Executive Summary

 I. Evaluation Objectives and Approach

1. This is an evaluation of the entirety of Danish aid to Uganda over almost two decades. The evaluation is required to assess achievements against the overall objective of poverty reduction, using the OECD Development Assistance Committee’s criteria of relevance, effectiveness, efficiency and sustainability. Danish assistance is to be evaluated in light of Ugandan national policies, and in the context of activities of other donors.

2. The evaluation approach was first to assess Uganda’s overall performance and the contribution of aid as a whole (Part II of the report), then to assess the Danish contribution (Part III).

3. The evaluation is based on a thorough review of available documentation, supplemented by interviews with a range of those involved with the Danida programme. A study of stakeholder perceptions was an important source of evidence, and is presented as a separate volume of the report. The analysis in the present volume also draws on a series of Background Papers and Thematic Papers that form Volumes 3 and 4 of the report.

II. Uganda’s Recovery and Aid in the Museveni Era

Political and Economic Developments

4. Uganda has proved an exceptionally difficult country to hold together, and both the years of Idi Amin’s dictatorship and the “Obote II” era which followed were marked by exceptional brutality and strife. When the National Resistance Movement (NRM) took power in 1986, led by Yoweri Museveni, its commitment to national unity and development was widely welcomed by the Ugandan public and the international community.

5. In the subsequent decades there has been substantial but not unqualified political and economic progress. The new regime has had a much better human rights record than its predecessors, but conflict has continued in the north of the country, and Uganda also became embroiled in the Democratic Republic of the Congo (DRC). A new constitution was adopted, linked to a radical decentralisation process, but only in the most recent elections was party political competition allowed.

6. By the end of the period under review, much of the government’s early support had been eroded, with both public and donors concerned that Uganda has become a de facto one-party state with highly personalised presidential power. Associated with the NRM’s monopoly on power, Uganda has come to appear like other patrimonial states with high levels of corruption and the use of public resources to buy support.

7. Uganda has made substantial economic progress. One of the strongest growth records in Africa has led to a substantial reduction in poverty (although rapid population growth means that absolute numbers below the poverty line have risen). But a number of caveats are required:

• A good deal of the growth can be explained by the restoration of the pre-Amin levels of economic activity and by the direct impact of the flow of aid.
• Reductions in poverty have been regionally unbalanced, with improvements concentrated in the centre and west of the country, and a much less impressive performance in the north and east.
• After 1997, economic growth slowed, inequality began to rise and poverty in the north increased.
• Despite its successes, Uganda remains one of the world’s poorest countries, and it is not clear that the foundation has been laid for longer-term sustainable economic growth.

The Role of Aid

8. Aid inflows increased substantially over the period, and Uganda has become highly aid-dependent in terms of the ratios of aid to GDP and public expenditure. The aggregate contribution of aid needs to be assessed in terms of its financial effects, but also its influence on public policies and the development of Ugandan institutions.

9. From the early 1990s, economic and fiscal discipline under a strong ministry of planning and finance (MFPED) enabled the dialogue between government and its aid partners to move on from structural adjustment concerns to more detailed consideration of development strategy and public expenditures. Uganda became a pioneer of many innovations in aid management.

10. The government itself had a strong interest in poverty reduction as a political strategy, and successive Poverty Eradication Action Plans (PEAPs) provided a policy framework with which donors could align. MFPED developed a system of medium-term plans which linked aid and public expenditure to the PEAP priorities, and was prepared to involve donors closely in public expenditure reviews and in the formulation and management of sector-wide approaches (SWAps) in key sectors. Debt relief under the Heavily Indebted Poor Countries (HIPC) initiative was linked to the establishment of a Poverty Action Fund (PAF) which encouraged donors to channel funds through the budget to pro-poor expenditure priorities. This led to a surge in funding of basic public services delivered through the new local government structure.

11. There were corresponding changes in the way aid was delivered. Balance of payments support for structural adjustment was succeeded by debt relief and, after HIPC, by increasing use of general and sector budget support. At the same time, fragmented project approaches gave way to more coordinated, government-led sector approaches, facilitating greater donor harmonisation and alignment.

12. For much of the period there was a strong coincidence of interests between the presidency, MFPED and donors, which fostered a high level of trust and collaboration. More recently, this relationship has deteriorated somewhat, reflecting donor concerns about a number of governance issues, including corruption and democratic transition.

Nevertheless, there is continuing impetus towards delivering aid more effectively, in keeping with the emerging ideas of good practice most recently expressed in the Paris Declaration. In 2005 a group of bilateral and multilateral agencies adopted a Uganda Joint Assistance Strategy (UJAS).

13. There are legitimate concerns about Uganda’s aid dependency, but we judge that aid in aggregate has made a clearly positive contribution. Without the aid that it received, Uganda’s economic growth would certainly have been slower, its political stability might also have been threatened, and more people would have been left in poverty.

III. The Danish Contribution

The Danish Aid Strategy in Uganda

Danish Aid Characteristics

14. Denmark is one of the most generous OECD donors. The consensus supporting high levels of aid has been nurtured by attention to the Danish “resource base”. After a change of government in 2001 there was some erosion of consensus and a reduction in aid, but it remains well above the UN target. There is a notable tendency to concentrate on a limited number of programme countries and of sectors within those countries.

15. As regards aid modalities, Denmark was an early advocate and practitioner of partnership with recipient governments, and of the use of government systems so as to build capacity and promote ownership. It was an early mover away from isolated projects towards programmes designed at sector level. However, because of concerns about accountability and about the need for distinct visibility of Danish aid, it has been cautious about disbursing through government financial systems, and has had reservations about budget support.

Danish Aid Strategy in Uganda

16. Denmark’s aid to Uganda has not been governed by rigid strategy documents. There is a rolling country programme with scope for annual adjustments. Nevertheless, there has been great continuity in the country strategy. From the beginning it was conceived as having three complementary elements: support to production; support to social development; and support to institutional development (including a strong emphasis on governance and human rights). Basic objectives have not changed, and Denmark has been remarkably consistent in staying engaged for the most part in the same sectors and with the same partners for very long periods.

The Danish Aid Programme in Uganda

Overview

17. Denmark was one of the first bilaterals to re-establish an official aid programme in Uganda, and it quickly grew to become one of Denmark’s largest bilateral programmes:

• Total Danish aid expenditure to Uganda from 1987-2004 was DKK 5,288.5 million (roughly USD 900 million at the present exchange rate).
• Expenditures grew steadily until the late 1990s; after the Danish aid review in 2001 they fell slightly, to an annual level of about DKK 355 million.
• Denmark’s share of official aid to Uganda peaked in the 1990s (over 9% in 1996). From 1994 through 2000 Denmark was the third or fourth largest donor to Uganda; its ranking in 2004 had declined to seventh, providing less than 5% of aid to Uganda. This decline was due more to increased aid from other donors than to the tapering off of Danish assistance.

Areas of Focus

18. The main sectors in which Danida remained engaged through the period were health, water and sanitation, governance (including human rights and democratisation, decentralisation and gender), agriculture and transport. There were substantial flows of “financial support” (balance of payments support and debt relief) in the period before 1998. A private sector development scheme, linked to partnerships between Uganda and Danish firms, has operated (outside the country frame) since 1996. Also outside the country frame, there have been significant flows of resources via Danish NGOs funded from Copenhagen.

19. There are certain common patterns. Initial interventions were informed by the broad strategy described above, but were often quite opportunistic. Several activities began with funding from the Local Grant Authority, before obtaining larger-scale funding from Danida HQ. Across sectors, there were moves towards sector approaches, first as an organising principle for Danida’s own interventions, then as a joint enterprise with government and other donors. However, unlike a number of like-minded donors, Danida did not continue with any other form of general budget support once its contributions to multilateral debt relief ended.

Assessment

20. This synthesis report includes a sector-by-sector review of experiences with Danish aid, and then a thematic review of cross-cutting issues, including poverty focus, accountability and corruption, aid modalities, capacity development and the organisation and management of Danish aid. This is reinforced by detailed Thematic Papers on different sectors and cross-cutting themes in Volume 4 of the report. There is not room in this summary to include descriptions of each component: we proceed straight to the overall assessment.

Overall Assessment

21. There are ways (with hindsight) in which Danish aid could have been made more efficient and effective. But our assessment is that Danish aid has generally been of high quality, and that Denmark’s contribution to Uganda’s progress is rightly valued.

Relevance

22. The Danish aid programme was clearly relevant both to national recovery objectives and more specifically to poverty reduction. However, poverty strategies were not at first well-defined. After the mid-1990s, as both Denmark’s and Uganda’s poverty objectives and poverty strategies became more refined, Danish aid adapted to become more relevant and more aligned with Uganda’s poverty reduction strategy. There was conscious attention to the main cross-cutting issues (gender, environment, HIV/AIDS), but on none of them is there room for complacency. There was strong support to democratic participation.

23. The Danish programme was consistently relevant in the nature of the aid offered – in providing grants, not loans, and in being prepared to finance recurrent costs. Denmark’s readiness to work with a range of partners – from NGOs and civil society, as well as government – was also relevant. Increasing collaboration with other donors has been both appropriate and responsive to national strategy.

24. Danida deserves special credit for the relevance of its support to the health sector, with its focus on building basic health systems, but some prominent early interventions (grain silos, a large dairy plant) were inappropriate.

25. Without labelling it as such, Danida provided general budget support during the 1990s (in the form of balance of payments aid and debt relief). This was highly relevant and effective. In discontinuing such aid the programme missed an important opportunity.

Effectiveness

26. Overall we judge that the programme was effective. Areas where Danish aid was conspicuously effective included: debt relief; rural roads programmes (arguably, rural roads have been the programme’s most successful contribution to agricultural development); support to the rehabilitation and expansion of basic health services, especially through the essential drugs system; rural water and sanitation programmes; support to economic and institutional recovery in Rakai District; in human rights and democratisation (HRD), support to the justice and accountability systems of government.

27. Danish aid has made distinctive contributions (over and above provision of infrastructure and services) in at least the following areas: water and sanitation (system development, innovation – including decentralised implementation of water projects and pri-vatisation of construction, capacity building as well as service delivery); gender (a formative influence on gender analysis and advocacy during the 1990s); decentralisation (an effective partnership with GOU in designing and implementing decentralisation strategy); labour-based roads; special education; in HRD, its advocacy and support for human rights.

Efficiency

28. We judge the Danish aid programme in general to have been efficient. We have found few conspicuously inefficient programme components; the correspondence between commitments and disbursements is impressive; and the management arrangements for the programme have generally been well adapted to requirements. There have been conscious efforts to make the programme more efficient by aligning it, where appropriate, with GOU systems, and by coordinating with other donors. Observer perceptions of Danida’s efficiency are generally favourable.

29. A number of factors had a positive influence on efficiency over time. These included: the relaxation of tying of Danish aid; the decentralisation of aid management by MFA; the integration of development and diplomatic aspects of MFA work; and increased harmonisation and alignment with other donors and government.

Sustainability

30. It is clear that the programme increasingly tended to use more sustainable modalities (reflecting the moves beyond Danida-specific projects and sector programmes to fuller engagement with government-led SWAps). At the same time Uganda’s poverty reduction strategy will require significant donor support, including support for recurrent costs, for many years ahead. Moreover, Danida (and like-minded donors) accord higher priority to certain institutions than the government does; their adequate funding is therefore likely to require continued donor support. This applies particularly to institutions for accountability and justice.

Coherence

31. Overall, the Danish aid programme to Uganda has shown strong coherence. It has maintained a balance between the different “legs” (social, productive, institutional) that were established at the outset. The breadth of the programme has been used to build support from both Danish and Ugandan stakeholders. Denmark’s credibility in pursuing its institutional and governance objectives has been strengthened by its track record of social and infrastructure support.

32. Denmark has also sought coherence and complementarity by staying out of sectors and programmes considered adequately supported, and by participating in joint government-donor coordination mechanisms. The recent decision to join the Uganda Joint Assistance Strategy is a welcome one, and will involve further efforts to rationalise the division of labour among donors.

Recommendations

33. The evaluation highlights a number of lessons to be learned from the experience of Danish aid in Uganda. These are reflected in the recommendations summarised below.

On Danida’s overall strategy and approach

34. Experience in Uganda confirms the value of several principles of Danida’s overall strategy and approach, which should be continued. These include:

• Concentration and focus (at country, sector and programme levels).
• Consistency and staying engaged.
• Flexibility within the country programme – avoiding rigid advance programming of expenditure
• Capacity development by working with and through local systems and recognising the importance of national ownership.
• Avoiding the tying of aid.

35. In line with these principles, Danida should take care not to micro-manage the agencies and the programmes that it supports.

On aid modalities, accountability and collaboration with GOU and other donors

36. Danida (at least in Uganda) has operated with a rather narrow paradigm concerning aid modalities. It has allowed its concern for strict accountability of aid funds to frustrate other important principles, including the use of national systems and more collaboration with other donors. It should adopt a less rigid approach in which:

More weight is attached to the value of using, and strengthening, national systems of implementation, disbursement and accounting.

Budget support and other modalities are seen as complementary, a lower “entry threshold” for budget support is applied, and there is more emphasis on learning from experience with new modalities.

37. At the same time, Danida should use its participation with other donors and government to push for strengthening of national accountability systems, and also to help raise general standards of monitoring and reporting.

On maintaining domestic support for aid

38. Danida is right to emphasise the importance of maintaining domestic support for the provision of generous levels of aid. The best way to maintain support is to ensure and demonstrate the effectiveness of aid. However, making Danish aid separately visible is less appropriate when more collaborative (and effective) aid modalities are adopted. A more nuanced strategy to maximise the effectiveness of a country programme and to maintain support for it will include:

• Considering the balance between joint and separate interventions.
• Seeking to improve monitoring and reporting on the effectiveness of aid (integrated with monitoring of the national programmes that it supports).
• Seeking to enhance (Danish) public understanding of what constitutes effective aid.
• Seeking to strengthen broad accountability for resources, not just specific accountability for Danish aid funds.

On “division of labour” and future priorities for the Danida programme in Uganda

39. The “division of labour” exercise should go beyond a simplistic “pruning” of the number of donors in each sector, and consider explicitly the balance between aid modalities that is appropriate for each sector. (This and the other recommendations under this heading require the joint action of GOU and donors.)

40. As regards the future focus of Danish aid:

• Denmark’s involvement in the health sector should continue, based on the depth of experience and comparative advantage built up over many years.
• Denmark should take a continuing interest in decentralisation, and seek through UJAS to encourage moves towards greater coordination and a “decentralisation SWAp”.
• Danida’s Human Rights and Good Governance Liaison Office (HUGGO) represents valuable planning and management capacity for the HRD sector, with potential for shared benefits among UJAS partners.
• Denmark should maintain its role in the agriculture sector. There is particular scope for Danish aid to reinforce the Plan for Modernisation of Agriculture (PMA) in some of the specific areas that the recent PMA evaluation highlighted as needing attention. These areas include the promotion of extension approaches that are appropriate for reaching poorer households and districts; marketing and land reform issues, with special attention to women’s access to land; more attention to environment as a cross-cutting issue; and more systematic impact assessment (in which there is scope to build on the gendered district poverty profiles supported under Danida’s Agricultural Sector Programme Support).
• Danida should seek to influence the work programme of the UJAS partners, and should take a special interest in issues of decentralisation, accountability and capacity building (as well as those sectors in which it remains directly involved).
• Danida needs to ensure that the Embassy in Kampala has adequate staff with economics skills to enable Denmark to participate credibly in general budget support discussions.
• Working through non-UJAS (and sub-UJAS) groupings will continue to be relevant, especially in pursuing governance concerns.

41. Both through UJAS and in its internal strategy, Danida should seek to develop more systematic analysis of risks and a more explicit risk mitigation strategy.

On future evaluation

42. Danida should support an external independent evaluation of the PEAP and UJAS in 2008/09.