China - Labor Market Development Project

Document of The World Bank Report No: 36023 IMPLEMENTATION COMPLETION REPORT (CPL-39670 SCL-3967A IDA-28000 TF-29225 TF-26781) ON A LOAN IN THE AMOUNT OF US$10 MILLION AND A CREDIT IN THE AMOUNT OF SDR 13.4 MILLION (US$20 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF CHINA FOR A LABOR MARKET DEVELOPMENT PROJECT December 27, 2006 Human Development Sector Unit East Asia and Pacific Region  CURRENCY EQUIVALENTS (Exchange Rate Effective December 29, 2005) Currency Unit = Yuan (Y) Y1 = US$ 0.12 US$ 1.00 = Y8.1 FISCAL YEAR JANUARY 1 DECEMBER 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy QAG Quality Assurance Group GDP Gross Domestic Product SAR Staff Appraisal Report ICB International Competitive SARS Severe Acute Respiratory Bidding Syndrome ICR Implementation Completion SI Social Insurance Reform Report LMDP Labor Market Development SOE State-owned Enterprise Project LMIS Labor Market Information UI Unemployment Insurance System M&E Monitoring and Evaluation VSTGC Vocational Skill Testing and Guidance Center MOLSS Ministry of Labor and Social VSTS Vocational Skill Testing Station Security NCB National Competitive Bidding VTC Vocational Training Component OSTA Occupational Skills Training VTCC Vocational Training Coordination Agency Commission PM Pilot Municipality VTF Vocational Training Fund PMO Project Management Office WBOO World Bank Operations Office (MOLSS) PRC People's Republic of China ZP Zhejiang Province Vice President: James W. Adams (EAPVP) Country Director: David Dollar (EACCF) Education Sector Manager: Christopher Thomas (EASHD) Task Team Leader: Dingyong Hou (EASHD)  CHINA Labor Market Development CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 9 6. Sustainability 10 7. Bank and Borrower Performance 11 8. Lessons Learned 12 9. Partner Comments 14 10. Additional Information 15 Annex 1. Key Performance Indicators/Log Frame Matrix 16 Annex 2. Project Costs and Financing 18 Annex 3. Economic Costs and Benefits 20 Annex 4. Bank Inputs 21 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 23 Annex 6. Ratings of Bank and Borrower Performance 24 Annex 7. List of Supporting Documents 25 Annex 8. Pilot Municipalities and LMIS Stage 2 Provinces 26  Project ID: P034618 Project Name: Labor Market Development Team Leader: Dingyong Hou TL Unit: EASHD ICR Type: Core ICR Report Date: January 9, 2007 1. Project Data Name: Labor Market Development L/C/TF Number: CPL-39670; SCL-3967A; IDA-28000; TF-29225; TF-26781 Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Vocational training (68%); Central government administration (15%); Sub-national government administration (14%); Law and justice (3%) Theme: Municipal governance and institution building (P); Education for the knowledge economy (P); Social analysis and monitoring (P); Improving labor markets (P) KEY DATES Original Revised/Actual PCD: 04/13/1994 Effective: 04/30/1996 06/28/1996 Appraisal: 06/22/1995 MTR: 12/01/1997 03/24/1998 Approval: 12/19/1995 Closing: 12/31/1999 12/31/2005 Borrower/Implementing Agency: People's Republic of China/MINISTRY OF LABOR AND SOCIAL SECURITY Other Partners: STAFF Current At Appraisal Vice President: James W. Adams Russell Cheatham Country Director: David R. Dollar Nicholas C. Hope Sector Manager: Christopher J. Thomas Joseph R. Goldberg Team Leader at ICR: Dingyong Hou Petros Aklilu ICR Primary Author: Donna Edgerton; Hon Chan Chai 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: HL Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S S Project at Risk at Any Time: Yes  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The project substantially met its stated objectives. The overall objective was to assist the government develop an enabling environment for State-owned Enterprises (SOE) reforms to promote China's transition to a market economy. The ultimate objective of the SOE reforms was the transfer, to be effected with minimum social instability, of surplus labor from enterprises, where it was no longer demanded, to those where it could be used more productively. The Labor Market Development Project (LMDP) was envisioned as a pilot project wherein the Ministry of Labor and Social Security (MOLSS), along with five municipalities and one province selected through a competitive process during project preparation, would institute legal reforms at the national level and introduce and test employment services, including in-service training in the pilot jurisdictions. Specifically, the project was designed to: (a) support policy and legal reforms to facilitate the development of functioning labor markets and promote urban labor mobility; (b) improve the delivery of labor market services and training to facilitate the redeployment of surplus workers in SOEs, the unemployed, and rural-to-urban migrant labor and thus increase labor productivity and mobility; and (c) enhance the institutional capacity of project implementing agencies with a view to promoting market-based services. The objectives were ambitious and somewhat risky in the context of China's transition from a central-command economy, but were in line with the government's aim of moving to a market economy whose continued growth would depend upon labor market development, labor mobility and increasing the pool of skilled workers. The objectives also reflected the Bank's experience in transition economies in Eastern Europe and the former Soviet Union, but adapted to China's environment where gross domestic product (GDP) growth averaged 9.6 % annually from 1980 and 1993, and skilled labor shortages prevailed in urban areas and unskilled labor surpluses in other areas. Because the growth was not enjoyed equally by all provinces and cities, labor mobility and vocational training were crucial aspects of the project's objectives. A key feature of project design was the focus on components where the participating agencies' commitment to labor reform was strong. 3.2 Revised Objective: The objectives were not revised. However, the project scope was expanded to accommodate the government's request to redirect project financing from the vocational training component to the Labor Market Services and Institutional Development Components, and implement the new Labor Market Information System (LMIS) in five additional provinces and Inner Mongolia Autonomous Region as discussed below. 3.3 Original Components: The original four project components were designed specifically to achieve the project objectives through the following measures: A. Policy and Legal Reform. This component would finance the technical assistance to enable the MOLSS develop the necessary labor legislation and regulations to implement the Labor Law and to advance other reforms in employment promotion, vocational skill development, unemployment insurance, vocational skill testing and certification, employment exchange, employment training and retraining, and rural migration. B. Labor Market Services. This component would finance the development of computer software and the acquisition of computer equipment to support the MOLSS, the Pilot Municipality (PMs) and Zhejiang - 2 -  Province (ZP) to establish a computer-based system for matching job-seekers with job vacancies, for collection of unemployment insurance (UI) contributions and payment of benefits, and for the collection of labor market information and statistics. C. In-Service Vocational Training. This component would support the establishment of an institutional capacity to effectively plan and manage a system of in-service vocational training through the Vocational Training Coordination Commissions (VTCCs) created by the PMs. The Vocational Training Funds (VTF) to finance the in-service training would be managed by the VTCCs. D. Institutional Development. This component would support institutional development through local and overseas training and study tours for senior management and technical staff to establish and operate computerized labor market services, including job brokerage, unemployment insurance and labor market information. 3.4 Revised Components: There was no revision to the original components. However, following the extension of the original Closing Date of December 31, 1999, partly to accommodate delays in procurement, the project scope was expanded. In April 2002, the Bank approved the government's request to use the credit/loan savings of US$6,950,000 to replicate the labor market service and institutional development components in six western provinces. (The savings were achieved through a combination of adjustment of original demands for investment in training equipment, activities financed by counterpart financing, and competitive bidding processes.) In June 2002, after the government complied with the legal requirements for the proposed amendment to the Loan and Development Credit Agreements, the credit/loan: (a) was extended to provide for the implementation of the LMIS in the provinces of Gansu, Henan, Hunan, Qinghai, and Shanxi, and Inner Mongolia Autonomous Region; and (b) was adjusted to alter the financing to expand the LMIS development and Institutional Development Components to accommodate project support of the new project western provinces. 3.5 Quality at Entry: The project was not reviewed by the World Bank's Quality Assurance Group (QAG) at appraisal. The Implementation Completion Report (ICR) rates quality at entry as satisfactory. The assessment is based on: (a) the consistency of project objectives with the Bank's other ongoing assistance to SOE reform; (b) the commitment from the MOLSS and the beneficiary institutions as evidenced by their participation during project preparation; and (c) the compatibility of the project objectives with the government's strategy to move away from a state-administered system of labor allocation towards a market system. Of particular significance is that the project was to implement several initiatives to which the government had been committed since 1980, including replacing of the job-for-life policy with the establishment of employment contracts, expanding and improving urban labor market services, allowing the market to determine wages, removing barriers to labor mobility within the cities, and alleviating skill shortages. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The project has substantially achieved its overall objective of starting the process of modernizing China's labor market with the necessary concomitant support services. This assessment is based on project outputs as well as outcomes. Although the project took longer than originally planned (the original three-year implementation plan was, in retrospect, too optimistic), the results in several areas far exceeded expectations. However, some project elements, such as VTFs, fell short of the intended results, which - 3 -  proved to be only temporarily useful. In the case where minimal results were achieved, valuable lessons can be applied to future project design and implementation. The overall project outputs are rated satisfactory. Details of outputs and outcomes by core indicators of project components and by municipality/province and MOLSS -- comparing the 1996 baseline data with the 2001 actual data -- are presented in Annex 1 (Monitoring and Evaluation Output Indicators