Liberia - First Education Project

RESTRICTED Ci,\C lIAThivG C}'pY Report No. P- 1044 TO BE RETUR,NED TO REMORTS DESF E This report is for official use only by the Bank Group and specifically authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF LIBERIA FOR A FIRST EDUCATION PROJECT March 14, 1972   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUELIC OF LIBERIA FOR A FIRST EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to The Republic of Liberia for the equivalent of US$7.2 million on standard IDA, terms to help finance a project for expanding and improving the education system. PART I - INTRODUCTION 2. The Bank has made five loans for projects in Liberia, totalling $20 million and IFC has made one investment of $250,000. Details are shown in Annex I. The Bank's loans have been for roads, port expansion and power. Project execution and loan disbursements have generally met expectations. However, an issue has recently arisen over the Public Utilities Authority (PUA). The Government's decision to add several new functions (radio, television and tele- communications) to the Authority's existing power, water and sewerage functions may be inconsistent with understandings reached in connection with Loans 684-LBR and 778-LBR. These matters are being discussed with the Government. The off-shore costs of both power projects have increased in terms of US dollars, partly because of the devaluation of the dollar and partly because of the need for larger gas turbine units. 3. The education credit proposed here represents the begin- ning of a planned shift in emphasis of Bank Group activity in Liberia. It is the first financing from the Bank Group other than for infrastructure. Negotiations were completed recently for a US$1.2 million agriculture credit--also the first lending for agriculture. This credit is due to be presented to the Executive  -2- Directors in FY 1972. Both the education and agriculture proposals are noteworthy because: (a) they would provide substantial technical assistance for institution building and project preparation; (b) they are expected to lay the groundwork for further Bank Group lend- ing in both sectors. These priorities conform to those of the administration that came into office in Liberia last July. 4. The new administration is placing greater emphasis on human resource development. It regards the present educational system as a major development bottleneck and is determined to intro- duce better planning and improve public administration. One of its objectives is to help farmers in the Liberian-owned rubber sector increase their productivity and incomes. This cannot be done, how- ever, without a vigorous extension service, with adequately trained personnel at all levels. This is why modernization of agricultural and vocational education figure so prominently in the project now proposed. In future, Bank Group lending will be directed more towards agriculture and education and less towards infrastructure other than roads. PART II - THE ECONOMY 5. An economic mission was in Liberia in July and August 1970 and its report (AW-25b), dated June 1, 1971, has been distributed to the Executive Directors. An interim economic mission visited Liberia last December and its main conclusions are discussed below. Country data are in Annex II. 6. During the last decade, Liberia's GNP has grown at an average annual rate of about 4 percent in real terms. Most of this growth originated in the so-called enclave sectors -- primarily iron ore, but also rubber and logging -- which contribute about 35 percent to GDP and 85 percent to merchandise exports. There has been little growth, however, in the large underdevelopedd rural economy. The per capita GDP of about $300 somewhat obscures the real poverty in the country, since there are large factor payments abroad and GNP per capita is only $235. Furthermore, income distribution is highly skewed; the 60-70 percent of the population engaged in subsistence agriculture has an average per capita income of less than $50.  -3- 7. The economic situation improved markedly in 1969 and 1970 as export prices for iron ore and rubber improved. However, in 1971, economic activity lost some of its buoyancy, mainly because of adverse external developments. The iron ore sector, which accounts for some 70 percent of the value of exports and 25 percent of GDP, failed to expand, largely due to the general economic slowdown in the industrial countries, and especially the reduced European demand for iron ore. The rubber industry was even more adversely affected in 1971. Prices received by Liberia rubber producers fell sharply throughout the year. Monthly average posted prices for latex and specification coagulum, the two main varieties sold by Liberian farmers, were respectively 28 percent and 42 percent lower than in 1969. Since one-third of total output is produced on Liberian- owned farms, the drop in prices had severe repercussions for domestic incomes. Public revenues failed to rise and the fiscal position deteriorated. Current revenues levelled off at $67 million while non-debt current expenditures increased 11 percent to $46 million. With debt service payments of some $18 mildion absorbing about 25 percent of current revenues, there were practically no budgetary savings to help finance development. 8. While the economic situation weakened in 1971, the polit- ical outlook changed significantly. The new president, William R. Tolbert, took office last July, following the death of President Tubman, who had been in power for 27 years. The new administration has already taken encouraging steps to help strengthen the economr and to provide more effective economic leadership. In view of the weak budgetary situation, the Government last December negotiated an IMF standby arrangement for $4 million. The Government's letter of intent included a commitment to introduce tax reforms, to exercise greater expenditure control, to limit domestic bank credit and not to contract or guarantee any external loans of less than 12 years' maturity. The new administration is stressing the need to improve public administration and to build an efficiently functioning development planning system with clearly defined pri- orities. It is now trying to broaden and diffuse economic growth, particularly in rural areas,and has decided to eliminate unecono- mic expenditure. It is also trying to obtain more revenue from the mining, timber and rubber concessionaires.  9. The Government has announced it will prepare a development plan for 1974-1978, an important step in view of the fact that so far there has been no systematic development planning and only in- adequate sectoral knowledge. In 1971, Liberia received an economic mission under ILO's auspices, which reviewed employment in the major sectors in the econowy. The report of this mission will include guidelines that will help in the preparation of the forth- coming development plan. Government also has initiated a pilot regional development study in Upper Lofa County and is seeking assistance for a comprehensive transport study. A new agency was recently established in the Office of the President to implement development projects in rural areas. 10. Public capital expenditure in 1971 continued at the level of about $10- 12 million for the fourth year in a row, reflecting the shortage of identified and prepared projects and reduced external assistance. However, given new capacities for greater project identification and preparation, public investment is expected to rise to an average of about $17 million annually over the next several years. With reasonable success in raising public savings, taking into account the temporarily adverse export picture, domestic sources should be able to finance about 20-25 percent of projected public investanent. This would leave an average of about $12-13 million annually to be financed externally. The United States and Germany may provide approximately half of the required external capital assistance. The remainder, averaging about $6-7 million a year, would have to come from other sources. 11. Disbursement of external capital assistance in the last two years averaged about $7.5 million annually, almost all for- infrastructure. There was also an average of about $8 million a year from grants for technical assistance, mostly from the United States. These amounts represent a sharp drop from the annual average of $ 13 million in capital assistance and $ 12 million in technical assistance from 1965 to 1969. There were no new aid commitments for capital projects in 1971, in contrast to average, annual commitments of about $10 million in the previous two years. IBRD loans accounted for about 55 percent of these commitments, with 29 percent from the United States and the remainder from the African Development Bank. The loans were mainly for power, air transport and rural roads, with only loans from the United States on soft terms.  12. External debt outstanding at the end of 1971 is estimated at $162 million. About 67 percent is owed to the United States (mostly loans from AID), 10 percent to Germany, nine percent to IBRD and 14 percent to suppliers (mainly Italian). In the past two years, debt service payments absorbed about 13 percent of net export earnings (merchandise exports minus net factor payments abroad), and about 24 percent of current revenues. They are ex- pected to absorb similar proportions in the next several years. For the immediate future, the debt service burden will remain heavy. And this occurs at a time when the Government is attempting to increase the scope and quality of certain normal economic and social services activities, and to introduce public administration and civil service reforms. These will exert heavy pressure on future budgets, thus limiting the generation of public savings. 13. Against this background, it is highly desirable to avoid a further increase in the debt service burden. Given Liberia's poverty (despite its prosperous enclaves), it needs considerable external assistance, a major part of which needs to be on conces- stonal tenrs. Every effort will be made to interest other donors in joint or parallel financing arrangements for Bank and IDA projects. Local expenditure financing will be necessary if the Bank Group is to finance the most important projects. 14. The events over the past year have important bearing on the directions of Bank and IDA lending. The new administration has shown signs of improving public administration and generally better economic management. Greater emphasis has been placed on rural development. Education also is of high priority. The education system, however, has serious deficiencies. Educational planning is inadequate and there is a scarcity of local talent. The large element of technical assistance in this project is designed to meet these basic problems and to complement efforts of other inter- national agencies, such as UNESCO and FAO. Without this kind of assistance, education in Liberia is likely to remain a serious bottleneck to development. The poor quality of education and the shortage of Liberian skilled and semi-skilled manpower at almost every level and in all sectors of the eoonoqW are major obstacles to development and remedying them deserves high priority.  -6- PART III - THE PROJECT 15. Liberia, governed by descendants of freed American slaves who first settled in the early 1800s, patterns its educational system after that of the United States--kindergarten, six years of elementary school, three years each of junior high (grades 7-9) and senior high school (grades 10-12) and a four- or five-year university program. The central government is responsible for the financing of public education and administration of the system is centralized in the Ministry of Education. Primary education is free. Fees are charged at the secondary and higher levels. Govern- ment spent a total of $8.0 million on education in 1970, about 12 percent of its total budget. Total education expenditures, including that for private schools, represented 3.7 percent of GDP in 1970, which is about average for African countries. 16. The education system in Libwia has many deficiencies. Teachers are underpaid and poorly trained. Physical plant is generally unsuitable and teaching materials are scarce. Curricula emphasize academic subjects; there is a notable absence of effective technical and agricultural training with practical orientation. While a few good educational institutions exist, they mainly serve Liberian elites and expatriates. Educational opportunities for the majority of Liberians are limited. In the elementary schools, there is a high proportion of over-age pupils. It is probable that only 25 percent of the 7-12 year age group is enrolled. Because of a high repeater and dropout rate, only three out of ten pupils enter- ing school-complete grades 1 to 6. In 1970, it was estimated that the average dropout rate reached 67 percent because of financial problems (pupils must pay for textbooks and uniforms), early marriage in the case of girls, inadequately equipped schools and poor quality of teaching. General secondary education is also weak. The dropout rate is 31 percent for junior high schools and 23 per- cent for senior high schools. Curricula concentrate almost entirely on social studies and language training, with emphasis on qualifi- cation for university entry. Of the 1,000 teachers employed in general secondary education in 1970, about 48 percent were ex- patriates and almost all were qualified teachers, while only about  - 7 - 10 poxrent of the Liberian staff could be regarded aos fully qualified. Another deficiency of the education system is its limited contribu- tion to manpower needs. In the absence of manpower planning and of adequate knowledge of manpower requirmsents, the education system has failed to meet the demands for skilled and semi-skilled workers, technicians and agriculturists. 17. Other development institutions, such as the United States Agency for International Development, have in the past provided assistance for primary, secondary and technical schools, as wel as equipment and textbooks. The results have frequently been dis- appointing, however, because of lack of planning, poor administration and other problems. Because of this experience, priority is given in this project to training. This will help ensure effective execution and, in addition, help strengthen fundamental planning of manpower development and the education system generally. In fact, it would not be possible for this project to be implemented satis- factoril,y without employing specialists from abroad and granting fellowships to Liberians. Other international agencies are also helping in this regard: UNDPP for example, is providing assistance at the Kakata Rural Teacher Training Institute, and UNESCO is provid- ing science teaching fellowships at the University of Liberia. 18. The new Government, anxious to improvre education, is stressing the importance of manpower and education planning. It accepts the need for improving education outside the capital city and to redirect the emiphais in school curricula to help mset man- power needs. The Government's total expendittures on education was 12 percent of the budget in 1970. Recurrent educational expend- itures were 11.4 percent of the recurrent budget in 1970. These proportions are expected to rise. Currently, in anticipation of one of the requirements of this project, the Goverment is preparing a graduated salary structure for teachers based on a job classifi- cation system which takes into account qualifications and length and quality of service. This should help considerably to alleviate one of the major problems inhibiting improvement of fthe educational system--the low status of the teaching profeasion. 19. EBy strengthening manpower and educational plannin& pro- riding for establishment or expansion of a limited number of new and existing institutions and by helping to institute more pertinent  curricula and more relevant education methods, the proposed project will help reshape the education system s0 that it can meet urgent manpower needs and thus serve the nation better. Specifically, the project consists of: (a) Construction of andequipment for two multi- lateral high schools in the north and east, each offering a wide curriculum in agriculture, mechanics and academic subjects; (b) construction of and equipment for a new college of agriculture and forestry; (c) expansion of the Kakata Rural Teacher Training Institute and construction of an adjacent demonstration school; (d) equipment for science and technical teacher training in Yekepa and Monrovia; (e) 57 man-years of technical assistance and seven man-years of fellowships for manpower and education planning, technical teacher training, secondary education and project implementation. 20. The new multilateral high schools would represent an innovation in secondary education in Liberia and would be likely to set a pattern for other similar schools. Consultants would assist in formulating the curriculum. The schools would accommodate 360 Junior pupils(1970 enrollment was 11,000) and 240 senior pupilst (1970 enrollment was almost 4,ooo). Fifty-six teachers would be required and they would be obtained from existing schools in the area, from the output of various schools of the-University of Liberia and from the technical teacher training program propose d under the project. Two technical teacher training courses of three years' duration, each for 18 students, would be provided under the project. In addition, the project would assist the teachers' college at the University of Liberia to carry out a science education program aimed at producing by 1980 160 qualified Liberian science teachbrs for junior and senior high schools and the upgrading of 100 in- service teachers. Finally, expansion of the Kakata Rural Teacher  -9- Training Institute would permit some 35 supervisors, 210 school principals and 2,600 teachers of different categories to be trained in the initial five-year program. The new College of Agriculture and Forestry, to be located next to the University farm at Fendoll, would provide academic and communal facilities and boarding accom- modation for 200 students. The college would have a strong practical bias and would offer four-year degree courses in agriculture and forestry. The technical assistance in this project would be mainly for manpower and educational planning and project implementation. In addition, technical assistance would be provided for the two multilateral high schools, for university planning and for technical teacher training. 21. For purposes of project evaluation, the Government would, within three years of the date of signing of the proposed credit introduce for all institutions included in tho project and for a limited number of traditional secondary schools, a "tracer" system and procedures for collecting information on dropout rates and class repetition. A condition of effectiveness will be the appointment of the Project Director and counterparts to the Deputy Project Director, Project Architect, Project Accountant and Project Procure- ment Specialist. 22. Total cost of the proposed project, as detailed in Annex III,is estimated at US$9.6 million. The proposed credit would pro- vide 75 percent of this amount, or US$7.2 million. This would cover foreign exchange costs, estimated at $6.65 million, and $0.55 million of local costs, all net of taxes. The Government of Liberia will finance the remaining $2.4 million of local costs. The project would be carried out in about 5-1/2 years (including technical assistance), and construction would be completed in about three years. 23. All contracts for the supply of furniture and equipment and for the construction of schools would be awarded on the basis of international competitive bidding. Domestic manufacturers of fur- niture and equipment would receive a margin of preference equivalent to the existing rate of customs and import duties, or 15 percent of the c.i.f. cost, whichever is lower. 24. The project would be implemented by a project unit to be established within the Department of Education and under the charge of a qualified Liberian Project Director. The unit would include  - 10 - expatriate advisors filling the positions of deputy project director, project architect, an educational equipment procurement specialist and an accountant, for whom suitable counterparts have already been designated. PART IV - LEGAL INSTRUMENTS AND AUTHORIT! 25. The draft Development Credit Agreement between the Republic of Liberia and the Association, the recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement of the Association, and the text of a draft resolution approving the proposed credit are being distributed to the Executive Directors separately. The draft Development Credit Agreement COnforms subs- tantially to the pattern of agreements for education projects. 26. I am satisfied that the proposed Development Credit Agree- ment would auply with the Articles of Agreement of the Association. PART V - RECOMMENDATION 27. I recommend that the Executive Directors approve the proposed Development Credit. Robert S. McNamara President Attachments Washington, D.C. March 14, 1972  ANNEX I STATEMENT OF BANK LOANS TO LIBERIA AT FEBRUARY 29. 1972 (US$ million) Loan Year Borrower Purpose Amount Undisbursed nmber 368 LBR 1964 Republic of Liberia Roads 3.3 368 LBR 1965 Republic of Liberia Roads 1.0 617 LBR 1969 Republic of Liberia Ports 3.6 0.4 684 LBR 1970 Public Utilities Authority Power 7.4 5.2 778 LBR 1971 Public Utilities Authority Power 4.7 4.7 Total (less cancellations) 20.0 of which has been repaid 0.. Total now outstanding 19.9 Amount sold 0-3 Total now held by Bank 19.6 Total undisbursed _10.3 STATEMENT OF IFC INVESTMENT IN LIBERIA AT FEBRUARY 29, 1972 Year Conpany Amount (US$ million) Loan Equity Total 1966 Liberian Bank for Industrial 0.25 0.25 Development and Investment Less sold or repaid 0.01 0.01 Now held 0.24 0.24  ANNEX II page 1 COUNTRI DATA - LIBE1RA* 1970 Area: 43,oco square miles Population: 1.5 million Rate of growth: 3.0% Per Capita GDP $300 Per Capita GNP $235 National Income & Product ($ million) 1969 / 1MOPW Gross Domestic Product (in market prices) 427.6 450.3 Net Factor Payments Abroad 92.6 98.5 Gross National Product (in market prices) 335.0 351.8 Annual Rated Growth of GNP at at constant prices (1960-1970) 4% Industrial Origin of GDP: Percentage Distribution (at current factor cost) b/ 1969 1970- Agriculture 26.9 25.6 Monetary Economy 19.4 18.3 Rubber (8.8) (7.8) Other (10.6) (10.5) Subsistence Economy 7.5 7.3 Mining & Quarrying 28.5 27.5 Iron ore (26.3) (25-5) Diamonds (1.2) (1.1) Quarrying (1.0) (0.9) Manufacturing 3.8 5.2 Construction 4.4 4.2 Transport & Communication 6.2 5.9 Wholesale & Retail Trade 13.5 14.7 Pablic Sector Agencies & Ehterprises 12.3 12.0 Other Services 3.7 4.5 * The currency in use in Liberia is the United States dollar. y Data for earlier years are not comparable. i Estimates.  AITNEX , page 2 ' ?