Morocco - Rural Basic Education Development Project

Dcument of The World Bank FOR OFFICIAL IJSE ONLY Repat No. P-5358-MOR MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$145 MILLION TO THE KINGDOM OF MOROCCO FOR A RURAL BASIC EDUCATION DEVELOPMENT PROJECT r JANUARY 28, 1991 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CaRRENCY AMD EoUIVAIENT UNITS (As of October 1990) Currency Unit - Moroccan Dirham (DH) US$ 1.00 - DH 7.9 DH 1.00 - US$ 0.13 !ISCAL YEAR January 1 - December 31 GLOSSARy OF ABBREVIATIONS ADB - African Development Bank ESRP - Education Sector Reform Program (Loan 2664-MOR) MOE - Ministry of Education  FOR OFFICIAL USE ONLY KINGDOM OF MOROCCO RURAL BASIC EDUCATION DEVELOPMENT PROJECT LOAN AND PROJECT SUMMARY Borrower: Kingdom of Morocco Beneficiary: Ministry of Education Loan Amount: US $145 million equivalent Terms: 20 years, including 5 years of grace, at the Bank's standard variable interest rate. FinancinQ Plan: Government US $ 48.0 million IBRD US $145.0 million ADB US S 45.0 million Total US $238.0 million Economic Rate of Return: Not Applicable Staff Appraisal Report: Report No. 8936-MOR. This document has a restricted distribution and may be used by recipients only in the performance of their otficial duties. Its contents may not otherwise be disclosed 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 KINGDOM OF MOROCCO FOR A RURAL BASIC EDUCATION DEVELOPMENT PROJECT 1. The following memorandum and recommendation on a proposed loan to the Kingdom of Morocco for US$145 million equivalent is submitted for approval. The proposed investment loan would be on standard IBRD terms with 20 years maturity and would help finance the Government's Rural Basic Education Development Project. The project would be cofinanced by the African Development Bank in the amount of US$45 million equivalent. 2. Background Morocco's outward-oriented growth prospects and its efforts to reduce poverty remain handicapped by widespread and, regrettably, rising illiteracy (now about 55% for men and 78% for women). Basic education enrollment, the main engine of emancipation, expanded very rapidly between 1960 and 1980. Since 1980, however, the school-age population has increased by an average of 2.4% a year, but school attendance growth has slowed down to 2%. Enrollment rates have therefore decreased: they now stand at only 50% at the end of the primary cycle, well below lower-middle- income country comparators. Within this disturbing general trend, there are alarming gender and regional disparities: the primary completion rate in rural areas (1989/90) is 25% overall, as against 87% in urban areas, and only 13% of rural girls of the relevant ages, as against 85% of their urban counterparts, were still in primary school. 3. Resource allocation issues, In an effort to stabilize its economy, Morocco embarked on an austerity program in the 80s, which resulted in substantial real per capita budget reductions, including in the education sector. The budget share allocated to that sector, however, did not diminish, and education continued to receive about 30% of the Government's recurrent budget. Only a tiny fraction of this, however, goes on critical non-salary items for basic education, such as boarding and canteen scholarships which encourage attendance by disadvantaged students, atnd educational materials or fuel for school inspectors' vehicles which contribute to quality improvement. Until recently, families bore the full cost of most basic textbook and supplies purchases. Within the basic education budget, real teacher salaries remained roughly constant throughout the 80s but the wage bill grew by over 4% p.a. (twice as fast as enrollments) as rural expansion implied somewhat lower pupil:teacher ratios. Meanwhile, the real boarding scholarship allocation fell by more than half, resulting in reduced access for rural students. The internal distribution of the education investment budget is an added concern. Strong social pressure for urban secondary and higher education compressed the share of basic education in the MOE investment budget from 85% to 75% during the 80s. 4. The special problems of rural education. In the 80s, universal basic education was rapidly becoming a reality in the cities, marked by very little gender disparity. Major additional improvements in school attendance nation- wide had to come from previously underserved rural populations with quite different characteristics. The education system, with hindsight, failed to recognize to what extent this new client group required specific measures to generate effective demand and tailor services accordingly. Efforts concentrated mainly on building schools closer to rural settlements, undoubtedly a strong contributing factor to initial enrollments, albeit at rising unit costs. These  - 2 - efforts, however, were not complemented by programs specifically designed to increase participation: awareness campaigns to promote the direct and indirect benefits of education, particularly for girls, were only started in 1989; availability of affordable educational materials and textbooks remained sporadic; selection criteria for student teachers gave no weight to readiness to serve in rural areas, and the lack of career or housing incentives for such assignments resulted in excessive teacher turnover; only a small proportion of rural schools had canteens providing a free meal, and even fewer had safe water, sanitation or electricity; and the higher opportunity cost of child labor at home or in the fields was not adequately factored into school schedules and curricula. 5. Middle schools: the missing bridge. Half the population Is rural, yet only 7% of middle school (basic education grades 6 to 9) places are in rural areas. This means that a rural fifth-grader, especially the o..e girl in eight to get that far, and her family, must overcome enormous barriers - logistical, financial, psychological - if she is to capitalize on this early learning and aim to complete the basic cycle, let alone reach for other opportunities contingent on completion. The immediate hurdle involves uprooting the student 30 miles or more, usually without the option of public transport. This is sustainable only for the few who have close relatives or access to supervised public boarding places in the city. The labor market payoff to these clear- cut costs and risks is distant and uncertain, whilst the daughter's contrib- ution to the household is tangible, immediate, and coming close to its peak. In the home vicinity, meanwhile, there are few if any integrated role-models of successful school graduates beyond the primary level, especially female school teachers, to help balance these disincentives. In sum, when the whole education and career system, beyond the village school, is seen as a loaded lottery, it is hardly surprising that rural parents' perception of the returns to basic education diverge from the longer-term returns to society, and therefore that primary attendance can lag behind available places. 6. Government Strategy. The underlying problems at the primary cycle are being addressed under the FY89 Rt:ral Primary Education Project, which focuses on increasing access and participation in rural areas through a joint program of school construction and targeted measures to promote demand, including text- book programs, awareness campaigns targeted on female education, housing and recruitment incentives, and improvements in school food, water and sanitation conditions. The Government has also commissioned a major operations research study, supported by the 1990/91 LSMS (Living Standard Measurement Survey) and a complementary Bank-executed Japanese technical assistance grant, designed to quantify school and home-environment constraints to basic school attendance, especially for rural girls, and identify, prioritize and test additional policy measures. 7. Moreover, in preparation for a likely second Structural Adjustment operation, Government has agreed in principle inter alia to very substantial real increases in non-salary operating budgets for basic education and to review the structure of the civil service, numerically dominated by primary and secondary teachers. This sharply reverses the negative trend described in para. 3 above. Government is also committed to restructure public higher education and encourage private post-secondary education institutions, thereby diversifying funding sources for growth of this sub-sector and taking budgetary  - 3 - pressure off basic education. The remaining major building block of the strategy is a comprehensive middle school development program, targeted on rural areas, supported through the proposed project. 8. Rationale for Bank Involvement. Universal basic education is the centerpiece of the fight against poverty through productivity, hence the Bank's key long-term country operational goal. This implies sustained Bank involve- ment spanning several phases of support over at least two decades, given the enormity of the challenge and the complexity of the technical and social constraints to be overcome. The proposed operation flows directly from experi- ence with the FY86 Education Sector Reform Program, which set the policy framework for basic education, and the above-mentioned Rural Primary Education Project, which covers investment needs at that level through 1994 and will sharply increase the numbers of qualified candidates for middle school. Con- versely, without an accessible rural middle school option, the credibility of the entire basic education cycle would suffer. The Bank's sustained presence was instrumental in triggering a renewed medium-term public expenditure program for middle schools by Government (para. 12), strongly focussed on the needs of rural populations, and girls in particular. It also helped underpin a second phase of African Development Bank (ADB) cofinancing for this sub-sector. Finally, the proposed operation complements the social expenditure goals of the proposed Second Structural Adjustment Loan and a follow-up project aimed at reorganizing higher education finances, under active preparation (para. 7). 9. Prolect Objectives. The objectives of the project are: a) to promote equality of educational opportunity at the middle school level by improving access and participation, particularly to deprived sectors of the population such as those in rural areas and especially females; and b) to enhance the teaching-learning environment by contributing to the improvement of basic education quality, nationwide. 10. Project Description. To achieve these objectives, the proposed project would finance: (i) the construction, equipping and furnishing of about 250 middle schools in rural areas, each accommodating some 360 students in a cluster of 9 classrooms, close to targeted communities chosen on the basis of primary school graduate demand projections and availability of supporting services (roads, water, electricity). Design standards for construction and equipment were reviewed in detail to minimize costs, yet provide adequate flexibility to school districts who need to adapt to local climate and terrain. All schools would have teacher housing as well as canteen facilities accommodating one in three students, and about one out of eight schools would have boarding facilities; (ii) the rehabilitation and partial reequipment of about 100 dilapidated middle schools; (iii) canteen and boarding scholarships, which would be provided on an equal basis (based on actual demand) for boys and girls; (iv) educational materials and textbooks for all participating schools, to be provided free or at nominal user fees to students; (v) vehicles for inspectors and a program to strengthen curriculum development; (vi) the introduction of a national educational achievement assessment program; (vii) a two-phase study to measure the impact of factors affecting middle school participation in rural areas; and (viii) a comprehensive in-service teacher training program.  -4- 1U. Costs and Financint. The total project cost of US$238.0 million fquivalent net of taxes would be financed as follows: (a) the proposed Bank loan of US$145.0 million would finance 611 of project costs; (b) the proposed ADB loan would finance an additional US$45.0 million equivalent or 19X of total project costs; and (c) the Government would finance US$48.0 million equivalent or 20X of project costs. The Government would also finance about US$45 million in direct and indirect taxes. The proposed IBRD and ADB loans would finance 100% of the foreign exchange component (US$101.6 million) and the IBRD loan would also finance 65% of local costs (US$88.4 million) excluding taxes. Net incremental recurrent costs for the last year of the Project (1996) are estimated at US$25 million (in 1990 terms), which represents about 41 of the 1990 MOE recurrent budget for secondary education and less than 1X of the 1990 Government recurrent budget. A breakdown of costs and financing plan is shown in Schedule A. Amounts and methods of procurement and disbursement are included in Schedule B. A timetable of key processing events and the status of Bank operations in Morocco are given in Schedules C and D, respectively. Further details are included in the Staff Appraisal Report No. 8936-MOR of January 28, 1991, being distributed separately. 12. Asreed Action. Before negotiations, the Government confirmed, through a latter of intent, its commitment to carrying out a national program to develop upper basic education in both rural and urban areas and to allocate sufficient budgetary and manpower resources to this program. It also designated MOE's Planning Directorate as project coordinating unit. During negotiations, the Government agreed that: (i) before loan effectiveness, it would satisfy the conditions of effectiveness of the ADB Loan Agreement (other than effectiveness of the Bank Loan Agreement); (ii) no later than December 31, 1991, they would provide, for Bank review and approval, a detailed plan for the provision of textbooks; (iii) a two-phased study would be carried out to assess the impact of measures to reduce gender and geographic disparities in access to middle schools. The first phase would be completed no later than December 31, 1992 and the second phase would be completed no later than December 31, 1995; (iv) no later than August 31st of each year, the Borrower would review with the Bank progress achieved in the upper basic education program and data on performance indicators; and (v) a technical unit would be established in each region, staffed with at least one architect or technical agent, one engineer and support personnel, prior to launching bids for the construction of middle schools in that region. As part of its reporting requirements, the Borrower would also furnish by August 31st of each year the proposed investment and recurrent budgets of the Ministry of Education for the next year. 13. Benefits. Increasing opportunities to complete nine years of basic education of better quality would enable more of the country's youth to meet the prerequisites for acquisition of higher level skills and entry into the modern work place. Concentrating on increasing enrollments in upper basic edu- cation in rural areas, particularly for girls, would render the provision of education more equitable. Expanding and improving education of girls would con- tribute positively to important social indicators, especially the reduction of adult female illiteracy and the higher fertility and infant mortality rates associated with it. In quantitative terms, the benefits would include an in- crease of about 120,000 at full capacity in the number of students enrolled in upper basic education in rural areas. This increase is very significant when  - 5 - compared to the 1989-90 total enrollments in rural areas of less than 52,000 students: the expectation is that almost one-third of rural primary school leavers, four times today's proportion, will find p.laces near their homes. Additional benefits include enhancement of educational quality student learning as a result of in-service teacher training programs, better instructional materials, improved supervision, and introduction of achievement assessment activities. 14. Risks. The main risk lies in tight public finance constraints which will exert constant downward pressure on low-visibility rural basic education spending, in spite of solemn commitments to the contrary. To guard against this, external financing will concentrate heavily on project components aimed at increasing access (construction and equipping of new schools, rehabilitation of existing schools, provision of textbooks, educational materials and boarding and canteen scholarships). Government's project contribution will concentrate on incremental teacher salaries and in-service teacher training: the Government will be the sole financier of its urban middle schools development program. Moreover, the proposed FY93 Higher Education Funding Reform Project, by promoting cost-recovery mechanisms and the expansion of private education, should lessen the risk of insufficient funding for basic education by creating an outlet for excess demand for higher levels. 15. Some residual uncertainty inevitably remains as to the strength of demand for basic education on the part of targeted groups - disadvantaged rural populations and, more specifically, girls - for whom the schooling decision is still imperfectly understood, in Morocco as elsewhere. This uncertainty, however, only affects part of the expected growth in rural enrollments, since the rest reflects retention in their environment of rural students who would otherwise try to enrol in urban schools (but thereafter often drop out). Also, the project includes a number of measures directly aimed at encouraging participation: closer schools, boarding and canteen scholarships and provision of textbooks free of charge or at nominal fee. Finally, lower-than-projected demand would be identified through performance indicators monitored in the context of annual reviews and school construction programs for subsequent years would be adjusted to maximize utilization of existing schools. 16. Environmental Impact. The Project was reviewed under the Bank's Environmental Assessment procedures and determined to be in Category C, for operations which do not result in a significant environmental impact. 17. Recommendation. 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, DC January 28, 1991  -6 Sched-ule A KINGDOM OP MOROCCO RUMAL BASIC EDUCATIPN DEVELOPMENT PROJECT ESTIMATED COSTS AND PINANcING LAN Estimated Costs by ComponentJJ: USS Million Local Eoreign total A. School Construction and Equipment 68.0 76.7 144.7 S. School Rehabilitation 2.6 2.4 5.0 C. School Equipment and Textbook Programs 3.0 6.7 9.7 D. In-Service Teacher Training 5.3 0.3 5.6 E. Institutional Development 0.0 2.0 2.0 F. Boarding and Canteen Scholarships 3.7 1.0 4.7 G. Incremental Salaries .IZ1 1Q 37.1 Total BASELINE COSTS 119.7 89.1 208.8 Physical Contingencies 3.8 4.4 8.2 Price Contingencies 12.9 8.1 21.0 TOTAL PROJECT COSTS 136.4 101.6 238.0 linancing Plan: USS Million Local Foreign Total Government 48.0 - 48.0 IBRD 88.4 56.6 145.0 ADB - 45.0 45.0 T O T A L 136.4 101.6 238.0 S net of taxes.  7 $2beftle a Page 1 of 2 KINGDOM OF MOROCCO RURAL BASIC EDUCATION DEVELOPMET PROJECT PROCUREMENT METHOD AND DISBRSEMENTS (US$ Million) Procurement Arranggments' -------- US$ Million ---------------- Categorv of Expenditures Procurement Method Tct l Ccst IQC LCB Other, N/A Civil Works 136.9 136.9 (107.5) (107.5) Equipment and Vehicles 2.5 2.0 4.5 (2.2) (1.5) (3.7) Furniture 7.8 7.8 (5.9) (5.9) Books and Educational Materials 29.7 3.0 32.7 (23.6) (1.5) (25.1) Experts Service and Fellowships 2.3 2.3 (1.8) (1.8) In-service Training 5.7 5.7 (0.0) (0.0) Scholarships 5.4 5.4 (1.1) (1.1) Incremental Salaries 42.8 42.8 (0.0) (0.0) Total 32.2 144.7 5.0 56.2 238.0 Bank financing (26.). (113.4) (3.0) (2.9) (145.0) V Figure in parentheses are the respective amounts financed by the Bank.  -8l Scebdule B Page 2 of 2 KINGDOM OF MOROCCO RURAL BASIC EDUCATION DEm LOPMENT PROJECT D I S B R Sn E N T S Disbursements would be made against: i. 80X of expenditures for civil works; ii. 100l of foreign expenditures for directly imported items, 100l of local expenditures (ex factory cost) for items manufactured locally, and 75X of local expenditures for other locally purchased items; iii. 100l of expenditures for expert services and foreign fellowships; and iv. 50X of expenditures for boarding and canteen scholarships. ESTINATED IBRD DISBURSEMENTS -U.S..-- US$ Million----------- Bank Fiscal Year FY92- FY93 FY94 FY95 FY96 EY97 Annual 8.0 22.0 25.0 30.0 30.0 30.0 Cumulative 8.0 30.0 55.0 85.0 115.0 145.0  -9- Sghedule C &INGDQX OF MOROCCQ RMRAL BASIC EDUCATION DEEL&OPMENT PROJECT (a) Time taken to prepare: 22 months (b) Prepared by: Governmerut with Bank assistance (c) First Bank preparativ>. mission: April 1989 (d) Appraisal mission departure: May 1990 (e) Date of negotiations: January 1991 (f) Planned date of effectiveness: June 1991 (g) List of relevant PCRs and PPARs: First Education Project (Cr. 79-MOR; PPAR No. 1637); Second Education Project (Cr. 266-MOR; PPAR No. 4545); Third Education Project (Ln. 1220-T-MOR; PPAR No. 6845). T Manager: Catheriise Klrdboff MM;2P5): Divisla cgef: Andrew Rogerson (RU2PH); Dipreeor: Kemal Dervis (EM2DR); Poor Rz.e : Eileen lkwnxga WAP4PR)  - 10 - Scedula D (pace I of 2) The Status of Bang Group Ooerations In Morocco Statement of Bank Loans and IDA Credits (As of DOecember 31.1990 UN Mimlon Amoum oan or EFial (less cancellations) CreitNo Year Borrower Mmase ggnl IDA Undisursd Sixty-one lans and five credits fully disbursed 2,76.87 45.16 Of which SALs. SECALs. and Program Loans la 2377 1984 Kingdom of Morocco Ind. Tr. Pol. (SAP) 150.40 2590 1985 Kingdom of Morocco Agric. Sector I 100.00 2604 1986 Kingdom ot Morocco Ind. Tr. Pol. Adi. II 200.00 2664 1986 Kingdom of Morocco Education Sector I 15Q000 3001 1989 Kingdom of Morocco SAL I 200 00 Sub-total 800.40 2082 1982 Kingdom of Morocco Ag. Dev. Middle Atlas 11.00 2.33 2217 1983 Kingdom of Morocco Ag. Dev. Oulmes 16.00 8.34 2253 1983 Kingdom of Morocco Small & Med. lrrig. 34.00 14.51 2254 1983 CIH Highways IV 76.60 0.25 2479 1985 Kingdom of Morocco Voc. Trng. l 27.10 11.20 2487 1985 Kingdom of Morocco Elec. Mech. Ind. 25.10 7.84 2508 1985 Kingdom of Morocco Jerada Coal 21.00 7.52 2572 1985 Kingdom of Morocco Health Development 28A0 18.39 2656 1986 Kingdom ot Morocco Large Irrgn. Improv. 46.00 20.94 2657 1986 Pon Authority PotProject 22.00 11.76 2779 1987 Kingdom of Morocco Voc. Training II 22.30 11.71 2798 1987 ONPT Telecommunications I 116.00 96.65 2806 1987 BNDE Ind. Exp. Finance 1 70.00 10.58 2820 1987 Kingdom of Morocco PERL I 240.00 0.44 2825 1987 Kingdom of Morocco Natl. Water Supply 60.00 55-34 2826 1987 Kingdom of Morocco Greater Casablanca Sew. 60.00 54.58 2885 1988 Kingdom of Morocco Agr. Sector II 226.00 75.00 2910 1988 Kingdom ot Morocco Power Distbuton 90.00 87.78 2954 1988 Kingdom of Morocco S & M Irrig. ll 23.00 21.88 3026 1 989 Kingdom of Morocco Rural Primary Education 83.00 71.95 3036 1989 Kingdom of Morocco Agric. Ext. & Res. 28.00 28.00 3048 1989 Kingdom of Morocco Public Admin. Loan 23.00 23.00 3088 1989 CNCA National Agric. Credit 190.00 124.78 3121122 1990 CIH Housing Finance 80.50 31.23 3136 1930 Kingdom of Morocco Industrial Finance 170.00 87.96 3156 1990 Kingdom of Morocco Forestry II 49.00 49.00 3168 1990 Kingdom of Morocco Highway Sector 79.00 75.87 3171 1990 Kingdom of Morocco Health Sector 104.00 104.00 3262 1991 KJngdom of Morocco Rural Elect. 11 lb 114.00 114.00 3283 1991 Kingdom of Morocco Port Sector/b 33.00 33.00 3284 1991 ODEP Port Sector lb SQ 99.00 TOTAL 5.031.87 45.16 1,358.83 Of which has been repaid (only amortization) 1.138.11 6.06 Total held by Bank and IDA 3,693.76 39.10 Amount sold 20.11 of which repaid 20.11 Total Undisbursed 1,358.83 * SAL. SECAL or Program Loan /a Approved after FY80 lb Not yet signed. C:NDlS8XMOR-MOP  - 11 Schedule 0 (page 2 of 2) Statement of IFC Investments In Morocco lAs of December 3t. 190 Oriainal Gross Commitment Fiwcal (US$ Million) Year Obliaator Type of Business kLoq EaltvY Total I 1962 Banque Nationale pour Development Finance 84.23 2.70 86.93 1978 le Dev. Econ. (BNDE) 1983 1985 1990 1966 Societe Industrielle Agroindustry 0.89 0.5 1.39 de Lukus 1976 Societe de Ciments Cement Production - 1.22 1.22 de Marrakech S.A. 1977 TEMARA Cement Cement Production 4.75 3.57 8.32 1979 Ciments d'Agadir Cement Production 14.71 - 14.71 1980 Societe Miniere du Bou- Mines 12.99 2.35 15.34 Gaffer (SOMIFER) 1981 Cimenterie Nouvelle Cement Production 15.80 2.04 17.84 1982 de Casablanca 1985 FRUMAT Agroindustry 7.58 - 7.58 1987 Credit Immobilier et Financial Institution 146.88 - 145.88 1989 Hotelier (CIH) 1990 1987 Settat Filature Textile Factory 3.47 1.39 4.86 (SETAFIL) 1987 Cigales-Maroc S.A. Agar Production 1.00 0.30 1.30 1989 COMARIT Ferry Service 6 Total gross commitments 297.60 14.07 311.67 Less cancellations, terminations, repayments, sa;es and exchange adjustments 164.86 Z722 172.08 Total commitments held by IFC 132.74 6.85 139.59 ot which undisbursed 0.00 0.00 0.00 IFC net. Does not Include participants from commercial banks