Turkey - Secondary Education Project

Document of The World Bank FOR OFFICIAL USE ONLY ReportNo: 27983-TU PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDLOAN INTHE AMOUNT OF EURO 80.00 MILLION (US$104 MILLIONEQUIVALENT) TO THE REPUBLIC OF TURKEY FOR A SECONDARY EDUCATION PROJECT February 16,2005 HumanDevelopment Sector Unit Europe and Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents mav not otherwise be disclosed without World Bank authorization.  CURRENCYEQUIVALENTS (Exchange Rate EffectiveJanuary 31,2005) Currency Unit = New TurkishLira (TRY) TRY 1.7454 = EURO 1 USD 1.3053 = EURO 1 TRY 1.3372 = USD 1 FISCALYEAR January 1 - December31 ABBREVIATIONSAND ACRONYMS A P K Research, Planning & Coordination Council MOF Ministryo fFinance A P L Adaptable Program Loan MONE Ministryo fNational Education BEP 1 Basic Education Project 1 MVET Modernizing Vocational Education Program BEP 2 Basic EducationProject 2 MY0 Higher Vocational Schools (post secondary) CAS Country Assistance Strategy NGO Non-governmentalOrganizations CDG CurriculumDevelopment Group OEDC Organization o f Economic Cooperation and CGCG Career Guidance & Counseling Group Development CGSDU Career Guidance Services Development Unit OED Operations Evaluations Department CSAG Career Services Advisory Committee PCC Project Coordination Center DPS DetailedProject Schedule PHRD Population and HumanResources EGITEK General Directorate for Educational Development (Japanese Grant) Technologies PIP Project ImplementationPlan EARGED Education Researchand Development Center PISA Program for International Student EC European Commission Assessment ECA Europe and Central Asia P M G Project Management Group EU European Union P M R Project Management Reports FMR FinancialMonitoring Report POAR Project Outcome Analysis Report GDP Gross Domestic Product P O M Project Operational Manual GOT Government o f the Republic o f Turkey PSEC Project Steering and Executive GPN General Procurement Notice Committee IBRD International Bank for Reconstruction and RAM Responsibility Assignment Matrix Development RFP Request for Proposal ICT Information and Communications SAL Sector Adjustment Loan Technology SAEG Student Assessment and EvaluationGroup ICTG Informationand Communication SDG School Development Group Technology Group SEP Secondary EducationProject IMF International Monetary Fund SIL Specific Investment Loan I L O International Labor Organization SVET Strengthening Vocational Education ISA International Standards on Auditing Programs ISKUR TurkishEmployment Agency SWAP Sector Wide Approach ISR Implementation Status Report TOR Terms o f Reference ISTG In-Service Training Group UNDB UnitedNations Development Business KPIR Key Performance Indicators Report WBI World Bank Institute MERG Monitoring, Evaluation, & Reporting Group WBS Work Breakdown Structure Vice President: Shigeo Katsu Country Director: Andrew N.Vorkink Sector Director: Charles C. Griffin Sector Manager: MaureenMcLaughlin Task Team Leader: Robin S. Horn  FOROFTI- USEONLY REPUBLIC OF TURKEY SECONDARY EDUCATIONPROJECT CONTENTS Page A . StrategicContext and Rationale ................................................................................................. 1 1. Country and sector issues........................................................................................................... 1 2. Rationale for Bank involvement................................................................................................ 3 3. Higher level objectives to which the project contributes........................................................... 4 B . PROJECT DESCRIPTION ........................................................................................................ 5 1. Lendinginstrument.................................................................................................................... 5 2. Project development objective and key indicators..................................................................... 5 3. Project components.................................................................................................................... 5 4. Lessons learned and reflected inthe project design................................................................... 6 5. Alternatives considered and reasons for rejection ..................................................................... 7 C . IMPLEMENTATION ................................................................................................................. 8 1. Partnership arrangements ........................................................................................................... 8 2. Institutional and implementation arrangements ......................................................................... 9 3. Monitoring and evaluation o f outcomes/results ......................................................................... 9 4. Sustainability.............................................................................................................................. . . . 9 5. Critical risks andpossible controversial aspects...................................................................... 10 D APPRAISAL SUMMARY . ........................................................................................................ 11 1. Economic and financial analyses ............................................................................................. 11 2. Technical.................................................................................................................................. 12 3. Fiduciary .................................................................................................................................. 13 4. Social........................................................................................................................................ 14 5. Environment............................................................................................................................. 16 6. Safeguard policies.................................................................................................................... 16 7. Policy Exceptions and Readiness............................................................................................. 16 This document has a restricted distribution and may be used by recipients only in the performance of their official duties I t s contents may not be otherwise disclosed without World Bank authorization . .  ANNEXES Annex 1: Country and Sector Background ..................................................................................... 17 Annex 2: Major RelatedProjects Financed by the Bank and/or Other Agencies ....................... 23 Annex 3: Results Framework and Monitoring ............................................................................... 24 Annex 4: Detailed Project Description ............................................................................................. 28 Component 1. Secondary Education Reform (Base cost o f64.7 million) ................................ 28 Component 2. Quality, Assessment and Management (Base cost o f5.5 million) ...................28 Annex 5: Project Costs...................................................................................................................... 30 Annex 6: Implementation Arrangements ........................................................................................ 31 1. Overviewof ImplementationArrangements........................................................................... 31 2. The Roles and Responsibilities o fthe SEP Team.................................................................... 31 3. The Project ImplementationPlan............................................................................................. 31 4. ImplementingUnits o f MONE ................................................................................................ 32 5. Project Reporting Arrangements.............................................................................................. 32 6. Specific Implementation Arrangements for Project Components........................................... 32 Annex 7: Financial Management. Audit and DisbursementArrangements ................................ 34 Annex 8: Procurement ....................................................................................................................... 40 Annex 9: Economic and FinancialAnalysis .................................................................................... 53 Annex 10: Safeguard Policy Issues ................................................................................................... 59 Annex 11:Project Preparation and Supervision ............................................................................ 60 Annex 12: Documents in the Project File ........................................................................................ 61 Annex 13: Statement of Loans and Credits ..................................................................................... 62 Annex 14: Country at a Glance ........................................................................................................ 64 Map (IBRD 32947)  REPUBLICOF TURKEY SECONDARY EDUCATIONPROJECT PROJECT APPRAISAL DOCUMENT Europe and Central Asia Region ECSHD Sector Director: Charles Griffin Themes: Education for the Knowledge Economy (66%); Project ID: PO66149 Education for All (65%) Lending instrument: Specific Investment Loan (SIL) Environmental screening category: C [XILoan [ 1Credit [ 1Grant [ 1Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing: Euro 80 million Proposed terms: VSL with 4 years grace period and 17 years maturity IBRD Project development objective Ref. PAD B.2, Technical Annex 3 The overall development objective of the project is to improve the quality, economic relevance, and equity of secondary :ducation to support lifelong learning. Project description Ref. PAD B.3.a, Technical Annex 4 Zomponent 1. Secondary Education Reform: Revising and implementing new secondary general and vocational :urriculum programs; providing secondary students with equipment and competencies in information and :ommunication technologies; and implementing improved career guidance and counseling services to secondary ;tudents. 2omponent 2: Quality, Assessment, and Management: Developing systems to provide educators, administrators, students, and the public with up-to-date information on student learning outcomes and the performance of educational nstitutions and other providers of secondary education services; helping schools, staff, parents, and students improve heir schools through school development planning, and strengthening the institutional capacity of the Ministry o f Vational Education to assure effective management of the Project. Which safeguard policies are triggered, if any? Ref. PAD 0.6, TechnicalAnnex I O None Significant, non-standard conditions, if any, for: Ref. PAD C.7 3oard presentation: None. ,oan Effectiveness: None   A. STRATEGIC CONTEXT AND RATIONALE 1. Countryand sector issues The October 2,2003 CAS' for FY04-06 identified the themes for the IBRDprogram: sound macroeconomics and governance, equitable human and social development, attractive business climate and knowledge, and strong environmental management and disaster mitigation. The Secondary Education Project would directly support the second priority, and indirectly the third, by enhancing the development o f human capital. It i s listed as a FY05 project inboth the base and highcase lending scenarios. Stabilizing the economy, creating and sustaining growth, and modernizing the role o f the state are key strategic objectives for Turkey, but none o f them may be fully achieved or sustained without improving the country's human capital. Comparative international studies repeatedly demonstrate that the educational attainment and educational performance o f the Turkishpopulation and labor force are by far the lowest o f all Organization o f Economic Cooperation and Development (OECD) countries. Economic Status: Given its growing working age population, Turkey needs to assure economic growth for job creation and address inequality in income distribution. Average annual Gross Domestic Product (GDP) growth was four to five percent until the mid 1 9 9 0 ' ~followed by a sharp decline o f about six percent in ~ 1999. Following its 2001 economic crisis, Turkey recovered strongly in 2002. GNP growth reached eight percent in 2002, six percent in 2003, and an estimated eight to nine percent in 2004. Continued economic growth can provide the right conditions for generating new jobs at rates commensurate with the increase in the size o f the working age population, especially jobs in high productivity sectors associated with higher wages. The implications o f these points for secondary education are that, to benefit from these conditions, future workers will need the competencies and knowledge required for greater intrasectoral productivity growth, increased labor mobility from lower to higher productivity sectors, and an economic environment more competitive with the European Union, other OECD countries, and Turkey's other global trading partners. Income Inequality and Poverty. Turkey has high income inequality, close to the levels for Russia or Peru. The poorest 20 percent command less than 5.3 percent o f total income, whereas the wealthiest 20 percent have 50.1 percent o f total income.* Differences in education account for as much as 22 percent o f total income inequality between households, revealing the existence o f entrenched inequities in access to education inTurkey. The average income o f adults with higher education i s almost six times that o f illiterate adults. The World Bank's 2003 Turkey Poverty Assessment Study reported that the allocation o f public finance on secondary education tends to reinforce patterns in the distribution o f income. These points underline the importance o f directing the project to schools that serve students from poor families, families where the adults have low levels o f education, families in rural areas, and families in the poorer provinces. Improving equity and reducing disparities in the quality o f education between upper and lower income regions, and improving the participation o f girls and children from low income families are goals o f the Government that are supported by the proposed project and are linked with other Bank investments (see Annex 1 for additional detail). The Education System: The Ministry o f National Education (MONE) system i s primarily public and consists3 of: (a) non-compulsory pre-school for 3-5 year olds with about 16,000 schools and enrollment o f about 430,000, (b) eight grades o f compulsory primary for 6-13 year olds with about 35,000 schools and a gross enrollment rate of over 97.4 percent and 10.5 million students, and (c) three years o f secondary education for ages 14-16 with a gross enrollment rate o f about 63.5 percent and 2.7 million students; and *'Board DocumentNo. R-2003-0181. Board date: November 6,2003-Report No. 267560-TU. Figures from Republic of Turkey, State Instituteof Statistics, 2002. 3 2004-2005 school year data from the Ministry of National Education (open educationprograms not included). - 1 -  includes over 2,900 general education schools with enrollment o f about 1.7 million students and about 3,800 vocational schools with an enrollment o f about 1 million students. The Higher Education Council administers the tertiary education, where the gross enrollment rate i s about 29 percent o f the cohort and includes about 1.9 million students. The system includes about 450 two year higher vocational schools with an enrollment o f over 345,000, 704 schools bachelors-level programs with an enrollment o f about 820,000, a graduate program with an enrollment o f about 90,000, and a large distance learning program with enrollment of over 650,000. This system i s also overwhelmingly publicly run and financed (only about 3 percent of the institutions are private). Educational Attainment and Learning Achievement: Educational attainment o f Turkey's population and labor force i s among the lowest o f the OECD countries. Virtually all children in other OECD countries have completed at least eight years o f schooling, and in nearly two-thirds o f these countries, over 70 percent or more o f 25-29 year olds have completed secondary education. OECD analyses show that completing secondary education i s a strong predictor o f the acquisition o f the skills required to function in the emerging knowledge economy. Similarly large gaps appear at the tertiary level, with only seven percent of young people (aged 30-34) attaining this level, compared to an average o f 24 percent for the OECD countries. On international assessments, Turkish students not only perform much worse than European Union (EU) members, but score lower than all o f the new EU members and other accession candidates. Inparticular, 2003 results from OECD's Program for Intemational Student Assessment (PISA), published on December 7, 2004, demonstrate that approximately 50 percent o f Turkey's 15-year-olds are not proficient inmathematics, reading, and science beyond the most minimal o f level o f competency. Improving Access to Basic Education: Turkey has mobilized nationally to improve the basic educational qualifications o f its population, with the support o f two World Bank-financed Basic Education Projects. The Basic Education Law No. 4306, adopted by Turkey's Parliament in August 1997, extends the period o f compulsory basic education from five years to eight years and raises new tax revenues to finance a vast expansion o f the education o f infrastructure to accommodate the expected increase in basic education enrollments. The compulsory extension o f basic education began to take effect in September 1998 and the net enrollment ratio increased very sharply following passage o f the Law, from 75.8 percent in 1996/97 to 91.1 percent in 1999/00. Turkey's success in raising enrollments at the basic education level will lead to a sharp increase in the number o f students entering secondary education (grades 9 through 12). Reforming Secondary Education: The Government's EighthFive-Year Development Plan indicates that the length o f compulsory education may be extended to 12 years. The Ministryo f National Education (MONE) has been planning to extend the secondary school cycle to four years across all types of secondary schools and programs starting with the 2005-2006 school year. The Government will be under short-term pressure to increase secondary capacity by almost three million additional places by 2007-08, relative to the number o f places in 2004-05. Simultaneous with this expansion, the Government o f Turkey wishes to align the structure and improve the quality o f its secondary programs with those o f the European Union inpreparation for greater integration with Europe and in response to an expected increase in the demand for higher level skills within Turkey and in Europe. In addition to improving the quality of general education (including ICT) and broadening vocational secondary programs to better reflect the needs o f the knowledge economy, the Government reforms o f secondary education will allow students the flexibility to move between programs and schools in accordance with their interests, aptitudes and progress. The current system has a variety o f programs and schools, offering a wide range o f tracks within general and vocational education and training (the latter has about 130 specialties). It is, however, horizontally and vertically inflexible. Students have great difficulty in moving between tracks, and it i s virtually impossible to move from vocational to general education. Students who begin in one track are destined to remain there regardless o f their progress or interests, or the quality o f the program (see Annex 2 for additional detail). - 2 -  Gender Balance: In2004, the enrollment levels in secondary education were 557,000 and 417,000 for boys and girls, respectively. It is anticipated that this gap will narrow as the enrollment rate increases and certainly if secondary enrollment becomes compulsory, as occurred for basic education. However, the proposed project will target resources to schools with lower socio-economic status, and strengthen education and career counseling to address social inclusion, job information flows, and equity issues (see Annex 2 for details). Career guidance services promote social equity and inclusion by helping assure equal access to information on labor market and education opportunities and promote the rights o f individuals to make free decisions about their own lives (as opposed to being "directed" to an educational option and career by school system). Finally, the assessment and planning activities component o f the proposed project will measure progress and provide assistance to develop plans to improve imbalances ifthey continue. 2. Rationale for Bank involvement. The Government's plan for reforming secondary education addresses a number o f issues affecting the sub- sector, and the proposed project supports a subset o f these reforms. The essential elements o f the Government's reform, which i s described in Turkey's Eighth Five-Year Development Plan and MONE's Secondary Education Development Project Preparatory Document, includes the following targets: (a) increasing compulsory education from 8 to 12 years (a longer-term goal), (b) enrolling 95 percent o f basic education graduates in secondary education (which was to start in the 2001 academic year); (b) increasing secondary education from 11 to 12 years. MONE has also initiated a several, related technical reforms, including: (a) making grade nine a common core general education program for all secondary education students to ensure all graduates have good basic skills; (b) delaying vocational specialization until grade 10; and (c) reducing the number o f vocational subjects from 130 specialty programs to 30 broad vocational programs. The Government has also proposed, both in previous five-year development plans and again in the Eighth Five-Year Plan, a target o f shifting the distribution o f secondary school enrollments from the current situation, where 65 percent o f students are enrolled in general secondary programs to one in which 65 percent o f secondary students would be enrolled in vocational programs. Based on its research, the World Bank counsels against efforts or methodologies that assign students to vocational programs or other educational tracks unless it i s the decision o f the student and the family. Also, the World Bank recommends against early placement of students into vocational specializations, narrow vocational training, and "watered- down" general education coursed for vocational students. MONE indicates that it i s addressing these issues by reforming secondary education, including strengthening guidance programs in primary and secondary schools, updating and increasing the proportion o f general education classes in vocational schools, and finalizing selection of vocational training at a higher grade level. MONE i s also broadening the nature o f vocational training to prepare students for further specialized post-secondary training and for lifelong learning. The Government passed Law No. 4702 to ease the entry o f vocational graduates into post- secondary education. As such, the differences in content and goals o f general and vocational education are coming closer together. Instead o f artificially directing students to different programs, it i s far better to introduce technical reforms that facilitate and allow them to make informed choices regarding participation in different upgraded secondary education. The proposed Secondary Education Project directly supports these technical reforms through an inter-related set o f components. The Bank has supported similar reforms in nearby counties, including Hungary and Romania, and in doing so has worked closely with the EU, which is already involved in two related projects in Turkey. These curriculum reforms are designed to prepare students better for the growing knowledge economy and lifelong learning, and reflect similar changes in secondary education programs in many OECD and EU counties. In addition, as reflected in the proposed project design, the Government wishes to strengthen complementary programs, including the integration o f I C T in instructional and learning, career guidance and counseling, and assessments. The World Bank has provided assistance to a number o f countries in these areas as well. - 3 -  It shouldbe emphasized that the proposedproject focuses onprogram development, as opposed to expanding the duration of, and enrollment in, secondary education. The rationale for this choice was twofold. First, a simple expansion o f existing outdated programs would not meet the needs o f the country, and the Government has requested the Bank's support for system reform, not simple expansion o f the existing system. Second, the costs o f expansion are considerable with regard to construction and equipping o f new schools, and the size o f the proposed project would not have made a significant contribution to these activities which are being supported from Governmentresources. 3. Higher level objectives to which the project contributes The objectives o f secondary education reform are integral parts o f the broader economic and social development objectives o f Turkey, as well as the European Union, which Turkey wishes to join, and are supported by the World Bank Country Assistance Strategy. The Turkish education system addresses both social issues and inequalities, as well as economic issues. These dual objectives are highlighted in the Basic Law on National Education. The L a w defines the key competencies that citizens should acquire through the educational system, including: (a) individuals' awareness o f their responsibilities toward the Republic as a democratic, secular, and social state o f law based on human rights; (b) respect for human rights; and (c) the ability to obtain education in line with individual interests and abilities, to prepare for life. The guidingprinciples of this Law emphasize equal access and the right to education (including for both genders), response to social and individual needs, orientation to democracy and secularism, planning o f education with respect to the needs o f the national economy, and cooperation with parents and the community. A recent OECD study4highlighted similar competencies as critical for living in a modern knowledge economy, including: a need to develop human capital which i s capable o f adapting to technological developments and innovations in the production and service sectors, including achieving higher levels o f core skills, and the ability to work in heterogeneous groups, evaluate information and make autonomous decisions inthe emerging knowledge economy. As noted previously, the proposed Secondary EducationProject components form an integral part o f this strategy. The European Union i s similarly committed to both social and economic objectives. The Lisbon 2000 EU Council Meeting set a strategic goal o f making the EU the "most competitive dynamic knowledge-based economy in the world capable of sustainable economic growth with more and betterjobs and greater social cohesion"'. Although education policy i s primarily the prerogative o f individual member states, there are substantial EU directives in the field o f employment. In 2001, the EU developed a series o f indicators to measure 10 dimensions for investing in quality o f work. The 2002 Barcelona summit requested a streamlining o f policy coordination with synchronized calendars for the adoption o f Broad Economic Policy Guidelines and Employment Guidelines. The Employment Guidelines currently address active measures for the unemployed, job creation and entrepreneurship, adaptability and mobility in the labor force, development of human capital and lifelong leaming, increasing the labor supply, gender equality, combating discrimination, incentives to make work attractive, undeclared work, and regional employment issues. Several o f these Guidelines have content directly related to secondary education, including the one on human capital and lifelong learning which states that "at least 85 percent o f 22 year olds in the EU should have completed secondary education by 2010". The proposed Secondary Education Project, while not financing the expansion o f secondary education, does finance reform and updating o f the structure and content of secondary education which i s an important precursor to expansion. Rychen and Salganik, 2002, Definition and Selection o f Competencies, Hogrefre &Huber Publishers, Toronto Council of the European Union, 2003: Council Decision on Guidelines for Employment Policiesofthe Member States, Brussels - 4 -  TheBank Country Assistance Strategy supports sound macroeconomics and governance, as well as equitable human and social development. The latter requires a change in the content and approach to all levels o f education, including secondary education which i s a key transition between school and work and/or tertiary education. The proposed Secondary Education Project incorporates these principles, including: (a) supporting reforms in general and vocational education content, including increasing the access to and the use o f information communication technology to meet the needs o f the emerging economy; (b) strengtheningo f career guidance and counseling programs to help individuals assess their personal interests as well as identify the needs o f the economy; and (c) assessing and benchmarking education programs and institutions to national and international norms so that increased access will be strengthened by improvements in quality and relevance. B. PROJECT DESCRIPTION 1. Lendinginstrument A Specific Investment Loan (SIL), as opposed to a Sector Adjustment Loan, was selected as the appropriate instrument at the Project Concept Review. The reasons are: (a) the SEP i s primarily an institutional development project which i s building capacity to implement already agreed policy reforms in secondary education; (b) the support required i s in the form o f technical assistance, goods and services for which the a SIL i s an appropriate instrument; and (c) the SIL provides a focused intervention that fits well with the timeline o f the Government's Eighth Five Year Plan and timeline for reforms in secondary education. Initially, a longer term APL was considered, but during identification, it was decided to proceed with a SIL for several reasons: (i)there i s substantial parallel assistance coming from the European Union and there may be no need for a follow-up to the proposed secondary education SIL; (ii) there i s increasing interest and need to address reforms intertiary education inthe future; and (iii) the current Basic EducationAPL has proved to be somewhat problematic to implement due to changes in Government priorities and focus over the duration of the APL. A SWAP was considered in late 2003, but rejected, because o f the advanced stage o f project preparation. In addition, the SEP would have to be substantially redesigned to convert it into a SWAp, especially given that 90 percent o f the procurement i s under ICB procedures. 2. Projectdevelopment objective and key indicators The overall development objective o f the project i s to improve the quality, economic relevance, and equity of secondary education to support lifelong learning. There are two key outcome indicators: 0 Secondary school graduates from schools receivingnew curriculum and related support via the proposed Secondary Education Project will have improved performance, as measured by scores on national and international assessments and graduate tracer studies, than those from schools not receiving project support. 0 Secondary schools receiving new curriculum and related support via the proposed Secondary Education Project will have a reduced variance in student achievement between schools in different regions, between general and vocational schools. 3. Project components There are two major project components, with six inter-related sub-components. The objectives are as follows (more details on sub-objectives are contained in Annex IV, and the Project Operational Manual contains detailed activities for each sub-objective). - 5 -  Component 1. Secondary Education Reform (Base cost o f64.7 million) Secondan Education Programs. The objective i s to revise and implement new general education and vocational education curriculum programs to provide students with core skills for the knowledge economy and lifelong learning. The project would finance technical assistance, equipment and materials to strengthen the institutional structures, develop technical procedures and new curricular content, implement revised general education and vocational education curriculum programs, and provide related in-service training for MONEmanagers and teachers. Information and Communications Technology (ICT). The objective i s to provide ICT training as a core competency for youth to function in a modern knowledge economy, to improve instruction by using I C T to expand access to learning opportunities, and to support better management o f learning and administrative processes. The project would finance technical assistance, goods and materials to utilize I C T to improve instruction, access on-line educational content and services on the Internet, and assess the educational impact o f the ICT investments. Career Guidance and Counseling: The objective i s to provide youth and adults with access to career information and guidance services to promote informed career choices and related education and training decisions and facilitate lifelong learning. The project would finance technical assistance, equipment, and materials to facilitate interagency cooperation, develop core career information and guidance resources and provide them to education and labor institutions, train existing staff for career guidance and improve the integrationo f career guidance and counseling into overall basic and secondary education programs. Component 2: Qua&, Assessment, and Management (Base cost o f5.5 million) Student Assessment and Evaluation. The objective i s to improve the quality and outcomes o f secondary education by developing systems to collect and disseminate reliable information on student learning and outcomes, and on the performance o f the education system staff and institutions, and to use information from these assessments to improve system performance and student outcomes. The project would finance technical assistance, equipment, test instrument development and printing, and training for MONE staff at all levels o f the system. School Development. The objective i s to help secondary schools staff, parents, and students improve the performance and outcomes, educational achievement, and quality in education through school development activities to be designed and implemented within the school development process. The project would finance technical assistance, development and distribution o f guide books and training materials, and training activities for school and provincial level MONE staff. Project Management. The objective i s to ensure effective administration and coordination o f the overall project. The project would finance related technical assistance, equipment, and materials. 4. Lessonslearnedand reflectedinthe projectdesign The Bank has considerable experience working in Turkey and with the Ministry o f National Education in implementation o f education projects at the basic, secondary, and tertiary education levels, as well as with similar reform projects inthe region (e.g., Romania and Hungary) and in other regions (See Annex 2). Based on this experience, the following lessons are noted. Fund afew selected components vs. a more comprehensive set of components. A comprehensive approach was selected, as opposed to funding a few selected components because the reforms beingenvisioned cannot be achieved by reforming only one element o f the institutional framework, even though the latter approach - 6 -  would make the project simpler. Reforming programs without strengthening career guidance and counseling i s not a good investment. Improving evaluation and assessment i s an integral part o f curriculum reform as it provides feedback on the impact o f reforms. For this reason, the proposed Secondary Education Project includes carefully integrated components that can be implemented on slightly different schedules, but which must inthe end come together, as the whole is greater than the sumo fthe individualparts. Proceed with general understanding of policy reforms but without speciJic activities and outcomes defined. Initial project identification work started out with the assumption that the project would be an APL, with the first phase focused on gaining agreement on reform policies; detailed investments would then be made at a later phase o f the project. At the early preparation stage, this approach was rejected, because experience with several previous secondary and post-secondary education projects in Turkey highlighted the need to confirm basic policy reforms as an integral part o f project design, and not during project implementation. The proposed Secondary Education Project i s designed as a SIL and the basic policy reform agreements have already been reached and confirmed in writing by the Govemment. It should also be noted that parallel EU projects are already operating and required policy decisions which helped provide a platform for the proposed project to move forward ina more concrete manner. Prepare and use a Project Implementation Plan as an integral part of project preparation and execution. Experience with recent education projects in Turkey, including the First and Second Basic Education Projects (BEP 1 and BEP 2), highlighted the need to clearly define implementation procedures, activities, and responsibilities as a part o f project preparation. It was recognized that inorder for MONE to effectively utilize loan funds to pursue project objectives, the staff working at the PCC and across MONE on the project needed enhanced capacity in the area o f project management, and needed to be further strengthened, upgraded, and consolidated into a qualified, agile, and pro-active Project Team. In addition, the Project Team needed to be headed by a dedicated, full-time Project Manager working under the direct supervision and guidance o f the PCC Director. Day-to-day management o f the project needed to be handed over to the Project Manager. MONE and the Bank have come to agree that implementation planning, staffing, and coordination were not properly undertaken during the preparation and implementation o f BEP 1 and BEP 2 and consequently, line units involved in implementation did not know their tasks, roles, and accountabilities. At the same time, it was observed that a more open, pro-active, and even self-critical character in the PCC improved the willingness o f staff to communicate with the implementing units in MONE and with the Bank and other agencies that they worked on project implementation. Having learned from these experiences, during the preparation o f SEP, MONE formally designated "Working Groups" for each component. These groups have cooperated with the Bank team in developing clearly defined goals, objectives, activities, output and outcome indicators, budgets, implementation schedules and responsibilities. These items, along with draft Terms o f Reference for all planned technical assistance activities, are included in a draft Project Operational Manual (POM) agreed at negotiations. In addition, considerable attention has been paid to defining the role o f the SEP Team in order to assure the most effective and efficient implementation o f the Project. It i s recognized that the POM is a starting point for preparation o f MONE's own Project Implementation Plan (PIP), which will be prepared by the SEP team during the first year o f Project implementation and will be used by the SEP Team to coordinate the implementation o fthe Project. 5. Alternatives consideredand reasonsfor rejection No Secondaary Education Project. The Government initially requested support for secondary education in 2000, and obtained a Policy and Human Resources Development Fund (PHRD) grant to support preparation, but delays in processing caused the PHRD to be closed without any significant disbursement. The delays were caused by multiple factors, including changes in Govemment leadership, Govemment policy effort directed at the Basic Education Program, and several changes inthe Bank's task team. Nonetheless, with the emergence o f a single party Govemment, a rekindled interest in reforming secondary education (which i s linked to EU accession and European integration issues), and the fact that many o f the objectives o f the - 7 -  Government's basic education program have now been mostly achieved; the Government has reaffirmed its intent ininitiating inthe project. Use project funding to build and equip secondary schools to absorb the additional number of students entering secondary education. The success o f the Government's major basic education reform (grades 1-8), and commitment to full secondary school enrollment, means that significantly more students are expected to enter secondary education in the near future. As such, the proposed project could have simply focused its total resources on school construction, equipment, and materials. Moreover, such an approach would have had little impact on the total construction program, and none on program content. In addition, it should be recognized that MONE has adequate intemal procedures to address new construction needs. Instead, the Government has requested support from the Bank mainly to strengthen the structure and content o f secondary education in order to improve secondary school outcomes. It was therefore agreed to exclude basic construction from the proposed project and to focus on program development and institutional reform. Fine-tune the existing secondary education program, without structural change. This option was rejected because it would not address some o f the underlying issues regarding the changing demands on secondary education. Programmatically, the distinctions between academic and vocationalitechnical education need to be reduced. Students inthe academic track need experience inapplying their knowledge to problems outside o f school; students inthe vocationalitechnical track needbroad core skills, not narrow specialized skills, and solid basic education foundation skills mobilized in adapting to the changing knowledge and skill demands o f theirjobs. The ultimate percentage split o f students between the vocationalitechnical and academic tracks, as proposed by the Government, i s less important than the process by which students end up in one or the other track, and the content and structure o f how the tracks are conceived. Students and their families need the opportunities to choose and re-choose, based on the student's own interests, and realistic information about the opportunities and payoff from alternative choices. These issues are addressed in the design o f the proposed project. Use of an Adaptable Program Loan (APL), Sector Adjustment Loan (SAL) or Sector Investment Loan (SIL) As noted previously, a SIL is considered to be the appropriate loan, as opposed to a SAL or APL. The proposed project i s primarily an institutional development project and the support required i s in the form o f technical assistance, goods and services that fit well with the timeline o f the Govemment's EighthFive Year Development Plan and timeline for reforms in secondary education. The APL was rejected because, as mentioned previously, after some delay the Government has made policy reform decisions and wishes to move quickly on concrete reforms. C. IMPLEMENTATION 1. Partnership arrangements There are no co-financing or formal partnership arrangements with other donors. However, the EU has two investment projects focused on reform o f secondary vocational education programs, which parallel the first component o f the proposed Secondary Education Project. The EU projects are: (a) the Strengthening Vocational Education Programs (SVET) project which addresses reform o f 17 o f approximately 30 secondary vocational curricula, and (b) the Modernizing Vocational Education Programs (MVET) project which addresses related teacher training programs. The EU and World Bank teams are working closely together to ensure that the process used to develop vocational programs in the EU projects and the proposed Secondary Education Project are the same and that the selection o f the 10 vocational curricula to be developed by the proposed Secondary Education Project and the 17 being developed by the EU projects are different. In addition, policies regarding the time at which vocational training begins in secondary school - 8 -  (lothgrade as opposed to 9`h), the duration o f the training, and the level o f specialization (30 core programs vs. 130 specialized programs) have been agreed between the MONE, EUand World Bank. 2. Institutionaland implementationarrangements MONE is the lead agency for the Project and has overall responsibility for carrying out the Project. Overall guidance for the Project will be the responsibility o f MONE's Project Steering and Executive Committee (PSEC) for SEP, which will oversee the policy aspects o f the project and ensure its alignment with the Government's Secondary Education Reforms. MONE has established the Projects Coordination Center (PCC) to coordinate across MONE the preparation and implementation o f all internationally-financed projects. The PCC i s headed by the PCC Director, who has civil service status. The PCC will serve as MONE's business office for SEP, and as the liaison for communications between the MONE and the Bank, and between SEP and other intemationally-financed projects. Management o f the Secondary Education Project will be managed by a SEP Team, which will be established in the PCC prior to loan effectiveness, and composed of staff from both the PCC and relevant MONE line units, which will be responsible for actual implementation. The SEP Team will prepare a Project Implementation Plan (PIP) prior to loan effectiveness, in agreement with the Bank, and MONE will use this PIP as the chief tool to manage and monitor project implementation. A detailed discussion o f project implementation arrangements is inAnnex 6. 3. Monitoringand evaluation of outcomes/results There will be several inputsto monitoring and evaluation o fresults and reporting: 0 MONE's routine systems for collection and management o f education data (e.g., annual reports, the annual schools census, and budget reports prepared by the Ministry o f Finance). These systems provide the primary sources o f information for project monitoring; 0 Project reports to be prepared by the SEP team inthe PCC, along with the implementing units o f MONE. These will provide regular reports on financial and program status, including progress on pre-defined output and outcome indicators for each component (details and timing cycles for these reports are described inAnnex 6); 0 Specific evaluations that are built into selected components (i.e., graduate follow-up surveys, information communication technology assessments, career guidance impact studies, national student assessments); 0 National assessment data, and international assessments (e.g., ongoing PISA studies and additional ones to be financed by the project); 0 Third party annual project evaluation financed under the assessment sub-component o f Component 2; and 0 World Bank supervision missionreports, including aide-memoires and the Project mid-term review. 4. Sustainability Reform efforts in Turkey have been hampered in the past by various political compromises required to sustain the Government. As a result, some o f the proposed reforms have floundered, or have only resulted in changes at the margin. However, the present Govemment has a significant majority in the Parliament. The Government has a strong commitment to the social sectors, as exemplified by Government's 2002 "Urgent Action Plan". The Government has committed itself to reform o f the content, structure, and duration o f secondary education. From the structural side, the Government i s committed to moving to a four year program, full enrollment, and making grade nine a common year o f education for all students. There i s commitment to reduce the variety o f secondary schools from the current 73 to two (general and vocational), to reform and upgrade general education programs, and to carry out a major restructuring of vocational education which will reduce the existing 130 specialties to about 30 broader programs. This i s already underway with EU support and the proposed Secondary Education Project will continue the reform. The use o f ICT as a medium - 9 -  and subject o f instruction i s also emphasized and major investments have already been made and assessed in the Basic EducationProject. The Government i s also committed to increasing the access o f secondary education graduates to tertiary education. The university entrance approach still needs revision. However, the Government has already passed Law No. 4702, which allows increased access to tertiary levels, specifically Higher Vocational Schools, by secondary education vocational graduates, without passing the university entrance exam. In 2004, some 230,640 secondary vocational school graduates applied for this option, and some 78,886 were accepted. With regard to employment, the Govemment i s committed to several initiatives, including passage o f the Law on the National Qualification System, which relates directly to improving the quality o f secondary vocational training. The draft bill i s prepared. The Government i s working toward reorganization of MONE, and has had a number o f national meetings to move forward on this issue, which i s long overdue. The Government i s committed to strengthening career guidance and counseling in schools, and the MONE and Turkish Employment Agency are working jointly to develop this sub-sector and will draft a Protocol which to be signed as a condition o f negotiations for the proposed Secondary Education Project. The initiatives to reform the current structure o f secondary education and extend compulsory secondary education to four years, which are reflected in written communications sent by MONE to the Bank, when combined with the Government majority in Parliament, indicate that the initiatives to be supported by the proposed Secondary Education Project will be sustained. However, while the proposed Project helps develop and improve the quality o f existing educational institutions and secondary schools, the pace o f expansion o f secondary education to full enrollment and to four years i s dependent on the availability o f Government resources. The cost o f this expansion i s beyond the scope o f the proposed Project and Bank financing. However, in 1997, the Govemment undertook a similar massive expansion o f basic education by increasing the duration o f compulsory education from 5 to 8 years. As a consequence, more than 1 million additional students entered the school system, and the enrollment ratio for children between 7 and 14years o f age shot up from 86 percent to 96 percent between 1997 and 2002. This record bodes well for sustainability of secondary education reforms now underway. Last but not least, the potential for EU membership i s another driving factor in reform o f the quality, content, and enrollment in secondary schools (Le., the EU target i s for 85 percent o f 22 year olds to have graduated from secondary school by 2010). 5. Critical risks and possible controversial aspects The experience o f the Bank's previous projects in the education sector, including previous secondary and post-secondary projects, the recently completed Basic Education Project 1, and the current Basic Education Project 11, indicates that there are risks, and the proposed SEP will carefully assess and explore ways to mitigate the risks. The key lessons learned have been summarized previously in section 4, and highlight the importance o f agreeing on policy reforms and detailed implementation arrangements during project design. As a result, every effort has been made to gain agreement on policies, as well as related technical and implementation procedures, and to document them in the Project Operational Manual and Project Implementation Plan, as opposed to leaving these decisions to be sorted out during implementation. Implementation problems in previous projects have been exacerbated by changing Governments and priorities. The key potential risks and proactive and remedial measures include the following: Risk Risk RiskMinimization Measures Rating Genenc Risks. M Macro-economic: While macro-economic indicators are improving, the Govemment has in the Macro- past curtailed investments as part o f a tight fiscal policy. While the proposed SEP I Sa small economic and investment, as compared to the ongoing recurrent costs o f the expanding enrollment in political nsk secondary schools, there could be a shortfall in availability o f investment funds for SEP, and the replication o f SEP financed programs in the remaining schools not financed by SEP. The Bank and Govemment have carried out a basic fiscal analysis o f "scaling up" SEP investment to - 10 -  existing secondary schools, as well as the overall expansion o f secondary enrollment (see Section D, 1). Political: Written confirmations o f secondary education reform policies have already been obtained from the MONE, in consultation with the EU. A protocol defining cooperation between MONE/Turkey Employment Agency (ISKUR), which was a condition o f negotiations, has already been signed. Monitoring o f implementation is provided for in the project design. Implementation H Implementation capacity is weak. There are several indicators o f MONE's weak Capacity risk implementation capacity. First, MONE's own implementation documents do not provide detail on specific activities and tasks that need to be completed by various implementing units (also referred to as line units) in M O N E to accomplish higher order tasks and objectives or to attain targets. Second, MONE's organizational and leadership structure makes it difficult for implementing units to take decisions, accept their accountability, control the necessary human and technical resources, and recognize their ownership o f the results. Third, M O N E does not have mechanisms for implementation follow-up and provision o f feedback by implementing units to their managers, peer units, or beneficiaries on outputs and outcomes, consequences and recommended actions. In order to reduce the risk, the Govemment has confirmed the following: (a) It will establish a SEP Team responsible for day-to-day implementation o f the Project, headed by full-time dedicated Project Manager, (b) It will prepare a detailed Project Implementation Plan, including a clear definition o f activities o f each component, designation o f responsibility for implementation o f each activity, with implementation schedules, budgets, outputs and outcomes. Finally, efforts have been made to consolidate technical assistance for each component to reduce the complexity o f procurement and help integrate technical work at MONE. Criteria for M Selection can be politicized and the profile o f institutions selected to pilot and implement new selection o f curriculum, I C T programs, career guidance programs, school assessment and planning initiatives local may not be the most appropriate (e.g., provide support to the most needy groups and regions). institutions to The Govemment has proposed draft criteria for the Project Operational Manual to be agreed at be involved in negotiations. SEP Interagency L Cooperationbetween MONE and Ministry of Labor, and Turkish Employment Agency Cooperation (ISKUR) on the career guidance and counseling sub-component development depends on good will and technical understanding between the two agencies. There i s currently excellent cooperation between the two agencies on the content and design o f the sub-component; they have cooperated in a related sector study, and they are both members o f the related working group. A Protocol o f cooperation between MONE and M O L i I S K U R was agreed and signed on October 26, 2004, Establishment M Need to improve cooperation between MONE and YOK Pre-service training delivered b y o f program universities in Turkey are outside o f the scope o f the Project. Nonetheless, full implementation integrity o f revised curriculum programs developed under the Project would need to be provided to new between teachers entering the profession. Likewise, for new vocational teachers entering the profession, secondary and including those teaching at the MYOs, pre-service teacher training should reflect the updated post-secondary curricula. The Ministry is working to establish a closer cooperating arrangement between pre- education service teacher training under the authority o f YOK, and MONE's own educational institutions. programs Furthermore, under the EU financed MVET Project, MONE is already piloting both pre-service and in-service programs in 21 Teacher Training Faculties. D. APPRAISAL SUMMARY 1. Economic and financial analyses Investments in secondary vocational education and in general secondary education generate positive labor market outcomes above 10 percent for graduates. There i s some debate as to whether general or vocational programs provide the best rate of return. The Government's goal i s to expand access to, and enrollment in, secondary education; change the structure of secondary education to four years; have all studentstake similar general education subjects in grade nine; delay the start of vocational education to grade 10; substantially -11 -  reduce the number o f vocational specializations; and have higher proportion o f secondary school o f the students invocational programs. Policy makers consider secondary vocational and technical education as an avenue to support direct labor market entry after graduation and to limit the excess demand o f youth on the limited supply o f university places (vocational graduates receive lower scores on university entry criteria). Only about 10 percent of high school graduates attend a university in Turkey. However, the Government is increasingly realizing the need to increase the skill o f the workforce, in part through increasing enrollment in post-secondary education, including for vocational secondary graduates. Turkey's secondary education policy objectives are ina state o f change. Past policies appear to run counter to evidence from around the globe that general secondary education provides its graduates with greater employment opportunities and earnings potential than vocational education, and i s therefore a better investment than vocational secondary schooling. Individual level survey data from the Turkish 2002 Household Expenditure indicate that rates o f return o f vocational school graduates are slightly higher than those o f general high school graduates (12 percent versus 14 percent for men between 25 and 44 years o f age) and unemployment rates are equivalent among the vocational high school graduates versus general high school. Therefore, it can be argued that the Govemment's policy o f increasing enrollment in secondary vocational education, along with proposed structural reforms in secondary education (including in vocational training) and opening o f alternative avenues to post-secondary education, combine to provide an appropriate policy mix for Turkey, and one which the proposed Secondary Education Project can and should support. The Govemment`s Secondary Education Development Project Preparatory Document shows the resource requirements o f its targets to expand enrollment in new schools to 95 percent and extend secondary education to four years. IfMONE is to achieve 100percent enrollment of secondary school-aged youth in the 2005-2006 school year, then based on ideal assumptions (that is, all secondary students are enrolled in a full-day school program and every class has only 30 students), MONE will need to open an additional 12,813 classrooms, with an estimated cost o f US$1.5 billion. Moreover, if all types o f secondary school programs are to be extended to four years (most are only three years today) by 2008-2009, then under the above assumptions for enrollments and class sizes, along with the current demographic projections, MONE will needto open 43,813 new classrooms. The estimated total additional investment cost would be approximately USS5 billion. Inaddition, there are costs o f updating general and vocational programs, and implementingthem inexisting schools (the same updated programs will be implemented in new schools and these costs are included in the above costing analysis). While the costs o f updating programs and implementing programs in existing secondary schools are much less than the overall secondary education expansion costs, they are still substantial. Based on the unit costing o f the proposed Secondary Education Project, this cost i s estimated to be a total o f about US$850 million. The proposed Secondary Education Project curriculum development component, when combined with parallel investments by the EU, will finance the development costs o f the majority o f required general education curricula and vocational curricula, and the costs o f implementing the curricula in about 10 percent o f secondary schools. In addition to curriculum reform, the proposed project will finance new initiatives to strengthen secondary education including career guidance services, information communication technology, assessment and school planning. 2. Technical Technical reforms o f secondary education have been under discussion for many years inTurkey. The World Bank has invested in different sub-sectors o f secondary education since early 1990, including support for vocational technical education inthree different projects, and in general education via the National Education Project. Duringboth the design and implementation o f these projects, several "white papers" and national seminars have been completed, including current World Bank Sector work. But in the past, actual changes have tended to be at the margin. More serious reforms are emerging from the pressure o f three events: the - 12 -  advent o f a Government with a Parliamentary majority, the realization that neighboring countries in Central and Eastern Europe are developing rapidly and entering the EU, and the development o f the global, competitive, knowledge economy. With the global economy being increasingly driven by knowledge, Turkey's Government recognizes that it needs a sufficiently educated population that i s able to create, adapt and use knowledge. The Government i s thus faced with the task o f transforming formal education systems into an overall higher performance learning system. H o w to effectively provide individuals with access to necessary knowledge and skills throughout their lives, i s the key challenge for education, and secondary education i s the key transition point from school to work or further education. H o w Turkey responds to the human resource challenges, including reforming secondary education, will affect economic growth and social cohesion, both goals o f the current Govemment. An initial review o f indicators shows that if Turkey i s to be competitive in the global economy, there needs to be significant adjustments in human resource institutions in terms o f the level, quantity, and type o f human capital they produce. K e y stakeholders in Turkey, including parents, private sector representatives, educators, and Government officials, are increasingly concerned about these issues, many o f which are also key elements o f EU accession, e.g., integrating the concept of lifelong learning into all parts o f the education and training system. Human Resource Policy Options. An examination o f the above trends indicates that Turkey i s at a threshold of change and has two basic options. The first option i s to maintain the status quo while expanding enrollment in the existing system. This could include minor reforms such as refining general education cumcula, changing some o f the specialties in vocational training, facilitating more transfer o f graduates to highervocational schools, and enhancing career information and services at the end o fbasic education (grade eight). This option i s the one that has been chosen inthe past, but i s being rejected during the current reform. The second option is to make significant "structural reforms" while at the same time expanding the system. This is the approach that is being taken, and the "structural reforms" are supported by the proposed Secondary Education Project. The technical reforms include: (a) providing similar core general education programs in grade 9, in both general and vocational secondary schools, and updating general education programs; (b) strengthening career information and services in basic and secondary education, and allowing students to move between general and vocational streams in grades 9 and 10 and beyond; (c) reducing the different types o f secondary vocational schools (e.g., Industrial, Commercial, Girls, etc.) and related specialized training programs from about 130 by replacing them with broader set o f core skill programs selected from about 20 occupational families that represent large areas o f the economy; (d) increasing the integration o f ICT into schools as a method o f supplementing delivery o f instruction as well as a core basic education skill; (e) reforming student and institutional assessment, including national and international benchmarking and linking these assessments with school planning initiatives in anticipation o f increased decentralization; (0buildinglinkages between secondary and tertiary education, inparticular with technician training; and (g) addressing in-service training as an integral part o f curriculum reform. 3. Fiduciary A financial management assessment o f the project was carried out at appraisal. The PCC, which will be responsible for financial management o f SEP, has highly satisfactory financial management arrangements in place for the BEP 2 project, and it was agreed that the financial management arrangements for SEP will follow the same procedures. The project will be implemented by MONE, and overall project coordination will be carried out by the PCC established at MONE under the direct responsibility o f the Deputy Undersecretary. The PCC will provide services to departments of MONE and financial management, procurement and monitoring and evaluation functions will be centralized at the PCC. The PCC i s led by the PCC Director who has overall responsibility for coordination o f the Bank and EU-financed projects. A full- - 13 -  time Project Manager will be responsible for day-to-day management o f the proposed Project. The PCC has a Financial Manager, who i s responsible for the project financial management, including maintenance o f financial accounts for the project, preparation and dissemination o f financial statements and Financial Monitoring Reports (FMRs), and ensuring the timely audit o f the project. The project accounting will be maintained separately within the PCC and will comply with InternationalAccounting Standards. Accounting procedures will be set out in detail in a draft Financial Management Manual for the project. The PCC will maintain records and will ensure appropriate accounting for the funds provided. Financial statements will be prepared for the project by the PCC. Duringproject implementation, the Bank will supervise the project's financial management arrangements in two ways: (i)review the project's quarterly financial monitoring reports as well as the project's annual audited financial statements; and (ii) during the Banks supervision missions, review the project's financial management and disbursement arrangements to ensure compliance with the Bank s minimumrequirements. As needed, a Bank accredited financial management specialist will assist inthe supervision process. M O N E has an Internal Control Department which i s responsible for carrying out investigations where irregularities are reported within any o f the departments o f the Ministry. Therefore, the PCC i s not subject to regular internal audits and no reliance will be placed on internal audit. The project financial statements will be audited by the Treasury Controllers in accordance with International Standards on Auditing (ISA) and underterms o freference (TOR) acceptable to the Bank. 4. Social Duringproject preparation, there were a number of major inputsthat link social/economic development with education reforms and that have provided input to the design o f the proposed project. Inaddition, the project implementation design provides for ongoing input from stakeholders. Assessments that have provided input to the project design include: (a) Informal scheduled focus group discussion with parents, school foundation members, teachers, and school staff and students at local secondary schools and higher vocational schools in different regions duringeachBankproject preparation mission; (b) Multiple meetings with key stakeholders representatives, including Government (i.e., Ministry of National Education, Ministry o f LaboriEmployment Agency, State Planning Organization, Council for Higher Education, Treasury), labor and the enterprise sector, NGOs, including training institutions; and other donors (particularly the EUwhich i s investing insecondary education reform); (c) Completion of a Knowledge Economy Assessment in 2004 which included discussions with a wide variety o f individuals and organizations representing the public, private, and NGO sectors dealing with knowledge economy issues, including the human development sector; (d) Poverty Survey. Completion o f the 2004 initial draft of a qualitative focus group survey o f men and women in four of the least developed provinces in South East Anatolia and East Anatolia. This survey was completed to support the Bank's poverty report preparation and the Government's public sector policy reform agenda and included several questions directly related to the functioning o f the education system; (e) Completion of labor sector analysis and surveys, and additional education sector work in 2003/4. The labor sector work has included a significant review of labor trends and policy issues, as well as a focus group survey of employers, workers, and the unemployed. The education sector work has initially focused on financing o f education and encompassing work with a broad range o f stakeholders, but more recently i s beginning to explore other areas in more depth (i.e., additional trachng o f secondary school graduates to supplement existing surveys already completedby the MONE). - 14-  While it i s difficult to condense all the qualitative and quantitative input, the following summarizes key issues and gives a sampling o f specific responses. (a) Employment and unemployment. The overriding concern o f most stakeholders i s - will investments in education result in employment? Results o f the Poverty Survey indicate that the parents are well aware that highly educated people can find better jobs and better income. Informal focus group meetings with parents, teachers, students as secondary schools reinforced these findings, as have meetings with Government agencies (including the State Planning Organization (SPO), MONE, and Turkish Employment Agency), and enterprise representatives. Most stakeholders realize the linkage between economic growth and employment, but also feel that a good education increases the potential o f employment and a better income. There i s evidence from: (i) secondary student trackmg surveys, which indicate 45 percent o f secondary school graduates do not think the existing systemprepares them well for employment; and (ii)the Turkish Employment Agency which indicates that about 50 percent o f the unemployed enrolling in retraining courses are recent graduates. This raises questions about the content of education, as survey data indicate many graduates end up underemployed, or in occupations different from their training, or in short-term retraining programs.6 This has implications for productivity, as it creates considerable dissatisfaction inan important segment o f the population and, over time, will reduce the incentives to seek education. In addition, according to a 2003 survey o f Turkish employers, the education and experience o f many job seekers i s not sufficient to find ajob; (b) Social inclusion and exclusion. Adults, inresponding to the Poverty Survey on the rural poor, expressed concerns about elected officials, particularly those elected to Parliament, as not being interested in their problems, but were more supportive o f village leaders. With regard to access to education, this was regularly raised as an issue, by both men and women for both male and female dependents. Access to education, and tertiary education were common themes and concern raised by parents and staff during focus groups at secondary schools. The recent full enrollment in basic education i s a key factor in the Government's policies to increase access to secondary and tertiary education. The National Education Law and the MONE secondary education development plan specifically cite equity and access as key goals o f the education system; and (c) Education and training. Access, including between different levels o f education and quality are the key issues raised by stakeholders. General access issues have been noted previously. However, another recurring theme i s the access o f secondary education graduates to tertiary education. In general, most stakeholders emphasize that they want secondary education to meet two different goals, entry employment and access to tertiary education. It i s noteworthy that 2/3 o f men and women in the Poverty Survey indicated that they wanted their male and female dependents to enter professional careers requiring tertiary education. Focus group discussions with parents and students revealed considerable concerns regarding the existing vocational education track in secondary schools, which makes entry to tertiary more difficult due to scoring procedures as well as weaknesses in general education subjects. Two students at a general education school in Ankara, when asked why they would not attend a vocational school, simply stated, "because if Iattend a general education school Ihave a choice to work, or enter university, but if Iattend a vocational school, it i s very difficult to enter university". When a parent in Trabzon was asked, why did you take your daughter out o f the vocational school, he answered "because if she attended a vocational school, she could not enter university". However, it i s noted that the Government, under Law No. 4702, has just begun to address the problem o f tertiary entry for vocational school graduates, and allowing them better access. Procedures to obtain ongoing input from stakeholders, and provide stakeholders with information on the results o f the project, are incorporated into design o f all major project components. Examples include 6 See Tansel (2003) and Ogawa and Tansel (2003). - 15 -  ensuring that: (i)curriculum will be reviewed by key stakeholders, including employers for the secondary education components; (ii) development o f ICT software for schools i s linked directly with private providers; (iii) guidanceserviceswillbedevelopedcooperativelybybothlaborandeducationalinstitutions, and career employers are to be directly involved in development o f labor market information; and (iv) new school and program assessment information will be shared directly with parents, and program evaluations will include graduate follow-up surveys. 5. Environment There are no significant environment issues in relation to this project. The Bank will not be financing civil works or grants to schools, which are two areas normally requiring environmental assessment. 6. Safeguard policies Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.01) [I TXl . _ Natural Habitats (OP/BP 4.04) i[I 1 [XI Pest Management (OP 4.09) [XI Cultural Property (OPN 11.03, beingrevisedas OP 4.11) [I [XI Involuntary Resettlement (OPBP 4.12) [I [XI IndigenousPeoples (OD 4.20, beingrevised as OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects inDisputed Areas (OP/BP/GP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) 11 [XI The Project has been classified as Category C for its low impact on the environment. 7. Policy Exceptions and Readiness There will not be any policy exceptions for this project. Most of the applicable readiness criteria, detailed component activities, budgets, output and outcome indictors, implementation plan and schedule, procurement plan, terms of reference for consultants, and financial management plan have been defined for appraisal, and are included inthe draft Project Operational Manual which i s to be agreed at Negotiations. The Government investment budget for the proposed Secondary Education Project has already been included in the Government's FY05 budget for MONE, as agreed in the Country Assistance Strategy and following project Appraisal. * By supporting theproposedproject, the Bank does not intend to prejudice thefinal determination of theparties' claims on the disputed areas - 16-  Annex 1:Country and Sector Background REPUBLIC OF TURKEY: Secondary EducationProject For many years, Turkey's economy seemingly defined rationality but fiscal imbalances and delayed structural reforms finally led to a series o f crises. The 2001 crisis was deep and triggered the start o f fundamental reform. Just when the program began to show initial signs o f recovery in the summer o f 2001, the economy was hit by external shock after September 11, 2001. The economy recovered strongly during 2002, despite continuing volatility in the financial markets. The war in Iraq created concerns at the beginning o f 2003, but the Government has shown a continuing commitment to reform. The economy has responded to the Government's reform actions for which it gained international support. Significant reforms have been undertaken to facilitate growth and employment generation, improve public management and accountability, expand social services and social protection, and strengthen environmental management and disaster mitigation. More needs to be done on the themes o f macroeconomics and governance, equitable human and social development, business climate, and environmental management and disaster mitigation, which are the major focus o f the October 2003 CAS. In the area o f human development, Turkey has made significant progress on basic education, but reforms in secondary education are necessary if Turkey i s to remain competitive in the global economy. The proposed Secondary Education Project addresses this issue and i s inthe low and highcase LendingScenarios. Economic Growth, Job Creation, and Human Capital Development. Given its increasing working age population, Turkey has inadequate economic growth and job creation. It has high income inequality. Education can help solve these problems. Although there i s currently a respectable economic growth rate, this growth rate has been insufficient to generatejobs at rates commensurate with the growth o f the working age population--especially jobs in high productivity sectors that are associated with higher wages. Annual growth in value added per worker has been low. Increasing educational levels for women and declining fertility rates are expected to translate soon into increases inwomen's attempts to enter the market. Over the last two decades, one source o f productivity growth - intersectoral shifts o f capital and labor from low to high value-added sectors - has been strong, although analyses suggest that these shifts could have been greater. However, investment rates and productivity growth within sectors have been low, especially in agriculture where 40 percent o f the labor force i s employed and in services. These low investment and intra- sectoral productivity growth rates have slowed GDP growth and employment creation. L o w investment rates and the consequent slow rate o f accumulation o f physical capital reflect the highreal interest rates and high inflation rates driven by unsustainably high public sector borrowing. The implications o f these points for education are that future workers need the skills and knowledge required for greater intrasectoral productivity growth, increased labor mobility from lower to higher productivity sectors, and a Turkish economy more competitive with the European Union, other OECD countries, and Turkey's global trading partners. Improving workers' productivity puts a premium on information processing and problem solving skills. Addressing income inequality, poverty, gender inequality. Turkey has high income inequality, close to the levels for Russia or Peru. The poorest 20 percent command less than 5 percent o f total income; the wealthiest 20 percent, 53 percent o f total income. Differences in education account for as much as 22 percent o f total income inequality between households, revealing the existence o f entrenched inequities in access to education in Turkey. The Bank's 2003 Turkey Poverty Assessment reported that the allocation of public finance on secondary education tends to reinforce patterns in the distribution o f income. The poorest 20 percent o f youth benefited from about 19.2 percent o f public spending on education, whereas the richest 20 percent o f youth benefitedfrom 16.9 percent o f public spending. The pattem in2001 shows improvement from earlier estimates based on 1994 data (reported in the World Bank's 2001 Public Expenditure and - 1 7 -  Institutional Review) that this situation has improved. As such, resources from the proposed project need to target schools inlow income areas. Retums to education appear to be much higher for younger than for older cohorts, a pattem associated with economies that are increasingly integrating into the global economy. Ruraliurban differences and regional differences account for an additional 10 percent and 11 percent o f income inequality, respectively. Poorer provinces have lower productivity within agriculture than richer provinces. Since agnculture accounts for high shares o f output and employment in these provinces, this sector's sluggish performance keeps these provinces poor and their overall growth rates low. Poverty: Education i s the strongest predictor o f poverty. Extreme poverty i s very low, at fewer than 2 percent in 2002, but poverty i s surprisingly high for a middle income country at 27 percent in 2002. Although households headed by an illiterate adult constitute 14 percent o f all households, such households account for about a third o f all poor households. The average income o f adults with higher education i s almost six times that o f illiterate adults. These points underline the importance o f targeting project resources to schools in regions which have students from families that are poor, families where the adults have low levels o f education, families in rural areas, and families in the poorer provinces. For example, the poorer provinces in the East and Southeast lagged far behind the rest o f the country in educational attainment, with almost half o f girls dropping out before completion o f fifth grade in some provinces. Reducing disparities in the quality o f secondary education between upper and lower income regions and improving the participation o f children from low income families and girls are goals o f the Govemment. The Project supports these goals and recent analytical work emphasizes the importance o f the linkage between education and the probability o f poverty. In particular, there is a sharp reduction in poverty with the completion o f secondary education, compared to primary education alone. Project linkages with related Bank investments. There are operational linkages between SEP and other social support programs, including the Social Risk Mitigation Project (SRMP) which seeks to bolster the demand for education among the poorest and reduce school drop-out rates. The largest component o f the SRMP supports Conditional Cash Transfers (CCT) targeted to the poorest 6 percent o f households. The CCT payments were revised inJuly 2004 to provide an additional incentive for keeping female children in school and increased funding for secondary education. CCT eligibility becomes an important proxy for poverty at the school level and will be used as one o f the criteria for selection o f schools to be supported by SEP. The revised CCT payments provide an additional incentive for keeping female children in school, particularly in secondary education (recognizing the higher out-of-pocket costs and opportunity costs for this level of education). Targetingproject resources. There are sufficient project funds to develop high priority general education, vocational training, and infomation communication programs; however, there are not sufficient funds to put these programs in all 6000 secondary schools. There i s a need to ensure that a substantial number o f schools in low socio-economic areas are included in the project to meet Govemment objectives o f removing disparities in educational services. There i s also a need to ensure that enrollment o f girls in secondary education increases. Finally, there i s a need to ensure that a core set o f schools receives all new programs so the impact o f the programs can be evaluated before expanding the programs to all schools. In order to meet these multiple objectives, minimum and special selection criteria for schools have been developed which include, but are not limitedto, the number o f youth eligible for Conditional Cash Transfers at schools and the increase inproportion o f girls' enrollment. Educational Attainment. Educational attainment o f Turkey's population and labor force i s among the lowest o f the OECD countries. Virtually all children in other OECD countries have completed at least eight years of schooling, and in nearly two-thirds o f these countries, over 70 percent or more o f 25-29 year olds have - 18 -  completed secondary education. OECD analyses show that completing secondary education i s a strong predictor o f the acquisition o f the skills required to function inthe emerging knowledge economy. Similarly large gaps appear at the tertiary level, with only seven percent o f young people (aged 30-34) attaining this level, compared to an average o f 24 percent for the OECD countries. On international assessments, Turkish students not only perform much worse than European Union (EU) members, but score lower than all of the new EU members and other accession candidates. In particular, 2003 results from OECD's Program for International Student Assessment (PISA), published on December 7, 2004, demonstrate that approximately fifty percent of Turkey's 15-year-olds are not proficient in mathematics, reading, and science beyond the most minimal o f level o f competency. Improving Access to Basic Education. Turkey has mobilized nationally to improve the educational qualifications o f its population. The Basic Education Law No. 4306, adopted by Turkey's Parliament in August 1997, extends the period o f compulsory basic education from five years to eight years andraises new tax revenues to finance a vast expansion of education infrastructure to accommodate the expected increase in basic education enrollments. Dropouts within the eight-year basic education cycle were proscribed. Prior to adoption o f the new Law, most children started school and completed five years o f schooling, but 45 percent dropped out at the completion o f grade five. Part o f the reason for the high drop-out rate at this level was that village schools typically provide only the first five grades o f schooling. In order to continue schooling beyond grade five, most rural children either had to commute to a middle school in a nearby town, or attend a boarding school. The compulsory extension of basic education began to take effect in September 1998, when all children who had completed grade five in the prior school year were required to enroll in grade six. In the following two years, progression from grade six to grade seven, and from grade seven to grade eight became compulsory. The net enrollment ratio increased very sharply following passage of the Law. As a consequence, more than 1million additional students entered the school system, and the enrollment ratio for children between 7 and 14 years of age shot up from 86 percent to 96 percent between 1997 and 2002. There are few cases o f such rapid enrollment gains in the history of any national education system. Turkey's success in raising enrollments at the basic educations level will lead to a sharp increase in the number o f students entering secondary education. Reforming Secondary Education. As noted at the outset, the Government's EighthFive Year Development Plan indicates that the length of compulsory education to 12 years will result in short-term pressure to increase secondary capacity by almost three million additional places by 2007-08, relative to the number of places in 2004-05. Simultaneous with this expansion, the Government o f Turkey wishes to align the quality of its secondary programs with those o f the European Union in preparation for greater integration with Europe and in response to an expected increase in the demand for higher level skills within Turkey and in Europe. The Government wishes to increase secondary education capacity leading to full enrollment, While doing so the Government has two broad alternatives: (a) maintain the status quo o f the existing system (i.e., essentially put the old system into the additional facilities); or (b) make substantial changes to the structure and content o f the system with the objective o f ensuring that youth are better prepared for lifelong learning and the challenge of the developing knowledge economy which i s typified by Turkey's move to EU accession. It i s critical that the Turkish Government and the Bank share a common understanding o f the need for, and the type of, reforms that are to be undertaken and supported by the project. The skills and knowledge neededby secondary school graduates are different now than 20, or even 10, years ago, The pace o f change will increase if Turkey wishes to remain competitive in the global economy, and moves toward EUmembership. Several factors signal what i s coming, and its potential impact on secondary education. The economy and labor market are already changing in Turkey and this has an impact on secondary education. For example, employment in agriculture dropped from 47 to 35 percent, services increased from 33 to 41 percent and industry increased from 15 to 18 percent in the past 10 years, and the - 19 -  new economy i s requiring different and higher level skills. Recent unemployment among all secondary school graduates in Turkey i s 17 percent, while only 11 percent and 8 percent for technical and university training. Studies by METARGEM indicate about half or more o f vocational school graduates were unemployed at the time o f follow-up surveys, and these are the very programs that are to help guarantee job entry. METARGEM surveys o f technical schools indicate that 49 percent o f graduates stated that the vocational education they received was not suitable for employment. These figures suggest that secondary schools may not be providing appropriate skills and knowledge. Initial information being developed for the knowledge economy assessment being carried by the Bank with the Turkish Government indicates that Turkey currently ranks 33rd (out o f 75) on the World Economic Forum Growth Competitiveness Index, but i s expected to slip to 54'h place in the future and fall behind almost all EU candidate countries. World Bank Institute benchmark data, including data on economic/institutional framework, information communication technology, national innovation systems, and human resource development (education), indicate that Turkey regressed since 1995. Education indicators are lower than many other middle income countries. Specific issues include low secondary and tertiary enrollment, and a l o w level o f technical skills in the workforce. There i s also high unemployment among graduates o f secondary and tertiary education, partially reflecting difficult economic conditions, but also problems with the content and structure o f initial education, including vocational training. Strengths o f the current secondary education system are evidence of a strong demand and public support for secondary education, a network o f schools inrural and urban areas to provide access, well-defined programs, two defined avenues for access to tertiary education (via the university exam and Law No. 4702), potential enhanced access to the labor market (via vocational training), sufficient pre-service and in-service teacher training programs, and strengthened basic education programs leading to secondary school entry. Work experience i s also an integral part o f most vocational programs. However, there are weaknesses as well. There i s a shortage of financial resources to meet the needs o f the full age cohort as Turkey moves to compulsory secondary education, and limited transfer to post-secondary programs (particularly technical schools). Currently, 29 percent o f the age cohort (including distance education) participate in tertiary education as compared to 64 percent average in the OECD, and only 17 percent o f Turkish students are in short cycle technical programs as compared to an average o f about 50 percent in the OECD. General and vocational programs may not reflect the necessary core skills for the knowledge society, identified in the market), School choice i s made too early, primarily in sth grade, forcing rigid student tracking and OECD study, and the changing Turkish economy (i.e., broad core occupational skills for the changing labor inappropriate early career choice. There i s very limited horizontal transfer between general and vocational secondary programs and schools, the university entrance exam i s complex, and there are severe restrictions on vertical mobility under Law No. 4702 for secondary vocational graduates. There i s a need to examine more closely the internal (i.e. student teacher ratios, unit investment and recurrent costs) and external efficiency o f secondary education (i.e., entry into further leaming and/or the labor market). Secondary vocational programs are highly specialized and career information and guidance services are weak. Vocational programs include narrow specialties (e.g., eight in textiles) which do not support lifelong learning and occupational mobility, and highly technical career (e. g., medical electronics) skills which cannot be achieved at the secondary level and probably belong at post-secondary institutions. The work experience invocational programs, while providing the context to develop general work habits and skills, are company specific, and may not facilitate future career mobility. The key challenge facing Turkey i s the need to expand and reform the system to provide all youth with a secondary education that will address short and long term goals, including providing them with core skills and knowledge as a base for lifelong learning as well as participation in a modem knowledge economy. The structure o f the current system does not sufficiently accomplish this goal. The early tracking o f students, resulting in specialized vocational training for many, tends to crowd out the opportunities to learn core - 20 -  general and occupational skills, and will not serve youth or the economy well in the future. Turkey i s at a threshold o f reform in secondary education and has indicated its intention to introduce structural reforms, including: (a) providing similar core general education programs in grades 9 and 10 in both general and vocational secondary schools; (b) strengthening career information and services in basic and secondary education to help them make informed career and educational decisions; (c) simplifying the structure o f secondary education by reducing the over 70 types o f secondary schools to two (i.e., general and vocational); and (d) replacing the existing 130 specialized vocational programs with 30 broader core skill programs. Again, the proposed project directly supports these reforms, along with enhancing school assessment and planning to monitor the impact o fthe reforms. Student Career Development Decisions. Compounding the costs o f inflexibility i s the fact that career guidance and counseling at both basic and secondary education levels i s weak.' Career guidance services promote social equity and inclusion by helping to ensure equal access to information on labor market and education opportunities and promote the rights o f individuals to make free decisions about their own lives (as opposed to being "directed" to an educational option and career by another person). This i s one method o f addressing the previously described gender imbalance in secondary education and can play a major role as the percentage o f enrollment increases as planned. Career guidance services also enhance economic efficiency, by making the labor market operate more effectively, and can help ensure that individual decisions are based on self assessments and labor market information, thus reducing market failures*. The quality and relevance o f the existing programs are often poor. For example, in the general education track, students are prepared for entry into higher education, malung this track much more popular than the vocational tracks. However, the result i s large numbers o f disappointed students because demand for higher education greatly outstrips supply. The skills and knowledge acquired by those who fail to get into higher education are often not suitable for rapid assimilation into the labor market. The vocational tracks are often terminal programs with very narrow curricula, equipping students at best with skills for a very specific job. Even where the skills provided are relevant for the intended job, the highly restricted access to post- secondary programs means that graduates do not have the ability to upgrade and improve their skills as the labor market changes, the requirements o f the job shift, andor their interests evolve. Recent METARGEM surveys o f technical schools indicate that 49 percent o f graduates stated that the vocational education they got was not suitable for employment. Finally, private sector enrollments constitute only a very small fraction o f total enrollments at the secondary level: less than five percent, and even lower in the vocational school track. The pattern i s the same at the tertiary level. Given the high demand for education, these figures suggest that there are significant constraints on the private sector's ability to establish and run schools. Student Assessment and Evaluation. Turkey has put a great deal o f effort and investment into the development o f assessment instruments and systems. The objectives o f Turkey's educational assessments, both the national ones and international comparative ones (such as TIMSS, PIRLS, and PISA), i s to measure the performance o f students, evaluate the progress o f the various components o f the system at different levels, identify problem areas, and increase the accountability o f the education system to the Government and, more broadly, the public. Turkey i s investing in assessments as a cost-effective means o f helping improve learning outcomes. Naturally, by itself, measuring educational outcomes will not yield increased school system performance any more than weighing grain will yield increase agricultural output. It i s a necessary condition to establishing quantitative targets, assessing tradeoffs between alternative allocation and investment strategies, and implementing strategies to achieve these targets. The goal o f the assessment subcomponent inthe project i s to improve the quality and outcomes o f secondary education by developing or improving systems to collect and disseminate reliable information on student learning and outcomes, and 'Akkok,F. & Watts, A.G. (2003). Country Report on Turkey: Public Policies on Career Development. Washington, DC: World Bank. 8 Fretwell, D; Watts, Public Policiesfor Career Development, Case Studies and Emerging Issuesfor Designing Career Information and Guidance Systems in Developing and Transition Economies, World Bank, March, 2004 - 2 1 -  system performance. This information will be used to ensure that stakeholders and beneficiaries alike, fi-om students and teachers, to parents, to community leaders, to Government policymakers, and finally to the employers in the labor market have the information needed to hold schools and school managers accountable. This will be done largely through support to existing national-level efforts to improve the reliability and availability o f educational information. National assessment results will be categorized by school characteristics and disseminated to schools and school systems. Information Communication Technology. ICT i s increasingly becoming a common core general education subject in all secondary schools in developed countries and i s recognized as a core skill in the recent OECD study (Rychen and Salganik, 2002) o f key competencies for the knowledge economy. This proposedproject supports the Government's ongoing effort to bring I C T into its schools with the aim o f improving the teaching and learning processes in order for Turkey's youth to function in a modern knowledge economy. UsingICT can also improve the medium o f instruction, expand access to learning opportunities, and support better management o f leaming and administrative processes. In basic education, the objective o f equipping schools was to develop computer literacy for students in grades four through eight, as well as for their teachers, through regular courses o f computer instruction in ICT classrooms (or labs). A somewhat different approach will be taken inthe proposed project, which i s to equip fewer schools but with a complete software and hardware infrastructure that will give support to daily classroom teaching and will enable teachers and students to use the system more frequently and effectively. Selected schools will have at least one ICT classroom. A heavy emphasis will be placed on better integration o f I C T within the teaching practice through extensive training and use o f quality, cumculum-based instructional software. - 22 -  Annex 2: Major RelatedProjectsFinancedby the Bank and/or Other Agencies REPUBLIC OF TURKEY: Secondary EducationProject Project Amount and closing OEDRating Sector Issues date Outcome Impact Addressed IndustrialTraining 1 US$25.6 mil. Satisfactory Modest Respond to industrial 12131/1990 need for skilled labor. Industrial Training 2 US$113.5 million Marginally Modest Improve supply o f 12/31/99 Satisfactory technicians, teachers, and tourism workers Industrial Schools I US$34.8 mil. Modest Moderately Improve supply o f 12/31/1994 Satisfactory technical labor for export industries Non Formal US$32.6 mil. Satisfactory Negligible Upgrade worker skills Vocational Training 1213111995 National Education US$57.2 mil. Moderately Modest Modernize education to Development 06/30/1999 Satisfactory meet OECD standards Employment & US$67mil. Modest Improve employment Training 12131/2000 Sati sfactory services and absorb unemployed into labor market Project Status Report Rating IP DO Basic EducationAPL I US$300 mil. U U To promote progress in 12/31/2003 coverage o f eight year basic education and Second Basic US$300 mil. S U improve basic education Education (BEP 2) 1213112004 quality - 23 -  Annex 3: Results Frameworkand Monitoring REPUBLIC OF TURKEY: Secondary EducationProject PDO Outcome Indicators Use of Outcome Information ~ The overall development objective o f Secondary school graduates from - To evaluate the impact of investments the project is to improve the quality, schools receiving new curriculum and in the reform o f the structure and economic relevance, and equity of related support via the proposed curriculum o f secondary schools, and secondary education t o support Secondary Education Project will have refine as necessary. lifelong learning. improved performance as measured by scores on national and international assessments and graduate tracer studies, than schools which do not have project support. Secondary schools receiving new curriculum and related support via the proposed Secondary Education Project will have a reduced variance in student achievement between schools in different socio-economic regions, between general and vocational schools, and an overall rise in achievement. IntermediateResults ResultsIndicators for Each Use of ResultsMonitoring One Der ComDonent Component ComponentOne: Secondary School ComponentOne: ComponentOne: ~ Programs I(a) SecondaryProwam Reform: 1 (a) Graduates o f revisednew 1(a) Monitoring o f administrative data Institutional structure and technical programs supported by the project and graduate tracer studies will enable procedures for curriculum development will have improved performance as M O N E and schools to determine if new revised measured by scores on national and programs are having the desired impact General Education: five programs international assessments, graduate and adjustments can be made before revised and implemented about in 280 tracer studies, and qualitative parent implementing programs in additional schools schools. Vocational Education: 10 programs and student surveys. revised and an average o f two implemented in about 149 schools. In-service training: provided to support implementation o f the about 1400 general and 298 vocational new programs. 1(b) Information Communication 1 (b) Monitoring f impact data from Technolon: 1(b) Participants in n e w ICT PISA and other assessment studies will Classroom Instruction use o f ICT programs will have increased determine value o f investments and improved in 400 schools, and acquisition of core ICT skills as suggest refinements before further E-learning opportunities extended to measured by national and expansion and scaling up. (assessment 400 schools. international assessments and qualitative parent and student surveys carried out under Component 2(a). (assessment carried out under Component 2(a). I(c) Career Guidance and Counseling Interagency Collaboration mechanisms 1(c) An increase in the career maturity 1(c) Monitoring o f impact o f career established levels o f youth in schools who are maturity levels in schools, andj o b Career Information standards and provided with new career counseling placement success o f participants in materials developed services. ISKUR programs will determine value Resources provided to about 6200 o f investments and needed refinements - 24 -  schools, 250 ISKUR Offices and 145 Unemployed adults who receive new Guidance and Counseling Centers with counseling services at ISKUR in-service training for about 10,000 employment offices have an increased staff. the rate o fjob entry. Program Integration o f career guidance inthe regular curriculum is increased. ____ IntermediateResults Results Indicatorsfor Each Use of Results Monitoring One per Component Component ComponentTwo: Quality ComponentTwo Assessment,and Management 2(a) Student Assessment and 2(a) Enhanced student assessment 2(a) The output o f the enhanced Evaluation results disseminated within 6 months o f :valuation system will be used to refine Improve National Student Assessment test administration; Increased quality o f individual programs, and Assessment Tool kit for 429 schools accountability o f public institutions as schools, identify and address Establish a Performance Management measured by number o f citations o f differences in quality and equity issues, school report cards in local newspapers; and inform key stakeholders (parents Improved equity and effectiveness in and students) to allow them to make university selection process: more more informed decisions about equality in student selection into educational choices university, Student learning achievement increased more in targeted schools than in other schools as measured by national and intemational student assessments, participants in I C T activities have increased acquisition o f core I C T skills as measuredby national and international assessments, as well as by qualitative parent and student surveys. 2(b) Higher results and reduced 2(b) Impact o fpilot and expanded variance in student learning in targeted school planning exercise can be linked schools, with feedback from overall assessment system to further strengthen local planning, and support plans for downstream decentralization inthe education field 2(c) Project administrative operations 2(c) Project Management 2(c) Implementation, procurement, will be monitored on an ongoing basis SEP Team at the Project Coordinating disbursement, and financial progress to identify blockages and issues so Center created and fully staffed, and the reporting on schedule and project rated corrective actions can be taken to PIP is agreed with the Bank. as satisfactory or better, ensure overall project goals are not inhibited by administrative problems. Project Audit completed each year Audit performed annually satisfactory Public Information Campaign initiated to the Bank and, Public information campaign initiated. - 25 -  Y z 0 E X X X X X X X X X I X W c\1 I  r* P5 w x 8z 02z 0 2z 2 * x X X X x x X X x x X x X  Annex 4: DetailedProjectDescription REPUBLIC OF TURKEY: SecondaryEducationProject The overall development objective o f the project i s to improve access to high quality and economically relevant secondary education on an equitable basis. TheProject has two major components with associated sub-components, each with more detailed objectives and activities. The project will fund limited technical assistance, equipment, and materials for each subcomponent. Descriptions o f detailed activities, budgets, implementation schedules, and outputs for each sub-component and its objectives are included in the Project Operational Manual (POM). The following are the major objectives and sub-objectives for each component and sub-component. Component 1. Secondary Education Reform (Base cost o f 64.7 million) (a) Secondary Education Programs. The objective i s to revise and implement general education and vocational education programs to provide students with core skills for the knowledge economy and lifelong learning. Sub objectives include: (i)strengthening national and local institutional structure for developing educational programs; (ii)developing technical procedures for working groups to use in program restructuring, (iii) developinglrevising five general education programs and implementing the five programs inabout 280 selected schools; (iv) developinghevising 10 vocational education programs and implementing an average of two programs in about 149 selected schools; and (v) providing in-service training for management and teachers in schools receivingnewirevisedvocational and general educationprograms. (b) Information and Communications Technology (ICT). The objective i s to provide ICT training as a core competency for youth to function in a modem knowledge economy, to improve the medium o f instruction by using ICT, to expand access to learning opportunities, and support better management o f learning and administrative processes. Sub-objectives include: (i) utilizing I C T to improve instruction in classrooms and utilize existing ICT classrooms to their full potential; (ii)extending opportunities in secondary schools selected under sub-objective 1 above, to access on-line educational content and services on the Internet via a web portal; and (iii)assessing the educational impact o f the ICT investments, and disseminating results of the assessment studies for the improvement of the system. (c) Career Guidance and Counseling. The objective i s to provide youth and adults with access to career information and guidance services to promote informed career choices and related education and training decisions and facilitate lifelong learning. Sub-objectives include: (i)facilitating interagency cooperation to improve the development, dissemination, and use o f career counseling services; (ii) developing core career information and guidance resources that will be made available for use in education, training, labor, NGO, and private sector settings; (iii) providing career information and guidance resources to education and labor institutions and training existing staff in use o f the resources; and (iv) improving the integration of career guidance and counseling into overall basic and secondary education programs. Component 2. Quality, Assessment and Management (Base cost o f 5.5 million) (a) Student Assessment and Evaluation. The objective i s to improve the quality and outcomes o f secondary education by developing systems to collect and disseminate reliable information on student learning and outcomes, and on the performance o f education system staff and institutions. Sub-objectives are to: (i) modernize the national assessment system; (ii)develop a toolkit o f assessment instruments for 5 general secondary program areas (2 packages per area-9th and lothgrades, and 1lth 12thgrades) to be used by and teachers to diagnose and improve teaching and leaming in their classrooms; (iii) establish a performance management system for continuous improvement o f staff and institutions; (iv) improve feedback mechanisms to disseminate and use performance and outcome information to improve quality; (v) support national - 28 -  participation in 3-4 international assessments and studies; (vi) explore ways to improve the efficiency and effectiveness o f the university entrance system; (vii) carry out a program to monitor and inform the Govemment and the public about the implementation o f the secondary education system and the SEP; and (viii) assess and report on the impact o f key aspects o f the secondary education reform, including social impact assessment and ICT impact assessment. (b) School Development. The objective i s to help secondary schools improve their own performance, their students' educational achievement, and quality in education through school development activities to be designed and implemented within the school development. The key sub-objective i s to increase secondary school performance, student achievement and outcomes, and the quality o f education by providing instruments, training and support to secondary school staff so that they can diagnose their schools' performance constraints and design their own strategies to assure that their students acquire lifelong learning competencies. (c) Project Management. The objective i s to ensure effective administration and coordination o f the project, including financial, procurement, contract, and risk management, quality assurance and control and team capacity development. Sub-objectives include: (i)coordinating project execution, and managing the resources o f the project, procuring all Bank-financed goods and services for implementing agencies, operating the financial management system according to World Bank requirements, and acting as liaison between the technical agencies and the World Bank. Project management should also ensure that an audit o f the project be carried out on an annual basis, satisfactory to the Bank; and (ii)developing a public information campaign to promote public awareness of the objectives and activities o f the Project through the development of a public information strategy and dissemination o f the key messages concerning the education reformprocess being supported under the Project. - 29 -  Annex 5: Project Costs REPUBLIC OF TURKEY: Secondary EducationProject (EURO `000) Local Foreign Total A. Secondary Education Reform 1. Secondary Education Programs 11,457.3 25,235.0 36,692.3 2. ICT 119.8 11,964.0 12,083.8 3. Guidance and Counseling 1,699.9 14,224.0 15,923.9 Subtotal Secondary Education Reform 13,277.0 51,423.O 64,700.0 B. Quality, Assessment and Management 1. Student Assessment and Evaluation 1,585.4 906.9 2,492.3 2. School Development 796.3 865.2 1,661.5 3. Project Management 1,025.5 289.9 1,3 15.4 Subtotal Quality, Assessment and Management 3,407.2 2,062.0 5,469.2 Total Baseline Costs 16,684.2 53,485.0 70,169.3 Physical Contingencies 2,469.2 5,308.5 7,770.0 Price Contingencies 393.1 1,667.7 2,060.8 Total Project Costs' 19,546.5 60,461.2 80,000.0 Total Financing Reqiured 19,546.5 60,461.2 80,000.0 (Total maynot add up to roundingerrors.) `Identifiable taxes andduties are 22.8-miIlion, and the total project cost, including taxes, is 80 million. The share of taxes in the total project cost is estimatedat 28.5 percent. - 30 -  Annex 6: ImplementationArrangements REPUBLIC OF TURKEY: Secondary EducationProject 1. Overview of ImplementationArrangements. MONE is the lead agency for the SEP and has overall responsibility for carrying out the Project. Overall guidance for the Project will be the responsibility o f MONE's Project Steering and Executive Committee (PSEC) for SEP, which will oversee the policy aspects o f the project and ensure its alignment with the Government's Secondary Education Reforms. The PSEC will be chaired by the Deputy Undersecretary o f MONE responsible for the World Bank financed projects, and will include the department heads and director generals o f all o f the related implementation units in MONE. The Projects Coordination Center (PCC) i s the organizational unit o f MONE that coordinates the management o f all internationally-financedprojects. The PCC i s headed by the PCC Director, who has civil service status. The PCC will serve as MONE's business office for SEP, and as the liaison for communications between the MONE and the Bank, and between SEP and other internationally-financed projects. Coordinating the implementation o f the Secondary Education Project across MONEwill be the responsibility o f a SEP Team, which will be established inthe PCC prior to loan effectiveness, and composed o f staff from both the PCC and relevant MONE line units responsible for actual implementation. The SEP Team will prepare a Project Implementation Plan (PIP) prior to loan effectiveness, in agreement with the Bank, and MONE will use this PIP as the chief tool to manage and monitor project implementation. 2. The Roles and Responsibilitiesof the SEP Team The SEP Team will be composed o f eight Working Groups (WGs), and will include staff from the PCC, other civil servants from the related implementation units o fMONE (Le., General Directorates o f MONE, the Board o f Education, and other units), and expert consultants as needed to strengthen the overall implementation capacity o f the SEP Team. The smooth functioning o f an integrated and accountable SEP Team will ensure the timely and effective implementation o f the Project, and efficient communication and coordination between the PCC and the related implementation units. The SEP Team, which will be headed by a full-time Project Manager with civil service status and fluency in English and Turkish, will be responsible for management and day-to-day administration, monitoring, and control o f SEP. The SEP Team will be organized into five "technical" WGs associated with the principal subcomponents o f SEP, and three functional WGs--one for the administration o f monitoring, evaluation and reporting, one for in-service training, and the third one, the Project Management Working Group, responsible for financial management, procurement management, contract management, risk management, quality assurance and control and team capacity development. The PCC will provide the SEP Team with project management training. Before loan effectiveness, the SEP Team will prepare the Project Implementation Plan (PIP) 3. The ProjectImplementationPlan The PIP will detail all the activities necessary and sufficient to achieve the Project Development Objectives. The PIP will include the entire standard instruments characteristic o f modem project management methodologies. These are: (i)the Work Breakdown Structure (WBS), an exhaustive, hierarchical, tree structure of activities that need to be performed to implement the Project and achieve its targets and objectives, (ii) the Detailed Project Schedule (DPS), which specifies all o f the activities in the WBS, and their timing, duration, and sequencing, as well as the staff responsible for their execution, (iii)the Responsibility Assignment Matrix (RAM), which lists the names o f the MONE units and individual staff members accountable for each activity in the DPS, and (iv) the Procurement Activities Timetable, which gives the detailed schedule for each item listed inthe Procurement Plan. The PIP will be revised on a yearly basis with the mutual agreement o f the Bank. The PIP for the Secondary Education Project will be approved - 3 1 -  by the PSEC and the Minister o f National Education. The PIP is based on, and incorporates, the Project Operational Manual (POM), which sets forth the procedures and rules underlyingto project implementation. 4. ImplementingUnits ofMONE The Project Operational Manual (POM) identifies the General Directorates in the Ministry that are to be responsible for the technical implementation o f the two major components (secondary education reform; and quality/assessment/project management) and their six related sub-components. Details on implementation arrangements will be specified inthe Project Implementation Plan. Director Generals and line unit heads in MONE will assign individual civil servants from their staff to permanently represent their departments on the relevant WGs o f the SEP Team, and to streamline decision-making and implementation. The five "technical" WGs o f the SEP Team will therefore be composed o f staff from the related implementing units/departments responsible for each sub-component, and from the PCC.' Each o f the WGs will contribute to the development o f the DPS in line with the activities, outputs, outcomes, schedules for implementation, and resource requirements (including technical assistance) stated in the Project Operational Manual. Most o f the sub-component will be supported by a technical assistance contractor, which will provide access to local and international consultative assistance, and will organize agreed local and international training programs to assist the department to implement the agreed activities. 5. ProjectReportingArrangements MONEand the Bank will agree on a standardized approach to progress reporting, based on the framework o f objectives, activities, outputs, outcomes, and schedule agreed in the Project Implementation Plan. The principal reports that the SEP Team will prepare for the Bank are: (i)the semi-annual Progress Report, including the Project Outcome Analysis Report (POAR), the Key Performance Indicators Report (KPIR), the Financial Management Reports (FMR), and the Project Budget Report; (ii) two regularly updated reports - the Procurement Activity Timetable and the Project Monitoring Report; and (iii) periodic site visit reports. The SEP Team will also submit a mid-term project implementation report, which will include summaries o f stakeholder and beneficiary interviews, school visits, and other consultations. The Progress Report will be due one month after the end o f each calendar semester, covering project implementation progress achieved duringthat semester and cumulatively up to the close o f that semester. The mid-term report will cover all semesters up to and including the semester in which 40 percent o f the loan has been disbursed, and will be due three months after that semester has ended. 6. SpecificImplementationArrangementsfor ProjectComponents. Component 1.Secondary Education Reform (a) Subcomponent I.I. Secondaly Education Programs. Both general secondary and vocational secondary curriculum programs will be developed with the support o f SEP. The Board o f Education has overall responsibility for reviewing and approving all curriculum developed under Project support. The SEP Team's Curriculum Development Group (CDG), which will be composed o f delegated and responsible staff from the relevant Secondary Education implementing units (general directorates), EGITEK, the Board o f Education, and EARGED, will facilitate the establishment and operations o f expert groups for the fifteen curriculum program areas to be developed and piloted. The expert groups will include teachers from pilot schools, and consultants. The five `Technical" WGs are the Curriculum DevelopmentGroup (CDG), the Information and Communication Technologies Group (ICTG), the Career Guidance and Counseling Group (CGCG), the Student Assessment and EvaluationGroup (SAEG), and the School Development Group (SDG). The three "Functional" WGs are the Project Management Group (PMG), the Monitoring, Evaluationand Reporting Group (MERG), and the In-Service Training Group (ISTG). - 32 -  supplied by a technical assistance contractor to be hired with SEP loan financing. One umbrella technical assistance contract will be procured by the Project Coordinating Center (PCC), with the support o f the SEP Team, to provide all necessary international and local technical assistance and training needed to implement and achieve the targets o f this sub-component. Details of implementation activities will be specified inthe PIP. (b) Subcomponent 1.2.Information and Communications Technology (ICT). EGITEK will have the primary responsibility for implementing this subcomponent, with support of consultants. The Information and Communication Technologies Group (ICTG) o f the SEP Team will facilitate the linkages o f this activity with other line units inMONEand coherence with other national educational objectives. Preparation o f the technical specifications for the hardware and software will be the primary responsibility o f EGITEK. Preparation o f the bid documents and further bidprocessing will be the responsibility o f the ICTG o f the SEP Team inthe PCC, in close coordination with EGITEK. The careful attention that has gone into preparing the I C T hardware and software technical specifications and bidding documents for BEPl and BEP2 i s expected to lead to smooth and fast procurement o f ICT infrastructure during the project. One umbrella technical assistance contract will be procuredby the PCC to provide all necessary international and local technical assistance and training for this sub-component. Details o f implementation will be provided inthe PIP. (c) Subcomponent 1.3. Career Guidance and Counseling. This component will be implemented by the General Directorate for Special Education and Counseling and Guidance Services, which will establish a Career Guidance Services Development Unit (CGSDU) composed o f a minimumo f three civil servants and support staff, plus three full time long term Turkish consultants financed by the Project. The Career Guidance and Counseling Group (CGCG) o f the SEP Team will facilitate the linkages o f this activity with other line units in M O N E coherence with other national educational objectives. One technical assistance contractor will be selected to provide and organize all necessary international and local technical assistance and training. A Career Services Advisory Committee (CSAG) will be appointed based on the protocol betweenMONE and the MOL which will be refined to expand membership and further define the role o f major stakeholders in the definition and development o f career services. One umbrella technical assistance contract will be procured by the PCC to provide all necessary international and local technical assistance and training for this sub- component. Component 2. Quality, Assessment and Management (a) Subcomponent 2.1. Student Assessment and Evaluation: EARGED will take the lead for implementing this subcomponent, in cooperation with other line units via the support o f the SAEG. APK will be responsible, however, for implementingthe impact assessment studies o f key secondary education reforms (objective 8 in the POM). Two technical assistance contractors will be hired to provide the assistance required to implement this subcomponent (one for EARGED's activities, and one for APK's). EARGED will also contract about three individual short-term experts to help initiate this work program. The ICT part o f the impact assessment will be implemented in cooperation with EGITEK. (b) Subcomponent 2.2. School Development. EARGED will take the lead for implementing this subcomponent, with the support and facilitation o fthe SDG. One technical assistance contractor will be contracted to provide the assistance required to implement these activities. (c) Subcomponent 2.3. Project Management. Implementation Arrangements for Project Management i s detailed inparagraphs 1through 5 of this Annex 6. - 33 -  Annex 7: FinancialManagement,Audit and DisbursementArrangements REPUBLIC OF TURKEY: Secondary EducationProject PAD FinancialManagement Section Summary of Financial ManagementArrangements An assessment o f the financial management arrangements for the project i s undertaken in March 2004 and updated inNovember 2004. The current financial management arrangements for the project are satisfactory to the Bank. RATING COMMENTS 1. Implementing Entity Satisfactory There i s a PCC inplace and it i s experienced inthe implementation o f WB 2. Funds flow ISatisfactory 3. Staffing I - ISatisfactory Qualifications and experience o f current PCC staff are satisfactory to the Bank. 4.Accounting Policies and procedures Satisfactory The PCC has sound accounting policies and procedures inplace for BEP 2 5. Internal Audit NA N o reliance on internal audit will be placed untilthe organizational arrangements completed. 6. External Audit Satisfactory The auditors for the project will be Treasury Controllers. 7. Reportingand Monitoring Satisfactory IThe format and the contents o f the FMRs are determined. 8. Information systems IMarginally IThe Accounting software will be satisfactory customized forSEP. OVERALL FMRATING Satisfactory Country Issues. A Country Financial Accountability Assessment for Turkey was carried out in 2001. The CFAA report identified major weaknesses in the Turkish financial accountability, inboth the public and the private sector. In view of this the CFAA concludes that to ensure Bank funds are used for the purposes intended, ring fenced financial management arrangements are more appropriate for the implementation o f Bank financed investment projects rather than relying upon government systems. The public financial management and control law which establishes the legal framework for harmonizing and modernizing budgetary practices across all o f general government i s enacted in the Parliament in December 2003. It will reduce fragmentation and provide for a more comprehensive presentation o f the budget. The law will also allow for future decentralization o f financial control to spending agencies. The law will become applicable inall government agencies starting from January 2005. There has also been an initiative to introduce modified accrual accounting in compliance with GFS requirements however this took more time to complete than initially envisaged. Based in part on the experiences from the pilots, the revised timetable for the accounting reform i s as follows: (i)introduce modified accrual accounting in consolidated budget entities in 2004, (ii) begin introduction o f the full accrual - 34 -  basis in entities outside the consolidated budget in 2004, and (iii)introduce full accrual accounting for consolidated budget entities by 2007. The government accounting standards board to be established through the PFMC law will be responsible for transforming the framework standards included in the accounting regulation into full-fledged accounting standards over time. Risk Analysis. A summary o f the risk assessmentfor the project is as follows Risk Comments 1INHERENT RISK 1, Country Financial Management Risk High Based on CFAA report prepared in 2001 12. Proiect Financial Management Issues I Moderate I I 13. Counterpart funds Moderate Overall Inherent Risk Moderate CONTROLRISK 1. Implementing Entity Negligible 2. FundsFlow Negligible 3. Staffing Negligible 4. Accounting Policies and Procedures Negligible 5. Intemal Audit NIA 6. Extemal Audit Negligible 7. Reportingand Monitoring Negligible 8. Information Systems Moderate Accounting software will be customized prior to Board Overall Control Risk Moderate Risk Mitigation Strategy Country financial management risk -the CFAA identified major weaknesses in the Turkish financial accountability, in both the public and the private sector. As mentioned above there has been a lot o f developments in the Turkishpublic financial management duringthe last three years. However most o f these changes will be applicable starting from 2005 on a gradual basis and therefore it i s not currently possible to assess the impacts o f these improvements on SEP's financial management. The integration of the project accounting into Government's accounting will be considered at a macro level and will not be within the scope o f SEP. Therefore in order to compensate for the weaknesses identified in the CFAA, the project will be controlled and accounted for by a separate unit within MONE, PCC. Control risk- the control risk for the project i s moderate. Implementing Entity. The project will be implementedby MONE and overall project coordination will be carried out by the PCC established at MONE under the direct responsibility o f the Deputy Undersecretary. The PCC will provide services to implementing departments o f MONE and financial management, procurement and monitoring - 35 -  and evaluation functions will be centralized at the PCC. The PCC i s currently responsible for coordination o f the BEP 2 project at MONE and the same PCC was also responsible for the recently closed BEP 1 project. The same PCC will also be responsible for the coordination o f the Secondary EducationProject. The implementation o f the newly enacted Public Financial Management and Control Law (PFMC) begins in 2005 and the law requires every ministry to have a Financial Services Unit (FSU) responsible for budget preparation and budget allocation and a Financial Control Officer (FCO) who will be responsible for ex-ante control. Currently these departments are not in place and therefore the financial management group at the PCC will be responsible for these functions. The financial management group o f the PCC has a financial manager who i s a civil servant, a full time consultant recruited with the Banks no objection and two accounting staff who are both civil servants. The financial management group will work closely with the new FSU and FCO inpreparing the budget for the project and inthe execution o f ex-ante controls. The risk associated with the implementingentity i s assessedas negligible. Funds Flow. The project will be budgeted under MONE. There will be one special account in Euros for disbursements from the Loan, and it will be at the Central Bank o f Turkey. Payments to the contractors, suppliers and consultants will be made from the special account with the authorization o f the PCC. The PCC will be responsible for obtaining the approval o f the Ministry o f Finance payment office which is required to register payments from the special account. Required accounting entries to the project financial management system will also be made by the PCC. There i s an allocation o f approximately USSl million in the Government's 2005 annual budget for the Project. This amount i s expected to cover the forecasted expenditures duringthe calendar year 2005. The risk associated with the flow of funds is assessedas negligible. Staffing. The SEP team established at the PCC under the overall leadership o f the PCC Director, has a Project Management Group (PMG) to deal with the procurement, financial management, contract management, risk management, quality assurance, and control, team capacity development, monitoring evaluation and reporting, civil works management and project management functions o f the project. The PCC i s led by the Project Director who has responsibility for the implementation o f World Bank financed projects as well as EU and other internationally financed projects. The financial management functions for the project are performed by the financial management group under PMG. The Financial Manager i s responsible for the project financial accounts, preparation and dissemination o f financial statements and FMRs, and ensuring the timely audit o f the project. There are also three other staff working in the financial management unit dealing with accounting and disbursement. Two o f these staff are civil servants and one i s a consultant cleared by the Bank. The qualifications and experience o f the staff working at the financial management department o f the PCC are satisfactory. But since they will be responsible for the financial management functions of SEP, in addition to BEP 2 the group needs to be strengthened with additional civil servants assigned by the Ministry. The financial management staff will be responsible for coordinating their work with other groups within the SEP team as well as with MONE implementing unitddepartments, preparing annual budgets and FMRs using the software (customized for the project) and executing other project-related assignments. The risk associated with staffing i s assessed as negligible. - 36 -  Accounting Policies and Procedures. The project accounting will be maintained separately within the PCC and will be on cash basis. Accounting procedures currently applying to BEP 2 are set out in detail in a Financial Management Manual. The Financial Management Manual covers: (1)the financial and accounting policies and procedures for the project; (ii)organization o f the financial management; (iii) the financial management information system; (iv) disbursements; (v) budgetingand financial forecasting; (vi) project reporting; and (vii) project planning procedures. The same manual with necessary modifications will also be used for SEP. The risk associated with accounting policies and procedures i s assessedas negligible. Internal Audit. The newly enacted Public Financial Management Law (PFMC) requires establishment o f internal control units in each ministry. Internal control units in each ministry will be established after an Internal Control Coordination Board i s established and designated intemal controllers are certified by the Board. These articles o f PFMC become effective on January 1, 2005 and will be applied gradually in the ministries. Therefore since currently there i s not an intemal control department which carries regular audits o f the departments within MONE,no reliance will be placed on internal audit. Reporting and Monitoring. The PCC will maintain records and will ensure appropriate accounting for the funds provided. Financial statements for the project will be prepared by the PCC. The Financial Monitoring Reports (FMR) will be prepared quarterly and will be submitted to the Bank no later than 45 days after the end o f the quarterly period. The FMRswill be submitted with a cover letter explaining the activities o f the quarter and will include the ..... following tables; Statement o f Sources and Uses o f Fundsby categories Statement o f Sources and Uses o f Fundsby Project Components Special Account Statement Detailed schedule for tracking disbursements against specific contracts for civil works, goods and consultant services Procurement reports. The financial accounting software i s capable o f producing the financial reports o f the FMRs.PCC has been submittingsatisfactory FMRsto the Bank for BEP 2. The risk associated with reporting and monitoring i s assessed as negligible. Information Systems. The PCC has a computerized financial management system LIKOM that i s currently used for BEP 2 and which was previously used for BEP 1. The system i s capable o f recording the project transactions in accordance with respective components as well as disbursement categories and sources o f funds. The chart o f accounts used for BEP 2 designed by the PCC i s very comprehensive. Different modules could be generated within the system and the same system will be used for both SEP and BEP 2. The system i s also capable of producing Financial Monitoring Reports. A new module will be introduced and customized for SEP by February 17,2005. - 37 -  The risk associated with information systems i s assessedas moderate. It i s expected that completing the customizationby February 17, 2005 will not be a problem since the financial staff at the PCC are very experienced inthis area. Strengths and Weaknesses. The significant strengths that provide the basis o freliance on the project financial management system are (a) the centralizationo f all payments and their accounting at the PCC inthe project design and (b) the experience o f the PCC with previous Bank financed projects. There are no significant weaknesses inthe project financial management system. Action Plan. It is concluded that the financial managementarrangements for the project satisfy the Bank's minimum requirements. Supervision Plan. Duringproject implementation, the Bank will supervise the project's financial management arrangements in two main ways: (i) the project's quarterly financial management reports as well as the project's review annual audited financial statements and auditor's management letter; and (ii) duringthe Bank's supervision missions, review the project's financial management and disbursement arrangements to ensure compliance with the Bank's minimumrequirements. As required, a Bank-accredited Financial Management Specialist will assist inthe supervision process. B. External Audit. No significant issues have arisen in the audit o f SEP PHRD grant and BEP 2. The BEP 2`s auditing arrangements and findings are satisfactory to the Bank and it has thus been agreed that similar audit arrangements will be adopted for SEP. The audit reports will be in a format in accordance with the "International Standards on Auditing" and the audit reports will have an opinion on the project financial statements. The audited financial statements will be sent to the Bank within six months o f the end of the Govemment`s financial year. The project financial statements will be audited by the Treasury Controllers in accordance with International Standards on Auditing (ISA) and under TOR that i s agreed with the Bank. The risk associated with extemal audit i s assessedas negligible. C.DisbursementArrangements The loanproceeds will be disbursedover aperiod o f five years, underthe Bank's traditional procedures including SOEs, direct payments and special commitments. Table 6 sets forth the Categories o f items to be financed out o f the proceeds o f the loan, the allocation o f amount o f loan to each category and the percentage o f expenditures for items so to be financed ineach category. - 38 -  Table 6 Allocation of Loan Proceeds (EURO) Amount ofthe Loan Category Allocated YOof Expendituresto be (ExpressedinEURO) Financed (1) Goods 70,000,000 100% (2) Consultant Services 3,100,000 100% (3) Trainingand Inservice Training 5,700,000 100% (4) IncrementalOperating Costs 400,000 100% (5) Unallocated 800,000 100% TOTAL 80,000,000 D. SpecialAccount The GOTwill open and maintain a Special Account in Euro at the Central Bank o f Turkey. The Special Account will be used following procedures agreed with the Bank, and will have an authorized allocation o f8.0 million. The PCC Director and the Project Manager will be authorized to sign the withdrawal applications, with two signatures required. At the start o f the project, the initial deposit will be limited to 4.0 million, and the remaining portions o f the authorized allocations will be requested only after cumulative disbursements from the loan reach a level of 20.0 million. The minimum application size for payments directly from the Loan Account for issuance o f Special Commitments i s 20 percent o f the Special Account authorized allocation. Applications for replenishment of the SA will be submittedto the Bank on a monthly basis, or when the balance o f the SA i s equal to about half o f the initial deposit or the authorized allocation, whichever comes first, and will include a reconciled bank statement as well as other appropriate supporting documents. Use o f Statements o f Expenditure (SOEs): The Bank may require withdrawals from the Loan Account to be made on the basis o f statements o f expenditure for expenditures for: (i) goods, under contracts costing less than $1,500,000 equivalent each; (ii)services o f consulting firms under contracts costing less than $500,000 equivalent each; (iii) services o f individual consultants under contracts costing less than $50,000 equivalent each; (iv) training and in-service training; and (v) incremental operating costs, all under such terms and conditions as the Bank shall specify by notice to the Borrower. Full documentation in support o f SOEs shall be retained by the PCC for at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made. This information shall be made available for review during supervision by Bank staff and for annual audits which will be required to specifically comment on the propriety o f SOE disbursements and the quality o fthe associated record-keeping. - 39 -  Annex 8: Procurement REPUBLIC OF TURKEY: SecondaryEducationProject Procurement of goods and technical services (other than Consultant Services) would be done in accordance with World Bank Guidelines; Procurement under the IBRD Loans and IDA Credits dated May 2004. Consulting Services, technical assistance and training would be procured in accordance with the Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated May 2004. The Bank's latest Standard Bidding Documents, Request for Proposals and Forms o f Consultants' Contract would be used. A General Procurement Notice (GPN) would be published in the U.N. Development Business online (UNDB online) and in the Development Gateways Market (dg Market) in March 2005. 1. Procurement Componentsand Implementation 1.1Project Components The Secondary Education Project has two broad components, supported by six sub-components. The two major components are: Secondary Education Reform, Quality, Assessment and Management (see details inAnnex 6 previous) Component 1. Secondary EducationReform 1(a)- Secondary EducationPrograms 1(b)- Information and Communication Technology (ICT) l(c)- Career Guidance and Counseling Component 2.Quality, Assessment and Management 2(a)- Student Assessment and Evaluation, 2(b)- School Development 2(c)- Project Management 1.2Implementation Implementation of the Project will be the responsibility o f the Ministry o f National Education (MONE), which will be the implementing agency for overall project. Overall management o f the Project will be carried out by the SEP Team at the Project Coordination Center (PCC) which i s going to be established to execute SEP. The PCC Director will be responsible for overall coordination o f the World Bank financed Projects including BEP 2 and SEP. The SEP Team will include a Procurement Management group with a Procurement Manager responsible for all procurement activities inthe Project. The procurement unit will be supported by two general procurement specialists and one ICT procurement specialist. All other personnel assigned to the procurement team will be civil servants selected by MONE. The quality and quantity of the personnel in the procurement team will be subject to the satisfaction o f the Bank. The Project Management Group o f the SEP Team will also be supported by a Project Management Specialist with extensive experience in intemational procurement as well as experience in Bank-financed projects. The three procurement specialists and project management specialist will be employed within 30 days o f the Loan effectiveness. These individual consultants will be financed under the Loan for the life of the project and will be dedicated full-time to the Project. The SEP Team will manage all the procurement activities in cooperation with the other agencies that are responsible from the implementation o f the project components. All bidding documents for the - 40 -  procurement of the Bank-financed goods and services will be prepared by the PCC. The related general directorates, departments and agencies at MONE, are responsible for: 0 preparing the technical parts of the procurement documents, such as scope o f works, terms o f references, technical specifications, etc. 0 evaluating the technical parts o f the proposalshids related with their field o f activity. The evaluation committees will be comprised o f procurement specialists from the SEP Team and technical specialists from the Implementing Agencies. The ICT procurement specialist in the SEP Team will also involved in the preparation o f the ICT procurement documents in the relevant implementing unit. 2. ProcurementArrangements 2.1. Procurement of Goods and Services (other than Consulting Services) 2.1.1 Procurement Methods and Thresholds The following procurement methods will be applicable with the specified thresholds. The contracts which are shown in the Attached Table to this Annex are expected to be conducted during the entire duration o f the Project. i)InternationalCompetitiveBidding(ICB): Contracts forGoodsandServices(other thanConsultant Services) each estimated to Cost US$500,000 equivalent or more shall be procuredby I C B inaccordance with the Bank's procurement Guidelines. The procurement will be done usingBank's Standard Bidding documents (SBD) for all ICB. ii)National Competitive Bidding(NCB): Contracts for Goods and Services (other than Consultant Services) each estimated to cost less than US$500,000 may be procured by N C B in accordance with the Bank's Procurement Guidelines. The procurement will be done usingthe National SBD agreed with (or satisfactory to) the Bank. Inreference to the provisions regardingNational Competitive Bidding,MONEshall apply the following provisions in the carrying out o fNational Competitive Bidding procedures under the Project when falling under the legal framework governed by the Borrower's Public Procurement Law No. 4734 dated January 4, 2002 and Amendment Law No. 4761 dated June 12, 2002 and Amendment Law No. 4964 dated July 30. 2003: A. Eligibility Biddingshall not berestricted to domestic bidders. N o restriction shall be appliedto foreign bidders who wish to submit a bid. B. Procedures The Open Procedure, as defined in the Public Procurement Law, shall be followed in all cases. Invitations to bid shall be advertised in the Official Gazette and in at least one widely circulated national daily newspaper allowing a minimumof 30 days for the preparation and submission o f bids. - 4 1 -  C. Assessment o f Bidders' Qualifications Inthe procurement o f goods, where pre-qualification is not used, the qualifications o f the bidder who is recommended for award of contract shall be assessed by post-qualification, applying minimum experience, technical and financial requirements which shall be explicitly stated in the bidding documents and which shall be shall be determined by a `pass/fail' method, not through use o f a merit point system. D. Participationby Government-owned Enterprises Govemment-owned enterprises in the Republic o f Turkey shall be eligible to participate inbiddingonly iftheycanestablishthattheyarelegallyandfinanciallyautonomous, operateundercommerciallawand are not a dependent agency of the Govemment. Furthermore, they will be subject to the same bid and performance security requirements as other bidders. E. ParticipationbyJoint Ventures Participation shall be allowed fromjoint ventures on the condition that suchjoint venture partners will be jointly and severally liable under the Contract. F. BiddingDocuments Procuring entities shall use the appropriate standard biddingdocuments for the procurement o f goods or services, and shall contain draft contract and conditions o f contract acceptable to the Bank. G. BidEvaluation a) Evaluation o f bids shall be made in strict adherence to the monetarily quantifiable criteria declared inthe biddingdocuments and a merit point system shall not be used. b) Extensiono fbidvalidity shall be allowed once only for not more than 30 days. N o further extensions should be requestedwithout the prior approval o f the Bank c) Contracts shall be awarded to qualified bidders having submitted the lowest evaluated substantially responsive bid. d) N opreference shall apply under National Competitive Bidding. H. RejectionofAll Bids All bids shall not be rejected and new bids solicited without the Bank's prior written concurrence. I.Contracts All contracts shall be in writing, signed and stamped by authorized signatories o f the Purchaser and the Supplier and shall contain identical terms and conditions o f contract to those included in the tender documents. J. Securities Bid Securities should not exceed 3 percent (three percent) o f the estimated cost o f the contract; Performance Securities not more than 10 percent (ten percent). N o advance payments shall be made to -42 -  the Suppliers without a suitable Advance Payment security. The wording o f all such securities shall be included inthe biddingdocuments and shall be acceptable to the Bank. iii) Shopping (S): The contracts for the procurement o f readily available off-the-shelf goods and services (other than Consultant Services) estimated to cost less than US$lOO,OOO per contract may be procuredthrough S in accordance with the Bank's Procurement Guidelines. In the procurement o f IT hardware and software by Shopping, when soliciting quotations, the firms operating in Turkey which are registered to the Bank's IT-Web site should be solicited in addition to the other firms which are representingthe reputable manufacturers. iv) Direct Contracting(DC): The procurement o f goods and services (other than Consultant Services) estimated to cost less than US$lOO,OOO per contract may be procured, with the Bank's prior agreement, through DC inaccordance with the Bank's Procurement Guidelines 2.1.2 Prior Review The Bank's prior review action would cover the following, and will be defined in the procurement plan for the first 18 months o f the implementation: 0 All ICB contracts for goods equivalent or more than US$1,500,000, and first ICB contract. 0 FirstNCB and S contracts 0 All contracts awarded under D C A complete set o fprocurement documentation will be submitted to the Bankbefore talung any action for review and clearance by the Bank's Procurement Specialist and the relevant technical staff. 2.2. Procurement of Consulting Services 2.2.1 Selection Methods and Thresholds The consulting services will be performed with the following selection methods and thresholds; i)Quality and Cost Based Selection (QCBS): The consulting services required for the Project components to be contracted to consulting firms estimated to cost above US$200,000 shall be procured on the basis o f QCBS procedure inaccordance with the Bank's Consultants Guidelines. ii)SelectionBasedon Consultant's Qualifications(CQS): The consulting services requiredfor the project components to be contracted to consulting firms estimated to cost less than US$200,000 may be procured on the basis o f CQS procedure inaccordance with the Bank's Consultants Guidelines. iii)IndividualConsultants(IND): The consulting servicesrequiredfor the Project components to be contracted to the individual consultants shall be procured on the basis o f Selection of Individual Consultants in accordance with the Bank's Consultants Guidelines. iv) Single Source Selection (SSS): The consulting services required for the project components to be contracted to consulting firms to cost less than US$lOO,OOO, or US$50,000 for individuals may be procured, with the Bank's prior agreement, on the basis o f SSS procedure in accordance with the Bank's Consultants Guidelines. - 43 -  Short lists o f consultants for services estimated to cost less than US$200,000 per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. For the in-service trainingdtrainings, in exceptional situations where (a) the private sector in Turkey has not yet developed sufficient capacity in terms o f large volume and requirement o f highly specialized competences and (b) the training has to be provided in Turkish language, the Govemment-owned universities may be sub-contracted to the Consultant Firms. 2.2.2 Prior Review The Bank's prior review for the selection o f Consultants would cover the following, and procurement for the first 18 months o f the implementation will be defined in detail in the overall procurement plan (See. Attached Table): 0 Consulting Firms: For each QCBS contract equivalent to or above US$500,000: TORs, draft request for expression o f interest, short lists, draft RFPs, technical and financial evaluation reports and negotiated draft contracts would be submittedto the World Bank for its prior review. 0 Consulting Firms: First CQS contract: TORs, draft request for expression o f interest, draft RFPs, short lists, evaluation reports, and negotiated draft contracts would be submitted to the World Bank for its prior review. 0 Individual Consultants: All TORs, consultant's qualifications and experience, and draft contracts, for consulting assignments above US$50,000 each. 0 All contracts for services awarded under Single Source Selection. The review actions will be specified inthe procurement plan. 2.3. Incremental Operating Costs (Recurrent Costs) The Loan would finance MONE's membership and participation subscription fee to/of the Intemational Organizations. 2.4. Post Review All contracts not subject to the Bank`s prior review would be subject to ex-post review. The supervision missions would include a procurement specialist especially in the first year, whose main responsibility would be to conduct ex-post reviews o f the procurement process and documentation, and provide his or her findings. 3. ProcurementScheduling(ProcurementPlan) Procurement o f goods and services for the Project will be carried out in accordance with the agreed procurement plan which i s prepared in compliance with the Bank's Procurement Guidelines (See. Attachment). The procurement plan provides a detailed schedule for activities inthe initial 18 months o f the Project and will be updated at least annually or as required to reflect the actual project implementationneeds and improvements in institutional capacity. The Bank will review the procurement arrangements proposedby the MONEIPCC, including contract packaging, applicable procedures, and the scheduling o f the process, for its conformity with the Bank Procurement and Consultant Guidelines, the proposed implementation program and disbursement schedule. The Procurement Plan will be available in the Project's database and Bank's external web site. - 44 -  4. Trainingand In-ServiceTraining Training and In-Service Training activities under the Project components shall be financed according to the training programs developed by the PCC annually, and to be reviewed and cleared by the Bank before implementation. 5. Publicationof the Award of Contracts Publications of the award of contracts will be done by MONE/PCC in accordance with the provisions in the Bank Procurement and Consultant Guidelines. 6. Frequency of ProcurementSupervisionandRecording The PCC will keep a complete and up-to-date record of all procurement documentation and relevant correspondence in its files, which will be reviewed by the Bank staff during supervision missions that will be minimumat every 6 months. 7. OverallProcurementRisk Assessment Section 1: Capacity of the ImplementingAgenciesinProcurementand Technical Assistance requirements The MONE/PCC will be responsible for the implementation/procurementsof the project components. The capacity o f the implementing agency has been assessedand specific measures have been agreed to reduce the risk and delays encountered in implementation under BEP. The following action plan for reducing procurement risks has been agreed as a result o f this assessment: (i) the procurement staff in PCC participatedthe trainings arranged by the Bank inM a y 2004; (ii) PAS will organize a one-day the procurement familiarization seminar for the line agencies and PCC during the Project Launch Workshop; and (iii)PCC will hire three individual consultants experienced in Bank procurement methods (one of them ICT procurement specialist) plus an overall Project management Specialist within 30 days after the LoanEffectiveness. Country Procurement Assessment Report or Country Procurement Strategy Paper status: Country Procurement Assessment Report dated June 2001. Are the biddingdocuments for the procurement actions o f the first year ready by negotiations? Yes NoX Section2: Training,InformationandDevelopmenton Procurement Estimated date of Project Launch Workshop: September 2005 Estimated date o f publication o f General Procurement Notice: March 2005 Indicate ifthere i s procurement subject to mandatory SPN inDevelopment Business: YES Yes X N o Domestic Preference for Goods - 45 -  Retroactive financing Yes No X Explain: Advance procurement Yes No X Explain: The procurement implementationprogress will be monitored through progress reports and supervision missions. Each supervision mission will include the project procurement specialist for updating the procurement plan and conductingpost-review. Co-financing: None. Section 3: Procurement Staffing The Bank's staff part of Task Team responsible for the procurement inthe Project i s Salih K.Kalyoncu, Procurement Specialist (ECSPS) There are two Procurement Specialists in the Country Office and one o f them will be responsible for this Project and the other will provide back-up service inthe absence o f the assigned staff. -46 -  x5 W E z0 3t V P Y + 8 .e e, B ET &2 _. I u m m I! m r- v) z 2 d  4 r- t- W 9 4 t- 5x 4 h 3 b 5 - W 4 W 4 W z 0 0 a" 8J W 4 W W e Pm 4 v: !? v) h W 4 W W 9 4 P 1 b 3 b E 8 m n $ c m gm gm $ Q Q $ Q 4i Q $ .+ 2b Y Y a8 8 I m Y Y Y I v1 a 8 a8 a 8 pi a" a" -- -- -- - m 2 m u m um VI m u LI1 u z VI adKL *0 0 Y  W z4 wl 4 vl 4 r- 4 0 0 B E 1 -i U F W 2 10 vl 4 4 W -i 9 E> E h vl 4 In 9 In 4 10 4 vl 0 B 6* 6* e 40 v1 a" FE z 10 F wl 9 10 4 W In m 2 e v1 k f z z E E E E $VI E P .;: P P P a"* P P P v) i- 8 * * VI VI I i- 8 8 *VI i- v) a a 0 a0 a a a0 a" m u m z m m m 2 m - c N adLL *13 'k 13 'k 13 *0 2 3 Y 3 7 Y d e e e - ---- Y 13 Y Y Y U 13 13 13 Tuauodmo3 P N  ; r- 4 13 U 40 E a" a" Q W W 4 4 cr 3 E x2 vi 4 vi 0 0 B 6 a W 4 c3 ; s5 vi r: vi 9 w l vi 10 vi & 7 b 4 4 4 e, 8 LA B LA B LA v) LA d z 2 < z -- + wl * a 0 a 8 v) m v) o $ v) u u B 0 u 0 iz 0 - - B th Y LA u u Ck U c I - $ A - u  \3 9 e, V U 24 W 9 In e, V Y h In ? m 8- 2 4 z 4 z 3 - 3 3 .-i 0 & VI IVI iv1 a 0 a0 e. 0 8 8 adhi * 43 * i3 cc u m TV m 43 Iuauodwo3 CJ V  I - .- k8 'Ft 0 st 0 t - u0 0 c, z u c,  Annex 9: Economicand FinancialAnalysis REPUBLIC OF TURKEY: Secondary EducationProject A. Linking Secondary Education Reformto the Developmentof Knowledgeand Skills to Increase Labor Productivity (I) A Workforce Preparedfor Technological Change. One o f the central elements of the economic rationale for the proposed reform o f secondary education inTurkey i s to better prepare its future workers to participate and compete in an economy that is experiencing rapid technological change, demanding o f higher levels of productivity, and becoming increasingly knowledge-based. Turkey's secondary education reform can also bejustified by the need to narrow the wage gap between different segments of the youth population entering the labor market. Inthe economies o f Turkey's neighbors in Europe, and its middle- income counterparts in Latin America and Asia, technological change i s already one o f the main forces driving the increasing wage differential between skilled and unskilled workers. Numerous studies have shown that differences in per capita income depend more on differences in total factor productivity than on differences in primary factor accumulation in these economies. Skills upgrading, technological change, and their interaction are major factors behind total factor productivity growth. Moreover, skill-biased technological change i s being transferred today at faster speeds in countries, such as Turkey, that are open to trade and foreign direct investment flows, and that have increased the level o f education of their work force. There i s strong evidence that technological change has complemented the level of skills in the last two decades in more developed countries and, as a result, firms have substantially increased the demand for educated workers. This rise in the demand for educated workers has bid up their relative wages. Adopting more advanced technologies and hiringmore educated workers i s one way for firms to respond to the pressure to become more productive. Increases in the demand for skills associated with the adoption o f new technologies have taken place primarily in countries with levels o f human capital above a minimum threshold. Inequality in wages tends to increase as long as major inequalities in access to education remain, and the lack of effective secondary education may constrain fast and efficient technology transfer and thus for potential growth. The increased potential demand for education offers the possibility to accelerate productivity growth in the economy by closing the educational and technological gaps. To achieve this, education policy must respond swiftly so that this potential demand for higher and better education i s actually translated into higher and better educational levels of the work force and thus higherproductivity at the firm level. (2) Increasing the Productivity of Future Workers. The rapid speed o f change in technological and knowledge economies means that workers will need a knowledge base that will enable them to upgrade their competencies on a continuing basis. Firms and the public sector can no longer rely solely on recent graduates or new labor market entrants as the primary source o f new skills and knowledge. School systems inTurkey can no longer afford to focus on task-specific or occupation-specific skills and certificates, but must instead prepare young people with skills for decision-making, problem solving, lifelong learning, and self-leaming. The secondary education reform i s designed to transform cumculum and instruction in ways that build these capabilities in students. Inparticular, both the new general secondary programs in language, math, science, and social studies, as well as the new curricula for the selected modernized vocational programs to be developed under the Project will be designed to promote in students greater autonomy and decision-making, more capability to use tools and symbols interactively, and increased competence to operate effectively in teams, heterogeneous groups, and across a variety of social and cultural environments. These, along with the ability to create and apply knowledge, function in a foreign tongue, and acquire advanced literacy competencies, are considered the new basic slulls for a modern, increasingly knowledge-based, economy. - 53 -  (3) Return on Investments in Secondary Education Investments in secondary vocational education and in general secondary education generate positive labor market outcomes for graduates above 10 percent. There i s some debate, and conflicting evidence, including in Turkey, whether an emphasis on general or vocational education results inthe best rate o f retum and if so, the reasons for the differences. Turkey has a relatively large young population. Thirteen million (13,000,000) students are enrolled in primary and secondary public schools. Enrollment rates are very high for the primary level (officially 97.6 percent), and relatively high for secondary school (64 percent), with a higher proportion o f the secondary school age group in general secondary school programs (41.8 percent) than in vocational programs (22.2 percent). The government's goal i s to expand access to and enrollment in secondary education, change the structure o f secondary education (i.e., make grade nine a general education year for all students and introduce vocational education at grade 10) and substantially reduce the number of vocational specializations (i.e., from 130 to about 29) and introduce teaching of broader core vocational competencies. In addition, the Government, in its Five Year Development Plan, i s to have 65 percent o f the students in vocational schools and 35 percent o f students in general high schools within secondary schools. However, currently the rate o f schooling between vocational and general schools i s nearly the opposite: 60 percent of students in secondary schools are in general high school programs, while 40 percent o f the students are in vocational ones. Policymakers consider secondary vocational and technical education as an avenue to support direct labor market entry after graduation and to limit access to university education (vocational graduates receive lower scores on university entry criteria). Only about 10 percent o f high school graduates attend a university in Turkey. In 2002, approximately 1.5 million secondary graduates took the university entrance exam, but only 170,000 were placed, 90 percent o f these fi-om general secondary schools. However, the Government i s increasingly realizing the need to increase the skill o f the workforce, including increasing enrollment in post-secondary education, including for vocational secondary graduates. Two avenues are available. First, the open university. In 2002, some 285,000 additional secondary schools enrolled in the Open University. Second, Law No. 4702 now provides for entry of vocational secondary school graduates directly to post-secondary Higher Vocational Schools (MYOs), without taking the University Entrance Exam, and 160,000 vocational secondary school graduates used this avenue in 2002. In addition, MY0 graduates may enter related university programs upon completion o f MY0 programs. Government policymakers believe that enrolling a higher proportion o f students in vocational/technical programs i s the solution for the ever growing numbers of general high school graduates who cannot be absorbed directly by the university system, and this reflects trends in OECD countries where short cycle technical programs are a major portion of post- secondary enrollment to respond to the needs o f the knowledge economy. Turkey's secondary education policy objectives are being modernized. Past polices appear to run counter to the advice given in the World Bank's most recent education strategy paper (Priorities and Strategies for Education, 1995), but some o f the above-mentioned policy shifts are significant. The Bank paper makes the case that general secondary education provides its graduates with greater employment opportunities and earnings potential than vocational education, and i s therefore a better investment than vocational secondary schooling. Psacharopoulos (1987 and 1994, as well as innumerous earlier publications) provides evidence that the rates o f returnto investments ingeneral secondary schooling are higher than invocational schooling. Hispapers also stress that the difference in social rates o f return i s even greater because o f the much higher unit costs o f vocational education (mainly due to smaller class sizes). Others argue the contrary, including Benne11 (1996), who challenged this view with results from a meta-analysis o f a variety o f studies on relative social profitability o f general versus vocational schooling in developing countries. An example of this type o f study i s the World Bank report, written by Moock and Bellew in 1990, which found in Peru that returns to investment in vocational schooling are comparable to those in general schooling. Chung (1990) found higher earnings for vocational than for general education inHong Kong. The World Bank (1990) found higher social rates o f return to vocational than to general secondary schooling in Thailand. Neuman and Ziderman (1991) found in Israel that vocational high school graduates who are in training related occupations earn more than general high school graduates, while there i s no significant difference in earnings of - 54 -  vocational school graduates in occupations unrelated to the course o f study and those o f general school graduates. Arriagada and Ziderman (1992) found similar results inBrazil. The purpose o f the following analysis is to assess the wage differential between general and vocational high school graduates in Turkey for the group o f students who may not go on to higher education. Individual level survey data from the Turkish 1994 Household Expenditure Survey are used. Three-way multinominal logit model i s estimated for school selection, Mincerian wage equations are estimated for each group, taking school selection into account." When controlling for observed characteristics and self selection, wages o f male vocational high school graduates are significantly higher than those o f general highschool graduates". Second, unemployment rates are lower among the vocational high school graduates than among the general high school graduates. Third, rates o f return to vocational high schooling (16.3 percent) are higher than to general high schooling (11.1 percent) using 1994 data. Earlier studies using other surveys (including the Labor Force Survey o f 1989) demonstrate that this difference between wage earnings and rates o f return to vocational versus general secondary education has been consistently significant and positive. Recently analyses o f these data (Ogawa and Tansel, 2004) found, in the transition from education to the labor market, that apprenticeship and training programs significantly increased the employment probabilities both o f males and females. Thus, in Turkey, it can be argued that vocational high schools have performed better than general high schools in terms o f affording their graduates with desired labor market outcomes such as returns to schooling, likelihood o f being employed, and wage benefits. And, the current changes in policy relative to the structure o f secondary education indicate that the Government i s increasingly sensitive to the need to reform secondary education to ensure that graduates have sufficient skills to meet the needs o f the knowledge economy and are prepared for lifelong learning. B. ExpandingEnrollmentsin SecondaryEducation. (1) Costs of Expansion. The Turkish Government has committed itself to a major expansion o f enrollment in secondary education. The costs of expanding the coverage o f secondary education (general and vocational) from the 65 percent enrollment rate to 95 percent enrollment rate, and extending secondary education from 3 years (for the majority o f the programs) to 4 years for all programs are substantial. The Government's Secondary Education Development Project Preparatory Document shows the resource requirements o f its targets to expand enrollment to 95 percent and extend secondary schooling from three to four years. IfMONEis to achieve 100enrollment of secondary school-aged youth inthe 2005-2006 school year, then based on ideal assumptions (all secondary students are enrolled ina full-day school program and every class has only 30 students), MONE will need to open an additional 12,813 classrooms, with an estimated cost o f US$1.5 billion. Moreover, if all types of secondary school programs are to be extended to four years (most are only three years today) by 2008-2009, then under the above assumptions for enrollments and class sizes, along with the current demographic projections, MONE will need to open 43,813 new classrooms. The estimated total additional investment cost would be approximately USS5 billion. As stated clearly in the main text of the PAD, the Secondary Education Project does not address issues related to expanding the access to secondary education, but rather the quality and content o f secondary education. The World Bank i s currently engaged in a comprehensive Education Sector Study inTurkey that will likely help the Government examine alternative ways inwhich secondary schooling can be expanded and its quality can be improved. Below we describe some o f the alternative issues that such a study would need to explore. ~~ lo Tansel (2004). It was not possible to make a similar comparison for women due to poor wage equation estimates for female vocational high school graduates. - 55 -  (2) Financing Expansion. The main challenges for the financing o f secondary education are (a) expanding coverage, (b) improving quality, and (c) providing quality secondary schooling to poorer and poorer segments o f the population as the target o f universal secondary enrollment is approached. The proposed project addresses the latter two challenges, will develop and implement upgraded programs in a portion o f the existing 6,000 secondary schools, and can be scaled up to the remainder o f the already existing secondary schools without massive investment costs. But, an overall expansion o f secondary education will require the Government to review its overall approach to financing education and two scenarios are under discussion: First, at the macro level, despite significant increases in the proportion of GDP devoted to education after 1995 (a low point), Turkey's spending on education represents a smaller share o f its GDP (about 4.1 1 percent) than that o f low and middle income countries (approximately 4.5 percent of GDP), and substantially less than the spending o f upper income countries (more or less at 5 percent o f GDP). If were to increase its annual expenditure on Turkey education from 4.11 percent to 4.5 percent, equivalent to what other countries at Turkey's income level are spending (infact, what Turkey was planning to spend in2004 before the 13 percent across-the-board budget cut), there would be approximately enough hnding to finance the enrollment o f 800,000 more secondary school students (at an annual cost o f US$800 in recurrent and US$400 in investment costs per student), enough to raise the secondary school enrollment rate from 59 to 83 percent. Second, at the system level, there are significant opportunities for the Government to consider financing expansion of secondary schooling through efficiency savings. Accompanying a dramatic increase in secondary school enrollments between 1997-98 and 2002-03, the average number o f students per classroom increased from about 34 after 1998, to nearly 40 in the 2002-03 school year. But for vocational secondary school students, classrooms are under-filled and under-utilized, with the number o f students per classroom at only 18 in the 2002-03 school year, and the number of students per teacher at only 14 in these programs. If MONE could undertake a strategy to fill these underused classrooms even to 30 students, approximately 500,000 additional students could be accommodated into the system. This step alone, although difficult inpracticalterms, could raise the enrollment rate from 59 to 75 percent. Given the steadily increasing demand for enrollment in general secondary education, the most viable scenario may be for MONEto convert under-utilizedclassrooms to general education programs. (3) Regional Differences in Challengeof Expansion Based on current student flow projections and the demographic transition, provinces in the Western part o f Turkey will experience a decrease in demand and enrollments for basic education over the coming decade. Less developed provinces such as those in Eastern and Southeastern Anatolia, however, may initially experience an increase in the demand for places in fifth through eighth grades due to the gradual attainment o f universal enrollment. Demand for and enrollments in secondary education will experience a constant growth in Turkey over the next decade, with a few provinces, such as Istanbul, Ankara, and Izmir reaching peaks, and most others expecting a continuous growth pattem. (4) Policy Optionsfor Achieving Expansion with Quality. . The following principles guide this discussion: The Government needs to find ways to finance improvements in quality and expand access without adding greatly to the overall fiscal burden o f investment ineducation. . It is viable for the Government to provide incentives to local governments and the private sector to increase educational investment. It i s critical that equity be kept in the forefront o f the agenda. In this regard, it i s clear that financing the expansion o f the secondary system i s a key element to ensuring education equity. As secondary enrollments expand, it i s expected that new students will increasingly come from poorer backgrounds. - 56 -  . The challenges of increasing access and quality are closely related to the enhancement o f efficiency and effectiveness of the investments. Utilizing scarce resources in financing inputsthat have documented effect on student learning is a more effective way o f directing investments. 5. Additional financing options [i)Usingsavingsfromincreasedefficiencyoftheeducationalsystem A promising but limited and delayed source o f financing for secondary education expansion may come with the improvement of efficiency inbasic education, and the reduction in student numbers due to the demographic transition (at least in Western Turkey). Turkey's student population inbasic education i s expected to reach its peak before the end of the decade. This will have a dramatic effect on releasing basic education inputs (i.e., teachers-or salaries going to teachers, and classrooms-r school buildings themselves) for conversion to use in secondary education. Increasing system efficiency can also have a direct impact on secondary school enrollments as well as education financing. There are several caveats to this proposal. First, potential savings from increased efficiency or the demographic transition represent a hypothetical gain that provides no advice about how to get from a costly and inefficient system to a higher performing, more cost-effective one, or how to transform the resources from a decreasingly demanded basic education program to an increasingly demanded secondary education program. Second, improving system efficiency i s surely linked to increasing the availability o f school quality inputs, which will require increased expenditures before the savings from increased efficiency can be realized. Third, there i s a strong assumption in this approach that the necessary increases in quality can be obtained solely by reallocating resources and directing them to the most cost-effective interventions. This generally applicable economic principle should not be interpreted as a policy recommendation or judgment about the adequacy o f current per student expenditures. And finally, reallocating resources i s far more complex in reality than in theory. It i s not always easy to reallocate or retrain teachers, consolidate classes or close schools. [ii)Fiscallyneutraloptions Other possible strategies that the Government should consider examining would include the provision o f incentives, financial or otherwise, for municipal governments or for the private sector to allocate new resources to support the expansion of secondary education. The general idea would be to use limited additional investments targeted as incentives to promote additional local or private investment in education. Municipal incentives. As indicated above, it may be difficult to encourage municipal governments to reallocate their investments or to create new investment programs for secondary school constructionunless there are incentives to do so. This brokerage role has not been played by the Government with respect to municipal governments to date. Nonetheless, the likely approval o f a new administrative r e f o m law may open the way for national to local fiscal transfer opportunities. The idea would be for the Government to top o f f the funding that a municipal government makes, under a scaling system, based on the total level o f investments that the given municipal government makes to expand secondary education. The amount o f resources to be transferred could be based on a formula including the share o f the local age group in secondary education and on a variable counterpart funding requirement that would favor poorer municipalities. These ideas would need to be examined with great care before such a scheme was to be developed. Private sector incentives. Private schools account for less than 4 percent o f the enrollments in secondary education today, and from this point o f view i s not a large player in the provision o f secondary education. Moreover, it i s clear that as the secondary school system expands to serve lower socioeconomic quintiles o f the population, families will likely be even less able to pay for secondary schooling and, as such, private provision o f education may not be viable. But the private sector in Turkey has proven its interest and ability in supporting education. In fact, it voluntarily contributed hundreds o f millions o f USD to expand the supply o f basic education schools since the 1997 Basic Education Reform. Since then, the Government has offered tax incentives for the private sector to continue its - 57 -  support. However, this support has not been forthcoming to stimulate the contribution o f private funds for the expansion of secondary education. A careful study o f tax incentives or other financial incentives to stimulate the participation of the private sector insecondary education expansion i s needed. Govemment incentives and non-profit secondary school altematives should also be explored as opportunities for the Government to use existing non-school infrastructure and private sector know-how in Turkey to expand the availability o f secondary schooling. As mentioned above, the Turkey Education Sector Study should examine these issues in the second phase o f its work program. C. RevisingProgramsand Curricula. While the costs o f updatingprograms and implementingprograms in existing secondary schools are much less than the overall secondary education expansion costs, they are still substantial. Based on the unit costing o f the proposed Secondary Education Project, this cost i s estimated to be a total o f about US$850 million. This includes: (a) US$17 million to update five core general programs, and 30 core vocational education programs (including developing related in-service training capability); and (b) US$835 million to provide related equipment and materials and deliver in-service training to implement the five upgraded general education curricula in 6000 secondary schools, and an average of two upgraded vocational curricula in about 3000 secondary schools. The proposed Secondary Education Project curriculum development component, when combined with parallel Investments by the EU, will finance: (a) the development costs o f all five general education curricula, and 90 percent o f the core vocational curricula, and (b) the costs of implementing the vocational cumcula inabout 10percent o f existing vocational secondary schools and of implementing the general education programs in about 5 percent o f existing secondary schools. The proposed Secondary Education Project will also develop and provide basic career guidance materials and services in all existing secondary schools, expanded ICT service in about 25 percent of existing schools, and assessment services for the majority of existing schools. - 58 -  Annex 10: SafeguardPolicyIssues REPUBLIC OF TURKEY: Secondary EducationProject Not Applicable - 59 -  Annex 11:Project Preparationand Supervision REPUBLIC OF TURKEY: Secondary EducationProject Planned Actual ~ PCNreview 09/05/2001 0910512001 Initial PID to PIC 08/24/2001 08/24/2001 Initial ISDS to PIC 08/24/200 1 08/24/2001 Appraisal 1111112004 1111112004 Negotiations 01/17/2005 0112512005 BoardRVP approval 03/15/2005 Planned date o f effectiveness 0813112005 Planned date o f mid-term review 0611512007 Planned closing date 05/31/2010 Key institutionsresponsible for preparation o fthe project: World Bank, ECSHD Bank staff and consultants who worked on the project included: Name Title Unit A. SedaAroymak Senior Financial Management Specialist ECSPS DilekBarlas- Senior Counsel LEGEC David Fretwell Former Task Team Leader ECSHD Marit Granheim Former Task Team Leader AFTH3 Robin H o m Task Team Leader ECSHD Virginia Jackson Operations Officer ECSHD Salih Kemal Kalyoncu Procurement Specialist ECSPS Selma Karaman ProgramAssistant ECCU6 Jennifer Manghinang ProgramAssistant ECSHD Rohit Mehta Senior Finance Officer LOAGl Ferda Sahmali Senior Operations Officer ECSHD Robert Schware Lead Informatics Specialist CITPO Aysu Serpen ProgramAssistant (Temporary) ECCU6 Bank funds spent to date on project preparation: 1. Bankresources: US$867,582 (Bank Budget [BB]) 2. Trust funds: US$ 30,813 (disbursed fromPHRD, Recipient Executed) 3. Total: US$898,395 Estimated Approval and Supervision costs: 1. Remaining costs to approval: What remains inFY05 for LENBudgetis US$O.OO; and 2. Estimated annual supervision cost: US$120,000 - 60 -  Annex 12: Documents in the ProjectFile REPUBLIC OF TURKEY: Secondary EducationProject Akkok, F. & Watts, A.G. (2003). Country Report on Turkey: Public Policies on Career Development. Washington, DC: WorldBank. Council of the European Union, 2003: Council Decision on Guidelinesfor Employment Policies of the Member States, Brussels EUEuropeanTrainingFoundation(2003) VocationalTrainingand Employment inTurkey, Turino,Italy Fretwell,D; Watts, A. Public Policiesfor Career Development, CaseStudies andEmerging Issuesfor Designing Career Information and Guidance Systems in Developing and TransitionEconomies, World Bank,March,2004 Ministry of National Education, Education Secondary Education Development Project - Preparatory Document, 2001 OECD, Education at a Glance2004, OECD, Paris, 2004. Ogawa, Keiichi, andAysit Tansel, Transitionfrom Education to Labor Market in Turkey, DraftTechnicalReport, World Bank, Aug 10,2004 Rychenand Salganik, 2002, Definition and Selection of Competencies, Hogrefre &Huber Publishers, Toronto Tansel, Aysit, Sclzooling and Earnings in Turkey,DraftTechnicalReport, WorldBank, July 15,2004. World BankLabor Study inTurkey-QualitativeFDGReport,June 30,2003 World Bank,Focuson Youth Project-DraftReport, January 2004 World Bank, QualitativeSurvey to Support WorldBank PovertyReportPreparationand Government'sPublic Sector PolicyReformAgenda, 2004 -61 -  Annex 13: Statementof Loansand Credits REPUBLIC OF TURKEY: Secondary EducationProject Differencebetween expectedand actual Original Amount in US$Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd PO70950 2004 ANATOLIA WATERSHED REHAB 2000 000 000 000 000 2000 0 00 0 00 PO72480 2004 RENEW ENERGY 202.03 0.00 0.00 0.00 0.00 201.02 -1.01 0.00 PO74053 2004 HEALTH TRANSIT (APL #I) 60.61 0.00 0.00 0.00 0.00 60.90 -0.06 0.00 PO82801 2004 EFlL 2 303.10 0.00 0.00 0.00 0.00 142.60 -122.50 0.00 PO82996 2004 PFPSAL 3 1,000.00 0.00 0.00 0.00 0.00 500.00 -500.00 0.00 PO59872 2003 BASIC ED 2 (APL #2) 300.00 0.00 0.00 0.00 0.00 292.96 242.47 -3.04 PO74408 2002 SRMP 500.00 0.00 0.00 0.00 0.00 325.77 244.90 2.90 PO70286 2002 ARIP 600.00 0.00 0.00 0.00 0.00 291.43 268.10 29.81 PO69894 2001 PRIV SOC SUPPRT 250.00 0.00 0.00 0.00 0.00 60.09 60.09 -15.91 PO68368 2000 MARMARA EARTHQUAKE EMG 505.00 0.00 0.00 0.00 0.00 290.47 290.47 2.92 RECON PO44175 2000 BIODIVMTRLRES MGMT (GEF) 0.00 0.00 0.00 8.19 0.00 4.82 3.75 0.31 PO09073 1999 INDUSTRIAL TECH 155.00 0.00 0.00 0.00 0.00 31.54 31.54 0.00 PO08985 1998 CESME WS & SEWER 13.10 0.00 0.00 0.00 4.45 1.74 6.19 2.79 PO48852 1998 NAT'L TRNSM GRID 270.00 0.00 0.00 0.00 27.79 146.45 174.24 26.92 PO09076 1995 HEALTH 2 150.00 0.00 0.00 0.00 20.17 14.75 40.38 40.38 Total: 4,328.84 0.00 0.00 8.19 52.41 2,384.54 738.56 87.08 TURKEY STATEMENT OF IFC's Held and DisbursedPortfolio InMillions of US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2001103 Akbank 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.00 Altematif Bank 0.75 0.00 0.00 0.00 0.75 0.00 0.00 0.00 1996101/03 Arcelik 19.18 0.00 0.00 0.00 19.18 0.00 0.00 0.00 2000 Arcelik LG Klima 10.77 0.00 0.00 0.00 10.77 0.00 0.00 0.00 1997102 Assan 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.00 2002 Atilim 6.50 0.00 0.00 0.00 6.50 0.00 0.00 0.00 2000 Banvit 10.00 5.00 0.00 0.00 10.00 5.00 0.00 0.00 BayindirbankA.S 3.00 0.00 0.00 0.00 3.00 0.00 0.00 0.00 2002 Beko 32.41 0.00 0.00 32.41 32.41 0.00 0.00 32.41 2001 Bilgi 9.00 0.00 0.00 0.00 9.00 0.00 0.00 0.00 1994196197 Borcelik 9.09 3.21 0.00 0.00 9.09 3.21 0.00 0.00 2004 BorusanHolding 30.00 0.00 10.00 0.00 30.00 0.00 10.00 0.00 1994 CBS Holding 3.50 0.00 0.00 0.00 3.50 0.00 0.00 0.00 1990102 Conrad 3.50 0.00 0.00 0.00 3.50 0.00 0.00 0.00 2002 EKS 12.20 0.00 0.00 0.00 12.20 0.00 0.00 0.00 - 62 -  2004 Ege 10.00 0.00 0.00 8.00 0.00 0.00 0.00 0.00 1995 Entek 19.75 0.00 0.00 11.59 19.75 0.00 0.00 11.59 1999 Finansbank 3.33 0.00 0.00 0.00 3.33 0.00 0.00 0.00 2004 Garanti Leasing 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 1999 GumussuyuKap 4.00 0.00 36 2 0.00 4.00 0.00 3.62 0.00 2001 Gunkol 5.97 0.00 6.25 0.00 5.97 0.00 6.25 0.00 1998 IndoramaIplik 5.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 1998100102 Ipek Paper 14.32 0.00 0.00 0.00 14.32 0.00 0.00 0.00 1990 Kepez Elektrik 3.24 0.00 0.00 0.00 3.24 0.00 0.00 0.00 1988190 Kirk 11.30 0.00 0.00 0.00 1I.30 0.00 0.00 0.00 2004 Koclease 30.00 0.00 0.00 0.00 30.00 0.00 0.00 0.00 1991 Kula 5.17 0.00 0.00 0.00 5.17 0.00 0.00 0.00 2003 MESA Group 11.oo 0.00 0.00 0.00 11.oo 0.00 0.00 0.00 2004 Meteksan Sistem 8.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Milli Re 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1998102 Modem Karton 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 1991 NASCO 10.18 0.00 0.00 3.55 10.18 0.00 0.00 3.55 2004 OPET 25.00 0.00 0.00 40.00 8.33 0.00 0.00 25.00 2004 Oyak Bank 50.00 0.00 0.00 0.00 50.00 0.00 0.00 0.00 2002 Pasabahce 5.63 0.00 0.00 0.00 5.63 0.00 0.00 0.00 1998 Pinar ET 3.93 0.00 0.00 0.00 3.93 0.00 0.00 0.00 2000 PinarSUT 12.81 0.00 0.00 0.00 9.16 0.00 0.00 0.00 1999 SAKoSa 18.31 0.00 0.00 9.74 18.31 0.00 0.00 9.74 1990 Silkar Turizm 2.18 0.00 0.00 2.49 2.18 0.00 0.00 2.49 2002103 Sise ve Cam 67.84 0.00 0.00 42.40 67.84 0.00 0.00 42.40 1998102 Soktas 2.50 0.00 0.00 0.00 2.50 0.00 0.00 0.00 1999 TEB Finansal 0.56 0.00 0.00 0.00 0.56 0.00 0.00 0.00 2005 TSKB 0.00 0.00 50.00 0.00 0.00 0.00 0.00 0.00 1982183189191196199 Trakya Cam 0.00 0.61 0.00 0.00 0.00 0.61 0.00 0.00 1999102 Turk EkonBank 13.33 0.00 15.00 0.00 13.33 0.00 15.00 0.00 2001 Turkish PEF 0.00 10.00 0.00 0.00 0.00 2.46 0.00 0.00 1999 Unye Cement 10.84 0.00 0.00 0.00 10.84 0.00 0.00 0.00 1999 Uzel 9.16 0.00 0.00 5.50 9.16 0.00 0.00 5.50 1998 Viking 8.65 0.00 0.00 0.00 8.65 0.00 0.00 0.00 1995 Yalova Acrylic 2.50 0.00 0.00 1.33 2.50 0.00 0.00 1.33 Total portfolio: 644.90 18.82 84.87 157.01 556.08 11.28 34.87 134.01 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2005 Acibadem 0.02 0.00 0.00 0.00 2001 Akbank 0.03 0.00 0.00 0.00 2004 Akbank BLoan Inc 0.00 0.00 0.00 0.02 2002 Milli Reasurans 0.00 0.01 0.00 0.00 2005 PALEN 0.00 0.00 0.00 0.00 2005 Palgaz 0.01 0.00 0.00 0.00 2002 TEB I11 0.00 0.00 0.00 0.05 Total pending commitment: 0.06 0.01 0.00 0.07 - 63 -  Annex 14: Country at a Glance REPUBLIC OF TURKEY: Secondary EducationProject Europe & Lower- POVERTY and SOCIAL Central middle. Turkey Asia income Developmentdiamond` 2003 Population,mid-year(millions) 70.7 473 2,655 Lifeexpectancy GNI per capita (Atlas method, US$) 2,800 2,570 1,480 GNI (Atlas method, US$ billions) 197.8 1,217 3,934 7 Average annual growth, 1997-03 Population(%) 1.7 0.0 0.9 Laborforce (%) 2.3 0.2 1.2 GNI Gross Most recent estimate (latest year available, 1997-03) per primary capita enrollment Poverty (% ofpopulation below nationalpovertyline) Urban population(% of totalpopulation) 66 63 50 Life expectancyat birth (years) 70 69 69 - Infantmortality(per 7,000live births) 35 31 32 Child malnutrition(% of children under 5) 8 11 Access to improvedwater source Access to an improvedwater source (% ofpopulation) 82 91 81 Illiteracy(% ofpopulationage 15+) 14 3 10 Gross primaryenrollment (% of school-agepopulation) 94 103 112 -Turkey Male 98 104 113 .Lower-middle-incomegrow Female 91 102 111 KEY ECONOMICRATIOS and LONG-TERMTRENDS 1983 1993 2002 2003 Economicratios. GDP (US$ billions) 61.5 179.4 183.9 240.4 Gross domestic investmenUGDP 16.3 27.6 21.3 22.8 Exportsof goods and servicesiGDP 12.5 13.7 29.2 27.4 Trade Gross domesticsavingsiGDP 12.2 21.9 19.8 19.5 Gross nationalsavings/GDP 15.3 24 8 20.8 19.5 Currentaccount balancelGDP -3.1 -3.6 -0.8 -2.8 InterestpaymentsiGDP 2 9 2.2 3.8 3.2 Total debtiGDP 33.0 38.2 71.3 61.2 Total debt servicelexports 39.2 31.6 50.7 40.3 Presentvalue of debffGDP 73.1 Presentvalue of debtiexports 234.2 Indebtedness 1983-93 1993-03 2002 2003 2003-07 (average annualgrowth) GDP 5.0 2.7 7 9 5.8 5.6 -Turkey GDP per capita 2.8 0.9 6.2 4.2 4.1 ~~ Lower-middle-incomegroup Exportsof goods and services 5.9 11.4 11.1 16.0 5.4 STRUCTUREof the ECONOMY I 1983 1993 2002 2003 Growth of investmentand GDP (%) ~ ~ __. . ~~ (% of GDP) Agriculture 21.4 16.2 13.0 13.4 50 - Industry 25.0 29.8 23.7 21.9 Manufacturing 16.8 18.3 14.0 13.3 0 Services 53.6 54.0 63.3 64.7 Privateconsumption 78.4 65.0 66.2 66.9 -50 - Genera governmentconsumption 9.4 13.0 14.0 13.6 Importsof goods and services 16.6 19.3 30.7 30.7 -GDI &GDP I I 1983-93 1993.03 2002 2003 .~ (average annualgrowth) Growth of exports and Imports (%) Agriculture 1.5 1.o 7.4 -2.4 40 - Industry 6.7 2.2 5.6 5.0 Manufacturing 6.9 3.0 8.2 8.4 Services 4.3 3.0 7.3 6.4 Privateconsumption 4.7 1.9 2.2 6.7 General governmentconsumption 4.0 3.9 5.4 -2.4 Gross domestic investment 7.7 1.o 35.9 20.4 Importsof goodsand services 11.4 7.8 15.8 27.1 Note.2003 data are preliminaryestimates. * The diamonds show four key indicatorsin the country(in bold) comparedwitt its income-groupaverage. If data are missing, the diamondwill be incomplete - 64 -  PRICESand GOVERNMENT FINANCE I983 1993 2002 2003 Domestic prices Inflation (Tij (% change) 100 - Consumer prices 31.4 664 44.8 25.2 75 Implicit GDP deflator 26.3 67.8 44.1 22.5 50 Government finance 25 ~ (% of GDP, includes current grants) Current revenue .. 19.0 31.2 30.4 Current budget balance .. -3 1 -5.1 -5.3 Overall surplusideficit .. -12.0 -11.9 -10.1 TRADE I 1983 1993 2002 2003 ___..~___ (US$ millions) Exportand import levels (US$ mill.) Total exports (fob) 5,905 15,345 40,124 51.206 80 000 Agricultural and livestock 1,032 1,044 2,089 2,545 Mining and quarry products 188 233 387 543 KO 000 - Manufactures 4,685 14.068 33,565 43,912 Total imports (ci9 9,235 29.428 51,554 69,340 40 000 Food 123 969 1.245 2,006 Fuel and energy 3,851 3,903 9,192 11,568 20 000 I Capital goods 2,311 7,499 9,103 11,792 0 Export price index (1995=100) 89 92 75 82 97 98 99 00 01 02 Import price index (1995=100) 100 85 73 83 $8Exports Imports O3 Terms of trade (1995-100) 89 109 102 99 BALANCEof PAYMENTS 1983 I993 2002 2003 (US$ millions) Current account balance to GDP ( O h ) Exports of goods and services 7,865 26,264 54,907 70,231 4 - Imports of goods and services 10,118 33,721 55,365 73,760 Resourcebalance -2,253 -7,457 -458 -3,529 2 - Net income -1,430 -2,744 4,554 -5,427 Net current transfers 1,760 3,768 3,490 2,106 Current account balance -1,923 -6,433 -1,522 -6,850 Financing items (net) 2,075 6,741 7,675 - 10,897 -4 Changes in net reserves -152 -308 -6,153 -4,047 -6 - Memo: Reserves including gold (US$ millions) 2,253 17,762 38,051 44,957 Conversion rate (DEC,local/US$) 226.0 11,046.7 1,509,471 1,496,668 EXTERNAL DEBT and RESOURCE FLOWS 1983 I993 2002 2003 ____. -. (US$ millions) Composition of 2003 debt (US$ mill.) Total debt outstanding and disbursed 20,324 68,605 131,058 147,035 IBRD 2,336 5,285 5,367 5,214 A 5,214 IDA 184 142 89 83 G 23,013 B 83 Total debt service 3,138 8,664 29,092 29,172 IBRD 274 1,183 708 728 IDA 4 7 7 7 Composition of net resource flows Official grants 98 403 Official creditors 327 -740 224 -1,217 Private creditors 139 6,104 6,901 -511 Foreign direct investment 46 622 863 1,063 Porlfolio equity 0 189 -1,183 2,250 F 86,624 World Bank program Commitments 675 207 1,650 0 A . IBRD E Bilateral Disbursements 486 354 1,031 276 B. IDA D - Other multliateral F Pnvate -- Principal repayments 115 753 443 502 C IMF . G -Short-term Net flows 371 -399 588 -226 Interest payments 163 437 272 233 Net transfers 208 -836 316 -459 Development Economics 9/20/04 - 65 -   MAP SECTION