Nepal - Higher Education Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 11924-NEP STAFF APPRAISAL REPORT NEPAL HIGHER EDUCATION PROJECT NOVEMBER 23, 1993 Population and Human Resources Division Country Department I South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit * Nepalese Rupees (NRs) US$1.00 = NRs 49.58 FISCAL YEAR July 16 - July 15 PRINCIPAL ABBREVIATIONS AND ACRONYMS USED CDC - Curriculum Development Center CNSE - Council for Higher Secondary Education EMIS - Educational Management Information System GDP - Gross Domestic Product ICB - International Competitive Bidding IDA - International Development Association LCB - Local Competitive Bidding MIS - Management Information System MOEC - Ministry of Education and Culture MOF - Ministry of Finance NEC - National Education Commission PCU - Project Coordination Unit SLC - Secondary School Leaving Certificate TU - Tribhuvan University UNDP - United Nations Development Programme USAID - United States Agency for International Development  FOR OFFICIAL USE ONLY NEPAL HIGHER EDUCATION PROJECT Table of Contents Page No. Credit and Project Summary ....................... . iii BASIC DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi I. SECTOR CONTEXT ... . . . . . . . . . . . . . . . . . . . . . .. 1 A. Background .1.. . . . . . . . . . . . . . . . . . . . . . . . I B. The Education System .1.. . . . . . . . . . . . . . . . . . . I C. Main Issues in Higher Education ... . . . . . . . . . . . . . 3 D. Government Strategy ... . . . . . . . . . . . . . . . . . . 11 E. IDA's Country and Sector Assistance Strategy . . . . . . . . . 11 F. Rationale for IDA Involvement ... . . . . . . . . . . . . . . 13 II. THE PROJECT ... . . . . . . . . . .... . . . . . . . . . . . . 13 A. Project Origin ... . . . . . . . . . . . . . . . . . . . . . 13 B. Project Design and Objectives ... . . . . . . . . . . . . . . 14 C. Project Components ... . . . . . . . . . . . . . . . . . . 15 III. PROJECT COSTS, FINANCING, PROCUREMENT AND DISBURSEMENTS . . . . . . 18 A. Project Costs ... . . . . . . . . . . . . . . . . . . . . 18 B. Financing ... . . . . . . . . . . . . . . . . . . . . . . . . 19 C. Procurement Arrangements ... . . . . . . . . . . . . . . . . 20 D. Disbursements ... . . . . . . . . . . . . . . . . . . . . . . 22 IV. IMPLEMENTATION AND SUPERVISION . . . . . . . . . . . . . . . . . . . 22 A. Project Organization and Management . . . . . . . . . . . . . . 22 B. Monitoring and Supervision ... . . . . . . . . . . . . . . . 23 C. Auditing ... . . . . . . . . . . . . . . . . . . . . . . . . 24 V. PROGRAMS OF SPECIAL EMPHASIS ... . . . . . . . . . . . . . . . . . 25 VI. BENEFITS AND RISKS ... . . . . . . . . . . . . . . . . . . . .. 25 A. Benefits ... . . . . . . . . . . . . . . . . . . . . . . . . 25 B. Risks ... . . . . . . . . . . . . . . . . . . . . . . . . . . 26 C. Project Sustainability ... . . . . . . . . . . . . . . . . . 26 VII. AGREEMENTS REACHED AND RECOMMENDATION . . . . . . . . . . . . . . . 27 Staff Review Arranqements: Messrs./Mmes. A. Hamilton, Director (SA1PH); M. Karcher, Chief, G. Sinclair, Task Manager (SAIPH); Peer Reviewers Messrs/Mme.. Hykin (higher education, ASTHR); Johnston (policy development, EAlPH); Selvaratnam (higher education, ESP). Mission Members: Messrs./Mmes. Sinclair (leader), Abadzi (education specialist, SAIPH); Johnston (education specialist, ASTHR); Min (educational finance specialist), Coyle (architect), Valdez (management information system specialist), Linklater (librarian), Consultants. 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.  - ii - ANNEXES Annex 1 Table 1 Enrollment Growth in Tribhuvan University . . . . 28 Table 2 Expenditures of Tribhuvan University . . . . . . 29 Annex 2 Libraries of Tribhuvan University . . . . . . . . . . . . . . 30 Annex 3 Current Situation and Future Scenarios of Higher Education Finance in Tribhuvan University . . . . . . . . . . . . . . . 34 Table 1 National Financial Situation and Higher Education Expenditure in Nepal (1981- 1992) . . . . . . . . . . . . . . . . . . . . . . 37 Table 2 Higher Education Expenditure in the Eighth Plan (1991/92-1996/97) . . . . . . . . . . . . . 38 Table 3 Tribhuvan University Financial Scenario Without Policy Changes . . . . . . . . . . . . . 38 Table 4 Tribhuvan University Financial Scenario With Policy Changes (Option 1) . . . . . . . . . 39 Table 5 Tribhuvan University Financial Scenario With Policy Changes (Option 2) . . . . . . . . . 39 Table 6 Comparison of Financial Scenarios for Tribhuvan University for the Eighth Plan Period (1992-97) .40 Annex 4 Implementation Issues in Higher Secondary Education Relative to Higher Education .41 Annex 5 Organizational Structure of Tribhuvan University . . . . . . 45 Annex 6 Course Examinations .47 Annex 7 Curriculum Development .49 Annex 8 Selected Policy Actions, IDA Interventions, and UNDP Self- Study Activities . . . . . . . . . . . . . . . . . . . . . . 55 Annex 9 Policy Statements . . . . . . . . . . . . . . . . . . . . . . 60 Annex 10 Management Information System Needs of Tribhuvan University . 64 Annex 11 Table 1 Expenditure Summary . . . . . . . . . . . . . . . 69 Table 2 Expenditure Accounts by Components . . . . . . . 70 Table 3 IDA Disbursement Schedule . . . . . . . . . . . . 71 Table 4 Disbursement Accounts by Financiers . . . . . . . 72 Annex 12 Table 1 Implementation Schedule, Physical Facilities . 73 Table 2A Implementation Schedule, Educational Activities, Examinations . . . . . . . . . . . . 75 Table 2B Implementation Schedule, Educational Activities, Curriculum Development . . . . . . . 76 Table 2C Implementation Schedule, Educational Activities, Higher Secondary Education . . . . . 77 Annex 13 List of Documents in the Project File . . . . . . . . . . . . 78 MAP IBRD 25032  - iii - NEPAL HIGHER EDUCATION PROJECT Credit and Proiect Summarv Borrower: The Kingdom of Nepal Amount: SDR 14.2 million (US$20.0 million) Terms: Standard with 40 years maturity Prolect Description: The six-year project is designed to provide tangible support for the ongoing reform process at Tribhuvan University (TU) by supporting the implementation of a package of policy changes in higher education, including the initiation of much-needed systemic changes in the administrative, financial, and management processes of the university. It would finance activities designed to: (a) assist institutional development, decentralization of management authority and strengthening of campus-level management; (b) improve selected facilities at three key campuses; (c) improve instructional delivery and rationalize the centralized student examination system; (d) assist the Ministry of Education and Culture (MOEC) to prepare for higher secondary education reform; and (e) develop TU's maintenance capacity. Facilities development would give priority to upgrading laboratories and library resource centers plus the rehabilitation of existing facilities at the main Kirtipur campus, and two other lead campuses expected to become the nuclei of regional universities in the future. 8enefits and Risks: By rationalizing the use of human and physical resources, the project would increase the value of the Government's investment in higher education. Enrollments would be more closely linked to the availability of physical facilities, thereby easing pressure on individual campuses and allowing organizational and management improvements to take place. Significantly increased resource mobilization and cost recovery is expected to help alleviate pressure for scarce resources on central government and improve the prospects for better funding of books, consumables, and maintenance. Institutional strengthening would improve prospects for long-term improvements in instructional delivery and manpower development. Assistance to MOEC to prepare for the introduction of higher secondary education into secondary schools would eventually benefit the university through decongestion of university campuses, and would also help to reduce the unit cost of this educational stage. The project would provide benefits to: (a) university students in the assisted campuses who would study in less congested  - iv - conditions, where demonstrated efficiency linked to greater self-management would be rewarded by better equipment, books, and maintenance; and (b) disadvantaged rural school leavers by supporting the development of higher secondary education closer to communities. Among the latter group, women would benefit particularly, in view of reluctance of many families to approve female education away from the community. The project also faces some significant risks. The policy measures facilitated by the project may create levels of student unrest that could be politically difficult to handle. The Government may be unable to resist the demands for admission to the university from the expanding ranks of secondary-school graduates. This could result in expanding enrollments, worsen the already intolerable congestion and management difficulties, and create further strong pressures for re-allocation of scarce funds from other priority areas. The risk of student unrest will be mitigated by TU moving to quickly demonstrate benefits associated with the project in terms of improved educational conditions, particularly while the more sensitive reform measures are being implemented. Poverty Category: Not applicable. Prolect Costs: Local Foreign Total ------(US$ million)----- Institutional Development 4.1 3.6 7.7 Selected Facilities Improvement 3.8 4.8 8.6 Instructional Development and Assessment 0.9 1.1 2.0 Preparation for Higher Secondary Education 0.6 0.7 1.3 Base Cost 9.4 10.2 19.6 Physical Contingencies 0.5 0.5 1.0 Price Contingencies 1.8 0.7 2.5 Total Project Cost 11.7 11.4 23.1 1/ Financing Plan: Local Foreign Total ------(US$ million)---- Government 3.1 0.0 3.1 IDA 8.5 11.5 20.0 Total 11.6 11.5 23.1 1/ Includes duties and taxes estimated at US$1.2 million equivalent.  v Estimated IDA Disbursements FY 94 95 96 97 98 99 2000 2001 -------------------(US$ million)-------------- Annual 0.9 2.1 3.5 4.4 4.5 2.6 1.5 0.5 Cumulative 0.9 3.0 6.5 10.9 15.4 18.0 19.5 20.0 Economic Rate of Return Not applicable Mav: IBRD 25032  - vi - NEPAL HIGHER EDUCATION PROJECT BASIC DATA POPULATION: 1/ Official estimate (1991) . . . . . . . . . . . 19.4 million Average annual rate of pop.growth (1985-90) 2.6 % Adult Literacy Rate (age 15+) . . . . . . . . 36.0 t Female Adult Literacy Rate (age 15+) . . . . . 13.0 % GNP per capita (US$) . . . . . . . . . . . . . 180 ENROLLMENT, NUMBER OF INSTITUTIONS AND TEACHERS (1991): 2/ PRIMARY AND SECONDARY Number Enrollments (in '000) PROGRAMS of Schools Total Male Female %Female Primary (1-5) 18,694 2884.3 1811.0 1073.3 37.21% Lower Secondary (6-7) 4,045 378.5 259.5 119.0 31.44% Secondary (8-10) 2,079 395.3 281.8 113.5 28.71% Total 24,818 3658.1 2352.3 1305.8 35.70% Gross Girls' Gross Enrollment Enrollment Ratios Ratios Primary (1-5): 106% 83% Lower Secondary (6-7) 40t 27% Secondary (8-10): 32% 20t Teachers (1991) Total Trained Teachers Total Female Total Female Primary (1-5) 74,495 10,206 31,096 3,758 Lower Secondary (6-7) 13,005 1,485 4,428 583 Secondary (8-10) 11,627 938 5,120 514 Total 99,127 12,629 40,644 4,855 (13%) SECONDARY SCHOOL LEAVING CERTIFICATE EXAMINATIONS (1992) ReQular Exemoted Compartmental Total Appeared 94534 35519 29439 159492 Passed 23213 7837 22154 53204 Pass t 25t 22% 75% 33 %  - vii - HIGHER EDUCATION (1991) 3/ Tribhuvan University Enrollment Non-degree 1656 Certificate level 69772 Bachelor's degree 33671 Master's degree 9673 Total 114772 Student:Teacher Ratio 22.51 Teaching Staff 5065 Non-teaching employees 5511 EXPENDITURES: 5/ on education as a proportion of: 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 GDP 2.2% 2.3% 2.2% 2.1% 2.0% 2.1% Government Budget 11.2% 11.5% 9.7% 9.1% 8.9% 11.4% Total Education Budaet by Category (NRs million) Primary 467.3 623.5 698.4 779.2 1003.0 1592.6 Secondary 196.8 215.8 231.0 231.0 293.0 443.3 University 365.8 379.7 381.4 381.4 485.0 902.2 Vocational Education 24.1 28.1 32.0 32.2 34.0 54.0 Adult Education 3.2 4.5 7.8 7.8 8.0 20.0 Other (Adm., etc.) 229.2 348.2 390.0 367.9 256.0 194.0 Total 1286.4 1599.8 1740.6 1799.5 2079.0 3205.0 e of Total Education Expenditures Primary 36.3% 39.0% 40.1% 43.3% 48.2% 49.7% Secondary 15.3% 13.5% 13.3% 12.8% 14.1% 13.8% University 28.4% 23.7% 21.9% 21.2% 23.3% 28.1% Vocational Education 1.9% 1.8% 1.8% 1.8% 1.6% 1.7% Adult Education 0.2% 0.3% 0.4% 0.4% 0.4% 0.6% Other (Adm., etc.) 17.8% 21.8% 22.4% 20.4% 12.3% 6.1% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Total Education Budget by Tyve (NRs million) Regular Expenditures 242.6 271.5 286.8 319.7 385.0 471.0 Development Expenditures 1043.8 1328.3 1453.8 1479.8 1719.7 2734.0 Notes; 1/ Social Indicators of Development, 1993. 2/ MOEC, Manpower and Statistics Section, Nepal. 3/ Gross Enrollment Ratios: total enrollment regardless of age as percentage of school age population. 4/ Planning Department, Tribhuvan University. 5/ MOEC (Planning Division), MOF (Budget Speech 1991-92) and Mission estimates.   NEPAL HIGHER EDUCATION PROJECT I. SECTOR CONTEXT A. Background 1.1 Nepal is one of the poorest countries in the world, with a per capita income of only US$180. Economic growth and development have been hampered by policies which stifle private initiative and by a public administration system that is costly and ill-equipped to serve the public. Nepal's indicators of development are among the lowest in the world: about half the population lives at income levels below that estimated to be required for a minimum caloric intake; average life expectancy (52 years) and infant mortality (115 per 1,000) are similar to levels found in the poorest parts of sub-saharan Africa; and the majority of Nepal's citizens suffer from malnutrition and/or debilitating diseases. The country of about 19.4 million people is also overcrowded relative to its existing resource base; the population is increasing at the rate of 2.6 percent per year and, in the absence of an effective national family planning program, it will double by about 2015.1/ Only about 36 percent of the Nepalese over 15 years of age are literate (13 percent of females). 1.2 Major educational investments have been made since 1951 to alleviate the serious shortage of trained human resources. Primary education has been a priority area, re-emphasized by the democratic Government that was elected in May 1991. Gross enrollment rates, as a result, have been raised to about 106 percent (83 percent female) for primary education and 32 percent for secondary education (20 percent female). Although progress is encouraging, the scarcity of well trained professionals affects the implementation of all Government programs, particularly outside Kathmandu. A vicious circle has been created whereby the low quality of inputs lowers the quality and efficiency of outputs in all areas, including primary and secondary education. In order to combat poverty, better- trained and more knowledgeable teachers must be made available at all educational levels. B. The Education System Overview 1.3 Formal education through the secondary level spans a total of ten years. Five years of vrimarv education (grades 1-5 for students six to ten years old) are followed by two years of lower secondary (grades 6 and 7 for students eleven to twelve years old), and three years of secondary (grades 8 to 10 for students 13 to 15 years old). Hiiher education may encompass another six years. Two years at the Certificate level are followed by two years at the Bachelor's and another two years at the Masters' degree level. As a consequence of the 10- year schooling system, (a) the equivalents of grades 11-12 are regarded as higher education and are delivered at the university; (b) Bachelor's degree holders in Nepal have a total of 14 years of education, compared to the 15-16 l/ Social Indicators of Development, 1993.  years provided in most countries; and (c) Master's degree holders have the equivalent years of schooling of Bachelor degree holders elsewhere. Thus, Nepalese university students tend to be younger than their counterparts in other parts of the world and they have received fewer years of education. 1.4 Despite recent increases in primary education development and recurrent budgets, overall expenditures for education remain relatively low. They averaged 2.1 percent of GDP in FY88-FY92 compared to three percent for Asian countries and about four percent for developing countries during that period. The education expenditures also averaged close to 10 percent of the total Government expenditures during FY88-FY92, a level somewhat lower than the 12.5 percent average for Asian countries. In view of the high illiteracy levels and the low enrollment rates in Nepal, the figures suggest that the education sector is being under-funded. In terms of the budget allocated to Education, the large and increasing share being given to primary education (36.3 percent in 1986/87, 49.7 percent in 1991/92) reflects Government's priority on this part of the sub- sector and is appropriate. The budgetary share allocated to higher education, 28 percent (1991-92) has begun to rise after dropping to 21.2 percent (1989-90) indicating competition for scarce resources. 1.5 Compared to other sectors, education receives relatively little external aid. In 1990/91, external aid to education amounted to 12.5 percent of the total education development expenditures compared to 32.9 percent for health, 45.3 percent for agriculture, up to 86.3 percent for communications, and 98.6 percent for power. 1.6 The Government hopes to achieve universal primary education by the year 2000 and at the same time to improve the quality of educational delivery and of teacher training. IDA's Basic and Primary Education project is a large multi- donor effort that is supporting these goals (FY93-FY2000: total project cost US$136.5 million equivalent). Nevertheless, severe institutional capacity limitations are constraining growth and quality improvement at the primary education level. Special Features of Hiaher Education 1.7 Graduation from secondary school and admission to higher education are determined by a single examination, the Secondary School Leaving Certificate (SLC) examination, which is administered after grade 10. Although only a fraction of students who enter primary school ever complete all ten years and pass the SLC, all who do are automatically eligible to enter Certificate programs at the university. Dropout and repetition rates are high during the first two years of the university (41 percent and 36 percent, respectively), and only about 31 percent of a cohort complete four years on schedule. After obtaining the two- year Certificate (after 12 years of education), many students may not go on to obtain a Bachelor's degree, since the Certificate enables them to teach primary school or become mid-level technicians. 1.8 Prior to the establishment of Tribhuvan University (TU) in 1959, Nepal had only a few small colleges affiliated with Indian universities. Since that date, however, Nepalese higher education has become virtually synonymous with  -3- TUJ2/ By 1992 enrollment in TU had risen to about 155,000 students scattered over 195 campuses (65 public and 130 private) throughout the country. Of this student body, about 61 percent was at the Certificate level, 30 percent was at the Bachelor's degree level, and eight percent was at the Master's degree level3/ (see Enrollment Growth, Annex 1, Table 1). 1.9 TU enrollments are highly skewed in other respects as well. In 1992, more than 80 percent of the student body was enrolled in humanities, social sciences, management, and law; less than 10 percent was in engineering, agriculture, forestry, or medicine. Only about 24 percent of all students were female, and they accounted for only 15 percent of science-related enrollments. Moreover, a significant number of them attended one large women's multi-faculty campus. 1.10 Thus, as greater numbers of students have completed grade 10 successfully, pressures on the TU system have mounted. Enrollment increases have not been met with commensurate investments in the human, physical or institutional infrastructure of the TU, and the quality of higher education has suffered accordingly. Neither the structure nor the financing of the institution have kept pace with the dramatic growth in enrollments, and the situation has reached crisis proportions. It has become increasingly clear to all parties that reforms must be made if Nepal is to develop and maintain a university system capable of meeting the manpower demands of the twenty-first century. The Government, which has become aware of the higher education problems and is dealing with increasingly articulate body of TU students, is beginning to review its policies regarding all aspects of higher education and has invited IDA to participate in and support these reform efforts. C. Main Issues in Higher Education 1.11 Although dilapidated infrastructure and overcrowded classrooms are the most visible evidence of the crisis in higher education, many of the worst problems are structural or managerial, the result of patterns of organization and governance ill-suited to providing responsive and relevant education at the tertiary level. Essentially, these patterns have produced a higher education system that is providing a low quality of education as a result of: (a) runaway enrollment growth; (b) chronic underfinancing, very low levels of internal resource mobilization, and a high proportion of expenditures on salaries; (c) provision of secondary-level education in a tertiary-level system; 2/ At this stage, the only other functioning university is Mahendra Sanskrit University (with about 1000 students), which offers the study of Sanskrit to a very restricted group. Another private institution, Kathmandu University, was founded recently and will become functional in the near future. 3/ The doctoral level, which consists only of dissertation writing, has approximately 400 candidates, mainly professors who are not counted in the student body. Also, about five percent of TU students are private" candidates and are not enrolled in a specific campus.  - 4 - (d) a highly centralized and unwieldy management structure; (e) outdated curricula; and (f) poor physical facilities conditions, chronic equipment shortages, and very limited maintenance. Problem of ExDloding Enrollments 1.12 As the population of Nepal increased and access to primary and secondary education expanded, demographic pressure on the university increased sharply. Enrollments have risen from 22,765 in 1975 to about 155,000 in 1992. The trend implies that there would be about 330,000 university students by the year 2000 if no changes were made (Annex 1, Table 1). Infrastructural investments have been narrowly focused on a few externally aided campuses, so that physical facilities in many other campuses are badly overstretched. Local campus administrations lack authority to limit admissions to available capacity. 1.13 Entrance examinations. Separate entrance examinations to the university would allow the university authorities to resist demands for admission and to limit the number of entrants. However, such a system was abandoned in 1979 following student demonstrations. At present, only certain faculties accounting for 10 percent of enrollments (e.g., medicine, engineering, forestry, agriculture, and animal science) have entrance examinations. The large arts and sciences faculties rely only on the SLC results. The variable percentage of students passing SLC each year makes university authorities unable to plan operations on the basis of a desirable and predictable number of students. 1.14 University admissions each year consist of close to 100 percent of the previous year's SLC passes. The demand for enrollment is thus closely linked to the SLC pass rate. In many countries, when a leaving examination is used as an entrance examination, admissions are controlled by limiting the number of graduates. Students who otherwise may have mastered enough material to graduate from secondary school become dropouts instead, at considerable systemic and social expense. Of the 95,100 candidates who were tested in Nepal in 1992, only 23,213 (24 percent) passed. Despite the large number of failures, admissions are not restricted to tolerable levels commensurate with TU capacity and resource availability. The SLC examination is not developed or scored through psychometric techniques that would set reliable cut-off scores, and the Government cannot predict or control how many students pass it each year. When large percentages of students pass (e.g. 47 percent in 1991), campuses come under intense pressure to admit as many applicants as possible without getting more funds. As a result, campuses are inundated with entrants they cannot adequately accommodate. 1.15 Facilities utilization. The total number of university campuses increased from 79 in 1975 to 198 in 1991. Most of the campuses are small (with an average capacity for 600 students), often offer very similar programs, and sometimes are placed within a few kilometers of each other. Despite the large number of campuses, facilities overall are grossly inadequate for the student body and if operated on a conventional single-shift system, would be able to accommodate only 30,000 to 40,000 students. Enrollment pressures oblige most TU  - 5 - campuses to operate on three or even four shifts, limiting each instructional period to 40 minutes. The 130 affiliated private campuses of the university operate mainly in secondary schools on early morning or evening shifts, necessitating the reduction of teaching time from an hour per lecture to 30 minutes. The poor, sometimes dangerous state of facilities and equipment contributes to staff dissatisfaction and student unrest. Insufficient Mobilization and Inefficient Management of Resources 1.16 Resource mobilization problems for higher education are diverse and severe. One of the worst problems is the underfinancing of the sub-sector. In 1990, only 2.1 percent and 0.44 percent of GDP was devoted to education and to higher education, respectively. This was much below the international average of 4 percent of GDP for total spending on education and 0.7-1.2 percent for higher education. The proportion of the Government's education budget devoted to higher education has declined, from 35 percent of the total in 1976 to 21 percent in 1991. Annual budget increases have generally fallen behind inflation, which averaged 11.8 percent between 1986 and 1992. Since these declining resources have been spread over an increasingly large student body, the per student allocations have decreased dramatically. 1.17 The sharp per student decline in university budgets has had serious operational consequences. Aside from the faculties receiving external support (such as medicine, engineering, forestry and agriculture), there has been very little capital investment during the past 15 years. For example, during 1990/91, recurrent expenditures absorbed 96 percent of the TU budget, (see Expenditures of Tribhuvan University, Annex 1, Table 2). Moreover, a disproportionate share of recurrent expenditure (82 percent) has been used to pay staff salaries. Yet professors' earnings are considered low; as a result, more than 90 percent of academic staff have supplementary employment, either outside the university or in additional shifts of the private and public campuses at an hourly rate (NRs 50 in 1992). Although professors devote relatively little time to their primary occupation, the high wage bill leaves few resources for non-salary items. The library system (Annex 2) is unable to order many new books or keep up its journal subscriptions. Equipment in the overcrowded laboratories is not only out-of-date but also in short supply and in a bad state of disrepair. Buildings are rarely maintained and some have become dangerous to occupants. Though donor funding to the supported faculties is substantial (US$9.3 million or 47 percent of the total university budget in 1991/92), it only benefits a small and select group of students, leaving the vast majority in continuously deteriorating conditions. 1.18 Generally speaking, underfinancing by the central Government is not compensated by other sources. Although local governments and communities largely finance secondary education, they have no part in financing higher education. The proportion of private financing of higher education is low. There are twice as many private campuses as there are public ones, but they tend to be small and to operate in secondary schools. Students must be able to afford NRs 150-600 per month to attend, compared to NRs 40 per month for public campuses. As a result, these sites absorb only about one-fifth of the student body, and most students attend the 65 publicly financed campuses. There is very little cost sharing or cost recovery in these public campuses. Students pay very low tuition, while dormitories are heavily subsidized. Many tuition waivers and scholarships are  given, even to students who are able to pay. University authorities are highly conscious of the need for cost recovery and have begun the ultra-sensitive process of increasing charges and reducing or eliminating subsidies. Tuition fees, static for 17 years, were doubled in 1991 from NRs 20 to NR8 40 per month and direct cost subsidies to cafeterias were discontinued in 1992. Even these small increases caused considerable student unrest in certain areas. Given the risk of political protest, the Government is proceeding cautiously with needed reforms. 1.19 Finally, the centralized control of the higher education budget promotes an inefficient utilization of the small pool of funds available. Funds that are provided to the University are allocated to each campus according to rigid norms which are generally based on precedent. Consequently, there are no incentives to generate income or to create greater efficiency in the use of finances at the institutional or campus level; the sizeable land holdings of the university are under-utilized or rented at below-market prices. In fact, there are genuine disincentives to promoting cost-effective behavior, since if savings are realized, the institution may be penalized through a lower budget allocation. For example, the University's many small campuses have high unit costs, and diseconomies of scale alone are estimated to reduce efficiency by about a fifth. However, since rationalizing the use of facilities would not be rewarded in any way, most prefer to maintain the status quo. Weak financial management and a dearth of modern accounting technologies and equipment at the campus level exacerbate the problems of centrally controlled financing. 1.20 Underfinancing and low cost-effectiveness have generated considerable pressure on the Government to increase allocations to higher education. If no policy changes are made and the rate of student growth and cost recovery remains constant, capital and recurrent expenditures will create an unsustainable deficit of NRs 3.2 billion at the university during the Eighth Plan period (see Current Situation and Future Scenarios of Higher Education Finance, Annex 3). Significant policy changes, however, (a reduction in enrollment growth to a yearly average of 5.5 percent, a 20 percent cost-recovery rate, adoption of resource mobilization strategies, and transfer of Certificate-level students to secondary schools) offer the prospect of limiting this additional financing requirement to about NRs 870 million during the Eighth Five-Year Plan period. It is clear that the current direction of university finances will compromise the future financing of the entire sector. If that were allowed to happen, the Government would be forced to shift priority funds to the university, thus potentially endangering priority social-sector programs, such as primary education or public health. Provision of Secondary-Level Education in the University 4/ 1.21 The problems of the university are compounded by the fact that about two-thirds of the undergraduate population do not properly belong to higher education and would be attending secondary school (grades 11 and 12) in most other countries. Their presence in the TU inflates the number of university 4/ For more information see South Asia Regional Series Internal Discussion Paper No. IDP-109, Reforming Higher Secondary Education in South Asia: The Case of NeDal.  -.7- students. Thus, the higher education enrollment ratio in Nepal (e.g., ratio of students enrolled in higher education vs. the higher-education age cohort in the population) exceeded five percent in 1991, which compared favorably with a median enrollment ratio for other lower-income countries of 3.7 percent. Without the younger students, however, the higher education enrollment ratio would drop to 1.95 percent. Furthermore, if this situation is allowed to persist, the proportion of Certificate-level students in the university will continue to grow. 1.22 As noted earlier, the most obvious consequence of higher-secondary education studies in the university has been the tremendous upsurge in enrollments in the university. Perhaps the most problematic aspect of this system is the low quality of university education for them. The students themselves are less mature intellectually, less knowledgeable, and less ready for the challenges of tertiary education. It may be indicative of the low general level of expectations that faculty members lack advanced training: only 3.8 percent have doctorates, and 23 percent even lack a master's degree. 1.23 In 1989, the Government enacted a law to reassign the first two (Certificate) years of the university to secondary education, thus creating grades 11-12, and to expand undergraduate higher education by one year to three years. The total length of the educational system would then be 15 years. There would be financial and social advantages to this reform particularly if entrance examinations are introduced to control admissions. Long-term pressure on the country's education budget would be reduced; secondary education, which is under community and private control in Nepal, is managed more flexibly than university campuses, has much lower per capita costs, and has the potential to provide students with less costly but higher-quality education. Young students, would study under closer parental and school supervision. They would be more mature when leaving their home towns to attend the university. Since mobility and family investment for female students are often limited, more rural-area women would have access to higher levels of education. Implementation of higher secondary education (also called "10+2" or "4+2") would affect nearly all university functions and policies. Students would be fewer and older; the crowded campuses would have space for courses of an additional year. 1.24 However, this reform requires curricular, financing, management, and planning preparation which has not yet taken place (see Implementation Issues in Higher Education, Annex 4). Most secondary schools in the country are already crowded and apparently lack the facilities to house two more grades. The country's secondary level teachers are few, and the professors who teach Certificate-level students are usually tenured university employees. Although Certificate-level courses are mainly general (e.g., Nepali, English, math, basic science), some specialty courses are also taught at that level, such as constitutional law and macroeconomics; at the very least, the order of the courses would have to be rearranged. It is expected to be cheaper to educate Certificate-level students in secondary schools in the long term, but considerable planning and investment will be needed in the short term. Investment and initial recurrent expenditures may be unacceptably high if new human and physical resources are developed solely for this level of education. If TU resources are reallocated to higher secondary education (e.g., buildings, professors, budget) political difficulties may arise. Wary of potential costs,  - 8 - MOEC plans to finance only the development of the program and to leave funding for its actual implementation to communities. Accordingly, 36 schools opened grades 11-12 in 1992, mainly in districts lacking university campuses. However, care will need to be taken in planning to avoid the formation of a parallel system to the university instead of absorbing Certificate-level students from existing campuses. 1.25 A semi-autonomous body of the MOEC, the Council for Higher Secondary Education (CHSE) has been formed to introduce the reform, develop curricula, conduct examinations, certify students, and monitor the schools. Operating with limited resources and staff, it has been unable to plan for a phased transfer or to provide curricular leadership for grades 11 and 12. It is important that CHSE be strengthened and that joint planning take place between MOEC and the university to develop: (a) an up-to-date curricular philosophy linking secondary and higher education; (b) valid and reliable examinations for the end of grade 12 and entrance to the university; (c) a reassignment strategy that would facilitate the introduction of a three-year Bachelor's degree and alleviate congestion at the university; and (d) a phased plan to prepare for the transfer of grades 11 and 12. Organizational Difficulties 1.26 Central control and low level of managerial effectiveness. Despite its geographic spread, TU has a highly centralized management structure, which except at its highest levels, also has limited participatory involvement. His Majesty the King is the Chancellor, an honorary and symbolic position; the Minister of Education is the Pro-Chancellor and is only indirectly involved in university affairs. There is a 50-member University Council, similar to a central board of trustees, whose effectiveness is limited by its large size. Daily operations are managed by the Executive Council consisting of the Vice- Chancellor, who is assisted by the Rector (chief academic officer) and the Registrar (chief administrative officer). The role of policy-making and funds allocation to a large number of campuses makes the Vice-Chancellor's office function virtually as a Ministry of Higher Education (Annex 5). 1.27 Despite the large topographical obstacles that separate many parts of the country from Kathmandu, individual campuses have extremely limited administrative control of their operations. For example, they do not have the authority to set or modify course content, or even score the examinations of their students. Although technically the campuses are supposed to determine enrollment, TU's central office has in practice set campus enrollment at levels relative to demand pressure. Personnel decisions are made at the central level; although poorly trained, most university employees are permanent, and no monitoring mechanisms are used to assess their performance. As a result, campus chiefs have very limited control over their staff and the quality of education they deliver. Having few opportunities for leadership, the management skills of campus chiefs are weak. 1.28 Decentralized admissions. Although most aspects of TU management are overly centralized, one crucial element--namely, admissions--is inappropriately decentralized. Students often make independent applications to many campuses and wait to be admitted by the campus of their highest choice before turning down  - 9 - others. This system delays the admission of wait-listed students as well as the commencement and end of the academic year. Students also have the option of enrolling in two campuses and occupying scarce dormitory rooms in each. If campuses had technological support, enrollments could be streamlined through computerized coordination. 1.29 The centralized administration and scoring of annual examinations is another unusual feature of TU (Annex 6). Its original purpose, when the university was much smaller, was to minimize possible corruption and to control the quality of private campuses. Examination questions for all courses in all faculties are decided in Kathmandu and sent to individual campuses. Answer papers are sent to Kathmandu and then redistributed throughout the country to professors who get paid a fee to score them at home. Most results are recorded manually at the Controller of Examinations office and distributed to students. The scoring process, particularly for the humanities faculty, takes about four months as students generate approximately 700,000 answer papers per year. Besides the expense and inefficiency involved in moving and scoring these papers, the process directly affects instructional delivery, because students must take approximately a month off to study, and examinations must be scheduled over several days so that there is no time conflict for students who must still pass courses of previous years. Extremely Low Ouality of Education 1.30 Outside the technical institutes, students are usually unable to specialize in a single subject. They must choose at least two that are offered by the same faculty (e.g. faculty of humanities). Although university syllabi list many subjects to choose from, the majority are offered in only one or two campuses. In most campuses, students actually have little if any choice. They may only take courses offered in a specific campus and during a specific shift and cannot develop a course of study that meets their professional goals. University majors and their content are not tailored to labor market needs. 1.31 The curricula for most courses, which are developed by subject committees in Kathmandu, have not been updated regularly, some not since the early 1970s. All professors throughout the country must teach the same curriculum. Consequently, professors with advanced degrees and up-to-date knowledge are forced to teach outdated material for the sake of the uniformity required by the examinations system; thus, the centralized examinations system reinforces utilization of outdated curricula. Large-scale curricular undating is needed in all faculties if the university is to impart usable knowledge to students and to adjust to the three-year Bachelor's degree and implementation of higher secondary education (see Curriculum Development, Annex 7). 1.32 Most university instruction nominally takes place in English, and students are expected to own and be able to read textbooks. However, students (particularly poorer students outside Kathmandu) tend not to have textbooks because books are: (a) not commercially available; (b) too expensive, particularly when more than one must be bought; (c) not helpful for the examinations, which ask for few, concrete pieces of information; and (d) sometimes incomprehensible. (They either do not contain sufficient explanations, or students may not know enough English to read them.) As a  - 10 - result, many students study from commercially or personally available notes and may only cover 50 pages of disjointed material in a one-year course. 1.33 The consequence of skyrocketing enrollments, few instructional inputs, lack of space, low level of financing, and centralized control is that relatively little teaching actually takes place. Many students find little appeal in attending courses offered at 6:30 a.m. in classrooms that are intolerably cold due to a lack of window panes. Examination questions are highly predictable, student notes of past years are available, and students may prefer to study at home and take the examinations or go to private coaching classes. In some respects, TU is a distance education institution that delivers low-quality and inefficiently managed education at very high cost. 1.34 Limited local authority, combined with Nepal's political past, has resulted in considerable student influence on the resources of the system and a distorted perception of student rights and responsibilities. Too often student expectations center on unlimited access to the university's subsistence-related resources (cafeterias, dormitories, low tuition) rather than on instructional delivery. Without substantive authority to support the decision-making power they have, campus chiefs feel forced to admit large numbers of students for whom they have no space. Encumbered by an administrative structure that discourages local initiative, TU administration has, until recently, been able to accomplish very little against professor and student interest groups. University Self-Study - UNDP Tertiary Education Prolect 1.35 The university's long-standing problems are the focus of a 21-month study, which is being financed by a United Nations Development Programme (UNDP) grant and executed by IDA (NEP/91/011; US$599,000; August 1992-May 1994). Its goals are to: (a) assess the long-term trends and needs of the sub-sector and develop a policy framework for the next 10 years in the form of a master plan; and (b) study specific priority issues of the university and prepare recommendations to address short and medium-term problems that could undermine long-term development prospects. The assessment, which takes the format of a self-study, consists of a series of workshops and specific studies, which will be integrated in a final document. Main areas of the study are: (a) organization and structure (internal efficiency, academic staff policies, higher secondary education); (b) management and administration (autonomy-regionalization); (c) planning and financial management (resource mobilization, cost recovery, financial planning); (d) educational quality control (post 10+2 measures to control admissions, curricular revisions and updating, examinations, instructional process); and (e) physical facilities and plant (maintenance, consolidation). 1.36 The priorities set by the self-study have helped formulate the proposed IDA-funded higher-education project. The proposed project will further benefit from the output of the self-study, which is expected to provide valuable technical assistance and consensus-building for viable solutions in the above areas. The activities of the two projects, which overlap by several months, have been coordinated to avoid duplication (see Selected Policy Actions, Annex 8).  - 11 - D. Government Strateqy 1.37 The Government's strategy on higher education focuses on cost containment, improvements in educational quality and efficiency, and greater resource mobilization including cost recovery. Accordingly, the National Education Commission has recommended: (a) the transfer of responsibility for the delivery of higher secondary education from the University to MOEC by creating a separate two-year higher secondary education stage; and (b) an increase in the number of universities by regionalizing the TU system and creating private universities. The potential volatility of the university's problems has made university reform a priority issue. The Government, therefore, has been supportive of the recent actions of the TU administration (such as increasing tuition fees and privatizing cafeteria operations). The proposed IDA project and a UNDP Tertiary Education Project are both reflected in the Government's priority investment program for the sector. E. IDA's Country and Sector Assistance StrateQy 1.38 IDA's country assistance strategy for Nepal, has four main areas of focus: (a) poverty alleviation through productivity gains in agriculture, expansion in small-scale industries and services, and increased investments in human resources; (b) an improvement of absorption capacity through strengthening the finances and management of sectoral institutions; (c) population and human resources development; and (d) the development of hydropower resources if Nepal's macroeconomic management and institutional capacity improve. The emphasis on human resource development reflects a belief that realization of the country's potential for growth in manufacturing, agriculture, and tourism will require long-term investments in a healthy, educated labor force. 1.39 IDA's sectoral strategy focuses on supporting Government goals for universal primary education, and its main vehicle at present, is the Basic and Primary Education Project (Credit 2357-NEP) which was approved in April 1992. To make this goal achievable, however, the long-term financial state of sub-sectors competing for funds must improve. Also, adequately trained human resources should be available in provincial and rural areas to staff public and private entities, including schools. The proposed higher education project will support the much-needed reforms that will attenuate the long-term financial demands of Tribhuvan University on the Government. At the same time, it will improve the quality of instructional delivery and begin to better relate university graduates training to the labor market. 1.40 World-wide, higher education is in a crisis of skyrocketing enrollments and financial demands. A recent policy study 5/ suggested that IDA and Bank lending in higher education should focus on: (a) institutional development; (b) cost-sharing but also financial support for needy students; (c) reduced reliance on government funding and linking such funding to performance; and (d) increasing quality of instruction, responsiveness, and equity. However, a 1993 OED higher-education study on sub-saharan Africa underlined the difficulties of introducing cost recovery and the importance of 5/ Higher Education: Issues and Options for Reform. World Bank, July 19, 1993.  - 12 - concentrating on curricular changes and institutional development rather than one-sided attention to financial and organizational issues. In South Asia, there has been relatively little IDA lending from which to draw conclusions, but Asian experiences in higher education have been quite productive. The OED audit of a higher-education project in Indonesia, for example (Ln.1904-IND), found that the project had met most of its objectives, particularly civil works, and improved student flows through the system. A long-term perspective was introduced in higher-education planning and the project succeeded in building an administrative, institutional, and personnel framework for a coordinated approach of the subsector. The proposed project includes many of the features considered important world-wide as well as within Asia that are reflected in a recent Bank Paper "Higher Education the Lessons of Experience" (September 30, 1993). 1.41 IDA's initial involvement in the education sector of Nepal was in higher education. To increase the supply of technical manpower, IDA has financed four projects that were implemented in University faculties: Technical Education (Credit 772-NEP); Education II (Engineering Education, Credit 1198-NEP; 1982), Agricultural Manpower Development (Credit 1534-NEP; 1985), and Engineering Education (Credit 2044-NEP; 1989). The four Credits total US$39.8 million equivalent. Sector work in the early 1980s pointed to the need for improving access to and quality of basic primary education, leading to two projects: the Primary Education Project (Credit 1463-NEP; 1984) and the Basic and Primary and Primary Education Project (Credit 2357-NEP; 1992). After a devastating earthquake in 1988 which extensively damaged primary and secondary schools in eastern Nepal, IDA responded with the Earthquake Schools Rehabilitation Project (Credit 2047-NEP; 1989). A Population and Health Project is currently being appraised. 1.42 The lessons learned from the implementation of higher education projects in Nepal are significant. First, successful implementation is directly tied to (a) adequate and timely budget releases for project components, (b) early recruitment of qualified personnel (including consultants) for project management and implementation activities, and, (c) a stable political climate. Second, in addition to the need for a well-staffed, experienced, and organized project management, project success is linked to an understanding of, and identification with, project objectives by university authorities indicating a need to ensure that this area is adequately addressed during project development. Third, the management of construction programs in Nepal can be difficult and can result in prolonged start-up delays. Care must be taken during the preparation and pre-investment phases to ensure agreement on an implementation plan that would address the need for early selection of consultants and a prompt start to construction and equipment procurement. Fourth, in all four projects substantial implementation time overruns have occurred or can be anticipated given the shortcomings in these areas. Even so, the development impact of these projects has generally been satisfactory. 1.43 Lessons from the four higher-education projects have been taken into account in project design in terms of: early staffing and consultant selection for implementation; and through discussion of changes in budgetary procedures for the project with the Ministry of Finance (MOF). Previous IDA projects in the sector have resorted to the use of project implementation units (PIUs) as an expeditious way of ensuring visibility of the project and capacity for  - 13 - coordination of project implementation in a generally weak management environment. A longer-term goal is to encourage development of implementation capacity as a part of the regular administrative structures of government, and in this case the university. F. Rationale for IDA Involvement 1.44 Although IDA has provided extensive support to the education sector, including the university since 1978, it has not been involved in higher-education policy issues per se; donor support to the university has tended to target faculties that fulfill specific manpower training objectives. As a result, university development has been very uneven. The drastic funding decline for non-aided faculties and the main campus6/, in particular, has created potentially explosive and politically sensitive congestion and resource problems. If unresolved, this situation could result in pressure for the diversion of scarce funds that are urgently required for basic education and for combatting illiteracy in Nepal. The proposed project would initiate and facilitate reforms designed to: regulate the runaway growth in enrollments at the higher level and reduce pressures for increased Government spending on TU. An on-going IDA sector study of secondary education is expected to lead to rationalization of policy in that sub-sector. The development of higher secondary education with its own examinations would provide a window of opportunity to mitigate the problem of runaway enrollment growth in TU by the introduction of tighter university entrance requirements in the interim. 1.45 The political and financial difficulties of the university have discouraged other donors from large-scale involvement in the university. They have limited their activities to the specialist technical faculties of TU. Demonstrated progress in implementing policy reform measures could begin to attract greater interest from donors who have not yet invested in the university system as a whole. II. THE PROJECT A. Proiect OriQin 2.1 In October 1991, HMG through TU proposed the preparation of a higher education project to assist the University to carry out badly needed upgrading of existing facilities, and support the modest reform process begun by the university during 1991 in the wake of democratization. Project preparation was carried out substantially by the university using preparation funds advanced from Credit 1534-NEP, Nepal Agricultural Manpower Project. 2.2 During preparation, modification of a number of existing policies was identified as being necessary to achieve the required systemic changes in the administrative, financial, and management processes of the university to permit Government and TU gain control over rapidly escalating costs and so improve the low quality of higher education. These were: 6/ The main campus of the university is located in Kirtipur, a town on the outskirts of Kathmandu.  - 14 - (a) Recaulation of Enrollment Growth by: (i) limiting enrollment to the capacity of each campus and department; (ii) devising measures to enroll students on merit basis, and (iii) regulating new campus affiliations; (b) Improving Resource Utilization and Mobilization by: (i) developing policies for cost recovery and income generation; (ii) privatizing service units within TU; and (iii) increasing private responsibility for tuition and other fees; (c) Preparation for Higher Secondary Education Reform by working jointly with the Ministry of Education and Culture to implement a higher secondary education program in accordance with a 1989 law enabling higher secondary education; (d) Improving the Organization, Planning, and Management Capacity of TU by: (i) increasing organizational effectiveness through decentralizing managerial responsibility to institutes, faculties, research centers, and campuses; and (ii) strengthening the central administration to perform policy planning and evaluation functions; (e) Improving Ouality. Utility, and ResRonsiveness of Higher Education by: (i) improving the quality and relevance of higher education by establishing three-year Bachelor's degree programs and updating the curricula; and (ii) improving the examination system of TU; (f) Improving and Maintaining Physical Facilities by (i) rectifying current serious facilities and equipment deficiencies through a program of renovation, upgrading and maintenance; (ii) developing maintenance plans for facilities and equipment; (iii) establishing capacity within TU's central administration to plan and advise on future facility development and maintenance operations of TU campuses to ensure sustainability. B. Prolect Design and Obiectives 2.3 In designing the project, it was recognized that implementation of the proposed policy reforms would be a long term process and it was decided to phase implementation by way of sequential project support. Thus the objectives of the first (the proposed) project are limited but integrate closely with the objectives of Nepal's Eighth Five-year Plan (FY93-FY97) for the sector which has been given priority for rapid development by Government. The project will support the reform process through financing that would promote much-needed systemic changes in the administrative, financial, and management processes of the university, and make such reforms feasible by improving physical facilities at a limited number of key University campuses. This stage would make use of the outputs from the ongoing UNDP-financed and IDA-executed study which has been revised to take into account the proposed project activities, and avoid duplication (see UNDP Self Study Activities, Annex 8). A policy statement and a detailed action plan for policy implementation were prepared by TU and submitted to IDA. (see Policy Statements, Annex 9).  - 15 - C. Prolect ComDonents 2.4 The project will finance physical and technical assistance activities designed to: (a) assist institutional development, with particular emphasis on provision of a management information system, decentralization of management authority and strengthening of campus-level management; (b) improve selected facilities (particularly libraries and laboratories) at three key campuses and develop institutional maintenance capacity; (c) improve instructional delivery and rationalization of the student examination system; and (d) assist MOEC to prepare for higher secondary education reform. Institutional Development Comvonent ($7.7 million) 2.5 OrcTanizational Reform (US$1.1 million). This subcomponent will include a systematic review of the current organization of TU, as well as redefinition and reallocation of responsibilities and authority to the campus level to facilitate decentralization. The project would finance: (a) a systematic review of the current organizational structure of TU; (b) policy studies on decentralization and reallocation of responsibilities to lower levels; (c) central and campus-level managerial staff training; (d) upgrading campus- level technical capacity to process information; (e) development of staff performance standards; and (f) a policy implementation fund (US$500,000) to provide support to campuses within the TU system (except Kirtipur and cluster campuses being funded under the project) which demonstrate measurable progress in: self-reliance; resource mobilization; improvement in campus operation management; and educational achievements. During negotiation it was agreed that funding will be allocated on the basis of eligibility criteria satisfactory to the Association to be provided by TU. 2.6 Educational Manaqement Information System (EMIS) (US$1.5 million). The component will cover Kirtipur and at least two regional campuses. The system will be based on stand-alone computer units (rather than a large central computer) and will commence with installations at the central administration level, within the Planning Division, gradually extending to several locations within Kirtipur campus, as well as the Controller of Examinations, and selected regional centers (see Management Information System Needs of Tribhuvan University, Annex 10). It is proposed that the structure of the information system include a series of "modules" of relational data bases linked through common-coded items (campus, student, and teacher identification codes). Financing would include computer hardware, software, staff training, foreign fellowships, technical assistance for system planning, implementation, staff development, vehicles, and supplies. 2.7 Regional Cluster Development (US$3.6 million). The component will fund the formation of two regional campus clusters to support EMIS development, decentralization, and ultimately, autonomy. Each cluster would consist of a lead campus and up to seven satelaito,,oampuses formed into an infotmal association (cluster). During negotiations it was agreed that by June 30, 1994, guidelines satisfactory to IDA for the establishment of clusters will be issued by TU. The guidelines would specify procedures to be followed and would include provision for IDA's approval of each of the following three stages by cluster:  - 16 - Staae 1 (US$0.5 million) upon formation of a cluster in accordance with the guidelines (which would include the name of the main campus and associate satellite campuses), the main campus would become eligible for book provision, equipment, and an allowance for minor essential maintenance. Each satellite campus would be eligible for an initial allowance for books and equipment. Stage 2 (US$1.6 million). Preparation of a management plan acceptable to IDA for cluster development covering all campuses in the cluster which would include: decongestion of the lead campus by redistribution of Certificate-level students to participating campuses or +2 schools by progressive reduction leading to elimination of Certificate-level courses in the lead campus, and a timetable to achieve this within a two-year period; an analysis of facilities required at recipient campuses to receive Certificate-level students; maintenance plans including resource mobilization for maintenance and evidence of appointment of suitable personnel. Upon completion of this stage, the lead campus would be eligible for an allowance to upgrade existing facilities, library expansion/upgrading as appropriate, equipment including fax, photocopiers, EMIS computer (from EMIS component), and books. The satellite campuses would be eligible for approved facilities upgrading to accommodate largely or exclusively additional Certificate-level students, equipment including fax, photocopier, books, and an allowance for essential maintenance. Stage 3 (US$1.5 million). Financing would be linked to evidence satisfactory to IDA of: (a) operationalization of Certificate-level student disengagement at the lead campus and acceptance of the approach by satellite campuses; and (b) resource mobilization within the individual campuses. Resource mobilization from acceptable sources would include fees, public and private donations, earmarked local taxes, but not from central budget allocations. Funding would be allocated on a campus-by-campus basis with funds allocated for approved investments, including facilities development, equipment, books, and furniture. Matching funds of at least 25 percent would be required from the lead campus and 15 percent from the satellite campuses. Facilities Improvement (US$8.6 million) 2.8 Maintenance Capacitv Develovment (US$0.6 million). Assistance will focus on the organizational structures, staffing and development of preventive maintenance programs for buildings and equipment. The component will include: workshops on preventive maintenance; the development of maintenance centers at each of the three principal campuses; staff training; maintenance and testing equipment. 2.9 Facilities Improvement at Kirtipur (US$7.9 million). Financing priority is given to expansion and upgrading of science and library facilities. The component also includes upgrading of facilities for the humanities, education, and management faculties. In addition, the proposed component includes: improvement to site services; boundary wall construction; re-alignment of a neighborhood access road to alleviate security problems; female dormitory for 100 students; refurbishment of the students' center; boys dormitory and cafeteria; equipment; furniture; library books; and professional fees.  - 17 - 2.10 Regional cluster development is also expected to include elements of construction estimated at about US$0.8 million that will be identified for financing only after completion of cluster development Stage 2 (para. 2.7). Instructional Delivery and Assessment (US$2.0 million) 2.11 Examinations (US$0.8 million). Proposed financing includes the provision of new facilities to replace unsuitable premises occupied by the Controller of Examinations, equipment including computers, technical assistance, staff training and fellowships. 2.12 Curriculum Development and Textbook Revision (US$1.2 million). Curriculum revision will span the duration of the UNDP-funded tertiary-education project (para. 1.35) as well as the IDA-funded project. IDA will finance the revision of undergraduate and graduate curricula in about 20 specialties. In general, these are science and technology, humanities, education, management, law, as well as a new course in environmental science. Financing will include international and local technical assistance, development of teachers' guides, expenditures to conduct dissemination workshops, and expenditures to ensure the availability of affordable and understandable textbooks through the private sector. To manage the multiplicity of specialties, twinning will be encouraged with more advanced institutions from countries in the region (e.g., India, Thailand, Sri Lanka). Although specific labor market assessments are not planned, the curriculum revision process is expected to make the skills of graduates more usable by the labor market. 2.13 The project will strengthen the Curriculum Development Center (CDC) of TU to enable it to undertake a leadership role in the curriculum exercise. The project will finance salaries for additional CDC staff, consultants services, and equipment. Preparation for Higher Secondary Education Reform (US$1.75 million) 2.14 Higher Secondary Education (US$1.2 million). Financing will include: (a) civil works for +2 classes in about 10 selected secondary schools that would facilitate the transfer of Certificate-level students from TU campuses; (b) re- furbishing for about two satellite campuses within regional clusters that would receive exclusively Certificate-level students (under Regional Cluster Development component, para. 2.7); (c) foreign and local technical assistance for curriculum and textbook development in the +2 grades; (d) technical assistance to develop a higher secondary school leaving Certificate; (e) instructional materials and equipment for +2 schools willing to provide matching funds; and, (f) technical assistance to refine and start implementing a plan for the country's transition from university Certificate to higher secondary education. MOEC leadership in developing an effective higher secondary education program is critical to the eventual disengagement of TU from the provision of secondary education within the TU system and the problem can only be solved by a willingness of MOEC and TU to work together on the development of an implementable transition framework for disengagement. An acceptable draft ioint MOEC-TU Policy statement for transferring the certificate level to higher secondary education was provided to IDA. (see Policy Statements, Annex 9)  - 18 - 2.15 Financing would include the costs of related equipment, furniture, vehicles, architecture/engineering and other consultancy services related to the elements listed above. 2.16 The sum of US$0.75 million is included for the preparation costs of a follow-on project in the sector. III. PROJECT COSTS. FINANCING. PROCUREMENT AND DISBURSEMENTS A. Prolect Costs 3.1 Cost Summary. The total cost of the project is estimated at US$23.1 million equivalent, including applicable duties and taxes estimated at US$1.2 million. Details of foreign exchange costs by category of expenditure, IDA and Government financing, and expenditure by components are shown in Annex 11. TABLE 3.1: Project Cost Seyar7 % % Total (NRs M0lon) (USS Millbn) Foreign Base Local Tot Loa ForLdgn Total Exchge Coet A. INSTITUTIONAL DEVELOPMENT Orpnization Reform 31.6 25.0 56.6 0.6 0.5 1.1 44 6 E_Joa MuagBnx Inlvmaion System 31.9 41.5 73.4 0.6 0.3 1.5 57 8 Rgionl Chuter Dvelopnt 33.5 97.3 110.8 1.7 2.0 3.6 54 19 Projed Manment 57.4 15.2 72.6 1.2 0.3 1.5 21 7 Subtotal ~204.4 179.0 333.4 4.1 3.6 7.7 47 40 B. SELECIED FACILITIES IMPROVEMENT FaWilitiesDevelopment-Kirtipur 182.1 211.8 393.9 3.7 4.3 7.9 54 41 Mantenance Capacity Development 3.0 24.2 32.2 0.2 0.5 0.6 75 3 Subtotal 190.1 236.0 426.1 3.3 4.3 3.6 55 44 C INSTRUCTIONAL DEVELOPMENT AND ASSESSMENT Curriauhim Development 21.3 31.9 60.2 0.6 0.6 1.2 53 6 Examinations 14.4 23.6 33.0 0.3 0.5 0.3 62 4 Subtoal 42.7 55.5 93.2 0.9 1.1 2.0 57 10 D. HICHER SECONDARY EDUCATION 27.5 34.2 61.8 0.6 0.7 1.2 55 6 Totel BASELINE COSTS 464.7 504.3 969.5 9.4 10.2 19.6 52 100 Physical Contingencies 26.6 27.0 53.6 0.5 0.5 1.1 50 6 Price Contingencies 87.1 36.9 124.0 1.3 0.7 2.5 30.0 13.0 Total PROJECT COSTS 578.4 568.6 1147.0 11.7 11.5 23.1 50.0 113.0  - 19 - 3.2 Basis of Cost Estimates. These are mission and TU staff estimates. Civil works costs are based on current market rates and experience with ongoing IDA-assisted projects in Nepal, including tertiary level projects. Costs of vehicles, equipment, furniture, books and supplies are based on lists of items prepared by TU and IDA at prevailing c.i.f. prices or local market rates as applicable. Cost estimates of consultants services for technical assistance reflect a mix of the United Nations rates for foreign (including regional) and local consultants. Overseas fellowship costs are based on TU experience with regional and international placement in ongoing projects. Architectural/ Engineering services are costed at the competitive rates generally prevailing in Nepal for the engagement of local consulting services. Costs of salaries and allowances, including training rates, are based on current university scales. 3.3 Customs Duties and Taxes. Goods specifically imported for the project may be admitted free of duties and taxes. Locally procured goods and services, including materials for construction and construction contracts, carry duties and taxes at varying rates. Project costs include import duties and taxes estimated at US$1.2 million. 3.4 Contingencies and Allowances. Project cost estimates include physical contingencies (US$1.1 million) averaging 6 percent of base costs (10 percent of civil works, and vehicles and five percent of equipment, furniture, books and periodicals). Price contingencies (US$2.5 million; 13 percent of base costs) are estimated on the basis of local cost escalation at the following annual rates: 7.5 percent in 1994, 6.5 percent in 1995, 6 percent in 1996, and 5.5 percent thereafter; and, foreign costs as follows: 1.2 percent in 1994, 2.4 percent in 1995, 3.2 percent in 1996, 3.4 percent in 1997, and 3.3 percent thereafter. 3.5 Foreign Exchange Component. As shown in Table 3.1, above, the estimated foreign exchange component (US$11.5 million), including contingencies, represents 54 percent of total project costs. It has been calculated as follows: (a) civil works 35 percent; (b) equipment and vehicles 90 percent; (c) furniture 40 percent; (d) books and periodicals 90 percent; and (e) foreign consultants and fellowships 90 percent. B. Financing 3.6 The IDA Credit of US$20.0 million (equivalent to SDR 14.2 million) would finance about 90 percent of project costs net of taxes and duties estimated at US$1.2 million. IDA would finance 100 percent of foreign exchange costs and 73 percent of local costs. His Majesty's Government would contribute US$3.1 million equivalent (13 percent of total project costs). In the event that donor financing acceptable to IDA can be secured by the borrower for overseas fellowships and external consultant services (estimated at US$2.2 million total) or for other elements of the project, the amount of the IDA credit may be reduced. During negotiations, an understanding was reached with Government that, in the event that suitable donor financing is not forthcoming by the time such training or expert services are required, IDA funds will be used for external fellowships and consultant services required for the project. During negotiations agreement was also reached with HMG that annual lump sum budgets will be provided to TU within the Government's overall budget framework of  - 20 - priorities (including TA and fellowships), and the University confirmed that it has adequate flexibility with regard to expenditures against allocated funds. C. Procurement Arrangements 3.7 The procurement methods are summarized as follows: Table 3.2: Procurement Arrangements (US$ Million) Procurement Method International Local Competitive Competitive Local Bidding Bidding Shopping N. A. Total 1. Civil Works - 9.3 - 9.3 (7.4) (7.4) 2. Goods 7.8 (7.2) 2.1 Vehicles 0.1 0.1 - (0.1) (0.1) 2.2 EquipmentandFurniture 3.9 1.9 0.4 (3.7) (1.8) (0.3) 2.3 BooksandMaterials 0.7 0.6 0.1 (0.6) (0.5) (0.1) 3. Consultancies and Training a/ 4.2 (4.1) 3.1 Institutional Development 2.2 (2.2) 3.2 Project Preparation and 1.6 Implementation Support (1.5) 3.3 Training/Study Tours 0.4 (0.4) 4. Miscellaneous 4.1 Salaries 0.3 0.3 4.2 Operational Costs b/ 1.5 1.5 (1.3) (1.3) Total 4.7 11.9 0.5 6.0 23.1 (4.4) (9.8) (0.4) (5.4) (20.0) Note: Figures in parenthesis are the respective amounts financed by International Development Association. a/ Services will be procured in accordance with World Bank Guidelines: Use of Consultants by World Bank Borrowers (August 1981) b/ Includes $0.75 million for future project preparation.  - 21 - 3.8 Civil Works (US$9.3 million) and Architectural/Enqineerina Services US$0.4 million). These will consist of: site improvements (including boundary walls, water and electrical services upgrading); repair and renovations of existing buildings; and expansion of selected facilities such as science laboratories and libraries at three principal campuses. Architectural/Engineering (A/E) consultants will be engaged by the university, in accordance with IDA guidelines, to prepare the necessary designs and bidding documents and this work is expected to be carried out by stages during the project period in accordance with an acceptable implementation schedule submitted by TU to IDA. Priority will be given to site improvement works and urgently required repairs and renovations at Kirtipur Campus, with such works expected to begin implementation shortly after Credit Effectiveness. Bid packages for construction works are expected to be small with the largest possibly about US$2-3 million at Kirtipur. It is unlikely that foreign contractors not already operating within Nepal will be interested, and contracts will be awarded on the basis of locally advertised competitive bidding. This would not exclude interested firms from outside Nepal from bidding. It was agreed that ICB procedures may be used if larger bid packages are practicable. Contractors for construction works greater than $250,000 will be pre-qualified on the basis of procedures acceptable to IDA. Standard World Bank bidding documents for "Small Works" will be used, amended as appropriate for the project. These were submitted and approved by IDA. Terms of reference for all A/E consultants will be reviewed by IDA and prior review will be carried out by IDA for all A/E consultant contracts exceeding US$100,000. Civil works exceeding US$250,000 will be subject to prior review by IDA. This is expected to cover about 75 percent of the value of such contracts. 3.9 Goods (US$7.8 million). Equipment, vehicles and furniture will be grouped into packages of US$150,000 or more whenever possible and will be procured through International Competitive Bidding (ICB) in accordance with IDA Guidelines. Furniture suppliers will be pre-qualified. Local manufacturers will be accorded a preference of 15 percent or the applicable rate of duties and taxes whichever is lower. For contract packages of less than US$150,000, locally advertised competitive bidding procedures acceptable to IDA may be followed except: (a) contracts under US$50,000 (up to an aggregate of US$500,000) for urgently needed items, may be procured under prudent local or international shopping with price quotation from at least three suppliers; and (b) books and journals will be procured on the basis of agreed lists with quotations invited directly from bona fide distributors and inviting discounts from publishers' list prices. Standard bid documents for "Goods" have been approved by IDA and will be used for goods procurement. Prior IDA review will be required for contract award in bid packages exceeding US$100,000. This will cover about 80 percent by value of such contracts. 3.10 Technical Assistance, training, fellowships, and other non A/E consultant services (US$3.8 million). Financing under this component will include local and foreign technical assistance and training for: (a) institutional development and capacity building, specifically organizational reform, development of an EMIS at Kirtipur plus 2 regional campuses, curriculum and examination improvements, regional cluster development and maintenance capacity development; (b) consultants services for  - 22 - project implementation; and (c) staff training and limited study tour opportunities in order to promote modernization of the educational and organizational system and improve prospects for longer-term sustainability. Consultants will be selected in accordance with IDA Guidelines. Training financed by IDA will be carried out in accordance with program objectives and procedures to be agreed with TU. Fellowship placement and institutional twinning will be negotiated by TU directly with training institutes in accordance with an overall training program agreed with IDA. 3.11 Procurement Plan. In accordance with IDA requirements for early project start up, TU provided a procurement plan for the first two years of the project period showing commitments expected to be entered into during this period. D. Disbursements 3.12 The proposed credit will finance about 90 percent of total project costs, net of duties and taxes, and will be disbursed at the following percentages: 80 percent of expenditures on civil works; 100 percent of expenditures on professional fees for Architectural/Engineering services and other IDA-financed consultants; 100 percent of foreign and local ex-factory expenditures, and 75 percent of other local purchases of equipment, vehicles, furniture, books and journals, and consumable materials; and 95 percent of agreed local training costs and 80 percent of operating costs of the project unit. The project will be implemented over a six and a half-year period and the Closing Date of the project will be June 30, 2000. 3.13 Disbursements against contracts for goods and consultants services below US$50,000 and civil works less than US$100,000 equivalent will be made against itemized statements of expenditure. Documentation supporting these statements will be retained by the university for review by IDA missions. All other expenditures will be fully documented. A special account will be established at the Nepal Rastra Bank to facilitate payment of eligible minor expenditures. This account will be maintained in US Dollars with an authorized allocation of US$500,000. The account will be used for both local and foreign payments for items costing less than US$50,000 equivalent each under all categories. All other expenditures will be submitted to IDA for payment. IV. IMPLEMENTATION AND SUPERVISION A. Proiect Organization and Management 4.1 The project will be implemented by TU. A project coordination unit (PCU) will be established under the office of the Vice-Chancellor to coordinate the various project activities. A Project Board comprising representatives of TU, MOEC, Ministry of Finance, National Planning Commission and the PCU will be established to facilitate inter-agency cooperation. The PCU will be headed by a full-time coordinator assisted by deputy coordinators for four major functional sections: finance and administration; physical planning and development; institutional development and educational  - 23 - development for which terms of reference have been provided by TU. Essential equipment, furniture, two motorcycles, two vehicles, and incremental operating costs will be provided to the unit under the project. TU and IDA are in agreement that the unit will be structured to serve primarily as a coordinating unit and as such would make use of existing operational capacity within TU wherever feasible, except that separate accounting for the project would be carried out by the PCU staff. During negotiations it was agreed with the Borrower that the formal establishment and staffing of the Project Coordination Unit will be a condition of effectiveness. 4.2 TU will create a Physical Facilities Development Division (PFDD) under the PCU. Initially the unit will perform largely a construction development and procurement role for the project but will gradually assume a broader facilities planning and technical assistance role for facilities development within the university system as a whole as the University lacks this capability. The staff will include an architect, an engineer, and a procurement and maintenance expert. TU will also create and develop a Facilities Maintenance Management Unit initially attached to the Facilities Division in the expectation that this unit will also eventually form part of a reorganized TU administrative structure. TU provided an organizational and staffing plan for the maintenance unit. Essential equipment, furniture, vehicles, staff training and incremental operating costs will be financed under the project. 4.3 Proiect Start-up Activities. A preparation coordination unit assisted by a faculty team was established to carry out preparatory activities identified as part of a strategy for early project start-up, including: (a) a policy implementation matrix; (b) preparation of an overall management and financing plan for the project; (c) selection of architectural consultants for preparation of: a facilities master plan, site development works, and renovations at Kirtipur campus; and building condition assessment reports for regional campuses; (d) terms of reference for the appointment of an EMIS task force, and development of a TU implementation plan for introduction of the EMIS system; (e) an action plan for maintenance at Kirtipur and at regional campuses; (f) workshops for regional cluster formation; (g) criteria for policy implementation fund operation; (h) advance librarian training; and (i) the preparation of standard bidding documents. The unit is expected to evolve into the planned full-time PCU by credit effectiveness. B. Monitoring and Supervision 4.4 Project Monitoring and Mid-Term Review. The PCU will send IDA semi-annual reports on project progress that will include: (a) a summary statement on the status of execution of each project activity; and (b) a table showing compliance with project covenants, and progress in implementing agreed policy objectives. TU agreed to provide IDA with the final format for semi- annual reporting by March 31, 1994 together with appropriate monitoring indicators. Quantitative and qualitative data would become available through the project as the EMIS system begins operation.  - 24 - 4.5 Monitoring will be important to measure the effects of the project on assisted campuses and on the system-wide effects of the university's proposed policy actions. Indicators to be developed for reporting will include: - comparative campus-by-campus enrollments; - number of days spent in studying for examinations, examining students, and scoring papers; - measurement of resource mobilization levels and cost recovery rates; - the rate of implementation of higher secondary education, as well as problems encountered in the transition from university based Certificate-level education; - faculty performance measurements, including absenteeism and instructional effectiveness, as well as the incidence of disciplinary measures and rewards; - indicators of decentralization and campus autonomy, including areas of decision-making actually undertaken by campus chiefs and their assistants; and - indicators showing the state of maintenance of various campuses to monitor improvements following project interventions. 4.6 The information will be collected by campus chiefs and supplied to the project coordination unit for aggregation and reporting. PCU staff will undertake spot visits to confirm the accuracy of the information. 4.7 Supervision. The project would not require special supervision arrangements but in early missions implementation start-up activities will be emphasized. The first full IDA mission would take the form of a project launch workshop, continuing and expanding the working format developed with TU during the project preparation and appraisal process. The workshop should reconfirm annual implementation targets for the various campuses and faculties, and agree on an appropriate format for reporting, including monitoring procedures. The borrower agreed to conduct with IDA a comprehensive mid-term review of the project by March 31, 1997. C. AuditinQ 4.8 Project accounts will be audited annually by an independent auditor acceptable to IDA, and copies of the audited statements will be sent to IDA within 12 months after the end of the fiscal year. The auditor's report will include an opinion and comment on the project accounts and on methods employed in compiling the statements of expenditures, the operations of the special account, their accuracy, the relevance of supporting documents, their eligibility for financing in terms of the project's credit agreement, the standards of record-keeping and internal controls, and the compliance with  - 25 - credit covenants including the status of the local contribution to the project. The terms of reference for the audit would specify the size of the sample for vouching of supporting evidence, which should be no less than 70 percent of the total expenditure for the period of the audit. Annual audits will be financed by the Credit if necessary and the inclusion of financing was agreed during negotiations. V. PROGRAMS OF SPECIAL EMPHASIS 5.1 Environmental Protection. The project is rated category C as the main emphasis is on renovation, refurbishment and equipping of existing educational structures. New construction would be relatively minor and would be linked to the expansion of library and instructional laboratory facilities at three existing sites. Such buildings would require only minor disturbances of land for foundations. 5.2 Women in DeveloDment. While the project does not have specific women's development objectives, the assisted campuses have relatively high female enrollment and refurbishing of existing campuses plus increased female dormitory capacity will improve their educational environment and encourage further growth in female enrollment. The assistance to MOEC to develop higher secondary education will have longer-term benefits for women through the provision of educational opportunity closer to home. This will help to address the additional family reluctance to allow females to study outside the community. 5.3 Povert . The project does not have a specific poverty focus. However, slowing the growth of Higher Education expenditures will reduce the pressure for re-allocation of scarce funds from basic education, a significant part of the IDA poverty focus for Nepal. Free-ships and scholarships are made available by TU and improved targeting of these to needy scholars is being examined by the university. VI. BENEFITS AND RISKS A. Benefits 6.1 By rationalizing the use of human and physical resources, the project would increase the value of the Government's investment in higher education. Enrollments would be more closely linked to the availability of physical facilities, thereby easing pressure on individual campuses and allowing organizational and management improvements to take place. Significantly increased resource mobilization and cost recovery will help alleviate pressure for scarce resources on central government and improve the prospects for better funding of books, consumables, and maintenance. Institutional strengthening would improve prospects for long-term improvements in instructional delivery and manpower development. Assistance to MOEC to prepare for the introduction of higher secondary education into secondary schools would eventually benefit the university through decongestion of university campuses. It would also help to reduce the unit cost of this education stage. The project would provide benefits to: (a) university students in the assisted campuses who would study in less congested  - 26 - conditions, where demonstrated efficiency linked to greater self-management would be rewarded by better equipment, books, and maintenance; and (b) disadvantaged rural school leavers by supporting the development of higher secondary education closer to communities. Among the latter group, women would benefit particularly in view of reluctance of many families to approve female education away from the community. B. Risks 6.2 The project faces some significant risks. The policy reforms supported by the project may create levels of student unrest that could be politically difficult to handle. The Government may be unable to resist the demands for admission to the university from the expanding ranks of SLC graduates. This could result in expanding enrollments, worsen the already intolerable congestion and management difficulties, and create further strong pressures for re-allocation of scarce funds from other priority areas. Specific project risks could be: (a) difficulty in obtaining bilateral donor assistance for fellowships and needed external expert services, and a reluctance by Government to utilize IDA funds for these activities, leading to poor performance or non-fulfillment of important project component objectives where these resources are critical; and (b) inadequate, delayed project budgets and the use of a line-item veto by the MOF. The risk of student unrest will be mitigated by TU moving to quickly demonstrate benefits associated with the project in terms of improved educational conditions, particularly while the more sensitive reform measures are being implemented. The budget problem was raised with Government at various stages including negotiations and it is expected that the University will be given responsibility for budget development and subsequent expenditure. Agreement was reached regarding the use of IDA funds for technical assistance if donor financing is not found within the time frame required by the Project. C. Project Sustainability 6.3 Sustainability will be enhanced by: the preparation of a longer- term business plan, currently being formulated under a UNDP grant (para. 1.35), as a basis for planning TU's future development; improved management practices (including decentralization of authority to campus level and staff performance standards); streamlined admissions and examination procedures; and maintenance programs. Income generation and cost recovery measures currently being undertaken and proposed, would increase resources available to higher education and contribute to significantly improved funding for maintenance, books, and consumables. The close involvement of key University faculty in project preparation and articulation of policy initiatives, will help to ensure a TU commitment to the project. However, the long-term benefits of the project will depend on sustained commitment by the university to the reform process, and the Government's willingness to push through reforms of higher secondary education that would ease the intolerable enrollment pressures on the University.  - 27 - VII. AGREEMENTS REACHED AND RECOMMENDATION 7.1 During negotiations, the following agreements were reached with Government: (a) funding for policy implementation will be based on eligibility criteria acceptable to IDA (para. 2.5); (b) by June 30, 1994, guidelines, acceptable to IDA, will be issued by TU for cluster formation (para. 2.7); (c) that annual lump-sum budgets will be provided to TU, and that TU will have the authority to allocate the budget for implementation priorities in accordance with the provisions of the Development Credit Agreement (para. 3.6); and, (d) that the borrower will conduct with IDA a comprehensive mid-term review of the project by March 31, 1997 (para. 4.1). 7.2 The following is a condition of effectiveness: the formal establishment and staffing of the project coordination unit (para. 4.2). 7.3 ecommendation. Subject to the above conditions, the project would be suitable for an IDA credit of SDR 14.2 million (US$20.0 million equivalent) to the Kingdom of Nepal on standard IDA terms with 40 years maturity.  - 28- ANNEX 1 Page 1 of 2 NEPAL HIGHER EDUCATION PROJECT Table 1: Erollmet Growth in Tribbuvan University Enrollment Projected Enrollment 1/ LevWel of Training 1975n6 19t8Ol1 195/86 1990/91 1991/92 1995/96 2000 NON-DEGREE FirmtYear 770 *73 1,269 1,317 - Second Year and Rqete 425 265 393 339 - - _ Toal 1,195 1,141 1.637 1.656 1,700 2,100 2.700 CERTIFICATE First Year 5.047 14,567 17,453 40.964 65,000 33,500 130,000 SecondYearandR peaten 5.773 11,377 22,543 26.308 41,000 74,500 I0S,000 Total 14,180 25.944 39,996 69.772 106,000 163,000 233,000 BACHELOR First Year 3.045 110 4,826 13,772 20,000 27,000 40,000 Sed Yea atnd Rpeater 3.549 5,039 4,960 13,099 16,000 22,500 33,000 Total 6,594 5,149 9.736 33.671 36,000 49.500 73,000 MASTER ,,s Year 561 45 1.733 6,999 7,500 10.000 15,000 3Scond Year and Repeaters 215 1,512 1,434 2,674 4,000 5,500 3.500 Total 796 1,960 3,167 9,673 11.500 15,500 23,500 TOTAL Fird Year 12.803 15,598 25,301 68,052 92,5C0 125.500 155.000 Second Year and Repeaters 9,962 13,496 29,335 45.720 62,700 104.600 152,200 GRAND TOTAL 22,765 34.094 54,636 114,772 155,200 230.100 337,200 oMislion estimates source: Constmeted by the miuion according to information from Tribhuvan University. Janury 1992. I/ Projected fiom preliminary 1991-92 dat.  - 29 ANNEX I Page 2 of 2 NEPAL HIGHER EDUCAMION PROJECT Table 2: Expendltures of Tribhuvan Univenrty 1/ lms Yar 1912/33 1913/84 1984/ 191M/86 1986/17 1937/38 1933/39 1919/9 1990191991)92 A. Capita Ispmim 33.483 20.753 15.748 9,s90 14,316 16,158 10.184 13.037 16,159 45,925 1. U Lndeoed Land 210 III 50 770 1,570 - 66 - - 300 2. kildbq 20,099 6,249 5,944 1,.86 3,830 3,692 3,424 s5s59 4.0O0 23.335 3. Paltmr 1.791 2,343 1,466 1,792 1,150 1.474 1,389 997 2,015 3,94 4. EqulmeW 11,333 12,045 3,233 5,562 7,716 10,992 5.305 6.531 10,144 17.44 S. R _awuwlmdltue 126,272 141,508 181,637 130,487 192,543 224,875 255.041 309,527 395,957 439.707 1. aud" 93n,573 102,501 141,633 137,933 156,025 172,378 195,983 235.603 325,606 350.700 Timbers 53,541 64,326 92,564 92.593 1O5,S65 103,637 129,111 160,535 211,390 216.706 A_lie3ou 35,032 37,675 49,069 45,315 50,460 63.791 66,372 75,070 113,776 133,994 2. bitude. 1.697 2,794 2,539 1,838 5,S21 5,766 6.948 8,422 ,5.92 10,531 3. ;i Welar 6,855 7,372 7,626 9.202 5,617 3,206 7.243 12,374 13,717 17,935 4. Rhae8md 2,870 3,892 4,293 3,298 677 8,241 12,658 17,012 11,608 15,614 5. Remare ad Pub'mjuom 3,636 3,627 4,075 2,502 1,350 2,197 1,93s 2,102 4,050 4,926 6. OehweRleur Eul_murs 17,641 20,822 21,466 20,664 23,346 28,107 30.241 34,013 32,384 39",95 TOTALPENDITURE 159,755 162,261 197,435 190467 206,ss9 241,033 265,225 322,564 412,116 435,632 1/ EzIdI foreip f bah of four TU inslitutmL  Annex 2 Page 1 of 4 - 30 - NEPAL HIGHER EDUCATION PROJECT Libraries of Tribhuvan Universitv 1. The Tribhuvan University library system consists of a central library, four regional libraries, and a large number of campus libraries. It is intended that the central library (acting as a regional library for the Central Development region) and the Regional Libraries provide professional leadership, policy and management direction, and a measure of technical support to their respective regions. The Central Library is also meant to provide overall leadership and policy direction to the system. 2. The libraries, however, do not function as a system. The central and regional libraries operate essentially as separate entities and the campus libraries operate under the direction of the campus chief. The central library has managed to provide some training input to the system but this is relatively recent and has been based on a very low level of technical competence. The reasons for the breakdown of the intended system are: (a) shortage of staff, particularly qualified professional librarians, but also trained para-professional, technical staff; (b) under-developed service and management policy; (c) the lack of any technical infrastructure within the libraries or the system. 3. The library system clearly requires systematic and continuing assistance and appropriate technical and financial inputs if it is to function efficiently and effectively as an information provider and an academic service to the University. The inputs to the system should provide for regionalization and decentralization; training in modern information technologies and services; training in internationally accepted computer-based bibliographical data standards; and increase in the number and quality of qualified staff; and for the inculcation of modern service concepts, thereby providing the base for future library coordination and cooperation at the regional, national and international level. 4. The following is a listing of the areas that will upgrade the system so that it can best service the needs of the university as a whole.  Annex 2 Page 2 of 4 - 31 - Finance 5. The percentage of the recurrent budget spent on library materials at Kirtipur in 1991 and 1992 compares favorably, though at the low end of the range, with the comparable percentage in many western and Southeast Asian universities but the spread of disciplines and the research emphasis would point to the need for the percentage total to be closer to 3 percent than 2.66 percent in 1991 at the 2.55 percent in 1992. The current percentage, 1.69 percent, is simply not reasonable if the library is to fulfil its role as an information provider. Budget continuity is essential if the library is to maintain periodical subscriptions and course support, and ensures that the library gets a fair and consistent share of funding in good land bad funding years. 6. One possible area of financial assistance might be the establishment of a compulsory academic services (or library) fee on a short, medium or long- term basis. This imposition of a service fee is common in many other countries, but the principle and the relative level of the fees is an issue that can only be resolved in the TU setting. Buildings 7. The central library at Kirtipur requires extensive renovations to its power supply, lighting and plumbing. Structural alterations are also needed to allow for more solar warming in winter. Extension of the building by approximately 1122 sq m along with associated furniture, fittings and shelving is also required in order to provide for user space and an expanded collection. The building is very cold in the winter. Heating should be provided for the entire building with the exception of the area housing the Nepal collection which should have a separate air conditioner and dehumidifier for conservation and preservation of nationally important documents. 8. The regional libraries are generally in need of renovation and upgrading for their current roles. Selected campuses may develop into regional universities, and the libraries ought to be able to serve these future autonomous units. Books and Periodicals 9. The reference collections at the central library and the regional Libraries require significant upgrading. Modest and selective upgrading of the reference collections in some of the satellite campus libraries in these regions is also needed. This input of library materials and associated shelving should be phased over a three year period to ensure its formal inclusion into the collections.  Annex 2 Page 3 of 4 - 32 - Eauivment 10. The central library requires a range of microform equipment; a camera for preservation and conservation of unique and/or cultural materials such as local newspapers, Nepal materials, etc; and associated microform readers and a read-printer to access this material. Binding equipment is needed for the central library and the regional libraries. Research Support 11. The limited bibliographic research tools available in Nepal and the lack of appropriate automation and communications facilities make contracted external research support a necessity. A service database searches despatched by facsimile and document supply by airmail should be instituted as soon as possible. Manpower Reauirements 12. There is an urgent needed for qualified and trained librarians. There are no professional courses available in Nepal, and training to date has mostly taken place in India. Only paraprofessional (technical) courses are available in Kathmandu and are conducted by the Nepal Library Association with certification by the Council for Technical Education and Vocational Training. 13. It is desirable that subsequent international training be provided in as advanced an institutional setting as possible. The reason for this is the very dated curricula available in the Indian library schools. The technical courses offered in Kathmandu should be supported by the university, and staff should be released to teach and/or attend these short programs. 14. The vacant university librarian position should be advertised at the professorial level and filled. As soon as practicable after appointment, the university librarian should undertake a study tour to Malaysia and Australia for one month with the primary objective of establishing, on return, library policy, standards, service guidelines and management directives for the library system. Cataloguing; Regional Purchasing and Processing of Library Materials 15. With the appropriate technical infrastructure, finance, and training, the central library can order, receive, account for, catalogue, and make shelf-ready all library materials for the campus libraries in the Central District. The regional libraries can provide the same service. 16. A large-scale cataloguing project is proposed that would use a team of qualified librarians, appropriately trained technicians and typists, and computerized databases accessed through compact disc technology. The team should also have UNESCO-sponsored CDS/ISIS software and personal computers. This team can catalogue the backlog of usable but uncatalogued material in the three regions, input all cataloguing data into the CDS/ISIS data base and provide for production of listings of library materials across the university  Annex 2 Page 4 of 4 - 33 - or regionally in author, title, subject or classified format. The approximate time frame for this project would be one year. 17. The highly skilled staff used in the project would, on completion, provide the core manpower for central technical processing in the regions. A level of local training using local and foreign experts is required as part of the project design, and study tours in library automation and networking should be provided after project completion. This would ensure that full advantage is taken of the data, the computing skills, and the enthusiasm of the staff. Training by local and foreign experts would required in the cataloguing Project but short-term curricular support by a foreign expert for the library technician program run by the Nepal Library Association would benefit the university. Nepal Collection 18. There are several collections of books related to Nepal within the University system, and also in the parliamentary and national libraries. The collection in the Central Library is extensive and well maintained and the library has commenced entering much of their cataloguing data for this collection into a database (CDS/ISIS). The cataloguing data for Nepal material at the regional libraries should also be incorporated into this database, thereby producing a university listing. 19. The university library should act as the instigator of a cooperative project with other major libraries in Nepal to incorporate listings and holdings into what would ultimately be a national catalogue of great value to scholars. The national library and the parliamentary library are very receptive to this concept and the parliamentary library is also using CDS/ISIS for part of its collection.  Annex 3 Page I of 7 NEPAL HIGHER EDUCATION PROJECT Current Situation and Future Scenarios of Higher Education Finance in Tribhuvan University 1. As indicated in Table 1, the total government education expenditure in Nepal (including foreign aid) has accounted for about 2 percent to 2.5 percent of the country's GDP, which is relatively low by international standards. The average total education expenditure as a percentage of GDP (or GNP for some countries) for the developed countries is about 6 percent, that for developing countries is about 4 percent, and the overall world average for all countries is about 5 percent. Therefore, it seems appropriate to recommend that Nepal increase its expenditure on education as soon as the state of the economy allows. 2. As indicated in Table 1, the higher education expenditure as a percentage of the total education expenditure in Nepal declined from more than 30 percent in early and mid 1980s to about 26 percent in 1991/92. Although this percentage for higher education is not low by international standards, the per student allocation in constant prices from the government was reduced from NRs 2551 in 1981/82 to NRs 1282 in 1991/92, showing the serious financial constraints of TU. This is probably because the overall spending on education is low but also because the enrollment of higher education expanded too quickly. Table I also shows a remarkable increase of total TU expenditure in 1991/92, which is mainly due to large foreign-aid programs implemented at the technical institutes of TU. Since foreign aid may fluctuate considerably from year to year, budgets may decline in future years. 3. Table 2 provides information about planned higher education expenditures for the Eighth Plan period (1992/93-1996/97) of Nepal; the total education expenditure as a percentage of GNP is 2.4 percent, and the higher education expenditure as a percentage of total education expenditure is 28.9 percent. The overall pattern of allocation to education and higher education remains unchanged in this period. 4. Table 3 gives a financial scenario of TU if no sicnificant policy changes take vlace. This means: (a) TU continues the "open-admission" policy and ex=ansion of enrollment based on past experience; (b) no adoption of new strategies for resource mobilization and utilization including new cost- sharing and cost-recovery policies; (c) no implementation of higher secondary education (+2 schools); and (d) no organizational reform for higher level of institutional efficiency and effectiveness. In this case, the higher education enrollment will reach 337,000 by che year 2000. (This figure includes about 30 percent students at the TU private campuses. However, in the projection of financial needs of TU, this proportion of enrollment is excluded.) The financial projection is in 1991/92 constant prices. Recurrent expenditure requirements are estimated by multiplying the enrollment number with the estimated unit recurrent cost of 1992 (though it is considered low).  Annex 3 Page 2 of 7 - 35 - The needs for capital expenditure are estimated by additional facilities needed for the increased student enrollment, without taking into account the urgent needs for improve the existing facilities. The current level of cost- recovery (student tuition fees) is taken into account. As the result shows that in the Eighth Plan period (1992/93-1996/97), TU will have a shortage of funds for about NRs 3.2 billion. This scenario should not be acceptable to the Government. 5. ODtion 1: Table 4 gives a financial scenario of TU with some significant policy changes. This means: (a) TU will regulate enrollment at no more than 7 percent annual increase; (b) TU will adopt new strategies for resource mobilization and utilization including new cost-sharing and cost- recovery policies (recovering 20 percent of the unit recurrent costs from admission fees, tuition fees and registration fees); (c) gradually implementing higher secondary education (+2 schools) to phase out Certificate- level students over more than 10 years; and (d) carrying out organizational reform for higher level of institutional efficiency and effectiveness. In this case, enrollment will be 131,000 by the year 2000. (This figure includes students at the TU private campuses. However, in the projection of financial needs of TU, this proportion of enrollment is excluded.) The financial projection is in 1991/92 constant prices. The needs for recurrent expenditure are estimated by the multiplying the enrollment number with the estimated unit recurrent cost of 1992 (though it is considered low). The needs for capital expenditure are estimated by an annual increase of about 5 percent capital outlay for improving and expanding the existing facilities, which are only suitable for about 40,000 students on a single-shift basis. As the result shows, during the Eighth Plan period (1992/93-1996/97), TU will have a shortage of funds for about NRs 1.6 billion under this scenario, (with an assumption of 15 percent of total government commitment be reallocated to the newly developed +2 schools). The NRs 1.6 billion deficit under this scenario is still going to be problematic for TU and the Government. 6. Ontion 2: Table 5 gives a financial scenario of TU with significant policy changes. This scenario implies that: (a) TU will regulate enrollment at no more than 4 percent annual increase before 1995/96 and no more than 7 percent from 1996/97 to the year 2000; (b) TU will adopt new strategies for resource mobilization and utilization including new cost- sharing and cost-recovery policies (recovering 20 percent of the unit recurrent costs from admission fees, tuition fees, and registration fees); (c) the Government will implement higher secondary education (+2 schools) to phase out Certificate-level students by the year 2000; and (d) TU will carry out organizational reform for a higher level of institutional efficiency and effectiveness. In this case, the higher education enrollment will be 69,302 by the year 2000. (This figure does not include students at the TU private campuses.) The financial projection is in 1991/92 constant prices. The needs for recurrent expenditure are estimated by the multiplying the enrollment number with the estimated unit recurrent cost of 1992 (though it is considered low). The needs for capital expenditure are estimated by an annual increase of only about two percent capital outlay for improving and expanding the existing facilities because the student enrollment will decrease. As the result shows the during the Eighth Plan period (1992/93-1996/97), TU will have a shortage of funds for about NRs 0.9 billion under this scenario, (with an  Annex 3 Page 3 of 7 - 36 - assumption of 10 percent of total government commitment be reallocated to the newly developed +2 schools. This is based on an additional assumption that when Certificate-level students are transferred to +2 schools, the direct private cost for students' families will be increased according to current tuition structure in Nepal, which might reduce the demand for this level education, so the government will only reallocate 10 percent of its commitment to +2 schools). The NRs 0.9 billion shortage might be handled by mobilizing resources through better utilization of the assets, from contribution of local governments, communities and private business, revenues generated from consultation services, and through improved internal efficiency of the TU system.  - 37 ANNEX 3 Page 4 of 7 NEPAL HIGHER EDUCATION PROJECT Table 1: National Financial Sitution and Higher Education Expenditure in Nepal (1981-1992) (a )hluion Nb) 19S112 19S2183 1953/54 1914/85 19S51S6 1986187 1987/13 19SS/S9 1989/90 1990t91 1991/92 ODP 30.983 33,761 39,390 44.417 50.428 59,246 61,358 73,259 38.711 100.628 129.975 Oovemment Revms 2.676 2.35 3.406 3.916 4.644 5,975 7,350 7.776 9.287 9,625 12.057 Goamnet Expenditure 5.361 6.976 7.437 8.394 9,797 11.513 14.105 lt.005 19.669 19.792 24.3S5 Total Education Expeaditur 623 121 g53 910 1.241 1.286 1,599 1,740 2.078 2.0S5 3.205 Education Expcadltw as % of GDP 2.0 2.4 2.2 2.0 2.5 2.2 2.3 2.2 2.3 2.1 2.5 among whick Educatin Dcvpt Expenditure' 412 604 675 64 379 1,036 1,226 1.458 1.430 1,719 2.734 Higher Edue. Expere (TU)* 203 352 336 349 459 407 422 333 452 463 *59 as of Educ. Expue rc 32.6 42.6 38.0 3t.4 37.0 31.6 26.4 22.0 21.8 22.2 26.8 amo : whlc ovewmatetOnot 131 144 162 170 212 200 226 234 270 314 369 Foreign Aid 72 208 174 179 247 207 196 149 132 149 490 TU Income 1S I1 is 15 15 15 45 32 42 42 49 ToIa TU Ddg*et 213 367 351 364 474 422 467 415 494 505 908 TU Studet Number 51,356 52,070 43.229 55,332 54,355 61.133 65,161 74,358 79,432 93,753 110.239 Per Staden AlioctUan from Govefimiet (in Rs.) in etutm pries 2,551 2,766 3,359 3.072 3,900 3,272. 3,465 3.146 3.399 3,349 3,347 in 1951 cenata price 2,551 2.426 2,776 2,431 2,671 2,152 1.1S5 1.511 1.559 1.401 1.252 Pilce Index too 114 121 126 146 152 154 199 211 239 261 Per Student TotAl ExpenditureS (in Rs.) in icwent price 4,245 7,048 7,273 6,S78 5,720 6,903 7,166 5,579 6,219 5,336 1.237 in 1981 condant price 4,245 6.1S3 6.015 5,221 5,973 4,541 3,895 2.303 2.853 2.254 3.156 iNocluding foreip aid. Source: Tribbivan University Plannin Dividon and mlioca atmates.  11