Uganda Country Case Study Field Visit Report and Lessons Learned February 6-8, 2004, Munyono, Uganda. Lessons Learned Louise Fox, The World Bank

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1 Uganda Country Case Study Field Visit Report and Lessons Learned February 6-8, 2004, Munyono, Uganda The field visit yielded some key insights: Lessons Learned Louise Fox, The World Bank Leadership and team work are critical for scaling up - at all levels Not only top level leadership, but an environment which encourages district level leadership and bottom-up communication as well. The Ugandan framework of restricted decentralization (conditional grants) was important at the early stages, as it helped expose and possibly reduce corruption and mismanagement. It also provided a framework for constructive participation and alignment of objectives at all levels. However, it was agreed that the time has come to relax these constraints. Uganda's participatory process has created a demand for quality from the local government. A key instrument has been the widespread dissemination of information - at all levels of the Government, and through multiple channels including the media and citizen's committees. This facilitate local planning and implementation. Adequate channels for redress are also important. Structural reform to remove price-distorting policies and promote private involvement in the economy and openness to trade paid off, especially for farmers who were able to take advantage of it, but may have reached its limits. Now farmers need better technology and access to financing. Privatization, while initially vehemently opposed by civil society, in hindsight, in civil society s words reduced the surface area for big corruption. A solid and mature relationship with donors has been key. Donor finance has facilitated scaling up, although concern was expressed about over-dependence on donors. Many challenges remain, including mobilizing more domestic resources for development through higher savings and strong revenue measures. Reaching the poorer districts with scaled-up growth and service delivery to avoid widening inequality was also an issue, and the need for continued capacity building here was key.

2 Uganda Country Case Study Field Visit Report February 6-8, 2004, Munyono, Uganda Prepared by Mohini Malhotra, World Bank Institute (WBI) The global learning field visit to Uganda took place from February 6 to 8. Uganda is one of 11 country cases that are part of the 70 case studies being prepared for the Global Learning Process on Scaling up for Poverty Reduction. The focus was on the country as a whole and not a specific project How did Uganda reform since the end of the civil war in 1986, and how has it sustained these reforms? The three-day visit began with an overview of the achievements over the last decade as well as the challenges moving forward, followed by site visits to observe some of the achievements in social service delivery and agriculture, and to understand how decentralization has assisted these improvements. The social service delivery field visits included schools launched under the Universal Primary Education initiative since 1997, and to health clinics providing a range of services including support to HIV/AIDS patients. The agriculture field visits included a smallholder farm, a demonstration banana plantation, and a vanilla farm all employing new crops and farming techniques and technologies in part provided by local government to stimulate agricultural production. During the final session, participants shared their impressions and views on the lessons of the Ugandan case for Uganda and implications for adapting them to other countries. Participants included senior Ugandan officials from government, civil society and the private sector, international participants from Bolivia and Kyrgyz Republic, international donor representation from DFID headquarters and from locally based representatives from other donor agencies, and World Bank staff from headquarters and the country office. Honorable Gerald Ssendaula, Minister of Finance, Planning and Economic Development of Uganda hosted this event and led the Ugandan delegation. Mr. Shengman Zhang, Managing Director, Mr. Louis Kasekende, Executive Director, and Ms. Pamela Cox, Operations Director for Africa led the World Bank team and international delegation. This was a very high-quality learning event, with superb preparation, content, discussion and facilitation, and is a case that merits prominence in Shanghai and beyond. I was struck by the uniform eloquence of all the presenters, chairs and discussants - eloquence is a national characteristic in Uganda! There was very clear country ownership of the field visit and the case study, both of which were overseen by a national team. The list of participants and agenda are attached to this note. Background to the Field Visit: Why Uganda?

3 This field visit focused on the social and economic achievements of Uganda since 1986, when the civil war ended. This section is only a very brief introduction as to why Uganda was selected as one of eight countries for a field visit, as part of the Global Learning Process on Scaling up Poverty Reduction. Please refer to the full case study that details the two phases of Uganda s reforms; the period, when the primary objective was stabilization, and the 1992 onwards period, when the focus shifted to addressing growth with poverty reduction. At the end of the civil war in 1986, Uganda s economy and infrastructure were in ruins, average income was below $100 per capita, social indicators were among the worst in Africa, lawlessness and crime were widespread, and public sector institutions were barely functioning. The economic strengthening and reform program begun by the Government in 1987 and sustained ever since - despite setbacks - has brought Ugandans substantial improvements in welfare. Between 1987 and 2000, economic growth averaged 6 percent per annum and maintaine d single digit inflation. Even with a population growth rate of 3.4 percent per annum during most of the period, the Ugandan economy was able to achieve a significant increase in income per capita and a substantial decline in the poverty rate from 56% in 1992 to 34% in During the same period, social indicators improved. Today, 52% of Ugandans have access to safe water, compared with only 10% in As a result of policies to increase access to education, gross primary school enrollments increased from 71% in 1990 to 127% in 2003, with the children of poor families as likely to attend school as those in better-off families. Child health indicators remain poor, however, as infant mortality was 88 per 1,000 births in 2001, and under-five mortality was 143 in 2000, a decline from the previous level of 203 in These stubbornly high child health indicators are partly explained by the continued high fertility rate in rural areas. Set in the context of the same period in sub-saharan Africa, Uganda s achievements are remarkable. In contrast with Uganda, real incomes in many countries in the region are lower than they were a quarter century ago. The annual GDP growth rate for SSA as a whole over the period was only 2.4%. At the same time, population growth averaged 2.6% annually, thus the per capita growth rate was actually negative for the region as a whole over the decade of the 1990s, as it was for the 1980s. The GDP growth rate for SSA in was 3.2%- for a per capita growth of 0.9%, a very welcome positive number, but still a small gain. For many countries, sustaining economic growth over even a five -year period has proved very difficult, and achieving pro-poor, poverty-reducing growth impossible. As a result, poverty has increased substantially in sub-saharan Africa. Using the $1/day standard, poverty increased from 217 million to 291 million in the period. How did Uganda managed to achieve the impressive results described above and in the case study paper? The policy ingredients are well-known, and mostly predictable: control of inflation and continued macro stability; trade and agriculture marketing reforms to increase producer prices at the farm gate, benefiting small holder farmers, (the bulk of the poor); improvements in public security, the rule of law, and investment climate which made Uganda a better place to invest than previously; effective political,

4 administrative, and fiscal decentralization which fostered a sustained focus on reaching the underserved in rural areas with public services. Luck with weather and high coffee prices in the 1990s and very low levels of civil unrest were part of the story as well, as were substantial and sustained foreign aid inflows. But even if the elements look simple in retrospect, the fact remains that putting all these together for a sustained period is unusual in Africa, and in other low-income areas of the world as well. Uganda cannot rest on the laurels of the past, as Uganda still remains a poor country, full of challenges. Income per capita is still only $260 and the high-income growth rates of the past decade have slowed. For the period , GDP growth was 5.8. When combined with a still rapidly growing population and increases in inequality, this slow growth translated into a modest increase in income poverty from 34% to 38% in Continued scaling up of poverty reduction implies more improvements in the productivity and profitability of the agricultural sector, which still support 80% of the population. The climate for the private sector also needs to progress, and while improvements have been noted, Uganda still ranks low among investors owing to ongoing governance issues. A more efficient and effective public sector is required in order for social indicators to improve at an affordable cost. Financing for programs to address these challenges will increasingly need to come from within Uganda, as there is little scope for increased donor support. The subject of this field visit and the accompanying case study was on how Uganda managed to build the institutions which supported these achievements, and how these institutions need to adapt to respond to the challenges of the next decade. How did Uganda Reform and Scale up its Achievements? This section highlights several core ideas that came out of the discussions on how Uganda achieved its successes. The case study provides a richer and fuller account, which this brief will not repeat. The story of Uganda s success is one of a war-weary nation rallying behind a national vision and creating a social compact to work together to rebuild the nation. And it is about the reform process being led and driven by a competent and visionary cadre of political and technocrat leaders who embraced participation from a wide spectrum of stakeholders, promoted transparency in the planning and budget allocation process, and sought empowerment of communities through instilling people -centered bottom-up planning processes. This leadership was able to create strong national ownership of and commitment to the reform agenda. 1. Strong single-minded committed political leadership backed by a critical mass of competent technocrats and institutions was key to the scaling up process Popularity and respect for the presidency allowed presidential decisions on key economic matters to be implemented rapidly. A core team of pro-reform change catalysts from the Ministry of Finance, Planning and Economic Development and the Bank of Uganda was given political support and autonomy to deliver on its mandate. This

5 political and technocratic leadership was able to develop a domestic political project and vision around growth and poverty reduction around which national consensus was built and provided the foundation for setting priorities for budget planning, international assistance and the policy dialogue. The efficiency and competence of the key government departments demonstrates the importance of competent and visibly powerful bureaucrats as the institutional agents of reform and policy implementation. This core team was recruited on merit. Uganda demonstrates that insiders have to be committed to the process. Over time, and as evidenced during the field visits to two districts, this leadership base has widened to many levels within central and local government, civil society, private sector, and other bodies. 2. The reforms, their results, and their sequencing led to increased legitimacy, wide - spread acceptance and scaling up of growth AND poverty reduction Early successes and demonstration effects of the first phases of reforms led to increased legitimacy of the NRM government. The first priority was to restore peace, law and order, achieved largely through the discipline of the armed wing, the National Resistance Army. The second objective was economic reconstruction and stabilization through tightening both fiscal and monetary policies to control inflation and achieve macroeconomic stability. Stabilization through exchange rate realignment and firm control of inflation in 1992, increased ownership and appetite for the next reform phase of addressing growth with poverty. Poverty was not directly addressed in the first reform phase, with the hope that the benefits of stability and growth would benefit all, but from 1992 onwards pro-poor planning became a focus. The first part of the economic reforms involved a 180 degree turn-around from the NRM s initial policies of barter trade, price and foreign exchange controls and direct state management of the economy, to implementing sharp devaluation of the official exchange rate, reducing monetary supply, tightened budgetary and monetary policies, and introducing an open general licensing system for private sector imports in Results included IMF and World Bank support, debt rescheduling promises and additional foreign aid promises, but most importantly, economic growth rebounded to 7.7 percent in Continued economic growth gave the NRM government increased legitimacy and an opportunity for consolidation. Poverty reduction reforms with pro-poor programs were introduced in 1992, with concern that unequal benefits would hurt the reform process. Since 1997, Uganda s Poverty Eradication Action Plan (PEAP) is the national development framework that guides formulation of government policy and program implementation through sectorwide approaches. Its strength is that it is linked to the national budget process, through the medium term expenditure framework which guarantees pro-poor allocation of public expenditures over three year periods and creates expenditure monitoring mechanisms with civil society and donor participation. The PAF (Poverty Action Fund) set up in 1998, protects poverty spending from in-year budgetary cuts, and channels HIPC and debt relief funds to priority area for poverty reduction primary education, primary healthcare, roads, agricultural extension, water and sanitation.

6 And underpinning macroeconomic stability was policy and vision stability that allowed continuity and results to be felt and seen which sustained momentum. 3. Post conflict optimism provided space to build social glue and national consensus around the reforms which was critical to scaling -up the achievements The post-war optimism created a mood where everyone rallied behind the common goal of nation building and peace. The mood was defined by space and tolerance for debate and discussion towards the shared purpose of nation building. The dream team from government, building on the benefits of the earlier debt relief campaign in which NGOs, CBOs, church groups and others worked together successfully to lobby creditors for debt relief, decided to pro-actively seek out and work with civil society. The National Forum was cited as an important example of venues that brought together diverse stakeholders to define the policy reform agenda. The war-weary population was ready to sacrifice and take on tough reforms, and gave wholesale license to the new government to change things for the better. The crisis in Uganda, similar to other post-conflict countries, opened up space for the reforms. 4. Transparency was a hallmark of the reform process and critical to scaling-up Transparency of budgets, of budget planning processes, and of data and information has led to rapid improvements in the delivery of more and better services at the local level, increasing money reaching intended beneficiaries from 36 percent to above 80 percent. The decision for public displays of the budget and of financial releases from central to local governments in newspapers, radio broadcasts and other media was solidly supported by civil society. Working groups made up of government, civil society, media and donors build consensus among key political actors to determine resource allocation and use by sector strategies and plans. And civil society watchdog agencies work in partnership with donors and governments to monitor expenditures. This process has increased the share of PAF (Poverty Action Fund) expenditures from 17.5% of total expenditures in 97/98 to 37% in 2001/02. The field visit participants saw this in practice at the district level in Wakiso District, where local government distributes a newsletter that provides detailed budget and budget allocation information by sub-districts. This transparency of information is increasing demand for services, and providing the right incentives to local government to respond to their constituency. 5. Participation was critical to building ownership of the reform agenda, leading to its scale Uganda s participatory processes including a wide pool of players civil society, academia, the private sector - were critical to widening the understanding, and building consensus and ownership of the reform program, and in creating citizen demand for quality and services from local government. There was consensus that participation has led to aligning priorities in the PEAP between central and local government and across

7 sectors. Contentious issues were debated. As articulated by the spokesperson for civil society, privatization, while initially vehemently opposed by civil society, in hindsight, reduced the surface area for big corruption. Participation extends beyond the planning phase to monitoring the implementation as well, as discussed earlier. Transparency of information was a key instrument to facilitate participation. And the participation process was critical to giving the poor space and voice to articulate and defend their issues. 6. Organization and maturation of civil society, private sector, and government institutions underpinned participation and scaling -up Civil society played a dual role as watchdog and partner of government. It coalesced and forged a common vision and strategy to work from within the reform process than shout from the outside, and also not to polarize within civil society for those who stayed out. The private sector organized to speak in a uniform and informed voice on regulatory issues as they affected private investment, both domestic and foreign. Government went through several institutional reforms, a key one being the merging of the Ministry of Finance with that of Planning and Economic Development to integrate functions of budgeting and planning under one roof. 38 ministries were collapsed to 17 by The government led an initial strategy of creating pockets of excellence within existing government institutions, with staff with better employment terms, to push through the reform agenda, than try to overhaul the entire civil service. This led to shortterm gains in expediency but led to long term bloating of the civil service with parallel semi-autonomous islands of efficiency. A key lesson from this experience is that institutional reform to underpin scaling up efforts requires transforming the whole civil service than moving piecemeal. 7. Decentralization has been an important step in the right direction for scaling up poverty reduction Introduced gradually, the final step of fiscal decentralization was completed in 1995, with budgetary transfers rising to 34 percent in 2002/03. Decentralization has increased the percent of intended money reaching beneficiaries, from an initially low percentage to an estimated 80 percent today. The central government introduced conditional grants, which by 2001 accounted for 80 percent of local government resources. Conditional grants from the center to the districts was important in the early stages as it provided continuity over an annual planning process, provided the framework for constructive participation and alignment of objectives at all levels, and helped build local capacity for planning and prioritization at the local level. It was agreed that in order to adequately align local priorities with resource allocation, there was need to relax these conditions in order to create flexibility at the local government levels. The dialogue and respective roles and relationship between central and local government appear to be functioning, and decentralization has been accompanied by capacity enhancement of local government, resulting in strong emerging leadership and

8 competence. There is increasingly, vertical and sectoral alignment of priorities established through a bottom up planning process. The center provides the framework while the district fills in the details according to own priorities. Local government, empowered by the local government act of 1997 which gave local authorities responsibility for delivery of almost all services, is taking on this role seriously, as observed in the site visits. Wakiso district is playing a catalytic role to scale up new farming varieties and practices. Examples include the establishment of demonstration plots of new disease resistant banana varieties, which will be the source for distributing banana suckers to other farmers to scale up the production of new banana varieties in the area, and distributing South African breeding goats to communities, one of which has resulted in 54 kids of better breed, and so forth. Districts are playing a key role in meeting UPE (universal primary education) targets, and focusing on quality issues in consultation with parent committees, and on the provision of health care, including support services for HIV/Aids patients, as seen during the site visits to Wakiso and Mukono districts. 8. Foreign aid was critical to the reform achievements, and a solid and mature working relationship between government and the donors was vital to scaling up Foreign aid went up every year in the period of averaging $500 million annually, and peaking at 788 million in 2002/03. Donors played a key role as partners in implementing the reforms - all stakeholders saw reform as a shared goal that everyone contributes to, with willingness on all sides to compromise. The donors were instrumental in providing both the technical and financ ial assistance to enable the Government to implement its programs, a partnership that led to quick results. These quick results were key to selling the Government reform program to the population. World Bank and IMF conditionality was however critical in helping technocrats push through politically sensitive reforms, and in some cases the technocrats used donors a scapegoats. This was possible because of the teamwork spirit that existed between donors and Government officials. In fact since 1992, when government ownership of the reform agenda was secured, conditionality became less instrumental in inducing reforms, and policy dialogue coupled with advisory services became more important. Looking Ahead - Challenges to Sustain and Scale up Growth and Poverty Reduction As much time was spent on the challenges Uganda faces today and on how to sustain growth and poverty reduction into the future, as was spent on analyzing the factors for the successes of the past decade. Several presenters felt that the gains of the past were relatively easy to achieve from rehabilitating existing economic structures, compared with the challenge of structural economic transformation necessary for sustaining such results into the future. Challenges raised by participants include: Restoring security, dealing with the consequences of conflict in the North which has led to 1/6 million displaced people, and improving regional equity

9 Managing the political transition. Presidential lections are scheduled for 2006 and the political transition to a multi-party system will be critical in determining the next leadership team in Uganda. Rising poverty rates coupled with high population growth rates. An increase in the poverty rate from 35 percent in 2000 to 38 percent in 2003 in the 2002/2003 household surveys; and regional inequities with poverty highest in the North and facing the sharpest worsening in the East. Uganda still is one of the poorest countries with per capita income levels of $260, at 1970 levels. High population growth rates of 3.4 percent - third highest in the world, and persistently high child and infant mortality rates are a major hindrance to poverty reduction. Need for economic transformation. A range of ideas were put forth expanding the manufacturing base, moving into higher value crops, illustrated by the site visit to the vanilla farm, increasing private investment both local and foreign direct investment, increasing exports, and seeking improved terms of trade, among others Additional funds. Uganda s public investment has been financed largely with donor funds. This can not continue, as the level of concessional financing is not likely to increase in real terms. Domestic resource mobilization is now key Eroding effects of HIV/AIDS (prevalence rates have leveled after sharp initial drop-off Increased and improved service delivery financial services, infrastructure, education quality and attendance rates in UPE schools, electricity, health care, and many others Addressing corruption Continued investment in building capacity of local government to achieve scaling up of poverty reduction, and Possible fatigue of the first generation of reform leaders and of the external partners. What were the Key Take-Aways from the Uganda case for Scaling-up poverty reduction for other developing countries, donors, civil society and government? While there was general consensus on the lessons and factors that led to Uganda s achievements highlighted in the case study and earlier in this note, several key points were noted by a concluding panel. Kyrgyz Republic was struck by the role that local government plays in service delivery and hence poverty reduction, and with the apparent success of decentralization in Uganda, and contrasted this with the view in many developing countries of government, both national and local as the enemy of the poor.

10 Bolivia was impressed with how Uganda was able to build true consensus around a national vision and translate concepts such as `participation and `dialogue into reality. He contrasted Uganda with Bolivia, which on paper has the same participatory budget processes outlined as those practiced by Uganda but with very different outcomes as evidenced by the latest political crisis in Bolivia. A key take-away lesson from Uga nda that he noted was on the critical importance of putting budget information in the public domain, as a way to promote government accountability, and create demand for service delivery. DFID highlighted the lesson for donors respect country priorities, provide stable and predictable support, and be part of an open and frank dialogue. He also noted the importance of Uganda s policy stability as a factor in providing continuity within a shared vision that is necessary for scaling up. From civil society s perspectives, key for the reforms to succeed was building a forum for genuine debate and dialogue among different stakeholders; early demonstration effects of the reforms built legitimacy and buy-in, and information and transparency. The Ugandan government underlined the factors noted above leadership backed by strong institutions and technocrats, the role of partners as catalysts, and decentralization as a step in the right direction, but also emphasized the importance of developing home-grown initiatives while learning from other experiences, or as noted by another colleague, we looked for the life-vest under the seat than the parachute outside. In terms of addressing future poverty reduction challenges, there was a strong view from participants on the need for additional resources to continue to help fuel Uganda s reforms, and for these resources to be used as effectively as possible to address the challenges raised above, as well as those witnessed during the field sites in terms of improved HIV retroviral treatments and services, and improved educational quality in UPE schools. Participant Feedback on the Event Participants found this to be an excellent event, and verified this in the written evaluations. The positive aspects uniformly mentioned were the very high quality of the content in the presentations and discussions, the discussive and participatory nature, the wide range of perspectives ands stakeholders brought together, and clear Ugandan ownership of the content and the event. In terms of suggestions for improvements, participants felt that the site visits should have been longer, and to more rural and representative districts (albeit noting the time constraints), and (understandably), not to hold these events over week-ends. Most importantly, there was a sense that this event provided rare pause for reflection on the lessons of the past as a segue to strengthening national dialogue on the policies for the next decade, and as such, there was consensus to continue this dialogue well beyond Shanghai.