (iii) mitigate construction-related impacts by including Environmental Guidelines for Contractors in KCC’s bidding documents. The EMP includes monitoring indicators as well as means o f verification, Le. the preparation o f Environmental Audit Reports, to verify proper implementation o f mitigation measures as outlined in the bidding documents and the EMP. I t i s anticipated that these measures will contribute to an improvement in the quality of l i f e of the population living in the project areas.

62. The EA report was prepared in consultation with the key stakeholders (representatives of NEMA, WID, and DWD; KCC officials, members of Parish Development Committees, Local Council Officials, and directly affected community members). Consultation methods included field visits, meetings with stakeholders, focus group discussions, literature reviews, data collection and analysis, and collaboration with other consultants. While there was overwhelming stakeholder support for the project as the

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improvements would lead to a healthier environment and improved economic opportunities, there were also some concerns (potential loss o f livelihoods among businesses that depend on their current locations, traffic accidents during construction, injuries to scavengers and workers at the landfill, a decrease in property values, bad odors, f l ies and other pests, blockages of drains with excavated soils during construction, and the potential increase in malaria and diarrhea near the landfill).

63. Their suggestions have been incorporated into the design o f component 2 which will provide bridges, pedestrian walkways, traffic control humps, pedestrian crossings, and road signs. A berm will be constructed as part o f the Lubigi channel improvement works to: (i) control land use; (ii) restore the wetland as well as flora and fauna species; and (iii) alleviate floods. Concerns regarding potential accidents during construction will be addressed through Environmental Guidelines for Contractors which will be included in KCC’s bidding documents.

64. The EA report notes that malaria control i s the responsibility of the Ministry of Health, and several initiatives are underway to control it. In this respect, the Public Health Department of KCC i s already working in close collaboration with the Ministry of Health and relevant NGOs as well as the various communities to support malaria control in the city. Similarly, other diseases such as diarrhea, skin diseases and tuberculosis are also handled by KCC and the Ministry of Health. The EA report further notes that the occasional spraying activities in the landfill area designed to deal with f l ies and other pests, will not lead to adverse environmental and social impacts. These spraying activities are limited to the landfill site, and are carried out by professional contractors according to KCC’s Vector Management Procedures (a copy i s included in the Final EA Report).

6. Safeguard policies

65. The KIIDP has triggered OP 4.01 Environmental Assessment and OP 4.12 Involuntary Resettlement due to its support for construction activities related to the planned infrastructure investments (drainage improvement; traffic and road maintenance; rehabilitation o f urban markets; and solid waste management). OP 4.04 Natural Habitats applies as the project will contribute to the improvement o f wetlands management. In addition to strengthening KCC’s environmental management capacity, the KIIDP will assist in the implementation o f parts o f Uganda’s Wetlands Sector Strategic Plan (200 1-20 10) as well as in the development of the environmental aspects of the new Kampala Structure Plan (2007- 20 17). The safeguard screening category i s S2, and the environmental screening category i s B.

66. The key safeguard policy issues raised by the project include potential soil and water pollution from construction activities, blockages and siltation of the drainage channels emanating from unpaved roads and construction sites; loss o f vegetation due to construction activities; higher pollution rates due to increased water flow velocity in the channels; traffic accidents, noise, dust, and potential loss o f livelihoods in areas where existing infrastructure are to be rehabilitated or expanded.

67. In an effort to mitigate potential adverse environmental and social impacts of the KIIDP as well as to improve existing environmental conditions in the project area, the Borrower has prepared: (i) an Environmental Analysis (EA) Report, including an Environmental Management Plan (EMP), dated November 2006; and (ii) a Resettlement Action Plan, dated October 2006. Both documents have been disclosed in Uganda and at the Bank’s Info shop on December 4,2006.

68. The EA recommendations focus on the need to (i) develop and strengthen environmental management capacity at KCC; (ii) ensure effective environmental monitoring as outlined in the EMP; and (iii) establish and strengthen strong inter-agency relationships between the KCC and NEMA, WID, DWD and others. In support o f these recommendations, the EMP makes provisions for the implementation and monitoring of mitigation measures, including monitoring indicators and means of verification, as well as

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the requisite environmental training; the total costs are $1 15,000. The key elements o f the EMP are as follows:

(a) To assist KCC’s District Environment Officer in hlfil l ing hidher mandate, the KIIDP will fund an environmental training program for relevant KCC staff. The purpose of this training i s to: (i) strengthen staff scientific field research capacity; (ii) enable s ta f f to educate communities in environmental issues, hygiene, sanitation, and safety management skills; and (iii) enable staff to enforce environmental regulations. The training will focus on:

Environmental monitoring; Environmental assessment and management skills including field sampling techniques, community advisory and facilitation skills; and Environmental law and legislation enforcement skills and techniques.

(b) To further strengthen KCC’s District Environment Officer, the KIIDP will provide: (i) equipment and other consumables for environmental monitoring, environmental assessment, and environmental management; and (ii) field operations equipment for sampling and monitoring to facilitate field operations o f the trained staff in ensuring that the recommendations of the EMP are strictly adhered to and that any unforeseen negative environmental impacts are concurrently mitigated and prevented as much as possible.

(c) Fencing of the current landfill site and the extension site to prevent unauthorized access and accidents as well as erosion and subsequent pollution of waterways and water bodies, including neighboring wetlands, during and after the decommissioning phase.

(d) In an effort to mitigate potential adverse environmental and social impacts effectively, KCC’s bidding documents will include Environmental Guidelines for Contractors. These guidelines will include provisions for HIV/AIDS education.

(e) To verify the effective implementation o f the monitoring measures as proposed in the EMP: (i) Environmental Audit Reports will be prepared by the District Environment Officer to verify that re-vegetation measures (planting of papyrus species and other sedges downstream of the channels) have been carried out as required under the contracts for drainage investments; and (ii) under the solid waste management component (a) Environmental Audit Reports and laboratory tests (monthly reports of treatment efficiency) will verify whether or not the.requisite steps were taken to pre-treat and stabilize leachate prior to disposal into waterways and to rehabilitate the constructed wetland; and (b) reports from communities and site audit reports as well as laboratory sample tests o f proximate surface water bodies or streamdrivers will verify whether or not temporary storm water drains were installed at the construction sites to protect against erosion; these reports will be prepared by KCC consultants.

(0 To implement the Resettlement Action Plan, this includes continued community participation in the implementation o f measures agreed on in the RAP including those to ensure that the vulnerable groups such as youth, disabled and others are adequately represented and communicating the institutional arrangements. The Directorate of Community services will be strengthened to implement the RAP, and an early review of resettlement will be done to provide ample time to undertake corrective actions if any.

69. As discussed earlier in Section 5, both the EA and RAP reports were prepared in consultation with the key stakeholders (representatives o f NEMA, WID, and DWD; KCC officials, members o f Parish Development Committees, Local Council Officials, and directly affected community members), and their suggestions have been incorporated into the design o f component 2 which will provide bridges, pedestrian

20

walkways, traffic control humps, pedestrian crossings, and road signs, while concerns regarding potential accidents during construction wi l l be addressed through Environmental Guidelines for Contractors which wi l l be included in KCC's bidding documents.

~~ ~

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.0 1) [XI [I Natural Habitats (OP/BP 4.04) [XI [I Pest Management (OP 4.09) [ I [ I Cultural Property (OPN 11 -03, being revised as OP 4.1 1) 11 Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) 11 Forests (OP/BP 4.36) [I [ I Safety o f Dams (OP/BP 4.37) [ I 11 Projects in Disputed Areas (OP/BP/GP 7-60)' [I [ I

[I

[ I

[ [ I [ I

7. Policy Exceptions and Readiness

70. procurement plan were reviewed and approved during negotiations.

The project complies with all applicable Bank policies. The Project Implementation Plan and

* By supporting the proposedproject, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

21

Annex 1: Country and Sector or Program Background

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

1. Introduction: In mid 2004 Uganda’s population was estimated at 26 million. The urban population o f Uganda i s about 12% o f the total or about 3.1 million. Kampala i s the capital city o f Uganda with a population o f about 1.8 mill ion and an annual demographic growth rate o f about 3.9%, well over the national rate o f about 3.3%. The population o f Kampala thus constitutes about 58% o f the total urban population o f Uganda. It i s the hub o f the country’s economic, political, and administrative activities.

Legal and Policv Framework

2. The policy and legal framework under which Kampala i s governed evolved over time. Until 1997 Kampala was administered under the Urban Authorities Act, which defined the functions o f Kampala city Council. This Act did not allow for a comprehensive approach to urban planning, nor did it address the challenges facing the city and i t s aspirations. Other Acts are the Town and County Planning Act (1964), which does not empower Kampala City to address urban sprawl on i t s periphery. The power to declare the urban sprawl areas as planning areas rests with the Town and Country Planning Board.

3. The existing legal and policy framework governing the city, embodied in the Local Government Act (LGA) o f 2000, has taken cognizance o f the need to democratize local governance through citizen participation by creating a 3 tier decentralized unit namely the DistricVCity Council, the Division Council and the Parishes. However the roles and responsibilities o f the three are not equitably defined and separated resulting in the duplication, disharmony and conflict. Revenue sharing arrangements where the Divisions collect revenue and remit 50% to city Council constrains the capacity o f the City Council to plan and invest in infrastructure and services throughout the entire city. The LGA provides for the District/City council to prepare an integrated Development Plan, incorporating plans o f the Lower Level Local Governments for submission to the National Planning Authority. However, it does not provide for handling o f Structural Plans and how to integrate them into development plans. While the LGA i s the key law governing the City, there are numerous laws that have a bearing on service delivery in the city including: Town and Country Planning Act (1964), Land Act (1998), Public Health Act (1964) water statute, the NEMA Statute (2000) among others. Recently, Parliament amended the Constitution (The Constitution (Amendment) Act 2005 which stated that Kampala the Capital city o f Uganda shall be administered by the Central Government, the territorial boundary o f Kampala shall be delineated by Act o f Parliament, and that Parliament shall, by law, make provision for the administration and development o f Kampala as the capital city. The Constitution (Amendment Act), 2005, entered into effect on September 30, 2005. The effect o f the constitutional amendment i s to accord the City o f Kampala a special status vis-a-vis other municipal and district cities under the LGA, entered into effect on September 30, 2005. KI IDP support to accountability and efficient service delivery i s an important factor in ensuring sustainable operations o f the city, irrespective o f whether i t s administration i s decentralized or not. When the Constitutional Amendments are implemented, there w i l l be a transitional arrangement to ensure that successor to KCC will take over the current responsibilities o f KCC, as well as assume i t s existing rights and obligations.

Economic significance o f Kampala

4. Kampala i s the largest center for industrial, commercial and service activities in Uganda. While accurate data on the spatial distribution o f economic activity in Uganda are not available, it i s estimated that about 80 percent o f the country’s industrial and services sectors are located in Kampala and the city

22

now generates 60 percent of Uganda’s GDP. Furthermore most of the import-export traffic passes through Kampala. Since 1991 most (71%) o f the new investment projects licensed by Uganda Investment authority are located in or near Kampala. These projects accounted for 66% and 63% o f planned investment and employment respectively. The city i s also growing rapidly as one of the major investment and technology development hubs in eastern Africa. The neighboring districts of Wakiso, Mukono, and Mpigi are fast growing districts especially the sub-counties surrounding Kampala city. In this regard, Kampala City faces the challenge o f maximizing the growth potential of the urban centers within surrounding areas as an important engine o f economic growth of the whole country. It must therefore create an enabling environment for accelerated economic growth through provision of adequate and quality infrastructure as well as promotion o f Public Private Partnerships for economic and social transformation.

5. The economic future of Uganda i s thus intrinsically related to the performance of Kampala as a locus o f productive activity and investment. This, in turn, relies on the city’s ability to provide the services and infrastructure on which organizations (public and private) and residents rely. There i s also evidence to suggest that urban economic growth in Uganda (and elsewhere in SSA) i s disproportionately effective in reducing poverty. Over the period 1992 to 02/03, when the Uganda national poverty headcount dropped by about a third, the corresponding drop in urban areas was over a half (from 28% to 12%) even during a period of relatively high rural-urban in-migration.

6. Unfortunately, Kampala’s delivery capabilities have not kept pace with its economic and demographic growth. Over time, infrastructure and service-delivery in key sectors (roads, drainage, solid waste) has deteriorated, and the Kampala local authorities (Kampala City Council and five Divisions) which have primary responsibility in these areas have encountered serious deficiencies in the organizational, management, financial and human resource capacities to meet the current infrastructure and service-delivery needs of the city. It has also become clear that there i s a fundamental lack o f vision and o f public service orientation.

Past Bank Support to Kampala City

7 . Various attempts have been made to deal with these problems, the most significant of which have been supported by the Bank. The First Urban Project (1991) focused on infrastructure investment with limited effort being made to strengthen Kampala City Council’s (KCC) organizational capacity. In November 1996, a proposal was made by KCC for a more fundamental reform o f local government in Kampala by formulating and implementing the “Strategic Framework for Reform” (SFR). The SFR focuses on restructuring KCC through organizational reforms and rationalization, implementation o f financial and fiscal reform, and enhanced private sector participation in service delivery. The SFR was launched by KCC in January of 1997, with a strong element of local ownership, which had been developed through consultation with relevant stakeholders including the Council, KCC management, the KCC labor union, and representatives o f the public. A number o f measures including testing alternative service delivery mechanisms, rationalizing the workforce, and improving financial and budgetary management were initiated. The IDA-financed Local Government Development Program (LGDP I) and the Nakivubo Channel Rehabilitation Project (NCRP) supported the implementation o f SFR. With staff and council changes since 1997, KCC’s commitment to the SFR seems to have slowed down.

8. Under the two projects, a number o f positive outputs have been achieved: (i) enhancement of KCC’s ability to implement and manage complex contracts and large civil works; (ii) alternative service delivery - increased the role of the private sector in service delivery and changed the role o f KCC from a provider to an enabler of services; (iii) increased competence and capacity o f KCC staff in project planning, works supervision and project management; (iv) revaluation of a l l properties in Kampala; and (v) improved financial management and budget formulation. The SFR was reviewed and revised and

23

SFR I1 developed with technical assistance under LGDP I. These outputs have required steady support from the PCU and consultants outside of KCC’s normal organizational structure. These successes are unlikely to be sustained or integrated into KCC’s operations without additional support and deep commitment to mainstreaming the approaches and capacities that underpin these successes.

9. Despite the efforts made in the implementation of the SFR, the progress of organizational reforms has not been as fast as earlier envisaged at the time o f the formulation of the SFR. This i s compounded by the extremely weak financial position o f the city. The implementation of the SFR to date has largely focused on development of strategies, and systems and procedures in all facets o f KCC operations including development o f accurate information and data on revenues, manpower, financial situation, contracting out revenue assessment and collection, reliable and accurate budgeting, expenditure control, institutional restructuring, and ICT development and applications. While progress has been achieved in these areas, the intermediate results will need to be carried forward and brought to maturity through institutionalization and application of the strategies, systems and procedures to KCC’s day-to-day operations. A comprehensive recommitment to, and expansion of, the SFR principles i s necessary.

The Kampala Institutional and Infrastructure Development Project:

10. The Government o f Uganda recognizes the need to broaden and deepen the SFR reforms undertaken by KCC to date. Upon closure o f the NCRP and LGDP I, that provided invaluable support to Kampala, the Government developed a concept paper for a follow on project for Kampala and requested IDA for support. The GOU had originally requested support for a project o f about US$98 million, mainly focusing on infrastructure, to be implemented over a 5 year period. Given the need for institutional reform required to place Kampala on a firm ground both in terms o f financial management and governance, a three phase, 10 year Adaptable Program Loan (APL), with Phase I to be a 3 year project focusing on support to institutional reform and high priority infrastructure, was proposed by the Bank and accepted by the government. This approach allows for a built in incentive for implementation of the reforms embodied in SFR 11, since moving from one phase to the next i s possible only upon fulfilling appropriate triggers, and also provides an exit strategy in case KCC falters on its commitment to reform and fails to meet the triggers.

Development Objectives, Triggers and Benchmarks for the Three Phases of the Program

Program Phases

Years Program Objective Develop a strong governance and management capacity in KCC to enhance service delivery and economic development

(a) Triggers

Phase 1 (Initiation)

2008-2010 Development Objective Improved institutional efficiency o f KCC through the implementation of the SFR

0 New organizational system operational

0 Establish and implement a formal public consultation process Implementation o f

Phase I1 (Transition)

2011-2014 Development Objective Extending coverage and quality o f service delivery and deepening institutional reform

0 Implement high priority infrastructure investments to support city economic development and PEAP goals

imdementation o f the 0 Continuation of the

Phase I11 (Sustained Implementation

Development Objective Consolidate institutional

2015-2017

development and enhance enabling environment for economic development

24

(b) Benchmarks

financial recovery action plan (FRAP) Comprehensive O&M plan for infrastructure Effective implementation of the infrastructure rehabilitation and maintenance

Staffing completed, codes o f conduct enforced, a performance based compensation system implemented and HR information system developed Citizens score card updated annually, media strategy implemented and budget and development planning consultation carried out Reduce the stock o f overdue liability from Ushs 8 bil l ion to Ushs 3 bi l l ion and increase own source revenue from Ushs 22 bi l l ion to Ushs 30 bi l l ion Provision and release o f adequate O&M budget and quality control system in place and operationalized for both O&M and new construction

FRAP, O&M plans and quality controi systems for infrastructure Institutionalize the public consultation process and incorporate feedback into annual work plans

Infrastructure investments selected based on sound appraisal and public consultation

i s operational

completed, O&M operational Customer care desk operational HR information system fully implemented

Quality assurance system

Financial restructuring

K C C i s bankable/ creditworthy Public/private partnership institutionalized Goodurban management and governance

11. In 2005, seven of Uganda’s major development partners developed a Uganda Joint Assistance Strategy (UJAS) that i s centered on three principles: supporting implementation o f the country owned and led revised Poverty Eradication Action Plan (PEAP) to achieve the MDGs, collaborating more effectively among the development partners and with the government, and focusing on results and outcomes. UJAS partners have agreed to focus their support on the implementation of the PEAP in general, but will focus on certain areas judged to be especially important for achieving the PEAP’s overarching strategic results. These areas are: (i) strengthening the budget process and public sector management; (ii) promoting private sector development and economic growth; (iii) strengthening governance; (iv) improving education and health outcomes; and (v) promoting the resolution o f the conflict in the north and fostering the social and economic development of the region. The KIIDP will clearly contribute to the first three strategic results. In terms o f the PEAP, KIIDP supports Pillar 1 (Growth) and Pillar 4 (Governance). The Bank has included the KIIDP (planned to be effective in FY 2008) as one of i t s instruments to support the UJAS.

25

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

Project (Bank-Financed) Completed Projects

Uganda First Urban Project (Cr. 2206-UG)

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

Ratings Outcome Sustainability ID Impact

S L M

Nakivubo Channel Rehabilitation Project (Cr. 3203-UG))

project (LGDP I) (Cr. 3295-UG)

(Cr. 2 124-UG)

Local Government Development

Second Water Supply Project

S L M

S L su

U UN N

Small Towns Water Supply Project (Cr. 2583-UG) Second Economic and Financial Management Project (EFMP 11) (Cr. 3297-UG)

S

S M

L

Ongoing Projects

Local Government Development project (LGDP 11) (Cr. 3773-UG) Second Private Sector Competitiveness Project (SPSCP) (Cr. 3975-UG)

H

Latest Supervision (ISR) Ratings Outcome Sustainability

Implementation Development Progress (IF) Objective (DO)

S S

S S

26

Annex 3: Results Framework and Monitoring

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

Project Development Obi ective

Improve institutional efficiency o f KCC through implementation o f the SFR

Intermediate Results

Component 1: [mproved approval process o f building plan permits

Component 1 : KCC issues property rate demand notes no later than :he end o f the f i r s t quarter o f the fiscal year

Component 2: [mproved city wide infrastructure (roads and drainage)

Zomponent 3: <CC incorporates the results if the annual Citizens Score 2ard in the planning process

Project Outcome Indicators

0 Reduce overdue liabilities from Ushs 8 billion to Ushs 3 billion

0 The share o f KCC own source revenue spent on service delivery increase from 10% to 30%

0 Increase in public satisfaction with service delivery in: o Roads from 18% to 50% o Drainage from 22% to 3 1% o Solid waste from 44% to 60%

0 Increase in KCC own source revenue from Ushs 22 billion to Ushs 30 billion

Intermediate Results Indicators

Component 1: Reduction in processing from one year to 60 days

Component 1: 90% o f the property rate demand notes issued to property owners

Component 2: 9 km o f gravel roads upgraded to bitumen standard by FY2009 (1 1.75 km EOP) 13 km o f roads and associated drains improved and strengthened by FY2009 (26 km EOP) 2 km o f primary drainage channel expanded and lined by FY2009 (3.6 km EOP) 4 km o f secondary drainage channels expanded and lined by FY2009 4 tertiary drainage “black spots” improved by FY2009

Component 3: KCC utilizing results o f annual Citizens Score Card to measure service delivery satisfaction

Use of Project Outcome Information

YR1-YR2 Measure the achievement o f the KPIs YR3 Lead into the implementation of the second phase o f the program

Use of Intermediate Results Monitoring

YRl-YR2 Low level o f reduction wi l l further reduce KCC’s credibility to the public

Delays in the issuance o f the demand notes wi l l have adverse impact on KCC’s own revenue

Delays in the completion o f the planned infrastructure improvements wi l l have an adverse impact on public satisfaction on KCC’s ability to deliver services

~~ ~

Low level o f satisfaction wi l l lead to intensification o f public consultation andor increase in resource allocation for service delivery

27

Arrangements for results monitoring

Data Collection and Reporting Project

Outcome Indicators

Baseline 2005l06

Frequency and

Reports Quarterly Progress Reports

Data Collection

Instruments

Responsibility for Data

Collection 2008 2009 2010

Reduce overdue liabilities from Ushs 8 billion to Ushs 3 billion

Ushs 8 billion

Ushs 6 billion

Ushs 4.5 billion

Ushs 3 billion

KCC annual financial reports

KCC, Director o f Finance

The share o f KCC own source revenue spent on service delivery increase from 10% to 30%

Quarterly Progress Reports

Quarterly Progress Reports

Annual Citizen Report

KCC annual financial reports

KCC annual financial reports

Citizen’s Score Card

KCC, Director o f Finance 10% 20% 25% 30%

Increase in KCC own source revenue from Ushs 22 billion to Ushs 30 billion Increase in public satisfaction in service delivery in: o Roads

from 18% to 50%

from 22% to 31%

o Solid waste from 44% to 60%

o Drainage

KCC, Director o f Finance Ushs 22

billion

18%

22%

44%

Ushs 25 billions

20

24

50

Ushs 27 billion

30

26

55

Ushs 30 billion

50%

3 1%

60%

KCC, Director o f Planning

28

‘ollection and Rl Frequency and Reports

Three Year Rolling Development Plans

iorting

KCC, Director o f Planning

Data

2010

60 days

Periodic Monitoring (IDA)

Results Indicators for each Component Component 1: Reduction in building plan permit approval processing

(US$33.6 million) (US$40.0 million) (US$17.4 million) Twice a year Twice a year Twice a year

Baseline 2005/06

1 year

Triggers’ Assessment Appraisal next phase

Data Collection Instruments

Physical progress report

February 20 10 June 20 10

February 20 14 June 20 14

Responsibility for Data Collection

KCC, Director o f Planning

2008 2009

Quarterly Progress Reports

Component 1: Percentage o f property rate demand notes issued to property owners

Component 2: Gravel roads upgraded (Kms)

30% 90% Quarterly Progress Reports

Annual financial reports

Physical progress report

KCC, Director o f Finance

0

348.08

0

0

0

0

353.08

0

2

1

9

361.08

2

4

4

1 1.75

374.07

3.6

0

0

Annual & mid- term evaluation reports Quarterly monitoring and progress reports

KCC, Director Works and Physical Planning Poor quality

bitumen roads and associated drains improved and strengthened ( h s ) Primary drainage channel expanded and lined (Kms) Secondary drainage channels expanded and lined (Kms) Tertiary drainage “block spots improved

M i d term evaluation reports; Annual monitoring and progress reports

Component 3: KCC utilizing results o f annual Citizens Score Card to measure service delivery satisfaction

KCC utilizing results o f annual Citizens Score Card

KCC utilizing results o f annual Citizens Score Card

KCC utilizing results o f annual Citizens Score Card

KCC utilizing results o f annual Citizens Score Card

Annual surveys

Phasing of APL

29

Annex 4: Detailed Project Description

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

The Phase I project will comprise o f three components that are aligned to support the implementation o f the SFR 11: Component 1 will focus on institutional development activities that support organizational development and governance, the implementation o f the Financial Recovery Action Plan, and actions to enhance effectiveness o f service delivery. Component 2 will finance infrastructure mainly focusing on rehabilitation of high priority infrastructure which were identified as critical to maintaining the productivity and welfare o f the City and that the proposed activities are ready for implementation; and Component 3 will support project management and M & E activities. The objectives o f the physical investments are the preservation of the current assets and arrest the deterioration of the assets. It will enable KCC to be a functioning capital city and position itself to attract investors.

Component 1: Institutional Development (US$5.8 million)

1. This sub-component will support Kampala to develop a comprehensive approach to municipal development, consonant with Kampala’s central role in the nation’s economic and political l i fe. The project will provide support in the following areas:

Support to Organization Development and Governance.

1.1 Human Resource Management. Activities will include: (i) carrying out a HR information management study including the pension management; (ii) sensitization o f councilors and staff on codes of conduct to be carried out; (iii) capacity building assessment for KCC, including the preparation of the annual training program; and (iv) carry out staff training across the organization in order to improve performance capacities.

1.1.1 Training: After undergoing the restructuring process, an assessment of the retained staff will be done. This i s expected to show that most staff do not have the proficiency needed to operate the systems which will be set up. Some basic training e.g. in computer operation has been carried out in KCC’s own centre but this i s not enough. A cross section o f s taf f have also benefited from the LGDP, capacity building component but KCC needs further training programs, especially tailor-made courses for the various sectors e.g. Contract management, revenue collection, etc. and in the new corporate environment. This will require implementing a comprehensive capacity building plan over the next 3 years at an estimated cost o f US$300,000 with GOU contributing 10%.

1.1.2 General Administration. Support will be provided to: (i) develop efficient and effective records management systems; and (ii) develop KCC’s capacities through learning from best practice from other local governments.

1.1.3 Education Information System. Activities will include: (i) design o f an Education Information System; (ii) development of an education work place policy; (iii) HIV/AIDS situation analysis in schools; and (iv) training of teachers on collection, analysis and generation o f comprehensive education information reports. All these activities will customize the National Education Information System to KCC requirements and needs.

1.1.4 Welfare h Community Service. Support will be provided to develop Kampala’s Gender and Welfare Strategy. This will assist KCC to customize the National Gender Policy to Kampala’s needs and requirements.

30

1.1.5 Communication Strategy. Activities will include: (i) public awareness campaigns through radio, newspaper and television; (ii) complaints management systems study; (iii) training o f KCC staff on customer care; and (iv) Civil Society Participation and establishment of stakeholder forum.

1.1.6 Environmental Management. Activities will include: (i) implementation o f the environmental training program; (ii) provision o f equipment to ensure effective environmental monitoring; and (iii) fencing of the current land fill site as well as the extension site to prevent unauthorized access, accidents and soil erosion and water pollution. This sub-component will furthermore support activities related to the implementation of Uganda’s Wetlands Sector Strategic Plan (200 1-20 10).

The project will also provide resources for goods which will include: (i) computers and laptops; (ii) office equipment; and (iii) vehicles.

1.2 Support to Financial Recovery. This subcomponent aims to assist the implementation o f the financial recovery plan designed to place KCC on a sound financial condition by the end of the program. The following activities will include:

1.2.1 Activities will include: (i) establishing the framework for a complete, consistent, and up-to-date revenue base in al l revenue areas (rate, licenses, ground revenues, billboards, contract management); (ii) enhancing revenue collection capacity, control, and efficiency through implementing the newly drafted model revenue contracts; (iii) enhancing receivables management; verifying a l l debtors and establishing a dynamic aging receivables database; and (iv) enhancing revenue management capacity.

Enhancing Revenue and management capacity.

1.2.2 Enhancing Expenditure Management (transparency, accountability, and timeliness). Activities will include: (i) enhancing procurement management; (ii) enhancing liability management: verifying al l liabilities and establishing a dynamic aging payables/liabilities database; (iii) enhancing expenditure planning, budgeting, and budget appropriation (this subcomponent i s linked through effective implementation o f the recently acquired IFMS); and (iv) enhancing outsourcing and PPP for expenditure rationalization purposes.

1.2.3 Expenditure control (reduction/rationalization). Activities will include: (i) establishing expenditure management for operation and maintenance; (ii) establishing a reliable framework and system for asset management (asset inventory study, clean asset register, asset replacement policy); (iii) establishing a framework for integrated infrastructure financing and capital improvement planning; and (iv) capacity building in expenditure management.

1.3 Strengthening Service Delivery

1.3.1 Public health and environment. At the moment the following programs are on going in Kampala within the field o f public health and environment: Kampala Urban Sanitation & Improvement Project (KUSIP), Ecological Sanitation Project (ECOSAN) and Kampala Integrated Environment Management and Planning (KIEMP) Project. The three programs are addressing issues of environmental management and sanitation improvement in Kampala. However, there i s no specific policy and strategy addressing the HIV/AIDS at the city level.

KIIDP will support the preparation o f the city wide HIV/AIDS strategy which will assist to localize a national HN/AIDS policy and make it more responsive to the council needs. The support will also help KCC to develop a work place HIV/AIDS policy and program, identify the internal and external dimensions of a city HIV/AIDS profiles and sensitization o f councilors and management on the impact of HIV/AIDS on the supply and demand of city services.

31

1.3.2 Works - Quality Assurance for Infrastructure. Under this sub-component, KCC will put in place performance measures that will ensure efficient and effective service delivery capable o f making real beneficial impacts on KCC residents. I t will introduce quality control systems and manuals in order to have a foolproof mechanism for control on the quality of works. In the areas of roads, drainage, urban markets and solid waste for which KCC i s responsible. Technical staff shall strictly be required to abide by quality control tests prescribed in the manuals. In addition third party quality control will be required for al l works above a prescribed threshold. The manuals shall provide the details and modalities o f third party quality control where applicable

1.3.3 Urban Planning. Kampala Structure Plan: This sub-component will support activities which will enable KCC to develop a new structure plan which can guide physical development of the city over the next decade. The structure plan currently under force was prepared prior to 1994 and i s now absolutely outdated. The pace and extent o f physical growth within the city limits has far outpaced the extent o f the old structure plan. At the same time, KCC’s internal systems (including rules and regulations, records management, etc.) o f monitoring and managing land development and building construction are not commensurate with the requirements o f a fast developing city.

Under such circumstances, it i s no surprise that a large part of the city which has developed over the past decade (and that could be as much as 70 percent o f the current city), has inadequate (or non-existent) formal documentation from the KCC. Not only does such a situation create severe problems for trunk and linking infrastructure networks, it impacts the ability of the council in determining, demanding and collecting applicable taxes, fees and levies. Preparation o f the structure plan will involve: (i) background studies and documentation; (ii) review of the existing structure plan; (iii) studies on Development control approvals and monitoring; (iv) developing a new structure plan; and (v) preparation of environmental studies in cooperation with NEMA, DWD, WID, and others as appropriate to coordinate future environmental management efforts.

Planning and development monitoring related ICT facilities: KCC will be supported to acquire appropriate computer hardware and software to support the physical planning and monitoring process, including environmental monitoring as required under the Environmental Management Plan (EMP) and developing o f a Geographical Information System (GIs). This will also include very specifically targeted training o f key staff using such facilities.

Coordination with another Bank-financed Project: The World Bank i s currently financing the Second Private Sector Competitiveness Project (SPSCP) which includes a substantial component supporting land administration, including district land registries. KCC, with its large number o f documented land parcels, will receive support from SPSCP which will include the rehabilitation and modernization o f land records and registration as well as a l l related systems and processes.

1.3.4 Information and Communication Technology. Activities will include: (i) enhancement of the service management systems; and (ii) extension and improvement of the Data & Voice Communication Network.

Component 2: Kampala City Wide Infrastructure and Services Improvement (US$28.5 million)

KCC has just completed the implementation o f the Nakivubo Channel Rehabilitation Project and the Local Government Development Project. Attempts to rehabilitate a limited number o f infrastructure (roads and drains) was carried out. During the NCRP, a comprehensive Kampala Drainage Master Plan (KDMP) and Kampala Urban Traffic Improvement Plan were prepared.

32

2. This component will support activities aimed at improving the provision o f critical services to the city and the implementation of the Resettlement Action Plan. The investment in infrastructure and service improvements will address five priority areas which are critical for inducing the confidence o f the public and service recipients and will contribute to the economic and commercial development o f the city. The investment in infrastructure will be limited in this first phase to only high priority interventions:

2.1 Drainage system improvement: under this sub component, the capacity o f a high priority primary drainage channel in a highly flood prone area will be expanded over a length o f 3.6 km, including expanding and lining of a total o f 4 km of secondary channels at critical locations in the city, and remedial measures of 4 tertiary drainage “black spots”.

2.2 Trafic management: This subcomponent will include: (i) area traffic management: dealing with measures for improved traffic flow and provision of traffic management infrastructure including guard rails, signs etc; and (ii) junction improvement: providing localized widening and signalizing at the junctions. This will be complementary to the four junctions and round about improvements that i s planned to be carried out in parallel under Japanese funding.

2.3 Road maintenance and upgrading: Activities under this subcomponent will include: (i) maintenance of roads: a total of 26 km of selected tarmac roads will be maintained by reconstruction/overlay o f surfaces and improvement to the drainage system; and (ii) upgrading o f gravel roads: a total of about 11 km of high priority o f gravel roads will be upgraded to bitumen standard. The roads were selected on the basis o f improving connectivity and economic rate o f return

2.4 Solid waste management: Activities under this subcomponent will include: (i) developing of a 6 acre land adjacent to the existing site; (ii) provision for supply and installation of a landfill gas collection and flaring system phase 1 at the existing landfill site; and (iii) preparation o f design for the development o f the new landfill site to be implemented during Phase I1 o f the program.

2.5 Urban markets infiastructure: Activities under this subcomponent will include: (i) provision o f markets infrastructure e.g. access roads, lighting, sanitation, shades, stowers, etc to selected markets; and (ii) preparation o f detailed designs for the high priority markets to be developed during Phase I1 based on the feasibility study carried out.

2.6 (B) and the RAP report).

Implementation o f the Resettlement Action Plan as detailed in the plan. (Details are in Annex 10

Component 3: Project Implementation Support, Monitoring and Evaluation (US$2.8 million)

3. This component will encompass the management activities associated with the implementation o f the project, the establishment and implementation of a comprehensive monitoring and evaluation (M&E) system and the preparation o f the next phase o f the project. Activities will include:

3.1 The project will be implemented by KCC through direct involvement o f its various directorates acting as component managers, supported by a Core Team o f experts. I t will be coordinated by the Town Clerk and the Permanent Secretary, Ministry o f Local Government will be the overall accounting officer.

Project Implementation Support.

3.2 KCC has prepared and adopted its own Second Structural Framework for Reform (SFR2) which lays out a roadmap for reform including a listing of specific monitorable goals and targets. KCC has a functioning Economic Planning Unit which, under KIIDP will be enabled to:

Monitoring and Evaluation.

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Establish a Baseline: A critical init ial activity under the M&E component will be to establish an appropriate baseline which accurately describes the situation before project effectiveness with respect t o the council’s institutional and infrastructural status. In many respects, the SFR2 includes a preliminary framework for the baseline including indicators for which data i s either generated within the K C C itself or are easily collectable f rom the external environment.

0 Develop an M&E Strategy: The SFR2 lays out a clear roadmap for institutional reform and service delivery which requires an effective strategy for M&E and i t s reporting o n a regular basis. K I I D P will support the development o f an overall M&E strategy which responds not only to Wor ld Bank project requirements but which can also enable K C C to regularly monitor and evaluate progress towards fulfilling i t s overall mandate. An important element o f the strategy wil l be to ensure the sustainability o f the M&E system which informs KCC policy formulation and effective service delivery beyond the l i fe o f KIIDP.

Bi-annual Reporting: The project will support the preparation o f at least two M&E reports every year which can inform the council and i ts executives on progress towards meeting the goals adopted under the Second Structural Framework for Reform (SFR2) as we l l as meeting the M&E requirements o f the KI IDP.

Social Impact Assessment: The project will provide resources to KCC to carry out a social impact assessment o f the project and the findings o f the report will be incorporated into implementation completion report.

3.3 Annual Citizen ’s Report Card: K C C was facilitated by the Wor ld Bank to develop and conduct i t s f i rst Citizen’s Report Card. This initiative has been instrumental in establishing a baseline o f Kampala citizen’s perceptions o f the council. As part o f i t s institutional reform process, K I I D P wil l support the conduct o f a similar annual exercise such that the K C C gets a regular feedback f rom i t s citizens and provides a benchmark for M&E.

3.4 effectiveness o f the K C C staff and councilors to carry out i ts functions.

Staffand Councilor Survey. A survey will be conducted to ascertain the level o f efficiency and

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Annex 5: Project Costs

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

Project Cost By Component Local Foreign Total

US $million US $million U S $million Institutional Development 3.3 2.2 Citywide Infrastructure and Services Improvement 9.6 15.5 Project Implementation Support and M&E 2.5 0.2

5.5 25.1 2.7

Total Baseline Cost Physical Contingencies Price Contingencies

15.4 17.9 33.3 0.7 1.6 2.3 0.6 0.9 1.5

Total Project Costs' 16.7 20.4 37.1 Interest during construction Front-end Fee

Total Financing Required 16.7 20.4 37.1

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Annex 6: Implementation Arrangements

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

1. Implementation period. The Project will be executed over a period o f about three years, from January 2008 to December 2010. The full APL has three phases - Phase I to be implemented over 3 years, Phase I1 over 4 years and Phase I11 over 3 years. This PAD focuses on Phase I project

2. Proiect coordination and implementation arrangements. The institutional arrangements for project implementation will be as per the government structure. At the central level, the MoLG, MoFPED, and the Office of the Auditor General shall be responsible for ensuring that project resources are budgeted for and disbursed within the national MTEF, and that project accounts are audited.

3. The overall project implementation period for APLl i s three years. KCC will be the executing agency for KIIDP and shall have overall responsibility for accounting for project funds and coordinating activities under the project. The Ministry o f Local Government will have an over all oversight function. In line with the proposed mainstreaming o f tasks currently being carried out by the Project Coordination Unit (PCU) into the various departments in KCC, an SFR Core Team will provide the necessary technical support during Phase 1 o f KIIDP to the various departments. The SFR Core Team will also act as an interface with the Bank to ensure that KIIDP i s implemented as per the IDNGOU protocol agreement. The SFR Core Team will assist in the preparation o f work plans, budgets, progress reports, and coordination of the overall implementation of the project.

4. The various Directorates o f KCC will be responsible for the corresponding components and sub components o f the project. Members o f the Core Team will be mapped to the relevant directorates and will provide support to implementation of the project and also assist in the various core activities of the respective directorates. They will be coordinated by the Core Team Coordinator who will be reporting to the Town Clerk, who as chief executive of KCC will have overall responsibility for the day to day implementation o f the project.

5 . Financing. The total Project cost i s US$37.1 million o f which IDA will finance 91% o f the total project costs, of which GOUKCC will pay 9% percent. These counterpart funds will be paid annually to cover GOUKCC contributions. IDA credit proceeds will be made available by the Government of Uganda to KCC under a subsidiary credit agreement between the two tiers of government, with terms and conditions acceptable to IDA.

6 . M&E procedures and reports are described in Section (2.3, Monitoring and Evaluation of OutcomesResults. In line with the intention and design o f KIIDP as a mainstream program, most of the routine M&E data will be made available through mainstream data collection to be performed by the Economic Planning Department in KCC. The mission carried out a review of the status o f the various monitoring and information systems in KCC. Under component 3, support will be provided to KCC to develop a council-wide M&E system and to strengthen the Economic Planning Department to implement it.

Monitoring and Evaluation.

7. Proiect Implementation Plan (PIP). A detailed draft PIP has been prepared by KCC, and will be updated from time to time in agreement with IDA to guide execution o f each component and the implementation of the Project as a whole. The PIP will set forth a l l operational and procedural steps regarding reviews and approvals o f specific activities, flow o f information, detailed description o f the

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functions o f Project management and implementing bodies, procurement and financial management arrangements, reporting requirements, and manual amendment procedures.

8. Procurement Arrangements. KCC will be responsible for al l procurement, planning process, implementation and supervision. The MoLG Contracts Committee will be responsible for approving contract awards. Details of procedures to be followed are provided in the Project Implementation Plan.

9. Financial Management services for KIIDP will be provided by the Directorate of Finance of KCC. KCC will deploy a full project financial management team to undertake the financial management responsibilities required during implementation o f the project, in terms o f an agreed Memorandum o f Financial Management Services (to be agreed before project effectiveness) and further supported by a FM procedure manual, which needs to specify in sufficient detail the operational procedures, controls and sanctions to ensure effective and efficient FM for KIIDP. The FM staffing requirement will be revisited as the need arises.

Financial Management Arrangements.

10. Engineering Design Services and execution o f Works. The detailed engineering designs and draft bidding documents for works to be implemented during the Phase I have been prepared already. Any updating that may be necessary will be made by the technical staff of KCC and the supervision consultants who will be selected on a competitive basis. Private consultants, based on detailed terms of reference, will carry out the supervision of major works contracts. The works will be contracted out, based on detailed technical specifications, to private contractors.

1 1. Environmental and Social Management. The District Environment Officer (DEO) located in KCC, will be responsible for coordinating the implementation of the Environmental Management Plans as well as the training activities and wetland management plans as outlined in the Project Implementation Plan. To facilitate this work, the DE0 will work closely with the relevant personnel at NEMA, WID, DWD, the Ministry o f Works, Housing and Communication, the Uganda Police, the Traffic Department, and the Uganda Taxi Operators and Drivers Association (UTODA).

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Annex 7: Financial Management and Disbursement Arrangements

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

Introduction

1. This report i s a record o f the results o f the assessment o f the proposed financial management arrangements for the Kampala Institutional and Infrastructure Development Project (KIIDP) implemented by Kampala City Council (KCC) under the Ministry o f Local Government (MoLG). The objective o f the assessment i s to determine: (i) whether KCC has adequate financial management arrangements to ensure KI IDP funds wil l be used for purposes intended in an efficient and economical way; (ii) KIIDP financial reports will be prepared in an accurate, reliable and timely manner; and (iii) the entities’ assets wi l l be safe guarded. The financial management (FM) assessment was carried out in accordance with the Financial Management Practices Manual issued by the Financial Management Sector Board on November 3,2005.

Country issues

2. In recent years, significant improvements in public sector accounting and reporting have been achieved. Most notably, the annual public accounts o f Government have been produced within the statutory period o f four months after the end o f the financial year for more than 5 years and the audit had been conducted timely.

3. The Country Financial Accountability Assessment (CFAA) carried out by IDA in 2004 shows that Government o f Uganda has made substantial progress in improving i t s Public Financial Management Systems since the last CFAA undertaken in 2001. The fiduciary risks associated with poor budget formulation and budget preparation processes have reduced. In terms o f appropriate legislation and regulatory frameworks, significant progress has been made to ensure that the risk associated with lack o f clear rules and regulations has been reduced. Also more useful information i s provided in the annual accounts. It i s recognized however that the process o f implementation o f new rules and ways o f working does take time and does require changes in attitude, continued capacity building and widespread demand for greater accountability.

4. Risks remain in terms of:

effective independent oversight; and 0

enforcement o f procurement and payroll rules and procedures; completeness o f data on debt;

timeliness and effectiveness o f legislative and public scrutiny.

5. In addition, the appropriate legislative framework for integrity i s s t i l l being developed. There remain significant legal, institutional and capacity constraints on the ability o f the integrity bodies (IGG, DEI, Police, DPP) to carry out their various functions including public education, detection, investigation and prosecution o f offenders.

6. With the support o f a number o f donor assisted initiatives, such as the Second Economic and Financial Management Project (EFMP 11) and the Second Local Government Development Program (LGDP) supported by IDA, the Financial Accountability and Decentralization Support Project funded by DFID, and the planned Financial Management and Accountability Project (FINMAP), Government i s seeking to rapidly enhance the financial accountability framework in order to: mitigate fiduciary risk in

38

public expenditure management; achieve economy, efficiency and effectiveness in the use o f public funds; enhance transparency and accountability; enhance staff capacity in public financial management; and to establish an appropriate enabling environment for private sector development and regulation. These initiatives and reforms have been supported and strengthened through PRSC 1 to 5 budget support programs.

Risk Risk Risk Mitigating Measures Rating Incorporated into Project

Design

Risk assessment and mitigation

Condition of Negotiations, Board or Effectiveness

(y/N?)

7. The objectives of the project’s financial management system are:

0

0

to ensure that funds are used only for their intended purposes in an efficient and economical way; to ensure that funds are properly managed and flow smoothly, adequately, regularly and predictably in order to meet the objectives of the project; to enable the preparation of accurate and timely financial reports; to enable project management to monitor the efficient implementation of the project; and to safeguard the project assets and resources.

8. Furthermore, the following are necessary features of a strong financial management system:

0

KCC should have an adequate number and mix o f skilled and experienced staff; the internal control system should ensure the conduct of an orderly and efficient payment and procurement process, and proper recording and safeguarding o f assets and resources; the accounting system should support the project’s requests for funding and meet its reporting obligations to fund providers including Government o f Uganda, IDA, other donors, and local communities; the system should be capable of providing financial data to measure performance when linked to the output of the project; and an independent, qualified auditor should be appointed to review the Project’s financial statements and internal controls.

0

0

9. The table below shows the results of the risk assessment from the Risk Rating Summary. This identifies the key risks project management may face in achieving project objectives and provides a basis for determining how management should address these risks.

Inherent Risk Country Level I M I

1. Entitv Level ( M I I I W Project Level / L /

W Budgeting / L /

Control Risk

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I Risk

rn FundsFlow Financial Reporting

Overall Risk Rating Auditing

rn Accounting

L M

M M

Risk Rating

Action 1

2

Agreement o f Interim Financial Report (IFR) formats. Approving a Financial Management Manual for the project that would supplement the Local Government (Financial and Accounting) Regulations, 2007 in order to cater for the donor specific accounting policies and procedures.

M

Date due by Negotiation (August 6, 2007) Initially assessed as a Condition o f Credit Effectiveness but given that it has been met by the inclusion of the policies and procedures in the Project Implementation Plan, this issue i s now resolved.

3

Risk Mitigating Measures Incorporated into Project

Design

I KCC and IDA Agreement of terms of reference for external auditor. Six months after

Credit Effectiveness

KCC i s using the LGFAR, 2007 but this falls short of donor specific accounting policies and procedures e.g. on financial reporting and auditing which are to be included in the Project Implementation Plan as a mitigation measure.

Condition of Negotiations, Board or Effectiveness

(Y/N?) Initially assessed as a Condition of effectiveness but given that it has been met by the inclusion o f the policies and procedures in the Project Implementation Plan, this issue i s now resolved.

M - Modest L - Low

10. management system and the dates that they are due to be completed by.

The action plan below indicates the actions to be taken for the project to strengthen its financial

Responsible KCCand IDA

KCCand IDA

Strengths and weaknesses of the Financial Management System

1 1, The project financial management i s strengthened by the following salient features:- . . The accounting personnel are adequately qualified and experienced; Budgeting arrangements are in place;

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. . External auditing arrangements are adequate; Internal auditing arrangements are adequate although staff training needs to improve their skills should be strongly considered by KCC. Particularly they should a l l become members o f the Institute of Internal auditors - Uganda Chapter to keep abreast with the new developments in Internal Audit; Funds flow arrangements are adequate; There i s good understanding o f the Financial Reporting requirements given that the Project Accountant has implemented World Bank projects before and has had training in Financial Management and Disbursement Guidelines for the World Bank; and There i s adequate accounting software.

. .

. 12. The project financial management i s weakened by the following salient feature:- . The management letter issues raised by the external audit report as o f 30 June 2004 showed that

the internal control systems in relation to mainly revenue collection needed to be improved. With the strengthening o f the Internal Audit Department it i s hoped that the monitoring and enforcement of stronger internal control systems should improve hence improving on the KCC internal control systems. . The Local Government (Financial and Accounting) Regulations (LGFAR), 2007 will be used as the Financial Management Manual (FMM) but it falls short when it comes to donor specific accounting policies and procedures. As a mitigating measure, the donor specific accounting policies and procedures e.g. on financial reporting and auditing have been included in the Project Implementation Plan.

Institutional and implementation arrangements

13. The institutional arrangements for project implementation will be as per the government structure. At the central level, the MoLG, MoFPED, and the Office o f the Auditor General shall be responsible for ensuring that project resources are budgeted for and disbursed within the national MTEF, and that project accounts are audited.

KCC under MoLG will be responsible for the overall implementation o f the project. KCC has implemented IDA projects before, that is, Nakivubo Channel Rehabilitation Project and a component of the Local Government Development Program.

14. During project execution, KCC shall coordinate project implementation and manage:

(a) procurement, including purchases o f goods, works, and consulting services; (b) project monitoring, reporting and evaluation; (c) contractual relationships with IDA and other co-financiers; and (d) financial management and record keeping, accounts and disbursements.

15. related to the implementation of the project.

KCC will also constitute the operational link to the IDA and Government of Uganda on matters

16. The Permanent Secretary (PS), MoLG, will be the Accounting Officer for the project, assuming the overall responsibility for accounting for the project funds. The Town Clerk of KCC will report to the Accounting Officer on matters concerning the accountability of KIIDP funds.

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Budgeting Arrangements

17. Budgeting arrangements are defined under Part I11 of the LGFAR, 2007. The capacity o f the accounting staff to fulfill budgeting needs o f the project i s adequate. The Sun accounting software can adequately cater for the budgeting arrangements o f the project.

Accounting Arrangements

Books o f accounts and list of accounting codes

18. KCC will maintain similar books o f accounts to those for other IDA funded projects. The books o f accounts to be maintained specifically for KIIDP should thus be set up and should include: a Cash Book, ledgers, journal vouchers, fixed asset register and a contracts register.

19. The books of accounts will be maintained on a computerized system. A list o f accounts codes (Chart of Accounts) for the project should be drawn up. This should match with the classification of expenditures and sources and application of funds indicated in the Financing Agreement (FA). The Chart of accounts should be developed in a way that allows project costs to be directly related to specific work activities and outputs o f the project.

20. Books o f Accounts to be used for the project will be opened and a Chart of Accounts will be completed in accordance with the requirement in the FA o f KIIDP of maintaining books o f accounts for the project.

Staffing Arrangements

21. KCC has an accounting unit that i s headed by a Director Finance who will be responsible for maintaining the books of accounts and records of KIIDP funds. The Director o f Finance will be assisted by a Project Accountant and an Accounts Assistant. The Project Accountant will report to the Director o f Finance or in his absence to any of the two Deputy Directors to whom authority will be delegated. In this regard, the staffing arrangements are adequate for KCC to ensure that KIIDP funds are accounted for.

22. Most o f the accounting staff dealing with this project except for the Project Accountant shall need training in the World Bank Financial Management and Disbursement Guidelines. This can be arranged in consultation with the Senior Financial Management Specialist at the Country Office during the implementation period o f the project.

23. staffing arrangements are maintained throughout the l i fe o f the project.

In order to ensure that the project i s effectively implemented, KCC will ensure that appropriate

Information Systems

24. KCC will be using Sun accounting software as the information system for KIIDP and accounting staff are comfortable using it to produce accounting reports. This accounting software i s accessed as adequate for accounting and reporting on the use of KIIDP funds.

25. Important to note i s that KCC has been part o f the roll out of the Integrated Financial Management System (IFMS) which i s the Government of Uganda (GoU) information system. We recommend that in the long run project accounts be captured within the IFMS and arrangements in this regard should be effected such that al l KCC projects are eventually accounted for using the GoU accounting system.

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Internal Control & Internal Auditing

Internal Controls and Financial Management Manual

26. The project’s internal controls policies and procedures are documented in a Financial Management Manual (FMM) of KCC which i s the LGFAR, 2007 but this falls short o f the donor specific accounting policies and procedures e.g. on financial reporting and auditing that have been included in the Project Implementation Plan as a mitigation measure. The FMM should be a living document that can be updated to strengthen the internal control system when the need arises.

27. The procedures used by the project to maintain its records are documented in the LGFAR 2007 and Financial Management section of the Project Implementation Plan. These will include the requirement for cross references to supporting documentation in the SOE supporting schedules in order to facilitate the inspection o f these schedules and improve the maintenance o f the project’s records.

28. The FMM will describe the accounting system: the major transaction cycles of the project; funds flow processes; the accounting records, supporting documents, computer f i les and specific accounts in the financial statements involved in the processing o f transactions; the l i s t of accounting codes used to group transactions (chart of accounts); the accounting processes from the initiation o f a transaction to its inclusion in the financial statements; authorization procedures for transactions; the financial reporting process used to prepare the financial statements and interim financial reports, including significant accounting estimates and disclosures; financial and accounting policies for the Project; budgeting procedures; financial forecasting procedures; procurement and contract administration monitoring procedures; procedures undertaken for the replenishment of the Designated Account; and auditing arrangements.

Internal Audit

29. KCC has an Internal Audit Department that i s headed by the Chief Internal Auditor. The department i s supposed to have one Chief Internal Auditor, one Principal Internal Auditor, two Senior Auditors and eight Auditors according to its current structure. Al l positions have been filled. The Internal Audit arrangements for KCC are adequate. However, we recommend that the Position for Principal Internal Auditor be filled up by an experienced and professionally qualified accountant. Training needs of the current staff in the Internal Audit Department should also be determined such that they keep abreast with the current developments in Internal Audit More specifically; the staff should strongly consider becoming members o f the Institute o f Internal Auditors - Uganda Chapter.

30. The role of Internal Audit i s clearly spelt out in the LGFAR 2007. The Chief Internal Auditor reports to the Council but works in co-operation with the Town Clerk. The duties of the Chief Internal Auditor involve reviewing the internal control systems o f KCC, conducting value for money audits and special investigations. Procedures for internal audit are documented in the Internal Audit Manual.

Funds Flow Arrangements

Bank Accounts

3 1. The following bank accounts will be maintained for the purposes of implementing the project:

0 Designated Account: Denominated in US dollars, disbursements from the IDA Credit will be deposited on this account.

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0 Project Account: This will be denominated in local currency. Counterpart funds and transfers from the Designated Account (for payment o f transactions in local currency) will be deposited on this account in accordance with project objectives.

32. These bank accounts shall be opened at Bank o f Uganda in accordance with the FA for KIIDP. Init ial cash flow forecasts upon which the advance disbursement will be made from the IDA Credit should also be prepared by the same date.

33. will s i g n from each o f the three categories as follows:

The account signatories for both o f the accounts will be three for each authorized payment. They

Category I: Permanent Secretary, M o L G who will be the principal signatory or designate.

Category 11: The Town Clerk o f KCC or designate.

Category In: Project Accountant o f KIIDP or designate.

Flow of Funds

34. Funds flow arrangements for the project (through the two bank accounts above) are as follows: . IDA will make an initial advance disbursement from the proceeds o f the Credit by depositing into a Borrower-operated Designated Account (DA) held at Bank o f Uganda (central bank) and denominated in U S Dollars.

Actual expenditure will be reimbursed through submission o f Withdrawal Applications and against Statements o f Expenditure which will be approved in accordance with internal control measures applied in KCC.

All expenditures will be paid centrally from KCC in accordance with the approval mechanisms documented in their FMM.

Counterpart funds from the GoU Consolidated Fund and transfers from the DA (for payment o f transactions in local currency) will be deposited in the Project Account to pay al l local currency project transactions denominated in Uganda Shillings (UGS). The Government wil l allocate and pay over counterpart fimds for the project by check (Warrant o f funds). Counterpart funds are allocated through the normal central government budgetary process. Counterpart funds i s accessed through compliance with the country specific Financial Regulations.

.

.

.

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KIIDP FUNDS FLOW CHART

Designated Account in BOU denominated in U S D

G o U Consolidated -r Project account in BOU

denominated in U G S ...............................

Project transactions paid in either U S D or U G S

L J

Disbursement Arrangements

35. Disbursements f rom IDA would be init ially made o n the basis o f incurred eligible expenditures (transaction based disbursements). IDA would then make advance disbursement f rom the proceeds o f the Credit by depositing into a Borrower-operated Designated Account to expedite Project implementation. The advance to a Designated Account would be used by the Borrower to finance IDA’S share o f Project expenditures under the proposed Credit. Another acceptable method o f withdrawing funds from the Credit i s the direct payment method, involving direct payments f rom the Credit to a third party for works, goods and services upon the Borrower’s request. Payments may also be made to Bank o f Uganda for expenditures against IDA special commitments covering Bank o f Uganda’s Letter o f Credit. IDA’S Disbursement Letter stipulates a minimum application value for direct payment and special commitment procedures.

36. Upon credit effectiveness, KCC will be required to submit a withdrawal application for an init ial deposit to the Designated Account, drawn f rom the IDA Credit, in an amount to be agreed to in the Disbursement Letter. Replenishment o f funds from IDA to the Designated Account will be made upon evidence o f satisfactory utilization o f the advance, reflected in SOEs andor o n full documentation for payments above SOE thresholds. Replenishment applications would be required to be submitted regularly on a monthly basis. If ineligible expenditures are found to have been made from the Designated Account, the Borrower will be obligated to refund the same. If the Designated Account remains inactive for more than six months, the Borrower may be requested to refund to IDA amounts advanced to the Designated Account.

37. Funds if reporting requirements are not complied with.

IDA will have the right, as reflected in the Financing Agreement, to suspend disbursement o f the

38. In order for KCC to move f rom transaction based disbursement to report based disbursement where six monthly forecasts o f expenditure are paid quarterly hence ensuring the project has adequate funding at al l times, KCC will during implementation have to meet the fo l lowing requirements: (i) sustain

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satisfactory financial management rating during the project’s supervision; (ii) submit Interim Financial Reports consistent with the agreed form and content within 45 days o f the end o f each reporting period, and (iii) submit a l l expected Audit Reports by the due date.

Financial Reporting Arrangements

39. Formats o f the various periodic financial monitoring reports to be generated from the financial management system will be developed. There will be clear linkages between the information in these reports and the Chart o f Accounts. The financial reports will be designed to provide quality and timely information to the project management, implementing agencies, and various stakeholders monitoring the project ’ s performance.

40. The fol lowing quarterly Inter im Financial Reports (IFRs) will be produced by KCC:

. Financial Reports: o Sources and Uses o f Funds o Uses o f Funds by Project Activity/Component o Designated Account activity statement Physical Progress (Output Monitoring) Report Procurement Report on pr ior review contracts.

. . 41. produce the IFRs to the Country Financial Management Specialist.

The formats were agreed at negotiations and the project must demonstrate i t s capability to

42. KCC may later become eligible to use the report-based disbursement upon fulfil lment o f the conditions listed in the Disbursement Arrangement section o f this report. The project will then be required to submit to the Bank the following information in order to support report-based disbursement:

. Inter im Financial Report (IFR). . . DA Bank Statements. . . Designated Account (DA) Act iv i ty Statement.

Summary Statement o f DA Expenditures for Contracts subject to Prior Review. Summary Statement o f DA Expenditures not subject to Prior Review.

43. The financial statements should be prepared in accordance with International Public Sector Accounting Standards (which inter alia includes the application o f the cash basis o f recognition o f transactions). The IDA Credit Agreement will require the submission o f audited financial statements for KIIDP to the Bank within six months after the year-end.

44. The KIIDP Financial Statements will comprise o f

1. A Statement of Sources and Uses o f Funds / Cash Receipts and Payments which recognizes a l l cash receipts, cash payments and cash balances controlled by the entity; and separately identifies payments by third parties o n behalf o f the entity.

2. The Accounting Policies Adopted and Explanatory Notes. The explanatory notes should be presented in a systematic manner with items o n the Statement o f Cash Receipts and Payments being cross referenced to any related information in the notes. Examples o f this information include a summary o f f ixed assets by category o f assets, and a summary o f SOE Withdrawal Schedule, l isting individual withdrawal applications; and

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3. A Management Assertion that Bank funds have been expended in accordance with the intended purposes as specified in the relevant Wor ld Bank legal agreement.

45. and agreed with the Country Financial Management Specialist.

Indicative formats o f these statements wil l be developed in accordance with IDA requirements

Auditing

46. The Auditor General i s primarily responsible for the auditing o f a l l government projects. Usually, the audit i s subcontracted to a firm o f private auditors, with the final report being issued by the Auditor General, based o n the tests carried out by the subcontracted fm. In case the audit i s subcontracted to a firm o f private auditors, IDA funding may be used to pay the cost o f the audit. The audits are done in accordance with International Standards on Auditing.

47. The audit report for KIIDP must be submitted to IDA within six months after the end o f each financial year. The new Audit Policy Guidelines al low KIIDP accounts to be included in the K C C accounts but because KCC has a reporting deadline to submit audited accounts to Parliament o f 9 months which i s different f rom IDA’S 6 months reporting deadline, KI IDP’s accounts will be audited separately f rom KCC’s accounts. Any firm o f auditors subcontracted to carry out the audit should meet IDA’S requirements in terms o f independence, qualifications and experience.

48. KCC has managed a number o f IDA projects and none o f the projects has an outstanding audit report. No significant issues were raised in the project audit reports managed by KCC. In addition to the project audit reports, IDA was also receiving the entity audit reports for KCC. The external audit report o f KCC for the period ended 30 June 2004 highlights a number o f internal control weahesses mainly in relation to revenue collection. Although the revenue collection problems are being addressed, this will impact o n the method o f disbursement. K C C will be expected to start on transaction based disbursements then eventually move to report based disbursements subject to getting confirmation that i t has a satisfactory Financial Management system.

49. The arrangements for the external audit o f the financial statements o f KIIDP should be communicated to IDA through agreed terms o f reference. Appropriate terms o f reference for the external auditor must also be developed and agreed within six months o f Credit Effectiveness.

50. G o U does not have a policy that allows public disclosure o f audit findings but Article 41 (1) o f the Constitution o f Uganda allows the public to access this information. The Access to Information Bill, No. 7 o f 2004 has been drafted to complement the clause in the constitution and i s currently with Parliament. The media under the Press and Journalist Ac t also has access to information such as audit findings. In addition, the public i s allowed to attend the Public Accounts Committee o f Parliament when i t i s addressing audit issues.

5 1. are:

The audit reports that will be required to be submitted by KCC and the due dates for submission

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Statements, i.e., KCC’s annual audited accounts

audited accounts to Parliament within nine months after the end o f the financial year, it was agreed during negotiations that given the fact that the LGFAR requires K C C to prepare books o f accounts for audit within 3 months after the end o f the financial year, they should liaise with the Auditor General to ensure the audited accounts are finalized and submitted to the Bank within six months after the end o f the financial year.

2) Project Specific Financial Statements, i.e., KIIDP annual audited accounts

Submitted within six months after the end o f each financial year.

Conclusion o f the Assessment

52. A description o f the project’s financial management arrangements above indicates that although they satisfy the Bank’s minimum requirements under OPBP10.02, there remain improvements to be effected for the system to be adequate to provide, with reasonable assurance, accurate and timely information o n the status o f the Project as required by the IDA. The recommended improvements are detailed in the Financial Management Act ion Plan.

Supervision Plan

53. A supervision mission will be conducted at least once every year based o n the risk assessment o f the project. The mission’s objectives will include that o f ensuring that strong financial management systems are maintained for the project throughout i t s l i fe. A review will be carried out regularly to ensure that expenditures incurred by the project remain eligible for IDA funding. The Implementation Status Report (ISR) will include a financial management rating for the component. This will be arrived at by the Country Office Senior Financial Management Specialist after an appropriate review.

48

Annex 8: Procurement Arrangements

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

General

1. Procurement for the proposed project would be carried out in accordance with the Wor ld Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated M a y 2004; and "Guidelines: Selection and Employment o f Consultants by Wor ld Bank Borrowers" dated M a y 2004, revised October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. Each contract to be financed by the Credit will be in the procurement plan to be prepared by the Borrower and agreed with the Bank. The procurement Plan will indicate for each contract the method for procurement o f goods and works, and method for selection o f consultants. The plan will also indicate the planned and actual for each contract, the need for pre- qualification, estimated costs, prior review requirements, and time fiame for key processing activities. The Procurement Plan will be updated at least semi-annually or as required to reflect the actual implementation progress o f each contract against planned benchmarks. The Bank's standard bidding documents will be used for procurement under International Competitive Bidding (ICB), and for procurement under National Competitive Bidding (NCB) with appropriate modifications. Alternatively standard tender documents prepared and issued by the Public Procurement and Disposal o f Assets Authority (PPDA) may be used for NCB subject to their being acceptable by the Bank. The Bank's Standard Request for Proposal document will be used in the selection o f consulting f i rms. Short l is ts o f consultants for consulting services contracts estimated to cost less than $200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

Scope of procurement under the Project

2. Procurement of Works: Works procured under this project would include improvements and construction o f new drainage system, upgrading and rehabilitation o f roads, traffic management schemes and rehabilitation o f markets. Other works will include development and expansion and improvements o f landf i l l and supply and installation o f landfi l l gas extraction systems. This category will also include a number o f technical services for maintenance o f facilities.

3. Procurement of Goods: Goods procured under this project would include vehicles, office, f ie ld and communications equipment (including computers), miscellaneous items o f supplies and stationery, Information and Communications Technology (ICT) equipment, a Geographical Information System (GIS) and satellite maps.

4. Selection of Consultants: Consulting assignments wil l include engineering services, auditing, management contracts (e.g. support Organization Development and Governance in the area o f human resource management, strengthening Service Delivery and Monitor ing and Evaluation) and various studies (e.g. the development o f records system, the design o f an Education Information System, complaints management system, a c i ty wide HIV/AIDS Strategy, quality control systems and manuals and financial management systems).

5. Operating Costs under this project will include technical services for maintenance o f building services, equipment, and vehicles, fuel, office supplies, utilities, telecommunications, and contract staff (other than salaries o f personnel o f KCC or o f the c i v i l service).

49

Applicable national procurement procedures

6. All contracts following National Competitive Bidding, and other lower procurement procedures (shopping, and selective tender for smaller works contracts) will follow the national public procurement law (Local Government (Amendment) Act and i t s Regulations). These procedures have been reviewed by the Bank and found to be acceptable except for the following provisions which will not be applicable under this project.

(i)

(ii)

(iii)

(iv)

Invitation to bid for NCB shall be advertised in at least one national newspaper with a wide circulation, at least 30 days prior to the deadline for the submission o f bids;

Negotiations with the best evaluated bidder. This practice i s not appropriate, except for consulting services contracts, and for contracts procured through direct contracting;

Use o f the merit point system for bid evaluation will not be allowed for goods and works contracts procured on basis o f competition (ICB, N C B or restricted tender);

For shopping procedures, the Procuring and Disposal Entity (PDE) will not be allowed to pre-qualify suppliers on an annual basis and invi te all pre-qualified providers to submit proposals. Shopping will be to a few f i r m s (at least three); and

There will be no use o f the micro-procurement method for each contract estimated to cost the equivalent o f $1,100 or less. Micro-procurement i s by definition, Direct Contracting, or Single Source Selection, which should be used on exceptional basis with adequate justification and prior approval.

(v)

Procedure for Request for Quotations

7. Because o f the risk associated with procurement under shopping and selective tendering and the ambiguities in the national procedures, for clarity and removal o f doubt, the following procedures will be will be followed. Request for quotations shall be from as many suppliers or contractors as practicable, but from at least three. The request for and quotations shall be in writing and the quotations shall be submitted and opened at the same time. The request for quotations shall contain all required specifications (and drawings, if needed, in case o f works); standards etc. to enable the supplier or contractor provide a complete quotation. Each supplier or contractor from whom a quotation i s requested shall be informed o f the place, time and method o f submission o f quotations and whether any elements, apart from the charges for the goods or services themselves, such as transportation and insurance charges, customs duties and taxes, are to be included in the quotations or not. Each supplier or contractor may only give one price quotation and may not change this quotation, once the quotations are submitted and opened. N o negotiations shall take place with respect to a quotation submitted by the supplier or contractor.

Procurement Capacity Assessment

8. The project will be implemented by KCC and MOLG, carrying out specific tasks o f the procurement process. The procurement capacity assessment o f KCC to implement procurement under the project was carried out on February 15, 2006 (assessment s t i l l valid) by Richard Olowo, Senior Procurement Specialist (AFTPC) and that o f MOLG was carried out by Howard Centenary and Grace N.M. Munanura (Procurement Specialists AFTPC) in May 2007. In each case the assessment reviewed the organizational structure, regulations and staffing for implementing project procurement, including internal effectiveness o f the interaction between the procurement staff and administration and finance units.

50

9. Procurement capacity assessment o f KCC: KCC i s a large cost. center with technically trained staff in many procurement-related disciplines, i.e. engineering, surveying, procurementlsupplies, accounting/finance, law, pharmacy and economics. K C C has wide experienced s ta f f in procurement o f goods works and services as this forms the core business o f KCC. Procurement i s carried out under various technical departments as there i s n o central procurement unit. KCC has some experience in managing procurement under a Wor ld Bank financed project (Nakivubo Channel Rehabilitation Project), which was implemented by a Project Coordination Unit (PCU). PCU staff will be absorbed in other technical departments o f KCC. The performance o f the PCU was rated satisfactory. K C C has not yet formed a PDU as required by the public procurement law. The competence o f individual procurement staff was not assessed. Procurement Planning, record keeping and contract management were rated as inadequate. Information gathered as part o f this assessment indicates that procurement at KCC i s riddled with malpractice and blatant violations o f existing procurement regulations, including flouting o f procurement procedures by the polit ical leadership, with impunity. The general conclusion i s that while K C C has some reasonable capacity that could be effectively harnessed for managing procurement under the project. There are three major r isks.

(9

(ii)

(iii)

Inherent risk: Procurement regulations are flouted by K C C with impunity. T h i s i s orchestrated by polit ical leadership interfering with procurement processes. Apparently K C C staff has not been able to stand against this interference. I t i s reasonable to conclude that staff themselves may be taking advantage o f this situation and flouting the regulations for own benefit. Apparently there does not seem to be a mechanism for taking action in case o f noncompliant cases. This risk i s heightened when non-ICB procurements are carried out using the national procedures through abuse of: (i) short listing o f bidders f rom annual pre-qualification o f providers; (ii) merit point system for evaluation o f bids; and (iii) pre-contract negotiations with the lowest evaluated bidder in procurements where competition on price has taken place. This i s a high risk for the project.

Orpanizational risks: KCC has not yet formed a PDU that would transition to the new procurement systems and practices under the Local Government (Amendment) Act, 2006. User Departments that carry own procurement lack skills and awareness o f their ro le in the procurement processes. The staffing levels and competencies o f such a future PDU unit are not known. There i s a possibility that such a new Unit may not be properly staffed and may not operate efficiently through new structures o f a PDU and a Contracts Committee. I t i s not yet clear h o w the P D U and the Contracts committee would react to residual polit ical influence and resistance to change. A functional PDU i s key to procurement processing, so this i s rated as high risk.

Procedural risks: There i s n o culture in K C C o f holding public officers (including senior managers) accountable for their actions, including timely performance o f tasks. There are very few cases where officials have been sanctioned for poor procurement performance and/or failure to comply with agreed procedures. As a result it i s diff icult to enforce efficiency, preparation o f adequate procurement plans, keeping proper procurement records and sound contract management. Required procurement tasks may therefore not be carried out with due diligence, as a result o f which procurement would ho ld hostage project implementation. Staff i s often influencedinstructed by polit ical leadership on h o w to conduct procurement. The key question i s whether senior management in KCC will be prepared to take action in case o f poor or inadequate procurement performance. This i s rated as high risk.

The risk to proiect procurement management by K C C i s HIGH.

51

10. Procurement capacity assessment o f MoLG: The Ministry o f Local Government i s more or less a supervisory Ministry that that does need same kind o f structures l ike KCC, Le. i t does not run such activities as roads, schools, health, etc. So i t s procurement function i s l imi ted to procurement o f goods and operating items, and review o f procurement documents o f the Bank-financed project, LGDP. The Ministry has a Procurement and Disposal Unit (PDU) which i s headed by a Principal Procurement Officer (PPO). The PPO i s supported by a Senior Procurement Officer and a Supplies Officer. The P D U i s due to be expanded with additional staff for the newly approved structure o f the PDU. The Ministry lacks the Technical Expertise for works procurement and contract management. Procurement officers have l imi ted experience with IDA Procurement f rom the LGDP I1 where their participation i s l imi ted to review o f documents prepared by the LGDP I1 Procurement Specialists. The PDU’s current workload i s high mainly due to the required review o f the LGDP I1 procurements. T h i s should however be significantly reduced after closure o f LGDP in December 2007. The Ministry has a fully functional Contracts Committee consisting o f 5 members in accordance with the Procurement Act. The Committee has been fully involved in the review and approval o f Procurement Documents (Bidding Documents, Evaluation Reports and Contracts) and therefore has experience in the review o f these documents. The Committee exercises close supervision o f the PDU. The general conclusion i s that i t would take a l o t o f staff recruitment into the PDU to manage the procurement implementation under the project. However there are certain tasks that PDU andor Contracts committee can do to enhance procurement implementation under the project. The key issues and r isks concerning procurement under the project have been identified and include:

(i)

(ii)

(iii)

Inherent risk: There i s n o evidence that procurement regulations are flouted by MOLG nor that there i s polit ical interference in procurement processes. So the inherent risk i s low for the project.

Organizational risks: The P D U i s not adequately staffed to carry out the procurement tasks under the project. The staffing levels and competencies o f the PDU would require a l o t o f consultant support to enable it carry out procurement management under the project. In addition, it would be diff icult for PDU to function effectively as it would need to the services o f the KCC technical staff to manage certain procurement tasks. Poor interaction between K C C and M o L G would cause delays. A functional PDU i s key to procurement processing, so putting procurement implementation under MOLG would be a high risk.

Procedural risks: The Ministry has a poor procurement records and data management system which i s compounded by the lack o f sufficient space and equipment for the storage o f procurement records. The records are f i led by document type rather than by Procurement contracts and there are therefore n o complete stand alone procurement files. There i s n o evidence o f sound procurement planning and contract management. The general conclusion i s that staff performance may not be monitored properly, so required procurement tasks may therefore not be carried out with due diligence, as a result o f which procurement would ho ld hostage project implementation. This i s rated average.

The risk to uroiect procurement management by MOLG i s HIGH, given the risk under (ii) i s crucial to procurement imulementation.

Overall Risk to Drocurement manapement rated as HIGH.

52

Implementation arrangements and actions to mitigate against the Overall Risk

11. Establish a PDU in KCC: A PDU in KCC should be established with functions, staffing and adequately resourced. There i s great potential and future gain in using this project to strengthen the PDU and the Contracts Committee in KCC. T h i s would be an action in the right direction, to support the implementation o f the public procurement law and building procurement capacity in KCC for long term benefits. The desired staffing should contain at least the Head o f PDU (who should be a principal procurement officer involved in procurement) and at least four senior Procurement Officers.

12. Once the PDU i s established, i t should be provided with adequate accommodation and equipment. The PDU will be expected to keep proper procurement records and in order to ensure that the new PDU i s up and running, a Procurement Consultant with qualifications satisfactory to IDA will be recruited to support the setting up o f the PDU, i t s capacity development, and to provide back up for the procurement function for the f i rst 12 months. M o L G will supervise the process o f establishing the PDU and selection o f the procurement consultant to ensure KCC recruits the people with correct qualifications and experience. As soon as the PDU i s established, PPDA and IDA should organize orientation training in procurement to brief the KCC mangers, PDU, Contracts committee and Councilors o f their tasks under the project and applicable procedures.

13. The PDU and the Contracts Committee and linkage with M O L G will cushion the KCC against political interference in procurement. Any interference will be reported by the Town Clerk to the Minister o f M O L G and copied to IGG and PPDA for action. This does not mean Council will not exercise i t s mandate in ensuring that KCC staff performs their tasks in an acceptable manner. More specifically, the roles and responsibilities for procurement tasks are shown on Table 1 below.

The rewired action bv Effectiveness: PDU for KCC should be established with functions. staffing and resources.

14. Procurement process: the technical s ta f f in KCC will be responsible for project planning and preparing schedules o f requirements including contract management. The PDU, under strict supervision o f the Town Clerk and the Contracts committee, wil l be responsible for processing all procurement (preparing bidding documents, advertising, opening o f bids/proposals, organizing bidproposal evaluation, forwarding reports to contracts committees, preparing contract documents, and supervising contract execution jointly with technical staff) including organizing for bid and proposal evaluations. Proposed contract awards will be submitted by the Town Clerk KCC to the Contracts Committee o f M o L G for review and approval. Proposed contract amendments will follow the same procedure.

15. Completing the PIP: by Credit Effectiveness KCC should have launched an IDA approved PIP containing the procurement plan, Standard Bidding Documents and Request for Quotations Templates. The PIP will describe the service standard to be observed by PDU and Contract committees in carrying out their part o f the procurement process.

16. Procurement Plan: the Borrower has at appraisal developed a procurement plan for project implementation which provides the basis for the procurement contracts, methods o f procurement and timelines (see Table 3). T h i s plan has been agreed between the Borrower and the Project Team as on June 01, 2007 and i s available at City Hall, Room 210, Appolo Kaggwa Road, Kampala. It wil l also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. However this plan shown in Table 3 i s not sufficient for monitoring o f procurement implementation. PDU o f KCC wil l prepare and submit to

53

the Bank a detailed Procurement Plan with more detailed information o n key processing dates, with plan and actual columns. The actual format o f the detailed procurement plan will be provided by IDA

17. Quality and compliance control: in order to ensure that project staff at a l l levels comply with the agreed procurement procedures, the project will finance an independent procurement consultant who would review project procurement o n a quarterly basis. The Consultant would prepare a report and submit the report to KCC, MOLG and to the bank. The report would include h o w each contract i s processed, progressed and implemented. The report would also highlight any grey areas and make recommendations o n remedial measures. The specific TOR o f the Consultant will be included in the PIP.

18. Procurement supervision: for the first 12 months o f project implementation (which could be extended to another 6 months if need be), the Town Clerk will organize and chair quarterly procurement review meetings to be attended by the project implementing staff o f KCC (including PDU and members o f the Contracts Committee), members o f the MOLG Contracts Committee, a representative o f PPDA, and Wor ld Bank project team. The main purpose o f the quarterly meetings will be to review progress o n procurement implementation and direct in a timely manner o n actions required to make good any shortcomings o n the implementation. The PDU will prepare for the quarterly meetings an update o f the procurement plan indicating how each contract o n the plan has progressedwill progress and highlighting emerging issues (if any) that require the meetings consideration. The quarterly meeting wi l l : (i) review the updated procurement plan and emerging issues; (ii) review reports f rom the Independent Procurement consultant; and (iii) take decisions o n actions required to put procurement on track. The meetings’ decisions will be specific and will include an indication o f who (by person) would be responsible for the action and by when. Each meeting will also review actions taken o n previous meetings decisions and instructions and direct o n further actions, if any are needed.

Approval and clearance authorities

19. The clearance and approval procedures are tabulated o n Table 1. All requests for non-objection must be sent only when the i tem to be given a non objection has been cleared with the highest authority in K C C or MOLG as per table 1. Requests must be accompanied with documentary evidence o f such authority.

Procurement Information and Documentation

20. The PDU o f KCC will maintain a fi le for each contract and the fi le shall contain procurement records o f the procurement proceedings containing the following information. Procurement Records maintained by K C C shall upon request be made available for inspection by authorized officials o f the Government, Audit Service, Independent Procurement consultant and Wor ld Bank Officials.

(i) A copy o f the current Procurement Plan and identifying the particular contract o n the plan;

(ii) A br ie f description o f the goods, works or services to be procured, or o f the procurement need for which K C C invited proposals or offers;

(iii) Contract documents, including advertisement notices, bidding and proposal documents, bids received, bid and proposal evaluation reports, minutes o f relevant approving committees, letters o f acceptance, contract agreements, securities, related correspondence, certified payments, any disputes and information o n their resolutions, etc. These records will be maintained in an orderly manner so as to readily available for review, audit and any reference;

54

(vii)

(viii)

(xii)

(xiii)

The names and addresses o f suppliers or contractors that submitted tenders, proposals, offers or quotations, and the name and address o f the supplier or contractor with whom the procurement contract i s entered;

Information relating to the qualifications, or lack o f qualifications o f suppliers or contractors that submitted tenders, proposals, offers or quotations;

The price, or the basis for determining the price and a summary o f the other principal terms and conditions o f each tender, proposal, offer or quotation and o f the procurement contract if these are known;

Evaluation reports and comparison o f tenders or proposals, offers or quotations;

If the tenders, proposals, offers or quotations were rejected a statement to that effect and the grounds for the rejection;

If procurement proceedings did not result in procurement contract, a statement to that effect and the reasons;

A statement o f the grounds and circumstances upon which KCC relied to justify the selection o f the method o f procurement used;

In procurement proceedings involving direct invitation o f proposals for services, a statement o f the grounds and circumstances on which KCC relied to justify the direct invitation;

A summary o f any requests for clarification o f the pre-qualification or invitation documents, the responses received as well as a summary o f any modification of the documents; and

A record o f any complaints received ffom suppliers, contractors or consultants and the responses received.

55

Table 1: Roles and Responsibilities for procurement tasks between KCC and MoLG

Regulation 72 o f

10. PPDA, 2006

Evaluate bids/Proposals and Bidproposal Evaluation I prepare report I Committee

11 I Forward bidproposal Evaluation I TC K C C

12

13 14

15

Report to Contracts Committee o f M O L G Approve proposed contract award Contracts Committee M O L G Include amendments

Prepare contract Documents PDU K C C Sign Contract Permanent secretary, M O L G & Role o f Town Clerk

Supervise contract performance,

to contracts

TC KCC PDU/Technical staff KCC

16 Town Clerk by use o f Quarterly meetings.

including preparation o f payment certificates Monitor implementation o f Procurement Plan has overall

responsibility to ensure project

18 delivers as planned.

Prepare Annual Procurement Audit Consultant

An Independent Procurement

56

Table 2: Thresholds for Procurement Methods and Prior Review'

The Thresholds for procurement methods show below wi l l be used for procurement methods on the procurement plan.

Expenditure Category

1. Works and Technical services

2. Goods

3. Consulting Services' and Training

Technical Services

All Types o f contracts

Contract Value Threshold

(US$)

Above US$350,000

US$50,000 to US$350,000

Below US$50,000

Above US$150,000

US$20,000 to US$150,000

Below US$20,000

With f i rms above us$loo,ooo

With individuals above US$50,000

With Firms below us$100,000

With Individuals below US$50,000

All types o f contracts Above US$lOO,OOO

us$20,000 to us$loo,ooo

Below US$20,000

None

Procurement Method

ICB

NCB

Shopping/selective bidding

ICB

NCB

Shopping

QCBSLeast Cost

Individual

Quali fications/Other

Individual

ICB

NCB

Shopping

Sole source and TORS

Contracts Subject to Prior Review

(US$)

All contracts

The First two Contracts

None

All contracts

The First two Contracts

None

All contracts

All contracts

First contract

First Contract

All contracts

The First two Contracts

None

A l l contracts

' Short list of consultants for services, estimated to cost less than $200,000 equivalent per contract, may comprise entirely o f national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

57

Table 3: Procurement Plan for Goods and Works

1

Ref. No.

2 3

Contract Estimated Procurem ent Method

Pre- Domestic Review qualificati Preference by Bank On (yes/no) (yesho) (prior 1

Post)

8 9

Expected Bid-Opening Date

Comm ents Cost (% mill)

-excludes local taxes

(Description)

~~

Records Centre & Archive - Modifications to office space

0.010 Shopping N o N o Post 8" September 08

Drainage System: Lot 1-Nakivubo tributaries, Lot 2-Nalukolongo

secondary Channel 2,

Lot 3-Nakivubo - Reticulation System,

Lot 4-Priority tertiary drains, Lot 5-Lubigi channel.

6.770 ICB N o Yes Prior 16" April 09

25" May 09 Yes

Yes

Yes

Prior

Prior

Prior

Traffic Management Schemes and Road Rehabilitation: Lot 1: Traffic

Improvement Schemes & Rehabilitation o f Bitumen Roads in CBD,

Lot 2-Rehabilitation o f Bitumen Roads Outside CBD.

Upgrading gravel roads to Bitumen-Phase 1 : Lot 1 -Kawempe

Mperenve Rd & Kalerwe Rd,

Lot 2- Bukoto - Kisaasi Rd,

8.924

4.212

1.313

ICB

ICB

ICB

N o

N o

N o

17" October 08

26" January 09 Upgrading gravel roads to Bitumen-Phase 2: Kimera Rd & Lukuli Rd.

Extension to Mpererwe landfill site

0.765 ICB N o Yes 22nd October 09

Prior

Prior

Prior

0.650 ICB N o Yes Landfill gas extraction system Phase 1.

Improvement o f Markets: Lot I-Kibul i Mkt. Lot 2- Kawempe Mkt. Phase 1

0.945 ICB No Yes 20" August 09

58

B) GOODS

EQMT-1 Computers & Other Electronic Office Equipment

ICB 1 NO 1 No I Prior 1 ::February I 0.430

NCB

ICB

NCB

NCB

EQMT-2 No No Post 19" August 08

No No Prior 14" March 08

No No post 14" July 08

No No Post 19" June 08

Non-Electronic Office Equipment (including Records Management Equipment)

Vehicles & Motorcycles: Lot 1-Motor Vehicles Lot 2-Motor Cvcles

0.05 1

0.512

NCB

VEH-I

No I No I Post I 10* December 1

Direct

Direct

EQMT-3

No No Prior

Prior

I 0.032 Field Equipment for Imolementation o f EMP

EQMT-4 Engineering Software I 0.085

EQMT-5 Acquisition of Urban 0.068 Planning Satellite Maps

Shopping No I No 1 Post 1 ,llSeptember 1

ICT-1 0.323

NCB 1 No I No

I Prior I 5"June08 I Extension and Maintenance of Network.

Increase bandwidths for: leased voice lines of KCC's Wide Area Network.

ICT-2 0.041

I I O 8

Direct I No I No I Prior OPC-2 Fuel I 0.065 ~

OPC-3 Stationary I 0.033 I Post I Shopping I No I No I ~

OPC-4

OPC-5

OPC-6

Advertisement 0.132

Field testing and 0.009 analyses' consumables for EMP

Shopping No I ~~~ I No 1 Post 1 OPC-7 0.010 Shopping No I No

I Post I Tools, equipment and materials required for

Coordination Desks at divisions and the headquarters

0.007 OPC-1

C) NON CONSULTANCY SERVICES

OPC-8 I Maintenance of vehicles 0.082 Shopping I Post I I No No I Servicing office

OPG9 I equipment 0.015 Shopping

No I No I Post I OPC-10 I Office running costs 0.025 Direct

OPC-11 Outsourced field laboratory analyses and servicing field equipment for EMP

0.019 Shopping

~

OPC-13 Preparation and payment of compensation packages, monitoring resettlement and follow up on effectiveness, outcomes and dealing with outstanding issues.

0.01 1 Direct

59

Table 5: Procurement Plan - Consultancy Assignments

Selection Method

1 2 Review

(Prior I Post)

Bank

1 4 Expected Proposals Submission Date

Ref. No. Description of Assignment

IDCS-01 Management Information Systems: Human Resource, Education, Assets, Court Case, Urban ':--- Development & Contracts.

Comments Estimated cost (US% mill)

QCBS 0.274 Prior

IDCS-04

IDCS-05

Implementation of PR Strategy 0.423 QCBS Prior 19" June 08

Developing & piloting a Gender Community Policy 0.106 QCBS Prior 20" November and a Strategic Plan for Public Health & Environment Services.

08

IDCS -07

IDCS-08

IDCS-09

IDCS-IO

Implementation of Records Management System 0.010 I Single I Prior I 20" February 08 Source

Legal Services - Implementation of KIIDP RAP 0.024 QBS Post

Supplementary Valuation & Rating of New 0.159 LCS Prior 20" December Properties (5 Contracts) 07

Revenue Enhancement & Management Systems and 0.475 QCBS Prior 20" March 08 Ground Rent Register & Development System

KCC HIV/AIDS Work Place Strategy 0.137 QCBS Prior 20" August 09

Review and Update of KCC's M&E Framework, 1 0.190 1 QCBS 1 Prior I 20" March 08 1 Citizens Score Card & Staff and Council Survevs

IDCS-I 1

IDCS-12

Quality Assurance System for Infrastructure Works 0.106 QCBS Prior 14" November

Updating Kampala Structure Plan 1.253 QCBS Prior 19" February 09

08

1 IDCS-06 1 Technical Support- Implementation of RAP for I 0.1 19 I Single 1 Prior 1 31" January 08 infrastructure works Source

Design update, detailed design and construction supervision for upgrading priority gravel roads to bitumen.

Design update and construction supervision of Landfill extension

0.455 QCBS Prior 6" December 07

0.173 QCBS Prior 9" October 08

PMS-1

I IDCS-13 I Upgrading of KCC's GIS I 0.159 I QCBS I Prior I 17 January08 I I

Project Implementation Support - Professional 1.021 Single Prior Expected Personnel & Support Staff (several contracts) Source Commencement

Date: 1 January 08

I ISCS-I 1 Design update and construction supervision of I 0.635 1 QCBS I Prior I S"June08 drainage improvement works I

PMS-2

PMS-3

Design update, detailed designs and construction 1 0.956 supervision for traffic management schemes and rehabilitation o f bitumen roads

1 QCBS 1 Prior 1 17" April 08 1

~

Project Audit 0.153 LCS Pnor 28 March 08

Mid-Term Progress Review 0.095 CQS Post 14Lh August 09

ISCS-3 i ISCS-4

I QcBs I Prior I I ISCS-5 I Design &construction supervision of landfill gas 0.147 extraction system. I I Detailed design and construction supervision of 1 0.213 I QCBS I Prior 1 7"August08 I ISCS4 I markets improvement works

Social Impact Study at Implementation Completion 0.053 1 CQS I Post 1 ;:November I PMS-4 I Preparation.

60

C. ImulementinP Agencv Cauacitv Building Activities, Imulementation Oueratinp Costs and Other Supuort Services/ Activities with Time Schedule

1. recommendation) are listed with time schedule

I n this section the agreed Capacity Building Activities (some items could be from CPAR

No

Ref. No.

TR- 1

TR-2

TR-3

N o

ws-1

Contract (Description)

Training including capacity building training for EMP & RAP implementation

Technical Cooperation (Twining)

RAP sensitization workshops, meetings and focus group discussions for KCC implementation staff, area politicians, affected communities and households

SFR Performance Review Workshops (bi- annual)

Estimated

-excludes local taxes

0.420

cost ($ mill)

0.264

0.03 1

0.095

Procure ment Method

QSS

Single Source

Direct

(yesho)

I

No I No

No No

Review by Bank (Prior I Post)

Prior Review of Annual Training Plans

Prior

Post

Prior

Expected

nt Date

16'h January 09

I

29'h September 08

61

Annex 9: Economic and Financial Analysis

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

1. KI IDP with a total base cost o f US$33.3 mil l ion includes three components: (i) Institutional Development (US$5.5 mill ion or 16.0% o f the total project cost); (ii) Citywide Infrastructure and Improvement Services (US$25.1 mil l ion or 76%); and (iii) Project Management, Monitoring and Evaluation and Civi l Society Participation (US$2.7 mil l ion or 8%).

2. Component 2: Citywide Infrastructure and Services Improvement which represents over 76% o f the project baseline cost i s to address four priority areas for which the cost-benefit/financial/cost- effectiveness analyses have been carried out:

A. Drainage system (US$8.7 million); B. Urban traffic improvement (US$13.9 million) consisting of: area traffic management schemes

(without junctions) Junction improvement schemes; Upgrade gravel roads to bitumen standard; Periodic maintenance/ Rehabilitation o f bitumen roads; Urban markets infrastructure (US$1 .O million); and Solid waste management (US$l.5 million).

C. D.

A. Economic Analyses of Drainage Works

Table 1: Proposed Drainage Works

3. Methodology. The drainage systems in Kampala form integrated networks. The construction and rehabilitation works to be carried out on specific spots, in the secondary or primary channels would impact on the performance o f the channels both downstream and upstream. Improvement in the selected drainage should therefore be seen in terms o f both local impacts and within the broader context o f better

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operation o f drainage channels as a whole. The KIIDP would finance many o f the black spots prioritized in the Kampala Drainage Master Plan (KDMP) as noted in Table 1: Proposed Drainage Works.

4. The basis o f the economic analysis o f the drainage sub component i s the costhenefit analysis. The design o f the channel i s for a 10-year return storm period with an economic l i f e o f 40 years. Construction period for most subprojects are expected to be over a two year period, although some works may be completed in shorter periods. The cost-benefit evaluations o f the drainage subcomponent are based o n detailed data collected and presented in Kampala Drainage Master Plan (KDMP) in March 2003 with updated costs to January 2006 as part o f the Appraisal o f KIIDP.

B. Assumptions

5. Costs. Construction, operating and maintenance costs are based mainly o n design estimates and are updated to January 2006. Assessment o f land acquisition costs, building expropriation costs and relocation factors are included in the overall land acquisition costs.

6. Benefits. Flooding f rom primary and secondary channels has impact on residential, commercial and industrial buildings, road network, environment, health; mitigation measures to be used and even on peri-urban agriculture produces. Some o f the costs to individuals and society attributed to flooding are quantifiable and others are non-quantifiable. Table 2: Coefficients for the estimation of flooding costs provides main category o f benefits and respective costs. The savingshenefits attributed to improved drainage are summarized below.

Table 2: Coefficients for the Estimation of Flooding Damages Costs

7. Damages to Residential and Commercial Properties. The flooding o f residential property damages buildings and structures, adversely impacts the value o f property, and causes additional expenses in cleaning-up and flood prevention and reduction measures. Flooding impacts significantly rental value. Residential houses in flooded areas have rents below the rents o f similar houses in non-flooded areas o f the city. For example, a residential room has rental value o f UShs. 375hquare meter per month in flooded areas. A comparable room in non-flooded areas rents for UShs. 625hquare meter; represents an increase o f 67% indicating the importance o f drainage in residential investments. The savings in cleaning-up, maintenance and flood prevention measures attributable to improved drainage i s estimated to be about 5% o f the construction cost per m2 and i s expected to grow at about 5% starting 2007.

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Table 3: Estimated values for flood damages to property

Building Type

Low level M e d i u m High

Rental Values Construction costs per m2 Attributed flood (UShs per room per month) (UShs) repair costs

500-1 000 50,000 2,500 1000-15000 1 10,000 5,000 15000-25000 165.000 7.500

(Ushs)

Commercial I25000 I 50,000 I 25,000 Shackshoutiques Solid Construction I 60,000 I 100,000 I 50,000

8. Disruption of commercial and industrial activities. The impact o f flooding on commercial and industrial activities i s reflected both in delays to transport o f goods, r a w materials and personnel, as wel l as damages to goods in transit and storage. However, i t i s not easy to assess the full impact o f the disruption to commerce and industry. An income survey o f retail traders was carried out based o n a sample o f 251 traders in a Social Impact Assessment Study for the Nakivubo Channel. The study estimated that the trader’s average income was around UShs.250, 000 per month or UShs 3 b i l l ion per annum. On this basis the estimated loss o f benefit per trader per year due to lack o f improved drainage was around UShs.150,OOO.OO or 5% o f the average annual income.

9. Road damages. Drainage reduces the pace o f deterioration o f the road network and results in cost savings o f vehicle operating costs. With improved drainage systems, less frequent repairs and periodic maintenance and rehabilitation will be required. The expected economic l i f e o f the road network wil l be enhanced and the resulting reduced roughness o f the road surface resulting in savings o f vehicle operating costs to the road users.

10. Disruption to Traffic. Under the Uganda rainfall condition, the frequency o f flooding in Kampala i s between 10 to 15 times in a year lasing 3 to 4 hours per flooding. Private and commercial vehicles are blocked f rom passing. Table 4 shows the estimated coefficients for value o f t ime for passengers.

Table 4: Estimated coefficients for the value of time for passengers

11. Savings in agricultural produce. Agricultural crops o n the sides o f the drainage channels are often damaged by flooding. The saving estimates in losses are valued on the basis o f the compensation schedule agreed by KCC and the Ministry o f Lands and Environment.

12. Non-quantifiable benefits. Improvements to the environment, health benefits f rom water borne disease due to improved drainage, better functioning o f markets and reduction in the loss o f goods, etc.,

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are significant. indicating that the cost-benefit estimates are conservatives.

The impact o f such benefits i s not fully reflected in the cost-benefit assessments

Makindaye Division M6- Railway Line /Queen ’s way

C. Cost-Benefit Results

0.8 0.16 N/A N/A

Table 5: Cost-Benefit Results

Base Case I 4,251.0 I 16.8% Sensitivitv at IS% increase in total costs I andlS%decrease in total beneflts

I 1077.85 I 13.1%

Sensitivity Analysis

13. The base case represents a Ne t Present Value o f Ushs.4,25 1 m i l l i on at a discount rate o f 12% and overall EIRR o f 16.8%. A simultaneous increase o f 15% in total construction and maintenance costs o n one hand and a decrease o f total benefits o n the other resulted in an overall o f Ushs.1077.85 mi l l ion o f Ne t Present Value at a discount rate o f 12% and an overall EIRR o f 13.1%, indicating that the selected projects represent a positive return o n investment.

Economic Analysis Urban TrafJc Improvement (US$I3.9 million)

14. The Urban Traffic improvement subcomponent covers: (a) area traffic management: dealing with measures for improved traffic f low and provision o f traffic management measures including guard rails, signs, etc; (b) junction improvement: providing localized widening and signalizing at junctions. This will be complementary to the four junctions and round about improvements that i s planned to be carried out in parallel under Japanese funding; (c) road maintenance and upgrading: periodic maintenance (28.6 km) and upgrading o f gravel roads (1 1 km) to bitumen standard. The roads were selected on the basis o f improving connectivity and economic rate o f return.

15. Methodology. The approach used for the economic analysis i s the costhenefit analysis o f “with” or “without project” case. The Urban Traffic improvement component (US$12.1 mill ion) i s expected to provide Kampala City with improved integrated road networks for more efficient traffic f l ow

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Road Name From To Length Current Maintenance Cost Division (km) Condition Strategy US$

million Acacia Ave Kira Rd YK Lule Rd 1.8 Fair Overlay 0.36 Central Buganda RD The Squre Nakasero Hil l Rd 2.0 Fair Overlay 0.40 Central Bukoto-Ntinda Lugogo bypass Ntinda 3.0 Fair Overlay 0.60 Nakwa Rd

Eight St. I Mukwano Rd I Mbogo Rd I 0.6 I Poor IReconstruct I 0.12 I Central Hioma Rd I Bakuli Junction I Nakulabye Rd I 1.0 I Fair I Overlay I 0.25 I Lubaga

Wandegeya Rd Mackenzie Vale Sub-total Bukoto -kiasi

I A ~ ~ o l l o K a w a I Mekerere Hi l l I Nasal0 Rd I 1.5 I Fair I Overlav I 0.30 I Central

Bombo Rd Lumumba Rd 0.3 Fair Overlay 0.06 Central Lugogo bypass Malcolm X drive 1.0 Fair Overlay 0.25 Central

Kira Rd Kisaasi Rd 3.0 Poor Upgrade 1.21 Kawaka 28.59 5.26

Rd Karenve Rd Kawempe-

Cayaza Rd Ttula Rd 3.8 Poor Upgrade 1.40 Kawempe Bombo Rd Cayza Rd 3.0 Poor Upgrade 1.00 Kawempe

Mperenve Rd St. Barnbas Rd Tankhii Rd Kisugu Rd 1.0 Poor Upgrade 0.32 Makindye

16. The construction period for most subprojects i s expected to be over two years, although some works may be completed in shorter periods. The cost-benefit evaluations o f the c iv i l works are based on detailed cost, traffic and accident data collected and presented in Kampala Urban Traffic Improvement Plan (KUTIP) July 2003 and updated to January 2006 as part o f the Appraisal o f KIIDP. The discount rate was set to 12% and the evaluation period i s 8 years for overlay and 20 years for the upgrading road sections. The exchange rate used i s US$l.OO equals Ushs.1820 (January 2006).

Subtotal

17. are as follows:

Main assumptions. The main assumptions used in estimating the N e t Present Value and ERR

I 10.8 I 3.93

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18. Investment costs. The investment costs for both periodic maintenance and upgrading are shown in Table 6. The costs for periodic maintenance range between US$153,000/km and US$253,000/km. The investment costs o f the upgrading works ranges between US$333,000/km to US$403,000/km. Road maintenance unit costs i s an average o f US$3,800/km for paved and US$6200/km for gravel road.

Project benefits

19. Benefits. The main benefits o f the urban traffic improvement are savings in vehicle operating costs to the growing number o f road users, savings in passenger travel time and reduced costs due to reduced incidents o f fatal and severe injuries to passengers and the traveling public. Net benefits estimates were based Highway Development and Management Mode l (HDM-4), which stimulates highway l i f e cycle and vehicle operation conditions and costs for multiple road design and maintenance alternatives. Vehicle operating costs were for six vehicle classes. Periodic maintenance and upgrading costs estimated in financial terms were converted into economic terms (net o f taxes).

20. Traffic Count. The post-construction traffic i s based o n traffic counts made in 2003 KUTP study projected to January 2006. Post-construction traffic growth i s assumed to grow f rom 2006 levels at annual rate o f 2% for the economic l i f e o f the project. The average daily traffic count i s presented in Table 10.

21. Vehicle Operating Cost savings. Net Benefits due to savings in vehicle operating costs were computed using Highway Development Management Mode l (HDM-4). Savings in VOC result due to improvement in surface condition f rom fa i rhad to good. The resultant savings for each vehicle type and changes in road condition are presented in the Table 8 and Table 9 provides the aggregate net saving in V O C per vehicle km.

22. Travel time Savings. The benefits due to travel time savings are calculated based o n driver wage per hour, crew wage per hour, passenger work time value, and non-work time value. The benefits are aggregated value o f occupant time in Ush/hr for the vehicle type shown. The urban traffic improvement subcomponent would help minimize VOC, travel distance and travel time. Table 9 summarizes the value o f travel time savings in UShs.h per vehicle-km.

23. Accident saving. Currently road accidents o n Kampala Urban road network are very high. Over the period 2002 to 2003 the average fatality was 230 persons per year and severe injuries averaged over the same period some 8,434 persons. Costs o f damaged property are not available. A major benefit o f the road improvement in traffic management subcomponent i s reduction o f accidents due to improved signs, and minor c i v i l works improvements. Insurance companies for various types o f injuries form the basis o f the unit accident cost. Such costs are not available for Uganda at the time. Kenya’s figures are as follows: Accident records do not permit a detailed analysis o f the accident history o f the road. The base case assumes an average accident cost per fatality o f US$13,600 and US$2,200 per person injured. The figures used in estimating the accident cost are for Kenya.

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Vehicle Operating Cost

Passenger working t ime USWlt 940 360 940 Passenger non-working t ime USh/lt 3 60 240 Cargo T ime Discount rate ( "3 ) 12 12 12

Table 7: Vehicle Fleet Characteristics and Economic Unit Costs provide

360 3 60 940 360 3 60 360 30 78 266 12 12 12

Fatal Injury Damage to property

Source: KUTIP

Table 8: VOC and Time in Ushshehicle-km

Accident costs" (US$) Accidents (Uganda) 13,600 230 6,800 8434 2,200 NIA

Table 9: Accident Unit cost

Accident rate per 1 m i l l i on vehicle -km T w o lane Road actual

2 accidents 2 accidents

'I

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Results of the Cost-benefit analysis

Base Case

24. Table 10 summarizes the N e t present Value at 12% discount rate for each o f the road sections. Overall the overlay has a Net Present value o f UShs.ll,l23.0 mil l ion and ERR o f 38%. Some road sections have high rate o f return while others have less than the discount rate o f 12%. However, the road maintenance subcomponent has an overall Net Present Value o f Ushs.8,516.0 mil l ion at the discount rate o f 12% and ElRR o f 28% for the base case. The road subcomponent has overall Ushs. N e t Present Value of 17,296 mil l ion at a discount rate o f 12% and ERR o f 32%. Overall the result i s robust. Wi th simultaneous increases o f 15% in total costs and 15% decreases in benefits the NPV at 12%discount rate i s UShs.10,249.0 mil l ion and the ERR i s 23%.

+15% cost& -15% benefits

Table 10: Traffic Estimates (AADT) and Traffic Composition (%)

Road Section Length Net Present Value ERR Net Present Value ERR (km) I I UShs.Million YO UShs. Million %

St. Barnabas road*

Average

I Accessroad I 1.8 I 16857 I 1670

1 1542 2130 55 1491 35 11.95

17296 32 10249 23

Hoima road 12656 0.8 2982 28

Kibuli Road 1.8 5783 297

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Table 11: Distribution of Benefits

Decrease in Vehicle Operating Costs Decrease in passenger time costs Decrease in accident costs

I Distribution of Net Benefits I PV (millions Ushs.) I Percent (%) I I

28,543.94 83 % 5,087.13 15% 790.51 2%

I Increase in road agency cost 116,355.41 148% I I

Type o f construction Internal Rate of Return (YO) Base Case I N o Time I N o Accident I Cost +15%

I Net societal benejits(NPv 134421.58 1100%

Overlay Upgrading

25. Table 12 presents the results o f the sensitivity analysis eliminating passenger time savings, eliminating accident benefits, increasing costs and decreasing benefits by 15%. The result shows that the entire project has positive NPV and ERR.

Benefits - 15% 38% 28% 37% 28% 28% 27% 28% 21%

Table 12: Economic Evaluation Sensitivity Analysis

I I I I Total 132% I 27% 132% I 23%

26. T h i s investment will provide for markets infrastructure (access roads, lighting, sanitation, shades, showers, etc) to selected markets; and prepare detailed designs for the high priority markets to be developed during Phase I1 based o n the feasibility study carried out. A financial analysis was carried out by KCC for the f ive markets proposed. These are: Kibuli, Kalerwe, Kasubi and Kawempe and Mbuya. The financial rate o f return shows that al l except Mbuya have financial rate o f return o f over 12% indicating that the market infrastructure works i s financially feasible. Moreover, the analysis shows that the four markets have a pay back period o f between 5 and 6 years indicating a sound return o n investment (for detail see project file). The overall economic rate o f return o f the urban markets infrastructure i s 14% and the NPV at 125 discount rate i s Ushs 1323.9 mi l l ion. An increase o f 15% in cost and reduction o f 15% in benefits results in ERR o f 12% and NPV o f Ushs 38.95 mill ion, indicating that the urban markets subcomponent too i s economically justifiable.

Urban markets Infrastructure (US$l .O million).

27. Solid Waste Management (US$1.5 million). T h i s subcomponent i s to develop a 6 acre land adjacent to the existing site; provide a sorting and composting facil i ty at the exiting landf i l l site; and prepare design for the development o f the new landfil l site to be implemented during Phase I1 o f the program. In the short run there i s n o alternative than expanding the existing site. The function o f the compositing facil i ty i s to optimize the operation o f the existing facility and i s considered the most cost- effective alternative available for KCC in the short run.

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Annex 10: Safeguard Policy Issues

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

1. Phase 1 o f the KIID Project will support infrastructure investments designed to improve (a) drainage (through channel lining, culvert upgrading, slope improvement and general bush clearing o n channel embankments, the construction o f a berm, and reticulation systems), (b) road maintenance and traffic management (rehabilitation, periodic maintenance), (c) urban markets (access roads, lighting, sanitation, shades, stowers etc.), and (d) solid waste management (extension o f the existing landfill) in the Kampala District3. Kampala i s the commercial and polit ical capital c i ty o f Uganda, with a population o f about 1.2 mill ion, and an annual demographic growth rate o f about 3.9%4. The Kampala District accounts for about 80% o f the country’s industrial and commercial sectors, over 60% o f the urban population, and generates over 60% o f the national GDP. Kampala i s built o n a series o f hills and valleys, with gentle slopes separated by valleys consisting o f natural streams, drainage channels, and wetlands o f varying gradients.

2. Uganda has a National Wetlands Policy (1995), designed to curtail the rampant loss o f wetland resources; wetlands are also protected under the Constitution (1 995), the National Environment Statute (1995), and the Land A c t (1998). The national wetland pol icy specifically addresses issues related to water supply and effluent treatment as the rapidly growing population requires increased water supplies and discharge o f effluents at affordable costs. Many urban settlements, including Kampala City, are dependent o n wetlands for water supply, treatment, and discharge o f effluent.

3. Consistent with Uganda’s environmental policies and legislation as wel l as the Bank’s safeguard policies, the Borrower has carried out an Environmental Analysis (EA) o f the planned infrastructure investments in the proposed project areas. The Final EA report, dated November 2006, and Final RAP, dated October 2006, were disclosed in Uganda in publicly accessible places and at the Bank’s In fo Shop on December 4,2006.

4. The EA report includes an Environmental Management Plan (EMP) which outlines institutional arrangements for the implementation o f appropriate mitigation and monitoring measures during construction and operation o f the above-mentioned infrastructure investments as wel l as related capacity building measures and cost estimates.

5. The main elements o f the (a) EMP are discussed below, as are (b) the current institutional framework; (c) the environmental and social conditions in the project areas; (d) the potential environmental and social impacts o f the planned infrastructure investments, and (e) the outcome o f stakeholder consultations carried out in the course o f EA preparation.

A. Environmental Management Plan (EMP)

6. The EA recommendations focus o n the need to (i) develop and strengthen environmental management at K C C through the KID Project (KCC, under the Ministry o f Local Government, will be responsible for the overall implementation o f the KID Project); (ii) ensure effective environmental monitoring o f the various project activities as described in the EMP; and (iii) establish and strengthen strong inter-agency relationships between the KIID ProjectKCC and NEMA, WID, DWD, the Uganda

3About 189 square kilometers in size according to the Kampala Urban Sanitation Project Report, 1994. While some o f t h i s area i s fully urbanized, a significant portion i s semi-urbanized, and the remainder i s regarded as rural settlements.

Uganda Bureau o f Statistics, 2002

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Police; the Traffic Department, and the Uganda Taxi Operators and Drivers Association (UTODA). Specific measures designed to strengthen KCC’s environmental management capacity in the areas o f wetland management, roads management, and the management o f urban markets are presented in the EMP .

7. As regards wetland management, the EA report proposes specific measures such as: (i) training o f relevant staf f in environmental management skil ls; (ii) supporting the District Environment Officer (DEO) in the identification o f a l l plots that are l ikely to be within wetland boundaries by facilitating the process in terms o f logistics and other needs; (iii) implementing a public awareness campaign to prevent encroachment into wetlands; (iv) instituting in-house capacity for information management, including provision o f computers and data management software to the District Environment Off ice to generate and track a variety o f documents; including information on environmental monitoring, environmental audits, as wel l as the status o f mitigation and monitoring plans and to manage in-coming and out-going information generated by the upgraded investments.

8. provided, for example,

The EA report further proposes that - after a proper assessment - training in general areas be

0

0

0

Training in project management and compliance with the proposed mitigation measures in the EMP; Training in general environmental management and wetlands management in particular; and Senior staff members should be provided with training at a workshop for Training o f Trainers (TOT) to be organized jo int ly with NEMA and WID.

9. As regards roads management and the management o f urban markets, the EA report proposes capacity building for K C C staff in the fol lowing areas: (i) establishment o f minimum operational standards for the management o f outsourced facilities; for example, solid waste management standards for urban markets need to be developed and instituted; (ii) transformation o f the engineering department into a professional unit, capable o f supervising the outsourced works; (iii) establishment and implementation o f routine maintenance procedures; (iv) training in procurement procedures; and (v) training in contract supervision.

10. The EMP outlines the institutional arrangements for the implementation and monitoring o f mitigation measures, capacity building measures, and cost estimates for the proposed infrastructure investments. The main elements are summarized below:

1 1. Implementation of mitigation measures: The contractors will be pr imari ly responsible for implementing the proposed mitigation measures as detailed in the Environmental Guidelines for Contractors (see chapter 6 in the EA report) which will be attached to the bidding documents. There i s a clear link between these environmental guidelines and the relevant mitigation measures presented in the EMP. KCC will be responsible for the implementation o f mitigation measures under the following components:

(a) drainage component where KCC’s District Environment Officer (DEO) will arrange for the planting o f papyrus species and other sedges downstream o f the channels to mitigate potential impacts due to higher pollution rates that are l ikely to result f rom increased f low rate in the channels;

(b) traffic and road maintenance component where K C C will ensure surface dressing and regular maintenance o f shoulders;

(c) urban markets component where KCC will arrange for the provision o f temporary alternative market sites as reported in the RAP; and

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(d) solid waste management component where K C C will (i) arrange for the fencing o f the existing landf i l l site and the extension site to prevent accidents and unauthorized access during and after the decommissioning phase; costs under Phase 1: $15,000 for the existing site; $10,000 for the extension; (ii) arrange for the fencing and replanting after decommissioning to prevent erosion and subsequent pollution o f waterways and water bodies as we l l as neighboring wetlands; costs under Phase 1: $10,000 for the current site; $5,000 for the extension; and (iii) ensure pre-treatment and stabilization o f leachate pr ior to disposal into waterways, and rehabilitation o f the constructed wetland to ensure i t s proper functioning. Costs under Phase I: $40,000.

12. KCC will also be responsible for the implementation o f (i) activities related to compliance with the environmental safety and health regulations as outlined in the Environmental Guidelines for Contractors; and (ii) the proposed environmental training program (see below).

13. Monitoring: Throughout project implementation, NEMA, WID, and DWD will p lay a significant role in monitoring the implementation o f the proposed mitigation measures. For example, NEMA and WID will monitor (i) the compliance o f contractors with the environmental safety and health regulations that are part o f the above-mentioned Environmental Guidelines for Contractors; (ii) the reticulation to protect flora and fauna under the drainage component; (iii) the planting o f papyrus species and other sedges downstream o f the channels; and (iv) the re-vegetation programs using indigenous species at the end o f the construction phase.

14. DWD, NEMA and WID will jo int ly monitor (i) the pretreatment and stabilization o f leachate pr ior to disposal into water ways; (ii) the rehabilitation o f constructed wetlands as part o f the planned solid waste management investments; and (iii) the implementation o f the proposed environmental management training.

15. Monitoring indicators: The EMP includes monitoring indicators for each project activity, including capacity strengthening. For example, (i) number and types o f project-related accidents and illnesses; (ii) scope o f reticulation established; (iii) scope o f re-vegetation; (iv) extent o f erosion during construction; (v) surface drains and wetlanddwater clear o f wastes; (vi) extent o f community cooperation in environmental regulation enforcement; (vii) extent o f observed environmental hygiene, sanitation, and safety, (viii) scope o f the maintenance contracts; (ix) affected persons resettled; and (x) safety on and around the fenced o f f and fully tree-replanted former waste disposal facil i ty and presence or absence o f site related pollution in the proximate environs.

16. Means of verification: Under the drainage component, Environmental Audit Reports will be prepared to verify that re-vegetation (planting o f papyrus species and other sedges downstream o f the channels) has been carried out as required under the contracts. Under the solid waste management component, reports f rom communities and site audit reports as wel l as laboratory sample tests o f proximate surface water bodies or streamdrivers will show whether or not construction sites were protected against erosion through the construction o f temporary storm water drains. In addition, Environmental Audit Reports and laboratory tests (monthly reports o f treatment efficiency) will show h o w effective .efforts to (i) pre-treat and stabilize leachate pr ior to disposal into waterways, and (ii) rehabilitate the constructed wetland, have been.

17. Environmental management training: The training program will be implemented by K C C and aims to (i) strengthen staff scientific f ield research capacity; (ii) enable staff t o educate communities in environmental issues, hygiene, sanitation, and safety management skil ls; and (iii) enable staff to enforce environmental regulations. The training will focus on:

0 Environmental monitoring

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0

0

Environmental assessment and management sk i l l s including f ie ld sampling techniques, community advisory and facilitation sk i l l s Environmental l aw and legislation enforcement sk i l l s and techniques

Costs for Phase 1: $30,000.

18. OfJce strengthening: This would involve the purchase o f office furnishings, equipment, and other consumables. The purpose would be to facilitate office operations o f the team responsible for environmental monitoring, environmental assessment, and environmental management. Costs under Phase 1: $10,000.

19. Facilitating impact monitoring: This would involve the purchase o f field operations equipment for sampling and monitoring plus the facilitation o f f ie ld operations staff, i.e. those engaged in talung f ie ld samples, lab tests, community awareness outreach, environmental audit operations and regulation enforcement. The purpose would be to facilitate field operations o f the trained staff in ensuring that the recommendations o f the EMP are strictly adhered to and that any unforeseen negative environmental impacts are concurrently mitigated and prevented as much as possible. Costs under Phase 1: $35,000.

Total Costs for Phase 1: $115,000

(i) Current environmental and social conditions in the project areas

20. Drainage: The EA assesses specific drainage systems in the Lubigi wetland, Nakivubo tributaries and wetland, Nalukolongo upper reach and minor systems (drainage black spots) as wel l as in the Central, Kawempe and Makindye Divisions. The EA report notes that most drainage channels are narrow and shallow, and are frequently blocked by solid waste and s i l t (generated by unpaved roads and compounds, construction sites, agricultural areas) which i s carried into the drainage channels by storm water runof f and leads to frequent floods. In the course o f EA preparation, water samples were taken in several locations. The results showed that water quality in the drainage channels i s generally laden with pollutants that do not meet the National Effluent Discharge Standards, except for total phosphorus5. The Nakivubo catchment recorded the highest values for the variables measured by the EA consultants, followed by the Lubigi, Nalukolongo, and Kinawataka catchments. The results will serve as baseline data for water quality testing during project implementation.

21. It was observed that the above wetland areas are currently settled and used for commercial development. For example, one o f the drainage channels that empties into the Lubigi wetland passes through residential and commercial areas. In the Nalukolongo drainage system, most o f the original natural habitat has been modified through agricultural activities and settlements, and the communities experience frequent flooding. Flooding disrupts industrial activities, delays traffic, disrupts commercial activities such as shops and open markets, and damage people’s homes. There are n o centralized waste water treatment facilities in Lubigi and Nalukolongo; instead, septic tanks are used, or in some cases, domestic and industrial waste waters are discharged directly into the drainage channels. 22. The Nakivubo wetland separates Kampala City f rom the Inner Murcheson Bay o f Lake Victoria (a sole raw water supply for Kampala). M u c h o f the Nakivubo wetland has been settled and i s used for industrial development or for the cultivation o f cocoyam and sugarcane which have replaced the papyrus vegetation. The Nakivubo wetland receives untreated and partially treated effluents f rom the Nakivubo

The Nakivubo catchment recorded the highest values for the variable measured [Total Nitrogen (mg/l); Total Phosphorus (mg/l); Biochemical Oxygen Demand (mg/l) and Total Coliforms (CFU/100 ml)], followed by Lubigi, Nalukolongo, and Kinawataka, in that order. This i s mainly due to the fact that most establishments in Kampala are not connected to the sewer l ines and in some cases, there are leakages into the channels due broken sewer lines.

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channel which ultimately discharges i t s polluted contents into Lake Victoria at the Inner Murcheson Bay. Studies6 o n waste water treatment processes have shown that the Nakivubo wetland performs considerable tertiary treatment o f the effluents i t receives f rom the sewage works and Kampala. According to the EA report, the wetland protects the Inner Murcheson Bay f rom eutrophication and excessive loads o f pathogens which otherwise would be transported to the nearby Gaba waterworks. The reticulation o f the papyrus within the lower reaches o f the Nakivubo wetlands enhances this process by spreading the polluted water over a large area and hence increasing the purification activity.

23. Solid waste management: The current solid waste management facility in Mpererwe-Kitezi i s located o n a 29-acre site owned by KCC and i s operating since April 1996. It i s a containment site with a clay l iner system and a leachate treatment facility, subject to regulatory control. The site i s surrounded by hills, i s accessed via a bitumen road, i t s vegetation consists mainly o f short grasses and a few shrubs, and it i s bounded on the lower edge by a seasonal stream that f lows along the bottom edge o f both the current disposal area and the proposed extension area. Management problems at the current landf i l l site relate to the inabil ity o f the constructed wetland’ to provide tertiary treatment; the lack o f a manned gate to prohibit unauthorized access, and dust in the dry season and muddy soils in the rainy season.

24. At the current disposal volume (400-500 tons o f waste per day, year-round), the existing Mpererwe-Kitezi site i s expected to be full by the end o f 2008. In light o f this fact, and given that K C C intends to improve i ts waste management services, Phase 1 o f the KIID Project will support the extension o f the current waste disposal site by developing 6 acres o f adjacent land. The EA report describes the vegetation and fauna (i.e. subsistence crops, various grasses, marabou stork, egrets, monkeys) in the extension area and notes that none o f the flora and fauna in this area are endangered species and will not be significantly impacted by the project as they occur in the neighborhood o f the project and area also widely distributed a l l over the country.

25. Road rehabilitation and maintenance: The current state o f roads and traffic management in Kampala i s very poor. The roads are generally poor ly planned, are full o f potholes, some roads are narrow, others have n o marked traffic lanes, and few roads have traffic signs. This leads to traffic accidents and congestion during peak hours. Some o f the roads to be rehabilitated and maintained, including urban traffic improvements, under Phase 1 o f the KID project are located in the vicinity o f the Nakivubo channel and pass through commercial and residential areas. Vegetation in these areas tends to be l imi ted to shade trees and various types o f grasses.

26. Urban markets: Kampala’s markets are characterized by inadequate sanitary and waste disposal facilities; irregular waste removal by the private sector operators; drainage channels blocked by market wastes; and, depending on the season, they become very muddy or very dusty. In the case o f the Kalerwe market, this situation i s aggravated by the fact that several unlined secondary drainage trenches feeding into the main Nsooba drainage channel pass through this market. The Kasubi market i s located in a road reserve, and some vendors operate within the road and o n top o f the drains, thereby inconveniencing traffic. The Kawempe market has n o drainage and floods during heavy rains.

(ii) Current institutional framework

27. The EA report identifies those institutions that will be responsible for environmental management, including wetlands management, under the KIID Project; a br ief overview i s given below:

Kansiime and Nalubega, 1999 ’ At the t ime o f the environmental assessment, the constructed wetland was being planted with another type o f reed that has been found capable o f acclimatizing.

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The National Environmental Management Authority (NEMA): NEMA, established under the National Environment Statute in 1995, i s responsible for supervising, monitoring and coordinating environmental management in Uganda, including the review and clearance o f EIA reports. NEMA reports to the Ministry o f Water, Lands and Environment.

The Wetlands Inspection Division (WID): Located in the Ministry o f Water, Lands and Environment, WID i s the lead agency for wetlands management in Uganda, responsible for the formulation o f policy, setting o f standards and guidelines, supervision, monitoring, technical support, and resource mobilization for wetlands management. In addition to preparing a management plan for the Nakivubo wetland8, the WID, in close coordination with NEMA, i s implementing the Wetlands Sector Strategic Plan for the period 2001-201 0 (WSSP) with the overall goal to contribute to human welfare and to enhance the health o f the environment. WID i s currently implementing the WSSP in different parts o f the countryg. However, due to a lack o f resources, some o f the activities have not yet been carried out in Kampala. The EA report recommends that the KID Project supplement some activities o f the WSSP, for example carrying out inventories, protecting vital wetlands, management planning o f wetlands in Kampala and enforcing wetlands policy as well as raising awareness among the public and key stakeholders regarding the importance o f wetlands.

The Directorate of Water Development (DWD): DWD i s the lead agency for the management o f industrial and municipal effluents that discharge to receiving waters or to land. I ts main responsibilities include (i) advice to NEMA on the environmental control measures to be included in development proposals submitted to NEMA; (ii) issuance o f permits for discharge o f wastes on to land or into water; (iii) monitoring o f discharges to ensure compliance with discharge standards.

The Kampala City Council (KCC); KCC i s responsible for orderly development in Kampala City. Over time, KCC developed by-laws and regulations to assist in carrying out i t s mandate, however, enforcement o f these by-laws and regulations remains a problem. Within the Kampala District, the District Environment Officer (DEO) i s responsible for monitoring the wetlands, and reporting any shortcomings to NEMA and WID. The EA report recommends that under the KIID Project, the DE0 will be responsible for monitoring the implementation o f the Environmental Management Plan (EMP) and report any issues or problems to NEMA for remedial action. The DE0 will coordinate KID Project support for the WSSP as well as the environmental and wetlands management aspects o f the new Kampala Structure Plan 2007-2017. To ensure that the DE0 can carry out h i she r responsibilities efficiently, the KIID Project will support measures to strengthen h isher capacity as required.

The District Environment Office and Environment Committee: Consistent with the Local Government Act (1 997), wetlands management i s a decentralized function. In Kampala City, wetlands management i s the responsibility o f the district, in this case Kampala District. The institutional responsibility for managing wetlands l ies with the Distr ict Environment Directorate which reports to and i s supervised by the Chief Administrative Officer. Since the directorate i s politically and administratively under the control o f the mainstream district management arrangements, operational autonomy, particularly in matters o f enforcing NEMA guidelines quite often becomes a challenge. Elevating the District Environment Offices to the level o f Directorates, and providing them with the

The management p lan has no t yet been finalized due to a lack o f funds; the EA report notes that it would be institutionally dif f icult for the KIID project t o get directly involved in the activities o f another agency, and hence there i s l imi ted scope for the project to support these efforts.

i.e. (i) Wetlands Management Plans have been formulated for 27 sites including Nabajuzzi in Masaka District; Lutembe in Mpigi, and Nabugabo in Masaka; (ii) halting unauthorized human settlements and other activities that degrade wetlands (Le. in Kampala where NEMA is currently demolishing structures that are i l legally constructed in the wetlands); (iii) Distr ict Wetland Act ion Plans have been developed in about 30 districts; these are two-year ro l l ing plans that assist districts to priorit ize wetland protection activities in their DPPs.

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same autonomy as the District Tender Boards, could ensure operational autonomy for the District Environment Offices. However, given that KCC has just undergone a restructuring, these changes may not be readily implemented, and therefore, the most practical approach i s to strengthen KCC’s District Environment Office through capacity building, training, and overall institutional strengthening initiatives.

(iii) Potential environmental and social impacts of infrastructure investments

28. Drainage: The EA report identifies and assesses potential positive and negative environmental and social impacts that are l ikely to result f rom the planned infrastructure investments in the project area. Thus, positive social and environmental impacts are l ikely to include improved employment and income earning opportunities, a decline in the mosquito population as there will be less standing water, increases in property values, and improvements in quality o f l i f e o f the surrounding communities. There are plans to construct a berm as part o f the Lubigi channel improvement works under component 2; the berm will be constructed with excavated material. The positive impact will be that the berm will (i) allow for the control o f land-use in the Lubigi wetland (particularly t o discourage human settlement), (ii) restore the wetland as wel l as i t s f lora and fauna species; and (iii) alleviate floods.

29. Potential adverse social and environmental impacts are l ike ly to include accidents and flooding during construction, interruption o f utility services and commercial activities, accumulation o f s i l t and other excavated materials, erosion o f channel banks, and destruction o f flora and fauna. There i s also a concern that higher pollution rates may occur due to increased water f low rates beyond the natural purification capacity o f downstream wetlands and water bodies.

30. As regards malaria, the EA report informs that malaria was reportedly the most common disease among residents in the drainage investment areas. Malaria control i s the responsibility o f the Ministry o f Health, and several initiatives are underway to control it. In this respect, the Public Health Department o f K C C i s already working in close collaboration with the Ministry o f Health and relevant NGOs as we l l as the various communities to support malaria control in the city. Thus, the KIID Project has only an indirect contributing role to play in the control o f malaria diseases. Other common diseases include diarrhea, dysentery, stomach pains, cough, flu, athlete’s foot, tuberculosis, and slun diseases. These, too, are being dealt with by K C C and the Ministry o f Health. The consultants were informed that the breeding o f mosquitoes in stagnant waters i s the main cause o f malaria, whi le the main cause for diarrhea and dysentery appears to be poor drainage, inadequate waste disposal practices and unhygienic pit latrines which attract house flies.

3 1. Solid waste management: The EA report identifies and assesses potential positive and negative environmental and social impacts that might result f rom the planned investments in the existing solid waste management facil i ty and the planned extension in Mpererwe-Kitezi. Thus, during the construction and operational phase o f the land fill site, increased employment and ,income generation activities are anticipated as positive impacts. Potential negative environmental and social impacts during the construction and operational phase may include soil erosion, groundwater contamination due to contaminated leachate, altered groundwater patterns, sedimentation o f downstream water bodies, noise, dust, and health problems due to water and air pollution. The EA report proposes measures for the decommissioning phase o f the landf i l l site such as (i) placement o f a secondary cover across the waste area, and re-vegetation after f inal landscaping; and (ii) increased vegetation in the root treatment zone.

32. The EA report further notes that n o adverse impacts are to be expected as a result o f occasional spraying activities in the landfil l area; these spraying activities are l imited to the landfil l site The operations o f both sites include occasional light spraying using diluted insecticides to reduce the presence o f flies and other pests that come with the waste. The KIID Project will fo l low KCC’s Vector

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Management Procedures which call for the controlled and occasional use o f chemicals and require that the spraying be carried out by professional contractors.

33. Road maintenance and upgrading: The EA report identifies and assesses potential positive and negative environmental and social impacts that are likely to occur during activities related to road maintenance, upgrading o f gravel roads. Thus, potential positive environmental and social impacts are likely to include improved traffic flows and driving practices, improvement o f road drainage as culverts will be upgraded, and improvements in the physical environment o f the upgraded roads. Potential negative environmental and social impacts during construction are l ikely to include accidents, flooding, interruption o f utility services, soil erosion, accumulation o f silt, soil and water contamination, and destruction o f flora and fauna.

34. Urban markets: The EA report identifies and assesses potential positive and negative environmental and social impacts that are likely to result from activities related to the improvement o f market infrastructure. Thus, potential positive environmental and social impacts are likely to include improved environmental conditions at the markets which in turn will attract more customers and vendors, improved income generation opportunities. Potential negative environmental and social impacts during the construction phase are likely to include interruption o f market activities and utility services, soil erosion due to site clearance, silting o f storm water drains. During the operational phase, increased solid waste generation will be an issue that will require attention.

(iv) Stakeholder consultations

35. Stakeholder consultations (with representatives o f NEMA, WID, and DWD; KCC officials, members o f Parish Development Committees, Local Council Officials, and directly affected community members) were carried out in the course o f EA preparation. Consultation methods included field visits, meetings with key stakeholders, focus group discussions, data collection and analysis, literature reviews, and collaboration with other consultants. The stakeholders' views are summarized below.

36. Drainage: In discussions with KCC officials, the poor state o f the drainage system in Kampala was confirmed. Local officials noted that there i s a settlement problem as people settle in the wetlands and thereby block the natural f low o f the drainage system, as i s the case, for example, in Nalukolongo wetland. Community members indicated that they expect to see improvements in environmental health and hygiene through a reduction in floods and water pollution which in turn will reduce the disease burden associated with these conditions. They further expect to see a reduction in vector borne diseases, especially malaria, because the stagnant waters that encourage mosquitoes will be eliminated, and the prevalence o f cholera and diarrhea will also be reduced. They suggested that channel investments should include bridges that will facilitate easy access from one side o f the channel to the other, and would also reduce accidents among pedestrians during floods.

37. At the same time, stakeholders were concerned about accidents during construction, and recommended that KCC take appropriate actions with contractors to ensure that accidents are minimized. Others noted that many households in the communities earn their livelihood along the drainage channels, and they expressed their concern that during the construction, these people will be displaced and will lose their livelihoods (activities most l ikely to be affected are commercial activities along the channels and along roads crossing the channels, car washing activities, and brick making).

38. Solid waste management: In discussions with various stakeholders, the consultants identified the benefits for people working in the vicinity o f a landfill". Thus, benefits include boda-boda cycling, brick

lo Land disposal i s the most common waste disposal technique in Kampala

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making, recycling o f usable wastes found at the dump site, the operation o f grocery shops to satisfy the household demands o f local communities, and some make-shift eating places that have developed over the years, mainly to provide services to landf i l l workers. However, the stakeholders also noted the negative aspects o f living in proximity to a landfill, namely (i) a decrease in property values due to bad odors, birds, and insects feeding o n the landfill; (ii) an increase in the disease burden o f malaria and diarrhea because the landfil l i s a breeding ground for vectors, especially flies and mosquitoes, if the landf i l l i s not properly constructed and maintained; (iii) a cause o f injuries for scavengers and workers during collection and disposal, because solid wastes include sharp objects (glass plates, forks, spoons) and metals. In focus group discussions it was learned that some children had to be hospitalized with food poisoning as a result o f consuming expired foods and beverages found at the landfill. The main environmental concern o f the communities living in the vicinity o f the current landf i l l i s the spread o f polythene bags due to poor delivery o f garbage f rom the collection centers to the landfill. Polythene bags prevent the infi l tration o f rainwater into the soil, thereby destroying agricultural lands, even if they are not close to the landfill.

39. Road improvements: Consultations with stakeholders confirmed the poor state o f the roads in the project area. In-depth interviews with key stakeholders (city authorities, government officials, local council authorities, business persons, and public transport personnel, and pedestrians) identified a number o f positive and negative impacts. Thus, positive impacts o f the road improvements will include an increase in the economic activities o f commercial enterprises along the roads as we l l as in property rates along the roads, leading to higher returns to owners and subsequent investments along the roads. They further indicated that traffic f lows in the affected areas will be improved if the road improvements include the development o f road infrastructure such as pedestrian walkways, traffic control humps, pedestrian crossings, and road signs.

40. The stakeholders identified potential negative impacts on: pedestrian traffic, motor vehicle traffic, commercial activities o f shops and bars along the roads, newspaper vending, boda-boda transport services, telephone services, public transport operations o f the public transport system along these roads, and the activities o f people who earn their livelihoods o n the roads such as mechanics in road-side garages, car washers, and food vendors. There was concern that excavated soils may block drains when construction takes place during the rainy season, and that this would lead to flooding in the surrounding areas. Others observed that “unless drainage i s a component o f the roads improvements, i t may result in flooding in some areas.” Environmental pollution was another concern, as o i l used by construction equipment may drain f rom the construction vehicles, plant and equipment which in turn could lead to contamination o f the soil and water bodies through run o f f water. Oil wastes were expected to be a problem along the roads where heavy machinery/equipment are used or kept. Some stakeholders were concerned about air pollution during construction activities.

41. Urban markets: Consultations with vendors, market authorities, community leaders and K C C officials, confirmed the deplorable state of the urban markets. There are expectations that the market improvement process will include a built up market area with stalls for goods, electricity, adequate water, sanitation, appropriate solid waste disposal systems, good road access, adequate drainage, parlung spaces for delivery vehicles and employers. Community leaders and KCC officials expect to see improvements in (i) public health as a result o f a reduction in the risk o f diseases that proliferate in dirt and transmissible through food such as diarrhea, respiratory infections, and parasitic diseases; (ii) short-term employment opportunities for a number o f workers mainly in the engineering and construction business (engineers, masons, carpenters, unskilled workers); (iii) property values in the vicinity of the markets; (iv) increased sales and profits; and (iv) the market environment due to the planting o f shade trees and strategically located access roads and drainage networks.

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42. Concerns were raised during focus group discussions that (i) there will be displacement o f vendors who are l ike ly to lose their livelihoods as a result o f upgradinglconstruction activities; (ii) the market dues might increase so that KCC could recover the costs for market improvements, and (iii) the allocation o f market stalls may become a source o f confl ict if the exercise i s marred by corruption and a lack o f transparency, and, as a result, “a number o f project beneficiaries might be pushed out when they are unable to secure a stall after the improvement o f the markets”.

43. Institutional concerns: There were concerns among key stakeholders regarding KCC’s weak institutional capacity for environmental management as wel l as wetlands management. Thus, NEMA’S Deputy Director indicated that District Environment Officers (DEOs) lack the institutional autonomy to act independently. H e pointed out that Section 34 o f the Local Government Ac t decentralizes responsibility for environmental management to the local governments; however, the respective arrangements are such that the DEOs lack the institutional autonomy to act independently. In order to resolve this anomaly, it i s important that the institutional profiles o f the DEO’s be raised, perhaps to be equivalent to that o f the Tender Boards. In this way, the DEOs would gain the freedom to act without undue polit ical interference. The offices have recently been elevated to Directorate levels, which i s a step in the right direction, but not yet sufficient to resolve the underlying issue. This concern was subsequently discussed with the Coordination Unit at KCC, and it was understood that in KCC, the Divis ion Environment Offices have not yet been elevated to Directorates.

44. The Assistant Commissioner o f the Wetlands Inspection Div is ion (WID) noted that one o f the weaknesses limiting proper management o f wetlands in Kampala i s the apparent unclear demarcation o f the roles o f the various players. Whereas K C C i s mandated by the Local Government A c t to manage the wetlands in there area o f jurisdiction, they often turn to NEMA to play this role, which i s outside i ts responsibility.

45. KCC’s Medical Officer o f Health suggested that the former Vector Control Department be reinstated. However, the EA consultants concluded that this approach would not y ie ld any results unless radical reforms based o n a sound Vector Management Plan are implemented.

46. The Act ing Principal Water Officer, Water Resources Department (WRD), Entebbe, recommended that a Surface Water Application be submitted to WRD, detailing the nature o f the works planned so that a no-objection to proceed can be obtained, or, a permit i s issued. H e explained that Cap. 152 o f the Water A c t require that the Director o f the Directorate o f Water Development (DWD) subject a l l hydraulic works to regulations. Hydraulic works cover a l l works that are l ikely to alter or impede the natural f l ow o f water in a water body. These include works such as diverting a river, building a dam or a bridge. Any person planning hydraulic works i s required to apply for a Surface Water Permit f rom the Water Regulation Section o f the Water Resources Department o f the DWD. The Commissioner for Water Resources would, after studying the application, advises the Director whether the proposed works require a surface permit or not.

B. Resettlement Action Plan (RAP)

47. The RAP has been prepared in close consultation with and participation o f impacted persons. After an init ial assessment o f impacts had been conducted, an alternate scenario was proposed and adopted which reduces the number o f people impacted as wel l as the level o f impacts. Preliminary compensation values have been calculated based o n the most recent available established rates. These values, however, will be up-dated to reflect values which coincide with the year o f actual compensation delivery. This will ensure impacted persons receive current value at the time o f impact.

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48. The RAP provides a grievance mechanism by which impacted persons may seek redress f rom project activities. During RAP preparation complaints focused o n the fact that due to project design changes compensation would not be received as there was n o longer an impact o n lands, assets, or livelihoods.

(i) Institutional Framework

49. The Directorate o f Community Services within Kampala City Council (KCC) will manage the resettlement process with technical support f rom the Principal Valuer located in the Directorate of Finance. A resettlement desk will be established within K C C to implement the RAP and directly interface with affected peoples.

50. K C C will be f i r ther supported by the Chief Government Valuer to deliver compensation while the Ministry o f Local Government would ensure timely release o f funds for project activities f rom the Ministry o f Finance Planning and Economic Development.

5 1. The Directorate o f Community Services within KCC works directly with communities and i s best suited for mobil izing communities. The staf f also works closely with NGOs and other external groups who demand time input from K C C staff. Due to the added work program, KCC will reassign staff to ensure proper coverage and workforce to meet the needs and demands associated with implementing the RAP.

(ii) Impacts

52. The majority o f impacts will occur within existing road reserves that have been predominately respected and thus has minimal encroachment. The two areas having the greatest amount o f impacts occurs at Bwaise Junction where buildings will be acquired in order to expand the road way to provide better movement o f traffic and the Lubugi Channel which i s being rerouted thus affecting commercial and residential buildings. The RAP provides a detailed l i s t o f people and assets impacted based o n individual project activity.

(iii) Costs

53. However, as noted earlier, alternate scenarios for each project activity were adopted which predominately entailed narrowing o f road reserves in highly populated areas. By adopting the alternate scenario the final compensation cost estimate totaled US$2,501,577. All valuations were based on market rate rather than replacement value as the market rate was the higher amount o f the two options.

Scenario One entailed a total estimated cost o f US$6,222,805.

(iv) Consultation

54. As noted earlier, impacted persons were directly consulted during the preparation o f the RAP. K C C will continue to solicit input and participation throughout RAP implementation by incorporating existing community forums such as Parish Development Committees. The Parish Development Committees will then be empowered to continually up-date the public on the different stages o f project implementation and seek community views. This system will forestall anxiety whi le promoting cooperation within the community.

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Annex 11: Governance and Anti-Corruption (GAC) Action Plan

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

1.0 INTRODUCTION

1.1 The Government o f Uganda (GoU) through the Ministry o f Local Government (MoLG) and Kampala City Council (KCC) has prepared the Kampala Institutional and Infrastructure Development (KID) project which will be implemented with support from IDA through an Adaptable Program Loan (APL) for the next 10 years. Phase I o f the project, which i s three years, will comprise three components: Component 1 will focus on Institutional Development activities that support organizational development and governance, the implementation o f the Financial Recovery Action Plan, and actions to enhance effectiveness o f service delivery. Component 2 will finance the rehabilitationheconstruction o f high priority infrastructure which has been identified as critical to maintaining the productivity and welfare o f the City. The proposed activities are ready for implementation. Component 3 wil l support project management activities.

1.2 The efficiency o f public expenditure depends highly on the governance environment and practices. Therefore, any effort to improve resource allocation must be preceded by creating an enabling governance framework" that facilitates accrued efficiency, and inhibits corrupt practices12. Accountability forms the core o f good governance.

1.3 Corruption, abuse o f office and mismanagement o f public affairs thrive where there i s no demand for accountability and transparency. The emergence o f corruption in Uganda has a historical background which dates back to the 197Os, an error characterized by gross mismanagement o f public affairs whch culminated into economic and political collapse. At that time the country was highly centralized and there was a high dependency on the state to provide and finance all basic social services to the population. This provided opportunities for those with power and corrupt tendencies to act for personal gain rather than for the common good. The long-standing culture o f patronage in Uganda society also played a significant role in moulding public attitudes to corruption.

1.4 Corruption in Uganda i s manifested in different forms: (i) loss o f public funds through mishandled procurements; (ii) outright embezzlement o f public funds; (iii) briberv; (iv) neuotism; (v) politicians recouping their heaw election expenses; and (vi) situations o f insecuritv that provides opportunity for profiteering.

1.5 Government has clearly made an effort to fight corruption. The capacity o f GoU to deal with corruption has been undermined by legal complexities (burden o f proof), lack o f cooperation from the public and weak institutional framework for public accountability.

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'I The World Bank Institute (WBI) defines governance as the traditions and institutions by which authority in a country is exercised for the common good. T h i s includes (i) the process by which those in authority are selected, monitored and replaced, (ii) the capacity o f the government to effectively manage i t s resources and implement sound policies, and (iii) the respect o f citizens and state for the institutions that govern economic and social interactions among them.

Corruption is generally defined as the abuse o f public office for private gain. In an environment o f weak governance, corruption may thrive; however weak governance itself is not necessarily synonymous with corruption, but rather with different manners o f inefficiencies. For example poor budgetary structure, bureaucracy, scarce resources or inadequate management capacity, may distort priorities, or otherwise not adequately prepare programs - al l o f which lead to inefficiency, but not necessarily as a result o f corrupt practices. The distinction between corruption and governance is that corruption i s deliberate intent and action for private gain wi th public goods while governance failures provide opportunities or inducements for rent seeking behavior.

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1.6 KCC supported by the Ministry o f Local Government has developed the GAC action plan which wil l be implemented together with KIIDP, and will guarantee maximum efficiency and transparency during and after the Project implementation period. The action plan i s divided into five parts:

Part one gives a brief introduction to the KI IDP project, history and nature o f corruption in Uganda and highlights the importance o f an enabling governance environment framework to ensure efficiency and reduction o f corruption.

Part two gives a brief highlight o f the national anti-corruption strategy in terms o f its goal, objectives and linkage to poverty reduction.

Part three o f the plan discusses the GAC reforms undertaken by government, achievements and challenges.

Part four looks at the current GAC at KCC within the context o f the legal status o f KCC, assessments o f the GAC risks and the proposed framework to improve the GAC status at KCC.

Part five discusses the proposed KI IDP GAC Action Plan in terms o f i t s structure, implementation arrangements, and the action (responsibility) matrix.

2.0 NATIONAL ANTI-CORRUPTION STRATEGY

Corruption which can be defined as the use o f public office for private gain includes amongst others acts o f embezzlement, bribery, influence peddling and nepotism. It i s not only a question o f individual criminal actions, but also a result o f failure in public administration systems. Weak public administrative and financial management systems have contributed significantly to the spread o f corruption in Uganda, as they have elsewhere. Corruption and abuse o f office i s one o f those public management evils that continue to threaten governments and institutions despite the many interventions to build public ethics and integrity for development. Both elected and appointed officials continue to use their positions for personal gains or those o f their fiiends and cronies. As a result, governments/institutions and the improvement o f public welfare have continued to suffer. I t i s against this background that in 2001, GoU launched the f i rst country strategy to fight corruption and rebuild ethics and integrity in Uganda public offices. A Second phase o f this strategy (2004-2007)'3 was launched in April 2004, and i s currently being reviewed in light o f Uganda's re-commitment to zero tolerance to corruption.

2.1 THE STRATEGY TO FIGHT CORRUPTION

The goal o f the Uganda National Anti-Corruption Strategy (2004 - 2007) i s to minimize levels o f corruution and increase transparencv and intemitv in uublic offices. The strategies for achieving this goal are by (i) strengthening enforcement, (ii) strengthening the coordination function to improve effective anti-corruption action, (iii) strengthening the legislative framework, (iv) ensuring that the public i s actively and increasingly involved in the fight against corruption, (iv) building sustainable systems and institutional capacities within anti-corruption agencies and addressing key bottlenecks that hamper effective action, (v) enhancing and sustaining political support at all levels in the fight against corruption.

l3 National Strategy to Fight Corruption and Rebuild Ethics and Integrity in Public Office (2004 - 2007) by the Directorate for Ethics and Integrity, Office o f the President.

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2.2 ANTI-CORRUPTION STRATEGY AND POVERTY REDUCTION

The National Anti-Corruption Strategy identifies the connections between poverty and corruption. Corruption thrives in an environment o f ignorance and apathy within the population. Ignorant and uniformed people are highly susceptible to demands for bribes and in most cases; corruption erodes the quality o f services and undermines development. The strategy therefore, i s an over-arching policy and approach which i s intended to address key issues that are central to moving forward the anti-corruption agenda. This i s intended to improve service delivery and poverty reduction consistent with the national Poverty Eradication Action Plan (PEAP).The strategy recognizes and supports all members o f the Inter- Agency Forum (IAF), in their individual capacities, to protect and defend the rights o f poor people against the actions o f corrupt public officials.

3.0 GOVERNANCE AND ANTI-CORRUPTION (GAC) REFORMS AT NATIONAL LEVEL

The GoU embraces good governance because it i s one o f the pillars which support poverty reduction and sustainable development. In 2000 the Government o f Uganda developed and launched the f i rst three-year strategy and plan o f action to fight against corruption and rebuild ethics and integrity in public offices. The thrust o f the f i rst strategy was to mobilize the public, the media and c i v i l society to participate in the fight using both reactive and proactive means. The implementation o f the f i rst strategy (2001 - 2004) greatly informed the design o f the second strategy (2004 - 2007). The Government has now embarked on the development o f the third national strategy which will support the renewed commitment to zero tolerance to corruption. The Government in November 2004 launched a complementary strategy to mainstream ethics and integrity in local governments in the country. Since then government has made major reforms at the central level and local government level with a number o f achievements although some challenges are yet to be addressed.

Corruption in all i t s forms undermines good governance.

3.1 THE GAC REFORMS

GoU has carried out a number o f reforms to improve governance and fight corruptions. These reforms include institutional, u, financial, urocurement and the engagement o f civic societv organizations.

3.1.1 Institutional reforms - The Government has set up a number o f anti corruption institutions not only to fight corruption, but also to build ethics and integrity in public service. These are: the Insuectorate o f Government (IG), the Directorate o f Ethics and Integri ty (DEI) and the Public Procurement and Disposal o f Public Assets Authority (PPDA). In addition, to complement the existing traditional agencies l ike the office o f the Auditor General (OAG), Public Accounts Committee (PAC) o f Parliament, the office o f the Director o f Public Prosecutions (DPP) and the Criminal Investigations Department (CID) o f the police, they are given facilitation to expedite their work. The IG i s created by the Constitution o f Uganda and an Act o f Parliament and i s mandated to, among other things, fight corruption in Uganda. The DEI plays a coordinating role in bringing together all oversight agencies while the PPDA regulates public procurement and disposal o f public assets. The accountability and oversight agencies are brought together through the Inter Agency Forum (IAF), chaired by the DEI. In addition Government has set up the Accountabilitv Sector Working Grouu (ASWG) to bring together the key anti corruption agencies and provide an avenue for comprehensive policy dialogue and mobilization o f resources through the sector wide approach (SWAPS). Within the Judiciary, which i s part o f the Justice, Law and Order Sector (JLOS), the Government has set up and operationalized the Commercial Court and i s now able to expeditiously handle commercial disputes. Alternative Dispute Resolution Mechanisms (ADR) such as mediation and arbitration has been introduced and provide an alternative track for resolution o f commercial disputes. This i s done under the Centre for Alternative Dispute Resolution (CADER) which provides an array o f alternative dispute resolution modalities. In addition, the

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Government i s also in the final process o f setting up a special anti corruption court and Leadership Code Tribunal as mandated by Article 232 and 235A respectively o f the Constitution.

3.1.2 Legal reforms - Government has promulgated a number o f important specific anti- corruption laws which are already in effect. Prominent among these laws are the Leadership Code Act (LCA) 2002, the Public Finance and Accountability Act 2003: Local Government Financial Readations 1999, the Public Procurement and Disposal o f Public Assets Act No. 1 o f 2003. and theAccess to Information Act (2005). These laws have a direct bearing on the implementation o f the KI IDP project and provide the legal framework for a range o f prevention and enforcement aspects, as well as strengthening the anti- corruption efforts o f institutions and agencies in Uganda.

3.1.3 Financial manaaement reforms - Overall, Government has provided support to comprehensive, cross-cutting reforms in public financial management both at central government and Local Governments including oversight. Government has introduced key management systems intended to enhance performance and efficiency in public service. These include among others: budget management; human resources information and payroll management through the introduction o f an integrated personnel and payroll system (IPPS) and payroll audits. Other systems also include: results-oriented management (ROM) and output oriented budgeting (OOB) as an integrated performance management system to strengthen accountability for result; and the integrated financial management system (IFMS) to fight fraud by ensuring timely production o f final accounts for audit. Over the years the oversight institutions such as the Office o f the Auditor General (OAG) have been strengthened and made more independent, the Public Accounts Committees (PACs) at District level and Parliament have been facilitated to follow-up the reports o f the auditor general and appropriate actions taken on persons found to have flouted public financial laws and regulations.

3.1.4 Procurement reform - In order to ensure that public procurement and disposal i s conducted in a fair, transparent and non-discriminatory manner, in 1997 Government embarked on far-reaching Procurement Reforms for the public service. The reforms covered the following measures: i) disbanding the Central Tender Board (CTB), ii) decentralization o f the public procurement and disposal function to Procuring and Disposing Entities (PDEs) in MDAs and LGs, iii) creation o f Contracts Committees, Procurement and Disposal Units (PDUs) to service PDEs, and iv) liberalization o f third party Procurement Providers. These reforms were aimed at professionalizing and depoliticizing procurement in public entities (MDAs and LGs).

Prior to 1997, Procurement was based on a centralized system with the CTB as the sole buyer for all Government entities for goods, services and works above US$lOOO. There was no regulator in the procurement and disposal sector and there was only one third party procurement provider to advise GoU.

In 2003, the Public Procurement and Disposal o f the Public Assets regulations were promulgated and the Public Procurement and Disposal Authority (PPDA) - a regulatory Authority was established. The Regulations provided guidelines to be followed by public entities (both central and LGs). Under the framework, there are four actors; the Authority - PPDA; over 110 Public Disposal Entities (PDE); Providers; Civi l Society Organizations and the Public. Under the Act, the Authority does not approve procurement or disposals (this i s done by PDEs) and has no involvement in individual tenders or contracts, except in reviewing appeals/administrative reviews o f procurements. The Authority reports to the Minister o f Finance, Planning and Economic development. Functions o f the Authority include the following:

o Policy and regulations on Government procurement and disposal.

o Regulatory functions in the sector and provision o f standards, guidelinedadvice as well as audit o f procurement and disposals.

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o Monitor ing Compliance o f a l l Government Entities against set standards, guidelines o f procurement and disposals.

PDEs comprise o f the following:

o The Accounting officer for the MDAs and LGs who has overall responsibility for the execution o f the procurement and disposal process in the PDE. In particular; he/she communicates award decisions, investigates complaints by providers, signs contracts and i s the link between the Authority and the Procurement structures.

o The Contracts Committee which i s responsible for the contract award and ensures compliance with the procurement regulation.

o The Procurement and Disposal Unit (PDU) i s responsible for the management o f the procurement process by carrying out activities such as; preparing bid documents, issuing contracts, and acting as the Secretariat o f the Contracts Committee. The PDU also nominates the evaluation committee which i s approved by the Contracts Committee and evaluates bids according to criteria set by user departments.

The user department initiates the procurement, provides specifications and TOR, participates in evaluation and responsible for the management o f the contract.

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Under this framework, the providers are obligated to prepare complete and accurate bids based o n the specifications in the bid documents and to meet a l l requirements in the bid documents. They are also required to adhere to the procurement l aw and code o f ethics.

The procurement reforms have led to a number o f improvements in procurement management in Uganda including i) providing an elaborate and clear set o f rules to guide procurement and disposal actions, ii) separation o f duties and powers to ensures checks and balances and to ensures that contacts between government and service users are free f rom undue and improper influence, iii) adherence to procurement and disposal guidelines, thus promoting transparency, accountability, competition and value for money in the process, iv) establishing mechanisms for channeling complaints and requests for administrative reviews o f procurement and disposals, and v) providing code o f ethical conduct in business for both PDEs and providers.

3.1.5 Civil Societv Oraanizations ( CSO) enaaaement - Civil Society engagement in the anti corruption area i s growing. National and regional c iv i l society organizations are increasingly participating in the anti corruption discourse in the country. Organizations such as the Uganda Debt Network and the Anti Corruption Coalition in Uganda with their attendant regional affiliates are such examples. The Government through the DEI has signed a framework agreement with CSOs to guide these collaboration efforts. The Civil Society and the public o n their part are expected to whistle b low (raise complaints where there i s cause to do so), expose cases o f corruption, recommend changes to the l aw and p lay an oversight role.

3.2 ACHIEVEMENTS BY GAC REFORMS

The reforms carried by government to fight corruption have yielded h i t s as revealed by the reduction o f incidences o f bribery, progress in the implementation o f the Leadership Code Act, 2002, actions taken on commission o f inquiries reportsh-ecommendations, and further legal reforms to fight corruption.

3 -2.1 Reduction in the incidences of bribew - The Government o f Uganda has carried out a survey to assess public experiences and views on corruption twice in the last 10 years. The f irst survey was

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undertaken in 1998. The Second National Integr i ty Survey o f 2003 indicated that anti-corruption efforts have yielded positive results. The survey revealed a marked reduction in the reported incidence o f bribery since the 1998 survey, down to 46% from 63% for the Police, 31% from 40% for the Uganda Revenue Authority (URA), and 29% from 50% for Magistrates Courts. The report also revealed that there has been an improvement in specific services in health, education and agriculture despite a general dissatisfaction being expressed with tendering procedures and contract management, thus confirming the linkage between corruption and poverty. A new survey i s due to be carried out in September 2007 to track progress since then. The July to December 2006 Inspectorate o f Government Report indicate Police as the institution with fourth highest number o f complaints against by the public at 16.7% o f the total number o f complaints, KCC i s ranked 19* with only 0.9% o f complaints during this period and URA ranked 27’ with only 0.5% o f total complaints during the same period.

3.2.2 Progress in the imulementation of the leadership code - The Leadership Code Act (LCA) 2002 aims to ensure that all leaders are accountable by establishing that their acquisitions o f assets were not through corruption. The Act defines leaders to include Political Leaders and certain specified officers under the Second and Third Schedule o f the Act. Political Leaders as defined range from the President all the way down to district leaders. Specified officers, on the other hand include Judges, Magistrates, Permanent Secretaries, Heads o f Department and others. The Code prohibits conduct that compromises honesty, impartiality and imposes penalties on leaders who breach it. The law requires officers to declare their incomes, assets and liabilities every two years in order to ensure their integrity and accountability.

By May 2004 the Inspector General o f Government’s (IGG) office had i) analyzed declared assets and information collected from key categories o f leaders; ii) investigated all complaints received from the public by lst November 2003; iii) initiated assets verification; and iv) presented a time-bound action plan for the implementation o f the Code. This was a marked improvement compared to the period July - December 2003 when the Inspectorate o f Government had a workload o f 3,773 complaints comprising 1,827 (48%) complaints brought forward and 1,946 (52%) complaints received during the period, only 25.1% (948) complaints were investigated and completed by end o f December 2003. However the number o f new cases reported has been decreasing since 2003 as the implementation o f the L C A started to show some results. In 2006, two leaders were barred from standing for public office for the next five years (Councilor from Moyo district for a conflict of interest case, and a member o f parliament (MP) for Rubaga South for failure to declare assets on time), hence breaching the LCA.

3.2.3 Imulernentation of Commission of Inauirv reuortshecommendations - Government has instituted a number o f Commissions o f Inquiry to probe corruption in a number o f public institutions like the Police (2001), Uganda Revenue Authority (2002) and the mismanagement o f the Global Fund for Aids, Malaria and TB (2006) in the Ministry o f Health. These Inquiries have had prominent coverage in the media and have set a milestone in Government’s efforts to fight corruption. A former Minister o f Health and the two ministers o f State for Health were arrested and charged in May 2007 as a result o f a commission o f inquiry report into the misuse o f Global Alliance for Vaccines and Immunization (GAVI) funds. The fact that corruption has become an issue o f national discussion and action i s in itself an achievement in the fight against corruption.

3.2.4 Further legal reforms to fipht corruution - As part o f the Constitutional review process in 2005, the office o f the Inspectorate o f Government (IG) was strengthened. The revision o f the Constitution made provision for the President or any local authority to report to Parliament at least once every year on reports submitted to them by the Inspectorate o f Government. In addition provisions for setting up a Leadership Code Tribunal and a special anti corruption court to combat corruption were introduced. Arising from the Constitutional Amendment, government set up task forces to revise the Leadership Code Act and look into ways o f setting up Anti Corruption Courts. These two will strengthen the mandate o f the Inspectorate o f Government in the fight against corruption.

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The Prevention o f Corruption Act (PoCA) 1970 has also been undergoing revision to bring it in line with the provisions o f the UN convention against corruption. The scope o f the legislation and definitions o f corruption have been widened and penalties increased. The Prevention o f Corruption Act i s a key piece o f legislation in the fight against corruption in Uganda. The preparation o f the Bill and implementation plan were completed during 2005 and approved by the Inter Agency Forum. Cabinet approved it in 2005 and it i s now pending parliamentary deliberations and enactment into law.

At the same time Government i s in the process o f developing Whistle Blower protection legislation to encourage citizens to report cases o f corruption without fear o f reprisals. Principles for the proposed law have been approved by Cabinet and the f i rst parliamentary council has commenced drafting the bill.

3.3 CHALLENGES IN THE FIGHT AGAINST CORRUPTION

Notwithstanding the major achievements highlighted above, there are a number o f factors (both external and internal) that are s t i l l curtailing government efforts in the fight against corruption. The following are some o f the challenges which need to be addressed over time:

0

0

0

0

0

0

0

Developing an effective accountability sector; Ensuring that the anti-corruption agenda i s understood and actively supported by the political establishment; Achieving improved success in enforcement and reducing levels o f corruption; Ensuring legal and regulatory framework i s up to date and effective; Promoting anti-corruption awareness and engagement with anti-corruption policy in all sectors; Improving the capacity o f anti-corruption agencies to perform; and Convincing the public at large to reject corruption and corrupt enrichment within Uganda society.

4.0 4.1 LEGAL STATUS OF KCC

CURRENT STATUS OF GAC AT KCC

KCC i s a Local Government with the status o f a district as per the Local Government’s Act 2003, as amended. I t i s therefore a corporate body charged with service provision responsibilities, which are clearly delineated in the Second Schedule. In general, the cumulative effect o f the legal provision (both in the Constitution and the LGs Act) has been to i) transfer political, administrative, financial and planning authority from the Centre to LGs, ii) make LGs increasingly responsible for the delivery o f the bulk o f services and accountable to their constituents, and iii) promote popular participation and empowerment o f the local people to make decisions.

In addition to all the functions performed by a rural district Local Government, Kampala ci ty i s also required to provide services equivalent to other cities o f the world. It i s the hub o f the country’s economic, political, and administrative activities. I t i s estimated that about 80 percent o f the country’s industrial and services sectors are located in Kampala and the city now generates a substantial percentage o f Uganda’s GDP.

The realization that the economic future o f Uganda i s intrinsically related to the performance o f Kampala as a locus o f productive activity and investment made government during the Constitutional Amendment o f 2005 to redefine the status o f Kampala as a Capital City for Uganda to be administered by the Central Government. The Constitutional amendment requires Parliament to enact a new law which will delineate

88

the territorial boundary, make provision for the administration, financing and the development o f Kampala as a capital city.

4.2 ASSESSMENT OF GAC R I S K S AT KCC

An assessment o f the KCC GAC risk shows that council has made progress in the area o f enhancing transparency and accountability in the service delivery process i.e. informing the citizenry o f i t s planned activities and projects including publicizing the annual budget, and establishing a Council's Stakeholder Forum. This initiative i s intended to allow stakeholders' participation in the oversight o f service delivery processes, provide a platform for the continued engagement o f the public and increase ownership and sustainability o f KCC activities.

Despite the above positive initiative, KCC has not yet fully customized nor implemented the strategv for mainstreaming ethics and inteeritv in LGs currently under review alonmide the National Anti Corruption St ra te~v '~ . Litt le progress has also been made to implement the K C C code o f conduct for councilors, members o f Commissions and Boards 2003. The KCC customized staff regulations 2003 are yet to be fully implemented. There i s s t i l l political interference in the service delivery process, weak internal control systems and a weak governance regime. This i s directly impacting on the potentially high risk areas o f procurement, financial management and public disclosure (efforts to promote transparency and accountability) and subsequently affecting KCC's image in the eyes o f the public.

4.3 PROPOSED FRAMEWORK FOR IMPROVED GAC IN KCC

KCC framework for GAC will be based on the National Anti-corruption Strategy, the strategy for mainstreaming ethics and integrity in the LGs, the KCC code o f conduct for councilors, members o f commissions, boards and the customized staff regulations. It will also include the various reforms taken to fight corruption, enhanced Civi l Society Organizations engagements, and a strong oversight by MoLG. The KCC GAC strategy wil l be revised when an over arching LG GAC strategy, which i s s t i l l currently under design by the M o L G and the new law to govern the administration, financing and boundaries o f KCC to be enacted by Parliament become operational. However in the interim there i s need to put in place implementation arrangements that would strengthen Government oversight in the potentially high risk areas o f procurement, financial management and public disclosure for KCC. This proposal therefore explains the implementation support that will be provided by the M o L G and other GoU agencies and also the safeguards that will be put in place to ensure that corruption in KCC i s eliminated and that KI IDP i s implemented efficiently.

5.0 KIIDP GAC ACTION PLAN

The objective o f this action plan i s to strengthen GAC around KI IDP and eliminate corruptive practices, so that the full impact o f the project i s realized. This action plan has been specifically designed for KI IDP although some elements could be applied to projects/programs implemented by LGs generally in Uganda.

l4 The Directorate for Ethics and Integrity, Office o f the President, prepared a national strategy for mainstreaming ethics and integrity in LGs in Uganda (November 2004). The objective o f the strategy i s to put in place a harmonized, nationally agree upon understanding o f ethics and integrity and a value system in the public service that is responsive to both the positive societal expectations and the requirements o f a modem public service.

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5.1 ACTION PLAN STRUCTURE

The KIIDP GAC action plan i s a tool to improve the impact o f the project and to transfer a number o f good practices to K C C as an institution to improve o n i t s efficiency. The plan has three elements: preventive actions, deterrent, and detection mechanisms.

5.1.1 Preventive actions - these are actiodmeasures that will be taken within the project cycle and processes to mitigate r isks associated with KIIDP implementation. These will include stringent oversight arrangement by the M o L G o f project implementation activities especially in the areas o f procurement and financial management to ensure transparency and accountability.

5.1.2 Deterrent measures - these will include control mechanisms and sanctions. Sanctions will be applied as per Government Standing Orders in case o f proven corruptive practices. T o this end specific investigative arms o f government will be supported to carry out investigations o f reported cases o f corruption or abuse o f office during the project implementation.

5.1.3 Detection measures - These will be identified through two indicators i) potential inefficiencies (unnecessary delays, unfair practices, non compliance o f set procedures etc) and ii) potential fkaud (over pricing, embezzlement etc).

5.2 IMPLEMENTATION ARRANGEMENT

This GAC plan will be implemented by two parties: i) the KCC/Core team and ii) the M o L G through an enhanced oversight arrangement. The Bank project team in the context o f project supervision will monitor KCC’s performance and the effectiveness o f the GAC plan in maintaining good governance and the fight against corruption.

5.2.1 KCC/Core Team’s role in the imulementation of the GACulan - K C C ’ Core Team wil l provide technical support t o the respective KCC Directorates to ensure that the Project i s properly and professionally implemented. The Core Team will provide in house quality assurance to a l l procurement documents before they are forwarded to the Contracts Committee o f the M o L G for approval, and will provide support to ensure that al l technical reports f rom respective consultancies are o f acceptable quality. Payment certificates for works and services supplied under the project will be prepared by the respective component managers within the Council’s Directorates and will be reviewed by the Core Team before they are finally paid. The Core Team will provide support to the Directorates and K C C Divisions in supervision and monitoring o f Works and performance o f Consultants. The KCC Council will participate in the monitoring o f various activities to ensure that the project i s wel l implemented.

5.2.2 Role of the M o L G in the imulementation of the GAC ulan - The M o L G shall provide the oversight in procurements, financial management, and technical supervision to ensure accountability and transparency. The M o L G may request other Government Departments or Agencies to provide support to KCC when it i s deemed necessary to ensure that the Project i s implemented in time. The M o L G will ensure that financial management and procurement procedures are adhered to during i ts oversight function for the implementation o f KIIDP. These measures will also help transfer knowledge, good practices and build the capacity o f KCC as an institution.

Financial management of theproject resources: There are 3 main r isks in this area:

(i) misuse o f project funds (ii) poor accountability (iii) failure to provide the required counter-part funds in time

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T o mitigate these r isks the fo l lowing measures will be taken:

i> The M o L G wil l oversee the f l ow o f KIIDP funds to KCC. In this regard the Permanent Secretary, M o L G shall be the Accounting Officer for the project, assuming the overall government responsibility for ensuring that project funds are used for the intended purposes and that there i s good “value for money”.

ii) Keeping in line the current practice in the IDA-funded projects, there shall be two separate Bank accounts for the project funds; the Designated Account and the Project Account. The Permanent Secretary o f M o L G shall be the principal signatory to both accounts. The T o w n Clerk and the Project Accountant will also be signatories in accordance with the Local Government Finance and Accounting Regulations currently in place.

iii) The Auditor General will carry out audits o f the accounts and financial statements o f the project in accordance with the relevant provisions o f the Constitution o f the Republic o f Uganda.

Procurement Management: Procurement i s viewed as another r i s k area in this project. The main r isks are:

(i) flouting o f procurement regulations; (ii) lack o f transparency; and (iii) undue delays in the procurement process.

In order to mitigate these risks the fo l lowing measures will be taken:

the M o L G will oversee the procurement activities under the project. In this process the Contracts Committee o f the M o L G will handle a l l procurements and perform a l l f inct ions o f the Contracts Committee for the project using the Procurement l aw and Regulations currently in force.

The Permanent Secretary o f the M o L G will ensure that the Contracts Committee o f the Ministry has enough resources to meet regularly and expeditiously handle procurements for the project.

K C C will prepare a Procurement Plan covering al l project activities in the first 18 months, and thereafter prepare annual procurement plans as required by the Wor ld Bank. The Procurement Plans shall be approved by the Council.

All the solicitations for tenders shall be advertised in local and international media as appropriate. They will also be displayed o n public notice board at KCC and on the websites o f K C C and M o L G .

All procurement decisions (including shortlists and award o f contracts) will be displayed o n public notice boards at KCC and on websites o f K C C and M o L G within the time frame stipulated in the PPDA Act.

For each procurement activity, an Evaluation Committee will be nominated by the Procurement and Disposal Unit o f K C C in consultation with the user departments and will be approved by the Contracts Committee o f M o L G .

K C C will ensure that the relevant Directorates o f K C C are adequately staffed for this purpose, among others. Members o f the K C C Core Team will work with the respective Directorates in

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order to provide a level o f technical capacity in procurement and contract management during the project implementation.

h) A procurement audit for all procurement activities o f the project will be conducted once every year. The MOLG will be expected to take appropriate action on the findings o f the annual procurement audit that borders on fraud and /or corruption.

5.2.3 Role of the Bank team in the imulementation of the GAC vlan - The Bank supervision team members will monitor the implementation o f the KIIDP GAC action plan during every supervision mission in addition to carrying post procurement reviews and financial management assessment. The procurement for goods, works and services that require prior review o f the World Bank shall be submitted for review as the bank procurement guidelines provide.

5.3 mIDP GAC IMPLEMENTATION ACTION MATRIX

The table below summarizes the KI IDP GAC implementation action plan by identifying the GAC risks, the issues, the proposed measures to address the risks, the intended outcomedresults o f the measures, and the institution(s) which will be responsible for the implementation o f the measures.

92

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Annex 12: Project Preparation and Supervision

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

Planned Actual PCN review 0511012004 05/10/2004 Init ial PID to PIC 06/23/2004 06/23/2004 Init ial ISDS to PIC 07/13/2004 0711 312004 Appraisal 02/15/2006 05/07/2007 Negotiations 0 8/06/2007 08/06/2007 Board/RVP approval 11/06/2007 Planned date o f effectiveness 0113 112008 Planned date o f mid-term review 04/30/2009 Planned closing date 1213 1/20 10

Key institutions responsible for preparation o f the project: Kampala City Council

Bank staff and consultants who worked on the project included: Name Title Unit Solomon Alemu Team Leader AFTU 1 Lance Morrell Rowena Martinez Naa Dei Niko i Mihaly Kopanyi Barjor Mehta' Mart in Onyach Olaa Patrick Umah Tete Richard OlowolMbuba Mbungu Barbara Magezi Edeltraut Gilgan-Hunt Kns t ine Schwebach Mary Bitekerezo Zara Sarzin Edith Mwenda Rajat Narulahlarie Khoury Grace Munanura Marie Claire Li Tin Yue Agnes Kaye Ephrem Asebe Andres McAlister G e m Connollv

Lead Operations Officer Operations Specialist Sr. Operations Officer Sr. Municipal Financial Specialist Sr. Urban Specialist Urban Specialist Financial Management Specialist Senior Procurement Specialist Public Sector Specialist Environmental Specialist Sr. Social Development Specialist Sr. Social Development Specialist Consultant Sr. Counsel Senior Finance Officer Procurement Specialist Program Assistant Program Assistant Consultant Consultant Consultant

AFTU1 AFTUl AFTUl SASE1 WBIFP AFTU 1 AFTFM AFTPC AFTPR AFTEN AFTCS AFTCS AFTU1 LEGAF LOAFC AFTPC AFTUl AFMUG AFTU1 AFTU 1 AFTU1

Bank funds expended to date on project preparation: 1. Bank resources: US$613,522.49

3. Total: US$613,522.49 2. Trust funds: -

Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$45,712.43 2. Estimated annual supervision cost: US$lOO,OOO

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Annex 13: Documents in the Project File

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

1. Project Implementation Plan

2. 3. Governance/Anti-Corruption Plan for KCC

4. Resettlement Action Plan

5. 6. Markets Feasibility Study

7. Letter o f Development Policy

Action Plan on the implementation o f the RAP

Environmental Assessment and Management Plan

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Annex 14: Statement of Loans and Credits

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

Project FY Purpose ID

Difference between expected and actual disbursements Original Amount in US$ Millions

IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd

PO83809 2005

PO74079 2005 PO79925 2004

PO65437 2003 PO75932 2003

PO77477 2003 PO02952 2003

PO02984 2002 PO70222 2002

PO69996 2002

PO65436 2002

PO74078 2002

PO72482 2001

PO70627 2001

PO50439 2001

PO73089 2001 PO44695 2001

PO44679 2000

PO59127 1999

PO02970 1999 PO49543 1998

PO46870 1997

PO46836 1997

UG-Priv Sec Competitiveness 2 (FY05) UG-Road Dev AF'L 3 (FY05)

UG-Natl Re Dev TAL (FY04) UG-PAMSU SIL (FY03)

UG-GEF PAMSU S I L (FY03) UG-Loc Gov Dev 2 (FY03) UG-N Uganda SOC Action Fund (FY03) UG-Power S IL 4 (FY02) UG-GEF Energy for Rural Transf (FY02) UG-Energy for Rural Transform (FY02) UG-Road Dev Phase 2 APL (FY02)

UG-Makerere Pi1 Decentr Srvc Del (FY02) UG-HIV/AIDS Control S IL (FYO1) Regional Trade Fac. - Uganda

UG-Priv & Utility Sec Reform (FYOI) UG-EMCBP S I L 2 (FYOl) UG-Nat Agr Advisory Srvcs SIL (FYOl) UG-Econ & Fin Mgmt (FYOO)

UG-Agr Rsrch & Training SIL 2 (FY99) UG-Roads Dev APL (FY99)

UG-Road Sec & Inst Supt (FY98) UG-GEF Lake Victoria Env SIL (FY97)

UG-Lake Victoria Env SIL (FY97)

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00

0.00

0.00

70.00

67.60 25.00

27.00 0.00

50.00 100.00

62.00 0.00

49.15

64.52

5.00

47.50

20.00

48.50

22.00 45.00

34.04

26.00

90.98 30.00

9.80

12.10

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 8.00

0.00

0.00

0.00 12.12

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00

9.80

0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00 0.12

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

68.11

107.56

24.50

19.24

3.98

50.81

77.08

23.51 9.27

46.31

48.83

1.69

7.39

15.96

26.81

8.77 44.94

15.61

7.81

45.56 9.04

0.1 1

1.49

7.03

10.90 6.74

9.42 2.57

8.92 31.34

16.24 6.67

23.50

35.17

-0.04

1.50

14.85

24.42

6.32 12.47

-0.22

5.98

42.10 8.91

0.11

-2.80

0.00

6.44

0.00

0.00 0.00

0.00

7.87

-6.01 0.00

1.21

24.45

-0.43

0.00

0.00

0.00

0.00 0.00

0.16

0.00

42.10

8.93

0.08

1.62 . .

Total: 0.00 906.19 0.00 29.92 0.12 664.38 272.10 86.42

98

UGANDA STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions of U S Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

1996 AEF A g o Mgmt 0.55 0.00 0.00 0.00 0.55 0.00 0.00 0.00 1992 AEF Clovergem 0.84 0.00 0.00 0.00 0.84 0.00 0.00 0.00 1999 AEF Gomba 0.45 0.00 0.00 0.00 0.45 0.00 0.00 0.00 1998 AEF Whi te N i l e 0.10 0.00 0.00 0.00 0.10 0.00 0.00 0.00 2005 DFCU 10.00 0.00 0.00 0.00 6.00 0.00 0.00 0.00 1998 Tilda Rice 0.71 0.00 0.00 0.00 0.71 0.00 0.00 0.00

Total portfolio: 12.65 0.00 0.00 0.00 8.65 0.00 0.00 0.00

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

2002 Bujagali 0.07 0.00 0.00 0.04

2005 UMU 0.00 0.00 0.00 0.00

Total pending commitment: 0.07 0.00 0.00 0.04

99

Annex 15: Country at a Glance

UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project

Uganda a t a glance 3/27/07

Key Development Indicators

~2005)

Population, mid-year (millions) Surface area (thousand sq. km) Population growth ( O h )

Urban population (% of total population)

GNI per capita (Atlas method, US$) GNI per capita (PPP, international $)

GDP growth (%) GDP per capita growth (%)

(most recent estlmate, 200&2005)

Poverty headcount ratio at $1 a day (PPP. %) Poverty headcount ratio at $2 a day (PPP, %) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Chiid malnutrition (% of children under 5)

Adult literacy, male (% of ages 15 and older) Adult literacy, female (% of ages 15 and older) Gross primary enrollment. male (% of age group) Gross primary enrollment. female (% of age group)

Access to an improved water source ( O h of population) Access to improved sanitation facilities ( O h of population)

GNI (Atlas method, US$ billions)

Uganda

28.8 241 3.2 13

8.0 300

1,500

6.6 3.2

49 80 23

77 58

130 125

60 43

Sub- Saharan

Africa

741 24,265

2.1 35

552 745

1,981

5.3 3.1

44 75 46

I 0 0 29

99 87

56 37

LOW income

2,353 29,265

1.8 30

1,364 560

2.486

7.5 5.6

59 80 39

73 50

110 99

75 38

Net Aid Flows

(US$ millions) Net ODA and official aid Top 3 donors (in 2004):

United States United Kingdom Nethedands

Aid (% of GNI) Aid per capita (US$)

Long-Term Economic Trends

Consumer prices (annual % change) GDP implicit deflator (annual % change)

Exchange rate (annual average, local per US$) Terms of trade index (2000 = 100)

Population, mid-year (millions) GDP (US$ millions)

Agriculture industry

Services

Household final consumption expenditure General govY final consumption expenditure Gross capital formation

Exports of goods and services Imports of goods and services Gross savings

Manufacturing

1980

114

13 7 4

9.2 9

108.7 45.9

1 .o

12.6 1,245

72.0 4.5 4.3

23.5

88.9 11.2

6.2

19.4 26.0 -1 .o

1990 2000

666 819

30 58 35 21 7 4 43

15.8 14.2 38 34

33.1 2.8 44.4 3.8

319.6 1,512.0 132 100

17.8 24.3 4,304 5,926

(% of GDP) 56.8 37.3 11.1 20.3 5.7 9.8

32.4 42.4

91.9 77.1 7.5 13.7

12.7 20.0

7.2 11.2 19.4 23.0 1.2 9.9

2005 a

1,159

208 108 71

17.3 42

8.2 8.6

1,737.2 91

28.8 8,712

33.5 20.9

9.0 45.6

76.7 14.2 22.7

14.6 27.7 12.1

Age dlstrlbutlon, 2005

Male Female

10.74 60-64 5 w

40.44 30.3 2c-224 10.14

M 20 10 0 10 20

Dement

Under4 mortallty rate (per 1,000)

200,

150

100

50

0 1990 1995 20W 2W4

0 Uganda mSub-Sahann Africa

Growth of GDP and GDP per capita (%)

15T

l:k 90 €5 w

--O-GDP - GDP per caplta

1900-90 1990-2000 2000-05 (average annual gmwth %) 3.4 3.1 3.4 2.9 7.1 5.4

2. I 5.0 3.9 2.8

2.7 2.0 8.0

I. 8 4.4

-10.1

3.7 4.1 12.2 7.2 14.1 5.1 8.2 7.1

7.2 3.8 7.1 4.8 8.9 8.2

14.7 6.7 10.0 8.0 5.5 24.9

Note: Figures in Italics are for years other than those specified. .. indicates data are not available a. Aid data are for 2004.

Development Economics, Development Data Group (DECDG)

100

Uganda

Balance of Payments and Trade

(US$ millions) Total merchandise exports (fob) Total merchandise imports (cif) Net trade in goods and services

Workers' remittances and compensation of employees (receipts)

Current account balance as a % of GDP

Reserves, including gold

Central Government Finance

(% of GDP) Revenue

Expense

Cash surplusldeficit

Highest marginal tax rate (%)

Tax revenue

Individual Corporate

External Debt and Resource Flows

(US$ miliions) Total debt outstanding and disbursed Total debt service HlPC and MDRi debt relief (expected; flow)

Total debt (% of GDP) Total debt service (% of exports)

Foreign direct investment (net inflows) Portfolio equity (net inflows)

2000

460 954

-703

238

4 7 8 -1 1.4

719

17.8 10.9 16.2

-2.0

30 30

3,497 74

1,950

59.0 10.5

161 0

2005

603 1,336 -1,139

842

-a87

1,087

-10.2

22.9 11.9 22.8

-3.6

30 30

4,822 103

70.7 7.8

222 i

Composition of total external debt, 2004

IDA 3 303

US$ millions I Private Sector Development 2000 2005

Time required to start a business (days) - 36 Cost to start a business (% of GNI per capita) - i i7 .a Time required to register property (days) 4a -

Ranked as a major constraint to business (% of managers surveyed who agreed)

Cost of financing Tax rates

Stock market capitalization (Oh of GDP) Bank branches (per 100,000 people)

.. 60.3

.. 48.3

0.6 1.4 .. 0.5

IGovemance indicators, 2000 and 2004

Voice and accountability

Political stability

Regulatory quality

Rule of law

Control of corruption

Country's percentile rank (0-100) hi&' vduss implybener mfings

Technology and Infrastructure

Paved roads (% of total) Fixed line and mobile phone

High technology exports subscribers (per 1,000 people)

(% of manufactured exports)

Environment

Agricultural land (% of land area) Forest area (% of land area, 2000 and 2005) Nationally protected areas (% of land area)

Freshwater resources per capita (cu. meters) Freshwater withdrawal (% of internal resources)

C02 emissions per capita (mt)

GDP per unit of energy use (2000 PPP $ per kg of oil equivalent)

Energy use per capita (kg of oil equivalent)

2000

a

22.5

62 20.6

0.06

2004

23.0

44

13.1

63

24.6

1,402 0.8

0.06

18.4

(US$ mlilions)

IBRD Total debt outstanding and disbursed Disbursements Principal repayments interest payments

IDA Total debt outstanding and disbursed Disbursements Total debt service

IFC (fiscal year) Total disbursed and outstanding portfolio

Disbursements for IFC own account Portfoiio sales, prepayments and

repayments for IFC own account

of which IFC own account

MlGA Gross exposure

0 0 0 0

2,115 190

9

36 36 0

6

43

0 0 0 0

3,141 133 74

9 g 0

4

44 New guarantees 0 44

Note: Figures in italics are for years other than those specified. .. indicates data are not available. -indicates observation is not applicable.

Development Economics, Development Data Group (DECDG).

3/27/07

101

M i I len n i u m Development Goa Is Uganda

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

Goal 1: halve the rates for S I a day poverty and malnutrition 1990 1995 2000 Latest

33.8 31.5 Poverty headcount ratio at $1 a day (PPP, % of population) Poverty headcount ratio at national poverty line (% of population) Share of income or consumption to the poorest qunitile (%) 5.9 Prevalence of malnutrition (% of children under 5) 23 26 23

Goal 2: ensure that children are able to completeprimary schooling Primary school enrollment (net, %)

Secondary school enrollment (gross, %) 11 16 16 Primary completion rate (% of relevant age group) 58 57

Youth literacy rate (% of people ages 15-24) 70 77

Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primary and secondary education (%) 82 93 98 Women employed in the nonagricultural sector (% of nonagricultural employment) Proportion of seats heid by women in national parliament (%) 12 18 18 24

36

Goal 4: reduce under-5 mortality by two-thirds Under-5 mortality rate (per 1,000) 160 156 145 140 Infant mortality rate (per 1,000 live births) 93 92 85 81 Measles immunization (proportion of one-year olds immunized, %) 52 57 61 91

Goal 5: reduce maternal mortallty by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) 880 Births attended by skilled health staff (% of total) 38 38 39

Goal 6: halt and begin to reverse the spread of HIVIAIDS and other major diseases Prevalence of HiV (% of population ages 15-49) 6.7 Contraceptive prevalence (% of women ages 15-49) 5 15 23 Incidence of tuberculosis (per 100,000 people) 161 402 Tuberculosis cases detected under DOTS (%) 57 49 43

Goal 7: halve the proportion of people without sustainable access to basic needs Access to an improved water source (% of population) 44 60 Access to Improved sanitation facilities (% of population) 42 43 Forest area (% of total land area) 25.0 20.6 18.4 Nationally protected areas (% of total land area) 24.6 C02 emissions (metric tons per capita) 0.0 0.0 0.1 0.1 GDP per unit of energy use (constant 2000 PPP $ per kg of oil equivalent)

Goal 8: develop a global partnership for development Fixed line and mobile phone subscribers (per 1,000 people) 2 2 0 44 Internet users (per 1,000 people) Personal computers (per 1,000 people) Youth unemployment (% of total labor force ages 15-24)

iducation indicators (%)

lZ5 1

75 i 50

1998 ZWO 2002 2W4

*Primary net enrollment ratio (..)

-0- Ratio of Bids to boys in primary & secondary education

Measles Immunization (% of I-year olds) L-F I 0 Uganda Sub-Saharan Afnca

0 0 2 7 0 2 4

ICT Indlcators (per 1,000 people)

50

40

30

20

10

0 2 m ZWZ 2w4

internet users

Note: Figures in italics are for years otherthan those specified. .. indicates data are not available.

Development Economics, Development Data Group (DECDG).

102

3/27/07

MAPSECTION .