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World Bank Document Document of The World Bank Report No. 15429-APR Public Disclosure Authorized STAFF APPRAISAL REPORT THE REPUBLIC OF KENYA, UNITED REPUBLIC OF TANZANIA, AND THE REPUBLIC OF UGANDA FOR THE LAKE VICTORIA Public Disclosure Authorized ENVIRONMENTALMANAGEMENT PROJECT June 18, 1996 Public Disclosure Authorized Agriculture and Environment Operations Division Eastern Africa Department Africa Region Public Disclosure Authorized CURRENCY EQUIVALENTS Currency Unit = Kenya (KSh), Tanzania (TSh), and Uganda Shillings (Ush) US$1 = KSh58 (une 1996); US$1 = TSh615 (June 1996); US$1 = UShl,000 (une 1996) SDR1.0 = US$1.44424 WEIGHTS AND MEASURES Metric System GOVERNMENT FISCAL YEAR July 1- June 30 ACRONYMS ASARECA Association for Strengthenling Agricultural Research in Eastern and Central Africa CBO Community-Based Organization CIFA FAO Committee for Inland Fisheries of Africa EAFFRO East African Freshwater Fisheries Research Organisation EU European Unioni FAO Food and Agriculture Organisation (of the United Nations) FIRI Fislieries Research Institute (Uganda) FY Fiscal Year GD)P Gross Domestic Product GEF Global Environnmenit Facility IAPSO Inter-Agency Procuremenit Services Office IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICR Implementation Completion Report II)A International Development Association IPM Integrated Pest Management ISP Internlational Shopping Proced ures IMF Internationial Monetary Fund IUCN International Unioni for Coniservationi (World Conservation Union) KENIFRI Kenya Marine Fisheries Research Institute LVEMIP Lake Victoria EnvironmiiienitalManagement Project LVIFO Lake Victoria Fisheries Organization M IS() Mlanagement Information Systems Officer NITR Mid-Term Review NCB National Competitive Bidding NEAP National Environmental Action Plan NENIA National Fnvironimenital Managenmenit Authority (Uganda) NGO Non-Governmental Organization NSP National Shopping Procedures NWSC National Water and Sewerage Corporation (Uganda) OPO Operations Officer PDO Procurement/DisbIursenment Officer PIC Project Implementation Committee PIP Project Implementation P'lan RPSC Regional Policy and Steering Committee SAP Strategic Action Plan SIDA Swedish International Development Agency SOE Statement of Expenditure TAFIRI Tanzania Fisheries Research Institute TECCONILE Technical Cooperation for the Promotion of Dev't. and Env. Protection of the Nile Basin UNDP United Nations Development Programme UNEP United Nations Environment Programme WNMO World Meteorological Organisation CONTENTS GRANT, CREDIT, AND PROJECT SUMMARY ............................................... i 1. BACKGROUND ................................................ 1 A. The Macroeconomies ................................................ 1 B. Lake Victoria and its Surrounds ................................................ 5 C. Major Threats to the Lake ................................................ 6 2. STRATEGIC FRAMEWORK ............................................... 10 A. Project Preparation ............................................... 10 B. The Lake Victoria Region in the Future ............................................... 11 3. THE PROJECT ............................................... 12 A. Objectives ............................................... 12 B. General Description ............................................... 13 C. Project Details ............................................... 14 D. Project Priorities ............................................... 24 E. Project Costs and Financing ............................................... 24 F. Rationale for GEF and IDA Involvement ............................................... 26 G. Lessons Learned and Technical Review ............................................... 28 4. PROJECT IMPLEMENTATION ............................................... 28 A. Management Structure ............................................... 28 B. Implementing Agencies ............................................... 29 C. Specific Implementation Arrangements ............................................... 30 D. Implementation Review ............................................... 32 E. Procurement ............................................... 32 F. Disbursement ............................................... 34 G. Accounting and Audits ............................................... 35 H. Sustainability and Participation ............................................... 36 I. Monitoring and Evaluation ............................................... 37 5. PROJECT BENEFITS AND RISKS............................................... 39 A. Benefits ............................................... 39 B. Environmental Analysis ............................................... 44 C. Risks ............................................... 47 6. AGREEMENTS REACHED AND RECOMMENDATIONS ............................................... 48 Annexes 1. Project Cost Summary and Financing Plan 2. Estimated Schedule of Disbursement (GEF and IDA) 3. Project Implementation Plan 4. Project Performance and Impact Indicators 5. Procurement Packages and Implementation Schedule 6. Supervision Plan 7. GEF Incremental Costs KENYA, TANZANIA, AND UGANDA LAKE VICTORIA ENVIRONMENTAL MANAGEMENT PROJECT GRANT, CREDIT, AND PROJECT SUMMARY Borrowers: The Republic of Kenya, United Republic of Tanzania, and the Republic of Uganda Beneficiaries: Fisherfolk, smallholder farmers Amounts: (a) GEF Kenya SDR8.0 million (US$11.5million equivalent) Tanzania SDR7.2 million (US$10.3million equivalent) Uganda SDR9.2million (US$13.2million equivalent) (b) IDA Kenya SDR8.9 million (US$12.8million equivalent) Tanzania SDR7.0million (US$10.1million equivalent) Uganda SDR8.4million (US$12.1million equivalent) Terms (GEF): Grant Terms (IDA): Standard, with 40 years maturity. Commitment Charge (IDA): Standard Onlending Terms: Grants to communities for microprojects Financing Plan (US$ m): GEF IDA Governments Totals Local 15.9 18.4 7.6 41.9 Foreign 19.1 16.6 0.0 35.7 Total 35.0 35.0 7.6 77.6 Economic Rate of Return: No ERRcalculated, as project benefits are not readily quantifiable. The major direct economic benefit for which the project lays the foundation is avoidance of collapse of the lake fisheries, which is estimated to have a present value of US$270-520million to the lake community. Staff Appraisal Report: Report No. 15429 Map No.: IBRD 27780 Project ID No.: F2-PA-44135 LAKE VICTORIA ENVIRONMENTAL MANAGEMENT PROJECT 1. BACKGROUND A. THE MACROECONOMIES Kenya 1.1 Kenya remains a low-income country. Even though its population growth rate, which historically has been very high (averaging 3.4 percent per annum as recently as 1987-91),dropped to about 3 percent in 1993, and although Kenya is one of the few countries in Africa that experienced a decline in fertility in the eighties (from 7.7 in the early 1980s to 5.2 in 1993), a significant and sustained increase in per capita income has proved to be an elusive goal in Kenya during the past decade. In spite of a few years of relatively good growth during the second half of the 1980s, the performance of the economy has been particularly inadequate in generating new jobs, and there has been no significant improvement in the incidence of poverty. Overall, the economy has generated only marginal increases in per capita output over the past decade; during the last four years, per capita income has actually declined - from $340 in 1991 to $260 in 1994 (at current prices and exchange rates). 1.2 The economy is heavily dependent on agriculture, which employs 70 percent of the labor force and contributes about one quarter of Gross Domestic Product (GDP). Coffee, tea and horticultural crops account for over 50 percent of merchandise exports. Between 1991 and 1993, Kenya's macroeconomic performance was poor. In April 1992, the Government agreed with the International Monetary Fund (IMF),on a program of actions necessary to re-establish a sound macroeconomic framework which included deficit reduction and liberalization of the foreign exchange regime. Until mid-1993, the implementation of the actions required was unsatisfactory: although fiscal targets were met, monetary targets were exceeded and the liberalization of the foreign exchange regime proved to be unsustainable. 1.3 Sustained Government effort since mid-1993 to tighten fiscal and monetary policy has resulted in effective economic stabilization and the revival of economic growth. The fiscal deficit (exclusive of grants) has been sharply reduced over two years from over 11 percent of GDP in FY93to about 2.5 percent in FY95. Combined with a generally tight monetary stance, these policies have resulted in the reduction of inflation. Measured month over month, inflation peaked in January 1994 at 62 percent and declined steadily to 6.6 percent in December 1994. The three-month annualized inflation rate was reduced to 2.8 percent by the third quarter of 1995. Exchange rate movements, after the initial inflation-induced depreciation to KSh 82 per US dollar in June 1993, have reflected the interest rate response of short-term foreign capital flowing in and out of Kenya. High interest rates led to the capital inflows which contributed to a reserve accumulation and caused the shilling to appreciate to about KSh 45 per US dollar by October 1994. The recent decline in domestic interest rates and the subsequent capital outflow, as well as the gradual recovery of import demand, resulted in the 2 shilling depreciating in the second quarter of 1995 to about KSh
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