Jordan - Human Resources Development Sector Investment Loan

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-5003-JO MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED HUMAN RESOURCES DEVELOPMENT SECTOR INVESTMENT LOAN IN AN AMOUNT EQUIVALENT TO US$73.0 MILLION $ TO THE HASHEMITE KINGDOM OF JORDAN MAY 22, 1989 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 Unit = Jordanian Dinar (JD) US$1.00 = JD .540 (February 1989) Abbreviations and Acronyms ODA : United Kingdom Overseas Development Administration OECF : Japan Overseas Economic Cooperation Fund SIL : Sector Investment Loan Government of the Hashemite Kingdom of Jordan Fiscal Year January 1 - December 31 FOR OFFICIAL USE ONLY THE HASHEMITE KINGDOM OF JORDAN HUMAN RESOURCES DEVELOPMENT SECTOR EMENT LOAN Loan and Prooam Sunmary Borrower: The Hashemite Kingdom of Jordan Beneficiaries: Ministry of Education Ministry of Higher Education Higher Council for Science and Technology Universities of Jordan, Yarmouk and Mutah Vocational Training Corporation Loan Amount: US$73.0 million equivalent Terms: 17 years, including 5 years grace, at the standard variable interest rate Financing Plan: US$ million IBRD 73.0 ODA 1.4 OECF* 73.0 Government 105.1 Total 252.5 Economic Rate Not applicable of Return: Staff Appraisal Report: Report No. 7641-JO, dated May 22, 1989 * The Japanese Government is considering cofinancing in an equivalent amount to the Bank loan, i.e., US$73.0 million. Although no final response has been received, Japan is expected to provide this amount. An observer from the Japan OECF participated in the Bank's appraisal mission and we expect the OECF appraisal to take place shortly. The signing of the loan agreement between OECF and the Borrower is a condition of effectiveness of the Bank's loan agreement. Should the amount of the OECF loan be less than the amount applied for, the school construction under the program will be adjusted in light of the financing available. 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 'e 'closed without World Bank authorization. MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE HASHEMITE KINGDOM OF JORDAN 1. I submit for approval the following memorandum and recommendation on a proposed loan to the Hashemite Kingdom of Jordan for US$73.0 million equivalent. This sector investment loan (SIL) would support Jordan's human resources development strategy by improving the quality of its basic and secondary education system. The loan would be repayable in 17 years with 5 years grace and would bear the Bank's standard variable interest rate. The operation would be cofinanced by the Japan OECF and UK ODA. 2. Backaround. Lacking natural endowments, relying on imports for most of its food and raw materials, and faced with one of the world's highest rates of population growth (3.8% a year), Jordan has in the past depended heavily on jobs obtained by Jordanians elsewhere in the Middle East region to maintain external balances, limit domestic unemployment and fuel GDP growth. In recent years, however, stagnant or falling oil prices, increased competition from lower priced Asian labor and rising domestic skill levels in neighboring countries have reduced Jordan's penetration of regional labor markets, leading to substantial reductions in remittances from abroad and increases in unemployment at home. A recent Bank staff review of the Jordanian economy has identified a strategy for expanding Jordan's human capital earnings and employment based on, inter alia, lowering the international price of Jordanian labor through the adoption of a competitive exchange rate and other macro policies, and enhancing the quality, flexibility and hence the employability of Jordan's human resource base through comprehensive upgrading of the education system. The 23% depreciation of the Jordanian dinar in real terms vis-a-vis the US dollar in 1988, together with the Government's ongoing adjustment program (supported by the Bank's proposed industry and trade adjustment loan and the IMF's standby arrangement), is helping to reduce the price of labor; quality enhancement is the subject of the proposed Human Resources Development SIL. 3. The need for a fundamental restructuring of the general education system had already been foreseen by the Jordanian Government, which had convened a National Conference on Educational Development in September 1987, as part of a wider macroeconomic strategy to reduce Jordan's dependence on external labor markets and promote the export of high value-added goods and services. The principal conclusion of the conference was that the rapid quantitative growth of the system--universal basic education (Grades 1-9) and a 65% enrollment rate in secondary education (Grades 10-12)-had entailed serious qualitative costs. Curricula and textbooks were outdated in terms of both pedagogy and subject matter; teachers were under-qualified; and physical facilities (with accommodation of 50% of basic education enrollments in rented classrooms) were substandard and not conducive to learning. Following the conference. the Government formulated an education reform strategy to be impleu-ited over a ten-year period (1989-98) in three phases. The proposed SIL would finance the first phase (1989-92) of the reform program and would represent a continuation of Bank lending to the sector, which has comprised eight education/manpower projects since 1972. 4. ProjectObjectives. Th2 SIL would support policy and institutional reforms designed to give Jordan the skill- and knowledge-intensive manpower base it needs. More specifically, the reform and the SIL would help enhance student achievement by (i) restructuring the school system and improving the quality of teaching and learning; (ii) developing an istitutional structure responsive to the system's long-term qualitative and quantitative needs; and (iii) developing the system's capacity to evaluate the reform program and sustain it on a self-renewing basis. 5. Project Description. The proposed operation would cover 7 national programs and 34 subprojects in curriculum reform, textbook development, teacher and supervisory staff upgrading, education technology, improvement of school facilities, vocational training and education research and development. The Bank has appraised the national programs. Subprojects would be prepared by the beneficiary institutions and appraised and approved by an intermediary institution, the Higher Council for Science and Technology. The Intermediary would be responsible for overall coordination, supervision, and financial management. Program components would include: (i) developing and introducing into schools new curricula and textbooks for six basic education subjects; (ii) setting up a Textbook Publishing Unit to institutionalize textbook development, testing and revision, and an improved storage and distribution system; (iii) upgrading, through university-level certification programs, the academic qualifications of about 4,000 basic education teachers, 1,500 secondary teachers and 360 principals/supervisors; (iv) providing in-service training on reform innovations for about 12,000 basic education teachers, 4,800 principals and supervisors, and 750 support staff; (v) instituting a new university-based BA program for pre-service training of basic education teachers (to provide an additional 2,000 teachers a year); (vi) starting construction of 180 new schools, 90 of which would be completed during Phase I to accommodate about 52,000 students (representing about 3at of those who are currently in rented facilities) and to create about 36,000 ncw student places (representing about 25% of the natural enrollment increase); and providing libraries, labs and workshops in the new schools as well as in about 180 existing schools; (vii) expanding vocational training capacity at existing and new training centers, to take account of the increased demand resulting from secondary school curriculum restructuring and anticipated market needs; and (viii) establishing a National Center f.)r Educational Research and Development to institutionalize policy-based research and development, together with the capacity to evaluate and help sustain ongoing innovation in education. 6. Projet Costsad Financhg. The proposed US$73.0 million loan would finance 29% of the four-year investment program for the first phase of the reform. Total Phase I cost is estimated at US$252.5 million equivalent, with a foreign exchange component of US$104.1 million (41%). Cofinancing in the amount of US$1.4 million equivalent will be provided by the UK ODA. The Japanese Government is considering cofinancing in an equivalent amount to the Bank loan, i.e., US$73.0 million. Although no final response has been received, Japan Is expected to provide this amount. An observer from the Japan OECF participated in the Bank's appraisal mission and we expect the OECF appraisal to take place shortly. The signing of the loan agreement between -3- OECF and the Borrower is a condition of effectiveness of the Bank's loan agreement. Should the amount of the OECF loan be less than the amount applied for, the school construction under the program will be adjusted in light of the financing available. The program's costs and financing plan are in Schedule A; amounts and methods of procurement and disbursement are in Schedule B. Key project processing events and the status of Bank Group operations in Jordan are in Schedules C and D, respectively. A Staff Appraisal Report No. 7641-JO, of May 22, 1989 is also attached. 7. Rationale for Bank Involvement. The Bank suppor's the Government's emphasis on human resources development as a key determinant of Jordan's long-run economic growth. The Government's overall strategy in this area focuses on providing new oppor-enities for employment growth by enhancing both the quality of Jordan's labor sipply (and hence increasing its penetration of the higher-skill portion of the external labor market) and the quantity and quality of skilled labor demand in the domestic economy. The education reform thus dovetails with the Government's ongoing adjustment efforts and the proposed Bank industry and trade adjustment loan. In addition to education system reform, the Bank is providing support to current efforts to enhance Jordan's scientific/technological capacity-efforts designed to help make Jordan a skilled human resources entrepot, along the lines of Singapore and Hong Kong--through a science and technology sector study which is likely to lead to a lending operation. In the case of education reform, the Bank has helped the Government to translate broad reform goals into a detailed ten-year implementation plan. The continuation of this involvement both financially and through technical advice is important for effective implementation of the reform program. 8. AgtMd Actions. The Government has provided a Sector Development Policy Statement and an Action Program specifying key activities with respect to policy measures, institutional development and qualitative improvements, together with target dates and performance indicators. To support pre-effectiveness preparation activities, up to US$3.0 million equivalent in retroactive financing will be provided against eligible expenditures for civil works and technical assistance. The Government has agreed to: (i) joint monitoring by the Government and the Bank of Action Program targets through semi-annual reports, annual review meetings and a mid-term review; (ii) submit, for the Bank's approval, appraisal reports prepared by the Intermediary agency on all subprojects to be implemented during the 12-month period following the date of loan effectiveness, and thereafter to submit appraisal reports on subprojects selected by the Bank for review; and (iii) implement, starting in March 1990, the recommendations of a study of opportunities for further cost savings and cost reductions in the education system. In the event of a shortfall in OECF cofinancing (para 6), or in domestic counterpart funds, the Government has agreed to reduce total program costs by extending the implementation period of the school construction program to cover the amount of the shortfall. In any event, the Government will maintain all other activities of the reform program intact. A condition of effectiveness of the Bank loan would be the signing by the Government of the cofinanciers' (ODA and OECF) loan agreements. 9. Benefits. The prime benefit of the project would be the upgrading of Jordan's human resources base into an increasingly knowledge-intensive, skills-adaptable work force, capable of responding flexibly to changing -4- employment opportunities and needs. This Ia turn would give Jordan the manpower it needs to promote high value-added, technology-based, export-oriented manufacturing and service activities, as well as helping to revive Jordan's competitiveness as a regionwide source of skilled labor. Specific benefits would include the following: basic education quality would be strengthened, spe:ialization at the secondary level enhanced, and technical/vocational education madn more relevant to modern technology and market needs; teacher quality would be upgraded, and other educational inputs/resources wo4ld be substantially improved and used more cost-effectively. The capacity of the education system would be qualitatively enriched and the basis would be laid for long-term, ongoing reform through the 1990s and beyond. The delegation of subproject appraisal and supervision responsibility to the Government would help enhance its planning and management capacity and support the application of objective criteria to other investments in the sector. 10. Risks. The operation has two potential risks. The first concerns external and domestic financing. Should OECF cofinancing not materialise in the full amount (paras 6 and 8) or should domestic financial constraints reduce the amount of counterpart funding availabl.j to the operation, the Government has agreed to reduce total program costs by extending the implementation period of the school construction program to cover the amount of the shortfall. The second risk concerns the capacity to implement a sector operation. The complexity of the program and the large number of subprojects (over 30), many of which are interlinked within and across program components, could overstretch the Government's implementation capacity. This risk is mitigated by the following factors: the beneficiary institutions and the Intermediary have been instrumental in planning and designing the reform and its components (and are therefore fully knowledgeable about its objectives and implementation requirements); the SIL incorporates a large technical assistance component (about 107 manyears of in-country training and overseas fellowships and 30 manyears of specialist services, a portion of which has already started) to supplement indigenous technical and managerial capacity; the program is incremental and can be adjusted over time to take account of implementation delays; and there are extensive built-in opportunities for Government/Bank reviews of progress against the detailed targets and performance 1idicators set forth in the mutually agreed Action Program. 11. Recommendain. I am satisfied that the proposed Loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed Loan. Barber B. Conable President Attachments Washington, D.C. May 22, 1989 -5- Schedule A THE HASHEMITE KINGDOM OF JORDAN HUMAN RESOURCES DEVELOPMENT SECTOR INVESTMENT LOAN Estimated Cost and Financing Plan Estimated Costofthe SectorPram a/ Local Foreign Total -(US$ million)-- 1. Curriculum Development 0.0 0.1 0.1 2. Textbook Development 3.8 4.0 7.8 3. Teacher/Supervisory Staff Training 21.9 12.0 33.9 4. Educational Technology 3.7 5.2 8.9 5. Educational Facility Improvement 82.2 57.7 140.0 6. Vocational Training 3.3 4.6 7.9 7. Education Research and Development 1.2 1.0 2.2 8. Program Management 0.5 0.3 0.8 Total Base Costs b/ 116.5 85.1 201.6 Physical Contingencies 8.0 8.3 16.3 Price Contingencies 23.9 10.7 34.7 Total Program Costs 148.4 104.1 252.5 Financie Plan Local Forei Total (US$ million) Bank 25.1 47.9 73.0 ODA .4 1.0 1.4 OECF c/ 17.8 55.2 73.0 Government 105.1 -0- 105.1 (of which taxes and duties) (23.1) -0- (23.1) Total 148.4 104.1 252.5 a/ Inclusive of taxes and duties. b/ Totals do not add up due to rounding. c/ The Japanese Government is considering cofinancing in an equivalent amount to the Bank loan, i.e., US$73.0 million. Although no final response has been received, Japan is expected to provide this amount. An observer from the Japan OECF participated in the Bank's appraisal mission and we expect the OECF appraisal to take place shortly. The signing of the loan agreement between OECF and the Borrower is a condition of effectiveness of the Bank's loan agreement. Should the amount of the OECF loan ba less than the amount applied for, the school construction under the program will be adjusted in light of the financing available. -6- Schedule B Page 1 of 2 THE HASHEMITE KINGDOM OF JORDAN HUMAN RESOURCES DEVELOPMENT SECTOR INVESTMENT LOAN Procurement Methods and Disbursements Procurement Methods Project Element Procurement Method Total ICB LCB Other N.A Cost (US$ million) Civil works: schools, special 26.0 73.5 45.5* - 145.0 facilities, textbook (16.9) (47.8) (64.7) distribution centers and teacher training facilities Land acquisition - - - 32.7 32.7 Equipment, furniture and library - - 44.0* - 44.0 books Technical assistance: specialists' - - 6.3 - 6.3 services, local and overseas (4.9) (4.9) training Textbook production: printing - 5.8 0.9 - 6.7 and authorship (3.4) (3.4) Teacher training - - - 15.5 15.5 O&M and incremental salaries - - - 2.3 2.3 TOTAL 26.0 79.3 96.7 50.5 252.5 (16.9) (51.2) (4.9) (-) (73.0) - azzmcmmm- Note: Figures in parentheses are the respective amounts financed by the Bank. * Subject to cofinanciers' procurement procedures. -7- Schedule _ Page 2 of 2 IBRD Disbursements Expenditures to be Financed Category Amount (Us$ million) % Civil Works 64.7 651 of total expenditures Textbook Printing 3.4 502 of total expenditures technical Assistance 4.9 1001 of foreign and 901 of local expenditures TOTAL 73.0 Estimated IBRDment Bank Fiscal Year 1990 1991 1992a93 99 US$ Million Annual 12.0 12.5 14.0 16.5 18.0 Cumulative 12.0 24.5 38.5 .55.0 73.0 -8- Schedule C THE HASHEMITE KINGDOM OF JORDAN HUMAN RESOURCES DEVELOPMENT SECTOR INVESTMENT LOAN Timetable of Key Projeet Processing Events 1. Time Taken to Prepare: One year 2. Prepared By: Government with Bank assistance 3. First IBRD Mission: December 1987 4. Appraisal Mission Departure: December 1988 5. Negotiations: March 1989 6. Planned Date of Effectiveness: September 1989 7. List of Relevant PCRs & PPARs: First Education Project (CR-0285-JO) PPAR No. 2494, Sec. M79-336 Second Education Project (CR-0534-JO) PCR NO. 4261 Third Education Project (LN-1781-JO) PCR No. 6251 -9- Schedule D Page 1 of 2 THE HASM T KINGDOM OF JORDAN Status of Bank Group Operations in Jordan (US$ Million) A. Statement of Bank Loans and IDA Credits (As of January 31, 1989) Loan/ Amount Credit (less cancellations) Number Year Borrower Purpose Bank/IDA Undisbursed 15 Credits/ 9 Loans fully disbursed 300.5 2068 1982 Jordan Education IV 25.0 5.6 2213 1983 Water Supply 17.0 2.6 2246 1983 Education V 18.8 5.6 2334 1983 Urban Transport 25.0 14.1 2371 1984 Energy Dev. I 30.0 4.1 2378 1984 Education VI 40.0 9.1 2463 1985 Multi-Mode Transp. 30.0 15.6 2531 1985 Health 13.5 10.3 2587 1985 Urban Dev. II 26.6 17.6 2614 1986 CVDB LL 15.0 9.0 2633 1986 Manpower Dev. 10.2 5.7 2694 1986 Water Supply 50.0 24.2 2710 1986 Power VI 27.5 15.5 2786 1987 Arab Potash II 12.0 3.8 ';841 1987 Nat'l Urban Dev. 26.4 23.2 2890 1988 Education VII 40.0 37.0 2902 1988 JPMC Phosphate Mining 31.0 29.0 2953 1988 a/ Jordan Telecommunications 36.0 36.0 GRAND TOTAL b/ Of which repaid 84.2 Total now outstanding a/ Not yet signed. b/ Includes exchange rate adjustments and cancellations. - 10 - Schedule D zaae 2 of 2 THE HASHEMITE KINGDOM OF JORDAN Status of Bank Group Operations in Jordan B. Status of IFC Investments (As of January 31,1989) Year Obligator Type of Business Loan Equity Total 1974 Jordan Ceramic Ind Co. Ceramic tiles 1.6 0.2 1.8 1975/78 Jordan Fertilizer Ind. Co. Phosphatic fertilizer 79.5 8.7 88.2 1981/82 1979 Jordan Lime and Silicate Building materials 2.5 1.3 3.8 1979 Jordan Securities Corp. Money and capital market 0.7 0.7 1980 Jordan Leasing Co. Ltd. Leasing 0.3 0.3 1988 Al-Mikma Pharmaceuticals Co. Manufacturing 2.2 2.2 Total commitments 85.8 11.2 97.0 Less: Total commitments repaid, sold or cancelled 71.8 9.3 81.1 Total commitments now held by IFC 11.2 Total undisbursed -