Mozambique - Higher Education Project

Report No. PID10008 Project Name Mozambique-Higher Education Project Region Africa Regional Office Sector Tertiary Education Project ID MZPE69824 Borrower(s) GOVERNMENT OF MOZAMBIQUE Implementing Agency Address MINISTRY OF HIGHER EDUCATION, SCIENCE AND TECHNOLOGY Contact Person: Lidia Brito, Minister Tel: Mobile: 258-82-322026 Email: Lbrito@zebra.uem.mz Environment Category C Date PID Prepared February 22, 2001 Projected Appraisal Date June 5, 2001 Projected Board Date October 15, 2001 1. Country and Sector Background Background:Education and poverty: Mozambique is one of the poorest countries in the world, with a per capita income of US $260 (1999). The latest census figures confirm that 70 percent of the population live in total poverty. Two issues are of fundamental importance for the future of the Mozambican people. The first is the attainment of economic growth, which in turn will increase national income and employment, the second is the reduction of poverty. These issues are interrelated and education is crucial for achievement of both goals. The principal concern is the overall level of education in the population and labor force. 60 percent of those aged 15 and over are illiterate, including 56 percent men and 85 percent women. As part of the Government's National Policy for Education (1995) and Strategic Plan for Education 1999-2003 supported by the Bank under the US$700 million sector wide Education Sector Strategic Program, over the last several years basic education has received significant attention and funding. As a result enrollment into primary education has almost doubled and increased by 900,000 children since 1993. In 1998 the primary gross enrollment rate was 92w, one of the highest in the region, but only one out of five children completes grade 5. However, substantial efforts are underway to improve the quality of teaching and learning. A similar steady trend is evident at the lower secondary level and the upper secondary pre-university level which again the Bank is supporting. Nevertheless, the education system and the country as a whole continues to suffer from a very limited number of higher level graduates. Only 3 percent of the population have attended secondary school, technical education or higher education. Although, the enrollment into upper secondary education have increased almost ten times since 1993, with about 9,000 students enrolled, the demand for secondary graduates remains high. Aside from the shortage of professionals in the economy such as doctors, accountants, engineers etc., the education system itself is suffering from the lack of teachers with a college degree to teach at the post primary levels. The lack of skilled professionals is a major concern of the  Government. With progress being made on basic education, but facing competing demands for the limited number of higher education graduates, the Government has had little choice but to accelerate the development of a strategy for higher education to ensure that social and economic achievements are sustained. The economy, prospects for growth and poverty alleviation: Since the first free elections in 1994 the Mozambican economy has been one of the fastest growing economies in the world. Buoyed by good agricultural seasons, recent economic performance has been impressive, though it represents recovery from very low base levels. GDP growth averaged 5.5 percent annually between 1987 and 1996 and 11 percent annually between 1997 and 1999. At the same time, investor confidence has grown. Between 1996 and 1998, consumption grew by an average of 9 percent annually, and investment by 13 percent annually. Merchandise exports increased by 42 percent from 1996 to 1998. Foreign direct investment (FDI) has also increased, and as a result of large investment associated with the Mozal aluminum smelter it reached US$213 million in 1998. This represents a tenfold increase over FDI in the early 1990s and, at about 3.3 percent of GDP over 1996-98, it is high relative both to the size of the economy and to other African countries. While recent figures may reflect a peaking of infrastructure investments, signs suggest that foreign investor confidence is growing rapidly and FDI sources are becoming more diverse and Mozambique is expected to continue to grow at 7 to 8 percent per annum over the next five years. Reducing poverty will depend on the success in maintaining these high economic growth rates, supporting investment in new areas, expanding employment opportunities and increasing national income and government revenues. Increasing revenues is the basis for increasing provision of public services and addressing inequities especially in the social sectors. However, the potential for increasing revenues depends on the composition of the labor force and its taxable base, and the contribution of the economic sectors to GDP and national revenues. In 1998, the formal sector accounted for more than one third of the gross domestic product of US$3.5 billion and about 60 percent of domestic revenues (World Bank, Growth Prospects Paper, 2000). In the short term an increase in revenues can be achieved by expanding the fiscal base, but in the longer term income growth will be dependent on the rate of expansion in the economy. Mozambique's prospects for long term growth are strengthened by the country's untapped natural resources. However, the lion's share of future growth and revenue will continue to be generated from the formal modern sector and depend on foreign investor confidence and investments -- areashighly dependent on the availability of high level managerial and professional skills. Labor force: structure, demand and supply: The National Statistical Institute (INE) estimates that the labor force is expected to reach 9.7 million by the year 2000, an increase of about 60 percent since 1990. Approximately 9 percent, or about 800,000 people, are employed in the formal modern sector. Informal labor market surveys show that there are essentially no Mozambicans employed in middle and higher level management positions in the largest foreign companies. Many industries are currently facing the need to replace an aging stock of educated professionals trained in the period preceding the civil war, and now nearing retirement. Thus far, the country has relied on imported labor to meet labor market demands for either professional or highly trained staff. This strategy has not only failed to build capacity in the country, but has pushed the government to limit the employment of foreigners in companies, thus, possibly jeopodizing future investments, if the number of Mozambican professionals is not increased. Further evidence of excess -2 -  labor market demand is provided by frequent anecdotal reference to students from the engineering and economic faculties of UEM leaving for employment before completing their thesis and formally graduating. In the public sector (totalling 120,000 people (excluding the armed forces)) about 30 percent of employees have a post-secondary degree. Assuming, very conservatively, that only 10 percent of the formal sector labor force are higher level professionals, that attrition due to retirements or death is only 1 percent, and with no allowance for any expansion in the economy, Mozambique would still have to replace about 800 professionals every year to fill the available jobs. In comparison, in 1999, total enrollment in higher education was 11,600, but the total number of new higher education graduates in Mozambique was only 483 in 1998 (World Bank, Education Cost and Financing Study, 2000, Strategic Plan for Higher Education, GoM, 2000). This represents the high level manpower stock from which national and international companies and the public sector must recruit future leaders, managers and professionals. Under a more positive and realistic growth scenario, evidenced by the current level of investment, the shortfall of trained professionals will be even more severe and the demand for graduates and high level professionals correspondingly greater. Finally, in addition to demand for normal replacement the prevalence of HIV/AIDS is likely to have a severe impact on overall attrition rates. Higher education investment: The current project in support of higher education has to be seen and justified against this picture. It could be argued that the country's state of poverty and the slowly changing enrollment profile provide little basis for investment in higher education at this time. Neither the Government nor the Bank share that view for several reasons. First, efforts are being made to by the government, the Bank and external partners to expand enrollment and improve quality and relevance at the basic and secondary levels. In this context support for higher education does not diminish investment at the lower levels, but rather complements it as envisaged under the sector wide approach. These investments are not substitutable. Second, the extent and severity of Mozambique's shortage of highly trained professionals for managerial and economic policy leadership is unique in Africa and an impediment to growth and investment and to national leadership of it. The shortage of capacity is so great that the country is re-importing sizable numbers of expatriates to take-up leadership in the private sector. The social and political implications of this situation have led government to legislate the number of such individuals who can be employed. Third, reform of Mozambique's university degree structure will bring it into line with higher education elsewhere in the region and the world, providing expanded access to international facilities and scholarship, and permitting the country to become a partner in the creation and exchange of global knowledge. Fourth, a major goal of the government is to create a national system of education and, within this, an integrated higher education sub-sector is an important component. While a coherent system of higher education can not solve problems of inefficiency at the basic and secondary levels, or redress equity problems arising from geographical and historical disparities at those levels, it can reinforce efforts being made at the lower levels and contribute to an efficient, functional and equitable system. Fifth, while it is difficult to demonstrate how any university reform program makes a direct contribution to the alleviation of poverty, there can be little doubt that in Mozambique an increase in the number of well trained and committed doctors, teachers and lawyers will provide the potential human resource -3 -  pool for the delivery of services previously inaccessible to poorer segments of the population. Finally, there is a public good argument, going beyond market demand, for investment in the higher levels of education in Mozambique: for a country with a painful colonial and post colonial history, in a continent itself torn by strife, ethnic cleavages and mismanagement, the university system can play an important unifying and leadership role in helping to define the identity of Mozambicans and the mission of the Mozambican nation. Higher education issues:The central sector issues for the higher education sector are described in detail in the Government's Strategic Plan for Higher Education, 2001-2010, Working Document 1. Among key issues are the following:Inadequate supply and limited access: The higher education system reflects the country's history. At first there was only one university, Eduardo Mondlane University (UEM), offering courses modeled on the Portuguese system, with a rather long period of study leading to a single qualification (licenciatura). During the civil war many areas were cut off from the capital and most Mozambicans had no access to higher education. In 1990, 77T of a total of 3,750 higher education students were in UEM. Even after the peace agreement in 1992 UEM remained the main provider of higher education, accounting for about 75t of total enrollment. By the end of 1995 there were only three higher education institutions in Mozambique with a total of 6,844 students, of whom 76t were in UEM and only 25 percent were women. New admissions remained fairly stable between 1992 and 1995, at around 1,000. Only recently has the system begun to expand and diversify, but on a very weak financial basis. There are currently six HEIs in Mozambique: Eduardo Mondlane University (UEM), Pedagogical University (UP), the Higher Institute for International Relations (ISRI), the Higher Institute of Science and Technology of Mozambique (ISCTEM), the Advanced Polytechnical University Institute (ISPU) and the Catholic University of Mozambique (UCM). By 1999 total enrolment had increased to 11,619 and new admissions doubled from 1,088 in 1995 to 2,155 in 1999. At the same time the number of applicants to HEIs continues to be ten times that of the available vacancies (Strategic Plan for Higher Education, Working Document, GoM, 2000). Concurrently, there are certain programs or areas of education that are not offered, but are in high demand by both the public and private sectors -- such as accountancy (there is no national accountancy institute), tourism (there is no tourism schools or programs), programming or business management. Other sectors are in a dire need for graduates, such as teacher trainers for the teacher training colleges. Low graduation rate and low internal efficiency: The number of new graduates remained stagnant at around 260 a year between 1992 and 1994, increasing slightly to 398 graduates in 1995 and 483 graduates in 1998. Expressed as a proportion of total student numbers however, the graduation rate is very low, at only around 5t per year. The low level of graduation points to a high degree of wastage and low efficiency of the system. This combined with internal inefficiencies of institutional governance and management resulting in low utilization of staff and facilities has resulted in the low graduation rates and high costs per graduate. The average expenditure per student is at par with average per capita spending in Anglophone and Francophone Africa (in Mozambique the average expenditure per student represents 6.4 times per capita GNP, compared with an average of 6.3 in Anglophone and 5.6 in Francophone countries). But because of the low internal efficiency the cost per graduate is very high.Poor quality and inadequate relevance: Another cause and effect of the low graduation rate is the situation that most courses - 4 -  and programs offered at HEIs, particularly the public HEIs, are outdated, of limited relevance and poor quality and do not respond to the demands of a fast growing economy and to specific needs in individual provinces or emerging sectors. The limited capacity (and incentives) among academic and administrative staff in HEIs to improve teaching and learning, devise new courses and deliver them to an expanded number of students, and similar limitations of management capacity in the new Ministry charged with leading higher education reform, have led to a lack of relevance and responsiveness to changing needs. The UEM has undertaking the implementation of a curriculum reform. But with the anticipated reforms under the PEES and continuing changes in the economy the curriculum will further have to be updated, not just at UEM, but in all institutions. In general research facilities, library and educational materials are limited and out of date negatively affecting the overall quality of the learning environment.Low integration of sector and weak capacity for policy design and implementation: Another important feature is the fact that the HEIs are not well integrated with limited (or no possibilities at all) for students to move across comparable programs. Furthermore, general policy coordination and monitoring of sector performance is weak if not totally absent. Finally, in the absence of a definitive legal framework, there is an inadequate demarcation of responsibilities and articulation between the new Ministry and the HEIs.Weak external efficiency: Equally important for understanding the development of higher education in Mozambique is the fact that for many years the university system operated under a centrally planned economy, paying limited attention to internal and especially external efficiencies and such issues as allocation and management of resources. The failure of current policies on institutional financing, cost recovery, subsidies and student support to ensure equity of access and resource distribution and financial sustainability has further contributed to this. The lack of responsiveness to changing external needs is further evidenced by the fact that while the labor force is estimated to have increased by 3.7 million people over the past decade and as stated before the economy has been growing at 9t, the number of university graduates have only increased to about 500. Inequity in access and socio-economic disparities: In Mozambique, there are still severe geographical disparities of access between Maputo and most other provinces, resulting from a concentration in the south of HEIs, leading to unequal opportunities for access and subsequent employment; between 1990 and 1999 about 60 W of students were from Maputo or the South, compared with only 109 from the North and 309 from the Central (and poorest) provinces. This is of course further exacerbated by the existence of a dominant, traditional and highly respected university (UEM) which has tended to monopolize the production of graduates. The UEM operated until recently under a privileged status with a sizable public subsidy, but with outdated course structures, antiquated curricula and centralized management systems which combine to produce internal inefficiencies, notably high drop out and repetition rates, and a lack of responsiveness to new labor market needs. However, with increasing demand for higher education, in the last seven years this has resulted in the emergence of a differentiated system of public, private and non-profit institutions which have begun to compete with UEM in terms of relevance, equity, efficiency and cost. Nevertheless, this expansion continues to benefit the higher income groups (Education Costs and Financing Study, 2000) and the weak financial solidity of the newer private HEI points to the inadequacy of resources among students.These issues and facts help to explain the - 5 -  reality of a rather rigid and unresponsive higher education system, and the current recognition of the need for reform so that the system can better serve its students, teachers and the country as a whole.Government strategyThe Government of Mozambique recognizes that improving and expanding higher education is vital in order to meet the demands of the labor market and to supply the professionals required for economic management and policy leadership, and that if economic growth is constrained by a shortage of professional skills, it will undermine long term prospects for poverty alleviation.Signaling the seriousness of its intent and awareness, the government formed a new Ministry of Higher Education Science and Technology (MiHEST) in early January 2000. Together with the higher education Task Force established in October 1999, this accelerated the preparation of a National Strategic Plan for Higher Education (PEES). The rapid development of a national strategy for higher education therefore demonstrates the Government's awareness of the problem, and its determination to address the challenge of the severe shortage of professionals. The Plan, one of the more impressive of its kind in the region, has been the subject of extensive consultations throughout the provinces and was refined in a major national seminar in July 2000 opened by President Chissano. It is national in scope and its main points of focus are to expand access, to increase regional and gender equity, to reduce costs per graduate and to improve the internal efficiency of the whole sub system. Government and universities alike recognize that a critical part of the strategy is to reduce the length of the undergraduate degree course by instituting a new bachelor level degree and speeding up the time taken to complete degree programs, thereby providing the expanding formal modern sector and the economy as a whole with the graduates and professionals needed. The task of turning the Strategic Plan into an operational document, which can be the basis for a Bank project, has already begun. Implementation will be in regions or zones and an inventory of existing institutions in each province is already underway. To ensure the necessary articulation between higher education and lower levels of education, particularly with policies and strategies for pre-university and technical and professional schools, the Government has contracted with the government of the Netherlands for assistance in this task. It is intended that both public and private HEIs that establish permanent university-level activities in the Provinces should receive state support, in terms of resource allocation, fiscal stimuli and import and customs facilities, but the provincial governments will also have to contribute fiscal resources from the province itself. Leading and coordinating this reform process is a complex task for a new Ministry. The Minister's intention is for all programs to be implemented at the institutional level, leaving the Ministry to deal with overarching issues such as planning, resource allocation, monitoring and evaluation. For this purpose a crucial component of the project will be the establishment of strong finance, planning , monitoring and evaluation unit (FMU) which will be responsible for project oversight. In addition, the Ministry intends to initiate analysis of key issues, at both system-wide and institutional level, in order to clearly understand underlying problems such as low internal efficiency and inequalities of access, to develop policies to address these problems and to explore the feasibility of new forms of financing, including tuition fees, scholarships, student loans and commercial credits for private institutions etc. 2. Objectives -6-  Phase I: The project will establish the physical and institutional conditions and capacity to implement improved programs of teaching, learning and research. Improving efficiency and the use of resources will improve graduation rates, equity and relevance of education in higher education institutions (HEI).Phase II: The project will expand coverage and improve equity, along with the internal and external efficiency of the system, by reducing repetition and drop out, increasing completion rates, expanding access, lowering the cost per graduate and improving the overall flexibility and diversity of programs and courses. 3. Rationale for Bank's Involvement Beyond the injection of extensive inexpensive funding the Government perceives several key dimensions of value that Bank involvement will add. They include:Knowledge within the Bank team, and among consultants, of experience from African and elsewhere of higher education systems that have committed themselves to a similar reform process.Technical expertise and practical experience in what is required for the successful design and implementation of major higher education projects,Responsiveness and flexibility in being able to provide support from the on going CBP project and to speedily apply PHRD and Norwegian Trust funds to project planning and preparation. Prior involvement in the CBP permits the application of lessons learned and more important it has enabled the largest external supporter of higher education in Mozambique to establish relationships of trust and the experience of continuity amounting to a comparative advantage that can now be extended to a project which involves the national system. 4. Description 1. Project components (see Annex l)Component 1. Strengthening institutions of higher education. This component will support the improvement of academic quality and the relevance of training, improvements in efficiency, as well as infrastructure rehabilitation/construction at institution level. Specific activities will be identified through preparation of mid-term development plans prepared by the HEIs and approved by the Higher Education, Science and Technology Council (CESCT). The component will include three windows. Window A. Academic quality and relevance of training programs (ET).This window will provide support for (i) strengthening staff academic capacities and (ii) improving the quality and relevance of programs and courses. Specific activities will include training of staff, support for mentoring arrangements, visiting lecturers and academic exchange. Twinning arrangements between institutes of higher education will be promoted. The institutions will be able to include the following activities for their development plans:Strengthening staff academic capacities:(a) training for faculty and staff; (b) scholarships for faculty for academic training in new disciplines; (c) stipends for visiting lecturers in key disciplines; (d) programs for bringing business and public leaders to teach higher education courses; (e) IT capacities and connectivity for faculty staff.Improving the quality of programs and courses:(a) upgrading existing academic curricula and courses; (b) introducing student-centered learning strategies; (c) designing and starting short (one to two-year long) certificate or diploma programs in new specialities [ TBDI, (d) designing and starting evening programs in new specialities [TBDI; (e) designing new modular based programs and courses.Window B. Capacity for internal efficiency improvement (ET).This window will support efforts to reduce the time - 7-  needed for successful completion of study (graduation), and reduction in repetition and drop-out, thereby lowering the cost per graduate. Activities to improve internal utilization of resources (faculty, facilities, equipment) will also be supported. The component will support the following activities:(a) introduction of "bridging" courses for candidates to HEIs; (b) introduction of institutional incentives for academic excellence; (c) design and implementation of activities to change the culture of "failing students" on the basis of national analysis undertaken under component... ; (d) training of management and administrative staff of institutions; (e) design and introduction of internal budgeting, financial planning, management and accounting systems; (f) development of career advisory service and linkages with private sector for facilitation of student placement.Window C. Institutional expansion and infrastructure rehabilitation (ET).This widow will finance the rehabilitation and expansion of facilities, equipment and library upgrading in existing institutions, as well as setting up of new facilities to expand the availability of programs in new locations. Both existing academic programs and programs in new areas such as [TBD: agriculture and farm management, finance, accounting, tourism/hotel management and public administration] will be assisted. This will include the following activities:(a) physical rehabilitation of existing buildings and construction of new facilities; (b) provision of IT, communication and laboratory equipment for teaching, reasearch and administrative purposes; (c) provision of textbooks, learning and research resources in libraries and subscriptions for information sources; (d) design and management of institutional expansion programs. Component 2. Sector and institute management reform and improved coordination and external linkages (ET).This component will provide system-wide policy analysis, design of specific reform initiatives, capacity building and training for effective monitoring and coordination at system level, and for improved internal management at institutional level.The objectives of the component will be achieved through provision of technical assistance, training of staff, procurement of IT, office and communication equipment and development and implementation of strategies for information dissemination, communication and promotion of labor market linkages. The component will support the following activities:(i) analysis of policy issues (current and projected relevance of produced skill mix , regional disparities in access, analysis of low graduation, high repetition and drop out rates etc. ), design of policy recommendations on the basis of these studies for higher education reform;(ii) design and testing of funding formulae and resource allocation mechanisms (capitation, institutional grants, etc) and revised financing policies (strategies for cost sharing and targeted student financial support);(iii) development and introduction of human resource management policies in public higher education (contracting scheme for faculty staff of the universities, evaluation principles etc.); (iv) building of planning, budget and financial management capacity at MiHEST, including design of guidelines, staff training, development of IT and communication strategies and equipment procurement;(v) establishment of management information system (MIS) for national higher education, including regular surveys of HEIs to collect and analyze academic and financial information for planning and monitoring at both the system and institutional levels;Component 3. National academic excellence program.This component will build academic capacity and capacity for academic program certification; design and development of quality assurance mechanisms, including monitoring of existing programs and accreditation of new courses - 8 -  and institutions. Activities will include:(i) design and development of quality assurance mechanisms and monitoring and accreditation system(ii) creation of a national program for faculty academic excellence awards;(iii) design of a national program for student academic excellence awards;(iv) design of and introduction of student-oriented learning.Component 4. Higher education scholarship fund - national pilot (ET). This component will finance the design, start up costs, initial operation and evaluation of a Higher Education Scholarship Fund. The fund will serve as a pilot instrument for allocation of public funding to HEIs on a capitation basis, to improve responsiveness to student and employer demand, and improve targeting of public funding to vulnerable groups. The fund will offer individual scholarships for graduates of secondary schools to finance tuition costs in various higher education training programs, including both public and private institutions. The criteria for eligibility, selection and allocation procedures will reflect: (i) the need to support access to higher education for disadvantaged groups, and (ii) labor market needs for technical skills in specific areas. Possibilities for private sector sponsorship or financing of scholarships will also be assessed and explored. Component 5. Program implementation (ET).This component will provide support for overall program implementation with the final aim of building national management capacity in the higher education sector at national and institutional levels. It will finance the following activities: (i) technical assistance to the Ministry in coordination, administration and management of a national higher education system; (ii) technical assistance in the area of procurement; (iii) technical assistance for the setting up of monitoring and evaluation mechanisms; (iv) support for program development. Component 1. Strengthening institutions of higher education. Component 2. Sector level management reform and improved coordination and external linkages Component 3. National academic excellence program Component 4. Higher education scholarship fund (national pilot) Component 5. Program implementation 5. Financing Total ( US$m) Total Project Cost 80 6. Implementation Overall project coordination and governance. The overall project strategic coordination will be in the hands of Higher Education, Science and Technology Council (CESCT) that will be established shortly as a strategic entity to advise the Minister, assist with development of higher education, science and technology policies and oversee implementation of policies. The CESCT will have broad representation of the Government, Institutes of Higher Education, also to include provincial and local government, civil society, the productive sector (public and private), academic and research community, secondary and technical and vocational education sectors. The Council will be convened bi-annually to approve the project annual budget, development plans and its execution, assess progress towards project and component objectives and other project strategic issues.A higher education operation and change committee and financial management board (constituting the heads or directors of planning and finance) would probably be the clearance house and monitoring of day to day project implementation on which basis the FMU would release - 9-  funds quarterly. The Financial Management Board would monitor the execution of the program and report on problems with disbursement and procurement. The procurement and financial management consultants would report to the Board.Project implementation/institutional arrangements/PIU: Two options for project implementation were considered: one included establishing a financial management and planning unit under the Ministry for Planning and Finance, which was rejected because of the lack of educational ownership and control. Therefore, the second option is currently under discussion. Under this option the project oversight will be delegated to a Financial Management, Monitoring and Planning Unit (FMU) to be placed under the MiHEST. The staff of the FMU will not be civil servants, but externally hired consultants and will include component coordinators, procurement and a financial management specialists. The FMU will be accountable to the Minister of Higher Education and to CESCT.Implementation at Institutional level. Existing and new HEI will be involved in implementation of the project, including the Eduardo Mondlane University (UEM), Pedagogical University (UP), the Higher Institute for International Relations (ISRI), the Higher Institute of Science and Technology of Mozambique (ISCTEM), the Advanced Polytechnical University Institute (ISPU), the Catholic University of Mozambique (UCM). Overall responsibility for the project implementation will be with the Rectors and Academic Councils of these institutions and implementation will use exisiting institutional structures. Each institution will appoint two key contact persons for project implementation. Procurement and financial management consultants will be hired in each HEI and integrated into each institutions respective financial and administrative department (DAF). The interrelation and contractual arrangement of the consultants and final set-up will be determined during preparationDisbursement and audits: Because of the complexity and cash flow requirements disbursement will be based on LACI, with quarterly reporting and annual audits of each institution and the FMU.Program period and implementing agencies: The project will be implemented over a 7 year period, divided into two phases of 3 and 4 years through the Ministry for Higher Education, Science and Technology (MiHEST) and the HEIs.Monitoring and Evaluation: Project implementation will be monitored on the basis of overall project performance and component indicators. It will be done on the basis of quarterly and annual project reports and indicators of higher education sector performance to be developed within the project. Besides regular monitoring indicators, special triggered for the next phase of the program will be developed by the time of project appraisal. They will reflect both progress toward achieving development objectives of the program as well as internal project performance. The project will support development and introduction of the sector performance monitoring system to be established within MiHEST. Once established, it will be used for monitoring of the project and overall system performance. Design of monitoring system will be supported through one of the project components. 7. Sustainability Financial sustainability: It is likely that policies supported by the project activities will incur some additional fiscal expenditures. These will be assessed during the project preparation and necessary recommendations provided for MTEF. Additional budget expenditures would be needed to finance additional salary costs of expanded higher education system; any government shortfall in other items can be met from the phase two and three of the credit. The size of this expanded envelope is - 10 -  expected to be minimal as soon as the project is concentrating on improved efficiency in the use of existing staff and facilities, introduction of of more effective modes of instruction and shorter courses and programs. Introduction of elements of cost sharing will also reduce the dimension of potential increase. Institutional sustainability: The project will support development of Government capacity to fomulate policy, monitor and coordinate sector perfromance. At institutional level training of management staff, development of financial managment capacities and introduction of improved governance procedures will ensure sustainability of improved efficiency of institutional management. This will ensure that the capacity and processes put in place will be utilized beyond the project's life.Relevance of education and quality: Introduction of shorter courses and programs in the areas of highest demand will improve relevance of provided education, will improve relevance and develop linkages of the sector with key employers and private sector at large. These linkages will help improve sustainability of higher education institutions.To institute sustainable reform in the sector is not a short term endevour. Therefore, a 7 years project period that can be adapted is considered a suitable approach for ensuring this. 8. Lessons learned from past operations in the country/sector Several lessons have been learned from the Capacity Building Project with UEM which was the forerunner to this project. and have been included in its design. Key lessons are: (i) an initial focus on institutional and operational arrangements, including procurement and financial managment, and capacity building (ii) integration of project implementation into the HEI structure, (iii) flexibility in design and possibility of adaptation to changing need (the appropriateness of an APL), (iv) early preparation of implementation and procurement plans, (v) clear drafting of contracts and managment set up for twinning arrangments, and (vi) longer term planning of scholarships and study abroad activities.Other higher education projects in the region, most notably Ghana, Kenya and Madagascar offer useful lessons, for both design and implementation stages, while outside the region the project in Vietnam is particularly instructive. All are being taken account of in the preparation of this project and offer pertinent lessons:n In recognition of the fact that in Mozambique, as in Ghana, universities possess an organized and influential constituency of staff students and alumni who can act as powerful interest groups, broad and sustained consultation and institutional participation has been adopted in project design and will be continued in implementation, despite the more than normal supervisory attention that this requires.n Where, as in the Mozambique project, enrollment expansion is a primary objective, care will need to be taken to ensure that it does not become led by political considerations in defiance of quality assurance. The Ghana experience, as well as the cost differentials between HEIs, have persuaded this project to adopt reduction in cost per graduate as the main performance indicator for monitoring the balance between expansion and quality as well as improvements in efficiency. n In the Mozambique as in the Ghana project improvement in the quality of higher education is an explicit project objective. On the basis of the Ghana experience relevant performance indicators which measure student learning (e.g. standard examination results) will be utilized or created.From the Kenya Universities Investment Project come several pertinent lessons: n Both Kenya and Mozambique are moving from a situation of a dominant national university to an integrated system of multiple differentiated - 11 -  institutions. The Kenya experience underscores the importance of a project design in Mozambique that provides for an appropriate balance between decentralization of responsibilities to universities and central coordination. n As the Mozambique project , like that of Kenya, involves a lending operation in support of a small number of universities which are self accounting organizations, it is planned on the basis of Kenya experience to ensure that at appraisal there is a record of the structure of the revenues and expenditures of the beneficiary institutions and their unit costs, so that subsequent progress reports can routinely monitor these aspects.n To the extent that the Mozambique project will require the installation of equipment, the Kenya experience points to the necessity of clear procedures and allocated responsibilities for receipt, inspection acceptance and testing of such equipment.n Universities in Mozambique, as in Kenya and Ghana, are on a path to becoming large-scale, complex organizations with an increased market orientation. This will require the inclusion in this project of correspondingly greater attention than before to managerial training at all levels.The case of Madagascar offers two general notes of encouragement arising from the fact that with bank support the system in Madagascar has improved from a dilapidated state, akin to that of Mozambique after the civil war, to a functioning system of quality and relevance.n Madagascar underlines the long term nature of education reform and innovation such as is being contemplated by Mozambique and the need for continuity in bank staff involvement.n It also confirms the key importance of a firm but flexible policy framework, as is manifested in the Mozambique Strategic Plan which will be operationalized through the harmonization of the development plans of constituent institutions, the very process in which the Government of Mozambique is now engaged for the preparation of this project. From outside the region two useful lessons are suggested by the Vietnam project:n The higher education project in Vietnam supports a regular survey of all HEIs to collect data on universities' financial operations, student teacher ratios, drop out, repetition and graduation rates and other performance indicators, which are used to monitor institutional performance and will also be used to monitor project implementation at HEI level. It also supports a regular graduate tracer study and development of career advisory services in HEIs to improve linkages with the labor market. This project could support such development in Mozambique.n One of the features of the Vietnam project is that HEIs that apply for investment funds from the project have to demonstrate that they are using data collected through the annual institutional and graduate tracer surveys in their own internal strategic planning ,including curriculum reform and the introduction of new courses to respond to labor market needs. This project will pay particular attention to developing such incentives for HEIs in Mozambique. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues None 11. Contact Point: Task Manager Soren Nellemann The World Bank - 12 -  1818 H Street, NW Washington D.C. 20433 202-473-8294 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. This PID was processed by the InfoShop during the week ending March 2, 2001. - 13 -