World Bank Document

Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 33265-UG

PROJECT APPRAISAL DOCUMENT

ON A Public Disclosure Authorized PROPOSED CREDIT

IN THE AMOUNT OF SDR 20.9 MILLION (US30.0 MILLION EQUIVALENT)

TO THE

THE REPUBLIC OF UGANDA

FOR A

Public Disclosure Authorized MILLENNIUM SCIENCE INITIATIVE PROJECT

May 1,2006

Human Development 1 Country Department 4 Africa Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS

(Exchange Rate Effective June 2005)

Currency Unit = Uganda Shilling (UGX) Shs.1,767 = USDl USD... = SDR1

FISCAL YEAR July 1 - June 30

ABBREVIATIONS AND ACRONYMS

AAA Analytical and Advisory Services BHE Board ofHigher Education (Indonesia) CSR Council for Scientific and Industrial Research (South Africa) DFR Department of Fish Resources DGHE Directorate General ofHigher Education (Indonesia) DIF Development Innovation Fund EC Executive Committee of the UNCST ESMF Environment and Social Management Framework FAPD Finance, Accounts, and Procurement Department (of the UNCST) GDP Gross Domestic Product HACCP Hazard and Critical Control Point HIV/AIDS Human Immunodeficiency Virus/Acquired Immunodeficiency Syndrome [email protected] Innovations at Makerere Committee ICB International Competitive Bidding ICT Information and Communications Technologies IDG Institutional Development Grant IFR Interim Financial Report JICA Japanese International Cooperation Agency LIB Limited International Bidding MoFPED Ministry of Finance, Planning and Economic Development MOES Ministry ofEducation and Sports MTCS Medium Term Competitiveness Strategy NAADS National Agricultural Advisory Service NARC National Agricultural Research Council NARS National Agriculture Research System NCB National Competitive Bidding NCDC National Curriculum Development Centre NCHE National Council for Higher Education NEMA National Environmental Management Authority NGO Non-Governmental Organization PAG Project Advisory Group PDE Procuring and Disposal Entity PDU Procuring and Disposal Unit PEAP Poverty Eradication Action Plan PEM Physics, Economics and Mathematics PIRT Private Investors’ Roundtable PMA Plan for the Modernization ofAgriculture PPDAA Public Procurement and Disposal of Public Assets Act PPF Project Preparation Facility WED Regional Program Enterprise Development RT Research Teams R&D Research and Development SBD Standard Bidding Documents SESEMAT Secondary Science and Mathematics Education Project SIL Specific Investment Loan SMEs Small and Medium Enterprises SRT Senior Research Teams S&T Science and Technology TC Technical Committee TPPA Third Party Procurement Agent TVET Technical and Vocational Education and Training UACE Uganda Advanced Certificate ofEducation (A-level exam) UIRI Uganda Industrial Research Institute UNAS Uganda National Academy of Science UNCST Ugandan National Council for Science and Technology WE Universal Primary Education

Vice President: Gobind Nankani Country Director: Judy M. O’Connor Sector Manager: Dzingai Mutumbuka Task Team Leader: Michael F. Crawford FOR OFFICIAL USE ONLY This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

UGANDA Millennium Science Initiative

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE ...... 1 1. Country and sector issues...... 1 2 . Rationale for Bank involvement ...... 6 3 . Higher level objectives to which the project contributes ...... 7

B. PROJECT DESCRIPTION ...... 7 1. Lending instrument ...... 7 2 . Project development objective and key indicators...... 7 3 . Project components ...... 8 4 . Lessons learned and reflected in the project design ...... 9 5 . Alternatives considered and reasons for rejection ...... 10

C. IMPLEMENTATION ...... 11 1. Institutional and implementation arrangements ...... 11 2 . Monitoring and evaluation ofoutcomesh-esults ...... 13 ... 3 . Sustainability...... 14 4 . Critical risks and possible controversial aspects ...... 15 5 . Loadcredit conditions and covenants ...... 16 D. APPRAISAL SUMMARY ...... 17 1. Economic and financial analyses ...... 17 2 . Technical ...... 20 3 . Fiduciary ...... 21 4 . Social...... 22 5 . Environment...... 23 6 . Safeguard policies ...... 25 7 . Policy exceptions and readiness ...... 25 Annex 1: Country and Sector or Program Background...... 27 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 32 Annex 3: Results Framework and Monitoring ...... 39 Annex 4: Detailed Project Description...... 47 Annex 5: Project Costs ...... 47 Annex 6: Implementation Arrangements ...... 63 Annex 7: Financial Management and Disbursement Arrangements ...... 71 Annex 8: Procurement Arrangements ...... 88 Annex 9: Economic and Financial Analysis ...... 95 Annex 10: Safeguard Policy Issues ...... 107 Annex 11: Project Preparation and Supervision ...... 110 Annex 12: Documents in the Project File ...... 113 Annex 13: Statement of Loans and Credits ...... 116 Annex 14: Country at a Glance ...... 118 Annex 15: Map(s) ...... 120 IBRD 33504R UGANDA

MILLENNlUM SCIENCE INITIATIVE PROJECT

PROJECT APPRAISAL DOCUMENT

AFRICA REGION

AFTH1

Date: May 1,2006 Team Leader: Michael F. Crawford Country Director: Judy M. O’Connor Sectors: Human Development Sector Manager: Dzingai Mutumbuka Themes: Tertiary Education, Science and Technology Project ID: PE-PO865 13-LEN-BB Environmental screening category: Partial Assessment (B) Lending instrument: Sector Investment Lending I Safeguard screening category: Limited Impact [ILoan [ X ] Credit [ ] Grant [ ] Guarantee [ ]Other: For Loans/Credits/Others: United States Dollars

Total Bank financing;I\ (USDM.): 30.00 Borrower Rationale for Choice ofLoan Terms Available on File: Yes; __ No. Proposed Terms (IBRD): Standard IDA Grace period (years):

Commitment fee: 0.5% Years to maturity: 40 Front-end fee (FEF) on Bank loan: Payment for FEF:

Source Local Foreign Total Borrower 3.35 0.00 3.35 International Development Association 1 13.42 I 30.00 I 30*00 Total 33.35 13.42 33.35 FY 2007 2008 2009 2010 201 1 Annual 4.98 6.21 7.04 6.80 4.97 Cumulative 4.98 11.19 18.23 25.03 30.00

Does the Project depart from the CAS in content or other o Yes X No

j ~~ Does The Project require any exceptions from Bank policies? o Yes X No Re? PAD D. 7 Have these been approved by Bank management? N/A o Yes No Is amroval for any policy exceDtion sought from the Board? o Yes X No Does The Project include any critical risks rated “substantial” or “hiah” Yes I No Does The Project meet the Regional criteria for readiness for X Yes o No implementation? Re? PAD D. 7

Project description [one-sentence summary ofeach component] Re? PAD B.3.a, Tech. Annex 4

The first component will support the creation of a competitive funding facility to: (i)advance research that is connected to graduate training; (ii)strengthen or create undergraduate degree programs in science and technology disciplines; and (iii)promote cooperative activities defined by the private sector. The second component will support involvement ofthe science and technology community in outreach and policymaking and will support restructuring and strengthening ofthe Uganda National Council of Science and Technology (UNCST) and the Uganda Industrial Research Institute (UIRI), and Monitoring and Evaluation (M&E) and policy studies. Which safeguard policies are triggered, if any? Re? PAD 0.6, Technical Annex 10

Environmental Assessment (OP/BP/GP 4.0 1) Involuntary Resettlement (OP/BP 4.12) Significant, non-standard conditions, if any, for: R& PAD C.5

Board presentation: May 25,2006

Loadcredit effectiveness: September 25,2006

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

Background

Uganda is widely recognized for the development progress it has made since the early 1990s. Macroeconomic stability and robust economic growth have been consistent over much ofthe past 15 years. Poverty rates decreased from 56% in 1992 to 38% in 2003. Government policy has been centered on the implementation ofthe Poverty Eradication Action Plan (PEAP); social investments have increased and many social indicators have improved.

But after more than a decade ofcontinuous progress, economic growth rates have recently fallen. Over the past four years, growth rates have hovered around 5% per year. Given population growth of3.4% per year, real Gross Domestic Product (GDP) growth per capita has been quite modest. For Uganda to become a middle-income country within 20 years (a major goal ofthe PEAP), it must average 7% annual GDP growth or higher.

The PEAP seeks to stimulate rapid and sustainable economic growth, and a structural transformation of the economy. Low-tech, inefficient production still makes up the bulk of economic activity. Agriculture currently accounts for 34.3% ofGDP, and employs more than two-thirds ofthe workforce. Uganda does not have sufficient “natural” advantages in wages, geography, or other resources that allow it to easily establish competitive industries while productivity remains at its current low levels. Increased productivity and private-sector led growth will require Uganda to make more and better use ofknowledge in an improved investment climate.

In keeping with the principles ofthe PEAP, the Government is addressing the problem on several fronts simultaneously. A better investment climate is being pursued through improved business registration and taxation procedures, customs administration, land titling, infrastructure, and availability ofdependable energy and financial services, inter alia. The Plan for the Modernization ofAgriculture (PMA) seeks a transformation from subsistence cultivation towards greater output and value added. Other pillars ofthe PEAP address roads, improved public sector management, and efficient delivery ofbasic education and health services.

The Government is giving specific attention to raising productivity and output in the industrial and service sectors ofthe economy. Lack ofskills and low levels ofeducation ofavailable workers are seen as a major constraint to improved competitiveness. * Raising education levels in firms and increasing exposure to modem technology and management practices is a major policy concern:

The most important factor in explaining differences in firm efficiency is education.. .Learning channels are the most significant drivers offirm performance.

World Bank, “Competing in the Global Economy: An Investment Climate Assessment for Uganda,” August 2004. Table 3.1. 3 1% of firms ranked “lack ofskills and education” as a major or severe constraint to expansion; among physical inputs (non-financiallpolicy), only “electricity supply” ranked above education in importance (45%).

1 Learning-whether through export experience, working in a foreign firm, or advanced education-helps boost firm performance. Government policies that help develop these channels will thus foster private sector growth in Uganda.2

Key Sector Issues

Historical Neglect of Science and Technology. A main goal ofscience and technology policy is to ensure that investments in the sector result in firms and public entities having access to the knowledge and human capital they need. In Uganda, neglect ofS&T has created a disconnect between the country’s needs and its ability to meet them. Outside ofthe National Agricultural Research Organization, virtually no public resources have been allocated to S&T. As a result, the research base has declined or failed to grow. Production ofpublished papers in the basic sciences is essentially zero in chemistry, physics, mathematics, engineering, and earth sciences. Domestic graduate education for sciences has not developed, with the exception ofa few disciplines favored by donors. Talented researchers have looked outside the country for work. This self-reinforcing process drains researchers and technical personnel from firms and the public sector, further weakening the position ofscience in the country.

Institutional Capacity and Cooperation in S&T has been Weak. Since 1990 the Uganda National Council for S&T (UNCST) has had the statutory responsibility for the coordination ofS&T policy. Successful S&T policy cuts across various sectors and themes in matrix fashion. Horizontally, it involves basic science education, tertiary education, advanced training, and research policy, linkage between universities and businesses for transfer ofknowledge and skills, and various policies that affect firms directly [patent law, tax incentives, infrastructure provision, etc.]. Vertically, it involves agriculture, health, energy, transport, environment, telecommunications and other areas. Making effective policy requires significant cooperation between the agencies involved, and begins with collection ofin-depth sector data. Without resource allocations to these sectors, policy formulation has been sterile and incentives for cooperation among key agencies have been absent.

Over the past two to three years, this scenario has changed. Government attention to coherence in policy and budgets is increasing, as described below in the section on Government Strategy.

Low Technology Acquisition and little “Technology Learning” within Firms. The most comprehensive survey of firm practice in Uganda shows that while many firms have aspirations to be innovative (47%) at least two-thirds ofthese cite imported machinery as their most important source oftechnology. Stakeholder consultations have confirmed a lack ofqualified local talent to select, adapt, or even consistently and properly operate and maintain imported capital goods. Firms with greatest exposure to foreign management and technology, as well as international competition, have been most successful.

Relevance of Tertiary Education-Stagnant Science and Technology Enrollment. Achieving the correct balance ofscience, technology, and engineering as tertiary education expands is a critical issue. Prioritizing areas ofstudy that are key to Uganda’s development is equally important.

Ibid. p.34.

2 With respect to balanced expansion, enrollment in tertiary education is burgeoning as demand skyrockets. The quadrupling ofprimary enrollment (from 1.5 million students to over 6 million) under the Universal Primary Education (UPE) program is well known. Less recognized is a quadrupling oftertiary enrollment, achieved over the same time period and unaffected by increased graduating cohorts from UPE. Tertiary education enrollment went from fewer than 25,000 students in the early 1990s to 108,295 in 2004. Enrollment in scientific and technological disciplines, however, is virtually stagnant in absolute terms and declining precipitously as a percentage oftotal enrollment. The National Council for Higher Education (NCHE) notes that 85% ofuniversity enrollment is in arts and humanities, with only 15% in S&T disciplines broadly defined.3 Worldwide, science and engineering degrees are 38% ofall first university degrees; in Sub Saharan Africa they are 25%.4 In Ghana and Kenya, the ratio of S&E first degrees to the relevant age group is 2.5 times that ofUganda.’

With respect to prioritization, tertiary education is expanding where costs are lowest (in arts and humanities). Investment and financial constraints, rather than policy or market signals, largely determine where expansion occurs. Students generally accept any place they are offered in a university, leading the NCHE to declare, “most students are doing subjects that are not key to economic development as detailed in Uganda’s development plans.” Graduates are not seen by employers to possess either the technical skills or the critical thinking and problem-solving abilities that employers seek.

Quality of Tertiary Education and Advanced Training. Quality is a general problem in tertiary education. Qualified professors are scarce in all disciplines; the entire tertiary system has fewer than 550 Ph.D faculty, about one per 200 students. Professors are poorly paid; some take on huge teaching loads to supplement their salaries; others may neglect teaching in favor ofpaid consultancies.

Problems that affect quality in general affect S&T education and research more severely. Virtually no investment resources are available for infrastructure. [Public universities now charge tuition to some oftheir students, as do the growing numbers ofprivate universities, but this has not led to capital investments in S&T.] Private universities currently do not have laboratories and do not offer any hard science courses. After decades without capital investment, laboratories and facilities at public universities are dilapidated and obsolete. With the exception offaculties that have been “rescued” by specific donor investments, facilities are inadequate even for the small number ofstudents enrolled.

National Council for Higher Education, “The State ofHigher Education: A Report ofa Survey ofUganda’s Higher Institution’s ofLearning,” Kyambogo, Uganda, November 2004, p.9. The figure of 15% overstates the actual (internationally comparable) enrollment in science and engineering for two reasons. First, it includes students in “science with education” degree programs-studying to become secondary school science teachers. Second, it includes numerous students who are studying information technologylcomputer literacy courses that are closer to business skills than they are to true computer science. In international comparisons, neither category ofstudent would be included in the percentage ofstudents in science and engineering. US National Science Foundation, “Science and Engineering Indicators 2004,” Appendix Table 2-33. Data are from 2000 or the latest year available. Ibid. op. cit. p.9.

3 Lacking an adequate research base, professors are often unable to keep their knowledge up-to- date and connected to worldwide advances in their disciplines. As a result, curricula are often static and obsolete. Memorization-based teaching tends to crowd out problem-based learning. Where funds have been available and incentives viable, pockets ofresearch excellence have developed. In areas such as Human Immunodeficiency VirdAcquired Immunodeficiency Syndrome (HIV/AIDS) and crop science, where donors have provided funding, successes have been recognized internationally. But these sporadic successes have not led to improvements to the national S&T system as a whole.

Connection to Global Knowledge and Local Labor Markets. A basic function ofuniversity- based research is to scan the global knowledge base in a variety ofdisciplines and keep curricula and training connected to key advances. This same scanning provides the basis for the selection of research topics that form the core ofpost-graduate training. When this process is weakened, graduates do not bring first-quality knowledge and skills to their jobs, or foster learning in firms. The isolation imposed on Ugandan professors and researchers by the investment and quality problems described above has had a doubly negative effect ofdisconnecting them from knowledge and technology advances being made elsewhere in the world, while frustrating employers because graduates lack the combination ofspecific expertise and problem solving skills that lead to profitable technology development and other innovations.

Improving Secondary Science Education. Science education in secondary schools has suffered the same deprivation ofinvestment and scarcity ofhuman capital as in tertiary education. Laboratory equipment is almost non-existent, and qualified teachers are difficult to find. As a result, students avoid S&T subjects at A-levels. Arts and humanities subjects attract about four times as many students as science subjects, and pass rates are uniformly higher. For the moment, the number ofA-level passes in science is still above the level ofannual tertiary intake, but this situation may not last as the Government targets scholarship support to S&T disciplines. The African Development Bank and the Japanese International Cooperation Agency (JICA) are assisting the Government to address problems in science education at the secondary level.

The Government’s Strategy for Science, Technology, and Innovation

The Government’s strategy for science, technology and innovation grows out ofthe Poverty Eradication Action Plan (PEAP). The Government’s budget for 2005/2006 provides for increased investments in industrialization, research and development and technology areas necessary to increase productivity and economic growth. In the 2006/2007 budget, the Government will continue to make investing in S&T a priority.

The Government has taken or is planning actions in four principal areas: (i)improving science education at the secondary level; (ii)restructuring ofsupport to tertiary education to promote greater enrollment in S&T and economic priority areas; (iii)promulgation ofpolicy initiatives and mechanisms designed to support technology transfer and commercial innovation, including the Industrial and Innovation Fund; and (iv) the restructuring ofthe National Agricultural Research Organization and the creation ofa National Agricultural Research Council.

4 In secondary education, plans for improved S&T capacity are being developed within the Government’s overall plans for the provision ofUniversal Secondary Education. Government intends to improve absorptive capacity, quality, and relevance under the Education Sector Strategic Plan 2004-2015. The “Education I11 Project - Support to Post-Primary Education and Training Sector”, which will be carried out with the assistance ofthe African Development Bank focuses on equity, curricula review, and improving the inadequate conditions (labs, equipment, learning materials, computers) for teaching and learning ofscience and math in the critical S 1-S4 grades ofsecondary education. Part ofthe project will support Business, Technical & Vocational Education and Training to make it a more credible option for post-S4 further education and skill development. Along with this program, the Government is cooperating with the Japanese International Cooperation Agency (JICA) to invest on the Secondary Science and Mathematics Education Project (SESEMAT) program to improve the capacity ofover 850 teachers and teacher trainers in science and mathematics education.

After a comprehensive review oftertiary education policy, carried out in collaboration with the Bank, the Government has recognized that these numerous problems keep the country from developing a “culture of S<.~” It is taking proactive steps to change the situation. Development ofS&T capacity is a PEAP priority under the Human Development Pillar (Pillar 5). The NCHE has articulated a vision for the subsector in which training opportunities for S&T studies would increase, and all students would be exposed to at least some science as a breadth requirement. The NCHE has also collected the most comprehensive data on the system, and is reviewing the adequacy ofscience programs and laboratories as part ofits quality control role. Parliament has endorsed a Government policy to direct scholarships for study in public universities increasingly towards scientific and technology disciplines, with up to 70% of scholarships being earmarked for S&T and other areas ofstudy deemed to be ofcritical economic importance. Reform efforts under the “Innovations at Makerere” ([email protected]) program have made university curricula and teaching practices more relevant to the needs of social development, reducing the perception ofthese institutions as useless or “Ivory Towers.”

At the same time, the Government has moved aggressively to promote private-sector driven economic expansion. The Government’s Private Investors’ Roundtable (PIRT) has highlighted skill quality and relevance and technology development issues for policy attention. The Ugandan Industrial Research Institute (UIRI) has been identified for strengthening and the Government is making some modest funding available to commercialize research-based industrial innovations through the Innovation and Industrial Fund.

The National Agricultural Research bill ofSeptember 2005 introduces important changes to the funding, performance, and dissemination ofagricultural research. A National Agricultural Research Council (NARC) will oversee the allocation ofa core research budget, 30% ofwhich will be allocated competitively to any qualified research group. This new policy ends a monopoly on research funding previously held by Government-owned agricultural research institutes. The increased competition is expected to improve policy and relevance. Six new “zonal” research institutes are being created across the country, to assure the relevance of

’ Collaborative AAA work resulted in the publication of the Uganda Tertiary Education Sector Report [Africa Region Human Development Working Paper Series No. 501 and led to a series ofimportant policy changes, including the Universities and Other Tertiary Institutions Act of 2001.

5 research to the particular needs ofagro-ecological zones. A demand-driven system for disseminating research through extension has been put in place under the National Agricultural Advisory Service (NAADS).

The policy changes above reflect a belief on the part ofthe Government that increasing capacity in S&T is vital for long-term development progress. The vision is ofa scientifically literate citizenry, a technologically-capable workforce, and more intensive use ofknowledge in production. The current challenges for Uganda are to (i)produce tertiary graduates with the skills in science and engineering needed to meet the current and future needs ofthe labor market; (ii)create and/or strengthen graduate education in S&T disciplines to provide a cadre offuture professors and other professionals; (iii)increase quality and relevance ofresearch and training, through investment in infrastructure and changes to incentives; (iv) increase connections and linkages between research and training and the needs ofthe private sector; (v) create alternatives to migration for the country’s most talented researchers by improving the ability ofthe national S&T system to support high quality research and training; (vi) remove the systemic obstacles (institutional, financial, and sociological) that drive students to avoid S&T in their training and careers; and (vii) improve the mathematics and science skills ofstudents at all levels of education.

The project will address points (i)through (v) directly, and point (vi) indirectly through the strengthening ofthe UNCSTand the public outreach activities. Point (vii) is being addressed by the Government with the assistance ofother development partners.

2. Rationale for Bank involvement

The rationale for Bank involvement in this project has four elements. First and foremost, the Bank is a major development partner for the Government ofUganda, and the proposed intervention addresses human development, productivity and growth issues that are central to the long-term success ofUganda’s development strategy. Uganda’s development partners harmonize and coordinate their efforts through the Uganda Joint Assistance Strategy (UJAS). The UJAS identifies the areas of comparative advantage for participating donors, and identifies the Bank as a principal partner for both human development/education and for the promotion of private-sector led growth. As part of this, donors use the Education Funding Agencies’ Group (EFAG), which the Bank chairs, to coordinate interventions in the sector. JICA and the African Development Bank, both EFAG members, actively support improvements to S&T in secondary schools, while the Bank focuses its main support to education on the primary and tertiary levels.

Second, due to the Bank’s intensive involvement in private sector development, agriculture, education, and other S&T-related areas such as health, it is uniquely positioned to address the cross-sectoral and system-wide issues and obstacles that constrain the S&T sector.

Third, the Bank, along with the Rockefeller Foundation, has experience in supporting reforms in tertiary education that increase its relevance and the quality oftraining as these relate to service delivery. Supporting similar reforms for S&T is a natural corollary. These interventions have grown out ofAnalytical and Advisory Services (AAA) completed in 2002 on tertiary education policy. The sector dialogue continued in connection with project identification for the MSI, as

6 in-depth analytical work on S&T was done in collaboration with local consultants. Through a series ofconsultation workshops on S&T policy, over 130 key stakeholders provided their input and validated the approach proposed for the MSIproject.

Fourth, the Bank has experience and expertise in the reform and promotion ofnational S&T systems, through work with several other client countries. The success ofMillennium Science Initiative projects in Chile, Venezuela, Brazil, and Mexico has spawned interest in Eastern Europe and Central Asia as well as in Africa. The Bank is recognized by clients and the international S&T policy community as a leader in transferring best practice in S&T systems and capacity development.

3. Higher level objectives to which the project contributes

The Uganda Joint Assistance Strategy (UJAS) document number IDMR2005-0250; IFC/R2005- 0301; MIGMR2005-0064, discussed by the Board on January 17,2006, specifies the measures through which the UJAS Partners (seven development agencies including the Bank Group) will support the Government’s efforts to achieve its PEAP outcome targets. The PEAP has five pillars: (i)economic management; (ii)enhancing competitiveness, production, and incomes; (iii) security, conflict resolution, and disaster management; (iv) governance; and (v) human resource development. The project will contribute directly to two ofthese five pillars. With respect to pillar (ii),“Enhancing Productivity, Competitiveness, and Incomes,” the project will increase the amount and quality of skills available to the labor market in areas critical to private-sector led growth. It will also increase the number and quality ofconnections between private firms and academia, and raise the awareness offirms as to the potential benefits ofgreater technology use. With respect to Pillar (ii)of the PEAP, “Human Development,” the project will contribute to goals 5.1 S.P1 (“to improve [tertiary] curriculum to emphasize S&T.. .”).

B. PROJECT DESCRIPTION

1. Lending instrument

The lending instrument for the project is a specific investment loan (SIL). The SIL is appropriate because this is the first project of its kind in Uganda; the implementing institutions do not have experience implementing competitive funds for the development of S&T capacity. Supervision ofthe SIL will provide greater guidance and technical assistance than would be the case if the goals of this project were to be pursued under budget support. This is consistent with the Government’s stated desire and Bank practice ofhaving budget support be the main form of assistance, with projects only in areas bearing on productivity enhancement. It is also consistent with the Strategic Framework for Investment in Africa, which identifies investment lending as appropriate for investment in sectors without an established track record.

2. Project development objective and key indicators

7 Increases in amounts ofhuman resources trained would be measured by increases in numbers of programs, enrollment, and graduates in science and engineering, and labor market utilization of these skills. Improvements in quality would be measured through independent review panels, and growth in total publications and publication citation impact analysis, as well as increased collaboration with advanced regional and international research partners and firms. Improved relevance would be indicated by increased labor market utilization of S&T skills, greater public awareness and understanding of science, and greater use oftechnology and skills to improve commercial product- and process-improvements, and similar improvements in PEAP priority areas ofpublic concern (Le. health, agriculture, infrastructure, energy, etc.).

Ifthe project is successful it will build experience within the GoU for managing a national science funding facility according to international best practice. It will help make it possible for Uganda to achieve, within 10 years time, the targets ofthe NCHE ofone-third oftertiary enrollment in S&T disciplines, with all tertiary students getting exposure to some science.’ It will train an increasing percentage ofthe national S&T workforce domestically, in programs that produce qualified Bachelors, Masters, and Ph.Ds in areas ofrelevance. It will increase the private sector absorption of both people and knowledge, creating greater competitiveness and new areas ofcomparative advantage. Its institutions and policies will support the continuous development and deepening ofS&T capacity.

3. Project components

The project will consist oftwo project components, each with various subcomponents and activities. The MSIis administered by the UNCST through a Secretariat composed ofUNCST employees.

Component One the MSI Funding Facility [USD 16.69 million], provides competitively- awarded grants through three different windows, each dedicated to a specific purpose.

Window A funds research groups led by senior researchers or emerging investigators to conduct relevant, high-quality scientific and technological research closely connected to graduate training.

Window B funds the creation of undergraduate programs in basic science and engineering at licensed public and private institutions and/or the rehabilitation and upgrading ofexisting degree programs in basic science and engineering. For both Windows A and Bygrants are ofa sufficient size to allow researchers to acquire the equipment and other inputs needed to conduct training and research at the highest levels of quality.

Window C will support private sector cooperation. It will support: (i)grants for “Technology Platforms” through which firms and researchers define collaborative agendas for solving problems ofdirect interest to industry, and then pursue solutions collaboratively; and (ii)formal

* The one-third figure applies to all tertiary enrollments, whether public or private, fee paying or sponsored. The 70% of scholarships to be devoted to key economic areas including S&T applies only to students on Government- sponsored scholarships.

8 firm-based internships for students in science, engineering, and business administration, allowing interns the opportunity to gain exposure to the “real life problems” facing the private sector.

Component Two [USD 16.65 million] will support an Outreach Program, plus institutional strengthening, M&E, and policy studies.

The Outreach Program will include a number ofactivities designed to enhance public understanding and appreciation ofscience; it will be especially aimed at younger Ugandans who may consider careers in science- and technology-related fields. Stakeholder consultations have shown that many young Ugandans view science as inherently difficult or irrelevant, and scientists as unemployable. Empirical evidence contradicts these perceptions. The Outreach Program will contain a program of school visits by top scientists and researchers, including those associated with the MSI, to provide more positive and accurate information on science to students who are getting ready to make career decisions. Also, a “National Science Week” will focus attention in classrooms, the media and civil society on the importance of S&T to national development.

Component Two will also strengthen S&T institutions, especially the Ugandan National Council ofScience and Technology (UNCST) and the UIRI. UNCST has the overall responsibility for MSIcoordination and implementation, as well as for science policy nationally. The current challenges inherent in improving the contributions of S&T to society require a strong and capable institution. Similarly, UIRI is the lead agency in Uganda for commercially-relevant knowledge transfer and technology development. To fulfill this mandate it requires considerable strengthening as well. Institutional strengthening at UIRI will focus upon articulating links to industry, rehabilitating pilot plants and analytical laboratory facilities.

M&E ofboth the project’s progress toward its development objective and overall progress in the S&T sector will also be a part of Component Two. To help ensure continuity in monitoring, evaluation, and policy action, Component Two will sponsor studies in key areas ofpolicy.

UNCST will implement the project and its permanent employees will manage and administer the Project. This will include general administration and facilitating all tasks and functions (annual work plan preparation, financial management, procurement) relating to the Project.

4. Lessons learned and reflected in the project design

Lessons from general Bank experience include the need to base project design on thorough analytical work and stakeholder cdnsultation. Prior to beginning design ofthe Uganda MSI, a comprehensive situation analysis, “The State of Science and Technology in Uganda,” was produced to examine the current status of S&T in education, private sector, health, agriculture, Government, and related sectors. Five major participatory stakeholder workshops were subsequently held at which 200 key actors fi-om universities, industry, Government and civil society reviewed and contributed to the draft situation analysis. The Task Team also coordinated the design in collaboration with on-going Bank-supported operations, such as the Second Private Sector Development Project and the reform ofthe NARS supported under the PRSC.

9 Bank experience with the Millennium Science Initiative has shown that focused investment in research excellence, awarded through competition and closely linked to training, can provide a catalytic stimulus for quality, relevance, and human capital development in S&T. In Chile, the number ofPh.Ds trained domestically was doubled through concentrating resources on a few top scientists. In Chile, Venezuela, and Mexico, giving highly-selected researchers grants large enough to attract them to stay in their home countries has been key to renovating quality in several critical research areas. This trend toward use of a competitive funding mechanism evolved in response to years ofless-than-satisfactory performance ofBank-funded projects that provided S&T infrastructure without a mechanism for competitive screening ofthe specific research activities for which it would be used.

Other projects have channeled support to improvement ofundergraduate education through competitive funds. The Indonesia: Quality of Undergraduate Education Project improved first degree programs at public and private universities by supporting staff development, equipment, technical assistance, and rehabilitation of facilities. The Quality Innovation Fund (QIF) ofthe Mozambique: Higher Education Project (P069824) was deemed at mid-termreview a “very successful” element ofan overall well performing project. This mid-term review also suggested promoting greater participation ofprivate universities in the QIFand raising maximum institutional thresholds by 33% to USD 1 million. The Ethiopia: Post-Seconday Education Project has emphasized different levels of funds for different purposes, as well as the need to put great ex-ante emphasis on the development offunding administration procedures.

The Uganda: Decentralized Service Delivery-Makerere University Training Pilot Project has demonstrated that investments in training directed to high priority social needs (social service delivery) can modify traditional curricula and teaching methods and bring the work ofstudents and professors much closer to concrete needs ofservice providers.

While project experience has been largely successful, it has also been apparent that improving S&T systems involves both institutional strengthening and “social learning.” These take place over reasonably long time frames when projects have been able to demonstrate the advantages of improved research fimding, administration, and linkage practices. For example, the use of competitive, peer-review grant awards systems, or intensive researcher accountability, are initially resisted by those who may feel unable to compete. After experiencing the benefits of this type ofsystem, however, stakeholders strongly prefer the transparent, merit-based procedures to the less efficient practices they supplant.

5. Alternatives considered and reasons for rejection

Several alternatives to this proposed project design were considered: (i) An investment in pre-selected centers of excellence in biotechnology. This alternative was rejected because it would concentrate too narrowly on research in a single field of science (albeit an important one) to provide the range ofscience-and technology- based solutions for obstacles to Uganda’s development. It would not improve the Ugandan S&T system in a balanced way, with focus on research, training, and application ofknowledge, and it would not create any open, transparent, funding opportunities to which all Ugandan researchers could apply.

10 (ii) An investment focused on seconday or primay level science education. Stakeholders pointed out the serious deficiencies ofscience education at the primary and secondary level, and the need to build the “pipeline” ofqualified candidates for advanced training. However, given the modest resources available, and the fact that other donors are active at the secondary level, it was felt that an investment in the tertiary/graduate training system would be cost-effective and would address an important sub-sector not currently receiving funding. (iii) An investment focused only on private sector demanded research, OY only on undergraduate engineering. It was felt that the Uganda S&T system should be encouraged to grow in a balanced manner, with a mix offundamental science tied to training (graduate and undergraduate) and applied research with emphasis on skills creation to best respond to the near-term needs ofthe productive sector. Attempting to pre-select the exact “needs” ofindustry was deemed likely to miss the mark.

C. IMPLEMENTATION

1. Institutional and implementation arrangements

The UNCST is the project implementing agency; it will have the overall responsibility for project coordination and implementation. The UNCST will administer the MSIGrant Funding Facility and manage the related outreach and policy activities. The TC will be responsible-for making all S&T-related decisions with respect to the grant proposals. The Executive Committee ofthe UNCST will ensure the project’s implementation is in accordance to the agreed procedures ofthe Project Implementation Plan.

The MSI Funding Facility (Component One) will be managed by the UNCST under the structure and rules contained within the Project Implementation Plan and the Financing Agreement. The MSIFunding Facility will issue two consecutive, annual rounds ofcompetition. Each round will award grants in three designated subcategories: Window A-research grants, Window B- creation and upgrading ofundergraduate science degree programs, and Window C-private sector cooperation. The MSIFunding Facility is modeled on successful Bank-funded projects in Chile, Venezuela, Brazil, and Mexico, but the model has been adapted by Ugandan stakeholders to address the specific needs of Uganda. As part of the government plan to revitalize S&T in the country, the UNCST is undergoing an extensive restructuring and strengthening. The MSI will be implemented through the UNCST under this new structure. Technical assistance will be provided initially as the UNCST begins implementation, but the UNCST will be responsible for general administration and for facilitating all functions (annual work plan preparation, financial management, and procurement) relating to the project.

The UNCST will coordinate project implementation and supervise:

0 Procurement, including purchases ofgoods, works, and consulting services; 0 Project monitoring, reporting and evaluation; 0 Contractual relationships with IDA and other co-financiers; and 0 Financial management and record keeping, accounts and disbursements.

11 The UNCST will ensure efficient coordination among different grantees participating in the MSI.

Each Window ofthe MSI Funding Facility will have its own particular goals, but will share a single administrative structure and a single set ofoperating principles and procedures. The principles are drawn from best practice in science funding worldwide and are key to ensuring the highest quality and relevance ofoutput. The first principle is open, transparent, rule-bound competition for resources. All grants are to be awarded based on ranked selection ofproject proposals. The second principle is adherence to merit-based selection criteria using international standards ofpeer review. As is the practice in MSIprojects, the ranking and selection of proposals shall be done by the Technical Committee (TC). This committee is composed of internationally recognized scientistshesearchers, half ofwhom shall be Ugandans. The third principle is the maintenance ofthe closest connection between research, training, and use of research output. The fourth principle is strong researcher accountability for output.

Under these rules, the TC drafts the Call for Proposals for each Window. The TC then reviews, ranks, and creates a shortlist offinalists in each category from which it selects winning grantees. Technical assistance for improving grant proposal presentation and substance will be available to all proponents through a “Better Research Program” that will also provide technical assistance for research managers and administrators. A two-stage selection process would allow short- listed candidates to improve proposals prior to final selection.

UNCST’s Executive Committee (EC) will play an oversight role, ensuring that implementation is proceeding according to agreed procedures defined in project documentation. As well, the EC will assist in articulating the national priorities and GoU S&T policies and communicate these to the TC.

Researchers at public and private universities, as well as private or public research foundations, are eligible to compete for MSIgrants, provided in each case their work is connected to the training of(graduate or undergraduate) students. Grants cover modifications to existing buildings, but will not fund the construction ofnew buildings. Physical space andor its construction costs may come from counterpart contributions.

The outreach program, institutional strengthening, and M&E and policy studies subcomponents of Component Two will be administered by the UNCST with the participation ofpartner institutions and stakeholders from the S&T community. UNCST will administer a program in marketing and public relations to organize and administer the School Visits Program, National Science Weeks, and the public information campaign. An institutional assessment ofUNCST, conducted as part ofproj ect preparation, has recommended a restructuring and strengthening of the organization around a more narrow and defined mandate. Significant progress to this end has been made to date. The project will further assist with this restructuring as well as with a similar process at UIRI.

With respect to M&E, the responsibility for organizing and executing the M&E Plan will be shared by UNCST, the NCHE, and the UIRI, according to their areas ofexpertise as will be elaborated upon in the subsequent M&E Section 2.

12 Under Component Two, improved policy and institutional strengthening would go hand in hand. Outreach activities, for instance, would be implemented by the division ofUNCST responsible for human capital development policy. Other activities would be similarly assigned to the appropriate part ofthe restructured UNCST.

Procurement under the project will be decentralized where feasible to participating institutions like UIRI and to institutions ofPrinciple Investigators who win grants. UNCST will retain services of a Procurement Consultant hired under the Project Preparation Facility (PPF) to assist with setting up functional Procuring and Disposal Units (PDUs) and to quality assure procurement planning and processes at the implementing agencies during the first year ofthe project. As deemed necessary and appropriate, a Third Party Procurement Agent (TPPA) may also be hired to set up a framework for sourcing specialized scientific equipment and supplies that could likely to be required by grantees using information from the initial grant proposals. Another consultant or consultants will be retained by UNCST to provide Technical Assistance under the Better Research Program services to assist potential grant applicants to make appropriate Initial Proposals (IP) andor to assist grant applicants who are finalists to make any necessary improvements to complete the Full Proposals (FP) and to support grant managers and administrators including UNCST.

2. M&E of outcomes/results

The project implementation plan contains a comprehensive M&E framework for measuring progress towards the development objective, intermediate process milestones, outcomes, and deliverables. The plan is summarized in Annex. 3. The framework is built around three mechanisms for timely establishment ofproject progress within the context ofdevelopments in the sector:

0 Four regularly-conducted surveys detailing: (i)annual expenditures on S&T and summary ofresearch output; (ii)the state ofS&T in tertiary education, including labor market outcome for graduates; (iii)the state of S&T in industry; and (iv) public attitudes toward S&T, including career plans. The surveys will be conducted by the M&E unit ofthe UNCST, NCHE, and UIRI and other stakeholders as determined. 0 A consolidated annual report from the MSI TC to UNCST’s Executive Committee. The report will consolidate project information from annual reports and self- evaluations ofsubproject grant holders and other beneficiaries. 0 Two independent assessments by visiting panels ofinternational experts. The panels will be composed ofdistinguished scientists, technologists, and entrepreneurs with the expertise profile to assess scientific progress, as well as progress in human resources training and dissemination and application ofresearch results.

Indicators will be supplemented by comparative international data on publications and citation impact gathered and published by the Institute for Scientific Information, the US National Science Foundation, and the OECD’s Directorate ofScience, Technology, and Industry, as well as the Council for Scientific and Industrial Research (CSIR) ofSouth Africa and other regional bodies that collect S&T indicators and data.

13 Indicators will be consolidated in annual reports based on assessments ofproject outcomes. Results will be analyzed at several levels. First, the UNCST will thoroughly monitor various aspects ofthe success ofthe MSIagainst established baselines. This shall include the number of groups and individuals applying for hnding, physical and intellectual progress ofresearch, changes in productivity ofMSI-funded researchers, changes in enrollment/training opportunities offunded versus non-funded groups, and production ofresearch outputs. The UNCST will also be responsible to collect and improve national level M&E data for the S&T sector, in collaboration with partner agencies such as the NCHE and UIRI. This data will include national baseline and trend data on the number oftertiary students in S&T disciplines, trends in S&T graduate production, funds devoted to research, personnel and R&D spending by industry, and other S&T indicators. As part ofthe M&E subcomponent, tracer studies to track job placement rates and sectors ofemployment ofS&E graduates will be included. Finally, the UNCST will collaborate with regional partners to benchmark progress in Uganda against regional trends.

3. Sustainability

The Government’s commitment to increasing and using improved S&T capacity to reach national goals is evidenced through a series ofpolicy measures aimed at increasing the role of S&T in tertiary education, improving the use of research results, and promoting innovation in industry.

In 2005-2006 the Government announced that public expenditure will be re-oriented toward increased investment in, among other industrial areas, agriculture, industrial processing, innovation and standardization.

Parliament agreed to the Government’s proposal that effective in the 2005/06 academic year, of the 4000 students to be sponsored by Government in the four public universities, 70% will be in the sciences and other disciplines viewed to be critical to national development. The Government will maintain both this policy of targeted support and the long-tern goal ofassuring science- literacy ofall university graduates, ensuring sustainability ofthe flow ofS&E students into the universities, research sector, and ultimately, private sector.

The Government also passed a law in 2005 to modernize the agricultural sector and reform the NARS. The emphasis on demand-driven research and outcomes orientation bodes well for the sustainability ofreforms in this critical S&T-relevant sector.

The project has been designed to accommodate the long-term aim to transition from an externally-financed project to a fully Ugandan-funded national program. The fiscal implications are modest enough to permit the Government to sustain the investments and continue to operate the fund as a main mechanism for research funding. Support to undergraduate programs is designed so an increasing percentage ofthe costs will be borne by the host institution as the project ends.

14 4. Critical risks and possible controversial aspects

Risk Mitigation Measures Risk Rating with Pks Mitination To Project Development Objectives

Capacity at UNCST insufficient to MOFPED restructuring UNCST so it s manage a competitive fund of contains a Policy and Program international-level quality Implementation Division, each with an Assistant Executive Director

Students and researchers use the Government policies are increasing M project as a means to improve their investments in S&T, improving prospects for finding work outside conditions for domestic employment Uganda, worsening brain drain

Other negative factors in business Government approach to S environments swamp the effects of improvement ofbusiness environment improved technology development and investment climate is and use comprehensive, addressing land titling, transportation, energy, regulations, and other issues

Project becomes lightning rod for Vice Chancellors oflicensed M criticism ofGovernment policy institutions have been involved in toward science by institutions that project preparation from the earliest stand to lose from the changes stages; Project rules drafted by a Ugandan committee representing a broad group ofstakeholders; in-depth consultation process preceded project design

Risks) To Com onent Results

~ Proposals ofinsufficient quality to Two levels ofresearch grants M justify international levels of available to accommodate variations investment in research in quality. Two-stage selection process allows for improvement of grant proposals

Tertiary institutions may not be able Analysis shows that the cohort of M to attract students to enroll in students with A-level passes in basic undergraduate science and sciences, while small, is sufficiently engineering programs in sufficient large to support increasing tertiary numbers enrollment in the short and medium term. Government policy is directing more scholarships toward science disciplines. Incentives for students, such as access to computers and

15 I equipment, will be included in the subprojects

External conditions cause employers Consultations with industry leaders S to shun S&T graduates even though have revealed stated willingness to they have more relevant, higher hire Ugandan S&T grads if they quality skills possess the requisite skills. The project includes mechanisms to change attitudes ofboth graduates and employers about the potential productivity benefits ofusing S&T knowledge more intensively in production

Corruption (funds may not be used Appropriately qualified and M in an efficient and economical way experienced staff are already working and exclusively for purposes with the unit intended) Internal control procedures are documented in the form ofmanuals and guidelines and are substantially being adhered to

Internal Audit UNCST has no internal audit function. In view ofthe fact that the project will be disbursing funds to other sub-grantees, it is paramount that UNCST has an internal auditor whose main role will not only be to ensure that UNCST is adhering to its policies and procedures but that the sub-grantees receiving MSI funds have adequate financial management systems in place to ensure funds are used for purposes intended and accounted for. This shall be mitigated by the recruitment ofan Internal Auditor before Project Effectiveness Overall Risk Rating M

5. Loadcredit conditions and covenants

Effectiveness conditions

The credit effectiveness conditions are listed below: 1. A Subsidiary Agreement will have been executed on behalf ofthe Government and the UNCST. 2. The Executive Committee of the UNCST, in conjunction with the MoFPED will have appointed a permanent Executive Secretary ofthe UNCST, with credentials and experience acceptable to IDA

16 3. UNCST and UIRI Procurement Officers should have undertaken basic Procurement Management training in Bank financed projects at ESAMI or GIMPA

4. An internal auditor will have been appointed to UNCST; and a procurement consultant with significant experience in World Bank procurement procedures will have been appointed to UNCST and UIRI

5. A PIP, satisfactory to IDA, with a chapter on Procurement Arrangements including details of actors, their roles and responsibilities as well as templates and standard procurement documents

Disbursement conditions

None

Other covenants

Ninety days prior to the beginning ofeach fiscal year, the UNCST will submit to the Bank for its no objection a consolidated annual work plan and budget for the upcoming year. The plan will be comprised ofthe annual work plans and budgets for UNCST, UIRI, and grant recipients.

D. APPRAISAL SUMMARY

1. Economic and financial analyses

The project is designed to increase the number ofscientifically- and technologically-trained people in Uganda, to improve the quality and relevance oftheir professional skills, and improve the channels through which firms become aware ofand make use ofthese skills, all for the sake of accelerating growth. Economic analysis reveals that the formal sector, especially those areas where technology use is intensive, is growing faster than the economy as a whole. Telecommunications, after benefiting from technology transfer, has increased from 0.8% ofGDP to 2.3% in four years, with an annual average growth rate of37%. Over the same period, agriculture fell from 37.6% to 34.3% ofGDP. The main economic policy ofthe Government is to multiply the number ofcases similar to telecommunications while maximizing productivity gains in all sectors. The new S&T policies are designed to achieve this.

Abundant evidence from the literature shows high double-digit returns to R&D in a myriad of settings. Evidence from Africa shows returns that are lower than global averages, but still consistently positive double digits. The difference is attributed to the shallowness and fragility of the research base in Africa and the absence of firms experienced with using R&D and other knowledge-related improvements to increase productivity. Adopting technology is not without costs, and is more difficult to do when firms and countries lack “absorptive” or “national

17 learning” capacity for technology. This argues for investments in both pure andsapplied research, as well as for the variety oftechnology learning mechanisms included in the project.

Extensive surveys ofUgandan firms show imported hardware and machinery as the most important source oftechnology. Human skills to select, adapt, and create new local uses for technology are reported to be inadequate. Government policies have begun to address this by targeting public support (scholarships) to S&T disciplines among other considered key to economic development. Other policies changes have opened funds for agricultural research to competition from universities as well as Government-owned laboratories, and restructured the way knowledge is channeled to end users through extension services. In addition, the Government is now making finding available for late stage commercialization ofknowledge and the creation ofprototypes in industry.

Examples from micro-economic studies ofparticular industries show large positive returns to technology upgrading. In the case offisheries, the aftermath ofa ban on exports for failure to meet EU sanitary and phytosanitary standards led to USD 36 million in losses in 1998. The losses were due, inter alia, to the absence of laboratory capacity for microbial, chemical and organoleptic analysis and technical personnel trained in Hazard and Critical Control Point procedures (HACCP). Uganda’s knowledge institutions were found to have been largely ineffective in improving technological performance in the fisheries sector.

The Impact of EU ban on Uganda’s fish exports

~ Effect/Group Loss Export earnings USD36,900,000 Income of fishermen community *USD850,000 per month due to reduced prices and fishing activities USD4,250,000 Factories that closed down 3 out of 11 Factories that reduced their labor force (2/3) 8 out of 11 Jobs lost in fish factories (113) 2,000 Jobs lost in fishing activities (1/3) 32,000 Persons that lost 2/3 oftheir income 68,000 Affected family members and relatives living on the same income 300,000 ss to

With significant international assistance, the industry reacted and recovered from these losses and instituted technological changes. The project seeks to create conditions under which such potential losses could be foreseen and avoided in the future, across industries key to Uganda’s economic growth and competitiveness. It seeks to move the S&T system from a reactive mode.

No exhaustive quantitative comparison ofcosts and benefits is attempted at the level ofthe economy as a whole, due to the “framework” nature ofthe project and due to the limited availability ofdata and case studied on industry. However, noting net present value ofthe losses in the fisheries example (USD 48.1 million) are more than twelve times the proposed annual investment costs under the project, modest coefficients for project outputs would more than compensate for such losses or, more positively, spawn the creation ofnew business opportunities. Such opportunities could come through: (i)process improvements that create the same output with fewer inputs; (ii)process improvements that increase output through reduction

18 ofwaste; (iii)creation ofproducts and services new to Uganda, or significantly improved from their current form, which are economically viable; (iv) creation ofnew or innovative products; andor, (v) improving the quality and efficiency ofpublicly-provided goods and services (clinical medical services, agricultural extension, etc.). Realization ofsuch opportunities is likely to lead to a positive rate ofreturn on Government investment.

Financial

The project is not expected to have any immediately significant negative impact on Government finances since, consistent with the new country parameters, IDA will finance 100% of most project investment costs. The majority ofproject counterpart contributions will be in-kind. Incremental recurrent costs would be primarily borne by the Government through additional staff needed at the UNCST and in conjunction with the overall strengthening ofUNCST, and through costs ofadditional staff at public universities hired in conjunction with expanded research, graduate training, and undergraduate science and engineering grants provided under Windows A & B ofComponent One ofthe project. An upper estimate oftotal numbers ofstaff to potentially be directly assumed at UNCST and UIRI is 10-12 individuals. This constitutes less than one- thousand ofa percent ofemployment in the traditional civil service. The estimated overall Project cost is USD33.35 million equivalent. The Government will finance 10% through resources it provides to the implementing and beneficiary agencies. The remaining 90% will be financed by the IDA credit.

Estimated operating costs amount to about 4.5% ofoverall project costs. It has been determined that the financing ofthese would be shared by the Government and IDA, with the Government providing approximately 35% and IDA 65%. These amounts and cost sharing arrangements will not pose a threat to project sustainability. The IDA credit will not pay salaries or any related salary expenses for civil servants. The IDA credit will pay up to 100% for the costs ofgoods and equipment, minor works, consultant services, and training. The Country Financing Parameters for Uganda state that currently no taxes have been identified as unreasonable or discriminatory. For the MSI, the tax regime is accommodating, in that scientific equipment are exempt from import duties. VAT taxes will apply to some expenditure items, but this in total are not expected to exceed USD0.81 million (2.4% oftotal project costs). This is not an excessively high share of project costs, therefore, the IDA credit will finance up to USD0.58 million (1.7% oftotal project costs) and the Government will financing the remaining portion.

The current country financing parameters were designed to mitigate the historical problems resulting from delays in provisions ofcounterpart funding to individual projects. Analyses preceding the adoption of the new parameters determined that these were not a result oflack of Government commitment to the portfolio.

19 existing capacity to be employed more productively without additional financial cost in many cases. In the majority ofcases, the project will therefore increase the productivity of existing professors and researchers. In cases where new faculty will be recruited, this will take place through normal channels, and utilize the existing vacancies for qualified faculty members in public universities.

When the project finishes, the Government will assume responsibility to continue financing the MSI Funding Facility as the main vehicle for investment in the S&T sector. The additional financing requirements will be 0.2% of Government expenditure starting in 201 1/12.

2. Technical

The technical approach chosen for this project is based on international best practice for science research funding and private sector linkage, but has been modified significantly to take into consideration Uganda’s current level of S&T skills and innovation performance.

The project’s core components will use transparent, competitive, peer-reviewed allocation of research resources, researcher accountability for results, intensive linkages to training, and incentive programs to stimulate industry-academia linkages. The use ofsuch procedures in funding mechanisms, accountability, training, and linkages promote the most efficient use of research resources, and the largest economic impact through innovation.

However, modifications have been introduced to make the project appropriate for Uganda’s current needs. Significant technical assistance will be provided to grant proponents, who will not be experienced in writing competitive grants proposals for intense, peer-review scrutiny through the “Better Research Program”. Also, in contrast to other MSIprojects, the Uganda MSIdoes not center only on tertiary-based, postgraduate research. It includes significant resources to stimulate undergraduate science education, through Window B. Special emphasis has been given to engineering education as well, as applied S&T skills are critical to the development challenges facing Uganda.

The project balances support to “classical R&D” in Window A with a host ofactivities that connect students, researchers, and firms to general productivity enhancement issues. It was felt that few firms or researchers are sufficiently advanced to benefit principally from classical R&D, but could benefit much more from improved technology awareness, selection, and upgrading.

Finally, the approach recognizes that financing mechanisms must be combined with social marketing activities which overcome the effect that decades ofneglect has had on perceptions of the usefulness ofS&T. It includes significant technical assistance for both the institutions responsible for formulating and administering S&T policies and programs as well as the stakeholders who will be using these instruments in some cases for the first time.

20 3. Fiduciary

Financial Management

The Country Financial Accountability Assessment (CFAA) carried out by IDA in 2004 shows that the Government ofUganda 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 been reduced. In terms of appropriate legislation and regulatory frameworks, significant progress has been made to ensure that the risk associated with lack of clear rules and regulations has been reduced. (Also more useful information is provided in the annual accounts). However risks remain in terms of enforcement ofprocurement and payroll rules and procedures; completeness ofdata on debt; effective independent oversight; and timeliness and effectiveness oflegislative and public scrutiny.

The project’s transactions will be managed within the existing set-up in the (UNCST). This is headed by the Finance, Accounts and Procurement Manager who is assisted by a Senior Accounts Officer and a Procurement Officer and two Accounts Officers who shall all be in charge ofmaintaining the books ofaccounts and records ofthe MSI project. The accounting unit is computerized and uses Quick Books accounting software. Due to its limitation in report writing, UNCST is planning to procure Navision Financials accounting software. A Financial Management Manual (FMM) documenting the accounting policies and procedures is in place. The project’s financial statements will be audited in accordance with statutory requirements, and suitable terms ofreference will be developed.

Actions outlined in the Financial Management Action Plan will be undertaken by the project to strengthen the financial management system. The major action is the recruitment and appointment ofan internal auditor who will be expected to ensure financial and operational policies and procedures are being followed by UNCST and the sub-grantees receiving MSI funds have adequate financial management systems to ensure the funds they receive are used for purposes intended and accounted for. The actions required before effectiveness ofthe Credit are opening bank accounts, setting up books of accounts, incorporating project budget lines and disbursement categories into the existing chart ofaccounts, recruitment ofan internal auditor and agreeing on Financial Monitoring Report (FMR) formats as well as demonstrating the ability to prepare the FMRs. As a condition for UNCST to disburse hnds to UIRI and sub-grantees, UNCST will carry out a Financial Management appraisal ofUIRI and these sub-grantees and get IDA approval to ensure that UIRI and the sub-grantees have adequate financial management systems that can utilise and account for the funds for the purposes intended as per project objectives. The other condition that will strengthen the financial management system and can be done after project effectiveness is agreeing on terms ofreference for the external auditor to ensure the project accounts are audited and submitted to the Bank on time.

In order to ensure that the project is effectively implemented, the UNCST will ensure that appropriate staffing arrangements are maintained throughout the life ofthe project.

21 The conclusion ofthe assessment is that the financial management arrangements for the project satisfy the Bank’s minimum requirements under OP/BP10.02 and are adequate to provide, with reasonable assurance, accurate and timely information on the status ofthe project required by IDA. With the implementation ofthe action plan, the financial management arrangements will be strengthened.

Procurement

In 2004, the Uganda 2001 Country Procurement Assessment Review was updated as part ofthe Uganda Country Integrated Fiduciary Assessment (CIFA) which reviewed the progress of implementation ofthe recommendations ofthe 2001 CPAR. The resulting 2004 CPAR reported substantial progress the key development being the enactment and implementation ofa procurement law. The Public Procurement and Disposal of Public Assets Authority, 2003 (the Public Procurement Act) had come into effect on February 17,2003 and the accompanying regulations were made in September 2003.

The law, which is based on the UNCITRAL model law, decentralized procurement to Procuring and Disposing Entities (PDEs) and established a regulatory body, the Public Procurement and Disposal ofPublic Assets Authority (PPDA). For a PDE to comply with the Public Procurement Act, it must have an Accounting Officer, a Contracts Committee, and a PDU headed by a procurement proficient staff. Evaluations are carried out by adhoc committees specific to the contract with the participation ofthe User Department.

PPDA issues Guidelines on the application ofthe procurement regulations and on July 1,2005 did issue Standard Bidding Documents (SBDs). PPDA carries out procurement audits and also has the mandate to build capacity in the public procurement sector and conducts administrative reviews as the second line ofappeal for procurement complaints.

The 2004 CPAR highlighted the serious lack of procurement management capacity in PDEs as well as weak enforcement ofthe law. The review update also recommended among others, better coordination ofprocurement audits between PPDA and the OAG, the setting up ofan accreditation scheme to professionalize the procurement function, the Inspector General of Government to use consultants in appeals against the PPDA or appeals against the administrative review by the PPDA, and the setting up ofa M&E system for the reforms.

UNCST and UIRI, the key Implementing Agencies and the potential grantee institutions assessed, all suffer from inadequate procurement management capacity. Heads ofPDUs invariably lack experience in managing procurement under bank financing. Therefore, as conditions ofeffectiveness, it will be required that UNCST recruits a Procurement Consultant on a one year contract and submits a satisfactory draft PIP/OM. Procurement reports in agreed format will be submitted every quarter as part ofthe Interim Financial Reporting, and ex post procurement reviews will be conducted annually to update the Procurement Management Capacity Assessment (PMCA).

4. Social

22 Project design benefited from strong consultation and stakeholder participation from its initial stages. The idea for the project grew out ofinteractions between key stakeholders and Government from early 2001 onwards. In October of2004, over 130 members ofthe Ugandan S&T community participated in four multi-day workshops to diagnose the policy needs ofthe sector from the perspective of(i) pre-tertiary science education; (ii)the research bases at universities and institutes; (iii)the private sector; and (iv) the Government’s policy goals. [Findings from the four workshops as well as highlights included in the report, “The State of Science and Technology in Uganda,” are available with the project documentation.]

Following these initial consultations, a Ugandan Project Advisory Group was created to ensure that the needs ofpractitioners and end-users would drive project design, and that the project would be appropriate for Ugandan circumstances. The Project Advisory Group consisted often recognized leaders from among researchers, the private sector, and the S&T policy community. The ranks included the representatives from research in biomedicine, agriculture, engineering, and microbiology, as well as secondary education, the private sector, and professional associations such as the Ugandan National Academy ofScience. The Project Advisory Group drafted the Project Implementation Plan.

Project design was reviewed and vetted against national and international experience at a stakeholders’ conference in March 2005. The Project Advisory Group consulted frequently with Honorable Members ofParliament, especially on the Science and Technology and Social Services Committees.

There is a potential that project activities may include construction ofnew learning and laboratory facilities. If it is determined that construction will occur outside ofexisting campus or compound locations, consultations will occur with potentially impacted peoples and surrounding communities. Any land acquisition, loss of assets, or impact on livelihood will entail preparing a resettlement action plan based on the guidelines and standards set forth in the resettlement policy framework

5. Environment

In recognition ofthe potential environmental and social impacts that may result from project activities, the Borrower has prepared an Environmental and Social Management Framework (ESMF). The document has been prepared in consultation with numerous stakeholders from among the sectoral Ministries, the National Environmental Management Authority (NEMA), researchers, heads ofdepartments and institutes, university and institute top-level administration and management, and the general public. The framework is appropriate because the precise subproject activities, including potential construction oflaboratory space, is not known at this time. The framework makes provisions for identifying the specific impacts and pursuing appropriate mitigation measures ofany environmental concerns that may arise.

Laboratory safety and the safe disposal of wastes is the principal potential environmental concern. The ESMF contains an in-depth digest ofinternational best practice standards for laboratory safety. The standards cover all classes ofphysical, chemical, biological, and radioactive hazards. They discuss procurement and transport, storage, protocols and facilities for

23 use in research, training ofpersonnel, segregation ofwaste types, and disposal ofwastes. The digest also describes core processes for establishing functioning environmental management systems within laboratories, including development oftraining for personnel, designation of responsibility for environmental management, performance ofneeds assessment and waste stream assessment, installation and maintenance ofappropriate equipment, treatment processes, and safe transport.

The ESMF outlines the steps ofthe environmental and social screening process to be followed by all subprojects as well as the institutional responsibilities for its implementation and the related training needs. The results ofthe screening process will determine the nature of procedures to be implemented in each specific case. Although the potential scope ofthe impact is modest, the framework makes provisions for the broadest range ofpotential situations. Through Window A, the MSIFunding Facility will sponsor a minimum of 12 and a maximum of 15 research and training subprojects. The majority ofthese will involve relatively small teams (5-9 individuals) working in relatively small laboratories. Total waste generation will be relatively small. The nature of the research to be conducted will also keep the potential environmental impact of the project relatively modest. The project will not contemplate the funding ofany research subproject involving field trials ofgenetically-modified organisms. Several subprojects may be in areas (such as mathematics) where no waste will be generated, Other subprojects will most likely concentrate on areas ofresearch that generate hazardous wastes in small amounts and ofthe kind that can be treated and disposed ofwith routine care and procedures. Again, nonetheless, this ESMF makes provisions for the potential extraordinary cases.

Implementation ofthe ESMF will be the overall responsibility ofthe UNCST Research Funding Secretariat, working in conjunction with principal investigators/proj ect leaders who are responsible for implementation ofthe ESMF for their individual projects. NEMA will collaborate with the UNCST with respect to monitoring ofcompliance with the ESMF.

The ESMF has been incorporated into the Project Implementation PladOperational Manual, where it integrates environmental and social screening requirements with other requirements which grantees must satisfy prior to receiving grant contracts. Ifit is determined during the screening process that new construction will occur, or people’s livelihoods or assets will be impacted, then the grantee will also need to follow the guidance and standards set forth in the Resettlement Policy Framework.

All laboratories and research facilities will be required to: (i)identify ex-ante the environmental, social, and safety impacts of proposed research and research wastes generated; (ii)submit a plan for minimization, mitigation, and proper disposal for review and approval ofboth national authorities (UNCST, NEMA) and the project’s TC; (iii)keep appropriate records and submit to periodic third person monitoring ofsafety and waste disposal practices.

Rehabilitation ofphysical space for laboratories or limited new construction may trigger potential impacts on the environment. Again, as research activities are not pre-defined, it is not known if any such activities will be undertaken. The ESMF describes the potential for specific

24 impacts, and the mitigation measures to be pursued, including referencing the Resettlement Policy Framework in cases where land acquisition, or impact on livelihoods or assets occurs.

6. Safeguard policies

The MSIhas triggered OP 4.01 Environmental Assessment and OP 4.12 Involuntary Resettlement; the safeguard screening category is S2 (“limited impact”); and the environmental screening category is B. Accordingly, the project has prepared an Environmental and Social Management Framework to address the issues discussed in the preceding section, and a Resettlement Policy Framework (RPF) to address and mitigate any potential negative social impacts in the event that there is land acquisition, impact on livelihood, or impact on assets, in connection with the project. Both documents have been disclosed in Uganda on October 25, 2005, and at the Bank’s InfoShop on December 7,2005.

The ESMF includes planning for the creation ofindividual Environmental Management Systems (EMS) in each laboratory, as well as proposed capacity building measures, M&E and supervision plans, and cost estimates. The ESMF and RPF are included in the Project Implementation PladOperational manual.

The RPF outlines the policies, principles, and procedures to be adopted in the event that land is to be acquired; there is an impact on livelihood, or an impact on assets in connection with the project, and the ex-ante screening process to mitigate any potential negative effects relating to resettlement or the loss oflivelihoods. The overall responsibility for the implementation ofthe RPF will be the UNCST/Research Funding Secretariat. In the event that activities include land acquisition, impact on assets, or impact on livelihoods, a Resettlement Action Plan will be prepared following the guidance and standards set forth in the RPF.

The prepared RAP would be cleared by the World Bank prior to initiating sub-project activities.

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, being revised as OP 4.1 1) 11 [XI Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety ofDams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP/GP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI

7. Policy Exceptions and Readiness

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

25 The project does not require any exceptions from IDA policies. Assessments and preparation of fiduciary arrangements, M&Es systems, and implementation plans have been prepared. These meet or exceed the regional criteria of implementation. Assessments of fiduciary, financial, M&E and implementation capacity have been prepared and actions are being taken.

26 Annex 1: Country and Sector or Program Background

Science and Technology as a Government Priority

Uganda needs to stimulate higher levels of economic growth. To make progress against poverty, Uganda's economy must grow at 7 percent per year or more, according to Uganda's third Poverty Eradication Action Plan (PEAP-revised as ofJanuary 2005). The strategic aims ofthe PEAP include increased GDP growth, reduced poverty and inequality, and improved human development. The PEAP, which is also Uganda's Poverty Reduction Strategy Paper (PRSP), explicitly highlights the importance ofS&T for economic transformation and private sector led growth in Uganda.

Greater S&T capacity can contribute to improved productivity and growth. According to the PEAP, one ofthe key factors hindering Uganda's competitiveness is continued inability to move up from export oflow value and unprocessed products. Skills gained through S&T will help add value to Uganda's leading exports such as coffee, cotton, fish and livestock products through processing technologies and innovative marketing approaches. At the same time, S&T skills and knowledge will remove obstacles to the growth ofthe domestic economy and play important roles in various areas ofpublic responsibility such as health service provision, agricultural research and extension, and engineering'infrastructure provision and maintenance.

Current S&T capacity is very modest and out of line with the country's aspirations for economic transformation. The PEAP also acknowledges the need for "institutional reforms and strengthening in the area ofassessment and importation oftechnologies and their modification to suit the Uganda situation". It explicitly refers to institutional capacity building for bodies focusing on S&T development (and others focusing on export promotion), e.g. the Uganda's Industrial Research Institute (UIRI) and the Uganda Council ofScience and Technology (UNCST). In addition, the PEAP argues for the need to bolster the role ofpublic technical and vocational training institutions (universities and institutions ofsecondary education) "to deliver the required manpower for enhancing production and competitiveness". It goes on to mention that: "While public institutions will most likely be the major providers of education and skills training, it is envisaged that private institutions will complement Government efforts in creating new skills and developing training schemes in emerging technological areas."

Current Status of S&T in Uganda

Education coverage is expanding and the demand for education is growing. Education coverage is expanding tremendously in the country, with close to a quadrupling of enrollment at primary and tertiary levels in less than a decade. The numbers oftertiary institutions is estimated to have grown from 92 in 2002 to 155 in 2004. Growth in demand is driven by at least three factors. First, the perceived value ofeducation is rising as Ugandan society as the economy becomes less rural-based. Second, Uganda has one ofthe highest population growth rates in the world (over 3 percent), thus creating ever larger cohorts ofyoung people. Third, Universal Primary Education and Universal Secondary Education programs produce ever larger amounts of Ugandans seeking additional schooling.

27 But enrollment in Science and Technology remains stagnant despite high market demand. At the tertiary level, tens ofthousands ofnew fee-paying students have been channeled almost exclusively into arts, humanities, and social sciences. S&T disciplines have not been part ofthe expansion. Very few science degree programs exist. Enrollment in basic sciences is miniscule and the number ofstudents in degree programs generally classified as “science and engineering” is likely to be no more than 2 to 3 percent oftotal tertiary enrollment. Funding for either capital or recurrent expenses for S&T training is meager. Despite burgeoning enrollment, no systematic attention is being given to the development ofdomestic graduate education. Fewer than 550 professors in the entire country have Ph.D.’s, and fewer than 8 new Ph.D.’s are awarded annually in the sciences and engineering nationally. At the same time, studies found that graduates with qualified education in S&T disciplines are in high demand and short supply.

Ugandan universities struggle to keep up with the explosive demand for tertiary education. Conditions are dismal, with overcrowded and deteriorating physical facilities and restricted and antiquated teaching materials, laboratories and equipment. The student to computer ratio across the 155 registered tertiary education institutions is a meager 35 to one. At the same time, teaching loads are very high and the time to conduct research or to renew course content is low. As a result, coursework is often highly theoretical and not up to date or informed by recent research. The S&T degree programs are among the weakest parts ofan overall weak system. Outside ofICT, Uganda has only a handful ofactual science faculties. Makerere is the only university to offer degrees in the four basic sciences.

Research is not an integral part of tertiary education. With the main exception ofMakerere and Mbara Universities, most universities in Uganda do not conduct research. Even at these universities, sporadic donor-fimded efforts have been essential to keeping university research from disappearing altogether. Most research in Uganda focuses on health and agriculture, with public universities playing a significant role within these sectors. Data on publications show a positive trend from an extremely low baseline. In the last decade, Uganda’s annual publications have tripled from about 30 a year to an average of90 or more. However, much ofthe growth is restricted to health and agriculture, which accounted for almost 90 percent ofthe publications in 2001. In a typical year, chemistry, physics, mathematics, and engineering might have a single article, if that, published.

S&T in secondary-education is weak. Secondary-level science education is also constrained by lack of laboratories and equipment, obsolete curriculum, and an inadequate supply oftrained science teachers. These poor conditions, along with disincentives built into the A level examinations and university admissions processes, have led to a widespread “science avoidance” tendency that runs counter to the country’s long term human resource needs.

Government Policies for S&T

Until recently, “Government Policy” had not stimulated the development ofS&T capacity. Traditionally, sector policy, regulation, and provision ofpublic goods and services have been uneven. The UNCST had some notable success in establishing review processes for bio-safety

28 and the ethical conduct ofresearch, but its overall plans for sector development have not been backed by resources or by a critical mass oforganized scientific leadership advocating for change. The system has instead relied on ad hoc measures made possible by sporadic donor largesse. Over the past two to three years, this situation has begun to change.

Some reforms have a high impact. The country’s flagship university, Makerere, has been transformed under a policy that admits additional fee-paying students. Total enrollment now includes 25,000 “additional” students who pay the equivalent ofUSD 1000 annually to attend. University reform, typified by programs such as the [email protected] (Innovations at Makerere Committee), is changing attitudes about the universities’ relationship to society and to development goals. More professors see the need to offer relevant, high quality education informed by research, and to produce graduates with needed skills.

A strategy is taking form. With respect to policy, the newly created National Council for Higher Education (NCHE) has articulated a strategic vision for tertiary education that serves the country’s future aspirations. It calls for exposure to science for all university students, improved research and technological infrastructure, and strong quality assurance mechanisms. The Government is moving forward with plans to target university scholarship support to economically-critical areas ofstudy, principally in S&T disciplines. Parliament has now endorsed a plan to target up to 70% ofGovernment scholarships to these disciplines.

Research funding is donor-driven. Essentially all research funding comes from external (donor) sources, for work on problems ofconcern to and defined by donors. Funding and fee policies have encouraged expansion ofless expensive undergraduate programs (in the arts, humanities, and social sciences), and have overloaded professors with excessive teaching responsibilities. Few universities, either public or private, have strategies to improve conditions for research; laboratories are scarce and under-equipped. On the positive side, where hnding and connections to global knowledge (including through regional networks) are strong, Ugandan researchers have done world class, highly relevant research.

Donor-aided research in health has established pockets of excellence. The health sector has established a research tradition and reputation for success under difficult conditions based on, inter alia, two decades ofcomplementary research and service provision linked to international funding for HIV/AIDS research. Needs in the field still far outstrip resources available, but the quality ofcare and its coverage have been positively influenced by the centers ofresearch excellence that have provided intellectual leadership to guide policy under difficult conditions.

S&T as a Driver for Growth

Uganda needs a “created” comparative advantage. Uganda has a comprehensive and well- coordinated approach to national development. Macroeconomic stability and social investments have improved over the past 15 years, and poverty rates have fallen. Yet, progress against poverty has slowed recently, as the easy gains from policy improvements have been made. Improving the investment climate and increasing Uganda’s private-sector-led growth trajectory are now central to further development progress. Several recent studies argue that Uganda does not have many obvious or natural comparative advantages for competing in export markets. It is

29 land-locked, transport costs are high, and wages, while low, do not compensate sufficiently for other costs ofdoing business. Even as the business environment improves, Uganda will have to use ingenuity and innovation so it can increasingly compete on the basis of“created” rather than natural comparative advantage. Uganda faces many challenges to modernizing and transforming its economy, but it is well placed to begin using S&T more intensively to achieve economic growth and social benefits. Agriculture accounts for the bulk ofGDP, employment, and exports, but this share is falling.

Human capital is a major constraint. The recent Uganda Investment Climate Assessment (2004) has shown that successful firms with educated, experienced management have done well amidst a general shortage ofhuman capacity and skills. Educated managers are able to increase firm size and get beyond small-scale, low-tech operations. Uganda’s formal private workforce is small and educati6n attainment is low. Fifty-six percent ofthe manufacturing workforce has secondary education or less. The nexus oflow education attainment and low technology adoption are thought to correlate with a low median value added per worker. In Uganda, median value added per worker is USD 1,085 per year, below that ofcomparator countries in the region, and far below the economically dynamic developing countries like India (USD 3,432) and China (USD 4,397). Both analytical and anecdotal evidence point to strong demand for engineers and employees with mathematical skills, computer proficiency, technical knowledge, critical thinking, and problem analysis. However, the labor market still views tertiary graduates as too theoretical, and lacking in the concrete Productivity of Labor by Country: Median Value Added per Worker in US $ skills required for current business challenges. Programs China ofinteraction between Kmya firms and academia, where firms have the India opportunity to define problems that require Zambia research solutions, Tanzania would help close.the gap between Uganda technology training 0 mo ium ism zmo mo 3000 3m 4om 601) and labor market needs.

Firms lack the ability to adopt new technologies. Although further research is needed, it seems clear that one major factor constraining Ugandan firms is lack ofawareness ofand ability to adopt productivity enhancing technologies. Progress in this area will be helped not only by the expansion ofexisting science and engineering degree programs through Window B of Component One, but by more widespread and creative approaches to educating scientists, entrepreneurs, and managers. NCHE’s proposed mixing ofbusiness skills into science curriculum complimented by at least some science skills blended into the business curriculum at universities is one promising plan toward achieving these aims. Without increased exposure to relevant coursework across many science-, engineering-, and technology-based disciplines,

30 workers will continue to be “out of sync with market trends, market developments and consumer preferences.”

S&T improves the business environment. Uganda has made much progress to date as a result of improved policies. However, when compared with countries outside of sub-Saharan Africa, Uganda still suffers from high costs, often related to use of out-dated technologies, or poor maintenance ofinfrastructure/technological services. International comparisons ofthe Uganda data show that while the number ofdays to obtain a telephone in Uganda may be better than Kenya, for example, the total number ofconnections in Kenya is three times as high as that of Uganda. When looking to a business environment like that of China, the contrast is even more stark: Chinese firms lose only 1.8 percent ofproduction from power outages even though only 17 percent ofChinese firms own their own generators and the number ofdays to obtain telephone and electricity connections is about a third that of Uganda. The recent establishment of the Private Investor’s Roundtable (PIRT) signals a willingness on the part ofthe Government to seek the advice of experienced investors for industrial policy formulation. This should help formulation ofindustrial and S&T policy to be coordinated and complementary.

Success in agriculture reforms depends on qualified research. In agriculture, the Government’s vision for transitioning toward higher value addition, more ago-processing opportunities, and a continued diversification ofexport and other markets puts new and greater demands on the research and extension services. These are being reformed to be more responsive to clients’ (farmers) needs. Money for extension funding is channeled to end-users to contract the highest performers. Research funding is being freed to flow to the most capable providers, with publicly funded research institutes competing alongside others. The long-term success ofthese reforms will depend on a growing critical mass ofqualified researchers and extension workers contracted to solve problems with the latest and best technological solutions in an environmentally sustainable manner.

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

Latest Supervision Sector Issue Project (PSR) Ratings (Bank-financt projects only) [mplementation Development Progress (IP) Objective (DO) Bank financed

HS HS

mechanisms. (IBRD 19130-CH)

Same as Chile MSIcited above. Venezuela (2000) S S Millennium Science Initiative Project (IBRD 19853-VE)

Project Focus on Improving Undergraduate Education Using competitive funds to establish and Indonesia (1996) S S upgrade the quality of undergraduate education; Quality of Undergraduate introducing new programs in sciences. Education project (DW Enhancing internal efficiency and expanding Mozambique (2002) HS HS the output of graduates, improving equitable Higher Education Project access and improving the quality ofthe (IDA 22962-MOZ) teaching-learning process and the relevance of the curriculum. Strengthening human capacity to lead the Ethiopia (2004) S S transition from an agrarian economy to a Post-Secondary Education Project service and production oriented one, (IDA 28 169-ET) expanding and strengthening secondary and university level education. Using innovation funds to promote specific Uganda (2002) S S capacities within local Government for Decentralized Service Delivery: A improved service delivery; improving Makerere University Training Pilot university capacity to deliver relevant Project education. (IDA 23762-UG) Project Focus on Industry-Academia Linkages Creating sustainable conditions for enterprise S S creation and growth, reducing the cost ofdoing Uganda (2004) business and encouraging investment, and Second Private Sector increasing the number of formal enterprises, the Competitiveness Project number of people employed and the number of (IDA 29639-UG) skilled employees leading to an increase in output per worker. Use of competitive funding systems and peer- Brazil (1 997) S S review allocation procedures to build a national Science and Technology Reform science base and increase industry linkages. Support Project (IBRD 17178-BR) Improving performance of system for Mexico (1 998) S

32 Latest Supervision Sector Issue Project (PSR) Ratings (Bank-finance projects only) [mplementation Development Progress (IP) Objective (DO) knowledge and innovation, promoting public (nowledge and Innovation Project and private sector investment in S&T. IBRD 17896-MX) Other development agencies Addressing the challenges of successful lfrican Development Bank (AfDB) expansion of primary education on subsequent 'reject support to Uganda Education levels of education--post-secondary and Strategic Investment Plan (ESSP) training and tertiary education, increasing efficiency in locating scarce public resources, and improving the management efficiency of the education sector, improve national competitiveness in high-value added modern sector economic activities by building post- primary skills and competencies associated with abstract reasoning, analysis, language and communication skills, and the application of science and technology. Supporting post-primary education, particularly lapanese International Credit Agency in two areas: (i)Mathematics and Science in JICA) Secondary Education; and (ii)Vocational Secondary Science and Mathematics Training. Specifically, supporting and reachers' (SESEMAT) institutionalizing in-service training for secondary math and science teachers, and sensitizing (through school level management training) principals, district education administrators, and parents about math and science education.

PiDO Ratings: HS (Highly Satisfactory), S (Sat factory), U (Unsatisfactory), HU (Higl

Discussion

The Uganda Millennium Science Initiative project aims to make investments in S&T effective by drawing on the lessons learned from various funding mechanisms and approaches, and aspects relating to institutional capacity building from similar types ofprojects around the world. Findings ofthe 2002 World Bank report on "Constructing Knowledge Societies: New Challenges for Tertiary Education" show that knowledge is a critical determinant ofeconomic growth. A country's national innovation system can help to transform goods and services. Cutting-edge research is an essential element ofan effective national innovation system in which S&T are intertwined. A community oftrained individuals is the most effective knowledge transfer and adaptation mechanism available, capable ofcapitalizing on the best science in the world. It is also widely accepted that anonymous peer review and competitive funding enhance research quality and increase productivity in S&T.

Appropriate funding mechanisms to promote innovations are critical for laying the foundation for successful S&T projects. Projects under the Millennium Science Initiative umbrella for new

33 lending take the form ofhighly-selective competitive funds to support research. They provide targeted support that focuses on research excellence, human resources training, and linkages with partners in the international science community and in the private sector. A goal ofall MSI projects is to raise the standards for research outputs and performance by concentrating resources on a selected group ofresearchers and providing funding and working conditions that approximate those of researchers at the cutting edge ofa discipline. The aim is to show that world-class research can be done anywhere in the world, and within the budgets ofmost developing countries (World Bank, 2002). Most importantly, MSIprojects seek to demonstrate that the process ofselecting the best researchers is through open and transparent competition guided by peer review, and that it is a highly cost-effective way to invest in science and technology.

Most higher education or science and technology projects in the Bank have focused on true and tested approaches such as competitive funding systems to improve the quality, relevance and productivity ofhigher education outputs. Completion reports from projects indicate that competitive funding schemes are a good and effective mechanism to change organizational culture, promote innovation, and increase efficiency. Several industrial countries have introduced perfomance-based funding schemes (making public budget allocations conditional on measurable performance criteria) for higher education. This requires higher education institutions to be more accountable for results, offering a promising way forward to improve efficiency and quality ofroutine expenditures. Experience in Mexico and other countries has shown that providing fragmented resources for research and development is unhelpful and that allocation offunds on non-transparent bases or without clear, merit-based criteria leads to unproductive outcomes. Equal-partition among all grant proponents, without screening the better from the worse, is a particularly hazardous practice.

Lessons from World Bank financed projects

The Uganda Millennium Science Initiativeproject draws on a number oflessons from similar projects in the Africa Region and around the world, especially for the design ofcompetitive fbnding schemes.

Lessonsfor Promotion of S&T Research Capacity (Window A)

The Chile Millennium Science Initiative project focused on building human capital for the global knowledge economy. An important element of the project design was a competitive fund for scientific excellence. It consisted offunding research projects at a limited number ofscience institutes and science nuclei. The grants financed scientific research, expansion ofdoctoral and post-doctoral training programs and opportunities, and promoted networking, outreach and special activities to promote scientific excellence. The projects financed by the Fund were carried out by Chilean scientists of international stature performing synergistic work in one or more cutting edge fields who were able to compete scientifically at the highest level in the international arena. The Fund financed cutting-edge scientific equipment, infrastructure rehabilitation (including laboratories), fellowships for doctoral and post-doctoral students, and publications.

34 Lessons from the project demonstrate good practice for supporting promising future scientists. Most importantly, a limited investment, under highly selective competitive processes that follows international best practice procedures can have a disproportionately high impact on performance and productivity in the S&T system. The use oftransparent and objective selection procedures and adequate conditions for research will elicit active participation from the international community, and have a measurable multiplier effect. Another aspect is that the effective use ofinvestments by promoting autonomy in spending resources and diminished bureaucratic burdens is crucial to making science effective. Grants need to be large enough to allow research groups to compete at or near levels found anywhere in the world. Transparency and fairness in the bidding process should be promoted, leading to the selection ofgrantees. Furthermore, a valuable lesson ofthe project is that the best research teams rapidly reach the limits oftheir physical infrastructure, suggesting the need for targeted follow-on investments in these groups.

The Venezuela Millennium Science Initiative project supported advanced training ofhuman capital by world-class scientists, and encouraged investigator autonomy by improving the quality and efficiency ofscientific research and training, resulting in increased research system productivity and efficiency. Like the Chile Millennium Science Initiative Project, the Venezuela project used the mechanism ofthe Competitive Fund for Scientific Excellence to provide funding for research projects, and to promote networking activities for the promotion of scientific excellence. The project introduced comprehensive research grants based on competitive procedures with clear eligibility and selection criteria. Rather than awarding small grants in different lines to individual researchers (as was the traditional approach), the project awarded large multi-purpose grants to research teams. One grant funded research, equipment, training of advanced human capital, and participation in conferences and networks, which facilitated the adoption ofa coherent and long-term approach among supported Centers of Excellence and Nuclei. Multi-disciplinary research was promoted through the multi-purpose grants. Another aspect was the strengthening ofthe country’s science base through the enhancement ofinter-teadcenter research collaboration.

Lessons from project implementation show that investigator autonomy is critical to research success. Project experience has revealed that the best research results can be achieved by packaging different categories ofexpenditures into one multi-purpose, multi-year research grant, including resources to pay the salaries ofgraduate students and staff, and networking and diffusion activities. Furthermore, to ensure accountability, a clear and simple set ofresults indicators needs to be established ex-ante and validated with the researchers. Another aspect is the importance ofsupporting network and dissemination activities as mainstream activities rather than add-on activities.

Lessons for the Promotion of Undergraduate Training and Program Improvement (Window B)

The Indonesia Quality of Undergraduate Education project focused on improving quality through competitive grants to undergraduate study program in public and private universities. Funding was provided for staff development, equipment, civil works rehabilitation, technical assistance, library materials, curriculum development and project management. A national and international peer review process helped to apply best practice conflict-of-interest policies which

35 are regarded by the local academic community as being fair and transparent. The Indonesian model ofcompetitive funding for higher education financing has received international recognition. Competition was held in three rounds.

An assessment ofimplementation completion for the project found that the mechanism of competitive funding for higher education can be effectively designed to have two positive benefits: (i)accountability in the use ofpublic funds through transparent processes in selecting grant winners and grant administration with checks and balances; and (ii)flexibility ofthe funding mechanism itself, offering the advantage ofadjusting at any time to better target the purpose ofthe grants and the eligibility criteria so that public funds to areas ofnational priority can be effectively delivered. Sustainability, however, depends on strong Government commitment to financing in this manner and strong capacity at central and institutional levels. Another lesson arises from institutional development which could serve as an agent for change in organizational behavior. How institutions receive their funding and the selection ofthe investments are critical elements. A bottom-up planning approach with the direct involvement of end-users (department heads, senior teaching faculty, etc.) can serve to enhance institutional autonomy while increasing accountability.

Mozambique Higher Education project: The facility provides financial support for quality improvements, capacity building and innovations in academic and research programs, and in institutional management and administration in higher education through three programs of support: (i)institutional programs to provide grants or repayable loans to public and private higher education institutions to finance investments to support the upgrading and capacity of staff through Staff Fellowships for post-graduate education and other training for teaching and management staff, and innovations to improve the quality and efficiency ofexisting programs; (ii)an academic staff program to provide small grants to individual academic staff or groups of staff to enable them to invest in development ofnew skills, teaching methods or learning materials, and the design and introduction ofinnovations and improvements in curriculum and delivery ofcourses and academic support of students; and (iii)research program to provide small grants towards supporting basic or applied research to develop linkages or other forms of collaboration with industry and the productive sector or with other national or international research and higher education institutions.

Early lessons from the institutional development and incentive funding aspects indicate the fundamental necessity to have stable institutions, in the absence ofwhich successful implementation suffers. Setbacks in institutional development can result due to lack ofsufficient political attention and leadership, and lack ofclarity in the division offunctions between ministries and the operational management ofthe project.

The Ethiopia Post-Secondary Education project’s objective is to improve human resource development capacity at the post-secondary education level. The DIFscherne ofthe project aims to group university and TVET programs into a single umbrella project with distinct funding windows. The (DIF) is a flexible, social investment fund designed to stimulate innovation, promote modernizing changes, and reward quality-enhancing effort within universities. Resources are distributed on the basis ofapproved proposals received from university faculties, departments, libraries, or other administrative units and evaluated against criteria that place

36 emphasis on performance improvements in strategically selected areas ofteaching, learning and management. The DIF has three windows (one each for undergraduate program proposals, postgraduate program proposals and for institutional leadership and management proposals). The DIF is designed to encourage and support innovation towards several goals, including: (i) improving the relevance, content and quality ofacademic programs; (ii)establishment ofnew academic programs; and, (iii)promote competence ofacademic, technical and administrative staff.

Lessons from ongoing implementation ofthe Ethiopia Post-Secondary Education Project indicate that it is important at the project design stage to: (i)make adequate provision for effective administration ofthe project, especially any fund, and ensure adequate staffing and timely follow through in the review ofproposals; (ii)develop basic organizational principles and practices, and plan adequately for the review process ofproposals/applications; (iii)fully think through the management ofthe review teams, and to developing their capacity and preparing them for their tasks; and (iv) ensure communications between granting agencies and universities.

The Makerere Pilot Decentralized Service Delivery project shows the need for: (i)adequate monitoring and evaluating reports consolidating the individual project activities; and (ii)analysis ofcost-effectiveness in drawing general conclusions and lessons learned. A detailed framework for M&E and a detailed action plan for M&E are important elements. Inclusion ofa legal covenant in the Development Credit Agreement is critical to ensure that M&E indicators and plans are adhered to and appropriate reports are available to assess the impact ofproject activities. The project has spawned numerous innovations and generated important knowledge about how local universities can build capacity for local Government service delivery.

Lessons for Academia-Industy Linkages (Window C)

The objective ofthe Brazil Science and Technology Reform Support project (PADCT III)was to improve the overall performance ofBrazil’s S&T sector through activities that promoted scientific research and technological innovation. The project supported reform efforts and financed investments to stimulate private sector financing and execution ofresearch and development, increase and improve the stock of S&T human capital, and supply support services required to increase the efficiency ofpublic and private investments in S&T activities. Among the finding support extended, a matching grant facility to promote technology development provided two types ofgrants: (i)publicly-led cooperative projects to foster partnerships between the public and private sectors for financing and executing R&D-finding socially and economically relevant research and development projects that would involve public-private cooperation and be co-financed with matching grants from participating firms. Proposals were appraised and selected by advisory committees through a competitive process reviewing both technical and business merits; and (ii)privately-led cooperative projects to foster cooperation between individual firms and public sector R&D projects executed by one or more public sector R&D entities cooperating with individual firms or consortia offirms.

Implementation completion results ofthe project show that public-private partnerships for development oftechnology can be a highly effective mechanism towards benefiting S&T markets. Such partnerships can foster the effective interaction of companies and academia, and

37 help to deliver concrete outputs. Success in delivering outputs such as publications, services and products can encourage partners to acquirer further technology transfer capabilities. Such institutionalization can increase the demand for highly trained workers. An important factor in the level ofcommitment and quality ofoutput generated can be competitive funding of S&T research components. The demand of funds outnumbering the available resources by a large margin helps to promote competition and create an environment critical to the consolidation of research activities. This can have important implications for medium- to long-term sustainability ofa country’s innovation system.

Interim results ofthe Mexico Knowledge and Innovation project show that permitting entrepreneurs to leverage their own investments, collaborate with private investors and maintain direct contact with researchers and private entrepreneurs receiving competitiveness grants helps to generate new business proposals. The implications are that a coherent pipeline for commercialization ofS&T research-from basic/applied education and research to pre- competitive funding, to full commercialization-can function.

38 Annex 3: Results Framework and Monitoring

Use of Project Outcome PDO Project Outcome Indicators Information Universities and research PDO Indicator 1: Size/number and Data from these indicators will be institutes produce more and productivity (measured by publications, patent provided to the MSIExecutive better qualified S&T applications, and number ofstudents trained) Committee. They will help to graduates and generate and ofresearchers and research groups increase by confirm whether the PDO is on transfer higher quality and 50% track to being achieved more relevant research. PDO Indicator 2: PDO Indicators 1-5 are aimed at Firms productively utilize Pipeline ofscience, technology, and measuring program impacts more trained human engineering undergraduates and postgraduates resources and more increases by 50% in key disciplines YR1: Assure that transparent technology (generated andor processes have led to effective transferred). PDO Indicator 3: Firms active in technology allocation ofresearch, training, development/evaluation employ 25% more and linkage resources S&T talent and enhance technology use YR 2-3: Assure that physical and PDO Indicator 4: Survey ofclients shows organizational inputs are leading that UNCST and UIRI provide effective toward expected subproject goals services YR 4-5: Measure the extent of PDO Indicator 5: More Ugandan A-level the change in system performance students plan careers in S&T fields, and and assess option for positive impressions ofcareers in science and consolidating S&T funding and technology increase innovation system Use of Intermediate Outcome Intermediate Outcomes Intermediate Outcome Indicators 1 Monitoring Intermediate Result A: Indicator Al: MSITC seated; call for YR 1- 1.5: MSIFunding Facility proposals issued Data from these indicators established, grantees selected consolidated into an annual report through transparent, merited Indicator A2: Ratio of applicants to fundable from the MSITC and the Project based competition. proposals 3: 1 or greater for Windows A & B Secretariat to the Executive Committee Indicator A3: 10% oftop 50 technologically- active fm in the process ofestablishing Report puts MSIprogress within internship programs and participating in the the context ofprogress on related Technology Platforms policy areas, using sectoral data I gathered by the UNCST, the Indicator A4: UIRI completes service demand UNCHE. and the UIRI assessment Sectoral and program report disseminated to stakeholders in S&T-related Ministries and agencies Intermediate Result B: Indicator B 1: Assessment ofresearch YR 2-3: Senior Research Teams progress by independent visiting teams reveals As project approaches mid-term (SRTs) and Research Teams research and training goals on track in 80% of review, independent assessments (RTs) fully staffed, equipped SRTs and RTs. Postgraduate theses topics determine whether project inputs and operational; identified are fully employed in ways that undergraduate programs are likely to lead to outcomes and admitting students; Indicator B2: New Undergraduate programs impacts Technology Platform admitting students for full-time study activities lead to transfer of Upgraded undergraduate programs expand MSITC makes recommendation

39 specific technologies and to enrollment and implement revised curricula for restructuring ofany grants follow on research by firms where implementation delays and partners. imperil ability to achieve Indicator B3: Technology Platform activities outcomes lead to acquisition ofappropriate technology in some participating firms. Technology Platforms result in increases in cooperative research. 15% ofbasic science and engineering students participating in internship programs

Intermediate Result C: Indicator C1: Publications, patent YR 4-5 Research results leading to applications, and postgraduate theses in draft, Preliminary measurement of planned publications; submission dates identified impact in program and sectoral students progressing towards reports forms the basis of dialogue undergraduate and Indicator C2: New program enrollment at on the size and format offollow postgraduate degrees; firms 70% ofcapacity; independent assessment on fundinglreplenishment ofthe demonstrate greater rates curricula at internationally-acceptable MSIFunding Facility and linkage technology use as a result of levels ofquality programs participation in the MSI; firms hire interns upon Indicator C3: Cost-effectiveness ofacquired graduation. technologieslnew processes and products is measured via increases in revenue; 15% of internship participants receive employment offers fiom participating firms upon graduation.

Indicator C4: UIRI generating fees for technological services offered to firms

W 0 0 r4 8 P E e! m&. m 3

m /I gge, >* 4 E+ Arranpements for results monitoring

Data collection: Data will be continuously collected from both the subprojects and the sector. For subprojects, data collection will begin at the grant proposal stage. Statistics on productivity and experience ofresearchers will be disaggregated for all proponents, finalists, and grant recipients. For the subprojects, detailed annual reporting requirements will be included in the grant agreements, and will monitor physical progress toward completion of agreed activities, the significance ofresearch results, dissemination, and application. Training outputs connected to research (Master’s and Ph.D. theses) will also be recorded. Self-reporting from grantees will be supplemented in two ways. First, monitoring ofeach subproject will be “assigned” to a member of the TC whose technical background is most appropriate for the research in question. Each member ofthe TC will be responsible to review the annual reports from the grantees, visit subprojects, and engage in other contact as necessary to follow the progress of the research and other expected outputs. The annual reports from each grant recipient will be consolidated into an annual report from the TC to the Executive Committee on project progress. In addition, twice during the subproject implementation period, independent teams ofinternational experts, with appropriate scientific and technical qualifications, will visit projects and produce independent assessment reports. The independent assessments will precede mid-term review and subproject completion. The assessment will cover both subprojects under all windows ofthe MSIFund. The Research Funding Secretariat will coordinate this aspect ofmonitoring.

To measure impact and guide policy, the UNCST will collaborate with UNCHE and UIRI among other appropriate agencies to continuously collect data on the S&T sector. This data will be regularly published and provide an important basis for judging the progress ofboth the project and the Government’s larger policy goals for the sector. Sectoral M&E will include four periodic surveys:

0 Annual Survey of S&T in Tertiary Education: Quantitative analysis will include number and size (enrollment) for all science, technology, and engineering programs at undergraduate and postgraduate level, information on time to degree completion, A-level scores of incoming students, student preferences regarding choice ofprograms. The complimentary tracer study will also trace employment and employment offers for S&T graduates. This survey will be conducted in collaboration with NCHE. It shall be associated with policy studies and analyses that determine the quality ofscience education being offered, and the ability of universities to provide remedial science education and science education for students not planning careers in S&T. 0 Annual Science and Technology Budget. This survey will aggregate and analyze all Government spending on S&T. It will enumerate the number offull-time researchers employed by Government research institutes (in agriculture, health, industry, and environment) and provide brief descriptions ofmajor research programs. As the exercise is repeated, it will seek to include donor funding ofS&T research and training as well as Government funding. 0 Annual Survey ofS&T in Industry. This exercise will survey a sample oftechnology- using firms in both the goods and services subsectors regarding use oftechnology. It will pay particular attention to firm hiring practices, investment and return-on-investment

45 patterns in technology transfer or upgrading. UIRI will collaborate with UNCST in conducting this survey. 0 Bi-annual Survey ofAttitudes Toward S&T. This survey will focus on public understanding of S&T, especially among A-level students and other tertiary-level aspirants.

Institutional issues: The UNCST will collaborate with its two main partners, NCHE and the UIRI for sectoral data collection. These three agencies will also collaborate in the conduct of policy studies. Data collection will be part of an evidence-to-policy continuum for the purposes ofmonitoring the implementation ofboth the project and the Government’s overall goals for the sector.

Capacitv: NCHE currently is the strongest and most experienced agency with respect to data collection and sectoral M&E. UNCST and NCHE will sign a Memorandum ofUnderstanding that includes both collaboration on the conduct ofspecific surveys and a joint plan for strengthening the data collection capabilities ofNCHE, UNCST, and UIRI respectively.

The OECD Directorate ofScience, Technology, and Industry maintains a large body of knowledge and experience for measuring all aspects of science, technology, engineering, and innovation. Capacity building will draw on technical assistance from firms and individuals with experience in adapting OECD-compatible S&T data collection techniques to the needs of countries with smaller, more incipient S&T systems.

46 Annex 4: Detailed Project Description

The project’s development objective is for Ugandan universities and research institutes to produce more and better qualified science and engineering graduates, and higher quality and more relevant research, and for firms to utilize these outputs to improve productivity. Increases in amounts ofhuman resources trained would be measured by increases in numbers ofprograms, enrollment, and graduates in science and engineering, and labor market utilization ofthese skills. Improvements in quality would be measured through independent review panels, and growth in total publications and publication citation impact analysis, as well as increased collaboration with advanced regional and international research partners and firms. Improved relevance would be indicated by increased labor market utilization ofS&T skills, and greater use oftechnology and skills to improve commercial product- and process-improvements, and similar improvements in PEAP priority areas ofpublic concern (Le. health, agriculture, infrastructure, energy, etc).

The project has two components:

COMPONENTONE: MILLENNIUMSCIENCE INITIATIVE(MSI) FUNDING FACILITY, RESEARCH GRANTS(USD 16.69 million)

Window A: Grant funding for Research Teams (USD 6.55 million)

Window A funding will be awarded to research teams in two modes.

Mode I: Grants to Senior Research Teams. Grants will be made to approximately 4 to 5 Senior Research Teams for an initial term of three years. A consequential mid-term review of each grant will be conducted after 18 months, and progress towards the grants’ objectives will need to be demonstrated at that time for continuation of funding. After the grants conclude, Senior Research Teams in good standing will not be excluded from resubmitting new proposals for competitive consideration based on the availability offunding.

Senior Research Teams will consist of one principle investigator (PI), at least one senior researcher, and/or an equal number of junior researchers, and at least six postgraduate or graduate students (at least two of whom would be expected to be Ph.D. candidates). The Principal investigator will be a researcher of established reputation in his or her particular field, with demonstrated capacity to lead research teams and obtain high quality scientific and managerial results. Senior investigators will be Ph.D. holders in their fields, with established reputations for research results and experience in the formation of human resources. Final proposals will need to include a letter from the Principal Investigator’s host institution agreeing to host the project and provide the physical space and other counterpart requirements.

Grants amounts for Senior Research Team Grants will be in the range ofUSD $500,000 to USD $800,000 equivalent over the three year period. Budgets must be fully justified (see Guidelines for Grant Proposals) and commensurate with the research activities proposed. In general, it is expected that roughly half of the grants awarded shall be used for equipment expenditure and half for recurrent expenditures, although this will vary with the needs of the individual research

47 programs. However, for any individual grant, no more than 65% of resources can be spent on equipment.

Mode 2: Grants for Research Teams. Grants will be made to 8 to 10 Research Teams for a term of three years. A consequential mid-term review of each grant will be conducted after 18 months, and progress toward the grant objectives will need to be demonstrated at that time for continuation of funding. After the grant implementation period concludes, Research Teams in good standing will not be excluded from competing for continued funding, yet neither will they be given any special consideration in the selection process.

Research Teams will consist of one Principal Investigator, plus at least one associated junior or senior researchers, and at least three postgraduate students. Lead Researchers must hold Ph.D.’s in their fields and must demonstrate capacity to train postgraduate students in research. The PI ofeach Research Team is expected to have the potential to evolve into a researcher ofthe stature of a Senior Research Team Leader.

Grant amounts for Research Team Grants will be in the range of USD $100,000 to USD $250,000 equivalent over the three year period. Budgets must be fully justified (see Guidelines for Grant Proposals) and commensurate with the research activities proposed. In general, it is expected that roughly half of the grant will be for equipment expenditure and half for recurrent expenditures, although this will vary with the needs of the individual research programs. However, for any individual grant, no more than 65% ofresources can be spent on equipment.

For both Senior Research Teams and Research Teams, all team members will be expected to be full engaged in research activities and the research program. They are expected to devote a high percentage oftheir time to these activities, and to routinely be physically present at the research site. Individuals who will not be so engaged in carrying out research should be listed on the proposals as advisors to the team, not as team members.

Window B: Upgrading or Creation of Undergraduate Programs in Science and Engineering (USD 8.55 million)

This subcomponent of the MSI will fund the upgrading or creation of undergraduate programs where they don’t exist in the basic sciences and engineering at licensed public and private universities. It seeks to fund a total of4-6 degree programs: upgrading of2-3 existing programs and the creation of 2-3 new programs. It is expected that for both upgrading and creation, at least one program will be in the basic sciences, one in technology, and one “open” or not pre- determined. It is also expected that creation ofnew programs will be at private as well as public universities. All four public universities plus all chartered and licensed private universities will be invited to submit proposals for participation in Window B.

The competition and grant award process for Window B grants shall be similar to that for Window A in several respects. The competition for Window B grants will be announced as part of the same CFP. It will involve initial proposals, creation of a shortlist of finalists by the TC, written reviews of final proposals by ad hoc peer reviewers, and selection ofgrantees by the TC.

48 Window B procedures will differ in other ways: (i)time periods for submission of Initial Proposals will be shorter for Window B than for Window A (60 days versus 90 days),and (ii) while the time period for submission of finalized full proposals following the announcement of finalists will be longer (90 days versus 60 days). Window B finalist will be given access to more resources in this 90 day period to improve their proposals (not to exceed USD 30,000 equivalent, managed by the RFS). Also, Window B proposals will be reviewed according to the selection criteria of Window A proposals (with due consideration to the differences in programs for training versus research) as well as the additional criteria listed below.

Contents ofWindow B Proposals

Successful proposals will have four components: (i)plans for development of curricula to internationally-accepted levels ofquality (which also encourages innovation and new approaches to instruction); (ii)laboratory and infrastructure development plans, fully commensurate with and integrated into proposed curricula; (iii)staffing plans-including for the contracting of new full-time staff, as well as visiting professors; and, (iv) student recruitment and development plans, which may include incentives to attract students into science disciplines, and remedial activities for students who lack appropriate preparation.

Programs should lead to a recognized first degree, but may also include activities to expose non- science majors to science as part of the breadth requirements suggested by the Uganda National Council for Higher Education. In this regard, the MSI would fund bridging courses to allow students with inadequate S&T exposure to catch up and pursue new fields. Additionally, it would provide incentives to top science undergraduate students (such as provision of laptop computers or other necessary equipment). Curricula could emphasize training for entrepreneurialhusiness skills along with mastery ofscience content.

Where applicable, proposals might include common or shared S&T infrastructure and facilities as part ofthe outreach activities envisaged to foster greater access to S&T teaching and learning facilities. Proposals will also address how the institution will sustain the program when the grant finishes.

Window C: Private Sector Cooperation (USD 1.60 million)

The main goal of activities under this Window is to give firms greater access to technology and skills and link academia and industry. These linkages are expected, to promote growth and accelerating the transition to a more science-and-technology driven economy with a critical mass ofwell-trained scientists and engineers focused on the needs of industry.

Private sector cooperation will be organized around research topics defined by and useful to the private sector. Window C will support: (i)grants for “Technology Platforms” through which firms and researchers eventually define collaborative agendas for solving problems ofdirect interest to industry, and then pursue solutions collaboratively; and (ii)formal firm-based internships for students in science, engineering, and business administration, allowing interns the opportunity to gain exposure to the “real life problems” facing the private sector.

49 Technology Platforms will be for a that seek: (i)to bring together firms and knowledgeable partners from academia and public research institutes to identify and evaluate technologies that exist and are used outside of Uganda and could profitably be transferred for use domestically; and/or (ii)to define a set of technological problems facing firms to which research or consultation could provide solutions is derived. A Platform can consist of one firm and one universityh-esearch institute partner or multiple firms in partnership. In Mode I,funds will finance both the cooperative evaluation of technologies and the definition of shared R&D problems confronting the partners participating in the Platform. In Mode 2, Mode Igrantees will be eligible to apply for funding to carry out the R&D agenda developed in Mode 1 as a collaboration between firms and universityhesearch institute partners.

The internships are based on formal agreements between a firm and one or more universities in which the number of training places, level of training, assistance and supervision by company and university staff, as well as involvement of company staff in focusing the university curriculum is specified in advance ofprogram commencement.

As the MSI’s focus on the institutional strengthening ofthe UIRI underscores that institution’s pivotal role in promoting the importance oftechnology for industrialization and the need for strong linkages between R&D and firms, UIRI is to play an active role in promoting and facilitating the Technology Platforms. However, the UIRI itself cannot be among the formal applicants for Window C funding. Its expertise must be made available to all Platforms for preparing proposals, for providing ‘headquarter’ facilities if necessary, and as needed during the implementation phase. With respect to the latter, only costs incurred by UIRI in the implementation ofR&D activities ofMode 2 Platforms will be eligible costs, consistent with UIRI policies ofcharging clients for services.

Funding in this Window will also be accessed through a peer-reviewed, competitive grant process, although one that is modified to take into account the special characteristics ofthe Technology Platforms and the Internship Programs. A Subcommittee ofthe TC will review and select proposals and activities to be fimded under Window C. The Subcommittee will consist of three ofthe eight TC members-including at least one Ugandan and one non-Ugandan. Subcommittee members will be chosen by the TC for, inter alia, their experience with academic- industry linkages, commercialization ofresearch, and other relevant expertise.

Technology Platforms: Mode 1

In Mode 1, up to USD50,OOO will be made available to facilitate two goals. First, to bring together partners to define technological problems facing firms, and possible means of solving these problems. Second, to conduct of searches by a number of firms together with universityh-esearch institute partners for available technologies to specific, targeted challenges confronting them. In exceptional cases a Platform may consist of one firm and one universityhesearch institute partner. With an emphasis on technology scanning, the monies elicited by eligible, winning Platforms through Mode 1 can be used to: (i)crystallize and formalize understanding ofthe specific technology-related challenge facing the firm, (ii)conduct a local, national, and international search for and evaluation of available technologies to respond to this challenge, (iii)conduct a business-planning exercise to determine the cost-effectiveness of

50 transferring/adapting/importing/applying any identified technological solution, and (iv) preparing an R&D proposal to develop/adapt/modify the identified technological solution in partnership with other firms, university research staff or research institute affiliates.

Mode 1 seeks to respond quickly to the needs of industry to understand what types oftechnology can reasonably be expected to lead to increased profitability and growth for a given firm. As such, each proposal must evaluate the technology under consideration as a potential tool for increased revenue and profitability. Examples of the kind of targeted, specific, technology- related challenges firms and firm-led teams are envisioned to identify for Mode 1 activity financing might include:

0 A floriculture firm working with agricultural scientists and other researchers to evaluate the potential for new plant varieties to be profitably grown and exported from Uganda

0 A food processing firm seeking to know if new process control or refrigeration technologies could be profitably employed in their production lines

0 A services firm considering investments in information technology seeking to understand the options available outside ofUganda

0 A medical testing laboratory seeking to know if they might profitably expand the ’ number and ranges oftesting services offered by investing in new equipment

The goal of each proposal submitted for a Mode 1 Technology Platform grant will be to forward a specific recommendation for or against the adoption or adaptation of available technologies versus the creation ofnew technologies, grounded in a quantitative and qualitative analysis ofits potential to increase firm productivity.

To achieve this end, proposals would consider a range ofissues that bear on the profitable use of new technologies including, but not limited to, its ability to reduce costs, increase outputs, improve quality, meet currently unmet market demands, and/or create profitable new products. Each proposal must combine the technical assessment of identified technologies’ capabilities with the financial assessment of cost-impact, and market assessment of increased business opportunities. Therefore, it is expected that teams would contain specialists in particular technologies, along with specialists in finance and marketing.

Teams of researchers at universities or research institutes (students and/or staff), along with scientists, engineers, or managers from firms and companies will develop proposals jointly. To be eligible, all proposals must have the substantial involvement of at least one active firm (a “going concern”) whose technical or management staff dedicate significant time to the proposal.

By the termination of Mode 1 the problem as well as those technologies available, potential partners/competitors and opportunities for technology adaptatiodimportatiod development need to have been identified.

51 All proposals must be submitted using the standard Proposal Submission Form contained in Annex Two ofthe PIP.

Technology Platforms: Mode 2

The aim of Mode 2 under the Technology Platform activities is to strengthen partnerships between firms, scientists and engineers from universities and/or research institutes, and to construct solutions to those technological challenges identified in Mode 1 by carrying out R&D and possibly engineering activities. At the conclusion of Mode 2, concrete innovative products, technological modifications, and augmentation of services or production processes should be ready for acceptance by firms thereby commencing a new business development trajectory.

To begin, those groups ofprivate sector stakeholders who successfully completed Mode 1 would submit a proposal to bring together relevant researchers, scientists, and technologist to hold a short series ofworkshops in which they would clarify and further define those concrete problems affecting industry to which a possible technological solution might be applied. Only those teams that successfully elicited Mode 1 funding are eligible to participate in Mode 2. Eligible teams will likely include the same team membership of firms, university and research staff partners participating in Mode 1. Proposals may be augmented by the addition of groups of companies and private-sector associations, or universities and research institutes backed by such private- sector organizations. Proposals that do not include both significant participation ofprivate sector partners and clear demonstration of the importance to firms of the problems identified for technological amelioration will not be funded.

Grant amounts of up to USD150,OOO will be made available to fund a range of activities including: (i)the workshops themselves, (ii)focused, short-term analyses and feasibility studies that shed light on the potential solutions to the problems, (iii)research and other activities such as technological development and adaptation, and (iv) analysis needed to confirm the cost- effectiveness ofthese solutions, bring them into practice, or advance knowledge about them so as to make their use by industry more feasible.

Most of those firm-based problems identified for both Mode 1 and Mode 2 support would address specific obstacles to discrete business challenges facing firms. However, some eligible teams might focus on issues of concern to firms across an industry or even from several industries, such as embedded software technologies, energy efficiency technologies, mechanical engineering technologies, packaging technologies, or food processing technologies. Examples of problems around which the workshops and other activities funded in Mode 2 include:

0 Under what conditions could aquaculture be commercially viable and environmentally sustainable in Uganda?

0 What are the commercial possibilities for processing ofstarch from plantains?

0 Can the quality of construction materials used in Uganda be improved and costs lowered?

0 Can transportation firms improve their productivity and profitability by investing in computer-based management oftheir vehicles and routes?

52 0 How could Ugandan agricultural products be certified as organic and would doing so raise their market value?

Proponents will submit standard Proposal Submission Forms in Annex Two. The MSI Project Secretariat shall verify the completeness of the information in these forms before forwarding them to the Window C Subcommittee of the TC. The Subcommittee will submit them for peer review and decide on funding on the basis of an assessment of the adequacy and potential success ofthe proposed platforms.

The costs associated with purchasing and employing the technologies involved will have to be borne by the firms themselves, possibly assisted by financial support from the Technology , Acquisition Fund under Component 2 of the World Bank’s Second Private Sector Competitiveness Project. Eligible expenses under this Technology Acquisition Fund include procurement of patents or manufacturing rights, procurement of prototypes or new quality control equipment and staff training to conform to international standards.

Technology Internships

A second set ofWindow C activities is also oriented around bridging the academia-private sector divide in Uganda. Through a Technology Internship program, grants will be made available to support structural agreements between companies and one or more universities to increase the level of practical training for students in S&T, their work orientation, the private-sector relevance of the curriculum, and the links between university staff and participating firms. Firms and universities can decide to include diploma-granting vocational and technical training institutes in their agreements as well.

Internship Program proposals may be designed by staff of companies, university faculties, or by groups of students. The agreements will describe the mutual obligations to which the partners will comply. These will include at least the number of training places the company will make available, the level ofthe training to be provided-the duration ofwhich can vary from 3 months to 9 months, the assistance to be received from company and teaching-institute staff, feed-back mechanisms, and the links to be built between companies and teaching-institute staff. Following their training period, participating Interns will be required to submit proposals to improve a particular aspect ofthe companies’ operations. These proposals must have a firm supervisor and may have a university supervisor as well.

It is expected that companies will invest some money of their own to finance the Technology Internship Program, but this will be complimented by fixed levels of support for each training position they make available and for the assistance ofcompany staff.

The Internship Program will include an annual conference with the faculty from relevant disciplines form which Technology Interns are drawn, the participating (receiving) firms, and the Interns themselves. This annual conference will provide a forum to dis’cuss such issues as: (i) preparedness of Interns to contribute to firm-level demands; (ii)perceived relevance and adequacy of Interns’ training and study at their universities to needs of firms; and (iii)ideas for strengthening and broadening the Technology Intern program.

53 Success of the Intern Program will be assessed based on firms’ commitments to offering Interns jobs following their experience with the program.

COMPONENTTwo: OUTREACH,POLICY, AND INSTITUTIONAL STRENGHTENING ACTIVITIES (USD12.66 MILLION)

Outreach Program (USD1.70 million)

Public understanding of science, technology, and their role in national development appears to be comparatively low in Uganda. Many Ugandans view S&T issues as abstruse and irrelevant to their lives and well-being. Communication links between scientists, policymakers, and the general public have traditionally been weak. With some notable exceptions, science and engineering careers have not been seen as financially or professionally rewarding, despite reasonable evidence to the contrary. The S&T community generally has not been successful in communicating the importance ofscience to national development nor the potential opportunities for career and personal fulfillment that can come through S&T.

As a result, and coupled with lack of investments, the Uganda public and especially school children have an inadequate understanding of science and its role in society; it is often viewed as both very difficult as a subject area and irrelevant to personal, social, or economic progress. Until recently, the debates-and follow-on actions-n science policy have lacked coherence and depth. The MSI will address this problem through a series ofoutreach and special activities.

The MSI Outreach Program will sponsor activities to improve public understanding of and appreciation for science. The principal activities ofthe Outreach Program will be: (i)a series of structured schools visits by scientists, technologists, engineers, and S&T-related entrepreneurs; (ii)an annual National Science Week program during which various kinds of social marketing and awareness raising on S&T issues will take place including the announcement of the winners of the MSI Funding Facility competitions in years one and two; and (iii)a public information campaign for the MSI designed to clearly communicate to all stakeholders the objectives and content ofthe program, and especially the opportunities available through it.

The School Visits Program

UNCST will contract a firm specializing in marketing and public relations to organize and administer the School Visits Program. The firm will develop a set ofactivities for short (half- day) visits to secondary schools throughout Uganda for the purpose ofraising students’ awareness and understanding ofS&T issues. As part ofthe Program, the firm will recruit noted national scientists, technologists, and entrepreneurs to take part in specific visits. It is expected that no fewer than 10 visits will be conducted per year, and a variety ofscientists will participate. The firm will design a series ofactivities for the visit to reach the following goals: (i)expose students to positive roles models in the S&T profession; (ii)demystify S&T and demonstrate its relevance to students’ lives and wellbeing; (iii)provide information about career paths for scientists, researchers, engineers, and technologists; (iv) valorize and raise the professional

54 profile oflocal science teachers; and (v) provide channels through which interested students can be connected to opportunities in S&T as they move through secondary schools.

The visits will be designed especially to enhance the role and standing oflocal science teachers, not to supplant it. The visits will be videotaped or otherwise visually recorded by the firm. The recordings will be archived and serve as a database for understanding students’ attitudes towards S&T. At periodic intervals, the firm will update the content ofthe Visits Program based on the recorded findings.

National Science Week

NSW will be composed ofa series ofevents for and by the science, technology, and entrepreneurial community to highlight the role ofscience in national development and Uganda’s progress toward increasing its national S&T capacity. The format for NSW will be flexible and UNCST will engage a firm to help with planning and organization.

National Science Week (NSW) will involve many ofthe country’s leading scientists and technology entrepreneurs, in addition to politicians, members ofcivil society, and visiting international figures. NSW will coincide-to the extent feasible-with the work ofthe TC and the culmination of the MSI Funding Facility grant award competition so that grant recipients may be announced during NSW.

In addition, NSW might include (but is not to be limited to) the following indicative list of activities:

0 National Researcher Conferences. A fundamental principle of functioning research systems is regular researcher accountability through periodic public presentation of research results before one’s peers, colleagues, and students. NSW may be used to sponsor groups of researchers to conduct such conferences among themselves, across disciplines, and with the end-users ofresearch. 0 Recognition of Socially and Economically Relevant Research. Prizes might be created (or existing prizes conferred) for the most socially and economically relevant research output ofthe year. Such prizes would recognize, inter alia, both the work of senior researchers and the work ofstudents and postgraduate students.

55 University-Industy Dialogue on Labor Market Skills. NSW could provide a forum for open dialogues between industry representatives, especially those participating in the Technology Internships program, and university-based educators on the relevance of education, training, and research. Structured discussions could be promoted on how university training can more closely respond to and prepare students to meet the needs of industry when they enter the labor market. Employment contacts and recruitment of students with science skills. The NSW might also sponsor events that bring together students from S&T disciplines with a host of potential employers in the fields of information technology, telecommunications, agriculture, manufacturing, services, and various other fields.

Public Information Campaign

The success of the MSIdepends upon key stakeholders’ timely access to complete information about the project. Researchers, firms, students, and others throughout Uganda need to know what the project is and how they can take advantage ofthe opportunities it affords. In addition to the dissemination ofthe projects’ documentation (including this manual), specialized public information materials will be developed and disseminated. These activities will also relate closely to those under the M&E subcomponent to develop and maintain accurate databases with contact information for potential beneficiaries and stakeholders. For example, the database of firms that may wish to apply for Technology Platforms or create Technology Internship Programs would facilitate direct mailing campaigns to make information available and for surveys that solicit M&E data from firms on their use oftechnology and science skills.

Institutional Strengthening Activities (USD10.16 million)

The project will strengthen selected S&T-related agencies, in particular the UNCST and the UIRI. For the UNCST, the implementation ofthe MSI is a major catalyst in its transformation toward a focused organization that puts at center stage the promotion ofpractical ways for S&T to contribute to private sector growth and attainment ofthe PEAP objectives. The UIRI has been given the mandate to play the leading role in strengthening the technology base ofprimary sector, manufacturing, and service industries. Restructuring and strengthening ofboth institutions is described in greater depth below.

Ugandan National Council for Science and Technology

This subcomponent will provide support and technical assistance for the restructuring and strengthening ofthe UNCST with the goal that it shall become more focused on deliverable , outputs and policy implementation as a result ofthese efforts. In May 2005 the Government announced its intention to restructure the UNCST to improve its effectiveness. An institutional assessment ofthe UNCST conducted in July 2005 described the Council’s current core activity as the formulation ofbroad policies for S&T. This has led to the creation ofvarious policy frameworks that have, unfortunately, not received budgetary commitment or institutional follow through.

56 In line with the recommendations ofthe institution’s assessment, the restructuring and strengthening ofUNCST will concentrate on:

0 Focusing UNCST’s activities on a reduced number ofhigh priority areas 0 Increasing the emphasis on implementing programs, notably the MSI 0 Reorganizing its structure and management

0 Adopting strengthened internal mechanisms 0 Upgrading skill levels and administrative procedures 0 Providing for a modem and efficient working environment

The planned reforms are captured in six areas ofconcentration, each with specific annual work plans and outputs.

The increased emphasis on implementation will ensure professional implementation ofthe MSI.

The Executive Secretariat’s structure will be revamped to allow it to exercise effective control over the new focus areas. The new Secretariat will be reorganized into two units: one for policy and one for operations. The policy unit shall be responsible for:

0 Annual analysis ofS&T activities and expenditure 0 S&T human capital development reports 0 Policy recommendations for S&T in economic and industrial development 0 Advice to government on occasional/ad-hoc S&T topics (with UNAS)

The policy unit will have responsibility for numerous sectoral M&E activities done in conjunction with project monitoring.

The operations unit will be responsible for:

0 Support to research through competitive funding mechanisms (including the MSI) 0 Safety and ethics regulation and compliance (including Bio-Safety) services

The operations unit will house the Research Funding Secretariat. Over time, the MSI Funding Facility and the Research Funding Secretariat will transition from donor-financed entities to a domestically-financed national science funding system.

The strengthening of internal mechanisms will result in deliverables such as more formal and transparent procedures between the Council, the Executive Committee, the Executive Secretary and UNCST staff, formalized through such accomplishments as the adoption of 5-year Corporate Plans to be used as frameworks for planning and budgeting.

Three specific UNCST activities will be funded under the MSI. MSI Administration is the first. This will cover management services, goods such as office equipment, web support and training, as well as recurrent costs. The costs incurred for the activities ofthe TC are also part ofthis subcomponent. These cover basic travel and subsistence, administrative support and meetings. The third category concerns the Better Research Proposals. A clear need has been expressed by

57 Ugandan researchers, universities, and research institutes for support in raising the quality of project proposals. This is a well-known mechanism in developed countries to improve the focus ofproject proposals, the reliability and adequacy ofresource estimates, compliance with requirements ofthe Call for Proposals, and so on. The services ofan experienced consultancy will be tendered for this purpose. The costs foreseen include two visits to Uganda for presentations in several sites and individual advice to potential project proponents on matters such as grant writing.

Uganda Industrial Research Institute

The UIRI has been given the official mandate to be the focal point for technological development ofthe industrial sector (including the primary sector and the services industries sector) in Uganda. It will also administer the Innovation and Industrialization Fund. After a meeting in September 2005, the President decided that the ULRI will be restructured, notably to include a Technology Development Center. A new 7-member Board ofDirectors has been appointed, and the UIRI Act of2002 will be amended accordingly. UIRI’s long-term vision is based on five pillars:

0 To serve as a demand-led institute 0 To stress partnerships with industry, universities, research institutes and relevant govemment agencies 0 To employ a critical mass ofqualified staff 0 To maintain state-of-the-art technical facilities 0 To support central and decentralized incubation and business development facilities

ULRI will work in close cooperation with the other agencies that perform complementary functions for Uganda’s industrial development. The Uganda Investment Authority, which is one of these, has recently been given the new role to hold and develop industrial land and parks to fulfill its objective ofencouraging foreign investment. Other relevant partnering agencies include the National Bureau of Standards, which is responsible for setting, monitoring and enforcing standards and for raising awareness ofthe importance ofstandards in quality assurance, and the Export Promotion Board.

To achieve UIRI’s long-term vision requires considerable institutional strengthening. New functions such as facilitating technology transfer, technology evaluation and assessment, innovation and applied research, offering broader incubation services, advisory and consultancy services, as well as providing deeper insight into the position ofthe Ugandan industrial sector, its technical needs, and also in technical and market opportunities each challenge UIRI’s current capability. To substantially augment current capability in these areas, MSI support will concentrate on:

0 Linh to industry, priority setting, technology/industry resource centre. The MSIwill facilitate UIRI’s ability to undertake the systematic development oflinks to industry as well as needs identification and consequent priority setting. A study to collect baseline information on the status and current needs ofthe industrial sector (technologies in use, major outputs, manpower and skills levels, unfulfilled needs, supplier chains, etc.) is vital

58 to kick-start this MSIsubcomponent. This study will serve as the basis to establish a Technology/Industry Resource Center-a reference library ofmaterials, position papers, and a host ofother literature on the position ofUgandan industry as well as the technical and market opportunities within it. The resource center will develop and maintain for use by industry, investors, policy makers, planners and research organizations, a well catalogued database ofinformation about industry, including relevant expertise and research results and projects in academia and research institutes. Access to relevant international data will also be developed. 0 Pilot plants, laboratories, engineering workshops. There is a need for rehabilitation and strengthening ofpilot plants and analytical laboratory facilities. Industrial demand dictates priority to be given to the dairy and hitjuice processing industry. Further plans will be added according to industry priorities. Pilot plants to transfonn fiber into paper, for value-added bamboo products and for the production ofceramic tiles are in advanced stages ofpreparation. Similarly, analytical laboratories in the area ofchemistry and microbiology need to be equipped to modem standards. Establishing engineering workshops is paramount when creating facilities for technology development as the priority for technology development is the introduction ofimproved manufacturing technology. 0 Technology Development Centre. Building up a technology development centre that will provide consultancy services and advise on innovations and applied research, instrumentation, design and engineering, technology assessment and transfer, and is located within a short geographic distance ofextended analytical laboratories constitutes another dimension ofUIRI institutional strengthening via the MSI. Further Technology Development Center-related functions are the provision offacilities for producer development that will make available support in all its stages from concept development and evaluation, prototyping, manufacturing process development through to pilot testing and test marketing. The consultancy and advisory services to be offered by the Technology Development Centre also comprise services offered by personnel from other divisions of the UIRI. Training of personnel to upgrade their skills to better respond to the needs ofindustry and to be better partner with universities and other research institutes is an important activity to be undertaken in this dimension as well. 0 Incubation services. Strengthening its incubation services which at present are concentrated on largely decentralized support for ICT business development is a high priority for UIRI institutional strengthening. The UIRI has demonstrated its capacity in this area by acquiring internationally competitive support in this area. 0 General purpose infrastructure. Strengthening the ICT and office infrastructure at UIRI is also entailed in MSIsupport under this subcomponent.

Total project amounts under institutional strengthening include, as well, USD0.66 million for the TC

Monitoring and Evaluation (M&E) and Policy Studies (USD0.80 million)

Comprehensive M&E activities will establish whether and to what extent the MSI Program accomplishes the Project Development Objective. It is thus necessary to measure whether more and better qualified science and engineering students are educated through the MSI, whether

59 higher quality and more relevant research is carried out, and whether firms utilize science and engineering graduates as well as research results to improve productivity. Due to the paucity of statistical data on Uganda’s S&T sector, the M&E subcomponent ofthe MSI will address the wider issue ofestablishing a better basis for information gathering and data assessment on the sector more generally. In particular, a broad set ofbaseline data will be collected to provide the appropriate perspective for the MSI efforts. Enriching the statistical data, a series ofmore in- depth studies will also be commissioned that will provide universities and other institutes of higher education, research organizations, industry, and Government agencies with relevant policy information and statistical resources to deepen national understanding ofUganda’s S&T system. A series ofspecific policy studies, including pilots to test possible technological solutions and measures, will constitute part ofthe support entailed in this subcomponent as well.

The M&E subcomponent goes beyond addressing the requirements ofmeasuring project progress which are part ofthe legal agreement between the GoU and the World Bank, significantly advancing the policy dialogue in Uganda on the contribution ofS&T to national development.

Five indicators, for each ofwhich targets are formulated, will be used to measure accomplishment ofthe Project Development Objectives. By the close ofthe project, the following achievements will be measurable. The first concerns the size or number ofresearchers and research groups in the country and their productivity, which should double by the end ofthe MSIProject. In key disciplines 50 % more science, technology, and engineering undergraduates and graduate students will be in the pipeline. The firms that take part in the Technology Platforms should employ more S&T talent and use more technology. To demonstrate the effect ofthe strengthening of UNCST and UIRI, client surveys will demonstrate satisfaction with the services these organizations offer. Similarly, surveys among students and, to some extent, the population in general demonstrate more positive attitudes towards careers in S&T.

The M&E scheme will not only concentrate on final outcomes but will include three major intermediate outcomes that will indicate whether the MSI Project is on course mid-stream. At the first intermediate benchmark, a number ofindicators will demonstrate whether the MSI Funding Facility is in place and is selecting grantees through a transparent, merit-based competition. Relevant indicators include whether the ratio ofapplicants to fundable proposals for the Senior and Emerging Research Teams number at least three, or whether at least 10% of the top 50 oftechnologically-active firms are involved in establishing Technology Internship Programs and are participating in Technology Platforms. At the second intermediate benchmark, the Research Teams should be fully operational, the undergraduate programs should be admitting new students, the Technology Platforms should be leading to the transfer oftechnologies and to follow-on R&D by firms and partners from universities and research institutes, and some 15% of science and engineering students should be participating in the Technology Internship programs. At the third intermediate benchmarking interval, planned publications will arise out ofthe research ofthe Research Teams, students will further progress toward their undergraduate or graduate degrees, and firms will be using technology to a greater degree, e.g., by paying fees to UIRI for technological services, and hiring Internship participants upon graduation. The M&E Plan comprises a series ofindicators to measure this third intermediary result.

60 As mentioned earlier, measuring these MSI-specific results will be put in the broader context of gaining deeper quantitative insight into the performance ofthe S&T sector as a whole. For example, broad baseline data are being and will be gathered as to the number ofscience and engineering students, the number of drop-outs, the number ofdegrees (bachelor, master or Ph.D.) granted in different relevant disciplines, the number ofqualified scientists and engineers in Uganda as a whole and in firms in particular, and the number ofA-level passes in science and mathematics. Moreover, a tracer study will be launched to elicit on a continuous basis data on the careers and whereabouts ofgraduates in the area ofscience and engineering. The UIRI will conduct a baseline study on the situation ofUgandan industry with respect to its technology position.

The second subcomponent concerns policy studies. As data become available, more in-depth policy studies become feasible. Performing these will be constitute a core element ofthe M&E Plan as a joint responsibility ofUNCST and NCHE. In a follow-on study to the tracer study one might for example investigate motivations and obstacles relevant to certain career patterns, as well as effective incentives (or disincentives) for different categories of employers. A background study on the government policy to concentrate student grants in science and engineering and those factors that ensured the policy’s success or mitigated against it would constitute another example.

A very important category of studies will address those problems that universities and students alike encounter as a consequence ofthe stringent demands facing A-level students in science and mathematics. One solution that has been advanced and is practiced on a very small scale for foreign students is to accept students who do not meet the formal admission requirements on the condition that they participate in and successfully complete a remedial course offered by the university. A scoping and feasibility study will provide insight into the size ofthe problem, the areas where such remedial courses are needed most, and the practical dimensions, including financial aspects, ofsetting up such remedial courses. A limited number ofpilots at selected universities and faculties with remedial courses would then provide further information on the practicalities ofintroducing such programs on a larger scale.

61 Annex 5: Project Costs

Table 1. Project Costs by Project Component /m (Shs Mlillon) (US$ Mililon) Forelgn Local Foreign Total Local Foreign Total Exchange Component 1. Mlllinnium Science Initiative (MSI) Fund 1.A.1 Grants for Sr. Research Team 2.595~, ~~ 26 4.04674 6.642.00 144 225 3.69 61 1 .A2 Grants for Research Teams 1.382.99 2.155.14 3,536.13 0.77 120 1.97 61 1 .E.' Grants for New Undergraduate Programs 2,59526 4,046.74 6.642.00 1.44 2.25 3.69 61 1 B 2 Grants for Upgrading Undergraduate Programs 2,593 37 4.043.23 6.636.60 1.44 225 3.69 61 1.C.l Grants for University-Industry Cooperative Platforms 1,699.87 - 1.699.87 0 94 . 0.94 1.C.2 Grants for Tech Internships 8 Coop. Firm-Teaching lnstt Relationships ------776.11 - 776.11 0.43 - 0.43 Subtotai 1. Miillnnlum Science Initiative (MSI) Fund 11,642.86 14.291.84 25.934.71 6.47 7.94 14.41 55 Component 2. Outreach and lnstltutlonal Strengthening 2.1 Outreach Program (National Science Week, School Visits 8 Public Info. Campaign) 2.758.90 . 2,758 90 1.53 - 153

2 2 Inst. Strength of UNCST (MSi Admn ~ Better Research Program, etc.) 4,922.33 2,266.60 7.191.13 2.73 1.26 4.00 32 2.2.1 Technical Committee 267.27 792.00 1,059.27 0.15 0.44 0.59 75 2.3 Inst. Strength. of UlRl 4,814.15 3,227.40 8,041.55 2.67 1.79 4.47 40 2.4 Monitoring 8 Evaluation / Policy Studies 810.00 450.00 1,260.00 0.45 025 070 36 2.5 Unaliocated 5.048.35 - 5.048.35 2 80 . 2.80 2.6 Front-end Fee 522.58 . 522.58 029 . 029 2.7 Project Preparation Facility 882.35 ~ 882.35 0.49 . 049 Subtotal 2. Outreach and lnstitutlonal Strengthenlng ------20,025.93 6,738.20 26,764.13 11.13 3.74 14.87 25 Total BASELINE COSTS 31,668.80 21,030.04 52,698.84 17.59 11.68 29.28 40 Physical Contingencies 1.125.17 783.37 1.908.54 063 0.44 106 41 Price Contingencies 3,076.86 2.347.25 5,424.11 1.71 1.30 301 43 Total PROJECT COSTS 35,870.82 24,160.66 60.031.48 19.93 1342 33.35 40

1 Estimated identifiable taxes and duties for importing equipment (computers, computer accessories and other office equipment) for Component 1 (MSI Fund) at 25% import duties plus 18% VAT amount to USD580,OOO (1.7% of total project costs) plus USD230,OOO of local taxes to be financed by IDA. Scientific and laboratory equipment are not subject to import duties or VAT per prevailing tax rules in Uganda. Total project taxes and duties amount to USD810,OOO (2.4% of total project costs).

Table 2. Project Costs by Financier (World Bank and Government) by Project Component

World Bank The Government Total ------Amount % Amount */. Amount % Component I.Miiilnnlum Science Initiative (MSI) Fund 1 A.l Grants for Sr. Research Teams 375 878 052 122 427 12 8 1.A.2 Grants for Research Teams 200 878 028 122 228 68 1.B.1 Grants for New Undergraduate Programs 375 878 052 122 428 128 1.B 2 Grants for Upgrading Undergraduate Programs 375 878 052 122 427 12 8 1.C.1 Grants for University-Industry Cooperative Platforms 110 1000 . 110 33 1.C.2 Grants for Tech. Internships &Coop. Firm-Teaching instt, Relationships 050 1000 . 050 15 Subtotal 1. Mlillnnlum Sclence initiative (MSI) Fund ------1485 890 184 110 1669 501 Component 2. Outreach and lnrtltutlonai Strengthenlng

2.1 Outreach Program (National Science Week, School Visits & Pubiic Info Campaign) 170 1000 ~ 170 51 2.2 Inst. Strength. of UNCST (MSI Admn. Better Research Program, elc.) 300 666 150 334 450 135

2 2.1 Technical Committee 066 1000 ~ 066 20 2.3 inst. Strength. of UlRl 500 1000 000 - 500 150 2.4 Monitoring & Evaluation / Poiicy Studies 080 1000 - 060 24 2.5 Unaliocated 320 1000 - 320 96 2.6 Front-end Fee 030 1000 - 030 09 2.7 Project Preparation Facility ------050 1000 - 050 15 Subtotal 2. Outreach and lnstltutlonal Strengthening 1515 910 150 90 1666 499 Total PROJECT COSTS ------3000 900 335 100 3335 1000

Note: Table 2 reflects sub-component costs including price and physical contingencies

62 Annex 6: Implementation Arrangements

Institutional Arrangements

The UNCST is the main project implementing agency; it will have the overall responsibility for project coordination and implementation. A light administrative structure within the UNCST will administer MSI grants and mange the related outreach and policy activities. Three tiers of management and administration, each with explicit roles and responsibilities detailed below, constitute the MSI’s governance structure: the UNCST Executive Committee, the TC (TC), and the Research Funding Secretariat (RFS). The RFS will be staffed by UNCST permanent employees. The institutional structure is depicted below.

MOFPED I UNCST 1 1 I I UNCST Executive Committee I I 1 UNCST Executive Secretary

~~ UNCST Secretariat I l~I I I

The UNCST Executive Committee

The Executive Committee ofthe UNCST will play an oversight role in the MSI as described here.

63 Responsibilities: The function ofthe Executive Committee is to oversee the implementation of the MSIProject in accordance with project documents and provide policy guidance for the MSI project. The Executive Committee articulate the national priorities and Government policies in S&T and communicate these to the TC. The TC will then write the Calls for Proposals (CFPs) based on these priorities, subsequently submitting the CFPs to the Executive Committee ofthe UNCST (EC) for clearance. Executive Committee shall review project annual reports and forward these with comments to MoFPED and the World Bank. The Executive Committee will confirm that implementation is proceeding according to agreed procedures defined in project documents.

The Technical Committee

Responsibilities: The functions ofthe TC are: To draft the CFPs for the MSIFunding Facility grant award process. The TC will draft the CFP after receiving input and guidance from the Executive Committee on national priorities for S&T. The TC will submit the CFP to the Executive Committee for its no obje~tion.~ To review initial project proposals and create short lists of finalist for each grant category. To identify appropriate highest-quality peer reviewers for full proposals. To select winning proposals for grant awards, according to the criteria contained in this manual. To review the outputs of M&E activities in order to gauge the progress ofthe initiative toward its stated research, capacity building, networking, and outreach targets. To receive and evaluate a consolidated annual report from the RFS based on annual program reports from the research teams and other project participants. To forward this report, along with substantial comments, to the EC prepare an annual report to the Executive Committee based on these inputs and any additional information on project progress. To facilitate international and national networking goals consistent with project objectives as appropriate.

Note: In the design and stakeholder consultation phases ofMSI, the lack ofresources for modem equipment and other physical investments was repeatedly cited as a major weakness ofthe Ugandan national S&T system. [It was also noted that investments are most productive when awarded to the most highly-competitive, top quality research groups.] To respond to this need, the MSIFunding Facility will emphasize, inter alia, areas ofresearch investigation that require significant equipment and other physical investments. It will not be limited only to these areas. For these reasons, the CFP proposals may emphasize interest in the basic sciences (biology, chemistry, mathematics, and physics), engineering, biotechnology and bio-safety; information and communication technology; indigenous knowledge and technologies; energy technologies (renewable and non-renewable); material sciencelconstruction technologies; water science and natural resource management technologies; post-harvestkalue addition; manufacturinglindustrriaLhnovation technologies.

64 To observe the highest standards ofprobity in discharging responsibilities, to foment a culture of scientific integrity, and to promote mechanisms for quality assurance.

Composition: The TC (TC) will consist of8 distinguished scientists ofinternational stature. Four ofthese will be Ugandans, and four will be non-Ugandans. The Committee will appoint one of the Ugandan members as a Committee Chair/Convenor. TC members will have an appropriate diversity ofbackgrounds, with balanced representation ofscientific, technological, and entrepreneurial areas. At the same time, all TC members will have sufficient expertise in S&T to be able to make informed judgments on the scientific and technical merits ofprojects, in conjunction with the opinion of expert peer reviewers.

Selection and Appointment Process: Candidates for TC membership will be solicited from a variety ofnational and international sources through a collaborative effort ofMoFPED, the UNCST, and especially the Ugandan National Academy ofSciences (UNAS). The World Bank Task Team for the project may assist in facilitating contacts with international S&T organizations for the solicitations ofnon-Ugandan candidates. UNAS will submit for consideration names ofindividuals who are accepted as both qualified and impartial, and without ties to particular institutions to avoid conflicts ofinterest. The Executive Secretary ofthe UNCST shall forward a list ofrecommended candidates to the Executive Committee for approval. The TC will be appointed by letter from the UNCST Executive Committee.

Length and Conditions of Service: TC members will serve for the duration ofthe project. One (each) Ugandan and non-Ugandan alternate member may be chosen, to serve when principal members are unavailable. TC members who are consistently absent from meetings or otherwise fail to perform their duties may be removed by the unanimous vote ofthe other Committee members. TC members will receive honoraria in accordance with established professional rates ofcompensation. The TC will have a budget for performing these functions and rely on the administrative support ofthe Research Funding Secretariat. The TC Chairperson will serve as the liaison to the Executive Committee.

TC Interaction with Project Supervision. The UNCST Executive Secretary and the World Bank Task Team Leader have responsibilities for insuring the project is carried out in accordance with the legal agreement between the Government ofUganda and the World Bank. Toward this end, the Executive Secretary ofthe UNCST and the World Bank Task Team Leader may, with the non-objection of the Chair ofthe TC, attend TC meetings as observers, and provide relevant information on project implementation procedures as requested by the TC. Neither may vote nor offer any opinions regarding the technical merit ofindividual proposals. Otherwise, TC meetings will be closed, the confidentiality ofproposals respected, and only TC members will have input into Committee deliberations on ranking or selection ofproposals.

Project Implementation by UNCST

UNCST will implement the project. The Executive Secretary (ES) ofthe UNCST will have the overall responsibility for project implementation. The ES will interact with the Executive

65 Committee and the TC on project matters, and will oversee all divisions ofUNCST that are carrying out specific project implementation activities.

Various divisions within UNCST will support the management and administration ofthe Project. These will be staffed by UNCST permanent employees. UNCST employees will follow the normal procedures for reporting to the Executive Secretary ofUNCST. The UNCST will be responsible for general administration and for facilitating all functions (annual work plan preparation, financial management, procurement) relating to the Project. These tasks will include:

Preparing consolidated annual work plans in keeping, inter alia, with the Project Implementation Plan (PIP) and the Project principles and procedures, including the preparation of indicative prospective actions/activities and documenting Project achievements. Tracking the physical goals of the Project through close M&E ofproject inputs, process, outputs and outcomes as outlined in the Project M&E indicators and conducting socialheneficiary assessment. Preparing cash projections to ensure timely and required levels ofwithdrawal of Project funds from the Special Account. Preparing withdrawal applications for appropriate signatures ofGovernment ofUganda approved signatories for submission to the World Bank and preparing supporting documentation to demonstrate that financing proceeds have been used for the purposes for which the financing was granted. Maintaining records for Project implementation. Completing project evaluationheview at mid-term. Preparing the Project Completion Report.

Implementation Arrangements

Detail on implementation arrangements through which the MSIProject will be executed are as described below, specific to each component and subcomponent.

COMPONENTONE: MSIFUNDING FACILITY, RESEARCH GRANTS

The selection and administration procedures have been designed according to international best practice, and include: (a) timely ex-ante dissemination ofrules and guidelines for competing for resources to all potential project proponents; (b) transparent, fair and merit-based competition for resources; (c) resource allocation based on independent review ofproposals by scientific peers of international standing; (d) concentration ofresources for the most qualified researchers; and (e) maximum administrative efficiency for provision and use ofresources by principal investigators. These procedures, in addition to other specifics related to implementation ofthe subcomponent is detailed below.

66 Implementing Window A:

Eligibility and Selection

Eligible Research Teams are those based at Ugandan licensed universities or Ugandan public or private research foundations (such as NARO Institutes, the Joint Clinical Research Center, the Ugandan Virus Research Institute, etc.). However, proponents not at or formally connected to a degree-granting institution will have to establish formal linkages for training as part of completing the full proposals. Individuals from the private sector may be incorporated into research teams as warranted and at the discretion ofthe PI. Likewise, individuals without formal academic credentials or institutional affiliations may be included in grant proposals where justified (for example, artisans in technological projects aimed at improving their productivity). Individuals may be included as part ofonly one proposal and may not be part ofany other applications to that Window. Non-Ugandan Research Teams are not eligible; Ugandan firms may not apply to Window A.

Full proposals must be accompanied by letters ofendorsement from the Research Teams’ host institutions. Endorsements should state that the host institution is willing to assume all responsibilities stipulated in this manual. In general, these responsibilities will include: (i) provision ofphysical space, and upgrading ofbuildings as necessary for installation of equipment; (ii)agreement to maintain researchers as faculty or employees and not to subtract resources from their programs; (iii)agreement to have financial management capacity and procurement capacity reviewed by UNCST prior to finalization ofthe grant contract; (iv) if capacity is deemed sufficient, agreement to provide grant administration services in compliance ofthe requirements ofthis manual, in return to a standard overhead charge, not to exceed 5% of grant totals; and (v) if capacity is not deemed sufficient, agreement to allow the UNCST to provide procurement and financial management services for the grant. The UNCST and the World Bank will determine the adequacy ofthese arrangements prior to finalization ofthe research grant contracts. In cases where institutional arrangements for grant administration are not adequate, the host institution must agree to the arrangements determined between the UNCST and the grantee, and agree to provide all necessary information and/or access to project documentation to the UNCST and the World Bank.

A Two Stage Grant Application and Selection Process

The UNCST will publish and widely disseminate the CFPs produced by the TC. The CFP will specify the rules and procedures for the competition, based on the stipulations in this manual, including dates, selection criteria, a scoring system, and application procedures. Prior to the initiation ofthe competition, the Research Funding Secretariat will make various types of technical assistance available to those who may wish to improve their grant proposal writing capacity and/or gain a deeper understanding about the proper completion ofMSI proposals. This technical assistance program will be known as the Better Research Program, and additional details on it will be forthcoming from UNCST.

67 Initial grant proposals will be completed by all proponents, using the standard format contained in Annex Two ofthis manual. Initial Proposals will consist ofa short (3-5 page) application giving the basic relevant details ofthe proposed research, including goals, team members, human resources development, relevance, expected outputs, indicative budgets, etc. Proposals that are not complete may be returned to proponents for completion if submitted prior to the deadline. After the deadline, no changes may be made to any proposals. Proposals which are incomplete at the time ofthe deadline will not be forwarded to the TC.

Completed proposals will be forwarded to the TC members, who will review proposals individually and deliberate collectively to rank the proposals according to a system ofExcellent, Very Good, Good, Fair, or Poor. The TC will determine the shortlist based on these rankings. Short-listed proponents will be notified and invited to develop full proposals for submission. Unsuccessful proponents will be notified in writing of (i)the ranking given to their proposal; (ii) the total number ofproposals in their category; (iii)the distribution ofrankings ofthese proposals; (iv) the cut-off point for the shortlist; and (vi) any major comments from the TC on the substance ofthe proposal. To the extent possible, comments will focus on how the proposals might be improved. Unsuccessful proponents from Round One will be encouraged to improve their proposals for re-submission in Round Two.

Selection Criteriafor Grants from Window A

Grants will be selected using the following criteria:

0 Scientific andor Technological Quality of the Proposed Research. This will include the extent to which, in the judgment of the peer reviewers and the TC, the research activities proposed in any given field address important scientific and technological questions, are at or near the forefront of research in that specific discipline, build on a superior understanding of previous research findings as determined by the TC, and are scientifically achievable.

0 Relevance. This includes both near-term relevance to national needs and long-term relevance to improving S&T capacity in the country. Improvement of capacity in the basic sciences is considered relevant to project objectives. Other relevancy criteria will include the extent to which research outputs (both human resources and knowledge) can be used by the private sector or for improved social service delivery.

0 Human Resource Development Activities. To be judged by assessing the extent to which the proposal will significantly increase the quantity and efficiency with which human resources are developed for S&T in Uganda. The incremental numbers of

I postgraduate students will be a key indicator for this criterium as will the ability to upgrade existing Masters’ programs to full Ph.D. research programs.

0 Track Record of the PI and Senior Researchers. To be judged by previous research output, publication track record in international peer reviewed journals, awards and recognition, and formation ofhuman resource development.

0 Budgets Commensurate with Proposed Work. Budgets in all full proposals will have to be justified in detail. For instance, the proposal will need to detail each piece of

68 equipment costing more than USD 10,000 equivalent, state its purpose in the research program, and describe its proposed use. Similarly, budget guidelines provided in this manual must be used for all expenditure categories. Proposals for which budgets are not fully justified or which are not commensurate with the research proposed will not be funded.

Ancillary Categories. These following characteristics will be considered “strongly encouraged but not mandatory,” including: (a) local partnerships, especially between more established and less established research institutions and teams; (b) international partnerships, including links to excellent institutions in the region and globally that are involved in similar or complementary research activities [note: with the exception of visiting professors and other specific expenditure categories enumerated in the Operations Manual, no funds from MSI Grants may be used to fund external research partners.] (c) multi-disciplinary research and research teams-encouraged where appropriate to further the overall goals ofthe research; (d) regional diversity and the creation ofresearch capacity in areas in which such strength does not currently exist in the country; and (e) sharing ofequipment and infrastructure-when possible and desirable, proposals may include ways in which equipment acquired under the grant can be made available for researchers and activities not directly involved in the Research Team;

Evaluation Process for Full Proposal and “Portfolio Criteria”

Short listed proponents will be given time and access to modest resources (not to exceed USD 5000, managed by the UNCST) to develop their initial proposals into Full Proposals. At this stage proponents will be required to furnish letters ofsupport from their host institutions. They will also need to justify budgets in detail, according to the expenditure guidelines in this manual. Full proposals should contain CVs ofall proposed team members. They should also describe in much more detail the content ofthe proposed research program.

At the time ofshort-listing, the TC will identify three ad hoc peer reviews to review each proposal. The peer reviewers will be recognized experts in the subject areas ofthe given proposal. Peer reviewers may review more than one proposal and shall be encouraged to submit extensive written comments on the proposals, in additions to assigning each a rank.

At the time offinal grant selection, the TC members will be physically present in Uganda. TC members may conduct site visits to the labs offinalists or have the finalists make presentations on the proposals and reply to questions.

Peer reviewers and the TC members will rank each proposal with the same qualitative grading system of“Excellent; Very Good; Good; Fair; Poor” used for ranking initial proposals. In addition, the TC may assign weights to different scoring categories. The final ranking system will be explained in its entirety in the CFPs.

The TC will be charged with selecting a portfolio offunded projects which, as a whole, serve the purposes ofthe project and the country and are likely to have the largest total impact. This could mean that if several proposals from the same discipline (biology, for example) score highest for

69 scientific quality, the Committee may only chose the top one or two, and then chose other projects with better scores on relevance or other criteria. As part ofthis “portfolio” approach, all proposals must include a full disclosure ofall other current areas ofresearch support for all listed scientists, and all pending applications. The TC will consider two aspects of “other funding” in its decision process. On the one hand, existence ofother funding validates ability and adds to the researchers’ ability to work sustainably. On the other hand, the MSI grants will not be most effective if they provide resources to those teams that are already well funded from other sources-that is, if there is higher added value in funding other teams. Therefore, consideration ofthe marginal impact ofadditional funding will form part of overall decision-making for selection ofgrantees. Failure to disclose all funding sources will make an application void, or be grounds for ex-post cancellation ofawarded grants.

The TC will select the grant winners. It will send these names, along with a report on its deliberations to the Executive Committee. The Executive Committee will verify that project procedures have been observed, and, if so, the grant selection process will be concluded and winners will be notified in writing. If the Executive Committee determines procedures have not been observed, it will discuss this with the TC and request that appropriate measures be taken. The Executive Committee will not offer opinions on the substance ofthe decisions, nor suggest any alterations to the TC’s decisions on grounds of substance, rather, only on matters of procedure.

Reporting and Accountability Requirements

Grantees will be required to report to the UNCST, the TC, the World Bank and the public in the following ways, inter alia:

0 Provide detailed financial management and procurement reporting and financial statements as described in Annex One ofthis manual. 0 Provide annual reports to UNCST on the physical progress ofthe research program or other activities toward their approved goals and objectives. 0 Periodically meet with, exchange views, and provide access to project activities and documentation to the UNCST, the TC, visiting project evaluators, and the World Bank.

In addition, and perhaps most importantly, grant recipients will be expected to participate in activities involving the Ugandan public at large. This may involve presenting their findings to interested group (as organized by UNCST), or participating in the Outreach Program by making visits to secondary schools, briefing government officials or members ofthe university community on their work, and other such events ofthis nature.

Other Issues Specific to Implementing Window A

For the period ofthe grant, equipment purchased with grant resources will be under the sole control ofthe PIand grant-recipient. It will be housed at the PI’S host institution, but the PIwill be the sole authority for all decisions regarding its use and who may access it. This is necessary to insure that the equipment serves the purposes ofproducing the intended results ofthe research program. The PI may, at her or his discretion, allow others to use the equipment for legitimate

70 research purposes, provided this does not interfere with the ability ofthe research team to carry out their obligations under the grant. At the conclusion ofthe grant implementation period, the equipment will remain in the same physical setting so long as the PIand the research team are still substantially in tact and active. However, at this point, the PIwill no longer have the exclusive rights to its use. Rather, its use will be governed by normal policies for the host institution.

In the event the PI can no longer continue as head ofthe research team or there are substantial changes to the compositions ofthe research team (such as illness or death ofa member), the host institution will inform the UNCST and the TC immediately. The host institution will be given a reasonable period (three months approximately) to propose a substitute for the PI, with equivalent qualifications. Ifthe TC approves the proposed individual, grant implementation may continue. The TC may reject the proposal and give the institution a short period (maximum six months) to find a suitable substitute for the PI, who may come from outside ofthe host institution. Ifno suitable candidate can be found, the grant will be cancelled or modified in accordance with the judgment of the TC, in consultation with the Executive Secretary and Executive Committee ofUNCST.

If the PI wishes to change institutions or changes institutions, it is incumbent on her or him to inform the UNCST and the TC ofthis situation. Ifthe research team will remain substantially in tact and the objectives of the research program are not jeopardized by the move, the TC will approve the continuation ofgrant implementation, including physical transfer ofthe equipment to the PI’S new institution (so long as the host institution meets the MSI eligibility criteria). If the move will cause significant disruption to the research team or prevent the team from achieving the goals on the basis ofwhich the grant was approved, the TC, in consultation with the ES and Executive Committee of the UNCST of UNCST, may cancel the grant.

PIare expected to include a budget for maintenance in their grant proposals and to use these earmarked grant funds to keep equipment in working order at all times. PI’S should plan carefully for maintenance, as the MSI will not make additional funds for maintenance available to grantees outside the grants.

Implementing Window B:

Selection Process

Projects in this category will also undergo a competitive peer review process initiated by a letter ofinvitation to compete. The letter and CFP emitted by the TC will specify the steps and dates for each part ofthe process.

As a first step, institutions wishing to compete will submit Initial Proposals according to the template in this manual. The TC will select a short-Iist offinalists who will have 90 days to develop Full Proposals. Finalists will be given technical assistance and access to a small budget (managed by RFS) to assist in the development ofFull Proposals.

Selection Criteria

71 The main selection criteria will be the perceived ability for the applying institutions to upgrade or create a degree program and other educational opportunities ofthe highest possible quality in the sciences andor engineering disciplines. Full Proposals will be reviewed with respect to: (i) the scientific and/or technological quality of the proposed program of education and training; (ii) theerelevance of the proposed program to national needs; (iii)the ability of the program to develop significant quantities of high quality human resources; (iv) the track records and professional expertise of the individuals to be involved; (v) the extent to which the budget is commensurate with the needs of the program; and (vi) the ancillary categories first described above.

In addition, successful proposals will be selected to the extent they have the following:

0 Plans for development of curricula to internationally-accepted levels of quality, which also encourage innovation and new approaches to instruction. 0 Laboratory and infrastructure development plans, fully commensurate with and integrated into proposed curricula. 0 Staffing plans-including for the contracting of new full-time staff as well as visiting professors, and for the eventual assumption of incremental staff costs by the institutions at the end ofthe grant period [Note: salary contracts for staff will be structured in such a way that institutions gradually assume a greater percentage of these costs as the grant progresses.] Student recruitment and development plans, which may include incentives to attract students into science disciplines and remedial activities for students who lack appropriate preparation.

Timetable for Implementation

Where grants are sponsoring the creation of wholly new programs, it is recognized that the implementing institutions will not be able to jump from having no programs to having full- fledged degree programs in a short period to time. Successful proposals will have recognized this and built in an adequate transitional plan. Grant-receiving institutions will then implement this transition period of 1-2 years in which to make the degree programs fully operational. Intermediate activities would build up to this full implementation phase.

Where grants are sponsoring the upgrading of existing institutions, the transitions will be shorter. Upgrading should take place as quickly as feasible, without causing undesirable disruptions in the programs. Successful proposals will describe the transition to full implementation.

Technical Assistance for Grant Proponents and Research Managers: The Better Research Program

The MSI Funding Facility will include a large program of technical assistance for grant proponents and research managers. Researchers, professors, entrepreneurs, managers, and administrators will have access to workshops and consulting services on relevant topics designed to elevate the quality oftheir grant writing skills and research management abilities.

72 For researchers and those interested in applying for research grants, a comprehensive technical assistance program will focus on ways to improve:

Research problem formulation Research program design Collaboration with scientific, technological, and private sector partners Grant proposal writing (both for MSIgrants and in general) Management ofresearch Publication and dissemination ofresearch results Commercial potential ofresearch outputs (intellectual property issues)

This suite of technical assistance activities will also help researchers identify other potential sources of funding as alternatives to the MSI Funding Facility.

For professors, Vice Chancellors, and others involved in undergraduate and graduate training, technical assistance will focus on planning for upgrading or creation of new degree programs in S&T disciplines, issues of remedial training for students in the sciences, and reviews of best practice and incentives for improving education quality in sciences and engineering.

For research managers and administrators, including the Project Secretariat at UNCST, technical assistance will focus on:

Managing competitive research funds 0 Identifying international level ad hoc peer reviewers e Financial Management of research funds and financial oversight of individual research projects 0 Legal, institutional, and administrative issues Procurement and maintenance ofscientific equipment

Programs of technical assistance will also be developed around issues of academia-industry linkages.

MSI Proponents will be the primary target audience for this technical assistance, but to the extent feasible, programs will also provide activities and services for other researchers and stakeholders who may not participate in MSI, but who wish to improve their capacities in these areas.

Implementing Window C:

The Subcommittee will be responsible to draft an open, continuous, or “standing” CFP for Window C, so that proposals can be received on an on-going basis to respond to the needs ofthe private sector for rapidity. The CFP will make explicit the goals, selection process and criteria, contracting and implementation procedures, and accountability and monitoring procedures for both sets ofactivities under Window C.

73 The CFP will specify that all proposals shall be sent to the Research Funding Secretariat for forwarding to the Window C Subcommittee. UIRI is allowed to receive a copy of all proposals. The Research Funding Secretariat will acknowledge receipt ofthe proposals in writing to the proponents. The Subcommittee will identify one Ugandan and one non-Ugandan peer reviewer per proposal for written opinions within 10 working days ofreceiving the proposal from the Research Funding Secretariat. The Subcommittee will subsequently deliberate virtually about the proposal, and decide whether or not to fund it within 20 working days ofits initial receipt by the Research Funding Secretariat.

Unlike Windows A and B for which proposals must be accepted or rejected as they are received and may not be conditionally accepted after the closing ofthe call, for Window C the Subcommittee may return a proposal to the proponents with suggested improvements or conditions that, if met, would make it eligible for funding.

COMPONENT TWO: OUTREACH AND POLICY ACTIVITIES

Implementing the Outreach Programs

Contracting firms for the School Visits, National Science Week and Public Campaigns

UNCST will contract a firm specializing in marketing and public relations to organize and administer the School Visits Program, the National Science Week activities and the public campaign. This firm will include individuals with specialized expertise in the public understanding ofscience and/or science education. The firm will develop a set ofactivities for short (half-day) visits to secondary schools throughout Uganda for the purpose ofraising students’ awareness and understanding ofS&T issues. For the National Science Week, activities will be coordinated closely and (potentially) undertaken in partnership with the Uganda National Academy ofSciences, international Academies of Sciences, and other partners. UNCST will engage a firm to coordinate an overarching public information campaign to raise awareness about the outreach activities, engage stakeholders, and ensure timely access to complete information about the project.

Implementing the Institutional Strengthening Activities

UNCST

After the decision to restructure the UNCST, initial steps to implement were taken. The acting Executive Secretary and the Executive Committee ofthe UNCST are now taking the lead beginning by putting in a new organizational structure. The finance department, also to be responsible for procurement issues in relation to MSIis strengthened. The Pre-Financing Facility for the MSI Project, which was agreed upon by the Ministry ofFinance, Planning and Economic Development in late 2005, will be used to support staff training, rehrbishment ofnew premises and improvement ofICT facilities. An operations manual will describe in operational detail the responsibilities ofthe Council, the Executive Council, the Executive Secretary, the Assistant- Secretaries and other staff members; operational procedures to establish a corporate plan, yearly

74 work plans and budgets, and yearly reports; and decision and information mechanisms. A plan for an extensive program ofM&E ofthe S&T sector in Uganda, which will encompass the M&E activities for the MSIProject, has also been established.

Uganda Industrial Research Institute

The formal conditions for the restructuring and strengthening ofthe UIRI were created in 2005, culminating in the Presidential decision to restructure the UIRI along the lines ofa Task Force chaired by Prof. Ssebuwufu in 2004. Among other changes, the Task Force called for the creation of a Technology Development Centre. A new 7-member Board ofDirectors has been appointed to the UIRI, and the Attorney-General has been requested to amend the UIRI Act of 2002 to affect these changes. The Government has provided some initial operational funds for this purpose.

A long-term perspective, including a new organizational chart for the development ofthe UIRI has been drawn up as the basis for the strengthening ofthe Institute. The Executive Director is in charge ofimplementing the restructuring. Some monies from the Pre-Financing Facility for the MSIProject will be used to improve the basic infrastructure ofthe Institute and also to strengthen UIRI’s links to industry. Baseline information will be collected as a starting point for a technologyhndustry resource centre, and consultation meetings with industry will ultimately result in a formal Advisory Board consisting ofrepresentatives ofmajor partners ofUIRI, i.e., industry, universities and research institutes.

Implementing the M&E and Policy Studies Activities

The quantitative data on the evolution and the performance ofthe various components ofthe MSIFinancing Facility will be collected both in separate surveys and as part ofthe regular annual reporting ofthe participating teams, universities, institutes, and firms. In addition, twice during the duration ofthe MSIProject an international panel of3-5 distinguished scientists will conduct highly qualitative reviews, including site visits, ofthe Research Teams and the undergraduate programs in science and engineering. They will provide substantive inputs in the deliberations ofthe TC.

The responsibility for organizing and executing the M&E Plan will be shared by UNSCT and the Ugandan National Council for Higher Education (NCHE), as well as UIRI for special data on developments in industry. NCHE has been very active oflate in compiling comprehensive data on the higher education sector. UNSCT will enter into a participation agreement with the NCHE for the purpose ofmaintaining, broadening, and developing this data.

Annex 7: Financial Management and Disbursement Arrangements

A FINANCIAL MANAGEMENT ARRANGEMENTS

Country Financial Management Issues

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

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 decreased. In terms of appropriate legislation and regulatory frameworks, significant progress has been made to ensure that the risk associated with lack of clear rules and regulations are reduced. Also more useful information is being provided in the annual accounts. It is recognized, however, that the process of implementing new rules and ways of working take time and require changes in attitude, continued capacity building and widespread demand for greater accountability.

Risks remain in terms of: 0 Enforcement ofprocurement and payroll rules and procedures 0 Completeness ofdata on debt 0 Effective independent oversight 0 Timeliness and effectiveness oflegislative and public scrutiny

In addition, the appropriate legislative framework for integrity is still being developed. There remain significant legal, institutional and capacity constraints on the ability of the integrity bodies (IGG, DEI, Police, DPP) to carry out their various functions including public education, detection, investigation and prosecution ofoffenders.

With the support of a number of donor assisted initiatives such as the Second Economic and Financial Management Project (EFMP 11) and the Local Government Development Program (LGDP) supported by IDA, and the Financial Accountability and Decentralization Support Project funded by Dm, Government is seeking to rapidly enhance the financial accountability framework in order to (i)mitigate fiduciary risk in public expenditure management; (ii)achieve economy, efficiency and effectiveness in the use of public funds; enhance transparency and accountability; (iii)enhance staff capacity in public financial management; and (iv) establish an appropriate enabling environment for private sector development and regulation. These initiatives and reforms have been supported and strengthened through PRSC 1,2, 3 and 4 budget support programs.

76 The objectives ofthe project’s financial management system are to:

0 Ensure that funds are used only for their intended purposes in an efficient and economical way 0 Ensure that funds are properly managed and flow smoothly, adequately, regularly and predictably in order to meet the objectives ofthe project 0 Enable the preparation of accurate and timely financial reports 0 Enable project management to monitor the efficient implementation ofthe project 0 Safeguard the project assets and resources

Furthermore, the following are necessary features of a strong financial management system for the MSI project:

The UNCST Accounting and Finance Department should have an adequate number and mix ofskilled 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 of assets and resources; The accounting system should support the project’s requests for funding and meet its reporting obligations to fund providers including Government of Uganda (GoU), IDA, other donors, and local communities; The system should be capable of providing financial data to measure performance when linked to the output ofthe project; and An independent, qualified auditor should be appointed to review the Project’s financial statements and internal controls.

The table below identifies the key risks that project management may face in achieving these objectives and provides a basis for determining how management should address these risks.

Table. Possible Key Risks

Risk Risk Risk Mitigation Measures Rating Corruption (Funds may not be used M Appropriately qualified and experienced staff is already working in an efficient and economical way with the unit, and exclusively for purposes intended).

Internal Audit S UNCST has no internal audit function. In view of the fact that the project will be disbursing funds to UIRI and other grantees, it is paramount that UNCST has an internal auditor whose main role will not only be to ensure that UNCST is adhering to its policies and procedures but that UIRI and the grantees receiving MSI funds have adequate financial management systems in place to ensure funds are used for purposes intended and accounted for. This will be mitigated by the recruitment of an Internal Auditor before Project

77 I Effectiveness. Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible Risk)

Strengths and Weaknesses

The project financial management is strengthened by the following salient features: 0 The accounting personnel are adequately qualified and experienced; 0 There is an accounting software although it is limited for reporting writing; and 0 There is an adequate Financial Management Manual (FMM) that is already in place.

The project financial management is weakened by the following salient feature: 0 UNCST has no internal audit function which is essential to ensure that all policies and procedures are adhered to and that UIRI and the grantees receiving MSI funds have adequate financial management systems to ensure that funds are used for the purposes intended, and are accounted for.

Institutional and Implementation Arrangements

UNCST under MoFPED will be responsible for the overall implementation of the project. UNCST has implemented an IDA project before-the Institutional Capacity Building for Integration ofIndigenous Knowledge Project in the Poverty Eradication Action Plan.

During project execution UNCST, established by Statute No. 1 of 1990 as a semi-autonomous institution within MoFPED, will coordinate project implementation. The Finance, Accounts, and Procurement Department (FAPD) ofUNCST will manage inter alia,

The FAPD will ensure efficient coordination among UIRI and the different grantees participating in the MSI. The FAPD will also constitute the operational link to the IDA and GoU on matters related to the implementation ofthe project.

The Permanent Secretary (PS), MoFPED, will be the “Accounting Officer” for the project, assuming the overall responsibility for accounting for the project funds. The Executive Secretary ofUNCST will report to the Accounting Officer on matters concerning the accountability ofMSI project funds.

Flow of Funds

Bank Accounts. The following bank accounts will be maintained for the purposes of implementing the project: 0 Special Account: Denominated in US dollars, disbursements from the IDA Credit will be deposited in this account.

78 0 MSIProiect Account: This will be denominated in local currency. Counterpart funds and transfers from the Special Account (for payment of transactions in local currency) will be deposited on this account in accordance with project objectives.

These bank accounts will be opened in Bank of Uganda (BoU) by credit effectiveness date. Initial cash flow forecasts upon which the advance disbursement will be made from the IDA Credit will also be prepared by the same date. The cash flow forecast will be prepared by UNCST’s Finance, Accounts, and Procurement (FAP) Department that will be using the Interim Financial Report (IFR) disbursement method. The account signatories will be documented in the Financial Management Manual (FMM) for the project. Funds flow arrangements for the project (through the two bank accounts above) will be as follows:

0 UNCST’s FAPD will prepare six-monthly cash flow forecasts based on the work plan and submit a quarterly Withdrawal Application under the IFR based disbursement guidelines for borrowers to submit to IDA within 45 days after the end ofeach quarter. 0 IDA will make an advance disbursement from the proceeds of the Credit based on the cash flow forecasts by depositing into a Borrower-operated Special Account (SA) held at Bank of Uganda (BoU) denominated in US Dollars. 0 Payments will be made centrally from the UNCST office in Kampala. These payments will also include those to grantees that do not have adequate financial management systems to manage advance payments in bulk. Such grantees will be required to submit their payment requests to UNCST for processing who will then issue a cheque signed by the Manager Finance, Accounts and Procurement or a designated person and the Principle Investigator ofthe research team (grantee) to withdraw funds from the grantee’s MSI bank account maintained by UNCST. The annual work plans submitted by grantees to UNCST will be accompanied by a letter from the Head of the Institution in which the grantee will be conducting research. This will ensure that the Institutions hosting the grantees are aware ofthe transactions relating to the grantees they are hosting. 0 UNCST will also enter into a Grant Agreement where funds will be disbursed to grantees implementing MSIapproved programs. Grantees will submit a budget based on approved work plans to UNCST and funds will be disbursed to grantees in bulk for onward payments relating to the approved budgeted programs. The grantees will be expected to open bank accounts for the MSI project with commercial banks after successfully appraisal by UNCST, and agreed with IDA, to ensure the grantees have systems to account for the funds advanced to them. Grantees will submit accounts or financial statements to UNCST on a quarterly basis. Additional funds will not be disbursed to grantees with outstanding advances yet to be accounted for. For grantees that do not have adequate financial management systems in place, their funds will be paid directly to them by UNCST based on agreed contractual arrangements. Similar arrangements will be adhered to when dealing with UIRI. 0 IDA will fund 100% of the cost of grants under the project in accordance with the recently approved Country Financing Parameters for Uganda. No counterpart funds are expected to be included in grant financing. Counterpart funds and transfers from the SA (for payment of transactions in local currency) will be deposited in the Project Account in accordance with project objectives. The Government will allocate and pay over counterpart funds for the project by cheque (Warrant of funds). Counterpart funds are

79 allocated through the normal central government budgetary process. Counterpart funds is accessed through compliance with the country specific Financial Regulations.

Funds Flow Arrangements for the MSI Project

World Bank (IDA)

Special BOU Account in

MSI Grantee NC in Commercial Bank

80 UNCST’s Finance, Accounts and Procurement Department has been staffed with key staff recruited during the year. The department is headed by a Manager who directs and guides the financial management operations of the institution. The Manager for Finance, Accounts & Procurement reports to the Executive Secretary of UNCST. She is assisted by a Senior AccountsProcurement Officer and 2 Accounts Officers who will maintain the books of accounts and records ofthe MSIproject. In this regard, the staffing arrangements are adequate for the MSI project to ensure funds are accounted for.

All UNCST accounting staff will need training in World Bank courses on Financial Management and Disbursement Guidelines. This can be arranged in consultation with the Financial Management Specialist at the Country Office during project implementation.

The staff in UNCST’s Finance and Administration Department are experienced and qualified as illustrated below:

0 The Finance, Accounts and Procurement Manager is pursuing a Masters degree in Business Administration (Finance & Accounting) from the Makerere University, has a Bachelor’s degree in Commerce (Accounting) from Makerere University, a Post- Graduate Diploma in Financial Management from Uganda Management Institute, a Uganda diploma in Business Studies from National College of Business, Nakawa and has ten years ofexperience in accounting and finance; The Senior Accounts / Procurement Officer is a professional accountant with ACCA, has a Bachelor’s degree in Commerce (Accounting) from Barkatullah University-India and a Post- Graduate Diploma in Financial Management from Uganda Management Institute with seven years ofexperience in accounting and finance; 0 One of the Accounts Officer has a Bachelor’s degree in Business Administration from Makerere University with five years experience in the field of accounting and finance while the other Accounts Officer has a Bachelor’s degree in Commerce (Accounting) from Makerere University and two years experience in the field of accounting and finance. Both ofthem are pursuing ACCA professional accounting course.

In order to ensure that the project is effectively implemented, the UNCST will ensure that appropriate staffing arrangements are maintained throughout the life ofthe project.

Description of Financial Management Arrangements

Internal Controls and Financial Management Manual

The project’s internal controls are documented in a FMM at UNCST, and can be updated to take into account any changes in procedures.

The procedures used by the project to maintain its records will be documented in the FMM. These include the requirement for cross references to supporting documentation in the SOE supporting schedules in order to facilitate the inspection of these schedules and improve the maintenance ofthe project’s records.

81 The FMM describes the accounting system: (i)the major transaction cycles of the project; (ii) hnds flow processes; (iii)the accounting records, supporting documents, computer files and specific accounts in the financial statements involved in the processing of transactions; (iv) the list of accounting codes used to group transactions (chart of accounts); (v) the accounting processes from the initiation of a transaction to its inclusion in the financial statements; (vi) authorization procedures for transactions; (vii) the financial reporting process used to prepare the financial statements, including significant accounting estimates and disclosures; (viii) financial and accounting policies for the Project; (ix) budgeting procedures; (x) financial forecasting procedures; (xi) procurement and contract administration monitoring procedures; (xii) procedures undertaken for the replenishment of the Special Account; and (xiiii) auditing arrangements.

Planning and Budgeting

Departmental budgeting procedures, including those outlined in the Project Implementation Plan (PIP) pertaining to the creation of Annual Work Plans (AWPs) will be used in preparing the project budget. The procedures will be documented in the FMM.

Books of Accounts and List of Accounting Codes

UNCST will maintain similar books of accounts as those for other IDA funded projects. The books of accounts to be maintained specifically for MSI will include: (i)a Cash Book; (ii) ledgers; (iii)journal vouchers; (iv) fixed asset register, and (v) a contracts register.

The books of accounts will be maintained in a computerized system. A list of accounts codes (chart of accounts) for the project will be drawn up. This will match the classification of expenditures and sources and application of funds indicated in the Project Financing Agreement. The chart of accounts will be developed in a way that allows project costs to be directly related to specific work activities and outputs ofthe project.

Books of Accounts to be used for the project will be opened and a chart of accounts will be completed by Credit Effectiveness.

Audit Arrangements

Internal Audit. UNCST does not have an internal audit function and will need to recruit an internal auditor by project effectiveness. The internal auditor will ensure that all policies and procedures are being adhered to, that the project has a strong internal control system and that UIRI and the grantees receiving MSI funds have adequate financial management systems to ensure that the funds are used for the intended purposes and are properly accounted for. The process ofrecruiting an Internal Auditor has already been initiated with an advertisement for the position being placed in the local daily news papers.

External Audit. The Auditor General is primarily responsible for the auditing of all government projects. The audit is usually subcontracted to a firm of private auditors, with the final report being issued by the Auditor General, based on the tests carried out by the subcontracted firm. The audit reports for the MSIproject will be submitted to IDA within six months after the end of

82 each financial year. The new Audit Policy Guidelines allow MSI Project accounts to be included in the UNCST accounts such that one audit report from UNCST is received by the Bank. This reduces transaction costs in relation to conducting an external audit. Given that UNCST audited accounts are up-to-date and that FY05 accounts have been received by the Bank, it is recommended that the MSI project accounts be included in UNCST’s accounts and that one consolidated report be received by the Bank. Any firm of auditors subcontracted to carry out the audit should meet the IDA’S requirements in terms of independence, qualifications and experience.

It is recommended that arrangements for the external audit of the financial statements of the project be communicated to IDA through agreed terms of reference. Appropriate terms of reference for the external auditor will also be developed and agreed within three months of Credit Effectiveness.

Reporting and Monitoring

Formats of the various periodic interim 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 of accounts. The financial reports will be designed to provide quality and timely information for project management, implementing agencies, and various stakeholders on project performance.

The following quarterly IFRs will be produced by UNCST’s FAP Department:

0 Financial Reports: o Sources and Uses ofFunds by Funding Source o Uses ofFunds by Project Activity/Component 0 Physical Progress (Output Monitoring) Report 0 Procurement Report

The formats will be defined and agreed by negotiations and UNCST’s FAPD will produce the IFRs by effectiveness.

The project is eligible to use the reports-based disbursement method provided that during project implementation, provided that the FAPD (a) maintains satisfactory financial management rating during project supervision; (b) submits IFRs consistent with the agreed form and content as explained below; and (c) submits Project Audit Reports by the due dates. The FAPD will be required to submit to the Bank the following information in order to support report-based disbursement:

0 Interim Financial Report (IFR) 0 Special Account (SA) Activity Statement.

0 SA Bank Statements 0 Summary Statement of SA Expenditures for contracts subject to prior review. 0 Summary Statement ofSA Expenditures not subject to prior review.

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

The Project Financial Statements will comprise:

a A Statement of Sources and Uses of Funds I Cash Receipts and Payments which recognizes all cash receipts, cash payments and cash balances controlled by FAPD; and separately identifies payments by third parties on behalf ofFAPD. a The Accounting Policies Adopted and Explanatory Notes. The explanatory notes will be presented in a systematic manner with items on the Statement of Cash Receipts and Payments being cross referenced to any related information in the notes. Examples ofthis information include a summary of fixed assets by category of assets, and a summary of SOE Withdrawal Schedule, listing individual withdrawal applications; and A Management Assertion that Bank funds have been expended in accordance with the intended purposes as specified in the relevant World Bank legal agreement.

Indicative formats ofthe statements will be developed in accordance with IDA requirements by Credit Effectiveness.

Information Systems

UNCST is using Navision Financials accounting software and the staff are comfortable using it to produce accounting reports. This accounting software is accessed as adequate for accounting and reporting on the use ofMSI project funds.

Procurement Arrangements

Procurement will be managed by the Manager Finance, Accounts & Procurement who will be working with the Procurement Officer / Senior Accounts Officer. There are no specific Procurement arrangements that specifically impact the project’s financial management arrangements.

Disbursement Arrangements

UNCST has established effective financial management and accounting systems which will facilitate the introduction of Interim Financial Report (1FR)-based disbursements. The IFRs will be submitted on a quarterly basis for disbursement. In compliance with IFR guidelines, FAPD will be expected to: (a) maintain satisfactory financial management rating during program supervision; (b) submit IFRs consistent with the agreed form and content within 45 days of the end ofeach reporting period; and (c) submit a Program Audit Report by the due date.

UNCST will submit within six months after credit effectiveness a six monthly cash flow forecast based on its work plan using the IFR disbursement method for disbursement. Upon satisfactory

84 review, IDA will deposit funds into the Special Account and these funds will be used by FAPD to finance IDA’Sshare ofprogram expenditures as per the Financing Agreement.

Upon credit effectiveness, UNCST will submit an IFR along with the six month cash flow forecast to IDA for a deposit into the Special Account. Replenishment of funds from IDA to the Special Account will be made upon receipt of the quarterly IFRs which will include the six monthly cash flow forecast for the subsequent period. If ineligible expenditures are found to have been made from the Special Account, the Borrower is obligated to refund the amounts. If the Special Account remains inactive for more than six months, the Borrower may be requested to refund to IDA amounts advanced to the Special Account.

IDA reserves the right, as reflected in the Financing Agreement, to suspend disbursement of the Funds for non-compliance with IDA reporting requirements.

Disbursements to UIRI and grantees implementing MSI programs will be made after ensuring that the grantees have adequate financial management systems in place to ensure the funds are utilized for purposes intended as per the grant agreements, and are properly accounted for. In this regard, UNCST will ensure that before disbursements are made to UIRI and grantees, they have the following as basic requirements for an adequate financial management system:

UIRI and the grantees will open bank accounts to which the funds will be disbursed and the movement of the funds will be monitored by UNCST through bank reconciliation statements that will be submitted by UIRI and the grantees’ accountants on a quarterly basis to UNCST alongside the supporting accounting documents for the funds; UIRI and the grantees will have a qualified and experienced accountant capable of keeping records showing appropriate accountability mechanisms for funds. Furthermore, UIRI and the grantees will budget for the funds in accordance with UNCST approved work plans, report on the utilization of the funds (using the IFR format) and submit statements ofaccounts for the funds on a quarterly basis to UNCST; and UIRI and the grantees should have accounting policies and procedures that are agreeable to UNCST and will ensure that accounting systems are in place to ensure funds are used for purposes intended.

The basic requirements once verified by UNCST will be agreed with IDA.

Category Amount of the Credit Percentage of Allocated (expressed in Expenditures to be SDR) Financed

(1) MSIGrants for Part 1 of the 10, 340,000 100% ofthe amount Project disbursed

85 ~~~ 2). Goods, works, consultants’ services and training for

(a) Part 2 (a) and (b) ofthe Project 1,750,000 100%

(b) Part 2 (c) and (b) of the 2,970,000 Project

3) Operating Costs: 65%

(a) for Parts 1 and Part 2(a) and 2,5 50,000 (b) ofthe Project

(b) for Part 2 (c) and (d) of the Project 530,000

4) Funding under Project 350,000 Amount due pursuant to Preparation Facility (PPF) section 2.07 of the General Conditions

5) Unallocated 2,410,000

TOTAL AMOUNT 20,900,000

Overall Policy Guidance

The UNCST Executive Committee will have a role in insuring that the project is implemented according to the PIP and the legal documents. A TC comprising 8 high caliber scientists, 4 of whom will be Ugandan Nationals and 4 international experts will be appointed by MofPED on the basis of recommendations from UNCST. Administrative support for the implementation of MSI will rest with the implementation division of UNCST under the responsibility of the Assistant Executive Secretary for Programs Implementation. The Head ofthe FAPD will ensure the funds are used for purposes intended and accounted for.

Financial Management Action Plan

Actions to be taken for the project to strengthen the financial management system and the dates they are due to be completed by are outlined in the Action Plan below.

Table. MSIFinancial Management Action Plan

Action Date due bv Responsible 1 Opening books ofaccount and completion ofthe Prior to project launch UNCST Chart ofAccounts for the MSIproject Demonstrate ability to prepare kRs 2 Opening Bank Accounts Credit Effectiveness UNCST

86 Action Date due bv ResDonsible

3 The Recipient has caused: (i)UNCST to appoint an Credit Effectiveness UNCST internal auditor; and (ii)UNCST and UIRI, to appoint a procurement consultant, all in accordance with the provisions of Section I11 ofSchedule 2 to this Agreement 4 Agreement of terms of reference for external Withinthreemonths UNCSTand auditors after Credit IDA Effectiveness 5 Any MSI Grant under Category 1, unless the Prior to first UNCST, IDA Association has given its no-objection to the first of disbursement for and grantees. such MSI Grant under Part l(a), (b) and (c) ofthe grants under category

Conclusion of the Assessment

A description ofthe project’s financial management arrangements above indicates that although they satisfy the Bank’s minimum requirements under OPBP10.02, some improvements are needed before the system can be adequate for providing, with reasonable assurance, accurate and timely information on the status of the project as required by IDA. The recommended improvements are detailed above in the Financial Management Action Plan.

Supervision Plan

A supervision mission will be conducted at least every six months based on the risk assessment ofthe project. The mission’s objectives will include ensuring that a strong financial management system is maintained throughout the life ofthe project. 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. The Country Office Senior Financial Management Specialist will provide the rating after appropriate review ofthe project financial management system.

Risk Assessment The risk assessment document is available on project files

Finally, the Financial Management Assessment Report (FMAR) for the MSI project was discussed with staff of the FADP on July 27,2005. Persons who attended the meeting were:

Patrick Umah Tete - Senior Financial Management Specialist with the World Bank Ismail Baruhagara - UNCST Ag. Executive Secretary Mylia Rubanzana - UNCST Manager Finance, Accounts & Procurement

87 Annex 8: Procurement Arrangements

A. General

Procurement for the Project would be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004; and “Guidelines: Selection and Employment ofConsultants by World Bank Borrowers” dated May 2004, and the provisions stipulated in the Financing Agreement. The various items under different expenditure categories are described below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and time frame will be agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Where feasible, the project procurement function will be decentralized to participating Implementing Agencies and Grantees. A Grantee, for economies of scale in the procurement ofcommon user items or where capacity is inadequate to perform the procurement function, may delegate its procurement function to the UNCST. For this purpose UNCST will maintain throughout the project period, adequate procurement management capacity or access to Third Party Procurement Agent(s) (TPPA).

Procurement of Works: Works contracts to be procured under the Project would include: rehabilitation ofexisting laboratories and office space; rehabilitation and augmentation ofpilot plants and the Resource Centre for the UIRI. Procurement will be done using the Bank’s Standard Bidding Documents (SBD) for all International Competitive Bidding (ICB) and NCB agreed with or satisfactory to the Bank. Use ofthe “prequalified list” of civil works contractors from the Contracts Committees of Government Ministries, Departments and Agencies (MDAs) will be allowed under the Shopping procedures provided quotations are solicited to ensure that at least three quotations from qualified contractors are obtained, opened at the same time for analysis, and the contract awarded to the qualified bidder offering the lowest price.

Procurement of Goods: Goods procured under the Project would include: motor vehicles; laboratory; workshop and office equipment; supplies; texts and didactic materials; hmiture and IT systems. Procurement will be done using the Bank’s SBD for all ICB, Limited international Bidding (LUB), and NCB agreed with or satisfactory to the Bank and for Shopping the Solicitation template included in the PIP. Framework contracts for common small value supplies e.g. pipette tips, test tubes, gloves, etc, will be procured annually so as to enable implementing agencies to place orders for urgently needed supplies at short notice, at a competitive price. Pooled procurement will be utilized at UNCST under the Grant scheme for common user items or procurements delegated by Grantees.

Procurement of Non-Consulting Services: Non-consulting services would include provision of services for publishing, travel, advertising, accommodation, “social marketing’’ ofS&T as well as workshop facilities. Procurement ofnon-consulting services will be done by using the sample SBD for Non-consulting Services for all ICB and NCB agreed with or satisfactory to the Bank

88 and for Shopping the Solicitation template included in the annexes ofthe PIP. UNCST will conduct pooled procurement ofcommon user services like advertisements and for procurements delegated by Grantees.

Selection of Consultants: Consulting Firms and Individual Consultants will be selected to provide Technical Assistance to proponents ofresearch proposals and Managers ofResearch Grants. Consultants will also be used to organize and facilitate workshops and scientific conferences, to set up Technology Resource and Development centers, to set up research and industrial information systems, to provide specialist Financial, Procurement, and Project Management services, to carry out staff recruitments, to perform financial audit ofthe project accounts, to monitor and evaluate the outputs and impacts, to assess the progress in meeting Project Development Objectives at Mid-Term Review, to provide engineering services for the rehabilitation or construction of laboratories, and for policy studies. Shortlists ofconsultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely ofnational consultants in accordance with the provisions ofparagraph 2.7 ofthe Consultant Guidelines. Researchers at public and private universities, Government research institutions, public training institutions, Non-Governmental Organization (NGOs), or any special public or private research organization would be engaged in research programs provided in each case their work was connected to training graduate or undergraduate students. Universities and other tertiary institutions which receive grants will recruit graduate and undergraduate students as well as other research staff or deploy Interns using their systems for student or staff recruitment or deployment ofInterns agreed to or satisfactory to the Bank.

Operating Costs: The Project will finance operating costs ofthe UNCST and UIRI that directly relate to project implementation. The Project’s operating costs will include: fuel and vehicle maintenance for a project vehicle, stationery, goods and equipment such as computers, office furniture, communication expenses, subsistence allowances for authorized travel, and equipment maintenance except maintenance costs ofequipment procured using grants which should be budgeted for within the grants.

Research Grants: Competitive Research Grants will be awarded through three windows A, By and C. The eligibility and selection procedures for award ofgrants have been elaborated in great detail in the PIP and Annex 4 ofthe PAD describes the grant scheme in detail. Under Window A not more than 65% ofthe grant amount will be used to procure equipment, the balance would be for supplies, maintenance ofequipment, staff costs and operational expenditure. The grantee institution would contribute (i)physical space and necessary upgrades to accommodate equipment, and (ii)maintenance ofresearchers as faculty or employees, and procurement, financial management and administrative management capacity for the research program. Under Window Bythe grants will fund the creation or upgrade ofundergraduate degree programs in basic sciences and engineering at licensed public or private universities. Under Window C, the project will facilitate the cooperation between industry and academia and universities will run Technology Internships in interested companies.

Research Grant Proposals will be assessed by the MSITC in two stages, the Initial Proposal (IP) from which a short list of finalists is drawn up to prepare the Full Proposals (FP). Following the short listing ofproponents, a Third Party Procurement Agent (TPPA) will be retained by

89 UNCST, to assist in drawing up specifications and possible sources and methods ofprocurement for equipment that are likely to be procured by selected Grantees. Procurement Plans will be prepared only after grant awards for the successful FPs. Grantees will sign grant agreements that enclose procurement plans agreed to or satisfactory to the Bank. Procurements under the grant scheme will follow the same procedures described earlier in this Annex. For contracts below the threshold for NCB procedures, the Private entities may use commercial practices agreed to or satisfactory to the Bank. The selection processes under the Technology Internship Programs will follow the practices by the grantee institutions agreed to or satisfactory to the Bank.

B. Assessment of the agencies capacity to implement procurement

Procurement activities will be decentralized to implementing agencies and grantee institutions where feasible. UNCST is a Government parastatal under the Ministry ofFinance, Planning and Economic Development (MoFPED). It is run by an assembly of32 Council members ofwhom are ex-officio members representing 2 1 specified ministries, institutions and organizations and not less than 15 eminent scientists in specified fields of S&T (S&T) appointed by the Minister. The council appoints an Executive Committee ofbetween five and seven members from among its membership three of whom are from the ex-officio members. The Executive Secretary of UNCST is appointed by the Council in consultation with the Minister and is a non-voting Secretary ofthe Council and also the Chief Executive Officer ofthe Council. There are six specified Specialized Committees in the areas ofPhysical Science, Industrial Science, Medical Sciences, Agricultural Sciences, Natural Sciences, and Social Sciences and Humanities, with the possibility ofothers as the Council may deem fit which recommend to, report to, and advise the Council on all policy matters within its sector ofscientific and technological activities in the country. The Executive Secretary is assisted by Assistant Executive Secretaries who head various departments and projects of the UNCST Secretariat. UNCST qualifies as a Procuring and Disposal Entity (PDE) under the Public Procurement and Disposal of Public Assets Act, 2003 (the Public Procurement Act).

UIRI is a parastatal organization, established by the UIRI Act, 2002 with the objectives to; (i) undertake applied industrial research, and (ii)develop and acquire appropriate technology in order to create a strong, effective and competitive sustainable industrial sector for the rapid industrialization of Uganda. UIRI is due to be restructured to perform the role ofthe Government Science Unit i.e. to create, acquire and implement new technologies, processes and know-how for industrial application and value addition. It is headed by an Executive Director, with a seven member Board ofDirectors. The restructured UIRI will operate four hnctional departments, the Technology Development Center, Product Development, Process and Industrial Production Systems, and Finance and Administration. UIRI also qualifies as a PDE under the Public Procurement Act.

An assessment of the capacity of the UNCST, Makerere University, Kyambogo University, Uganda Christian University, M/s Medbiotech Laboratories and UIRI to implement procurement actions for the project has been carried out by Richard Olowo between March and August 2005 and updated in February 2006. The assessment reviewed the organizational structure for

90 implementing the project and the interaction between the project’s staff responsible for procurement and the Ministry’s relevant central unit for administration and finance.

The key issues and risks concerning procurement for project implementation have been identified and include:

At UNCST, the Procuring and Disposal Unit (PDU) is headed by a Procurement Officer who reports to the Finance, Accounts and Procurement Manager and is assisted by a stores clerk. UIRI doesn’t have an established PDU and the Ag. Finance and Administration Officer is also performing the procurement function as well as handling the accounting function. None ofthese Officers has had formal procurement training but are graduates ofBusiness Administration and utilizing on-the-job experiences with public procurement under the new law to perform their duties. Capacity building will be needed to achieve the ability to apply Bank Procurement Guidelines, given no track record ofexperience with these procedures. Some ofthe institutions likely to be awarded grants would not have satisfactory procurement capacity to carry out procurement satisfactorily using the grant funds. All institutions that are to receive grants will have their procurement capacity assessed prior to the initial grant disbursements. UNCST and UIRI PDU don’t have procurement staff with experience in project procurement using Bank funding and are not familiar with the Bank Procurement Guidelines or use of SBDs. Staff ofGrantee Institutions and those ofUNCST and UIRI would not be familiar with procurement planning which will be key to the success ofprocurement for the research programs. Inadequate procurement filing making it impossible to carry out procurement reviews Inadequate internal controls at UNCST and UIRI.

The corrective measures which have been agreed are:

As a condition of effectiveness, a draft PIP, satisfactory to IDA, with a chapter on Procurement Arrangements including a Procurement Plan, details ofActors, their roles and Responsibilities as well as templates and standard procurement documents Within the first three months of Credit effectiveness UNCST to procure the services of a Third Party Procurement Agent (TPPA) with a reputation in the procurement ofscientific equipment to assist with urgent supplies and capacity building ofUNCST procurement management capacity. By Credit effectiveness, UNCST to have recruited a Procurement Consultant of qualifications and with a terms ofreference agreed to or satisfactory to the Bank. The Procurement Officers ofUNCST and UIRI should have undertaken basic training in Procurement Management under Bank funding which is offered regularly in the Africa region by ESAMI and GIMPA. Within the first three months of credit effectiveness, UNCST and UIRI shall have established an internal audit function to reinforce the internal controls in the procurement processes. By the end ofthe first six months after Credit effectiveness, UNCST should have established a Procurement Data Management System including a verificatiodapproval system satisfactory to the Bank.

91 The overall project risk for procurement is rated HIGH. This rating will be reviewed annually during the annual Procurement Post Review (PPR) exercise.

C. Procurement Plan

The Borrower, at appraisal, had developed a draft procurement plan for project implementation. The draft Procurement Plan is expected to be finalized prior to project negotiations in early- March 2006. -The Procurement Plan would 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.

D. Frequency of Procurement Supervision

In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment ofthe Implementing Agency recommends six monthly supervision missions to visit the field to carry out post review ofprocurement actions.

E. Details of the Procurement Arrangements Involving International Competition

1. Goods, Works, and Non Consulting Services

(a) List ofcontract packages to be procured following ICB and direct contracting:

1 2 3 4 5 6 7 8 9

Ref. Contract Estimated Procure- P-Q Domestic Review Expected Comments No. (Description) Cost (US ment Preference by Bank Bid- $1 Method (yedno) (Prior / Opening Post) Date Refurbish- 150,000 NCB No Tbd ment of UNCST Offices Refurbish- 150,000 NCB No Tbd ment ofUIRI laboratories Computer/ 90,000 ICB No No Tbd Commun- ications Equipment for UNCST Office 50,000 NCB No Tbd Furniture UNCSTLJIRI Scientific 800,000 ICB No Yes Tbd Equipment for UIRI Advanced 400,000 ICB No Yes Tbd

92 Computing Equipment UIRI Vehicles 2 70,000 NCB No Yes Scientific 1,750,000 ICB No Yes Equipment under research grants-Year 1 ICT 750,000 ICB No Yes Equipment under research grants-Year 1 Scientific No Yes Equipment under research grants-Year 2 ICT No Yes Equipment under research grants-Year ?l

(b) ICB contracts estimated to cost above USD250,OOO equivalent for Works and USDl50,OOO equivalent per contract and all direct contracting will be subject to prior review by the Bank.

2. Consulting Services

(a) List ofconsulting assignments with short-list ofinternational firms.

1 2 3 4 5 6

Ref. No. Description of Estimated Selection Review Expected Comments Assignment cost Method by Bank Proposals (Prior I Submission

Post) Date ~ Third Party 75,000 QCBS Post Tbd Procurement Agent Design of S&T 50,000 QCBS Post Tbd Outreach Program M&E Technical 75,000 QCBS Post Tbd Assistance (Survey Design)

93 M&E Technical 150,000 QBCS Prior Tbd Assistance (Tracer Studies S&T Policy 60,000 QCBS Post Tbd Study no. 1 S&T Policy 60,000 QCBS Post Tbd Study no. 2

(b) Consultancy services estimated to cost above USDlO0,OOO equivalent for Finns and USD50,OOO equivalent for Individual Consultants per contract and single source selection of consultants (firms) for assignments estimated to cost above USD5,OOO equivalent will be subject to prior review by the Bank.

(c) Shortlists composed entirely ofnational consultants: Short lists ofconsultants for services estimated to cost less than USD200,OOO equivalent per contract may be composed entirely of national consultants in accordance with the provisions ofparagraph 2.7 ofthe Consultant Guidelines.

94 Annex 9: Economic and Financial Analysis

Part A: Economic Analysis

Introduction The Uganda Millennium Science Initiative Project is designed to increase the number of scientifically- and technologically-trained people in Uganda, to improve the quality and relevance oftheir professional skills, and improve the channels through which firms become aware ofand make use ofthese skills, all for the S&T led growth. Agriculture is the largest share ofthe economy, accounting for 34.3% ofGDP in 2003/04 with 75% ofthe labor force used to produce this output. However, agriculture’s share of GDP and employment is trending steadily downward-it was 37.6% ofGDP just four years before.

Over the past five years, the economy has grown at 5.5% annually. Since growth in agriculture is below this rate (4.3%), to reach the PEAP goals ofsustained growth above 7% other sectors of the economy that currently account for a smaller share ofGDP must grow at a much higher rate. Some progress is evident. Fixed private capital formation (investment in physical capital) has grown at 9.6% since 1999/00. Sectors ofthe economy that are more technologically intensive have shown above-average growth.

posts & 0.8 2.3 37% I Telecommunications*] I *a subcategory of Transport and Communications

Telecommunications growth is an important positive example: a new technology (mobile telephone) developed outside Uganda, has been transferred for domestic use. Annual growth has been close to 40% percent, and within five years the telecommunications sector has tripled its share ofan expanding GDP. The main policy ofthe Government for economic development is to multiply the number ofsuch cases, and maximize expansion in each case.

In the absence of an explicit S&T policy, some technology transfer will continue to occur, as the mobile telephone example demonstrates. When a new technology offers clearly evident cost and quality advantages over a predecessor, profit opportunities are obvious enough to overcome inertia or risk aversion among investors. In such instances, the cost ofusing expensive foreign expertise can be justified. But unless these conditions are blatant, other highly profitable but non-obvious technologies that could spur productivity and growth will not be transferred because the capacity to seek them out does not exist domestically.

95 Under an explicit S&T policy, investments in knowledge, human capital and development are aimed at accelerating and maximizing technology transfer and utilization and strengthening the capacity ofUgandan firms to seek out and make productive use ofcompetitiveness enhancing technologies. A principal aim ofthe project is to upgrade Uganda’s capacity to scan global stocks ofknowledge, transfer and absorb relevant knowledge and technology, and use both knowledge and technology to enhance productivity, income, and competitiveness.

Discussion

Investments in S&T are economically justified by the effect they have on the ability of firms, industries, and public entities or Governments to create or connect to the latest knowledge, and transform them for productive use. Formal analysis ofthis process has measured the returns to research and development in various settings.

In more mature economies, the evidence for positive returns to R&D is abundant. A meta- analysis of59 studies from OECD countries found average private rates ofreturn to research between 10 and 20 percent at both the firm and industry level. Significant positive spillovers were also found, leading to social rates ofreturn ranging between 20 and 50 percent (Cameron 1998 in OECD 2000).

Other studies have looked at the overall growth ofan economy as the result ofinvestments in research. Findings show that in large countries, R&D helps increase the rate ofinnovation, while in smaller countries R&D may primarily facilitate the transfer oftechnology from abroad. (OECD 2002, Tax Incentives for Research and Development: Trends and Issues). On the average, country studies suggest that a 1% increase in the stock ofR&D leads to a rise in output between 0.05-0.15% (OECD 2001, Science, Technology and Industry Outlook - Drivers of Growth: Information Technology, Innovation and Entrepreneurship).

Additional research by Guellec and van Pottelsberghe (2001) differentiates the effects of business R&D, foreign R&D, and public R&D on productivity, resulting in the following findings:

0 A 1% increase in business R&D coincides with a 0.13% increase in MFP. This effect has increased since 1980 and is larger in more R&D-intensive countries. 0 A 1% increase in foreign R&D coincides with a 0.44% increase in MFP, an effect that has been stable since 1980 and larger in R&D-intensive countries, suggesting that the size ofthe domestic R&D base influences the rate oftechnology adoption from abroad. 0 A 1% increase in public R&D coincides with a 0.17% increase in MFP, an effect that has decreased since 1980 and is larger in countries in which the share ofuniversities as opposed to Government labs is higher.

However, this research was conducted primarily in OECD countries, which are generally characterized by large stocks and annual investments in basic scientific and technological research, reasonably efficient human capital and advanced training systems for S&T, labor markets that allocate this talent efficiently, and business managers aware ofand experienced in

96 taking advantage ofthe benefits ofR&D. None ofthese conditions can be taken for granted in poorer developing countries.

Other more extensive reviews ofreturns to R&D looked at agricultural research, a common feature in both the developed and developing countries. A meta-analysis of 1,722 estimates from commodity specific agricultural research in 292 studies published between 1958 and 2000. The mean rate ofreturn was 8 1.2%.

Source: Alston, J.M., C.K. Connie, M.C. Marra, P.G. Pardey, and T.J. Wyatt. A Meta-Analysis of Rates of Return to Agricultural R&D: Ex Pede Herculem? Washington, D.C.: Abstract of IFPRI Research Report No. 113, October 2000.

Evanson and Westphal(l995) compared the rates ofreturn to R&D in industrial as well as agriculture research in the developing versus developed countries.

Estimated Rates of Return to R&D

Source: Evenson and Westphal 1995.

Findings show mean returns to private industrial research and public sector agricultural research above the mean for developed countries, although one should bear in mind the relatively small number ofstudies on private sector industrial research in the developing world may open the

97 door to selection bias. Returns to research in Africa were lower than either average, probably due to an absence ofthe positive conditions cited above for OECD countries.

But the consistency ofhigh returns poses the question ofwhy developing countries do not invest more in R&D. Lederman and Maloney (2003) address this question:

Why do developing countries, with great potential gains from adopting technologies from the industrialized countries, fail to do so?. ..[C]ountries [that are] generating new technologies at the frontier appear to have faster TFP growth in manufacturing and agriculture than poor countries, who could, in theory, simply adopt.

[Rlecent work in innovation stresses that adopting technology is not without cost. Firms and countries need to develop “absorptive” or “national learning” capacity which, in turn, are hypothesized to be functions ofspending on research and development. Though often considered only relevant for basic science, Cohen and Levinthal(l991) among others stress learning-knowing where the frontier is and figuring out what adaptations are necessary-as the “second face” ofR&D. In fact, Pavitt (2001) argues that investment in pure research is also important for developing countries. First, those most familiar with the frontier ofbasic science will best train the applied problem solvers in the private sector. Second, even basic research does not flow easily or costlessly across borders so developing countries cannot simply rely on what is being generated in the advanced countries.

With respect to the project, one must bear in mind that it seeks to deepen the S&T knowledge base and capacity in basic sciences and engineering at the tertiary level as well as to promote public and private R&D. Ugandan firms do not currently have the capability or the practice of regularly conducting R&D. A survey of300 Ugandan firms found that for two-thirds offirms that reportedly innovate, importation ofmachinery was considered the most important source of innovation. This type of“hardware-based” technology upgrading does not have the same character as efforts that use human capital to select, adapt, and create local uses for new technologies.

The primary objective ofthe project is then to move firms and public entities closer to a system in which they can routinely conduct and benefit from R&D. The steps to doing this involve the creation ofa competitive finding mechanism for continuous investment in research and training, and promoting mechanisms that connect the end-users oftechnology in firms to these expanding knowledge resources.

The project supports the Government’s wider policy on S&T which seeks to redress the imbalance ofstudents in S&T degree programs in tertiary education and to promote the application ofresearch. The policy oftargeting an increasing number ofpublic scholarships in tertiary education to S&T studies is one aspect ofthis, as is the goal to have wider exposure to science among all tertiary students.

98 With respect to industry, the Government is providing financing for commercialization of innovations through the Innovation and Industrial Fund, and is promoting the revitalization ofthe UNCST and the UIRI through this project. This package ofpolicy measures will put Uganda in a better position to benefit from R&D and knowledge in the future.

With respect to agricultural research, the Government is promoting the application of agricultural research through new statutes, creating the National Agricultural Research Council (NARC) with a balanced set ofinstitutes handling basic or national-level research (7 national research centers) and 6 “zonal” agricultural research centers concerned with the application ofresearch within their districts. The new legislation also introduces merit-based funding mechanisms open to both Government researchers and university-based researchers, which will enhance productivity through competition. The creation ofthe National Agricultural Advisory Services (NAADS) was also, designed to ensure more complete use ofknowledge and research findings.

By enhancing its research capacity and developing its S&T base, Uganda could move closer to the technological frontier causing productivity rates, income, and competitiveness to rise. The increases, possible through research and S&T, could come from several sources:

0 Process improvements that create the same output with fewer inputs; 0 Process improvements that increase output through reduction ofwaste; 0 Creation ofproducts and services new to Uganda, or significantly improved from their current form, which are economically viable; 0 Creation oftruly new or innovative products; and, 0 Improvement of the quality and efficiency ofpublicly-provided goods and services (e.g., clinical medical services, agricultural extension, etc.).

It must be emphasized that most ofthese improvements would not come from scientific and technological breakthroughs that are fundamentally new to the world. Many would come through improved awareness and mastery oftechnology, better economic evaluation of technologies used elsewhere in the world, quicker adoption ofsuch discoveries made elsewhere, and application of routine technological practices (such as adequate phyto-sanitary practices for food exports, or new packaging or marketing technologies) that permit export into more regulated markets.

It is recognized that not all new technologies are appropriate, cost-effective, or economically viable in Uganda. Trained human capital offers the most effective means ofbuilding awareness of, evaluating, selecting, adapting, using, maintaining, and developing technologies and technological practices. While it is possible for Uganda to make economic losses through poor technology selection, it is assumed that good technological choices vary positively with the quantity and quality of available and trained human capital for S&T screening, adaptation, and use. In fact, developing its technology scanning capability should be appreciated as an extremely high priority for Uganda due to its low purchasing power, which mandates that technological inputs be screened even more closely to ensure the commercial viability ofthe products and processes for which they are intended.

99 Research subproje.ct areas and activities are not defined ex-ante in this project. They will be selected on the basis ofcompetition among proponents. The project’s TC will be a mixture of distinguished Ugandan and non-ugandan members with expertise in science research and technology development and use. Grant proponents must demonstrate the potential economic and social benefits oftheir proposed research. An explicit mandate ofthe TC is to choose the portfolio ofprojects that has the highest probability of finding near-term users and deepening the knowledge base for the creation of future research and applications.

Given that the subproject areas are not defined ex-ante, in keeping with Bank guidelines, no cost- benefit analysis ofthe project is attempted. It is important that these not be chosen ex-ante, because the selection process itself is an instrument for verifying the quality and relevance ofthe proposed research. Ifthe Ugandan economy and S&T system were more mature, we would expect continuous investments across a range ofresearch disciplines, sound training, efficient market allocation oflabor skills, and firm practices that incorporate R&D. In such a scenario, one could calculate the expected increase on total factor productivity across the sectors in the economy where the R&D would likely take place, and compare a discounted total ofthe benefits to the costs ofthe inputs ofproducing the research.

The way technological change takes place today in Uganda is more haphazard. The goal ofthe project is to decrease this haphazard nature, and promote a more systematic approach. However, this will take time to become established. For the present, it is more appropriate to examine potential benefits on a micro-economic level.

Effect/Group Loss Export earnings USD36,900,000 Income offishermen community *USD850,000 per month) due to reduced prices and fishing activities USD4,250,000 Factories that closed down 3 out of 11 Factories that reduced their labor force (213) 8 out of 11 Jobs lost in fish factories (113) 2,000 Jobs lost in fishing activities (113) 32,000 Persons that lost 213 of their income 68,000 Affected family members and relatives living on the same income 300,000 For a long time, the only degree-level training available for would-be fisheries officers was offered by the zoology department ofMakerere University. Although this training included some modules on fisheries, graduates obtained a rather generalized training in animal science without specific skills in capture fisheries. Training in aquaculture received even less attention. Collaborative arrangements across departments of food science, zoology or veterinary science simply did not exist.

Agencies worked relentlessly to facilitate compliance with EU rules but not necessarily to upgrade the technology support system in the fisheries sector. Hence, they did not set out to achieve technological change, as an explicit objective but instead made a spontaneous response to the export crisis. Some ofthe other critical problems faced by the Government were: (i)the non-availability ofsuitable laboratories (in-country) for pesticide residue analysis; and (ii)the absence oflinks between relevant Universities-based programs and the fish processing industry. The nonscientific-based production and management made the fish industry highly vulnerable to production, storage and pricing changes. For example, from 1996-97 production volume decreased by about 40 percent and the value offish sales by 28 percent. Production picked up from 1998 to 2001 and fell again by about 9 percent, only to increase again in 2002 and decrease dramatically in 2003, revealing the unsteady nature ofwhat is generally a positive recovery (See UNIDO International Trade Statistics Yearbook 2003 .).

The Uganda Integrated Program (UP) run by the UnitedNations Industrial Development Organization (UNIDO) played a vital role in managing and driving the EU compliance process and in organizing the process ofknowledge and skill diffusion across the fish processing industry. UP identified and hired consulting firms (based in Europe) to strengthen HACCP audit systems at the Department for Fisheries Resources (DFR), to train Fisheries Inspectors as well as Quality Assurance Managers across all fish processing and exporting firms. The interactions between the foreign specialists and fish-processing firms, through their business association, were a vital source of learning and key to the ability ofthe fish industry to introduce process- related technical changes necessary to re-enter the European market. Fish processing plants were closely monitored to check structural and operational compliance with national standards through regular inspection visits by DFR, and joint missions with other specialist organizations.

Of course, technological expertise is never used in isolation. Managerial capacity and the correct business environments are strongly influential. But the case shows that the absence ofa functioning national S&T system led to economic losses valued at several years’ worth ofpublic investment in S&T in this one instance alone. With significant international assistance, the industry reacted and has begun to recover from the losses by instituting technological changes. The project seeks to create conditions under which such potential losses could be foreseen and avoided. It seeks to move the S&T system from a reactive mode to one in which the system actively seeks to contribute to business opportunities through technological development.

No exhaustive quantitative calculation ofbenefits is attempted, due to the “framework” nature of the project. However, noting net present value ofthe losses in the fisheries example (USD48.1 million) are more than twelve times the proposed annual investment costs under the project, modest coefficients for project outputs avoiding such future losses or creating new business opportunities through: (i)process improvements that create the same output with fewer inputs;

101 (ii)process improvements that increase output through reduction ofwaste; (iii)creation of products and services new to Uganda, or significantly improved from their current form, which are economically viable; (iv) creation ofnew or innovative products; and/or, (v) improving the quality and efficiency ofpublicly-provided goods and services (clinical medical services, agricultural extension, etc.) would lead to a positive rate ofreturn on Government investment.

Fiscal Impact Analysis

Impact on Government Finances

The project is not expected to have any immediately significant negative impact on Government finances since, consistent with the new country parameters, IDA will finance 100% ofmost project investment costs. The majority ofproject counterpart contributions will be in-kind. Incremental recurrent costs would be primarily borne by the Government through additional staff needed at the UNCST and in conjunction with the overall strengthening ofUNCST, and through costs ofadditional staff at public universities hired in conjunction with expanded research, graduate training, and undergraduate science and engineering grants provided under Windows A and B ofComponent One ofthe project. An upper estimate oftotal numbers of staff to potentially be directly assumed at UNCST and UIRI is 10-12 individuals. This constitutes less than one-thousand ofa percent ofemployment in the traditional civil service. The estimated overall Project cost is USD33.35 million equivalent. The Government will finance 10% through resources it provides to the implementing and beneficiary agencies. The remaining 90% will be financed by the IDA credit.

Estimated operating costs amount to about 4.5% ofoverall project costs. It has been determined that the financing ofthese would be shared by the Government and IDA, with the Government providing approximately 35% and IDA 65%. These amounts and cost sharing arrangements will not pose a threat to project sustainability. The IDA credit will not pay salaries or any related salary expenses for civil servants. The IDA credit will pay up to 100% for the costs ofgoods and equipment, minor works, consultant services, and training. The Country Financing Parameters for Uganda state that currently no taxes have been identified as unreasonable or discriminatory. For the MSI, the tax regime is accommodating, in that scientific equipment are exempt fiom import duties. VAT taxes will apply to some expenditure items, but this in total are not expected to exceed USD0.81 million (2.4% oftotal project costs). Consistent with the Country Financing Parameters, IDA will finance these costs.

The current country financing parameters were designed to mitigate the historical problems resulting from delays in provisions ofcounterpart funding to individual projects. Analyses preceding the adoption ofthe new parameters determined that these were not a result oflack of Government commitment to the portfolio. No incremental subsidies will be created by the project.

Recurrent Cost Implications

During Project Implementation. The increase in recurrent costs to the Government will be vanishingly minor during the project implementation period. The most direct source ofincreased

102 recurrent costs will be the small increases in staff required for the UNCST Research Funding Secretariat. [In keeping with the Government’s policy, the project will be implemented by the appropriate existing Government agency; no Project Implementation Unit will be created.] Additional staff may be assumed at UNCST or UIRI as part ofthe institutional strengthening of these agencies. An upper estimate oftotal numbers of staff to potentially be directly assumed is 10- 12 individuals. This constitutes less than one-thousand ofa percent ofemployment in the traditional civil service.

A second avenue for immediate fiscal impact is the employment ofadditional faculty at public universities, whose salaries will be paid in part initially by the project, but whom would be expected to become full-time faculty over the course ofthe project. Again, upper estimates of the total number ofindividuals is small, fewer than 40 in total even if the public universities win a disproportionate number ofgrants. This is equal to 0.0074 percent ofcurrent public employment ofuniversity personnel. This effect is further mitigated because much ofthe likely counterpart contribution for research and teaching will come from in-kind contributions already being financed by the Government in public universities and research institutes. The investments in physical equipment under the project will allow existing capacity to be employed more productively without additional financial cost in many cases.

During the project implementation the tentative project costs at the time ofproject preparation yielded the following results:

Tentative Project costs at project preparation

UShs USD million millions equivalent Investment costs 57,326.58 31.85 Recurrent costs 2,704.90 1.50 Tentative total project costs 60103 1.48 33.35 of which Estimatedhentative price and 7,332.65 4.07 physical contingencies (allowances for inflation) Source: Mission estimates.

A relatively small proportion ofthe project costs (around 10 percent or USD3.35 million) would be co-financed by the Government predominantly as recurrent cost financing and taxes and duties towards achieving the MSI project objectives. The recurrent costs estimates for the five years ofproject implementation is estimated at USDlSO million and constitutes about 4.5 percent ofproject cost estimates. This amount, when spread over the project implementation period, is equal to less than one-thousand ofa percent ofannual Government expenditure. Government’s contribution reflects about 10 percent ofestimated total project cost. The local cost element in the project is estimated to be USD19.93 million or 60 percent oftotal project costs.

103 Availability of Government Resources for the Tertiary Education and public R&D subsectors

As Table 7a shows, real GDP is estimated to increase over time indicating that the economy is expanding over time. Government expenditure as a percentage ofGDP is estimated to decrease from 23.7% in 2001 to 20.7% in 2008 thereby alleviating pressure on overall Government expenditure and leading to an overall increase in Government resources.

Table 7a. GDP and Government Expenditure

2001 2002 2003 2004 2005 2006 2007 2008 GDP (Ushs billion, constant 1997/98 prices) 8,641.1 9,068.4 9,650.4 10,104.7 10,696.2 11,312.4 11,991.1 12,710.6 Goa Exp. (Ushs billion, constant 1997198 prices) 2,044.4 2,451.8 2,368.6 2,595.1 2,593.3 2.725.5 2,645.8 2,632.1 GobtExp (constant)/GDP(Oh) 23.7 27.0 24.5 25.7 24.2 24.1 22.1 20.7 Source: MTEF, World Bank, 2005 and mission estimates.

As Table 7b shows, the education budget peaked in 2003 at 20.6% and is on a downward trend as a percentage ofGovernment expenditure and GDP since 2004. The education budget as a percentage of Government expenditure is estimated to decline slightly from 18.3% in 2001 to 17.8% in 2008. As a percentage of GDP, the education budget is also estimated to decline slightly from 4.2% in 2001 to 3.7% in 2008.

Table 7b. Education Budget as % of Government Expenditure and GDP

_____~ 2001 2002 2003 2004 2005 2006 2007 2008 GDP (Ushs billion. constant 1997/98 prices) 8,641.1 9,068.4 9,650.4 10,104.7 10,696.2 11,312.4 11,991.1 12,710.6 Goa Exp. (Ushs billion. constant 1997/98 prices) 2,044.4 2,451.8 2,368.6 2,595.1 2,593.3 2.725.5 2,645.8 2,632.1 Education (Ushs billion, constant 1997198 prices) 374.6 471.4 488.7 487.4 475.6 464.9 444.5 468.4 Education/Govt. Exp (%) 18.3 19.2 20.6 18.8 18.3 17.1 16.8 17.8 EducatioMGDP (%) 4.3 5.2 5. I 4.8 4.4 4.1 3.7 3.7 Source: MTEF, World Bank, 2005 and mission estimates.

Focusing on the Government sector, within the education sector, as Table 7c shows, primary education expenditure is leveling off after Universal Primary Education (WE), and secondary and tertiary education sub-sectors are increasing their share.

Table 7c. Education budget by level of education (YO)

2001 2002 2003 2004 2005 2006 2007 2008 Primary Education 78.5 70.0 68.3 64.8 63.5 63.9 64.1 65.4 Secondary Education 9.9 9.8 11.8 11.7 13.5 13.1 15.0 14.5 Tertiary Education 8.8 9.7 10.0 9.6 12.5 14.4 16.8 17.1 Source: MTEF, World Bank, 2005 and mission estimates.

104 Table 7d. GDP and Government Expenditure by level of education (“YO)

Level of education as %of GDP 2001 2002 2003 2004 2005 2006 2007 2008 Primary Education 3.0 3.6 3.5 3.1 2.8 2.6 2.4 2.4 Secondary Education 0.4 0.5 0.6 0.6 0.6 0.5 0.6 0.5 Tertiary Education 0.3 0.5 0.5 0.5 0.6 0.6 0.6 0.6

Level of education as %of Govt. Exp. 2001 2002 2003 2004 2005 2006 2007 2008 Primary Education 14.4 13.5 14.1 12.2 11.6 10.9 10.8 11.6 Secondary Education 1.8 1.9 2.4 2.2 2.5 2.2 2.5 2.6 Tertiary Education 1.6 1.9 2.1 1.8 2.3 2.5 2.8 3.0 Source: MTEF, World Bank, 2005 and mission estimates. Footnote: The tertiary sector is expected to increase rapidly due to wage concessions won by trade union negotiations.

Finally, Table 7e shows that the plausible case scenario (extrapolating from current levels of Government expenditure allocations) Government expenditure on R&D is estimated to increase over time from UShs3 1.46 billion in 2004 to Ushs 54.19 billion in 2010. Government expenditure on R&D as percentage of GDP is also estimated to increase from 0.3 percent in 2004 to 0.4 percent in 2010. This reflects the Government’s commitment to reallocate resources to S&T.

Table 7e. GDP, Government Expenditures (overall and on R&D) (2004-2010) (projections in constant 1997/98 prices)

2004 2005 2006 2007 2008 2009 GDP 10,104.70 10,696.20 11,312.40 11,991.10 12,710.60 13,498.66 14,335.57 Govt Exp. 2,595.1 2,593.3 2,725.5 2,645.8 2,632.1 2,834.7 3,010.5 as percentage of GDP 25.7 24.2 24.1 22.1 20.7 21.0 Govt. Expenditures on R&D 31.46 46.68 49.06 47.62 47.38 51.02 54.19 as percentage of God Exp. 1.2 1.8 1.8 1.8 1.8 1.8 as percentage of GDP 0.3 0.4 0.4 0.4 0.4 0.4 0.4

The third avenue for potential impact on Government finances is the assumption ofinvestment costs for a national science funding system at the conclusion ofthe projects implementation period. Upon completion ofthe project the Government would assume responsibility for financing ofcontinuous investments in S&T research, in undergraduate training in science and engineering disciplines, and in selected activities linking the private sector with academic researchers. Specifically, this would be expected to include: (i)USD5 million per year for new investment costs; (ii)USDO.5 million for the cost for maintenance ofa growing stock of equipment for research; and (iii)USDO.5 million expenditure for an expanding cadre of professors employed in public universities.

The budgeted figures have been compared to the availability ofGovernment resources. The latter is estimated under alternative scenarios based on assumptions regarding growth ofGDP, Government expenditure allocation for education in general and the tertiary education sub-sector in particular. Three scenarios have been estimated: the base case, a plausible case, and an optimistic case. The summary of assumptions is provided in Table 8.

105 Table 8. Summary of Assumptions

Base case Plausible case Optimistic case 1. Average annual growth GDP % (market prices) 5.4 6.2 7.0 (real prices) 2. Govt. expenditures as % of GDP (market prices) 22.7 21.0 20.0 3. % of education in total 17.5 18.5 19.0 Government expenditure 4. % of tertiary education in 15.2 15.0 14.5 education expenditure 5. R&D expenditure as % of GDP 1.4 1.8 2.1 6. % of UMSIP expenditure in estimated Government’s tertiary 1.201 1.197 1.219 education expenditure Sources: Mission Estimates; Data on Central Government Operations.

Overall Feasibility Assessment. Projections for budget availability are provided in Table 9. Based on the projection ofresource availability under the ‘plausible scenario,’ the resource envelope (Government’s project related contribution) for tertiary education beyond the project period (201 1-2015) is estimated to be Shs501 billion (approximately USD0.26 billion equivalent in 2008 prices). The current GDP allocation (base case scenario) for education at approximately 22.7 per cent is insufficient to ameliorate the quality ofS&T education. Ifthe economy grows at an annual rate of6.2 percent in real terms, and the Government allocates 18.5 percent of the total Government expenditure to education and 15.0 percent ofthis amount to tertiary education (including those funded via external donors) and an additional UShs65 billion (which is estimated to be approximately 16.9 percent ofpublic R&D expenditure, 12.9 percent of Government tertiary education expenditure, and only 1.9 percent of overall education expenditure and only 0.4 percent ofoverall Government expenditure) for sustaining the MSI project outputs, overall sustainability ofquality and programmatic improvements are likely.

Sustainability of the MSIProject investment. Ifthere is no follow-on project, the Government’s budget would need to replicate the anticipated good practices put in place through the MSI project and other qualitative improvements proposed through the MSIproject. There is a likelihood that the tertiary education system could revert back to pre-MSI project levels, especially if sustained financial and technical support is not forthcoming. Implications for long- term sustainability ofthe proposed financing pattern are that a follow-on project would be required in order for Uganda to fully benefit from the investments in the first project. Furthermore, since teacher salaries are relatively low, the Government has the opportunity to increase teacher salaries to provide incentives to retain teachers in the profession, especially given the likely increases in salaries outside the education sector as the economy grows. In order to make the teaching profession competitive, Government would need to increase teacher salaries by more than the inflation rate of8.2 percent. The fiscal analysis takes into account sustainability issues including implied future budgetary outlays. The recurrent cost financing (at 4.5 percent) under the project will neither place an undue fiscal burden on the Government’s coffers, nor compromise the country’s ability to service its debt arising from the proposed project and the anticipated follow-on project.

106 Annex 10: Safeguard Policy Issues

The key issues with respect to environmental and social safeguard policies triggered by the project are: (i)laboratory safety and the safe disposal ofwastes; (ii)potential environmental issues arising in connection with the potential rehabilitation ofexisting laboratory or classroom space or the potential construction of laboratories or classrooms; and (iii)any potential resettlement issues that could arise in the case that universities or research institutes acquire land, and/or impact assets or livelihoods, for construction of laboratory or classroom space.

With respect to laboratory safety and the safe disposal ofwastes, assessments ofpotential waste disposal problems were made through interviews ofprincipal investigators and heads of laboratories that carry out research with potential safety and waste disposal issues. The number ofsuch laboratories currently operating in Uganda is limited so sample interviews were able to capture existing practices. Interviews included heads of laboratory for biomedical microbiology (fundamental research), veterinary microbiology, chemical and mechanical engineering, and basic biology, chemistry, and physics.

In conjunction with the preparation ofthe Environmental and Social Management Framework (ESMF), a research and laboratory safety expert from the Howard Hughes Institute of Biomedical Research in Bethesda, Maryland completed a consulting assignment to create an in depth digest ofinternational best practice standards for laboratory safety and waste disposal. These standards cover all classes ofphysical, chemical, biological, and radioactive hazards. They discuss procurement and transport, storage, protocols and facilities for use in research, training ofpersonnel, segregation ofwaste types, and disposal ofwastes. They also describe core processes for establishing functioning environmental management systems within laboratories, including development oftraining for personnel, designation ofresponsibility for environmental management, performance ofneeds assessment and waste stream assessment, installation and maintenance of appropriate equipment, treatment processes, and safe transport.

Since the grant recipients for research projects will be selected through a competitive process under the project, it is not possible to know beforehand the types ofresearch that will emerge. Nonetheless, the ESMF has defined a process that encompasses the widest possible range of research and associated safety and waste disposal issues. The ESMF outlines the steps ofthe environmental and social screening process to be followed by all subprojects as well as the institutional responsibilities for its implementation and the related training needs. The results of the screening process will determine the nature ofprocedures to be implemented in each specific case. Although the potential scope ofthe impact is modest, the framework makes provisions for the broadest range ofpotential situations. The MSIwill sponsor a minimum of 16 and a maximum of21 research and training subprojects, in addition to the Technology Internships and Technology Platform activities. The majority ofthese will involve relatively small teams (5-8 individuals) working in relatively small laboratories. Total waste generation will be relatively small. The nature ofthe research to be conducted will also ensure that the potential environmental impact ofthe project is modest. The project will not contemplate the funding of any research subproject involving either clinical medical research or field trials ofgenetically- modified organisms. Several subprojects will be in areas where no waste other than domestic

107 waste will be generated. The other subprojects will most likely concentrate on areas ofresearch that generate hazardous wastes in small amounts and ofthe kind that can be treated and disposed ofwith routine care and procedures. Nonetheless, this ESMF makes provisions for the potential extraordinary cases.

The UNCST collaborated with the National Environmental Management Agency (NEMA) for the elaboration ofthe ESMF. A review was conducted ofthe relevant NEMA legislation for both use and disposal ofhazardous materials and for environmental screening ofconstruction sites. The review found that pertinent legislation in Environmental Statute No. 4 of 1995, as well as Environmental Impact Assessment Regulations of 1998 and the National Environment (Waste Management) Regulations of 1999. In addition, the draft biosafety legislation, resulting from UNCST’s biosafety framework, covers any research issues related to modification ofgenetic material in living organisms.

The discussions during the preparation ofthe ESMF concluded that; (i)given the very small number oflaboratories operating in Uganda presently, specific efforts to verify compliance of research laboratories had not been a priority for NEMA; and (ii)NEMA and UNCST would agree to specify cooperation on compliance under the project. Implementation ofthe ESMF will be the overall responsibility ofthe Research Funding Secretariat, working in conjunction with principal investigators/project leaders who are responsible for implementation ofthe ESMF for their individual projects. The NEMA will collaborate with the UNCST with respect to monitoring ofcompliance with the ESMF.

The ESMF has been incorporated into the Project Implementation PladOperational Manual, where it integrates environmental and social screening requirements with other requirements which grantees must satisfy prior to receiving grant contracts. If it is determined during the screening process that new construction will occur, or people’s livelihoods or assets will be impacted, then the grantee will also need to follow the guidance and standards set forth in the Resettlement Policy Framework.

All laboratories and research facilities will be required to: (i)identify ex-ante the environmental, social, and safety impacts ofproposed research and research wastes generated; (ii)submit a plan for minimization, mitigation, and proper disposal for review and approval ofboth national authorities (UNCST, NEMA) and the project’s TC; and (iii)keep appropriate records and submit to periodic third-person monitoring ofsafety and waste disposal practices.

Rehabilitation ofphysical space for laboratories or limited new construction may trigger potential impacts on the environment. The UNCST sampled vice-chancellors and heads of research institutes regarding the probability ofnew construction in the event that a grant award is received. Agreement was unanimous that physical space has never been and is not now a constraint for science research. The main constraint has always been lack of funds to purchase the necessary scientific equipment. As such, it is expected that the vast majority ofconstruction

108 to be undertaken would entail the rehabilitation ofexisting buildings to accommodate new laboratory equipment. This may involve the construction ofventilation systems, the expansion or addition oflaboratory bench and storage space, or the rehabilitation ofelectrical systems to run larger equipment. Environmental Impact Assessment legislation and the World Bank’s Environmental Assessment policy will cover these rehabilitations and any new construction planned under the project. Again, as research activities are not pre-defined, it is not known if any such activities will be undertaken. The ESMF describes the potential for specific impacts, and the mitigation measures to be pursued ifrehabilitation or construction occurs.

The MSIhas triggered the OP 4.12 Involuntary Resettlement and is a safeguard screening category S2 (“limited impact”) project. The ability ofthe grantee to implement the project within the designated timeframe ofthe project will be a criterion for grant award selection. Subproject proponents will have to indicate the availability and adequacy ofphysical space for the proposed work. This will reduce the number ofpotential subprojects wherein new construction is contemplated, and even more so the number ofpotential subprojects in which land would be acquired for new construction. The Environmental and Social Screening Form will identify all potential cases early in the selection process.

The Resettlement Policy Framework (RPF) outlines the policies, principles, and procedures to be adopted in the event that land is to be acquired in connection with the project, and the ex-ante screening process to mitigate any potential negative effects relating to resettlement, impact on livelihoods, or impact on assets. The overall responsibility for the implementation ofthe RPF will be the UNCST’s. In the event that activities include land acquisition, impact on assets, or impact on livelihoods, a Resettlement Action Plan will be prepared following the guidance and standards set forth in the RPF.

The Environmental and Social Management Framework and Resettlement Policy Framework have been disclosed in Uganda on October 25,2005, and at the Bank’s Infoshop on December 7, 2005.

109 Annex 11: Project Preparation and Supervision

Steps Planned Actual PCN review 07/30/2004 01/31/2005 Initial PID to PIC 09/0 1/2004 02/22/2005 Initial ISDS to PIC 09/01/2004 02/22/2005 Appraisal 0 1/14/2006 01/13/2006 Negotiations 0 1/2 8/2006 03/27/2006 Board/RVP approval 05/25/2006 Planned date of effectiveness 06/05/2006 Planned date ofmid-term review 04/01/2007 Planned closing date 09/31/2010

Key institutions responsible for preparation ofthe project: Name Title Unit Keith Muhakanizi Deputy Secretary of Treasury MoFPED Kenneth Mugambe Ag. Commissioner for Budget MoFPED Zerubabel Nyiira Executive Secretary UNCST Peter Ndemere Deputy Executive Secretary UNCST Ismail Barugahara Ag. Executive Secretary UNCST Charles Kwesiga Executive Director UIRI Hon. Amuriat Oboi Patrick Chair, Committee on S&T Parliament ofUganda Abel Katahoire Chair Uganda Communications Commission Senteza Kajubi Vice Chancellor Nkumba University Amb. Yeko Acato Ag. Executive Director Uganda National Council for Higher Education Patrick Mangheni Professor of Mathematics Uganda Christian University Paul Mugambi Executive Director Uganda National Academy of Science Phillipa Musoke Department ofPediatrics MUK Faculty of Medicine Thomas Egwang Scientific Director Medbiotech Laboratories Fagil Mandy Fmr. School Inspector MoES Francis Ogwal Natural Resource Management NEMA Specialist Byekwaso Evaristo Environmental and Audit NEMA Monitoring Officer Fred Muhumuza Economic and Policy Research Consultant to UNCST Center Cole Dodge Facilitator Consultant to UNCST

110 Bank staff and consultants who worked on the project included:

Name Title Unit Michael Crawford Task Team Leader AFTH1 Dzingai B. Mutumbuka Sector Manager AFTHl Donald Hamilton Lead Education Specialist AFTH1 Shobhana Sosale Operations Officer HDNED Kristine Sc hw ebach Safeguards Specialist ASPEN Johannes Widmann E T Consultant AFCTZ Sara Farley S&T Consultant HDNED Patrick Picker Umah Tete Sr Financial Management Specialist AFTFM Richard Olowo Procurement Specialist AFTPC Modupe A. Adebowale Senior Finance Officer LOAG2 Edith Ruguru Mwenda Sr Counsel LEGAF Eva K. Teh Team Assistant AFTHl Peace K. Tukamuhabwa Team Assistant AFMUG Parminder PS Brar Lead Financial Management Specialist AFTFM Rogati Anael Kayani Lead Procurement Specialist AFTPC Peter Tindemans Science and Innovation Specialist Consultant George Ndahendekire Operations Analyst Consultant James A. Socknat Human Development Specialist Consultant Mohamad Hassan Executive Director, Academy of Consultant Science ofthe Developing World, TWAS

Peer Reviewers

William Saint Lead Education Specialist, AFTH2 Jacob Bregman Lead Education Specialist, AFTH3 Lauritz HoIm-Nielsen Lead Education Specialist, LCSHD Robert T. Watson Chief Scientist and Advisor, ESSD

Quality Enhancement Reviewers

Alfked J. Watkins Lead Science and Technology Specialist, HDNED Andreas Blom Education Economist, LCSHD Mary Kathryn Hollifield Senior Country Officer, AFCTZ John Boright Director, International Affairs, US National Academy ofSciences

111 I 1. Bank Resources FY05 $130,000 FY06 $40,000 Total $170.000

2. Trust Funds NETF $325,000

3. Total $495.000

Estimated Approval and Supervision costs 1. Remaining costs to approval $110,000 2. Estimated annual supervision cost: $95,000

112 Annex 12: Documents in the Project File

Analytical and Consultative Reports Done in Preparation for the Project

Ekwamu, Adipala, Uganda Millennium Science Initiative Stakeholders Conference Highlights, Kampala, 19 March 2005.

Dodge, Cole P., Science and Technology Focus Group Discussion on Pre-Tertiary Education, Entebbe, 14 October 2004. Report No. 1.

Dodge, Cole P., Science and Technology Focus Group Discussion on University-level Research, Entebbe, 15-17 October 2004. Report No. 2.

Dodge, Cole P., Science and Technology Focus Group Discussion on Private Sector End Users, Entebbe, 20 October 2004. Report No. 3.

Dodge, Cole P., Science and Technology Focus Group Discussion on Policy Dialogue, Entebbe, 22-24 October 2004. Report No. 4.

Muhumuza et al. The State of Science and Technology in Uganda. Background paper for the Uganda Millennium Science Initiative Project (UMSIP). Kampala, June 2005,

Official Project Documents Project Concept Note Project Concept Note - Review meeting minutes Pre-Identification Mission November 2003, Aide Memoire, Annexes and Back to Office Report Identification Mission June 2004: Aide Memoire, Annexes and Back to Office Report Preparation Mission October 2004: Aide Memoire, Annexes and Back to Office Report Follow up Mission March 2005: Aide Memoire, Annexes and Back to Office Report Pre-appraisal Mission, September 2005: Aide Memoire, Annexes and Back to Office Report Draft Project Appraisal Document, October 2005 Project Appraisal Document Data Sheet-Technical Concept review package for Uganda MSI-ISDS Project Information Document, (PID) Project Concept Note Datasheet, (PCN) Integrated Safeguard Datasheet, (ISDS)

Quality Assurance Quality Enhancement Review Final Panel Report August 2005.

113 Background Studies

African Centre for Technology Studies (ACTS) and East African Regional Programme and Research Network for Biotechnology, Biosafety and Biotechnology Policy Development (BIO-EARN). Report of the Regional Workshop on Enlarging Public-Private Partnerships in Biotechnology. September 18-19,2000. Landmark Hotel, Nairobi, Kenya. Al-Samarrai, Samer and Paul Bennell. August 2003. Where has all the Education Gone in Africa? Employment Ozltcomes among Secondary School and University Leavers. Institute of Development Studies, University of Sussex. Asea, Patrick K. and Darlison Kaija. January 2000. Impact of the Flower Industry in Uganda. Sectoral Activities Programme. International Labour Organization. Working Paper-WP. 148. Geneva. Beintema, Nienke M. and Clesensio Tizikara. Uganda: Agricultural Science and Technology Indicators. IFPRI, ISNAR and NARO. ASTI Country Brief No. 1. October 2002 Kayanja, Frederick I.The Uganda Strategic Plan for Higher Education 2003-2005: Strengths, Challenges and Prospects for Implementation. The Uganda Higher Education Review. Journal of the National Council for Higher Education, Vol. 1 No. 1, pp.28-3 1. October 2004. Kiggundu, Rose. December 2004. The How to of Technological Change for Faster Growth in Uganda's Fishery Exports. The United Nations University, Institute for New Technologies (UNU- INTECH). Lejeune, Michel. Quality Assurance Framework: Rules and Regulations. The Uganda Higher Education Review. Journal of the National Council for Higher Education, Vol. 1 No. 1, pp.20-24. October 2004. Ministry ofFinance, Planning and Economic Development. February 2004. An Overview of the National Economy. Discussion Paper 7. Kampala, Uganda. www.finance.go.ug. Mugaju, Justus. A Model Universityfor Uganda. The Uganda Higher Education Review. Journal of the National Council for Higher Education, Vol. 1 No. 1, pp.13-19. October 2004. Mugoya, Dr. Charles F. Status Overview of Biotechnology in Uganda. Background paper prepared for the Regional Workshop on Biotechnology Assessment: Regimes and Experiences. September 27-29, 1999. Nairobi, Kenya. National Council for Higher Education. November 2004. The State of Higher Education: A Report of a Survey of Uganda 's Higher Institutions of Learning. Final Draft. Kyambogo, Uganda. Sengendo, Ahmad. Institutional Financial Management. The Uganda Higher Education Review. Journal of the National Council for Higher Education, Vol. 1 No. 1, pp.32-35. October 2004. Republic of Uganda. August 4,2004. National Agricultural Research System Reform Programme: Core Document. Ministry of Agriculture, Animal Industry & Fisheries. Entebbe. . The National Agricultural Research Bill, 2004: Arrangement of Clauses. Kampala, Uganda. . National Budget Framework Paper for Financial Years 2005/06 - 2007/08: Part I-Three- year Macroeconomic Plan; Part 11-Programmes for Economic and Social Development; Part 111-The Indicative Preliminary Revenue and Expenditure Framework. Rodrik, Dani. September 2004. Industrial Policy for the Twenty-first Century. Paper prepared for UNIDO. Rudaheranwa N., F. Matova and W. Musinguzi. Enhancing Uganda 's Access to International Markets: A Focus on Quality. Uganda Bureau of Statistics. March 2005. Key Economic Indicators-Mth Issue: Second Quarter 2004/05. Entebbe, Uganda. Uganda National Health Research Organization (UNHRO). August 2000. An Analysis of Institutions doing Health Research in Uganda-Year 2000. Uganda National Council for Science and Technology (UNCST). November 2002. Statistical Manual on ScientiJic and Technological Development for Uganda. UNCST Department of Science, Policy, Planning and Evaluation.

114 . November 2003. Addressing the Poverty Eradication Action Plan: Strategic Framework and Planfor Science and Technology Development in Uganda. National Reference Document. . June 2003. Framework for Development of Science and Technology Sector Plans and Strategies by the Specialized Technical Committees of the UNCST. Republic of Uganda. . May 2004. Highlights of Performance and Programme of Work for Financial Year 200412005. Republic of Uganda. Uganda. Joint Assistance Strategy (UJAS). Draft dated May 25,2005 for the period 2005/06- 2008/09. UNCTAD. July 2003. Africa’s Technology Gap: Case Studies on Kenya, Ghana, Uganda and Tanzania. United Nations. UNCTAD/ITE/IPC/Misc. 13. Wabudeya, Beatrice. Why We need Quality Higher Education. The Uganda Higher Education Review. Journal ofthe National Council for Higher Education, Vol. 1 No. 1, pp.ll-12. October 2004. Whitaker, Meri and Shashi Kolavalli. October 2004. The How to of Technological Change for Faster Growth in Floriculture in Kenya. Uwazo-Creative Directions. www.uwazo.com. World Bank. 2000. “Mapping Science Education Policy in Developing Countries.” By Keith Lewin. Human Development Network. Secondary Education Series. Washington, D.C. . 2000. “Linking Science Education to Labour Markets: Issues and Strategies.” By Keith Lewin. Human Development Network. Secondary Education Series. Washington, D.C. World Bank and UMACIS. April 2004. Competing in the Global Economy: An Investment Climate Assessment for Uganda. Africa Private Sector Group. Rped: business knowledge for development. . 2004. Export Growth and Competitiveness for Uganda: Synthesis of the Technical Notes. Background paper for Competing in the Global Economy: An Investment Climate Assessment for Uganda. Africa Private Sector Group. World Bank. May 2004. Health Public Expenditure Review Study Report. Washington, D.C. . Uganda: Environmental, Rural and Social Development-Background Notefor the Country Assistance Strategy. Washington, D.C. World Bank and International Finance Corporation (IFC). August 2004. Investment Climate Assessment: Competing in the Global Economy-An Investment Climate Assessment for Uganda. Washington, D.C. .2005. “Uganda--Medium Term Expenditure Review (MTEF).” World Bank Country Office.

115 Annex 13: Statement of Loans and Credits

Difference between expected and actual Original Amount in USD Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

PO83809 2005 Private Sector Competitiveness I1 0.00 70.00 0.00 0.00 0.00 73.38 0.00 0.00 PO74079 2005 UG-Road Development Program 3 (FY05) 0.00 67.60 0.00 0.00 0.00 111.55 0.00 0.00 PO79925 2004 UG Natural Resources Dev TA 0.00 25.00 0.00 0.00 0.00 24.88 -0.42 0.00 PO65437 2003 UG-PAMSU SIL (FY03) 0.00 27.00 0.00 0.00 0.00 20.83 8.15 0.00 P0 75 9 32 2003 UG-GEF PAMSU SIL (FY03) 0.00 0.00 0.00 8.00 0.00 4.71 2.80 0.00 PO77477 2003 UG-Local Government Development 2 0.00 50.00 0.00 0.00 0.00 69.56 -0.43 0.00 PO02952 2003 Northern Uganda Social Action Fund 0.00 100.00 0.00 0.00 0.00 95.61 30.49 5.05 PO02984 2002 UG-Fourth Power SIL (FY02) 0.00 62.00 0.00 0.00 0.00 31.54 23.24 -0.02 PO70222 2002 UG Energy/RurTrans 0.00 0.00 0.00 12.12 0.12 10.55 6.44 0.00 PO69996 2002 UG: Energy for Rural Transformation 0.00 49.15 0.00 0.00 0.00 52.61 17.18 0.00 PO65436 2002 UG2ND PHASE OF THE RD. DEVE 0.00 64.52 0.00 0.00 0.00 60.43 38.77 25.01 PROG PO74078 2002 Makerere Pilot Decentrl Service Delivery 0.00 5.00 0.00 0.00 0.00 2.49 0.48 0.00 PO72482 2001 HIViAIDS Control Project 0.00 47.50 0.00 0.00 0.00 11.94 21.79 0.00 PO70627 200 1 Regional Trade Fac. - Uganda 0.00 20.00 0.00 0.00 0.00 15.96 14.02 0.00 PO50439 2001 Priv & Utility Sec Reform 0.00 48.50 0.00 0.00 0.00 29.91 42.76 0.00 PO73089 2001 UG-EMCBP 2 SIL (FYO1) 0.00 22.00 0.00 0.00 0.00 11.63 8.10 0.00 PO44695 200 1 UG-Nat Agr Advisory Services SIL (FYOI) 0.00 45.00 0.00 0.00 0.00 50.82 10.61 0.00 PO44679 2000 UG - Second Economic and Fin. Mgrnt. 0.00 34.04 0.00 0.00 0.00 21.17 4.61 0.00 PO59127 1999 UG-Agr Rsrch &Training 2 SIL (FY99) 0.00 26.00 0.00 0.00 0.00 11.44 8.04 0.00 PO02970 1999 UG ROADS DEVT PROGRAM 0.00 90.98 0.00 0.00 0.00 49.43 42.77 43.93 PO40551 1998 UG-Child Nutrition Dev SIL (FY98) 0.00 34.00 0.00 0.00 0.00 0.01 1.02 0.00 PO49543 1998 UG ROAD SECT/INST.SUPP 0.00 30.00 0.00 0.00 0.00 10.34 9.79 9.81 PO46870 1997 UG-GEF Lake Victoria Env SIL (FY97) 0.00 9.80 0.00 9.80 0.00 0.38 0.38 0.04 PO46836 1997 UG-Lake Victoria Env SIL (FY97) 0.00 12.10 0.00 0.00 0.00 2.66 -1.69 0.72 Total: 0.00 940.19 0.00 29.92 0.12 773.89 288.90 84.54

116 UGANDA STATEMENT OF WC’s Held and Disbursed Portfolio In Millions ofUS Dollars

Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 1996 AEF Ago 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 0.46 0.00 0.00 0.00 0.46 0.00 0.00 0.00 2000 AEF Ladoto 0.48 0.00 0.00 0.00 0.48 0.00 0.00 0.00 1998 AEF White Nile 0.12 0.00 0.00 0.00 0.12 0.00 0.00 0.00 1998 Tilda Rice 0.83 0.00 0.00 0.00 0.83 0.00 0.00 0.00 Total portfolio: 3.28 0.00 0.00 0.00 3.28 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

117 Annex 14: Country at a Glance

Uganda at a glance 4/3/06

Sub- Saharan LOW. ~ ~~~ POVERTY and SOCIAL Developmentdiamond' Uganda Africa income 2004 719 2,338 Population, mid-year (millions) 25.9 Life expectancy GNI per capita (Atlas method, US$) 270 600 510 GNI (Atlas method, US$ billions) 7.0 432 1,164 T Average annual growth, 1998-04 3.4 2.2 1.8 Population (%) GNI Gross Labor force I%) 2.4 1 .o 2.1 Most recent estlmate (latest year available, 1998-04) capita Poverty (% of population below national poverty line) 38 Urban population (% of tofalpopulation) 12 37 31 Life expectancy at birth (years) 47 46 58 i Infant mortality (per 1,000 live births) 81 101 79 Child malnutrition (% of children under 5) 23 44 Access to improved water source Access to an improved water source (% ofpopulation) 58 58 75 Literacy (% ofpopulation age f5+) 69 65 61 Gross primary enrollment (% of school-age pOpUlatiOI7) 141 95 94 ~ <-Uganda Male 142 102 101 Low-income orom Female 139 88 88

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 2003 2004 Economlc ratios' GDP (US$ billions) 3.6 4.0 6.3 6.8 Gross capital formation/GDP 8.1 14.7 20.7 21.7 Trade Exports of goods and services/GDP 12.7 8.7 12.3 13.7 Gross domestic savings/GDP 6.5 4.3 6.6 7.9 Gross national savings/GDP 6.3 9.6 7.3 10.1 Current account balanceiGDP -1.9 -6.6 -13.5 -11.3 Interest payments/GDP 0.5 0.8 0.4 0.5 Total debWGDP 29.6 84.5 72.3 70.8 Total debt service/exports 31.9 43.2 10.5 11.2 Present value of debWGDP 30.1 Present value of debtiexports 237.3 Indebtedness 1984-94 1994-04 2003 2004 2004-08 (average annual growth) "* "-1 GDP 5.1 6.4 4.7 5.7 5.7 Uganda GDP per capita 1.5 3.5 1.9 3.1 2.1 Exports of goods and services 3.5 10.3 8 .O 6.2 4.2

STRUCTURE of the ECONOMY 1984 1994 2003 2004 (% of GDPJ Agriculture 54.8 49.9 32.4 32.2 Industry 10.9 13.9 21.2 21.2 Manufacturing 6.7 6.5 9.3 9.2 Services 34.3 36.2 46.4 46.6 Household final consumption expenditure 82.5 65.4 78.2 76.4 General gov't final consumption expenditure 11.0 10.3 15.2 15.7 Imports of goods and services 14.3 19.1 26.4 27.5

1984-94 1994-04 2003 2004 IGrowth of exports and imports (Oh) (average annual growth) I Agriculture 3.6 4.0 2.3 5.2 30 industry 7.8 9.5 7.2 5.6 15 Manufacturing 7.9 10.0 4 .O 4.0 Services 5.7 7.6 6.3 6.3 0 -15 Household final consumDtion expenditure 4.5 6.2 1.3 3.6 General gov't final consumption expenditure 3.7 6.5 6.4 13.0 Gross capital formation 6.7 5.9 10.0 8.1 -'Exports +Imports Imports of goods and services 2.3 6.7 -2.3 3.7 -- I

Note: 2004 data are preliminary estimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomglete.

118 Uganda ~

PRICES and GOVERNMENT FINANCE I984 1994 2003 2004 Domestic prices (% change) Consumer pnces 6.5 5.7 5.8 Implicit GDP deflator 25.3 8.8 10.1 5.5 Government finance (% of GDP, includes current grants) Current revenue 11.1 8.3 12.1 12.6 Current budget balance 2.8 -0.6 -1.1 -0.7 Overall surplus/deficit -2.7 -10.3 -10.8 -10.5

TRADE 1984 1994 2003 2004 Export and import levels (USS mill.) (US$ millions) Total exports (fob) 378 254 498 603 1,500 T Coffee 342 172 106 108 I 4 17 29 cotton 1000 Manufactures Total imports (cif) 368 672 1,151 1,336 Food 500 Fuel and energy 91 55 134 144 Capital goods 0 98 99 w 01 02 m Export price index (2000=100) 238 102 77 86 lmport price index (2000=700) 66 89 87 94 OExports mlmports Terms of trade (2000=100) 362 114 88 91 i

BALANCE of PAYMENTS 2003 2004 1984 1994 Current account balance to GDP (X) (US$ mi//ions) Exports of goods and services 402 333 778 928 Imports of goods and sewices 450 841 1,663 1,867 Resource balance -48 -508 -685 -940 Net income -47 -61 -131 -140 Net current transfers 26 304 163 308 Current account balance -69 -265 -852 -771 Financing items (net) 121 355 985 1,000 Changes in net reserves -52 -90 -133 -228 Memo: Reserves including gold (US$ millions) 117 219 93 1 1,112 Conversion rate (DEC, /oca//US$) 2.3 1,102.7 1,883.4 1,934.9

EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 Composition of 2004 debt (US$ mill.) (US$ millions) Total debt outstanding and disbursed 1,070 3,371 4,554 4,837 ~ G: 149 IBRD 35 11 0 0 F 24 IDA 177 1,604 3,061 3,303 I Total debt service 128 149 84 108 IBRD 2 7 0 0 IDA 2 17 33 41 Composition of net resource flows Official grants 66 319 516 0 Official creditors 76 196 287 165 Private creditors 6 -15 7 7 Foreign direct investment (net inflows) 0 88 194 0 Portfolio equity (net inflows) 0 0 1 0 Wodd Bank program Commitments 148 262 65 25 A. IBRD E. Bilateral Disbursements 58 221 260 138 B. IDA D. Other multilateral F .Private Principal repayments 1 12 16 17 C. iMF G .Short.term Net flows 58 208 244 121 I Interest payments 4 12 18 24 Net transfers 54 197 227 96

Note: This table was produced from the Development Economics LDB database. 4/3/06

119 IBRD 33504R UGANDA

DISTRICT CAPITALS DISTRICT BOUNDARIES DISTRICT CAPITALS APPROVED BY DISTRICT BOUNDARIES APPROVED BY CABINET AND PARLIAMENT, CABINET AND PARLIAMENT, UGANDA EFFECTIVE JULY 1, 2006 EFFECTIVE JULY 1, 2006 NATIONAL CAPITAL INTERNATIONAL BOUNDARIES RIVERS

MAIN ROADS This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information RAILROADS shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.

30°E 32°E 34°E 0 25 50 75 100 Kilometers SUDANS U D A N

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