Documento f The World Bank FOROFFICIAL USEONLY ReportNo: 33 174-MZ PROJECTAPPRAISAL DOCUMENT ON A PROPOSEDCREDIT INTHEAMOUNT OFSDR20.8 MILLION (US$30 MILLIONEQUIVALENT) TO THE GOVERNMENTOF MOZAMBIQUE FORA TECHNICAL AND VOCATIONAL EDUCATIONAND TRAINING PROJECT February21,2006 Africa Region HumanDevelopment CountryDepartment2 This document has a restricted distribution and may be used by recipients only in the performance of their officialduties. Its contents may not otherwisebe disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (ExchangeRateEffectiveJanuary30,2006) CurrencyUnit = Metical (pl. Meticais) MZM25,OOO = US$1 U S $ 1 = SDR0.69 FISCALYEAR January1 - December31 ABBREVIATIONS AND ACRONYMS ANEP Autoridade Nacional da Educagio Professional (National Training Authority) AWPB AnnualWork PlanandBudget CAS Country AssistanceStrategy CBT Competency-BasedTraining CIREP Commisslio Interministerial para a Reforma da Educagio Profissional (Interministerial Commissionfor ProfessionalEducationandTraining Reform) COREP Commissio Executiva de Reforma da Educafio Profissional (Executive Commission for ProfessionalEducationandTrainingReform) CPS CooperatingPartners CPI Centro de Promofio de Investimentos (Investment PromotionCenter) CTA Confederafio das Associagdes Econdmicas de Mogambique (Confederation of Trade Associations) DCA DevelopmentCredit Agreement DINET Direcfao Nacional da Educafao Tecnico Profissonal e Vocacional (National Directorate for VocationalandTechnicalEducation) EMP EnvironmentalManagementPlan EP Ensino Primbrio (Primary EducationSystem) ES ExecutiveSecretariat ESG Ensino Secundario Geral (GeneralSecondaryEducationSystem) ESMF EnvironmentalandSocialManagementFramework ESSP EducationSector Strategic Program FMRs FinancialMonitoringReports FMS FinancialManagementSystem FUNDEC Fundo para o Desenvolvimento de Compet2ncias Profissionais (Skills Development Fund) GoM Governmentof Mozambique GPN GeneralProcurementNotice HE HigherEducation HEP HigherEducationProject IAF Inque'rito aos Agregados Familiares (Household Survey) IC Individual Consultants ICB InternationalCompetitive Bidding IDA InternationalDevelopment Association IGF Inspecgfio Geral de Finangas (FinanceInspectorateGeneral) INE Instittlto Nacional de Estatistica (National Institute of Statistics) INEFP Instituto Nacional do Emprego e Formagao Profissional (National Institute for Employment andTraining ) LSP Letter of Sector Policy MEC Ministry of Education andCulture MEP Monitoring andEvaluationPlan MICOL Ministry for the Coordination of Environmen-llAffairs ~ MINTRAB Ministry of Labor NCB NationalCompetitive Bidding NSPE NationalSystemof ProfessionalEducation NTA NationalTraining Authority O M Operational Manual PARPAII Poverty ReductionActionPlan PDO ProgramDevelopment Objective PIREP Programa Integrado de Reforma da Educa@o Profissional (Integrated Programfor TrainingReform) PPG Proposta de Programa do Governo2005-09 (Govenment's ProgramProposal2005-09 QCBS Quality andCost BasedSelection) REP Reforma da dtlca@o Profissional Wocational EducationReform) RPF ResettlementPolicy Framework SISTAFE Government FinancialSystem sss Single SourceSelection TVE TechnicalandVocational Education WET TechnicalandVocational Education andTraining VT Vocational Training Vice President: GobindNankani Country ManagerDirector: Michael Baxter Sector Manager: DzingaiMutumbuka Task Team Leader: Alexandria Valerio FOROFFICIAL USE ONLY This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. MOZAMBIQUE Technical and Vocational Education Project Project Appraisal Document Africa Region AFTHl Date: January 30,2006 Team Leader: Alexandria Valerio Country Director: Michael Baxter Sectors: EV - Vocational Education & Sector Manager: Dzingai Mutumbuka Training Project ID: PO87347 Themes: Education Lending Instrument: Specific Investment Loan (SIL) Safeguard screening category: B2 Environmental Screenine cateeorv: B2 For Loans/Credits/Others: Total Project Cost 0: US$37.5 million US$7.5 million TotalBank Financine (m.): US$30.0million Source I Local I Foreign I Total BORROWER 0 0 0 IBRD/IDA 21.0 9.0 30.0 The Netherlands 4.5 3.0 7.5 TOTAL 25.5 12.0 37.5 FY 2006 2007 2008 2009 20010 2011 2012 Total Annual 2.5 4.8 8.2 10.0 8.0 3.0 1.0 37.5 Cumulative 2.5 7.3 15.5 25.5 33.5 36.5 37.5 Does the project depart from the CAS incontent or other significant respects? Yes !ZlNo Ref. PADA3 Does the project require any exceptions from Bank policies? Ref. PADD7 Yes n N o Have these beenapproved by Bank management? Yes o N o Is approval for any policy exception sought from the Board? Yes nNo Does the project include any criticalrisks rated 'substantial' or 'high'? Ref. El Yes o N o PADD7 Does the project meet the Regionalcriteria for readiness for implementation? LZi Yes N o Ref. PAD D7 Project development objective. Ref. PAD B2, Technical Annex 3 Programa lntegrado de Reforma da Educap7o Profissional (PlREP) is the first five year phase of a fifteen-year reform program, Reforma da EdtlcapZo Profissional (REP). The objective of the longer- term reform programis to improve the quality and responsiveness of the W E T system to labor market needs by providing training that is delivered ina sustainable, integrated, effective, and ?quitable manner. PIREP is taking the first steps toward achieving these objectives. Its development objective is to facilitate the transition to a demand-led training system and provide beneficiaries with more market relevant skills and improved economic opportunities. Key mechanisms to accomplish the objective include the establishment of a TVET governance framework with representation from Government, industry, and civil society; a qualifications framework underpinned by occupational standards for sectors experiencing employment growth and skill shortages; and a re-alignment of the TVET system (based on occupational standards) inup to 16 pilot training institutions. The competitive grants component of PIREP will increase access to training for underserved groups, stimulate innovative approaches to WET, andimprove quality andrelevance of trainingby public andprivate training institutions not amongthe pilot traininginstitutions. Critical issues of gender inequity and the impact of HIV/AIDS are incorporated inall relevant aspects of program design and implementation. Each of the project components includes concrete activities andincentives to mainstream gender and HIV/AIDS preventionprograms. Project descriptionRef. PAD B3, Technical Annex 4 PIREP will have four components: A - Development of a n Institutional Framework; B - Standards-based Qualification and Training System; C - Quality Improvement in Training Institutions; and D - Skills Development Fund (FUNDEC). The combined investments u n d e r the four components will b e instrumental, firstly in establishing the most important k e y elements of the n e w demand-oriented TVET system (governance structure, outcome-based system of occupational standards, modularized curricula and external assessment and certification), secondly in starting, in a targeted manner, the improvements in quality and relevance of TVET course programs, and thirdly in addressing the problems of access and equity. The principal target group of PIREPare school leavers attending TVE and VT p r o g r a m s as well as other target groups inneed of training. Inaddition, through FUNDEC, (Component D), PIREP stimulates innovative demand-led TVET reform initiatives that are taking place outside the designated pilot institutions and other initiatives increasing access to WET by underserved population. Each of the project components includes concrete activities and incentives to mainstream gender andHIV/AIDS prevention andmitigation programs. Which safeguard policies are triggered, if any?Ref. PAD D6, Technical Annex 10 PIREP has triggered OP 4.01 Environmental Assessment and OP 4.12 InvoluntaryResettlement. Accordingly, the project has prepared an Environmental and Social Management Framework (ESMF) to address potential negative environmental and social issues, and a Resettlement Policy Framework (RPF) to address potential negative social impacts related to landacquisition. Both documents have been disclosed in Mozambique on September 15, 2005, and at the Bank's Infoshop on September 28,2005. Sigruficant non-standard conditions, if any, for: Ref. PADC6 Board presentation: None Loan/credit effectiveness: (a) Legal opinion onthe DCA received from the Borrower. Covenants applicable to project implementation: The b a s e k e data to measure progress on the Development Objectives (DO) is expected to b e available by October 1,2006. Prepare a n annual Work Plan and Budget inform and substance satisfactory to IDA on or about March 1of each year for a 12 monthperiod starting the following January1. A draft proposal with a transition strategy to convert CIREP/COREPinto the Autoridade Nacional da EducqBo Professional (ANEP) will b e submitted to IDA not later than 30 m o n t h s after Credit effectiveness; A draft proposal with a transition strategy to transform the pilot schools to only offer a competency-based curriculum will b e submitted to IDA not later than 24 months after Credit effectiveness; A draft proposal with a strategy to align DINET and INEFP's roles, responsibilities and institutional arrangements, both at the national as w e l l as provincial a n d districts levels, to the envisaged decentralization context will b e submitted to IDA not later than 36 m o n t h s after Credit effectiveness; and A draft proposal with a strategy to ensure the technical, institutional and financial sustainability of project activities at the end of the pilot phase in2010 will b e submitted to IDAnotlater than36months after Credit effectiveness. MOZAMBIQUE TechnicalandVocationalEducationandTraining CONTENTS Page A. STRATEGIC CONTEXTAND RATIONALE .......................................................................... 9 1. Country andsector issues......................................................................................................... 9 2. Rationale for Bank involvement ............................................................................................ 14 3. Higher level objectives to which the project contributes..................................................... 15 B . PROJECTDESCRIPTION ......................................................................................................... 15 1. Lending instrument ................................................................................................................ 15 2. Project development objective andkey indicators............................................................... 15 3. Project components ................................................................................................................. 17 4. Lessons learned and reflected inthe project design ............................................................ 20 5. Alternatives considered andreasons for rejection............................................................... 21 C. IMPLEMENTATION ................................................................................................................. 21 1. Partnership arrangements ...................................................................................................... 21 2. Institutional andimplementation arrangements ................................................................. 22 3. Monitoringandevaluationof outcomes/results .................................................................. 24 4. Sustainability ........................................................................................................................... 24 5. Critical risks andpossible controversial aspects .................................................................. 25 6. Loan/credit conditions and covenants .................................................................................. 28 D APPRAISALSUMMARY . .......................................................................................................... 29 1. Economic andfinancial analyses ........................................................................................... 29 2. Technical .................................................................................................................................. 31 3. Fiduciary .................................................................................................................................. 32 4. Social......................................................................................................................................... 34 5. Environment ............................................................................................................................ 35 6. Safeguard policies ................................................................................................................... 36 7. Policy Exceptions andReadiness........................................................................................... 37 Annex 1:Country andsector or program background ................................................................... 39 Annex 2: Major related projects financed by the Bank andor other agencies ...........................43 Annex 3 A: Results Framework & Monitoring ............................................................................... 45 Annex 3 B: Performance Data Table ................................................................................................. 48 Annex 4: Detailed project description .............................................................................................. 54 Annex 5: Program costs ...................................................................................................................... 69 Annex 6: Implementationarrangements ......................................................................................... 75 Annex 7: Financial management and disbursement arrangements ............................................. 82 Annex 8: Procurement Arrangements .............................................................................................. 90 Annex 9: Economic andFinancial Analysis .................................................................................... 99 Annex 10: Safeguard Policy Issues ................................................................................................. 118 Annex 11:Project Preparationand Supervision ........................................................................... 121 Annex 12: Documents inthe Project File ....................................................................................... 124 Annex 13: Statement of Loans and Credits .................................................................................... 127 Annex 14: Country at a Glance ........................................................................................................ 129 Annex 15: M a p................................................................................................................................... 131 Annex 16: COREP Decree No .29.................................................................................................... 132 Annex 17: Letter of Sector Policy .................................................................................................... 138 A. STRATEGIC CONTEXT AND RATIONALE 1. Countryandsectorissues Background Mozambique provides an example of steady economic recovery and social reconstruction after a prolonged period of war. Since 1992, the country has sustained a period of rapid economic growth and marked poverty reduction. Between 1997 and 2004, GDP growth averaged 9.4 percent, one of the highest growth rates in sub-Saharan Africa. Substantial economic growth was registeredinconstruction, tourism, certain manufacturing sub-sectors (led by food and beverages), transport, services, and certain agricultural sub-sectors. K e y factors in the recovery include a combination of external aid and large foreign investment projects, commonly referred to as the mega-projects1. Economic forecasts indicate buoyant growth prospects for most sectors, but particularly in mining, transport, tourism, a n d services. Over the same period, equally important achievements were recorded in human development indicators and poverty reduction. From 1996 to 2003, the proportion of people living in poverty declined from 69 percent to 54 percent and inequality, measured in real consumption, diminished across provinces and regions. Notwithstanding the gains in poverty reduction, more than half of the population still lives in poverty. Moreover, broad statistics on humandevelopment and poverty prevalence often conceal the complexity and diversity in the way in which poverty affects different groups in society and in the disparities that persist in terms of education opportunities, gender and geographic equity. Poverty in Mozambique remains predominantly a rural phenomenon being more widespread inthe central and northernregions than inthe southern part of the country. T h e impact of HIV/AIDS o n economic growth and social development adds to the complexity and poses an additional development challenge. Broadening economic opportunities a n d social development, reducing poverty and responding decisively to the HIV/AIDS epidemic remain of paramount importance in Mozambique and the focus of the Government's development agenda for the foreseeable future. Although the labor market in Mozambique is still characterized by a small formal sector, employing about 10 percent of the economically active population (estimated at 520,000 people), data from the national household surveys of 1996 and 2002 indicate this employment segment is growing and demanding more skilled labor. This shift in the skill profile demanded in the labor market has triggered a sharp increase in the return to post- basic education, particularly with respect to workers with little or no education and skills. A sizable proportion of the new jobs created by the mega-projects in the metal, gas and `Mozambique has currently three mega-projects - the Mozal aluminum smelter, the Cahora Bassahydroelectric plant, Sasol gas and telecommunications. Mozal, the biggest one, represents the single largest investment (about US$ 1.34 billion) ever made in Mozambique. This investment i s a consortium owned by London based Billiton (47%), Mitsubishi of Japan (25%), South Africa's Industrial Development Corporation (24%) and Government of Mozambique (4%). It has recently doubled its capacity by constructing a second phase of the smelter and now expects to produce 506.000 tons of aluminum per year for export. 9 telecommunication industries2 (between 10,000-20,000 jobs) are for medium to high skill positions. However, the training system, whch i s responsible for shaping the skills profile demanded in the labor market, has been slow to respond to changing labor market demands inthe formal sector. Employer surveys and labor market studies in formal sector enterprises point to a mismatch between the labor supply and the evolving needs of labor market, which require more skilled workers. Overall, the Mozambican workforce i s poorly educated and lacks technical skills, which acts as a constraint to further economic growth and investment. Half of the population either has no education at all or, merely, basic literacy skills. Although access to primary education has increased substantially in the last decade, reaching near universal levels, still less than one-third of an age group reach Grade 7, less than 10 percent progress to Grade 10 and less than 3 percent of an age group completes 12 years of education. Girls have a significantly lower completion rate than boys. In 2003 approximately 12 percent of the Grade 7 leavers continued their education withinthe formal technical vocational education (TVE) stream3. No information i s available on learning achievement for any of the systems. Small scale qualitative studies, however, indicate that learning outcomes are poor, ineither system, and further compromised by the poor quality of services. TVE is mainly provided by the National Directorate of Technical Education (DINET) in the Ministry of Education and Culture (MEC), but there are also other government Ministries and a small number of training institutions that are providing post-primary technical education. DINET i s responsible for approximately 42 TVE training institutions offering pre-employment training of which the great majority is equivalent to lower secondary level (Grade 10). The Ministry of Labor (MINTRAB) through the National Institute for Technical Training (INEFP), NGOs and churches offer non-formal Vocational Training (VT), mainly short-term training, to different target groups of employed and unemployed, mainly school leavers without alternative educational and economic options in the labor market. Other Ministries, such as Public Works, Agriculture and Tourism also offer vocational training programs through a network of separately managed training centers. While the DINET training institutions accommodate 35,000 full-time students annually, the seven INEFP training centers offer short-term courses to an estimated 1,500 persons every year. Overall, more than 95 percent of all TVE is provided by public schools. In contrast, the private training market is at an infant stage and employer-based staff training is mainly found in 2These include MOZAL Iand I1(aluminum smelter), the Sasol gas pipeline, new coal and sand mining projects and infrastructure upgrading projects in Maputo and Beira industrial development corridors. The contribution of the mega-projects to GDP rose from zero in 1997 to about 7% in 2002 and i s expected t o rise to approximately 10% by the end of the decade. They will add about 0.5 percentage points annually to GDP growth, on average, until2010. By 2010 they will probably account for some 2% of private sector employment, though it is expected that upstreamand downstreamlinkages will increase inthe future. 3Inthis document the term Technical and Vocational Education ( W E )refers to formal educationbased on curricula approved by DINET, Vocational Training (VT) refers to formal and non-formal training on curricula approved by INEFPor trainingcourses provided by NGOs, churches and other enterprises usingtheir own curricula. Finally, Technical and Vocational Education and Training (TI/ET) is used as an overarching t e r m to describe the entire landscape of formal, non-formal and informal training and technical education. 10 large enterprises, particularly in the mega projects. Traditional artisan activities are widespread inthe informal sector. The likelihood of being under the poverty line i s closely linkedwith educational attainment; particularly post-lower secondary education or training equivalent (Grade 12). More than ever, workers who lack education and skills remain trapped under the poverty line. At this juncture in the development of Mozambique, it is imperative to maintain current growth rates in the formal sector to further stimulate and broaden economic opportunities. It is critical, therefore, to ease institutional constraints in the training system to ensure it responds effectively and efficiently to the demand for medium to high level slulled workers. At the same time, given the limited size of the formal sector, it is also critical to foster economic and education opportunities for the 90 percent of the labor force, who depends on the informal sector and have limited educationand skills. Recent analytical work led by the World Bank with technical support from Cooperating Partners (CPs) inMozambique identified the key issues and challenges that are vital for the future development of TVET to ensure it can be transformed into a system capable of responding flexibly and effectively to changing economic needs and labor market demands (See World Bank, 2004. Skills Development in Mozambique: Issues and Options. Washington, DC. Report No. 29492). The sector analysis provided a foundation for the preparation of the proposed investment. Key Sector Issues (a) Relevance:The scattered information available o n slulls and qualification needs suggests there is a severe shortage of appropriately skilled and qualified workers. Although the graduates from the public technical education schools seem to be rather easily absorbed into the formal sector of the labor market (particularlyat medium level, or Grade 12 equivalent), enterprise surveys indicate a general dissatisfaction and outline a number of complaints related to the lack of relevant, especially practical, supervisory and foreign language skills of graduates. This often translates into retraining costs for employers, adding to their immediate operational costs and, more broadly, to the overall cost of doing business in Mozambique. One of the principal reasons for the poor relevance i s the lack of involvement from employers and industry representatives in defining occupational standards and learning contents for the courses offered in the public training system. The current supply- led approach to planning and training delivery, which is completely disconnected from industry needs, has dominated government policy and planning practices since the establishment of the TVET system. An additional cause of concern is the acute shortage of relevant training earmarked for employment and self-employment in the informal sector, particularly for school leavers who may have only attained primary education. This situation i s further compromised by the lack of recognition of informal training. (b) Quality is perceived to be very low in the general public training systems offered by DINET schools and INEFP training centers, a situation caused by under-qualified and insufficiently skilled teachers/instructors, a shortage of teaching aids, partly dilapidated workshops for practical training and an outdated curricula, which is overloaded with academic subjects (almost 50 percent in some instances) and few linkages with industry to 11 strengthen the quality of student practices. The poor quality of training often translates into l o w levels of internal efficiency, as indicated by the highrepetition (as high as 45 percent for some levels) and dropout rates (estimated at 15-20 percent, annually). There are n o studies available on the efficiency and quality of training in the private sector (See Annex 9 Economic and FinancialAnalysis). (c) Access and equity: Generally, there is an acute shortage of places in secondary a n d technical schools for graduates from the expanding primary school system with many learners choosing to enter the technical schools as a second best option, even though the returns to TVET tend to be higher at the medium level compared to the same level in the general secondary academic stream at Grade 12 (See Annex 9 Economic and Financial Analysis). Access to TVE schools is further restricted by the limited availability of relevant training opportunities for school-leavers and other groups inneed of training; cultural a n d social barriers which discourage female participation in the TVET system; an urban bias in that nearly all the (formal) TVET institutions are located inthe major towns and cities; a n d financial and social barriers resulting from poverty. Moreover, the HIV/AIDS epidemic i s resulting in teacherhnstructor absenteeism and premature death which exacerbates these inequities, especially among vulnerable students who are directly or indirectly affected by HIViAIDS and are unable to afford tuition and/or other direct costs associated with attending training courses. (d) Governance and institutional arrangements: A major problem of the current TVET environment is its fragmentation and the uncoordinated manner in which each sub-system is managed and administered. There i s a lack of an institutional framework to organize, articulate, integrate, regulate and ensure the quality of training interventions and programs. This often leads to unnecessary duplication of efforts and suboptimal use of scarce training resources. Although the TVET institutions offer equivalency to academic qualifications, the pathways to cross from one system to another are not always straightforward and there are n o mechanisms in place to recognize previously-acquired learning. The system offers little flexibility to stimulate a continuous upgrading of skills to respond to changing labor market needs or production innovation opportunities. The centralized decision-making structure in the formal TVET system, coupled with a generally weak management capacity at school a n d training institution level, contribute to the inefficient use of resources and limit public training providers from responding to the specific requirements of target groups and the needs of the local economic environment. Historically, the governance and management of the public training system has not involved employers, industry representatives or civil society to any significant extent, with the consequence that training programs and the curricula remain disconnected from the labor market context. (e) Sustainability: Available information indicates that the entire TVET system is seriously under resourced, whether compared to the general education system or the training systems inneighbouring countries. In2003, the Government spent 0.2 percent of GDP or 2.3 percent of the education budget on TVE training institutions. Unit spending in public schools, both formal and non-formal, is among the lowest in sub-Saharan Africa, negatively affecting the quality of training and capacity utilization (on average the Government spent US$ 95 p e r student in2002 and US$l64 per student in 2003 compared to US$ 130 in 2002 and US$125 12 in2003 inthe general secondary education system). Available information indicates public expenditure inMozambique is less than that of Ethiopia (between US$200 and US$280 per student in2002), Tanzania (US$575 to US$1,292 per student in2002), Malawi (between US$ 238 and US$622 per student in 1998) and Botswana (between US$1,109 and US$1,842 per student in 1996). With the exception of some large, well resourced enterprises, industry's preparedness to embark on employee training is also constrained by a lack of resources. There is a lack of data and information about the unit cost of training in different segments of the TVET system, at different qualification levels and for different occupational specializations. As a matter of priority, there is an immediate to obtain accurate data to improve planning and the cost effectiveness of training interventions and to broaden the sources of revenue to finance a more effective the training system. Government's TVET Strategy The Government has reacted to the sector issues and challenges outlined above with substantial efforts to align training policies and transform the training system by creating a consultative institutional framework for TVET development. The policy framework comprises the MEC Estratkgia do Ensino Tkcnico Profissional em Mocambique 2002-2022 approved by the Council of Ministers in December 2001, the MINTRAB Employment and Vocational Training Strategy 2004-2020, the Education Sector Strategic Program 2005-09 (ESSPII), the Policy Proposal o n Polytechnics prepared by the Ministry of Higher Education, Science and Technology (MESCT) before its amalgamation with MEC, and, most recently, the Proposta de Programa do Govern0 2005-09 (PPG). Inthe latter, the Government confirms i t s commitment to transform the TVET system and improve the quality and relevance of training inclose cooperation with industry and social partners. The PPG also underlines the Government's desire to expand the TVE sub-system as part of the overall effort to increase access to post-primary education and, most importantly, respond effectively and efficiently to the needs of the labor market. Further, in a Memorando de Entendimento of July 2004, the Ministers of Education, Labor a n d Higher Education and the Confederaqlo das Associaqdes Econdmicas de Mocambique (CTA) agreed to incorporate current and/or future interventions in the sector into an integrated TVET reform program. This partnership laid the foundation for the establishment of an Inter-ministerial Commission for TVET Reform or Cornmisslo Interministerial para a Reforma da EducapZo Profissional (CIREP) and a NationalPublic-Private Commission for TVET Reform or Cornmisslo Executiva de Reforma da Educaqao Profissional (COREP). The latter Commission was tasked with the responsibility to develop an integrated TVET program with a longer term vision and discrete phases with milestones (See Annex 16 COREP Decree No. 29/2005). Section B of this Project Appraisal Document (PAD)provides a thorough description of the longer termprogram, the phases and the proposed investment (See page 15). The general vision, investment principles, lines of intervention, timetable and expected milestones to be attained under the integrated investment program are summarized in a Letter of Sector Policy (LSP) signed by the Minister of Planning and DevelopmentinOctober 2005 (See Annex 17 Letter of Sector Policy). Key elements highlighted inthe LSPinclude: (i) the creation of a consultative governance and institutional framework with equal representation from Government, industry, organized labor and civil society organizations 13 to lead the transformation of the TVET training system; (ii) adoption of a demand-led the paradigm to ensure planningand delivery of training fully coincides with requirements of a growing economy and changing labor market requirements; (iii)a commitment to addressing and mainstreaming transversal issues of gender and HIV/AIDS in the selection of programs for investment, learning content and delivery of training in all training institutions and in the workplace; (iv) the introduction of occupational standards set and validated by industry and a modularized curricula; (v) the establishment of an independent national system for assessment and certification of learners; (vi) the introduction of an accreditation system for public and private providers offering Competency Based Training (CBT) courses and qualifications; (vii) the establishment of a new system for technical teacher training; and (viii) the introduction of a decentralizedsystem for TVET management. Furthermore, the Government has expressed its commitment to diversify the funding sources for W E T inorder to maintain long-term sustainability. The status of existing GoM TVET strategies vis-a-vis REP and PIREP i s n o t entirely clear. However, it must be assumed that with the approval of Deaee No. 29/2005 and the signing of the LSP the previous policy and strategy documents, which are broad in scope and fiscally unattainable, are indirectly nullified should discrepancies exist with the REP and PIREP which were have been endorsed by COREP and CIREP. 2. Rationale for Bank involvement The proposed investment supports the TVET reform efforts of the GoM which are firmly anchored in the PARPAII (Action Plan for Reduction of Poverty) and emphasize the investment in relevant, quality skills development as a means to reduce poverty. The investment is in accordance with the current Country Assistance Strategy (CAS) for Mozambique which envisages investment in the TVET sector reform as a means to improving access to post-primary education, and to 'increase graduation of Mozambicans with the skills, practices, and attitudes needed to filltechnical positions, and create value- adding knowledge and innovation in production' hereby overcoming the problem of 'the missing middle in Mozambique', i.e. the shortage of skilled and qualified persons at secondary education level. The investment is justified by its expected impact o n poverty through enhancement of the competitiveness and productivity in key (growth) economic sectors and increased opportunities for gainful employment and earnings inthe formal and informal sectors. The investment i s complementary to the Bank's effort to develop the private sector and increase access and the quality of basic, secondary and higher education. Through a comprehensive and integrated investment approach, it is envisaged that the proposed program will leverage technical and financial resources, eliminating to the largest extent possible the duplication of efforts and contradictions in methodology and approach which are all too commonincountries heavily dependent on external aid. The Bank's comparative advantage derives from its experience in financing related investments including the Education Sector Strategic Program (ESSP Cr. 31720), the Higher Education Project (HEP Cr. 36090), and the Enterprise Development Project (PODE Cr. 33170) inMozambique, and similar programs inChile, Mexico, Zambia and Ethiopia. 14 3. Higher level objectives to whichthe project contributes Inorder to sustain the social and economic development of Mozambique of the past decade and thus continue contributing to the decline of poverty, increasing employment growth and generally improving human development indicators, it is essential that several internal and external challenges continue to be addressed. Key internal challenges include raisingthe educational level of the general population, particularly females; minimizing the negative effects of HIV/AIDS; reducing regional disparities; modernizing public management and service delivery; and increasing the skills and employability of the workforce. External challenges include integrating Mozambique into the global economy and knowledge society; strengthening regional economic integration; and improving the technological adaptability of the economy. The Government's strategy to address these challenges i s economic growth through public investment in social capital and productive infrastructure, as well as institutional reforms to improve the climate for private investment. In the light of this strategy, the proposed investment will contribute to the transition of the existing TVET system to a demand-led training system providing the beneficiaries with more market relevant skills and improved economic opportunities. B. PROJECTDESCRIPTION 1. Lendinginstrument The proposed IDA investment (P087347) is a five-year Sector Investment Loan (SIL) to support part of the Government's investment program Programa Integrado de Reforma da EducapTo Profissional (PIREP). PIREP is the first phase of Government's Reforma da EducagEo Profissional (REP), a long-term program with a vision until 2020, designed to overcome the currently fragmented and uncoordinated provision of TVET. The objective of the longer- term reform program is to improve the quality and responsiveness of the TVET system to labor market needs by providing training that is delivered in a sustainable, integrated, effective, and equitable manner. PIREP is taking the first steps toward achieving this objective. The monitoringand impact evaluation results of this first phase (to be undertaken throughout project implementation) will guide the subsequent phases of the envisaged longer-term vision, namely the scaling up to other occupations and sectors of the economy and to other private and public training institutions in the second phase period (2011-15). Duringthe third phase (2016-20), it is contemplated that reforms will be consolidated across all the existingTVET institutions. 2. Project development objective and key indicators PIREP's Project Development Objective (PDO) i s to facilitate the transition of the existing TVET system to a demand-led training system and provide beneficiaries with more market relevant skills and improved economic opportunities. Key mechanisms to accomplish the objective include the establishment of a TVET governance framework with representation from Government, industry, and civil society; a qualifications framework underpinned by occupational standards for target sectors experiencing employment growth and skill shortages; and a re-alignment of the TVET system (based on occupational standards) inup to 16 pilot training institutions. Further, the Government will seek to develop arrangements to diversify the funding sources of TVET to 15 ensure it has a stable platform of income that can sustain its operational effectiveness inthe future. The competitive grants component of PIREP will increase access to training for underserved groups, stimulate innovative approaches to TVET, and improve quality and relevance of training by public and private training institutions that are n o t taking part in the 16 pilot institutions rolling out occupational standards based training. Critical issues of gender inequity and the impact of HIV/AIDS are incorporated in a l l relevant aspects of program design and implementation. Each of the project components includes concrete activities and incentives to mainstream gender and HIV/AIDS prevention and mitigation programs. It is expected that TVE graduates from pilot training institutions will receive market relevant skills to improve their economic and social development opportunities. Similarly, it is expected that graduates of programs financed through the competitive grants component of PIREP will receive relevant training aimed at improving livelihood opportunities primarily in informal sector activities. (See Annex 4 Detailed Project Description for an explanation of selection criteria for economic sectors, occupations and training institutions and PIREP Operational Manual for the Concept Note and detailed documentation on the competitive grants component). The performance of PIREP will be measured by means of the following Development Indicators (DO) indicators: (i) percentage of surveyed employers who indicate that those of their employees, who are recent graduates of targeted institutions, have market relevant skills; (ii) labor market earnings of graduates of targeted programs compared to control group; (iii) average time (in days) to find a job or become self-employed after graduating from a targeted program compared to a control group graduating from institutions not targeted for PIREP assistance; and (iv) percentage of graduates of targeted programs who find jobs or create jobs that are directly linked to their field of study. Data from these indicators will help to confirm whether the PDO is on track to being achieved. Also, it should be hghlighted that PDO indicators (ii), and (iv) are specifically aimed at (iii) measuring programimpacts (See Annex 3 Results Framework and Monitoringfor indicators o n Development Objectives and Intermediate Results). The baseline data to measure progress on the Development Objectives (DO)is expected to be available by October 1,2006. The indicators will be monitored using a Monitoring and Evaluation Plan (MEP) for the program (see Annex 3 Results Framework and Monitoring and PIREP Operational Manual Chapter 6). Given the importance of active learning while piloting the realignment to a demand oriented training paradigm, the MEP was designed as a tool to manage, learn and, more generally, tell the PIREP story. As such, this MEPis broader inscope than a traditional Monitoring and Evaluation Framework (M&E) in at least two ways. First, it emphasizes not just performance monitoring and evaluation, but management of processes and outcomes, which is a broader concept of w h c h monitoring and evaluation is only a part. By taking a more comprehensive approach, the MEP integrates performance monitoringand evaluation with the overall management imperatives of the program. Second, the MEP takes a n operational approach to performance management. Typical M&E frameworks lack practical tools to facilitate data collection and analysis. As such, many problems ensue during implementation, including poor quality data resulting from different interpretations of indicator definitions or lack of data from some sources because of a lack of clarity on data 16 collection and reporting schedules. The MEP seeks to overcome this weakness by providing a series of reference data sheets and tools to plan for and implement a comprehensive system of performance managementthroughout project implementation. 3. Project components PIREP will have four components: A - Development of an Institutional Framework; B - Standards-based Qualification and Training System; C - Quality Improvement in Training Institutions; and D- Skills Development Fund(FUNDEC). The combined investments under the four components will be instrumental, firstly in establishing the most important k e y elements of the new demand-oriented TVET system (governance structure, outcome-based system of occupational standards, modularized curricula and external assessment a n d certification), secondly in starting, in a targeted manner, the improvements in quality and relevance of TVET course programs, and thirdly in addressing the problems of access a n d equity. The principal target group of PIREP are school leavers attending TVE and VT programs as well as other target groups inneed of training. Inaddition, through FUNDEC, (Component D), PIREP stimulates innovative demand-led TVET reform initiatives that are taking place outside the designated pilot institutions and other initiatives increasing access to TVET by underserved population. Each of the project components includes concrete activities and incentives to mainstream gender and HIV/AIDS prevention and mitigation programs. The project cost is estimated at US$ 37.5 million over a five year period. The financing package is US$ 30 million from IDA and US$ 7.5 million from the Netherlands. Financing from the Netherlands is considered as co-financing with IDA through a Trust Fund Agreement. Fiduciary responsibility and accountability for the supervision of IDA Credit and Trust Fund Agreement will rest with IDA. Additional contributions of US$ 15.9 are expected to come on stream to the overall PIREP over the next three years, namely f r o m Danida (US$ 7.5 million), GTZ (US$ 2.4 million), Spanish Cooperation/Salesians (US$ 4.4 million), Portuguese Cooperation (US$ 1.6 million). Although these contributions are envisaged to follow the vision and methodologies of the overall reform program such resources are considered parallel financing since the management and oversight of such resources will not necessarily rest with the Executive Secretariat. Component A - Development of an InstitutionalFramework (US$ 7.0 millionincluding the costs of an Executive Secretariat, but excluding contingencies) responds to the diagnosed weaknesses of the current institutional set-up of the TVET system, including problems of governance, e.g. lack of stakeholder involvement and ambiguity about the role of DINET and INEFP vis-a-vis COREP; resource constraints as indicated by the severe under-funding of the TVET system; excessive centralization; and the absence of a comprehensive transition plan. The objective of this component is to reform the governance and management structures for the training system and develop options for the reform of a system of financing in collaboration with the relevant industry representatives and social partners. Component A comprises four sub-components, addressing (Al) the institutional framework for the governance of the TVET system, including capacity building of DINET and INEFP and establishment of labor market monitoring mechanisms, (A2) the mechanisms for providing a sustainable financing basis for the TVET system, (A3) the arrangements for 17 decentralized management of TVET institutions, and (A4) studies and other research related activities to facilitate the transition to a demand-led TVET system, the pedagogical strategies to articulate the academic and technical modules in the context of a competency-based scheme, the incorporation of the informal sector into PIREP and the impact and mitigation of HIV/AIDS o n training institutions and workplace issues. A major thrust of the component is to encourage the involvement and active participation of industry and enterprises in the management of TVET institutions and to move towards the coordination and articulation of the different skills development programs, offered by different providers. Major inputswill be technical assistance (consultancy inputs) for problem diagnosis and conceptual work, capacity building of stakeholders and administrator/managers as well institutional development support (system proceduresand equipment). Component A has a dual function. Firstly, through analytical work and consultations, it will provide the institutional, funding and management framework for the reformed national TVET system; and secondly, it provides for the establishment of an Executive Secretariat (ES) of COREP which will coordinate the implementation of PIREP.4 Accordingly, both investment and operational costs associated with COREP are budgeted separately under Component A. It is envisaged that legislation on establishment of the Autoridade Nacional da Educa@o Professional (ANEP) will be submitted to the National Assembly in Year 4 (on or before December 31,2009) of PIREP. Component B - Establishment of a Standards-based Qualification and Assessment System (US$ 2.0 d l i o n , excluding contingencies) is the principal objective of this component and one of the fundamental elements of the TVET reform process. The Government i s committed to transforming its current curriculum-based TVET system into a system based on occupational standards to ensure that enterprises and experts inthe world of work have a strong influence on the definition of competencies and training content; that a transparent and legitimate assessment system can be established; and that target groups with different training and learning backgrounds will be able to access the TVET learning system and get recognition for their skills regardless of where the learning/skills acquisition takes place. The component is divided into three sub-components addressing (Bl) the development of occupational competency standards, (B2) the development of modularized training course programs based o n these occupational standards, and (B3) the development of a standards- based assessment and certification system. The component includes support for developing and adopting methods and procedures for standards-setting, curriculum planning and development, and assessment/certification arrangements, including the testing of the system that will target a minimumof 20 occupational areas spread across four economic sectors, viz. tourism and hospitality, management & administration, industrial maintenance, and agro- 4The COREP Decree No., 29/2005 dated August 23, 2005 calls for the establishment of an Executive Secretariat (Article7) to coordinate the PIREPprogram (See Annex 17Decree No.29).A set of internal regulations for COREP and for the Executive Secretariat were approved by COREP on January27, 2006 and February 6, 2006, respectively, to establish rules, regulations, competencies for the array of stakeholders expected to be involved in the implementation of PIREP (See Operational Manual Chapter 2). 18 industry. Inputs include technical assistance for the design of the occupational standards, curriculum and assessment design, capacity building for Mozambican officials who will be directly involved in this process, and the development and establishment of necessary systems to implement the reforms as well as operational support for implementation at the pilot schools. Critical issues related to gender and HIV/AIDS will be mainstreamed in the curricula for the pilot sectors. In addition, a core module on HIV/AIDS prevention will be developed for all pilot sectors to address workplace policy issues, prevention and information related to availability and support services for HIV/AIDS. At the end of the project, training and assessment based on occupational standards will have been fully implemented in four pilot sectors, industrial maintenance, agro-processing, tourism and hospitality, and management and administration. Component C - Quality Improvement in Training Institutions (US$19.1 million, excluding contingencies) is designed to address the quality problems affecting DINET and the INEFP institutions. It comprises five sub-components: (Cl) the development and piloting of courses for teachers and management staff; (C2) the supply of relevant furniture, equipment, tools, and consumables; (C3) planningand implementation of the necessary rehabilitation of the physical infrastructure; (C4) the acquisition, development and piloting of new learning materials; and (C5) the development and piloting of student counselling and career path guidance methods, including assistance in facilitating internship arrangements w i t h industry. Critical issues of gender and HIV/AIDS are to be mainstreamed in the development of teacher/trainer programs and acquisition of learning materials, in the rehabilitation of infrastructure to ensure proper water and sanitation facilities for students, and counsellingservices to provide informationor referrals to young students seeking social and emotional support or information on career prospects. For the four selected pilot sectors, the project will fund the development and piloting of n e w learning materials, teacher in-service and pre-service training, improvement of management capacity, and relevant upgrading of teaching faalities, e.g. class rooms and workshops to respond to the new modularized training course programs based on occupational standards. Sixteen different DINET and INEFP institutions have been chosen as pilot sites for testing of the new Competency-based Training (CBT) courses, mentioned above. These schools are supposed to specialize in skills development within target industries or occupational areas, e.g. agro-processing or tourism. Priority will be given to activities that support teacher training, materials development rehabilitation of the educational infrastructure and investment inequipment targeted at the occupational areas selected for piloting. Component D - Skills Development Fund or Fundo para o Desenvolvimetznto de Compet8ncias Pvofissionais (FUNDEC) (US$ 6.4 million, excluding contingencies) is designed to promote innovation and initiatives for the improvement of quality and relevance of training and to increase access to employment-oriented TVET for underserved population groups. The component will finance small grants that can be accessed, on a competitive basis, through FUNDEC. Unlike Components B and C where re-alignment is envisaged inselected sectors and institutions, activities financed by FUNDEC are not limited to selected target sectors. Instead, the intention is to promote innovation and initiatives for the improvement of quality and relevance of training and at increasing access to 19 employment-oriented TVET courses for the out-of-school (children and adults) population inruralareas. FUNDEC consists of three funding windows. The first window is earmarked to fund capacity building and training activities offered by public providers (formal or non-formal training) who are not taking part in the pilot projects. The second window is earmarked to fund capacity building and training activities (formal and non formal training) offered by non-public providers. The third window i s earmarked to fund targeted training courses to respond to the needs of underserved groups who are located primarily inrural areas to tap or improve livelihood opportunities inthe immediate economic context. Each window has a different upper ceiling for project costs (between US$ 50,000 and US$ 250,000 per proposal depending on the window and type of provider). FUNDEC will b e managed by a small department within the PIREP Executive Secretariat. In addition to evaluating grant applications and monitoring projects financed by FUNDEC, the unit will also support potential beneficiary training institutions to develop good quality proposals - this will be inthe form of consultancy services and training. For all components, steps have been taken to ensure that transversal issues of gender equity and HIV/AIDS are appropriately taken into consideration through establishing a HIV/AIDS and gender coordination desk in the ES of COREP; developing gender and HIV/AIDS specific standards, modules and training materials; ensuring that HIV/AIDS awareness training courses are made accessible to all learners and teachers in the pilot schools and where possible, more widely in the larger network of TVET institutions; and making it a condition that FUNDEC will only provide financial support to those training providers that have developed and implemented institutional HIV/AIDS prevention and workplace plans and gender policies. Social marketing is considered crucial to the success of PIREP. Therefore, the Executive Secretariat will at the outset of the reform process launch a campaign with the purpose t o sensitize relevant stakeholders about the visions and plans of PIREP, and on a regular basis disseminate information on its achievements to the public. This will be followed up at appropriate milestones of implementation. 4. Lessons learned and reflected inthe project design Analyses of the current TVET system in Mozambique indicate its main weaknesses are the lack of stakeholder involvement in the governance and planning of the TVET system, a n d the fragmented structure of the system and its under-funding. The Government's Programa de Reforma da EducaqZo Profissional, of which PIREP constitutes the first phase, focuses on changing these conditions and testing the new system in selected sectors of the economy. The design emphasizes critical lessons learned including: (i) increasing the involvement of employers, industry representatives and civil society in the planning, design, governance and implementation of TVET as a pre-condition for a shift towards a demand-led system; (ii) developing a standards-based training paradigm intended to facilitate integration and articulation between different training schemes and in encouraging the emergence of non- formal training; (iii)devolving greater decision-making, responsibility a n d resources to the 20 management of individual TVET institutions as a means towards improving resource utilization and better aligning of training with labor market needs, hereby improving the efficiency and effectiveness of training delivery; and (iv) planning for the introduction of a diversified system for financing TVET so as to provide a stable financial basis and improve its sustainability. The design of Component D (FUNDEC) benefited from the lessons learned and successful implementation of the Quality Innovation Fund (QIF) currently in i t s fourth year of implementation under the Higher EducationProject financed by IDA. More broadly, throughout the preparation process, PIREP adhered to the following five principles. First, all program activities aim at establishing a demand-led training system that i s aligned to skill needs of selected sectors of the economy. Second, the design applies carefully conceived selectivity criteria to target economic sectors and professional occupationsfor which there is a shortage of skills and commitment from industry to embark o n a process of development and validation of occupational standards. Third, the implementation of the program envisages a gradual approach of scaling up only on the basis of learning acquired from testing the reforms primarily from the proposed impact evaluations. Fourth, the program adopted a bottomup approach whereby interventions are piloted, evaluated, and revised before moving into new sectors or institutionalizing the reforms. Finally, it i s anticipated that new external partners will conform to the PIREP vision, objectives, methodologies and above-mentioned principles. 5. Alternatives consideredand reasons for rejection As an alternative to the current project approach, it was planned initially to target only DINET technical education schools as the single largest provider in the TVET system in Mozambique. This alternative was dropped in favor of acknowledging the importance of integrating the different TVET sub-systems and the need to extend relevant TVET beyond the target group of full-time secondary school leavers. This i s consistent with the regional and international approach towards a flexible system that encourages life-long learning and skills upgrading. FUNDEC (Component D) was initially planned to restrict capacity building funds to a pre- defined range of public sector training providers instead of working through an open funding facility, accessible to a potentially wider range of training providers on a competitive basis. I I u s alternative was abandoned for the following reasons: (a) the TVET system is still at an infant stage of reform in which priorities of the reform process are still emerging, thus making an open, flexible and adaptable facility more appropriate; (b) the need for capacity building of training providers in Mozambique i s too vast and cannot be accomplished within the limited available PIREP resources. Accordingly, a competitive fund will ensure that the more dynamic segment of training providers will be given priority support. C. IMPLEMENTATION 1. Partnershiparrangements PIREP will be jointly financed by different Cooperating Partners (CPs) with earmarked contributions to the program. The total envisaged resource envelope is as follows: IDA US$ 21 30 million, GTZ US$ 2.4 million, Danida US$ 7.5 million, the Netherlands US$ 7.5 million, the Spanish Cooperation US$ 2.7 million and US$ 2.4 million through the Rede Salesiana de Forma@ Profissional. The PIREP project cost described in this PAD for the IDA and co- financing through a Trust Fund Agreement is estimated at US$37.5 million over a five year period. The financing package i s broken down as follows: US$30 million from IDA and US$ 7.5 million from the Netherlands. Fiduciary responsibility and accountability for the supervision of the IDA Credit and Trust Fund Agreement will rest with IDA. It is expected that other CPs with existing, newly signed or forthcoming support to the sub-sector (mentioned above) will adhere to the PIREP's vision, methodology, joint review, monitoring mechanisms, and to the investment framework. In light of this, the Government has committed itself in the Letter of TVET Sector Policy of October 2005 to negotiate new cooperation projects as part of PIREP for the next five years, and REP for longer term support. Inaddition, COREP will invite CPs to sign Memoranda of Understanding ensuring alignment of present and future support to W E T in Mozambique to the objectives and principles of PIREP. In order to operationalize the principles in the context of the implementation of PIREP, Decree No. 29/2005 establishes the AnnualWork Planand Budget (AWPB) as the guide to prioritize and jointly monitor the implementation of annual investments and activities. In addition to partnership arrangements with CPs to align external support, the PIREP, through COREP, will include three distinct types of partnership agreements. Firstly, a partnership agreement i s intended to be signed with industry representatives from the four PIREP pilot sectors to ensure that the standards setting process and validation of occupations receives their full support and participation. Secondly, a partnership agreement with pilot training institutions will be signed to ensure full commitment to the implementation of PIREP and adherence to the principles of demand-led training. Thirdly, partnership grant agreements are mandatory for training providers, industry groups, NGOs and civil society organizations who are recipients of FUNDEC grants to ensure commitment to the objectives and outcomes expected from the program. 2. Institutional andimplementation arrangements Until the National Training Authority is established (Autoridade Nacional da EducapTo Profissional ANEP), PIREP will be implemented and managed through an (interim) 3-level institutional structure which was recently approved by the Council of Ministers (Decree No. 29/2005). This 3-level structure consists of: (i) political level which is known as the a Cornmiss& Interministerial para a Reforma da Educaqgo Profissional (CIREP), composed exclusively of 7 Ministers from relevant portfolios and chaired by the Prime-Minister. This body i s responsible for the approval of policies which will guide reforms performed by the lower level bodies; (ii) an executive level, known as the Comrnissao Executiva de Reforma da EducaGao Profissional (COREP), which is composed of 12 members, of which 6 are from government and 6 are from the private sector. The government representatives include the Minister of Education and Culture (who chairs the body) and five other high level officials from four different Minisbies. The private sector representatives include 2 from the productive sector, 2 from the trade unions and 2 from organisations of other civil society. The function of COREP i s to translate the policies approved by CIREP into strategies, action 22 plans and activities, to set the rules and guidehes by which the system i s regulated and to provide for periodical monitoring of the implementation process and (iii)management a and technical support level, performed by the so-called Executive Secretariat (ES) which i s responsible for the implementation of the daily activities included inthe AnnualWork Plan and Budget for PIREP and for coordinating activities across stakeholders and institutions. The ES comprises one central unit and five departments. (i) A central department will be responsible for general coordination of the implementation of PIREP, including activities relating to the monitoring and evaluation of activities, objectives and targets a n d coordination with DINETDNEFP and other stakeholders. Specialists o n Institutional development, Gender/HIV/AIDS and Monitoring and Evaluation will be part of the team in the central unit. (ii) procurement department will be responsible for contracting goods A and services. (iii) A financial management department will be responsible for overall financial control and accountability. (iv) An infrastructure department will be responsible for coordinating infrastructure rehabilitation, upgrading and establishment of water and sanitation facilities in pilot institutions. (v) A qualifications and training department will b e responsible for managing the core regulatory functions of the system, the development and establishment of a national system of qualifications and occupational standards. (vi) A skills development fund (FUNDEC) department will be responsible for the administration, management and quality control assurance of funded proposals. It should also be highlighted that the ES'smainresponsibility will be to coordinate activities across stakeholders and institutions, facilitate the procurement of goods and services (based o n the AWPB), monitor physical and financial progress and measure and report on the overall impact of the PIREP. The actual implementation of activities will be done by DINET, INEFP, NGOs, trade associations and, most importantly, training institutions. Staffing of the ES will remain lean and would not be expected to surpass 20 full-time specialists at the height of this first phase of the overall reform program (See Annex 6 Implementation Arrangements for visual representation and roles and responsibilities of all stakeholders expected to be involved inthe implementation of PIREP). The ES will be assisted by an Advisory Group (AG), comprised of the representatives of the Cooperating Partners who provide technical and financial support to the training sector as well as other relevant representatives and specialists. The mainpurpose of the AG will be to provide technical and advisory support o n an ad-hoc basis at the invitation of the Director of the ES. For the purposes of designing the PIREP project outlined in this PAD, the Government created an Executive Secretariat inJuly 2004 through a Memorundo de Entendimento between the Ministers of Education, Labor and Higher Education and the CoxjederapTodas Associup7es Econdmicas de Mopzbique (CTA). The Secretariat has a full time staff of three to coordinate activities across Ministries, stakeholders and CPs. The Secretariat received financing from a PHRD Trust Fund 53734 and contributions from TVET Cooperating Partners inthe form of leasing of physical space, equipment and consumables. All procurement and financial management activities for the PHRD TF53734 have been carried out by the Department of Administration and Finance (DAF) in the Ministry of Education and Culture (MEC), which 23 is also handling the ESSP (IDA Credit 32710) and the HEP (IDA Cr. 36090) in coordination with the secretariat. In addition, short term consultants for procurement and financial management were contracted by the Secretariat to design and establish the appropriate systems in the Executive Secretariat (ES). It is expected that the Secretariat will be transformed into the ES in this program where full and part time specialists will be located in various departments to coordinate the implementation, procurement and financial managementof the PIREP 3. Monitoring and evaluationof outcomeshesults The Monitoring & Evaluation Plan (MEP) dl be used as the principal tool to measure progress toward achievement of PIREP objectives, milestones, outcomes and deliverables. As outlined above, the MEP consists of the set of performance indicators that will be used to manage processes and track progress throughout project implementation. Detailed reference sheets for each indicator provide all details related to the indicator including its precise definition, the plan for data collection and the plan for data submission to the ES. Four larger scale performance evaluation studies are included inthe MEP. The first i s a series of tracer studies aimed at assessing the impact of the project over the medium- to long-term. The other three will evaluate (i) effectiveness of FUNDEC, (ii) the progress with gender integration and (iii) progress with incorporating the HIV/AIDS prevention policy a n d mainstreaming its content, respectively. It is anticipated that additional evaluations will be identified over time and conducted as needed. The MEP describes the overall performance management process, the responsibilities of various players (ES M&E specialists, project beneficiaries, etc) inthe process and provides a master schedule that the ES M&E team can use to manage its activities. It also describes the reporting and program review process for the project and links the data collection schedule to these key annual events. In addition, it emphasizes the importance of data quality a n d recommends ways in w h c h the M&E team can assess data quality and work with project beneficiaries to safeguard against data quality problems. 4. Sustainability Interms of financial sustainability, the GoM has demonstrated its commitment to the REP by continuing to increaseits allocation to the TVET sub-sector (from US$ 4.6 millionin2002 to US$ 5.1 million in 2003) and by covering additional recurrent costs associated with n e w training programs under the COREP structure. It should also be highlighted that, initially, some operational costs of COREP will be fmanced under PIREP to support the start-up of the reform. Additional resources are expected to be available for TVET in a sustainable manner from the second phase of REP (2011-2016) onwards, after a new financing framework has been developed and implemented. In addition to financial sustainability, it is important to outline the steps introduced to ascertain technical and implementation capacity throughout the preparation process. Preparation of PIREP has followed a participatory planning process that included Government technical officials from DINET/MEC and INEFPMNTRAB, representatives from industry and civil society and representatives from international agencies, including the World Bank, GTZ, Danida, Spanish Cooperation, Salesians, Portuguese Cooperation, 24 Italian Cooperation and the Netherlands. The PIREP's overall design, components and activities were planned in a series of joint missions over a 14-month period from August 2004 until October 2005. In between the joint missions, the PIREP Executive Secretariat conducted several regional workshops with industry, training providers and provincial technical officers from MEC and MINTRAB to share component design and objectives, select economic sectors and occupations and increase the likelihood of participation and ownership from industry and training providers. The extensive participatory approach was intended to broaden ownership and maximize the Zlkelihood of effective implementation, thus ensuring that the reforms take root. 5. Critical risks and possiblecontroversialaspects 5sks Risks Mitigation Measures Risk Rating with Mitieation o project development obiective Government fails to raise - Budget lines to cover the additional H dditional recurrent costs operational costs following PIREP will be eriving from the reform incorporated inthe budget for the MEC andMINTRAB. The commitment willbe a pre-requisite for approving the Annual Work Plan& Budget (AWPB). COREP i s not de facto assigned - A Decreeestablishing the institutional set M l e role and responsibility upwas approvedprior to the PIREP nvisaged inthe DecreeNo. 29/ appraisal. PIREPhas the support of the 005 Government authorities, including the Prime Minister and an inter-ministerial committee of seven (CIREP). Appointment of COREP members andapproval of its internalrules for operation will be conditions for negotiations. Government reverts back to a - Government's commitment to the reforms H upply-led approach to planning is outlined inthe Decree, Letter of Sector nddelivery of training Policy and a Development Credit Agreement. Inaddition, pressure from non-Government COREP members will help to mitigate the riskof revertingto the old system. Stakeholders outside of - The PIREP design envisages abottomup M ;overnment are not paying the approach whereby sectors of the economy xpected attention to the W E T are selected not only o nthe basis of growth eform process but also willingness andcommitment to participate instandards development and validation. Partnership arrangements will be drafted andsigned between COREP and industry representatives inthe pilot target sectors to ensure fullparticipation. 25 - The labor market is not - PIREP incorporates a comprehensive M respondingpositively to the monitoring and evaluationframework to reforms learn as the implementation i s taking place andtake corrective action, if necessary. In addition, careful selectionof industry representatives willbe made to ensure standards are up to date and validated by industry associations. Introductionof decentralized TVET will furthermore allow adjustment to prevailing labor market conditions. -Important cooperating partners - A Memorandum of Understandingwill M are not aligningtheir be agreed with Government to align interventions with REP external support to the PIREP objectives, methodologies andfinancingframework. - That a fundingmodelmay fail - PIREP includes adequate resources to H to be accepted thereby bringing carry out consultative meetings to discuss into question the long term financing options. sustainability of the reformed system -There is no strategy inplace to - Covenant inthe DCA requiring the M gradually phase out the current, Borrower to submit a plan, midway inthe centralized, supply-led, subject- implementationcycle, to phase out existing based TVET, especially at the non-relevant training activities. participatingpilot institutions - Sensitization o n HIV/AIDS i s an -The AIDS pandemic negatively integrated part of PIREP and steps will be M impacts on the humanresources taken to develop an AIDS policy for all available for implementationof training institutions. Moreover, each PIREP, limiting the effects of the component incorporates HIV/AIDS training prevention andmitigation activities. ITO comuonent results Component A - Stakeholders not interested in - Government's commitment to the reforms H taking part inCOREP. i s outlined inthe Decree, Letter of Sector Government, through CIREP Policy and a Development Credit might over-rule or ignore the Agreement. AnnualWork Program & decisions andrecommendations Budget, agreed with stakeholders, willbe emanating from COREP on how used as the tool to finance TVET activities. the W E T system should be Should the AWPB be changed drastically, reformed CPs, includingIDA, willbe unable to continue financing commitments. Component B: - Disagreement o nmodalities and - The PIREPprovides resources for H desim of national qualification extensive technical support, national and 26 :ramework or o n the nternational, to accompany launching of .estructuring/redesign of the :hereform as planned. Several CPs have nstitutionalbasis where school dedged their support to contract needed :oles are re-defined ong-term technical assistancein nstitutional set up, includingdeveloping a iommonqualifications framework. .Insufficient interest from the .The PIREPprovides resources for ?reductive sector in the :xtensive technical support, national and ievelopment of occupational mtemational, to accompany launching of standards :he reform as planned. Initialselectionof :arget economic sectors already used potential participation as one of the criteria for inclusion. .Academic subjectsintechnical .The COREP ESplans to establish linkages ?ducationare not revised thereby with the Directorate of Secondary zonstraining improvement in Education (MEC) to determine how internal efficiency indicators. zhanges inthe revised general secondary xrricula canbe incorporatedinthe TVET CBT curricula. Component C: - Insufficient capacity to train - Given the new approach to training, the technical teachers and pilot PIREP seeks to begin the alignment of the coursesbased o n occupational system usinga targeted andbottom up standardsthat havebeen approach whereby activities willbegin in developed selected sectors andoccupations. Inorder to ensure the program takes root at the training institution level, PIREP plans to establish partnership arrangements to determine roles, responsibilities and expected outcomes. Inaddition, PIREP envisages Technical Assistance from CPs to deepen advisory services inareas that may arise duringimplementation. Finally, current TVET support by several partners is concentrated o n teacher/trainer support. - Delays inrehabilitation, both - Modules will be introduced even if during the designor inthe rehabilitation of infrastructurehas not been rehabilitation phase, therefore completed and assistance will be provided preventingthe introductionof to pilot institutions to ensure courses are complementary activities offered throughout the rehabilitation envisaged inthe program process. Component D - Intended beneficiaries of - FUNDEC has incorporated extensive FUNDEC unable to prepare lessons learned from the Quality proposals to obtain grants Improvement Fund (QIF) which is currently ongoing as part of the Higher EducationProiect financed bv the IDA. 27 QIF staff participated inthe design of FUNDEC. Technical Assistance is incorporated inthe design of FUNDEC to support institutionsinthe development of proposals. Finally, guides o n quality improvement, relevance and institutional assessmentwere prepared to self-guide training institutions inthe development of proposals. - Insufficient capacity to handle - FUNDEC provides resources for close M the financial support provided by supervision of providers andincorporates the Fund strong linkages with DINET/INEFP to ensure they assist with implementation efforts ininstitutions under their auspices. -Sub-project financed by -Steady fine-tuning of implementation M FUNDEC may not contribute to modalities anddevelopment of appropriate achievement of PIREP's TORand assessment and oversight development objective mechanisms for approval of sub-projects to be funded by FUNDEC will ensure that the financed sub-projects are inline with the PDO. Overallriskrating M 6. Loadcredit conditions and covenants During the Appraisal Mission in October 2005, it was agreed to include the following covenants as part of the DCA: (a) The baseline data to measure progress on the Development Objectives (DO) is expected to be available by October 1,2006 (b) Prepare an Annual Work Plan and Budget inform and substance satisfactory to IDA on or about March 1of eachyear for a 12 month period starting the following January 1. (c) A draft proposal with a transition strategy to convert CIREP/COREP into ANEP will be submitted to IDA not later than 30 months after Credit effectiveness; (d) A draft proposal with a transition strategy to transform the pilot schools to only offer a competency-based curriculum will be submitted to IDA not later than 24 months after Credit effectiveness; (e) A draft proposal with a strategy to align DINET and INEFP's roles, responsibilities a n d institutional arrangements, both at the national as well as provincial and districts levels, to the envisaged decentralization context will be submitted to IDA not later than 36 months after Credit effectiveness; and (f) A draft proposal with a strategy to ensure the techrucal, institutional and financial sustainability of project activities at the end of the pilot phase in2010 will be submitted to IDAnot later than36 months after Credit effectiveness. 28 D. APPRAISALSUMMARY 1. Economic andfinancialanalyses During 1996-2002 period, the Mozambique economy experienced important structural changes. The manufacturing and mining sectors almost doubled their share of GDP (from 9 percent to 18 percent), while the share of the agriculture sector declined f r o m 82 percent to 72 percent. As the economy moved from labor intensive sectors to capital intensive ones, demand for labor also changed from heavy reliance on the unskilled workers to more highly skilled labor. The labor supply, however, has been slow to respond to these structural changes. The shift towards more skilled labor triggered a sharp increase in the returns to post-basic education and beyond, particularly with respect to workers with little or no education and skills. Inlight of the positive performance of the economy and the growing need for medium to high skilled workers, the analysis seeks to determine whether there i s a case for public intervention in the TVET sub-sector. Using data from two cross sectional national household surveys (1996/97 and 2002/03) and a series of Government and technical documents, the analysis explored the ways in which the educational system influences the incentive framework to encourage or discourage further education and training, whether public or private. The economic analysis sheds light on the trend and magnitude of private returns to technical and vocational education by estimating the probability of employment as well as the wage premium. Finally, a unit cost analysis was carried out to estimate whether the benefits (returns) to skills (TVE training or general education) offsets the costs. In general, the household survey trend analysis indicates that, on average, workers with more than 10 years of schooling up to 12 years command returns almost twice larger than unskilled workers (with 5 to 10 years of schooling) and are more likely to be employed by the formal sector. Inaddition, the findings indicate that, even after controlling for individual and job type characteristics, graduates from TVE institutions command a higher market wage premium compared to graduates from the General Secondary Educationalsystem. These results are even more remarkable when applied to the industry and services sectors, which have been by far the two most dynamic sectors of activity in the Mozambique economy. Industry and services pay in 2002 a premium about three times higher than agriculture, and about more thanone and a half higher than trade, while in 1996,the returns inthe various sectors were quite similar. The economic and occupation sectors selected for investment, namely management and administration, industrial maintenance, agro-industry and tourism are included in these two broader sectors and match with the industrial changes and growth prospects for the cowntry. It should be noted that, in addition to economic criteria, selection of economic sectors included the following considerations: (i) demonstrated skills shortages/trainingneeds; (ii) demonstrated interest from stakeholders to participate; (iii) addressing equity concerns (gender, regional disparities); a n d (iv) scope for public-private TVET provision in a balanced manner where public TVET i s not crowding out private TVET. Regional consultation with employers, industry and stakeholders were carried out from March-August2005 to discuss the criteria and make the final selection. See Annex 4 for a list of selection criteria). 29 The financial analysis indicates that while the Government has been considering TVET more and more as a priority, among sub-Saharan countries, Mozambique has still one of the lowest spendmg in TVET. In 2002, the Government allocated 0.55 percent of total public spending to the TVET system and 0.17 percent of GDP, while in 2003 the TVET system spending represented0.78 percent of total public spending and 0.20 percent of GDP. Source: Conta Geral do Estado 2004 Y (2003) Y+l Y+2 Y+3 Y+4 Y+5 GDP nominal inbillof MTS 102749 125776 144771 165447 190264 218804 GDP nominal growth rate 22.41 15.10 14.28 15.00 15.00 GDP real growth rate 7.80 7.20 7.70 7.40 8 8 MTS per US$(Ex rate) 23895 22600 24000 25200 26460 27783 Public exp / GDP (YO) 26.50 23.70 25.60 24.40 23.11 21.89 Revenues 1GDP (YO) 12.90 12.30 13.20 14.00 14.76 15.55 EducationExp. growth rate 30 25 20 15 10 Student unit cost growth rate 40 30 20 10 10 Student number growth rate 5 5 5 5 5 Y (2003) Y+l Y+2 Y+3 Y+4 Y+5 EducationExp. /GDP 4.62 4.91 5.33 5.60 5.60 1 Education Exp. /Public Exp. 1 17.85 121.19 21.30 23.47 24.78 25.02 TVE 1GDP 0.13 0.17 0.20 0.21 0.21 0.20 W E / Public exp 0.49 0.74 0.78 0.90 0.92 0.96 W E 1Education Exp. 1 1 2.75 3.47 3.67 3.83 3.70 3.83 30 W E / EducationExp. (noHE) 3.22 4.07 4.30 4.49 4.34 4.48 TVE / Revenue 0.98 1.39 1.48 1.53 1.40 1.32 W E T / GDP 0.20 0.26 0.30 0.33 0.32 0.32 TVET 1Public exp 0.78 1.12 1.20 1.39 1.44 1.51 TVET / EducationExp. 4.35 5.29 5.66 5.92 5.79 6.02 TVET / EducationExp. (no HE) 5.10 6.20 6.63 6.94 6.79 7.06 W E T / Revenue 1.56 2.11 2.28 2.37 2.20 2.07 Cost beneficiaries 15 years interval: cost 5 years interval: cost 10years (million) year 1(2003) interval: cost per students per students per students Total 45 113,943 1,672 1,039 644 Average Industry Services Male Female Male Female Male Female ( W E el & bas -EP2 & ESG1) 125 80 242.9 155.8 205.9 132 (TVE med- ESG2) 134 86 258.7 166.3 216.5 139.9 2. Technical The combined investments under the four components of PIREP will be instrumental, firstly inestablishing the most important key elements of the TVET system (governance structure, outcome-based system of occupational standards, modularized curricula and external assessment and certification), secondly in starting, in a targeted manner, the improvements inquality andrelevanceof TVET course programs andthirdly inaddressingthe problems of access and equity. Detailed implementation arrangements and timetables, schedules for 31 procurement of goods and services and for monitoring and evaluation are included in a comprehensive Operational Manual developed by the PIREP interim Execuitive Secretariat. 3. Fiduciary Procurementissues Procurement for the proposed program, specifically the part of PIREP to b e financed by an IDA Credit and a Trust Fund to be made available by the Netherlands, will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated M a y 2004, and the provisions stipulated in the Legal Agreement. The general description of various items under different expenditure categories are described below. For each contract to be financed by the IDA Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Government and the Bank Project Team in the Procurement Plan, which will also be incorporated into the AWPB. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. By negotiations, a draft General Procurement Notice (GPN) will be prepared and submitted to the Bank for review and approval. The Bank will arrange for its publication in the UN Development Business (UNDB). The GPN will give information on International Competitive Bidding (ICB) procurements and major consulting assignments to be financed under the project. The proposed program will be implemented by a procurement unit within the ES that will take advantage from staffing and experience gained from other Bank financed project, including the ESSP (IDA Credit 32710) and the HEP (IDA Cr. 36090). The procurement unit will be staffed by a Procurement Specialist and a Procurement Assistant with qualifications and experience acceptable to the World Bank. The procurement department within the ES is beingestablished and its procurement capacity cannot be assessedfor the time being. As an interim measure, pending recruitment of the Procurement Specialist, the PIREP Executive Secretariat has contracted the services of a short-term consultant to set in motion the required procurement planning and arrangements inreadiness for project implementation. Work being carried out includes the preparation of a procurement manual including a detailed civil works procurement manual and an 18-month procurement plan. The PIREP Secretariat, which is physically located in Maputo, is expected to be converted into the PIREP ES. Financial management issues The ES's financial management department, under the direction of the Financial Management Specialist, will maintain records and accounts to reflect, in accordance with sound accounting practices, the operations, resources, and expenditures of the project. The 32 department will set up and maintain a project-specific accounting and a financial management system that is adequate to provide complete, accurate and timely information regarding program resources and expenditures. The department will be responsible for designing appropriate Financial Monitoring Reports (FMRs) which set forth actual sources and uses of funds for the program; describe physical progress inproject implementation and explain variances between the actual and previously forecast implementation targets; and set forth the status of procurement under the project and expenditures under contracts financed out of the proceeds of the IDA credit and IDA-managed Trust Funds. It was agreed that a Financial Management Specialist with qualifications and relevant experience acceptable to IDA will be appointed to lead all financial management and accounting operations of PIREP (See Annex 6 Implementation Arrangements). The Finance Management Specialist will be assisted by qualified and experienced accounting and administrative staff. The levels and numbers of such staff would need to be determined as the situation dictates. Varying levels of training would be required infinancial management and government accounting; information systems and computer applications; and procedures relating to utilization of funds. Given that the ES and its financial management department have yet to be formally established, the proposed PIREP does not satisfy the Bank's minimum financial management requirements. To ensure full compliance before Credit effectiveness, a time- bound action plan was agreed with the PIREP Executive Secretariat and officials from the Department of Administration and Finance (DAF)inthe Ministry of Education and Culture (MEC) to ensure a financial management system i s designed by negotiations and operationalized immediately thereafter by a financial management specialist, also to be appointed before negotiations. Once this time-bound action plan is carried out successfully, it is believedthat the project will have developed an accounting system that will be able to produce the required level of financial management reports ina timely fashion. To date, all financial management arrangements for the PHRD TF 53734, established to prepare the PIREP project, have been carried out by DAF/MEC, which is also handling the ESSP (IDA Credit 32710) and the HEP (IDA Cr. 36090). This has been done in coordination with the PIREPExecutive Secretariat which is the entity responsiblefor leadingthe technical and operational design of PIREP. It was agreed that the Financial Management Specialist to be appointed for PIREP will receive training from DAF/MEC staff. Inthe meantime, andas aninterimplanningmeasurependingthe recruitment of aFinancial Management Specialist, the PIREP Executive Secretariat contracted the services of a short- term consultant to design the required financial management arrangements to be ready for project implementation. Work completed before negotiations includes a financial procedures manual and a chart of accounts, identification and installation of suitable accounting software, and documentation of the proposed internal controls for the project including TORSfor Audit reports. A time bound Action Plan was agreed with PIREP and DAF/MEC officials, and work has commenced, to address the weaknesses noted above and ensure the PIREP ES complies with 33 the Bank's financial management procedures by Credit effectiveness. Once t h s time-bound Action Plan i s carried out successfully, it i s believed that the project will have developed a n accounting system that will be able to produce the required level of financial management reports in a timely fashion. The establishment of the ES and the appointment of a financial management specialist were conditions for negotiations, both of which were met in February 2006. The project will have two separate Special Accounts (one for the IDA credit and one for the Trust Fund) to be managed by the ES. These Special Accounts would be operated in accordance with Bank's operational guidelines. Accounts of the program will be audited annually in accordance with appropriate auditing principles consistently applied. In addition to the audit reports, the auditors will be responsible for preparing a management letter giving comments and observations, and malung recommendations for improvements on accounting records, systems, controls, and compliance with financial covenants. The financial management arrangements are explained inmore detail inAnnex 7. 4. Social The social assessment sought to deepen information o n the demand, receptiveness and the potential impact of PIREP using a sample of pilot and non pilot training institutions. The assessment relied o n information from secondary sources (documents, studies, government policies, etc) a well as primary information from a field research conducted inJune/July 2005 inMaputo City and Province, Sofala Province and Cab0 Delgado Province. The research methodology includedstructured, semi structured and focus groups interviews of a sample of stakeholders. The solutions to improve the quality and relevance of the TVET system given by the stakeholders interviewed, especially at the training institution level, were often of a supply- led nature (more schools and classrooms, more equipment and didactic materials, more training for teachers and directors, etc.) rather than demand-led. Issues such as strengthening the partnership with the productive sector and curriculum reform were also mentioned but often they were not at the top of the list of possible ways to radically change the system. The research team, however, does not believe that, for instance, building new technical schools or improving the conditions of the existing network or training of the current teachers, etc. would fundamentally and structurally change TVET from a supply-led to a demand-led system. What i s needed i s not a "revamping of the system as is" but a change of paradigm where the role of the productive sector in partnership with the TVET training institutions becomes a critical component of the reform process. From the information provided by stakeholders, the team was able to identify some areas to reflect upon which are more in line with a demand-led approach: (i) strengthening of the partnership/ articulation between TVET training institutions and productive sector through the development of an overall framework cooperation agreement which can be the basis for specific agreements at the provincial level between TVET institutions and private 34 companies; (ii) involving the productive sector in all phases of the TVET reform process a n d inPIREP activities, particularly in curriculum reform, course design, definition of course/ module content, definition of training needs, graduate competence profiles, school performance standards, course evaluation standards, etc. (iii) introducing courses that are demand-led such as tourism and hotel management and phasing out of those that are outdated; (iv) promoting the acquisition of skdls aimed at small business creation a n d management; (v) creating courses that motivate women to enroll inTVET institutions along with incentives to stay in school and complete the courses; (vi) introducing a systematic approach to integrate HIV/AIDS prevention and mitigation efforts inTVET institutions; (vii) experimenting with alternative models of training (e.g., INEFP's Electvotemia inMaputo or the rural oriented Self-Employment Promotion Center of the NGO Progresso in Niassa); (viii) reversingthe ratio of theoretical vs. practical content inall courses, giving emphasis to practice through quality internships incompanies and the use of update equipment and n e w technologies in schools; (ix) hiring of teachers with practical professional experience in the technical area they teach and training them pedagogically as needed; and (x) decentralizing the TVET system so that TVET training institutions are empowered to make administrative and technical decisions that make sense at the local level. 5. Environment As part of its efforts to transform Mozambique's TVET training system, PIREP will support the rehabilitation of physical infrastructure (12 teaching facilities and related water supply and sanitation systems; an additional 4-5 institutions belong to the Salesian network and are not in need of rehabilitation; and 1 institution will be rehabilitated directly by the Portuguese Cooperation and the Italian Cooperation). Recognizing that these rehabilitation activities are likely to incur negative environmental and social impacts (air, soil and water pollution, loss of vegetation, public health impacts from dust, noise, traffic accidents a n d unsafe asbestos disposal), PIREP has prepared a n Environmental and Social Management Framework (ESMF). This document has been prepared in consultation with numerous stakeholders such as various sector ministries, communities and the general public.They welcomed the rehabilitation activities as these would contribute to a hygienic learning environment and thus attract more students. The ESMF outlines the steps of the environmental and social screening process as well as the institutional responsibilities for its implementation and the related environmental training needs and cost estimates. The results of this screening process will determine the scope of environmental work needed for the rehabilitation activity at hand. Implementation of the ESMF will be the responsibility of the Environmental Focal Point (EFP) located in the Execuitive Secretariat of COREP. The EFP will coordinate hisher activities with the relevant representatives of the (i) Directorates of the Ministry for the Coordination of Environmental Affairs (MICOA); (ii)Technical Services of the Municipalities where teaching facilities will be rehabilitated; and (iii) COREP's Execuitive Secretariat. To ensure effective implementation of the ESMF, PIREP will support environmentalmanagement training for the EFP; selected members of the Technical Services of the Municipalities, and, as necessary, members of the Provincial Directorates of MICOA and other agents as outlined inthe ESMF. 35 The ESMF includes an Environmental Management Plan (EMP) a n d environmental monitoring indicators in Section 9, and a summary table of the EMP in A n n e x 7. The EMP outlines the institutional responsibilities for the implementation of the proposed mitigation and monitoring measures, their timing and cost estimates. This section also lists environmental and social indicators (i.e. compliance with the environmental guidelines for contractors, safe disposal of asbestos, and the number of people provided with environmental training to implement the ESMF). The EMP and the environmental and social monitoring indicators are included in the project's Operational Manual (OM).Inaddition, the OM includes Environmental Guidelines for Contractors (Operational M a n u a l Annex 5 of the ESMF) to ensure that construction-related impacts are mitigated appropriately. To ensure effective environmental management of the rehabilitated teaching facilities and related water supply and sanitation systems during their operation and maintenance, the maintenance manuals to be prepared by PIREP will include a section on effective environmental management of these facilities; provisions in this regard h a v e been made in the ESMF. 6. Safeguard policies PIREP has triggered OP 4.01 Environmental Assessment and OP 4.12 Involuntary Resettlement; the safeguard screening category is S2, and the envirorunental screening category is 8. Accordingly, the project has prepared an Environmental and Social Management Framework (ESMF) to address potential negative environmental issues as discussed above, and a Resettlement Policy Framework (RPF) to address potential negative social impacts related to land acquisition or impact on livelihood. Both documents have been disclosed, in Mozambique o n September 15, 2005, and at the Bank's Infoshop o n September 28,2005. The ESMF includes an Environmental Management Plan (EMP) which includes support for (i)environmental management training for the Environmental Focal Point located in the Execuitive Secretariat of COREP; selected members of the Directorates of the Ministry for the Coordination of Environmental Affairs (MICOA); representatives of the Technical Services of those Municipalities where teaching facilities will be rehabilitated, and other agents, as outlined in the ESMF; (ii) the preparation of an environment section for the maintenance manuals to be prepared by PIREP for the rehabilitated teaching facilities to ensure their effective environmental management during operation and maintenance; (iii) the preparation of separate EA reports, if necessary. The RPF outlines the policies, principles and procedures to be adopted in the event that people lose their land and/or livelihoods as a result of future rehabilitation activities. The overall responsibility for the implementation of the RPF will be with COREP. Safeguard Policies Triggeredby the Project Yes No Environmental Assessment (OP/BP/GP4.01) [XI [I Natural Habitats (OP/BP 4.04) [I [I Pest Management (OP 4.09) [I [I Cultural Property (OPN11.03, beingrevised as OP 4.11) [I [I 36 Involuntary Resettlement (OPBP4.12) [XI [I Indigenous Peoples (OD 4.20, beingrevised as OP 4.10) [I 11 Forests (OP/BP4.36) [I [I Safety of Dams(OPBP4.37) [I [I Projects inDisputed Areas (OP/BP/GP 7.60)" [I [I Projects on International Waterways (OP/BP/GP 7.50) [I [I 7. Policy Exceptions andReadiness This project complies with all applicable Bank Policies. ~~ *By supporting the proposed project, the Bankdoes not intend to prejudice the final determinationof the parties' claims onthe disputed areas. 37 TECHNICALANNEXES Annex 1:Country and sector or programbackground Annex 2: Major related projects financed by the Bank and/or other agencies Annex 3 A: Results Framework & Monitoring Annex 3 B: Performance Data Table Annex 4: Detailedproject description Annex 5: Project costs Annex 6: Implementationarrangements Annex 7: Financial management and disbursement arrangements Annex 8: Procurement Arrangements Annex 9: Economic and Financial Analysis Annex 10: Safeguard Policy Issues Annex 11:Project Preparation and Supervision Annex 12: Documents inthe Project File Annex 13: Statement of Loans and Credits Annex 14: Country at a Glance Annex 15: M a p Annex 16: Decree No. 29/2005 Annex 17:Letter of Sector Policy 38 Annex 1:Country and sector or programbackground 1. Although the Mozambican economy continues to grow strongly and fairly stable with a real growth rate in the magnitude of 9-10 percent, most Mozambicans still live in poverty. The key elements of the Action Plan for Reduction of Poverty, PARPAII, are economic growth achieved through public investment in human capital and productive infrastructure, and institutional reform to improve the climate for private investment. As regards education, the PARPAIIreaffirms the Government's commitment to securing access to primary education for all. However, the importance for overall socio-economic development of other types and levels of education is also emphasized, including technical and vocational education especially at elementary level. 2.. The Country Assistance Strategy 2004-07 (CAS) indicates that the Bank is prepared to enter into a credit agreement to finance an integrated Technical and Vocational Education and Training (TVET) sector reform program. The project i s envisaged as a means to improve access to post-primary education and to 'increase graduation of Mozambicans with the skills, practices, and attitudes needed to fill technical positions, and create value-adding knowledge and innovation in production.' To support the preparation of the project, an Economic and Sector Work (ESW) was conducted in2004 to identify key issues and strategic options for the reform of TVET. Trends in post-primary education 3. Although access to primary education has improved significantly, it is still less than one-third of an age group that reaches EP2, and less than 10 percent that makes it to EGS1.5 N o t more than 2-3 percent of an age group completes 12 years of education. Girls have a significantly lower completion rate than boys. A s a result of higher access to primary education there is a mounting pressure o n the GoM to expand the capacity of secondary education as well. At the moment, access to secondary education i s highly biasedinfavor of urban youth, especially those from the southern zone (Maputo-Matola). At its present capacity, the TVE sub-system provides education opportunities for approx. 12 percentof the EP2 graduates, or approx. 10,500 young people, every year. Labor market context 4. More than 90 percent of the total labor force of approx. 9 million depends on the informal sector for its subsistence. By far most of the informal sector employment i s related to agriculture. An estimated 500,000 people are employed in the formal sector, public and private. Interms of employment large enterprises dominate the formal sector, while small enterprises (1-9 employees) dominate interms of number of registeredenterprises. 5. Almost one-quarter of all jobs in the formal sector are found in trade/commerce, while some 40 percent are engaged government services such as education, health and general public administration. Employment seems to be stagnating in the private formal 5The formal educational system inMozambique i s structured as follows: lower primary level (EP1) which includes Grades 1-5; upper primary level (EP2), which includes Grades 6-7; lower secondary level (ESGl), which includes Grades 8-10; andupper primary level, which includes Grades 11and 12. Technical and Vocational education is divided into three levels, elementary, basic and medium/intermediate level, corresponding to EP2, ESGl and ESG2levels, respectively. 39 sector with the exemption of some few areas such as tourism, processing of forestry products, agriculture, and manufacturing of certain specialized items. Fast growth has especially been experienced by industries with strong foreign investment, e.g. the so-called mega-projects. 6. Overall, the Mozambican workforce is very poorly educated and has limited skills. Half of the population has no education at all or only basic literacy skills, while slightly above 40 percent leave the education system with primary education. Merely 7.5 percent have achieved secondary or tertiary education and only 0.5 percent of the populationhas a post-secondary degree. Access to education is highly unequal with significantly less chances for girls and students inrural areas. Employment opportunities inthe formal sector as well as salaries increase with the level of education. Graduates from technical schools earn, on average, more than those from the general education system. 7. Appropriately skilled and qualified workers are inhigh demand by the Mozambican economy. There are indications that up to two-thirds of the workforce in the formal sector are qualified or semi-qualified, indicating a marked need for training opportunities. Only scattered information, however, is available on specific skills and qualification needs. Although TVE graduates are easily absorbed in the labor market, enterprises complain about a lack of relevant skills of graduates. Enterprises cope with this problem differently. Large enterprises utilizing state-of-the art technology seem to be ready to invest inin-service training. However, h s i s not the case for the many medium-sized and small enterprises. Lack of financial incentives to train and fear of loosing employees after training are important reasons for the reluctance of companies to invest in training. In the informal sector, traditional apprenticeship appears to be the common mode of skills transfer. An assessment of TVET 8. TVET in Mozambique comprises different public and private provider systems a n d is offered as formal, non-formal or informal training. Formal technical and vocational education (WE) provided by the National Directorate of Technical Education (DINET) in the Ministry of Education and Culture (MEC), some other ministries and few private training institutions i s by far the largest sub-system, providing educational opportunities to some 13-14,000 young people every year. Ministry of Labor (through INEFP), NGOs a n d churches offer non-formal vocational training to different target groups, mainly school leavers without alternative educational and economic options and other marginalized groups inthe labor market. A private training market, albeit still at aninfant stage, is slowly developing, serving school leavers, companies whch send their staff to upgrading training programs and other target groups who are able to afford commercial tuition rates. Employer-based staff training can be found mainly in large and mega projects and, as traditional apprenticeshp, inthe informal sector. 9. Access to training is very l o w and largely concentrated in Maputo city and Maputo province. Only recently has the MEC embarked o n broadening lower level TVE offers inthe rural areas. Girls are underrepresented in the entire TVET system. Not more than 25 percent of all TVE students are girls. Although exact figures for the other sub-systems are 40 not available, it can be assumed that the gender bias i s even more pronounced in other public and non-public TVET provider systems, notably invocational training. 10. Quality is generally very l o w inthe public training systems, notably the DINET and the INEPF schools, caused by under-qualified and insufficiently skilled teachers, shortage of teaching aids, partly dilapidated workshops for practical training and outdated curricula. As a result, internal efficiency in the formal TVE system is l o w as indicated by high repetition and dropout rates. Besides, employers complain about insufficient practical and management skills of graduates. N o information i s available about the quality of training in the private sector. A serious cause of concern is the shortage of training earmarked for employment and self-employment in the informal sector, by far the largest segment of the labor market. Hence, the current TVET system as a whole is not capable of effectively responding to the needs of the labor market. 11. The entire TVET system is seriously under resourced. Regarding formal TVE, public unit spending inMozambique is among the lowestinAfrica affectingthe quality of training. However, funds available for training are also short in all other TVET sub-systems. INEFP schools, for example, run under capacity due to resource constraints. The preparedness to embark o n staff training by industry i s also constrained by lack of resources. There i s a serious lack of data and information about unit cost in different segments of the TVET system, at different qualificationlevels and for different occupational specializations. 12. A major bottleneck of the current TVET environment is its fragmentation and the uncoordinated manner inwhich each sub-system is managed and administered. T h s tends to produce duplications and wastage of scarce national training resources. Management and governance of the public training systems furthermore do not involve employers a n d other representatives of the world of work to any significant extent, with the consequence that training programs and curricula are not related to the labor market context. The centralized decision-making structure in the formal TVE system prevents efficient use of resources at school level and responsiveness of the training offers to the specific requirements of target groups and needs of the local economic environment. 13. The social and economic consequences of Mozambique's estimated 16.2 percent HIV/AIDS prevalence rate are extensive. It is projected that HIV/AIDS could reduce per capita GDP growth rates by up to 1percent annually in this decade (Arndt, 2003). As regards education, HIV/AIDS results in absenteeism and death of teachers, and the need to subsidize orphaned children. Governmentpolicies on TVET 14. In recent years GOM has gradually but significantly improved the policy and institutional framework for the reform of the TVET sector. The roots of the reform can b e found in the Education Sector as well as T I E and Employment and Training strategies adopted formulated inthe beginning of this decade. 15. The new Education Sector Strategy Plan2005-2009 (ESSPII) emphasizes the need for public-private partnership and contributions by international development partners in the 41 expansion of access to secondary education, including TVE. As regards expansion of the TVE sub-system, the plan gives priority to Escolas Artes e Oficios, i.e. the elementary level thus highlighting Governments emphasis to enhance access in remote areas and for previously undersupplied target groups. The Estmtkgia do Ensino Tkcnico-Profissional em Mogambique 2002-2011 (TVE Strategy) emphasizes the need for quality improvement, increased access, decentralization of school management, and redelinition of the role of DINET towards regulation downplaying its function as provider of TVE. The National Employment and Vocational Training Program prepared by INEFP suggests establishment of a tripartite national training board and authority, the development of a competency-based training system with the possibility of recognition of prior learning, introduction of a payroll levy to improve the financial base of TVET, etc. Building on these strategies, the new Proposta de Programa do Governo 2005-09 (PPG) confirms the Government's commitment to improve the quality and relevance of TVE incorporation with the social partners. The PPG also underlines the Government's desire to expand the TVE sub-system as part of the overall effort to increase access to post-primary education. 16. Further, in a Memorando de Entendimento of July 2004, the Ministers of Education, Labor and Higher Education and the Confedera@ das Associaqdes Econdmicas de Mogarnbique (CTA) agreed to incorporate current and/or future interventions in the sector into a n integrated TVET reform program. This partnership laid the foundation for the establishment of the NationalCommission for TVET Reform or ComrnissEo Executiua de Reforma da Educagao Profissional (COREP), including leading the development of an integrated TVET program with a longer term vision and discrete phases with milestones. The following section provides a thorough description of the longer term program, the phases and the proposed investment. 17. The Government's commitment, timetable and milestones for the integrated TVET program are outlined in a Letter of TVET Sector Policy (LSP) signed by the Minister of Planning and Development in October 2005 (See Annex 13). Key elements highlighted in the LSP include: (i) creation of a consultative governance and institutional framework the with equal representation from Government, industry, organized labor and civil society organizations to lead the transformation of the TVET training system. (ii) the adoption of a demand-led paradigm to ensure planning and delivery of training fully coincides with requirements of a growing economy and changing labor market requirements; (iii) a commitment to addressing and mainstreaming transversal issues of gender and HIV/AIDS inthe selection of programs for investment, learning content and delivery of training inall training institutions and in the workplace; (iv) the introduction of occupational standards defined and validated by industry and a modularized curricula; (v) the establishment of a n independent national system for assessment and certification of learners; (vi) the introduction of an accreditation system for public and private providers offering CBT courses and qualifications; (vii) the establishment of a new system for teduucal teacher training; and (viii) the introduction of a decentralized system for TVET management. Furthermore, the Government has expressed its commitment to diversify the funding sources for TVET inorder to ensure long-term financial sustainability. 42 Annex 2: Major related projects financed by the Bank and/or other agencies services Decentralized To improve performanceof district authorities to plana n d manage demand- 42.0 37 1 30106/08 Planning a n d driven intrastructure investments (grant) Sector Reform 43 foreign buyers and investors; enhance access to t e r m finance; a n d strengthen capabilities of the MIC, CPI, and selected business organizations Mineral Resources To encourage private investment 117 mining, including small-scale and 18 5.4 30106106 Management I artisanal mining;and develop a data bank and geologcal maps for potential investors Total Private Sector Development and Mining 44 15.3 TOTAL 944.9 652.83 44 Annex 3 A: Results Framework & Monitoring Project Development Project Outcome Indicators Use of Project Outcome Objective (PDO) Infomation PDO:To facilitate the Indicator PDO 1:% of employers Data from these indicators will transition to a demand-led surveyed who indicate that their help to confirm whether the PDO training system and provide employees, who have are recent is on track to beingachieved. the beneficiaries with more graduates of targeted institutions, have market relevant skills and market relevant skills. PDO indicators2,3 and 4 are improved economic specifically aimed at measuring opportunities Indicator PDO2: Labor market program impacts. earnings of graduates of targeted programs compared to control group. The data will also help PIREP (impact indicator) program managers to plan for subsequent phases (expansion, Indicator PDO3: Average time (in consolidation) of the program. days) to find a job or become self- employed after graduating from a Positive trends inthe data will targeted program compare to a control help to strengthen support for group graduating from institutions not andbuildevenmoreconsensus targeted for PIREP assistance. (impact around PIREP objectives. indicator) Indicator PDO4: % of graduates of The baseline data to measure targeted programswho findjobs or progress on the DO is expected to be create jobs that are directly linked to available by October 1,2006. their field of study. (impact indicator) Intermediate Results Intermediate Outcome Indicators Use of Intermediate Outcome Information Intermediate Result A: Indicator A l : COREP ES and COREP All five indicators willbe tracked Institutionalframework for Board fully functional throughout the life of the project administration and usingmilestones scales. While management of the W E T Indicator A2: Law on establishment of each indicator itself reflects the system established and the Autoridnde Nncional de Educapi'o final outcome that will be reached functioning (with active Profissional (ANEP) submitted to by the latter years of the project, participation of key social National Assembly by end Y4 key milestones/benchmarks partners) and proposal for precedingthe final outcome will future financingframework Indicator A3: Agreement reached with be tracked regularly from t h e agreed with stakeholders stakeholders onframework for future outset of the project to ensure financing of PIREP by Y3 and satisfactory progress towards the legislation approved by Y4 end. If progress toward meeting benchmarks i s not on track this I Indicator A4: Decentralized will provide early indication that management system of W E T training the final target for each indicator providers under implementationby Y4 will also be delayed and corrective actions can be taken Indicator A5: Monitoring and early on. 45 evaluation mechanisms for PIREP (including arrangements for tracer survey) inplace and functioning. htermediate Result B: Indicator B1: # & '/Oof targeted Performance data willhelp to salificationandtraining occupation levels with comprehensive adjust and fine tune the technical system based o n occupational occupational standards and design and strategy of component standards (including qualifications B (including each sub- H N / A I D S core module) component) of the project as w e l l 2stablished and functioning Indicator B2: X of programs developed as PIREPas a whole. intargeted sectors. based o n competency standards Achievement of indicators 31 and Indicator B3: # and % of learners who 82 by year 2will indicate that are assessed through the n e w CBT Result C outcomes can also be regime vs. those assessed under the old achieved on target, since system by gender. completion of component B i s a pre-requisite for completing component C. Indicator B3 can only start being measured by year 3. Identify lessons learned that can be applied when replicating system outside of pilot occuuations/sectors. Intermediate Result C - Indicator C1: Retention rate of students Performance data will help to Improved efficiency, enrolled intargeted courses by gender. adjust and fine tune the technical effectiveness and relevance of (compare to control group) design and strategy of component training by WET institutions C (including each sub- intargeted sectors. Indicator C2: Pass rate of students component) andPIREP as a enrolled intargeted courses by gender. whole. (compare to control group) Identify lessonslearned that can Indicator C3: # and % of targeted be applied when replicating teachers that received training under system outside of pilot sectors. the n e w CBT system by gender , A positive trend inthe data Indicator C4: YOof training courses combined with a good response aligned to the CBT system from the productive sectors will indicate that the project i s headed Indicator C5: O hof TVET institutions inthe rightdirectionwith a aligned to the CBT system strong likelihood of the PDO being achieved. Indicator C6: 2 of school principals w h o have received training o n quality school management 46 htermediate Result D: Indicator D1:# of partnerships formed Performance data will help to hcreased capacity of between training providers or adjust and fine tune the technical institutionsinnon-targeted promoters and private sector design and strategy of component sectors to deliver market institutions D(includingeach sub- responsive training. component) and PIREP as a Indicator D2: % of participating whole. institutionsthat have improved their organizational capacity to deliver Improvements inthe indicators market responsive trainingprograms. for this component will indicate the extent to whichthe program is responsive and applicable to sectors and organizations outside of the target group. Thus, it will provide valuable information that can be utilized insubsequent phases (expansionand consolidation) of PIREP. The increased capacity of institutions in non-targeted sectors to deliver market responsive training will also be assessedunder the PDO indicators inthe mid-term tracer study. The capacity of the FUNDEC management unit to support the training promoters to submit and implement the proposals will be assessedinindicator Al. 47 c c 8 0 0 0 h L je n \ II 4 Y P 3 r P 2 Y2 N m g d 8 8 0 0 b E .r E .r c 2 8 0 Annex 4: Detailed project description 1. The Programa Integrado de Reforma da Educa@o Profissional (PIREP) is a five-year investment program of the Government of Mozambique. It is part of the Reforma da EducaGBo Profissional (REP), a long-term program with a vision until 2020, designed to overcome t h e currently fragmented anduncoordinatedprovision of WET. 2. The REP'Slong-term vision is divided into three phases. The objective of the longer- term reform programis to improve the quality andresponsiveness of the TVET system to labor market needs by providingtraining that is delivered ina sustainable, integrated, effective, and equitable manner. PIREP is the first five year pilot phase of REP and planned to runfrom May 2006 until September 2011. The results of the pilot phase will guide the subsequent phases of the envisaged long-term vision, namely the scaling up to other occupations and sectors of t h e economy and to other private and public traininginstitutions inthe (second phase) period 2011- 15 and the subsequent third phase period, 2016-2020 during which the reforms will b e consolidated andextended to all WET institutions. 3. PIREP's Project Development Objective (PDO)is to facilitate the transition to a demand- l e d training system and provide the beneficiaries with more market relevant skills and improved economic opportunities. Key mechanisms to accomplish the objective include t h e establishment of a TVET governance framework with representation from Government, industry, and civil society; a qualifications framework underpinned by occupational standards for sectors experiencing employment growth andskill shortages; andre-alignment of the W E T system (based on occupational standards) inup to 16 pilot training institutions. Furthermore, the Government will seek to develop arrangements to d i v e r s e the funding sources of WET to ensure it has a stable platform of income that can sustain its operational effectiveness in t h e future, The competitive grants component of PIREP will increase access to training for underserved groups, stimulate innovative approaches to TVET, and improve quality and relevance of trainingprovided by public a n d private institutions not among the pilot training institutions. Critical issues of gender inequity and the impact of HIV/AIDS are incorporated in allrelevant aspects of programdesignand implementation. 4. The performance of PIREP will b e measured by means of the following indicators: (i) percentage of employers surveyed which indicate that those of their employees, who are recent graduates of targeted institutions, have market relevant skills; (ii) labor market earnings of graduates of targeted programs compared to control group; (iii) average time (in days) to find a job or become self-employed after graduating from a targeted program compared to a control group graduating from institutions not targeted for PIREP assistance; and (iv) percentage of graduates of targeted programs who findjobs or create jobs that are directly linked to their field of study. Data from these indicators will help to confirm whether the PDOis on track to being achieved. All baseline data will b e available nolater than October 1,2006. 5. The project cost is estimated at US$37.5 million over a five year period. The financing package is US$30 million from IDA and US$7.5 million from the Netherlands. Financing from 54 the Netherlands is considered as co-financing with IDA through a Trust Fund Agreement. Fiduciary responsibility and accountability for the supervision of IDA Credit and the T r u s t Fund Agreement will rest with IDA. Additional contributions of US$15.9 millionare expected to come on stream to the overall PIREPover the next three years, namely from Danida(US$ 7.5 million), GTZ (US$ 2.4 million), Spanish Cooperation/Salesians (US$ 4.4 million), Portuguese Cooperation (US$1.6 million). Although these contributions are envisaged to follow the vision and methodologies of the overall reform program such resources are considered parallel financing since the management and oversight of such resources will not necessarily rest with the Execuitive Secretariat. 6. PIREPwillbeimplemented throughfour components: A -Development of anInstitutionalFramework - B- Standards-based Qualifications andTraining System C -Quality Improvements inTVET Institutions D-SkillsDevelopmentFund(FUNDEC). Figure 1-PIREPComponents Piloting of Refovins v v A B C Developmentof an Institutional Standards-basedQualifications Quality Improvement Framework andTraining System 1.Trainmgof trainers, teachersand 1. Establishmentof National 1. Developmentof occupational managementManuals TrainingAuthority standards 2. Provisionof furniture, equipment, tools, 2. FinancingFramework 2. Developmentof Tralning and consumables 3. DecentralizedManagement Programs 3. Improvement of physical infrastructure System 3. Developmentof standards- 4. provisionof newlearningmaterials 4. StrategicStumes andAction basedassessment and 5. Professionalguidance orientation Research ~rtification ........................................... ...in 4 professional 'leaSf2V'ocmpa#iar&/evels end _., in 4 professio#al.~~~s~,,at occupationsNeve1.s and fields,at least 20 ; ................. (.."._..- ........................................ ............................:......................" r"................. L... f6 pilot institutions ;..>::. ............... Genrkr & HII454IDS 16pilot institutyo?i?-.. .,.:,ci .................................................. ............... .... ..- .... ............... ...........,..''1,.. ...................... ................................................. .i D .q;..''. ............................................................. ~ FUNDEC(CompetitiveFund)'.'" ...for training institutions not Window 1:Relevance andQuality improvement of Training selected for piloting inPublicTrainingInstitutions Window 2: Relevanceand Quality improvement of Training inPrivateTraininglnstitutions Window 3: Self-employmentdriven- training inrural areas and ininformal sector. 55 ComponentA: Developmentof an Institutional Framework (US$7.0million, includingUS$4.0 for the ExecutiveSecretariat, but excluding contingencies) 8. Component A responds to the diagnosed weaknesses of the current institutional set-up of the TVET system, including problems of governance, e.g. lack of stakeholder involvement a n d ambiguity about the role of DINET a n d INEFP vis-a-vis COREP; resource constraints as indicated by the severe under-funding of the TVET system; excessive centralization; and the absence of a comprehensive transition plan. The objective of this component is to reform the governance and management structures for the training system and develop options for the reform of a system of financing incollaboration with the relevant industry representatives and social partners. Activities under this component will assist the GoM to establish an institutional and funding framework necessary to support an integrated TVET system that i s responsive to the needs of the labor market, and accessible to both in-school andout of school learners and managed ina coordinated, stakeholder-driven and sustainable manner. 9. Component A comprises four sub-components, addressing (Al) the development of an institutional framework for the governance of the TVET system, including capacity buildingof DINET and INEFP and establishment of labor market monitoring mechanisms and the establishment of a National Training Authority (Autoridade Nacional da Educa@o ProfessionaE, ANEP), (A2) the design of mechanisms to provide a sustainable source of financing basis for the TVET system, (A3) the arrangements for decentralized management of TVET institutions, and (A4) studies and other research related activities to facilitate the transition to a demand- l e d TVET system, the pedagogical strategies to articulate the academic and technical modules inthe context of a competency-based scheme, the incorporation of the informal sector into PIREP and the impact and mitigation of HIV/AIDS on training institutions and workplace issues. A major thrust of the component is to encourage the involvement and active participation of industry and enterprises inthe management of TVET institutions and to move towards the coordination and articulation of the different skills development programs, offered by different providers. Major inputs will b e technical assistance (consultancy inputs) for problem diagnosis and conceptual work, capacity building of stakeholders and administrator/managers as well institutional development support (system procedures and equipment). 10. Component A has a dual function. Firstly, through analytical work and consultations, it will provide the institutional, funding and management framework for the reformed national TVET system; and secondly, it provides for the establishment of anExecutive secretariat (ES) of COREP which will coordinate the implementation of PIREP.8 Hence, investment and 8The COREP Decree No., 29/2005 dated August 23, 2005 calls for the establishment of an Executive Secretariat (Article 7) to coordinate the PIREP program (See Annex 17 Decree No. 29). A set of internal regulations for COREP and for the Executive Secretariat were approved by COREP o n January 27, 2006 and February 6, 2006, respectively, to establish rules, regulations, competencies for the array of stakeholders expected to be involved in the implementation of PIREP (See Operational Manual Chapter 2). 56 operational costs associated with COREP and its Executive Secretariat appear, although budgeted for separately, under Component A. To ensure that transversal issues are appropriately dealt with inthe entire TVET reform process, a gender and HIV/AIDS specialist willbe established within the COREPExecutive Secretariat. 11. The implementation strategy to be used for each of the sub-components of Component A will be essentially the same, namely, (i) diagnostic study on the current situation in a Mozambique compared to other relevant countries; (ii) development of a preliminary the proposal for consultation with social partners; (iii) a wide national consultative process with the social partners; (iv) the development and approval of the legal framework; and (v) the establishment of the structures and respective operational systems. 12. Social marketing of PIREP is essential for its success. For that reason, the Executive Secretariat will at the outset of the reform process launch a campaign with the purpose to sensitize relevant stakeholders about the visions and plans of PIREP, and on a regular basis disseminate information on its achievements to the public. At appropriate milestones of implementation such as the introduction of the first competency-based course, particular information campaigns will b e carried out. 13. Sub-component Al: Establishment of the National Training Authority. This sub- component will carry forward the process of establishing a National Training Authority (Autoridade Nacional da EducagiFo Professional, ANEP), a joint decision-making body composed of the key national stakeholders involved inthe TVET system inthe country, w h i c h will become responsible for the overall management of the future WET system. Once established, ANEP will b e responsible, inparticular, for the planning, coordination, regulation, accreditation and supervision of the TVET system; while DINET and INEFP will deal with provision of technical education and trainingaccording to their mandates. 14. Untilthe ANEP is established, PIREPwillbe managedbyCIREP/COREPas indicatedin Decree No. 29/2005. Specifically, COREP and its Executive Secretariat will have a key r o l e in terms of: Development of education and trainingpolicies, plans, objectives a n d targets; v Development and approval of occupational standards and TVET qualifications; 5 Development of assessment, certification andaccreditation systems; .*Coordination and implementation of the activities of PIREP and monitoring of its progress andimpact; Management of the Skills Development Fund (FUNDEC); .F Development and implementation of management support systems such as the Management Information Systems (MIS), Marketing and Communication Systembtrategy andthe MonitoringandEvaluation(M&E) System. 15. Duringthe course of the project, COREPwill submit a billto the National Assembly for the establishment of a National Training Authority as the coordination and policy-makingbody 57 for WET, Autoridade Naciond da Educaqlio Professional, ANEP. It is envisaged that establishment of the ANEP will pursue the following timetable: Concept developed and draft legislation prepared inYear 3 (2008) of implementation; legislation submitted to National Assembly in Y ear 4 (2009); andlegislation enacted and ANEP launched inYear 5 of PIREP (2010). 16. Duringthis process, also the future role of DINET andINEFPvis-a-vis the ANEP willb e clarified. Hence, as part of the preparatory work, it will b e necessary to agree on the role, powers and functions of ANEP and to develop its operational procedures. Under this sub- component, funds have been set aside for initial capacity-building initiatives aiming at empowering DINET and INEFP to undertake their roles and responsibilities inconnection with the implementation of PIREP. 17. Sub-component A2: Sustainable TVET financing framework. Under this sub- component, the GoM will b e given technical support to conceptualize and prepare an implementation plan for the introduction of financing mechanisms for supporting the W E T system on a sustainable basis. The government envisages the creation of a comprehensive and diversified funding mechanism to financially support - and encourage through incentives - to different providers who offer various kinds of relevant TVET. 18. The involvement of key stakeholders, particularly the representatives from t h e productive sector, will be crucial in the work that has to b e developed under this sub- component, especially given their important role in contributing to the WET system. It is expected that the Executive Secretariat will b e able to present the outline of a n e w financing system for stakeholder consultation in Year 2 (2007/08), the consultations completed and legislation drafted inYear 3 (2008/09), and that a final proposal is considered by the National Assembly and the financing system introduced inYear 4 (2009/10). Activities under this sub- component include analytical work, stakeholder consultations, sensitization, and drafting of necessary legislation. 19. Sub-component A3: Decentralized TVET management system. Decentralization of management in the TVET system, notably by delegating increasing levels of responsibility to management at the level of the individual traininginstitutions, is another element of PIREP that will be supported under this sub-component. This willbe achieved throughthe development of the necessary conceptual, legal and regulatory arrangements, as well as providingmanagement capacity buildingat training institutionlevel. 20. This objective (of decentralizing decision making powers a n d responsibilities to managers at the institutional level) will have serious implications for the way in which administrative, financial and employee management systems are designed and resourced, so that they have the capacity to implement their n e w roles. On the other hand, given t h e dimensions of the country, decentralization inthe management of TVET will also have to imply stronger supervisory, administrative and uniform financial procedures at various other levels, which also has considerable implications interms of capacity buildingacross the whole system. 58 Hence, issues to be addressed in this connection comprise: Which functions to devolve, how and when to transfer responsibilities to the lower tiers of the DINET and INEFP systems, and, not least, financial andhumanresource implications of the decentralization. Inthis connection, the future role of the provincial level i s crucial and will have to be defined. 21. Itis expected that the establishment of thenewmodelof management of WET will start to be implemented inyear 2 and continue untilyear 5. The consultativeprocesses are expected to start inYear 2 (2007/08), necessary legislation and a decentralization plan submitted to the National Assembly in Year 3 (2008/09), and a n e w decentralized TVET management system under full implementation in Year 4 (2010/11) of PIREP. Planned activities include consultancies, consultations with affected parties, and drafting of legislation, guidelines, manuals etc. 22. Sub-component A4: Studies and other research-related activities to facilitate the transition of the TVET system. The purpose of this sub-component is to provide a qualified basis for making decisions on how to complete the transition from a supply-led, input-based system to one responding to the needs and opportunities of the labor market, applying a competency-based approach. Issues to be addressed through further analytical work include the articulation of the academic and the technical elements of the n e w competency-based scheme, articulation of TVET with general secondary and tertiary education, mainstreaming of the new modularized, competency-based approach (phasing inof the CBT scheme andphasing out of the 'old' one), andintegration of other TVET provider systems inthe reformprocess. The sub-component budget includes resources for studies, consultative workshops, circulation of documentation etc. It i s expected that as a result of the activities of the sub-component, a plan for transition of the existing TVET system into a competency-based training system will b e available by end of Year 2 (2007/08) of PIREP. ComponentB: Standards-based QuaEificationand Training System (US$2.0 million, excluding contingencies) 23. Development of a standards-based qualification, training and assessment framework is the key to raising relevance and quality in the WET system. It will change the (input-based) orientation of the existing curriculum towards an outcome-based orientation, in which the learning outcomes of education and training course programs and the assessment of the learners are aligned to the occupational competency standards required in the labor market. This will enable the integration and articulation of different components of the TVET delivery systems and thus enable previously neglected target groups to gain access to recognized course programs through the emergence of non-formal and private training provision. During the preparation process, a preliminary TVET qualifications framework outline consisting of five levels, aligned to existing qualification levels in the general education system, has been developed for discussion and public comment. This will form the basis of the activities in this component. The new standards-based qualification andtrainingsystem inMozambique will b e harmonized, as far as possible, with best practice inneighboring SADC countries. 59 24. The component is divided into three sub-components addressing (Bl) the development of occupational competency standards, (B2) the development of modularized training course programs based on these occupational standards, and (B3) the development of a standards- based assessment and certification system. All three sub-components include a phase of definition and agreement on system elements, rules and procedures, capacity building of t h e mainactors, as well as pilotingthe system inthe four defined sectors of PIREP.The component includes support for developing and adopting methods and procedures for standards-setting, curriculum planning and development, and assessment/certification arrangements, i n c l u d i n g the testing of the system that will target a minimumof 20 occupational areas spread across four economic sectors, viz. tourism and hospitality, management & administration, industrial maintenance, and agro-industry. Inputs include technical assistance for the design of t h e occupational standards, curriculum and assessment design, capacity building for Mozambican officials who will be directly involved inthis process, and the development and establishment of necessary systems to implement the reforms as well as operational support for implementation at the pilot schools. 25. Gender and HIV/AIDS issues will b e addressed through the integration of gender and HIV/AIDS specific competences in all occupational standards; the development of a relevant core training module, and the inclusion of gender and HIV/AIDS specialists in all standards development panels. 26. The responsibility for the implementation of the component rests with the Qualifications and Training Department of the ES. Inaddition to a department manager for Qualifications and Training Programs, there will also b e five Specialists, one for each pilot sector, and another specialist for the area of training of trainers and managers. Further, t h e department will b e supported by different industry/sector teams that will b e established involvingthe participation of key stakeholders, including representatives from the productive sector (see Annex 6 for Implementation Arrangements for further details). 27. It is also envisaged that there will be a need for contracting short-term international technical assistance for the implementation of specific activities under this component, such as development of methodologies and training of h u m a n resources for the development of curricula plans, the production of training manuals, institutional capacity-building and monitoring and evaluation. At the end of the project, it is expected that n e w training courses and assessment policies and practices, based on occupational standards, will have been established andfunction inthe four selected pilot sectors. 28. Sub-component B1: Development of occupational standards. This sub-component will finance activities for the development of a system to define and approve occupational standards (including definition of responsibilities, procedures and manuals for standards setting and formats of standards); capacity building for the m a i n actors (coordination officers, facilitators, standards-setting panels); and the actual standards-setting for the pilot sectors and occupations. 60 Standards will b e developed by sector groups comprising technical subject matter experts from the private sector, professional associations, trade unions and traininginstitutions. They will b e developed in a w a y that allows for modular curriculum development and the design of short- term training programs in employable skill areas. Where feasible, standards will b e generated by way of adapting existing standards developedandinuse inother countries, andcustomized to the needs of Mozambican conditions. During the project, a sufficient number of standards will have been developed to underpin the relevant qualifications for each occupation at different levels in the four pilot sectors, although it is impossible to quantlfy this amount in advance. 29. This sub-component will finance: (i) national and international technical assistance for the revision of the qualifications framework, the revision of a procedural manual for setting competency standards, including formats of standards and follow-up of the standards development (total 14 months); (ii)purchase of equipment including hardware and software;(iii) travel costs and per diems for the members of the working groups; (iv) seminars andworkshops; (v)training courses and(vi) study visits inside andoutside Mozambique. 30. Interms of flow of activities, this sub-component will be implemented in accordance withthe following stages: Stage 1Definition of model for development andapproval of standards; Stage 2 Preparation of manuals and formats for standards development; s Stage 3 Training of facilitators for standards development; I* Stage 4 Standards development; Stage 5 Approval of standards. 31. For some occupations, stages 1to 3 are expected to be finalized inyear 1and stages 4 to 5 are expected to be implemented from year 1to year 2, aligned to the progressive introduction of new courses in the pilot sectors. Inorder to quick-start the process, for some occupational areas the standards development will draw on material already available inother countries, e.g. Brazil and Portugal. 32. Sub-component B2: Development of training programs based on occupational standards. Based on the already agreed principles of the TVET qualifications framework, this sub-component will facilitate the translation of the occupational standards defined in sub- component B1 into curricula and modules to b e used for training in different WET delivery- systems. Activities will include the development and approval of a n e w training system, curriculum development methods, human resource capacity building, as well as actual curriculum development processes for the selected occupations in the pilot sectors. The nature of the activities tobe financed under this sub-component is the same as for sub-component B1. 33. This sub-component will b e implementedinaccordance with the following stages: e Stage 1Definition and approval of the new training system (in the context of the definition andapprovalof the qualifications framework); 61 T Stage 2 Training of team members; Stage 3 Curricula development and approval; Stage 4 Module development andapproval; v Stage 5 Evaluationof curricula and modules andits implementation 34. Stages 4 to 5 are expected to b e implemented from year 1to year 2, aligned to t h e progressive introduction of n e w courses inthe pilot sectors. 35. Sub-component B3: Development of standards-based assessment and certification. This sub-component will facilitate the development of a transparent assessment and certification system against the defined ocmpational standards. At the end of the project, W E T students and external candidates will b e able to undergo testing and acquire recognized certification in the occupations and at the levels for which occupational standards have been developed under sub-component B1. The system will b e designed in an easy and pragmatic way using existing training facilities for testing purposes, at least for the pilot phase of t h e reform (2006-2010). Testing will b e conducted by an accredited testing panel of experts from industry and traininginstitutions. 36. This sub-component will b e implementedinaccordance with the following stages: t Stage 1.Development and approval of a national assessment and certification system; I Stage 2. Training of assessors (15 annually); Q Stage 3. Identification and accreditation of evaluations centers; Stage 4. Establishment of a registrationsystem; v Stage 5. Implementation of the evaluation. Component C: Quality Improvement in Training Institutions (US$ 19.1 million, excluding contingencies) 37. Component C is designed to address the quality problems affecting the DINET and t h e INEFP institutions. The objective of the component is to increase the relevance of t h e competencies of male and female learners through improving the quality of the technical educationprovided by up to 12 designated pilot institutions. 38. The component includes five sub-components: (Cl) the development and piloting of courses for teachers and management staff; (C2) the supply of relevant furniture, equipment, tools, and consumables; (C3) planningandimplementation of the necessary rehabilitation of t h e physical infrastructure; (C4) the acquisition, development and piloting of n e w learning materials; and (C5) the development and piloting of student counselling and career path guidance methods, including assistance infacilitating internship arrangements with industry. 39. The direct beneficiaries are the teaching a n d managerial staff of the pilot institutions and their students. Each pilot school is supposed to specialize in offering technical education and training within a particular sector or occupational area, e.g. management & administration, 62 tourism and hospitality, industrial maintenance, and agro-industry, and phase out training activities outside these areas. 40. While the Qualifications and Training Department of the Executive Secretariat will be responsible for coordination of sub-components C1, C4 and C5, the Procurement Department will be incharge of sub-component C2, and the Civil Works Department incharge of C3. It is expected that the development of technical teachers training curricula, the training of teachers and managers, the development of instructional materials, and the delivery of equipment etc. willbe outsourcedto organizations specializing inthese fields. 41. Sub-component C1: Training of trainers, teachers and management. Under this sub- component, teachers andinstructors directly involved inthe delivery of the pilot courses at the selected pilot institutions will receive in-service training insubjects related to the occupational standards that will be generated under Component B. The training will comprise pedagogical as well as practical and theoretical aspects. If resources allow, also teachers teaching academic subjects at the pilot institutions will b e enabled to update their teaching skills. 42. It is envisaged that crash courses for instructors/trainers and managers will b e implemented inyear 1while the profiles and a n e w model for entry-level andinservice teacher trainingis being developed. Implementation of the new trainingmodules is expected to start in year 2 and continue untilyear 5. 43. With support from the Spanish Cooperation, DINET is in a process of establishing a technical teacher training center near Maputo. Implementation of sub-component C1 will b e coordinated closely with this initiative, but other options for technical teacher upgrading will also be considered. Foreign expertise m a y b e required for some of the teacher training. 44. Also, under this sub-component, the issue of management capacity of TVET institutions will be addressed. Decentralization is a key element of PIREP. Shift to a demand-led W E T paradigm requires that the individual TVET institution is granted the authority to take decisions on activities, e.g. which courses to b e offered and the contents of these. While sub- component A3 will provide the broader framework for a decentralized TVET paradigm, sub- component C1 is meant to provide direct support to the pilot institutions to strengthen their management capacity. Administrative, management and supervisory staff at the pilot institutions will be offered specialized courses in various aspects of management, s u c h as budget and finance, education planning, curriculum development, labor market assessment, dialogue with stakeholders, etc. If relevant, school board members will b e sensitized about their role andmandate andintroduced to issues related to governance of TVET institutions. 45. Sub-component C2:Provisionof furniture, equipment, tools, and consumables. PIREP will provide the furniture, equipment, tools and consumables necessary for piloting of the courses developed under Component B. Hence, under this sub-component, the following i t e m s will be financed: (i) technical assistance to prepare specifications for the furniture, equipment, 63 tools and consurnables; (ii) purchase and installation of the furniture, equipment, tools and the consurnables relevant for each professional occupation being piloted; (iii)a l l costs related to trainingthe teams fromthe institutions onhowto use, manage andmaintainwhat is purchased; (iv) the costs related to seminars or sessions for sharing experiences between representatives of the selected training providers. During the preparation of PIREP, preliminary estimates of furniture, equipment and tools required to introduce the new courses were made. 46. Sub-component C3: Improvement of physical infrastructure. At pilot institutions in need of rehabilitation, PIREP will fund upgrading of the physical infrastructure, i n c l u d i n g workshops and other teaching facilities, required for introducing the n e w courses developed under Component B. The rehabilitation and repair activities will take place in accordance with the estimates made during the preparation of PIREP (see the Operation Manual for details). Maintenance procedures will b e introduced in connection with the rehabilitation through both the preparation of manuals for the maintenance and supervision of physical infrastructures, as well as training of staff from the pilot institutions. The management of pilot institutions will b e assisted to prepare contingency plans for the operation of the institutions while t h e rehabilitation activities go on, e.g. temporary relocation of teaching etc. 47. The m a i n responsibility for the implementation of this sub-component will lie with t h e Civil Works Department of the Executive Secretariat. Depending on the pilot sector, t h e rehabilitation of the infrastructure will b e completed from Year 2 (2006 for the management sector) to Year 4 (2008 - some schools for piloting the agriculture professional occupations selected). Preliminary estimates of the cost of refurbishing the 12 training institutions to b e rehabilitated under PIREP have beenmade. 48. Sub-component C4: Acquisition, Development and provision of new learning materials. Basedon the occupational standards to be generated and the guidelines onminimum requirements on teaching aids, required learning materials, such as text books, training manuals, teacher/instructor guides and librarymaterial, willbe made available. 49. It is envisaged that a substantial part of the learning materials to b e developed will b e based on what already exists or, preferably, that existing material will be taken over as it is. What will determine the purchase of existent titles or the development of n e w materials i s a combination of time, resources and quality required according to the needs of each pilot occupation. 50. Sub-component C5: Professional guidance orientation. This sub-component aims at supporting activities in three main areas: (i) preparation of trainees for the world of work through information about labor market opportunities; (ii) provision of information about services and other support available to trainees aiming at self-employment; (iii) support for t h e integration of graduates in the labor market through the establishment of links betweens training providers and enterprises. The sub-component will draw on the experience of similar initiatives inother countries, e.g. South Africa and Brazil. 64 51. A s part of the sub-component, students will b e provided with the necessary skills and knowledge on how to enter the labor market. This can b e achieved through seminars for sharing experiences with employers and trade unions among others, making visits to enterprises, cooperatives and financial institutions, and through gaining work experience. T h e starting point in this sub-component will be hiring of technical assistance to prepare a document with the several options available to strengthen professional guidance and orientation. Component D:Fundo para o Desenvolvimentode Competbcias Profissionais (FUNDEC) (US$ 6.4 million, excludingcontingencies) 52. Component D is designed to promote innovation and initiatives for the improvement of quality and relevance of training, and to increase access to employment-oriented W E T for the underserved population. The component will b e supported through grants that can be accessed through the national skills fund (FUNDEC: Fundo para o Desenvolvimento de CompetEncias Profissionais). Whereas Component C is intended to fundamentally restructure the supply of training ina limited number of key sectors of the economy andtested in selected public W E T institutions, FUNDEC, on the other hand, provides a vehicle through w h i c h other (public and private) providers that offer training courses in other occupational fields and targeted at different groups can be supported. Specifically, the objectives of FUNDEC are: to improve the quality andrelevance of trainingof non-pilot traininginstitutions; to increase access to TVET for underserved areas andtarget groups; to increase regional, social, andgender equity; to support expansion of innovative trainingprograms; to stirnulate development of pioneering trainingprojects; to promote competencies necessary for local economic development; to support the emergence of trainingprograms stimulating self-employment; and to promote collaboration betweentraininginstitutions andemployers. 54. The component includes five sub-components: (Dl) Grants to institutions; (D2) M e d i a campaigns and information materials; (D3) technical assistance for grant preparation or supervision; (D4) training; and (D5) Equipment. These sub-components work together as i n p u t s to ensure proposals are of good quality and implemented accordingly to reach the objectives expected under each of the individual proposals. 55. FUNDEC will consist of three funding windows. The first window targets p u b l i c providers of formal and non-formal training and will fund activities of institutional capacity building including staff upgrading, improvement of management, curriculum development, market assessment, equipment and delivery of n e w training programs, on a pilot basis. Applicants will b e eligible to receive up to 30 percent of the total project cost for rehabilitation of infrastructurewith a ceiling set at US$200,000 per individual proposal. The second window 65 targets private (for profit and not-for profit) providers of formal and non-formal training and will fund any necessary institutional capacity building initiatives, except for rehabilitation of physical infrastructure. The upper ceiling for individual projects is set at US$ 100,000. The third window targets the underserved population, inparticular girls and women, who are currently not catered for in the training system. The upper ceiling for individual projects is set at US$ 50,000. The fund will reimburse actual delivery cost of relevant and employment-oriented trainingto these target groups. 56. Whereas in window 1and 2 the specific training providers can submit proposals and compete for funding, inwindow 3, apart from the public and private training providers, t h e r e exists the possibility for training 'promoters', who m a y not necessarily represent a training provider, to make a proposal. Inthis case, the FUNDEC Unit will select the training providers that will provide the services of the approved proposals (described indetail inthe Operational Manual Annex 5 and 6). 57. The stvategj to implement this component will b e through the mechanism of a competitive fund controlled through the release of requests for proposals, issued annually, calling for applications from eligible institutions (excluding those institutions already benefiting from the interventions in Component C, i.e. the institutions selected for piloting the new courses). FUNDEC grants will b e managed by the FUNDEC Department located in t h e Executive Secretariat. Training providers will b e required to submit funding proposals that are inaccordance withthe objectives of FUNDEC and meet specified criteria. Approval of grants will be made by the FUNDEC Board (to be established by COREP) on the basis of reviews and recommendations by external evaluators. It is anticipated that the FUNDEC Department staff will need to render substantial technical assistance to potentialbeneficiary training providers to ensure that high quality and relevant funding proposals are developed and that individual projects which received FUNDEC support are appropriately monitored. 58. FUNDEC grants will only be available to training providers with an institutional gender and HIV/AIDS policy. Furthermore, the fund has included specific gender and HIV/AIDS criteria for the selection of proposals. Selection of Economic Sectors and Pilot Institutions 59. Four economic sectors were identified for the pilot projects: (i) administration and management, (ii) and hospitality services, (iii) tourism industrial maintenance, and (iv) agro industries (agro-processing). The preparation phase included several regional consultative workshops between March and M a y 2005 with industry, organized labor, civil society and trainingproviders). 60. Key criteriaincluded: Substantive potentialinterms of GDP andm e d i u m term growth prospects Experience obvious skills shortages/training needs 66 F Demonstrated stakeholder interest in participating fully in pilot activities (including standards setting and validation of curricula) and possibilities for partnerships with the private sector for testing n e w trainingandundertaking supervised student practices. I Allow equity concerns (gender, regionaldisparities) to be addressed e Combine public-private TVET provision in a balanced manner where public TVET is not crowdingoutprivateTVET. 64. Selection of pilot training institutions. The total number of training institutions selected for the pilot project is limited; about a quarter of public training institutions from DINETDNEFPwillbe targeted. The selection of the pilot institutions was nationwide. 65. Key criteria included: c Geographicallocationinrelation to national coverage of the project. I Geographicallocation inrelationto the local demands of the sector specific training that the institution willprovide. -e Possibilities for partnerships with the private sector. F Training needs for teachers andinstitution management. I Current state of the buildings of the institution. Current state of equipment inworkshops andlaboratories. s Absence of similar initiatives close to the selected institution. List o - 01 Escola Agraria de Lichinga Agro Industry M E C North Niassa Province 02 Escola Industrial e Comercial de Pemba Tourism Services M E C North Cab0 Delgado Province* Administration & Management 03 Escola/ hstituto Industrial e Comercia13 Administration & M E C North de Fevereiro, Nampula Management Nampula Province Industrial Maintenance 04 Centro de Forma@o Profissional- Industrial MINTRAB North Nampula Maintenance Nampula Province 05 Escola Agraria de Mocuba Agro Industry M E C Centre Zambezia Province 06 Escola Profissional D o m BOSCO,Matundo Industrial Rede Centre Tete Province Maintenance Salesiana 07 Instituto Industrial e Comercial da Beira Administration & M E C Centre Sofala Province - Management Industrial 67 Maintenance 08 Centro de Formaq5o Profissional -Beira Industrial MINTRAB Centre Sofala Province Maintenance Administration & Management 09 Escola Industrial e Comercial Eduardo Tourism Services M E C south Mondlane, Inhambane Administration & Inhambane Province Management 10 Escola Profissional de Moamba Agro Industry Rede south Maputo Province Salesiana 11 Centro deForma$HoProfissional da Industrial Rede south Matola Maintenance Salesiana Maputo Province 12 Instituto Comercial de Maputo Administration & M E C south Maputo City Management 13 Instituto Industrial de Maputo Industrial M E C south Maputo City Maintenance 14 Centro de FormagHo Profissional de Industrial MINTRAB south Electrotecnia- INEFP Maintenance Maputo City 15 Escola Comercial de Lhanguene Administration & Rede south Maputo City Management Salesiana 16 Escola Agraria de ChokwelPolit6cnico Agro Industry M E C south * The cost of rehabilitationof this school is not included inthe current project financing of US$ 37.5 million. 66. Rede Salesiana. The Rede Salesiana i s an international non-profit organisation, specialized in TVET. The inclusion of four institutions belonging to this organisation is seen as a n asset for the successful implementation of the pilot project, as Rede Salesiana has high professional standards, well prepared trainers and an excellent infrastructure. All expenses related to building renovation and the supply of necessary equipment to the institutions belonging to Rede Salesiana will come from their own sources, and not from the overall PIREP budget. 67. EscolaAgrhria de Chokwe.The cost of rehabilitation of this institution willbe carried bythe Italianand the Portuguese Cooperation. 68 Annex 5: Programcosts Table 1: EstimatedFinancingRequirements" (US$ million) Cooperating partner The IDA Netherlands Total** Components A -Development of anInstitutional Framework 0.2 2.8 3.0 B - Standards-based Qualifications andTraining System 1.1 0.9 2.0 C - Quality Improvements inTraining Institutions 19.1 19.1 D- Skills Development Fund-FUNDEC (Grants to Institutions) 2.6 3.8 6.4 Executive Secretariat 4.0 4.0 Physical Contingencies 1.6 1.6 Price Contingencies 1.4 1.4 Total Estimated Financing 30.0 7.5 37.5 *Mozambique has a 100 percent financing framework agreement with IDA. It was agreed with GoMto apply the 100 percent framework to the proposed PIREPproject. Excludes cooperating partners' managedor forthcoming contributions estimated at about US$15.9 million to the overall PIREPas follows: Danida (USS7.5 million), GTZ (US$2.4 million), Spanish Cooperation/Salesians (US$4.4 million), Portuguese Cooperation (US$1.6 million). Table 2: EstimatedCostsby Component (US$ million) Program Cost By Component Local Foreign Total %of Total Components A - Development of an InstitutionalFramework 2.1 0.9 3.0 8.0 B - Standards-based Qualifications and Training System 1.8 0.2 2.0 5.3 C - Quality ImprovementsinTraining Institutions 8.6 10.5 19.1 51.0 D- Skills Development Fund-FUNDEC (Grants to Institutions) 6.4 0.0 6.4 17.0 Executive Secretariat 3.6 0.4 4.0 10.7 Total Baseline Costs 22.5 12.0 34.5 92.0 Physical Contingencies 1.6 0.0 1.6 4.3 Price Contingencies 1.4 0.0 1.4 3.7 Total Program Costs 25.5 12.0 37.5 100.0 IIdentifiable taxes and duties are estimated at US$2.8million, and the total cost, net of taxes, is US$32.7 million. The share of estimated costs net of taxes is 92%. 69 Table 3: EstimatedDisbursements by Category, by Financier (US$ million) The IDA Netherlands Total (1) Works 11.9 11.9 (2) Goods 4.6 4.6 Consultant Services, including Audits and (3) Training 6.5 5.5 12.0 (4) FUNDEC Grants under part Dof the project 2.0 2.0 4.0 (5) Operating Costs 1.9 1.9 (6) Unallocated 3.1 3.1 Total 30.0 7.5 37.5 70 0 0 0 0 0 0 2 E. g. 0 0 0 0 0 0 0 0 0 0 0 2 m tr \o omw n - * m. 0. 0. c-. 2 0 0 0 0 2 0 0 In r i 3 s E. 0. m x 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3 b c - 0 0 0 0 g g. 0 0 0 0 0 0 0. 0 0 0 0. Ti. 0 00- 0- * 0 0 C Q N C0- 00' d d o\ m N c N N 3 i? N U c0-- h N N I-- di 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 b c - 0 0 0 0 0 0 0 0 0 0 0 m o o 0 m di N h, Lo, m Ni 0- 0- hi 0- 0- 0- \o rJqQL.0 a' 0- *- 2 2 In N N N 00 ri % b * 2 0 - 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 b c - 0 0 0 g g. 0 0 0 0 0 0 0 0 0 0 h, I? 2 $. g. $. 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Ln m m m m l n N N 8 0 0 o o o c 0 0 0 0 2- 0 0 o o o c 0 0 0 0 0 c 0 0 h, ti. 3 0. 0- u. hl' hli r4N h t i r4N S W m 7 0 0 0 0 0 0 h 0 0 0 0 t-: h t i g. g. u * * h. ti' Nhl u) u o \ o 0 0 0 0 0 0 0 0 0 0 0 0 h t i 0 0 h 0 0 h t i 8 g. 0 0 2. ,$. a m m.0 N. z. h. m - - t-: ti- u u\D N N m w o a 3- N h Q H 0 0 2 s: 2 2 h - z 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 m o m 0 0 02- m 2- 0 0 0 a o + m z4 0- 8 $. h -. e'. 0. m' 10 CI O N 9 m d . ri- ri- z. E. 0 0 0 0 0 0 0 0 2- 3m 0 0 0 3 h O N 10 m * ri-ri 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 m o m 0 0 0 0 0 0 0 z. z. 0 h. 0. mi -$0- 2- g. $. w o r i o m 2 m o r i r i r di m a3 10Nri 1 0 Q 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 m o m 0 0 0 0 e" 2- 0 0 0 0 2 0 0 0 0. m o r i h m 0- m. d 0- d m. Q e', 0. ri m N 10 a m i -0- Co a3 10- rid 0 0 0 ri 2- 2- ri Q\ Y v) u .3 !? Y E 0 & Annex 6: Implementationarrangements 1. Project implementation comprises two broad sets of activities: (i) those related to the implementation of the project and (ii) program monitoring and evaluation functions (M&E). The present annex focuses on arrangements pertaining to the implementation of the project while M&E arrangements are described inAnnexes 3 and4. Agencies 2. During the initial stage, until a National Training Authority is created (Autoridade Nacional da Educaqlio Professional ANEP), PIREP will b e implemented and managed through an (interim) 3-level institutional structure which was recently approved by the Council of Ministers (Decree No. 29/2005). This 3-level structure consists of (i) a political level which is knownas the Comisslio Interministerial para a Reforma da EducaGlio Profissional (CIREP), composed exclusively of 7 Ministers from relevant portfolios and chaired by the Prime-Minister. This body is responsible for the approval of policies which will guide reforms performed by the l o w e r level bodies; (ii) an executive level, known as the Comissao Executiva de Reforma da Educaqlio Profissional (COREP), which is composed of 12 members, of which 6 are from government and 6 are from the private sector. The government representatives include the Minister of Education and Culture (who chairs the body) and five other high level officials from four different Ministries. The private sector representatives include 2 from the productive sector, 2 from the trade unions and 2 from organisations of other civil society. The function of COREP is to translate the policies approved by CIREP into strategies, action plans a n d activities, to set the rules and guidelines by which the system is regulated and to provide for periodical monitoring of the implementation process and (iii)management and technical support level, performed a by the so-called Executive Secretariat (ES) which is responsible for the implementation of the daily activities included inthe Annual Work Plan and Budget for PIREP and for coordinating activities across stakeholders andinstitutions. 3. The creation and existence of this body represents the first example inthe Mozambican legislation in which the Government and private sector sit together as equal partners in the same executive commission - prior examples to this one refer to consultative type of commissions - with equal representation. 4. The PIREP Executive Secretariat, which was established inJuly 2004 with the signing of a Memorando de Entendimento between the Ministers of Education, Labor and Higher Education and the Confedera$& das Associaqdes Econdmicas de Mopmbique (CTA), has been responsible for leading the technical and operational design of PIREP. The Secretariat, with a physical address inMaputo, has a fulltime staff of three to coordinate activities across Ministries, stakeholders and partners. The Secretariat received financing from a PHRD Trust Fund 53734 and contributions from WET Cooperating Partners in the form of leasing of physical space, equipment and consumables. All procurement and financial management activities for the PHRD TF53734 have been carried out by the Department of Administration and Finance (DAF) inthe Ministry of Education andCulture (MEC), which is also handlingthe ESSP (IDA Credit 75 32710) and the HEP (IDA Cr. 36090) in coordination with short t e r m consultants for procurement and financial management responsible for designing the systems to be established for those purposes inthe Executive Secretariat (ES). It is expected that the Secretariat will b e transformed into the ES where full and part time consultants will b e located to coordinate the implementation, procurement andfinancial management of the PIREP. 5. Since the ES will be dealing more closely with the implementation issues of PIREP, and will have more operational responsibilities, its composition and modus operandi will also b e presentedinm o r e detailinthe present section. Diagram 1illustrates the detailed composition of the Executive Secretariat within the general configuration of the institutional structure of PIREP. Roles and responsibilities 6. Inthis section, the roles functions andresponsibilities of each of the three institutional levels mentioned above is presented, as well as the composition of the Executive Secretariat, as shown indiagram 1. Inter-ministerialCommission CIREP - Inthe context oftheREPandPIREP, theresponsibilityofCIREP, willbeto: Ensure that the REP process is consistent with and integrated into t h e broader n a t i o n a l development process; Approve the policies and other measures necessary for the consolidation of the REP; Ensure that the PIREP implementation plan is aligned with the policies and strategies defined for the REP; Promote the interaction and articulation between the different subsystems of Education withthe objective of ensuringthat there is a nationally integratedsystem; Promote the balanced participation of the different stakeholders from Government, Private Sector and Civil Society inthe activities of COREP; Invite applications and confirm nominations for representation on COREP from the non- governmental organizations; and Submit annually a report of its activities to Cabinet, including the any recommendations considered necessary about policies and legislation to promote the REP. StakeholderGovernanceBoard COREP- 8. Inthe context of the REP andPIREP, the responsibility of COREP, willb e to: J Define the strategies and priority actions for the REP and ensure their implementation ina n effective and efficient way; v Recommend to CIREP the policies considered necessary to facilitate and reinforce the implementation of the REP; Approve the operational and implementation manuals of the REP; Designate the Director of the Executive Secretariat; v Approve the annual work plan and respective budget of the REP, submitted by the 76 Executive Secretariat, andmonitor its progress; Mobilize the financial resources needed for the implementation of the REP from the p u b l i c andprivatesectors; Provide for honest and effective management of the financial resources allocated for t h e PIREP reform process, in accordance with the rules and principles for the governance of public funds andinternational agreements; Monitor andevaluate the measure andresults of the implementation process of theREP; Ensure that n e w investments in the area of TVET are compatible with the vision, methodology and financial framework of the REP; Recommend to CIREP the general framework for the definition and validation of t h e standards and qualifications; Approve andregister the standards and qualifications; Accredit the training providers and assessors in accordance with the standards and qualifications approved and registered; Identlfy and promote mechanisms for achieving effective linkages between the different subsystems of TVET; Promote the dissemination of information and public discussion about the new integrated approach for the Reform of TVET; Create or disband working commissions; Execute other functions andresponsibilities as determined by CIREP; Delegate, formally, its responsibilities to the Executive Secretariat; Submit a bi-annualreport of its activities to CIREP, including recommendations considered necessary for the effective implementation of the reformprocess; Overseeing the implementation of environmental management. Executive Secretariat (ES) 9. Inthe context of PIREP, the responsibility of the Executive Secretariat willb e to: 8 Implement the policies and strategies defined for the REP; v Implement the annual work plan and respective budget, as defined in the Operational Manual; v Prepare the annualwork planandrespective budget for approval by COREP; Execute the budget of the annual work plan of REP, including the external resources and counterpart funds, in accordance with the financial and procurement procedures established for the REP; Maintain contact with the governmental and non-governmental agencies and institutions related to TVET, involved in the implementation of the annual work plan and respective budget; P Ensure the correct financial management and the accountancy procedures i n the implementation of the REP; c Procure goods andservices needed for the day to day operation of the Unit; 77 Maintain and manage a system of financial records of signed contracts related to the purchase of g o o d s andhinng of services; Monitor and evaluate the process of implementation of the REP; Manage a n d coordinate the development and registration of standards, qualifications and curricula plans, andmonitor their application; Identlfy any obstacles, as well as connexions and complementarities, to achieving linkages between different education subsystems and make proposals for how these c a n b e addressed; Define and implement a communication strategy and plan for the dissemination of infomation andpublicity about the REP; Prepare the agenda and documentation, keep the minutes and m a k e all logistical arrangements for convening meetings of COREP; Plan and coordinate joint missions from the co-operating partners, seminars and other events; Prepare periodicalreports andproposals about the process of implementationof the REP; Execute other activities approved by COREP attributed inthe context of the REP. Figure 2. Composition of the Executive Secretariat andresponsibilities of its different FinancialSpecialist Procurement 1Qualificationsand Training 1 Civil Enaineer 1 FUNDEC Manaaer FinancialAssistant Specialist Specialist 1Civil EngineerI Architect 1Assistant procurement 1 industrial MaintenanceSpecialist 1 M&E Specialist Assistant 1Agriculture Specialist 1 ManagementSpecialist 1Tourism Specialist 1Training of Trainers Specialist 78 10. The Executive Secretariat, given its responsibilities will have a central unit and five departments, namely: A central departmentresponsible for general coordination of the implementation of PIREP, which will have three sections, (i) a monitoring and evaluation section w h i c h is responsible for monitoring and evaluation of activities, objectives and targets, (ii) institutional a development section, which coordinate all the activities related to the reform of the institutional framework (Component A) and (iii) a HIV/AIDS andGender section w h i c h will b e responsible for the promotion of gender equity and the prevention and fight against the HIV/AIDS. This nucleus, which will b e located under the direct supervision of the Director, who is responsible for the entire Executive Secretariat, will have three full time technical advisors responsible for institutional development, gender equity and HIV/AIDS, and monitoring andevaluation; A procurement department and a financial management department responsible for contracting goods and services andoverall financial control and accountability, respectively. Each department will have one full-time specialist and one full-time assistant; An infrastructure departmentstaffed by one full-time civil engineer and one architect for a period of three years; A qualifications and training department, responsible for managing the core regulatory functions of the system, the development and establishment of a national system of qualifications and occupational standards. This department will need, on a full-time basis, an internationalspecialist for the areas of qualifications design andtraining development. In addition, there will b e a specialist for each pilot economic sector (industrial maintenance, management, tourism and agriculture) as well as a specialist for coordinating the training of teachers/trainers. Additionalshort term experts will b e hired to assist the workinggroups in the different sectors for such activities as standards development, qualifications design, curriculum planningand learning materials development. A FUNDEC department responsible for the management and implementation of the skills development fund (FUNDEC),composed of a senior manager, an assistant and a specialist for training, monitoring and evaluation. The role of the latter position will be follow-up the implementation of the different projects or trainingprograms which are beingfinanced with grants from FUNDEC; In addition to these five departments the ES will be assisted by an Advisory Group, comprised of representatives for the co-operating partners, who provide technical and financial support inprofessional education sector, as well as other relevant representatives and specialists. The mainpurpose of this group will be to provide technical and advisory support the ES, on request. This group will meet quarterly in a regular basis, as w e l l as on invitation of the Director of the ES. COREP will encourage the co-operating partners to sign Memorandum of Understanding with COREP indicating the conditions of collaboration with the partner. 11. In addition, short-term technical assistants will be contracted to provide support to working teams or groups that have been established to give effect to the implementation of PIREP, as described inthe OperationalManual. 79 Procedures 12. The processes and procedures governing project implementation will be outlined in detail inthe project Operational Manual (OM), and subject to the satisfaction of the Bank. An agreement will b e sought with the (Government) Borrower at the time of final appraisal of t h e project, that a Project Operational Manual, satisfactory to the Bank, is m a d e available as a condition for t h e credit. Procedures governing the basic relationship between the Government and the World Bank, mainly covering financial management and procurement arrangements, which will b e included inthe OM, are described inmore detail inAnnexes 7 and 8 of the PAD. Finally, procedures for (i) environmental and social monitoring indicators and (ii) environmental guidelines for contractors are included on the OM. Linkageswith Stakeholders and Training Institutions 13. It is envisaged that duringthe first phase of the PIREPimplementation process, the old andnew approaches to education andtrainingwill coexist not only within the same systembut, insome cases, within the same school where the pilot projects willbe located. Inthis regard, whereas the organisations which currently manage the present system of professional education will continue to develop their activities for the non-pilot schools in accordance with t h e traditional approach, they will also b e involved inthe implementation of t h e n e w TVET system inthe pilot institutions. An importantobjective will be to ensure that a transitional process for introducing the n e w approach into the non pilot institutions starts to b e promoted through, for example, awareness training for the teaching staff andmanagement about w h a t the new system of professional education entails interms of a learning and assessment methodology and new responsibilities for decentralized management. Sub-component A4 has been created with a view to facilitate the transition from the old to the new TVET paradigm. 13. The Operational Manual makes clear that representatives from DINET and INEFP will combine together inworking committees of COREP, to discuss and agree on the determination and design of standards, qualifications, curricula plans, training modules and a n e w system for training managers and trainers. Representatives of DINET and INEFP will also meet monthly with the ES management to reinforce coordination, as stated in the approved ES operative n o m s . The objective is bothto avoid duplication of efforts and waste of resources. 14. Another objective for the implementation of PIREPis to avoid duplication of efforts and wastage of resources. Wherever possible, the project will take the approach of supporting and building capacity in existent institutions by providing them with the necessary human and material resources to b e able to carry out their functions, instead of creating n e w structures for this purpose. 15. One example of this approachis to builduponthe Systemfor Accreditation of Providers which has already been developed for the Higher Education Institutions and Polytechnics, and which will be adapted for the technical education schools. Another example is to strengthen t h e Labor Market Observatory,presently operated by INEFP to build a more effective system for 80 collecting and analysing information from labor market studies and data collected by its provincialemployment centres. 16. The implementation strategy of PIREP will also emphasise the need for building partnerships with other institutions, such as (i) the National Institute of Statistics where the objective would be to include questions relating to professional education skills profiling in their household and employer surveys : and (ii) Centre for the Promotion of Investments the w h i c h can provide crucial information about planned andn e w investment projects indifferent regions of the country and (iii) the direct and effective participation of social partners (professional associations, trade unions, private sector organizations and from the civil society andprivate providers of professional education). Itis anticipated that the information that can b e collected from these partnerships will contribute to the effective improvement of curriculum contents, the development of n e w short-term training programs or the reinforcement of existent ones. 17. Finally, it is importantto mentionthe links between PIREP and the training providers of professional education. As the Operational Manual makes clear, althoughthe pilot schools will b e directly involved in testing the n e w competency based courses, it will still be necessary to ensure that representatives from the training institutions become involved in the processes of public consultation which are envisioned inthe context of sub-components Al, A2, A3 and B1, and that they are also encouraged to participate in the working groups for developing standards. 81 Annex 7: Financial management and disbursement arrangements This report is the result of a review of financial management arrangements on the proposed Mozambique Technical and Vocational Education Training Program (TVET) carried out in October 2005. The scope of the work has been set out inthe "Assessment ofFinancia2 Management Arrangements in World Bank-Financed Projects - Guidelines to Staff" issued by the Financial Management Sector Board on October 15, 2003. Under the Bank's OPDP 10.02 with respect to projects financed by the Bank, the borrower and the project implementing agencies are r e q u i r e d to maintain financial management systems - including accounting, financial reporting, and auditing systems - adequate to ensure that they can provide the Bank with accurate and timely information regarding project resources and expenditures. The guidelines issued by the Bank's Operations Policy and Country Services regarding FinancialMonitoringReports (FMRs) r e q u i r e adequate financial management arrangements, including the ability to produce timely FMRs, to b e in place by credit effectiveness. The purpose of the review therefore was (i) assess the to extent of preparedness by the borrower's implementing agencies in terms of financial management arrangements; and (ii) prepare a time-bound action plan for strengthening t h e financial management system inreadiness for programimplementation. Given that the ES andits financial management department have yet to be formally established, the proposed PIREP does not satisfy the Bank's minimumfinancial management requirements. To ensure full compliance, a time-bound action plan was agreed with the PIREP Executive Secretariat and officials from the Department of Administration and Finance (DAF) in the Ministry of Education and Culture (MEC) to ensure a financial management system is designed by negotiations and operationalized immediately thereafter by a financial management specialist, also to b e appointed before negotiations. Once this time-bound action p l a n i s carried out successfully, it is believed that the project will have developed an accounting system that will be able to produce the required level of financial management reports ina timely fashion. These were accomplished by negotiations inFebruary 2006. To date, all financial management arrangements for the PHRD TF 53734, established to prepare the PIREP project, have been carried out by DAF/MEC, which is also handling the ESSP (IDA Credit 32710) and the HEP (IDA Cr. 36090). This has been done incoordination with the PIREP Executive Secretariat which is the entity responsible for leading the technical and operational design of PIREP. It was agreed the Financial Management Specialist to be appointed for PIREP willreceive training from DAF/MEC staff. Inthe meantime, andas aninterimmeasurepending the recruitment of a Financial Management Specialist, the PIREP Executive Secretariat has contracted the services of a short-term consultant to set in motion the design of the required financial management arrangements and in readiness for project implementation. Work completed before negotiations includes the preparation of a financial procedures m a n u a l including a chart of accounts, the identification and installation of suitable accounting software, andthe documentation of the proposedinternal controls for the project. Inaddition to the abovepreparatory steps, a timeboundActionPlanwas discussed andagreed with PIREP andDAF/MEC officials, andwork has commenced, to complete a series of activities 82 to address the noted weaknesses and ensure the ES complies with IDA'Sfinancialmanagement and procurement requirements by Credit effectiveness. Once this time-bound Action Plan is carried out successfully, it is believed that the project will have developed an accounting system that will b e able to produce the required level of financial management reports in a timely fashion. The establishment of the ES and the appointment of a financial management specialist are conditions for negotiations. These were accomplished by negotiations inFebruary 2006. RiskAssessment IInherent Risk I I Country-Specific Substantial Entity/Project-Specific Substantial Control Risk ImplementingEntity High Funds Flow Substantial I Accounting Staffing Policies and Procedues I Hih g Substantial I Internal Audit I Hieh I ExternalAudit High Reporting and Monitoring High Information Svstems High The risk ratings above are showing substantial to high mainly because these financial management arrangements are not yet on the ground. Mitigating factors to address these are noted below. In addition, an action plan has also been agreed with the client to ensure that acceptable financial management arrangements are in place and agreed by negotiations and fully operationalized by effectiveness. County-Specific A Country Financial Accountability Assessment (CFAA) was carried out inDecember 2001. The overall 'conclusion was that public sector financial management systems inMozambique w e r e very weak. A follow-on Public Financial Management Assessment conducted in September 2004 concluded that the overall public sector financial management risk remained high. Management of the economy was quite satisfactory, but comprehensiveness and transparency of the budget was poor, the medium-term planning and budgeting was weak, while budget execution and accounting and reporting presented quite serious weaknesses. At the same time, a number of reforms were movingahead in a very structured and comprehensive manner. T h i s included the implementation of the n e w financial management information system through the public sector management reform program, SISTAFE, which is intended to address many of the current weaknesses. 83 EntitylProject-Specific The project is to b e implemented over a five-year calendar period and will b e implemented by the Executive Commission for the Reform of Professional Education (COREP). A new Implementing Unit (ES) is being established for the sole purpose of managing t h e implementation of the project (See Annex 6 ImplementationArrangements). This willbe staffed with a core team of experienced professionals and is a sign of commitment on the part of t h e government to, as far as possible, remove any impediments to the smooth implementation of the project. The use of a project-specific financial management and accounting system would also address the weak financial management and accounting environment currently in t h e public sector. Implementing Entity Project management will be coordinated through the ES. Core staff includes a Project Director, FinancialManager and Procurement Manager. The challenges facing the new unit would b e t h e lack of experience of implementing Bank-financed projects; however, the govenunent i s assembling a team of competent staff. This use of qualified and experienced professionals to manage the accounting and auditing arrangements would ensure that this risk would b e mitigated Once the right professionals are inplace. A Project Operational M a n u a l (OM)i s being developed and wiU be finalized prior to effectiveness. The PIM will provide a clear picture of project administration, including a definition of roles of the ES, its staff and relationships to other agencies andunits. Funas ROW Funds will flow from IDA and IDA-managed Trust Funds to specific and separate special accounts to be opened and maintained by the ES. The proposed procurement arrangements are that, as far as possible, most of the required expenditures would be made from the head office inMaputo (with the exception of the FUNDEC Grants), includinginternationalprocurement. The Government of Mozambique has a financing parameter agreement with IDA for 100 percent financing of eligible expenditures out of the proceeds of IDA credits. It was agreed t h e project will adopt the 100 percent parameter and will therefore not require counterpart funds for implementation. Staffing The staff capacity at ES financial unit will comprise of a Financial Manager and an Accountant. COREP was recently formally established and the two positions are still vacant. Agreement was reached to appoint a Finance Manager with requisite qualifications and relevant experience before credit negotiations to direct and guide the financial management operations of the project. In the meantime, and as an interim measure pending the recruitment of a Finance Manager, the project has contracted the services of a short-term consultant to set inmotion t h e required financial management arrangements in readiness for project implementation. Work being carried out includes the preparation of a financial procedures manualincluding a chart of 84 accounts, the identification and installation of suitable accounting software, and the d o m e n t a t i o n of the proposed internal controls for the project. AccountingPoliciesand Procedures The ES will adopt a cash basis accounting method to record its financial operations, u s i n g project-specific accounting software (Primavera) to b e installed shortly after negotiations. The programwill comply with applicable International Public Sector Accounting Standards (under the Cash Basis of Accounting), as promulgated by the International Federations of Accountants (IFAC). The application of the above, together with other internal processing procedures and controls for the program will b e documented ina FinancialProcedures Manual. The government of Mozambique is undertaking a public sector management reform, SISTAFE, which among other things, is aimed at improving public financial management. This would integrate budgeting, treasury management and accounting, through a computerized management information system, and also introduce a n e w internal control regime to support improved public financial management. The programaccounting policies and procedures to b e outlined in the financial procedures manual should take into account of this government initiative and its likely impact on the program depending on the role out of the SISTAFE computer system. Internal Audit There is no internal audit function envisaged for the program. However, internal auditing across the entire government (including projects) is the responsibility of the Inspectorate General of Finance (Inspec@o Geral das Finangas-IGF). The IGF is understaffed and has limited capacity to oversee program implementation. There will therefore b e need for thorough supervision, as well as quality assurance of the program. ExternalAudit Annualfinancialstatements willbeauditedbyindependent auditors, acceptable to the Bank, in accordance with acceptable auditing standards. The external audit will b e conducted using terms of reference acceptable to the bank.Auditors will b e required to issue a single opinion on the program's financial statements, as per the guidelines "AnnuaZ Financial Reporting and Auditing for World Bank-financed activities", of June 30, 2003. In addition, auditors will b e required to issue a management letter, highlightingany identified internal control weaknesses, which will contribute to the strengthening of the control environment. T h e auditor's report will be.submitted to the Bank no later than six months after the end of each fiscal year. The proceeds of the IDA credit may be used to finance audit costs. Reportingand Monitoring The financial transactions relating to the program would b e recorded and monitored using a project-specific computerized financial management and accounting. The Finance Manager would determine: the project's Chart of Accounts as well as the format andcontent of quarterly reports and annual financial statements; the selection and adoption of accounting policies and 85 accounting standards; and the need to include any supplementary notes to the project financial statements inorder to enhance the presentation of a "true andfair view". Management Interim Reporting (Financial Monitoring Reports) The reports would closely follow sample formats that are given inthe World Bank's "Financial Monitoring Reports for World Bank-Financed Projects: Guidelines for Borrowers If.The contents of these reports would as a minimumconsist of the following: 0 FinancialReports: > Sources and Uses of Funds by Funding Source P Uses of Funds byProgramActivity/Component 0 PhysicalProgress (Output Monitoring) Report 0 Procurement Report The formats were defined and agreed by negotiations and the program must b e capable of producing these reports by effectiveness. These reports would b e expected to b e submitted to the Bank on a quarterly basis. Annual Financial Statements The program will produce annual program financial statements for analytical and a u d i t purposes. These would consist of: 0 Statement of Sources and Uses ofFunds I Cash Receipts and Payments w h i c h recognizes all cash receipts, cash payments and cash balances controlled by the entity; a n d separately identifies payments by thirdparties on behalf of the entity. 0 The Accounting Policies Adopted and Explanatory Notes. The explanatory notes should b e presented in a systematic manner with items on the Statement of Cash Receipts and Payments being cross referenced to any related information inthe notes. Examples of this information include: > > a summary of fixed assets by category of assets; a summary of SOE Withdrawal Schedule, listing individual withdrawal applications; 0 A Management Assertion that Bank funds havebeenexpendedinaccordance for the intended purposes as specified inthe relevant legal agreement. Information Systems The financial management system for the program has not yet established. The accounting system will be based in a conventional package. An accounting software (Primavera) h a s already identified, and will be installed shortly after negotiations. The development of this computerized accounting system would b e crucial to the smooth implementation and monitoring of theprogram. Impact of Procurement Arrangements A Procurement Specialist is one of the key positions to be filled up in the proposed establishment of the ES. Indications are that most of the procurement requirements will b e 86 made at the head office. This inturn would simplify the flow of funds andminimize the r i s k of use of project resources. DisbursementArrangements Disbursements from the IDA credit and the IDA-managed Trust Funds would initially be m a d e on the basis of incurred eligible expenditures (transaction based disbursements). Payment of eligible programexpenditures would b e made from the Special Accounts to b e managed by the ES. Another acceptable way of withdrawing funds would using the direct payment method, involving direct payment from the IDA credit or IDA-managed Trust Funds to a thirdparty for works, goods and services upon the Borrower's request, such procedure to be limited to a minimumthresholdamounttobe setbyIDA. Uponcredit effectiveness, ESwouldberequiredto submit withdrawalapplications for aninitial deposit to the Special Accounts, d r a w n from the IDA Credit Trust Funds, in an amount to b e agreed to in the legal agreements. Replenishment of the Special Accounts would be based on the submission of withdrawal applications to Bank by the borrower. Guidance for preparation of withdrawal applications is provided in the Disbursement Handbookg and Letter of DisbursementlO. If ineligible expenditures are found to have been made from the Special Account, the Borrower will b e obligated to refund the same. If the Special Account remains inactive for more than six months, the Borrower m a y b e requested to refund to IDA m o u n t s advanced to the SA. The Special Accounts will be held in a commercial bank accepted by IDA. The authorized allocation and limitation amount will be US$ 1.8 million. IDA will require withdrawals from the Special Account to b e made on the basis of Statements of Expenditure (SOE) for expenditures for: (i) goods costing less than $250,000 equivalent per contract; (ii) costing less than works $1,000,000 equivalent per contract; (iii) services of individual consultants costing less than $50,000 equivalent per contract; (iv) services of consulting firms costing less than $100,000 equivalent per contract, (v) operating costs, training and workshops, and (vi) goods, works and services financed through FUNDEC Grants less than $ 250,000, all under such terms and conditions as IDA shall specify by notice to the Borrower. The retroactive financing for the project is established at US$500,000 [equivalent in SDR] to finance consulting services, operational expenses and training and workshops dating back to October 31, 2005. 9 Disbursement Handbook issued by the Word Bank 1"UponCredit signing, the LoanDepartment will send the Disbursement Letter to the Borrower which will p r o v i d e specific guidance for disbursement 87 FinancialManagementAction Plan Detailed below is a n action plan that would ensure that acceptable financial management arrangements would be inplace. Action Due Date Conditionality FMRformats andcomponents agreed and submitted inelectronic format during Negotiations Negotiations negotiations: Financialreport - agreed with FM Specialist 0 Procurement report - agreed with Procurement Specialist 0 Physical progress report - agreed with TTL Project Chart o f accounts inaccordance with the Negotiations Negotiations public accounting requirements and reflect the project operations Process of hiring a qualified and experienced Effectiveness external auditor for the programhas started. FinancialManagement System designed and Effectiveness Effectiveness installed at ES Financial Procedures Manual describing Negotiations Negotiations financial, accounting and administrative procedures, including job description of financial management staff Recruitment of the Financial Manager Negotiations Negotiations Supervision Financial management supervision will b e carried out regularly by the Bank Financial Management Specialist (FMS) at least twice a year. The initial supervision will be a r e v i e w of the implementation progress of agreed action plans noted above. The FMS will also: 0 Conduct a financialmanagement supervision before effectiveness/disbursement; 0 Review the financial component of the quarterly FMRs as soon as they are submitted to the World Bank; and, 0 Review the annual audit reports and management letters from the external auditors and follow-up on material accountability issues by engaging with the TTL, Client, and/or auditors. 88 PlREP- Flow of Funds mm -l Netherlands 1 1 1 1 I 1 ES Comp Comp Comp FUNDEC c, Admin & A B -- C Paymentupon goods senice deli\ ery Performance& basedoncontract fmancial Direct monltormg disbursementto Consultants, Providers of Goods training and Services (construction,ofetc.) institutions Deliwry CoordmationI goods & Performance & serviceb financial monitoring ----A Public and non-public beneficiary training institutions I 89 Annex 8: Procurement Arrangements A. Procurement Methods Procurement for the proposed project would b e carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated M a y 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated inthe Legal Agreement. The general description of various items under different expenditure categories are described in general below. For each contract to b e financed by the Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Government and the Bank Project Team in the Procurement Plan. The Procurement Plan will b e updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Before negotiations, a draft General Procurement Notice (GPN) will b e prepared and submitted to the Bank for review and approval. The Bank will arrange for its publication in the UN Development Business (UNDB) and the dgMarket. The GPN will give information on International Competitive Bidding(ICB) procurements and major consulting assignments to b e financed under the project. The methods to be used for the procurement of goods and services under the loan are described below, with the estimated amounts for each method for Phase I,and summarized in Table A. The threshold contract values for the use of each method are outlined inTable B. Procurement of Works: Works procured under this project would include: rehabilitation and/or refurbishing of technical schools. The procurement will b e done using the Bank's Standard BiddingDocuments (SBD) for all ICB. National Competitive Bidding (NCB) documents in Portuguese language, translated documents from the ICB version willb e used as agreed uponby the World Bank. For contracts estimated to cost less than US$ 1,000,000 equivalent per contract NCB procedures will apply. The works will also include minor and urgent rehabilitation of school laboratories and project unitpremises. Thevalue of the individualcontracts isnot expected to behigher thanUS$50,000 equivalent andmay b e procured under lump sum, fixed price contracts awarded on the basis of quotations received from at least three qualified contractors. Procurement of Goods: Goods procured under this project would include: office furniture/equipment, information technology equipment for the Implementing Agencies and the Project Executive Secretariat (ES), vehicles for ES and laboratory equipment, didactic materials (including textbooks). T h e 90 procurement will b e done using the Bank's SBD for all ICB. National Competitive Bidding (NCB) documents inPortuguese language, translated documents from the ICB version will b e used as agreed upon by the World Bank. Contracts estimated to cost less than U S $ 250,000 equivalent per contract will be procured throughNCB procedures, while contracts costing U S $ 50,000 equivalent per contract andbelow willbe procured throughShopping method. Goods to b e purchased for standardizationof equipment or spare parts, to b e compatible with existing equipment andproprietary and obtainable only from one source m a y b e procured by Direct Contracting subject to prior Bank review and approval. Selection of Consultants: Consultancy services required for the project would cover consultancies to: (i) develop t h e technical specifications, evaluate bids, and supervise civil works; (ii) develop learning competencies and standards in four economic sectors, prepare training manuals, train instructors, and develop technical specifications for the purchase of didactic materials; (iii) provide technical assistance to all implementation agencies at the central and decentralized levels; and (iv) carry out studies under the project All consulting service contracts costing more than US$ 100,000 equivalent for firms will be awarded through Quality and Cost Based Selection (QCBS) method. Contracts for highly specialized assignments estimated to cost less than US$ 100,000 equivalent m a y b e contracted throughConsultants' Qualification (CQ). Least-Cost Selection (LCS) will b e used for selecting consultants for assignments of a standard or routine nature (audit services) where well-established practices and standards exist estimated to cost less thanUS$100,000.00. Single Source Selection (SSS) m a y b e employed with prior approval of the Bank and will be in accordance with paragraphs 3.9 to 3.12 of the Consultant Guidelines. All services of individual consultants (IC) will be procured under individual contracts in accordance with the provisions of paragraphs 5.1 to 5.4 of the Guidelines. Short lists of consultants for services estimated to cost less than US$ 200,000 equivalent p e r contract for construction design and supervision and US$ 100,000 for other types of assignments m a y b e comprised entirely of national consultants in accordance with the provisions of paragraph 2.7of the Consultant Guidelines. Training Workshops This category would cover all costs related to the carrying out training a n d workshops, i.e. hiring of venues and related expenses, stationery, resource required to deliver the workshops and per diem and travel costs of participants. Training programs would b e part of the Project's AnnualWork PlanandBudget andwillbeincludedinthe procurementplan.Prior review of all 91 activities will b e required, only on annual basis, including proposed budget, agenda, participants, location of training and other relevant details. Grants Component D is a grant fund (FUNDEC: Fundo para o Desenvolvimento d e CompetGncias Profissionais) accessible to public and private training providers, NGOs, civil society organizations or trade associations on a competitive basis. FUNDEC consists of three funding windows: one window is earmarked to fund improved training capacity of public providers of formal and non-formal training not included in the pilot schools. A second window is for improved training capacity of non-public providers, and a third window i s earmarked to fund trainingdelivery for underservedpopulation groups with special emphasis onrural and female population. Each window has a different upper ceiling for project costs (between US$ 50,000 andUS$250,000 per proposal depending on the window andtype of provider). FUNDEC will b e managed by specialists in the Executive Secretariat in accordance with the manuals developed for this purpose. Apart from evaluating grant applications, and monitoringprojects financed by FUNDEC, the unit will also support potential beneficiary training institutions to develop goodproposals. The disbursement and procurement methods for institutions receiving FUNDEC grants are detailed in the Operational Manual (See Operational Manual Annex 6). In broad terms, disbursements under windows 1and 2 will b e done as follows: 25 percent uponapproval of the application and signing of agreement, an additional 50 percent will be disbursed m i d - w a y through the implementation of the grant and the last 25 percent will b e disbursed upon completion of activities and delivery of financial, grant results and impact information. For the third window, the disbursements will follow a pattern of 60 percent upon signing and 40 percent upon completion. In terms of procurement, for small works b e l o w US$ 50,000 a minimumof three quotations will be required while a minimumof five quotations will be needed for small works ranging from US$ 50,000 up to US$ 60,000, w h i c h is the maximum allowed for small works in any g v e n single proposal. The same procurement m e t h o d and thresholds will b e applied for the procurement of small scale equipment and goods. For consulting services, the procurement procedures andthresholds are the same as those described inthe section of Selection of Consultantsinthis Annex. Operating Costs: Operating costs for project Executive Secretariat shall consist of office supplies, operation and maintenance costs for vehicles and equipment, travel expenses and subsistence expenditures among others. B.Assessment of the agencies'capacityto implement procurement The proposed project will b e implemented by an Executive Secretariat (ES) w h i c h will include a Procurement Department responsible for the procurement of all goods a n d services financed by IDA andIDA-managed Trust Funds for PIREP.The Procurement department will be staffed by a Procurement Specialist and a Procurement Assistant whose qualifications and experience will 92 b e acceptable to IDA. Since the ES and its Procurement Department have yet to be established, its procurement capacity cannot b e assessed for the time being. The establishment of the ES and the staffing of the Procurement Specialist within the Procurement department are conditions for IDAnegotiation, however. These were met inFebruary2006. The overall project risk for procurement is high. After one year the Bank will conduct procurement post-review to re-assess the Project risk. Action Due Date Conditionality Recruit a Procurement Specialist inthe ES with qualifications andexperience Negotiations Negotiations acceptable to the Bank Prepare an overall procurement planand a detailed procurement planfor the first 18 Negotiations Negotiations months of the project stablish acceptable procurement filing and Within six months of project n/a effectiveness onduct clinics on World Bank procedures to procurement DuringProject Implementation ~ C.Procurement Plan The Borrower developed a draft procurement plan (18 months) for project implementation which provides the basis for the procurement methods. This plan was agreed between the Borrower and the Project Team during negotiations a n d is available at the ES. It will also b e available inthe project's database andinthe Bank's externalwebsite. The Procurement Plan will b e updated in agreement with the Project Team annually or as required to reflect the actual project implementationneeds and improvements ininstitutional capacity. D.Frequency ofProcurement Supervision In addition to the prior review supervision to be carried out from Bank offices, it is recommended that at least one supervision mission every six months b e held in the field to carry out post review of procurement actions. 93 Table A -Project Costsby ProcurementArrangements Amounts inUS$ TOTAL I 13,809,750 I 4,300,750I 19,406,259 I 37,516,760I Consulting Method Services QCBS CQ LCS IC TOTAL FIRMS 6,645,500 235,000 250,000 7,130,500 IND 3,594,422 3,594,422 Table B: Thresholds for ProcurementMethods andPrior Review' Expenditure Contract Value Procurement Contracts Subjectto Prior Category Threshold Review (US$) Method WS$) 1.Works >1,000,000 ICB All <1,000,000 NCB First contract <50,000 Shopping None 2. Goods >250,000 ICB All 50,000-250,000 NCB First contract <50,000 Shopping None DC All 2. Services Firms >100,000 QCBS Above US$lOO,OOO <100,000 QCBS andCQ First contract Individual >50,000 IC All Cons. <50,000 IC 94 E. Details of the ProcurementArrangements Involving InternationalCompetition 1.Goods, Works, andNonConsulting Services List of contract packages to be procured following ICB and direct contracting: Works Est. Bid I= Package Amount Number Description 000us P Q Review Closing- Comments Opening $ Rehab of Schools (EIC 05/06/QIC Nampula) 2.900,OO Post Prior Q2-2007 Rehab of Schools (EA Mocuba andEA Lichinga) 3.100,OO Post Prior Q3-2007 1 Rehabof Schools (EIC 07/06/QIC InhambaneandI1Maputo) 3.650,OO Post Prior Q3 - 2007 Goods Est. Package 1 I B i d C o m e Number Description Amount in P Q Review Closing- Opening nts 5 01/06/QIC Equipment for Classrooms 430 I Post Prior I Q3 - 2007 ~ I 02/06/QIC I Post Prior I Q3 - 2007 books Acquisition anddistributionof 04/06/QIC Prior Q4 - 2006 05/06/QIC 1111Equipment for computer rooms 650 Design andprinting of instructional manuals Prior Q4 - 2006 Maintenance workshop for 11 13/06/Q1C farming equipment Post Prior Q3 - 2007 18/06/QIC Electricity and electronicmulti- purposelaboratory 880 Post Prior Q3 - 2007 Electricity multi-purpose 19/06/Q1C workshop 1050 Post Prior Q3 - 2007 95 I I Est. Package Amount Bid C o m e Number Description in P Q Review Closing- nts 000 us$ opening - I 20/06/QIC I Fitter andwelder workshop 520 Post Prior Q3 - 2007 - 22/06/QIC 1 School and office furniture for 1 1I 3 Schools 450 Post Prior Q3 - 2007 23/06/QIC Schooland office furniture for 6 shoals 415 Post Prior Q3 - 2007 24/06/QJC School and office furniture for shoals 840 Post Prior 14 3 - 2007 2. Consulting Services Est. Package Amount Commen Number Description in P Q Review ts 000us $ 01/06/FU Establishment and capacity N buildingfor managementof the 500 Prior Q3 - 2006 Fund Capacity Buildingof the 02/06/Fu N PotentialBeneficiariesof the 210 Prior Q3 - 2006 Grants (NorthRegion) 03/06/Fu Capacity Buildingof the N PotentialBeneficiariesof the 210 Prior Q3 - 2006 Grants (Central. Renion) Capacity Buildingof the -r 04/06/Fu N Potential Beneficiaries of the 210 Prior Q3 - 2006 Grants (SouthRepion) 05/06/FU Capacitybuildingof the N PotentialBeneficiariesof the 210 Prior Q3 - 2006 Grants (Maputo) Creation of theNational 01/06/IAC Authority for Technical Prior Q4 - 2007 Education I 02/06/IAC Information Management 1 System 400 Prior Q4 - 2007 03/06/IAC I Marketing andCommunication 340 lPnor Q4 - 2007 96 zst. 3id Package $mount 2losing- Commen Number Description n P Q Review 1 ts I00 us $ 3pening Svstem 05/06/IAC Monitoring andEvaluation Svstem 380 Prior 22 - 2007 Proposalfor Funding 06/06/IAC Mechanism Development 190 Prior (Baseline) 22-2007 I Implementationof a I 08/06/IAC Decentralized Management 150 Prior 24 - 2007 Model Communication and Social Marketing Prior 24-2007 10/06/IAC Strategy for the Transformation I1 of COREP-ANEP Prior 24-2007 ' Strategy for the transformation 11/06/IAC of Subject -Based Training into 100 Prior 24 - 2007 1 CompetenceBased 12/06/IAC Strategies for the Alignment of I 1 DINET and INEFP 100 Prior Q4-2007 13/06/IAC Strategiesfor the Sustainability I I Prior 1I of the Reform 100 Q4-2007 1 I TechnicalAssistance (ES) 240 I IPrior Q4 - 2007 01/06/QIC Design Services for Schools 400 Prior Q3 - 2007 [ Rehabilitation Design Services for Schools 102/06/QIC Rehabilitation 300 Prior Q3 - 2007 03/06/QIC Supervision Servicesfor Schools Rehabilitation 260 Prior Q3 - 2007 04/06/QIC Supervision Servicesfor Schools ,, Rehabilitation 200 Prior Q3 - 2007 Implementationof the New I05/06/QIC Training of Trainers Model 200 Prior Q4 - 2007 06/06/QIC Definitionof the Professional 1 Orientation Model 230 Prior Q4-2007 ~ Training based on Standards of 01/06/QTS CompetenceinAdministration 400 Prior Q3 - 2006 1 andManagement 02/06/QTS Training basedon Standards of CompetenceinTourism and Prior Q3 - 2006 97 Est. Package I 1 Bid C o r n m e n --I- Number Description 1 P Q Review Closing- ts 100OUS$ I I Opening Hospitality Training based onStandards of 03/06/QTS CompetenceinAgriculture and 400 Prior Q3 - 2006 Aao-Industrv Training based onStandards of 04/06/QTS Competence inIndustrial 400 Prior Q3 - 2006 Maintenance Sistema Nacional de 05/06/QTS 1 Oualificacoes e Formacao 500 Prior 43 - 2006 (a) Consultancy services estimated to cost above U S $100,000 equivalent per contract for f i r m s and US $ 50,000 equivalent per contract for individuals and single source selection (SSS) of consultants will b e subject to prior review by the Bank. (b) Short lists comprised entirely of national consultants: Short lists of consultants for services estimated to cost less than U S $ 200,000 equivalent per contract for construction design and supervision and US$ 100,000 for other types of assignments m a y b e comprised entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 98 Annex 9:Economicand FinancialAnalysis 1. Inthelast decade, the Mozambique economyhas experiencedimportantstructuralchanges. Manufacturing and mines sectors almost doubled their share of GDP (from 9 percent to 18 percent), while the share of the agriculture sector declined from 82 percent to 72 percent. As t h e economy moved from labor intensive sectors to capital intensive ones, demand for labor i s also changing from heavy reliance on the unskilled workers to more highly skilled labor. The shift towards more skilled labor triggered a sharp increase inthe returns to post-basic education and beyond, particularly with respect to workers with little or no education and skills. More than ever, those who lack education and skills remain trapped under the poverty line in Mozambique. 2. The labor supply, however, has been slow to respond to these structural changes. Despite the growth in the manufacturing sector, the proportion of the labor force involved in manufacturing has declined. Instead, there has been an increase in the proportion of skilled workers employed inthe public and service sectors. 3. Using data from two cross sectional national household surveys (1996/97 and 2002/03), t h e analysis inthis Annex indicates that technical and vocational education has high returns (both net and gross of cost) and that it gives the worker a highprobability of being formal. 4. Among the African countries, Mozambique is one of the most successful examples in t h e last decade of post-war economic recovery. Aggregate or "big" numbers point out the story of a country with a GDP growing at an average of more than 8 percent, and with the inflation r a t e which, apart the flood years, stayed at the one digit levelll. Also interms of public finance, t h e last decade recorded a period of stability both interms of internal or external budget a n d debt sustainability12. 5. The economic growth triggered a poverty reduction pattern. People living under absolute poverty line declined from a share of 69 percent of the whole population in1996 to 54 percent in 2002, allowing the country to meet the first MDG goal13 before the established target date of 2015. 6. Selected mamo economic indicators, such as GDP growth rate, however, present only a part of a more comprehensive picture. In Mozambique, the economic recovery has been d r i v e n primarily by external aid and a few large foreign investment projects (i.e. the mega-pr~jectsl~) 11See PRSC 2004 andBenito-Spinetto and Moll(2005) for details. 12 The 2004 Fitch Ratings report put Mozambique in the B rating category. Accordingly to the report, the risk of external payment crises is mitigated by the fast external debt declining trend and because the nominal debt increase is mainly related to the FDIborrowing from private sector. Foreign financing support which still accounts for a high share of the total revenue (around 40%), is mainly inform of grants. Finally, tax to GDP ratio is still low (projection for 2007-08are at around 17-18%),but it is following a positive trend. 13See Fox et aZ2004 for details 14Mozambiquehas currently three mega projects - the Mozal aluminum smelter, the Cahora Bassahydroelectric plant and Sasol gas. Mozal, the biggest one, represents the largest investment (about US$US$ 1.34 billion) ever done in Mozambique. This investment is a consortium owned by London based Billiton (47%), Mitsubishi of Japan (25%), South Africa's IndustrialDevelopment Corporation (24%) andGovernment of Mozambique (4%). Now it doubled his 99 which, according to Castel-Branco (2003), account for almost half of the entire GDP growth ratel5. Inspite of the positive macro economic trends and prospects, job creation has remained anelusive goal. 7. Whenjobs are not being created at a desired rate, it is possible to think of the reasons b e h i n d this in two ways. First, job creation m a y b e stunted if there are substantial constraints in t h e business environment, credit market or, more broadly, in the private sector institutional frameworkI6. Second, job creation m a y b e compromised by having asymmetric information whereby the supply of labor is disconnected from what is being demanded inthe labor market. That is, either there is a surplus in both the demand and the supply of labor, there is a bad matching between the two, or the supply of labor does not meet the skills requested inthe labor market. 8. This analysis looks at the case of public intervention in the technical and vocational education sector in Mozambique. First, it focuses on the match between t h e supply of labor in light of an expansion inthe demand for more educated and skilled labor. More specifically, it explores how the educational system manipulates the incentive framework to encourage or discourage further education and training. For this analysis, data from two (TOSS sectional national household surveys (1996/97and 2002/03)17are used. 9. Second, it estimates private returns to technical and vocational education by estimating t h e probability of employment as well as the wage premium. The analysis indicates that, on average, qualified (with more than 10 years of schooling) workers are m o r e likely to b e employed by the formal sector, and further they command higher returns on compared to unskilled workers (with less than 10 years of schooling). Inaddition, the findings indicate that, even after controlling for individual a n d job type characteristics, graduates from WE18 institutions command a higher market wage premium compared to graduates from the General Secondary Educational system. 10. These results are supported by other studies on the subject. For example, a labor market study carried out by MINED (2004) found that at least 50 percent of the firms polled for t h e study mentioned the need to upgrade workers on a regular basis, often relying on their own facilities and bearing the training costs themselves. Borgarello et a1 (2004), based on an entrepreneurs' survey, show that, inaddition to access to credit, lack of a properly skilled labor force is one of key private sector development constraints. They also find that it is not uncommon for lending or financial institutions to include criteria related to entrepreneurial and capacity constructing the second smelter and expects to produce 506.000 tons of aluminum per year for exporting reasons. 'The way Mega-Projectcontribution i s computed i s a controversial issue. The result can vary from 10% to 50% of the GDP. See for example Benito-Spinetto and Moll (2005). 16See for example Borgarello et a1 (2004) and m(2003) 17See Fox et al(2005) for a data description 18Inthis docuement the term technical and vocational education (TVE) refers to formal education based on curricula approved by DINET, whereas technical and vocational education and tvaiiziizg (TVETI is used as an overarching term to describethe entire landscape of formal, non-formal andinformal training and technical education. The latter includes the Vocational Training Courses set by INEFP under the Ministry of Labor 100 technical skills as part of the application process. 11.Given the benefits of education inraising the skilled profile of the labor force, it would be natural to ask whether there is an underinvestment ineducation or an investment inthe wrong type or quality of education. A complete answer to this question is complex and b e y o n d the scope of the analysis. However, this paper explores the extent to which the current supply of labor (i.e what is being supplied by the education a n d training system) matches the demand for labor in terms of absolute numbers, type of sector or occupation. In addition, the analysis incorporates the cost and financing of the actual provision of different types of education and training to gain a better appreciation for the cost effectiveness of different sub-levels of education and academic or occupation specific programs. 12. A s in other countries in the Africa region, the impact of HIV/AIDS on the labor market, economic growth and social development is serious. The latest HIV projection data for Mozambique (UNAIDS 2005) estimate that 14.9 percent of the adult population (15-49 years) was infected, with an increase to 16.2 percent in2005. Youth aged 15-24 are the most heavily affected and account for 60 percent of n e w infections. Current projections indicate that the Mozambican economy will b e 14-20 percent smaller than it would otherwise b e due to the impact of HIV/AIDS in2010. Per capita GDP growth will b e between 0.3 percent and 1.0 percent lower per annum due to reduced productivity growth, human capital accumulation, and reduced physical accumulation. The projected population growth between 2000 and 2010 is estimated to b e about 1.6 percent per annum, as opposed to the 2.5 percent it would be in the absence of the pandemic. Life expectancy projections show that by 2010, average life expectancy m a y b e 36.5 years, as opposed to a projected 50.3 years inthe absence of the pandemic19. 13. There is evidence, however, of the critical role that educationplays inHIV/AIDS prevention, particularly the role of post basic education. The latest Demographic and Health Survey (2003) inMozambique found that knowledge, attitudes and practices to prevent the disease increase substantially and progressively with educational attainment. Nearly all respondents who have attained secondary education or beyond have full knowledge of a w a y to avoid HIV/AIDS. In contrast, only half of the respondents without education h a d the same level of knowledge. The role of education cannot b e underestimated to assist an uninfected generation grow up free of AIDS. 14. The present paper is structured as follows. Section Idemonstrates that there is a mismatch between the current labor demand andlabor supply. Section I1provides the rationale for public intervention in the WET sector on the grounds of higher return and equity. Section I11 examines the cost and financial sustainability. Finally, Section IV relates the analysis to the project components. l9See also PRSC 2004 101 Section I-Analysis inLabor Demandand Labor Suuulv 15. TheMozambican economy has undergone significant structural changes in the last decade. The agriculture sector, which traditionally has occupied a predominant role inthe Mozambican economic growth, still represents the main share of the overall GDP (72 percent), but it decreased by almost 9 percentage points from 1996 to 2002. As shown in Table 1, in the s a m e period, the manufacturing and mines sector almost doubled their share as a proportion of GDP while the trade and services sectors experienced a reduction. 16. Total employment slightly increased with important shifts among sectors. In the two reference years in Table 1 (1996 and 2002), the share of employed in t h e agriculture sector declined from 81 percent to 72 percent while people working in manufacturing and m i n e s reduced the (already) small share of the total employment. Employment, however, increased in the trade and private services sector, which is incontrast with reductions of the two sectors as a percentage of GDP. The construction sector is the only sector that showed a n increase inboth the share of GDP and employment. 17. Ifw e roughly compute individual average productivity by dividing the GPD by the labor force, w e note that in the mines and manufacturing sector there has been a n increase in t h e individual average productivity, while there has been a drop in the trade and agriculture sectors. The service sector is a separate case, mainly because it can group largely heterogeneous jobs, including a mix of highly productive workers and low productive ones, and because t h e public service sector does not necessarily follow market rules. Table 1.Economic sector structural change and labor force Yo of GDP YOof Labor Force 1996 2002 1996 2002 Agriculture & fishing 34.4 26.9 81.3 71.7 Mines 0.2 0.4 0.8 0.7 Manufacturing 9.1 17.7 3.7 1.1 Construction 6.6 8.0 1.4 2.9 Transport & communication 8.6 8.1 1.6 1.5 Trade 23.2 21.6 5.0 10.0 Services 13.4 12.9 3.2 7.7 Education 1.4 1.4 1.0 2.0 Health 0.4 0.4 0.7 0.8 Public administration 2.6 2.6 1.3 1.7 TOTAL 100.0 100.0 100.0 100.0 18. The labor force composition changed during this period. Table 2 highlights some of these transformations. For example, female employment increased inalmost all t h e sectors, especially in agriculture and services, although their share was reduced in industry. The working population remains constant by macro region (North, South and Center), although not across sectors. From 1996 to 2002 the North halved its share over the national employment in t h e 102 manufacturing and mines. On the other hand, 55 percent of people working inindustry are in the South and 35 percent inthe Center which doubled its 1996 share. People working inrural areas declined everywhere inthe period of reference. Table 2. Labor force composition, % by individual characteristics in1996 and 2002. I I I Gender I Area I Education I Female North Centre Rural u p t o EP2 TVEel WE Un EP1 ESGl &bas med Agriculture 1996 59 30 41 90 92 7 0 0 0 0 & fishing 2002 63 31 42 75 94 6 0 0 0 0 Industry 1996 16 15 17 36 70 24 1 2 2 0 (min&man.) 2002 13 9 35 29 72 20 5 2 0 0 Construction 1996 5 15 18 33 70 26 1 0 1 2 2002 3 11 22 21 67 27 3 1 1 1 Trade 1996 48 11 18 20 71 25 2 1 1 0 2002 47 13 31 17 73 24 2 1 0 0 PrivateService 1996 18 9 28 19 54 34 5 2 3 1 2002 27 10 26 11 60 28 7 2 2 1 Public service 1996 26 14 26 29 36 47 9 3 2 3 (Health,Ed,PA) 2002 28 23 27 17 23 50 19 3 3 3 Total 1996 53 27 37 78 82 15 1 1 1 0 2002 54 26 38 58 81 15 3 1 0 0 19. The educational groups' composition also varied within the sectors. Inmanufacturing and mines, the proportion of ESG2 graduates changed from 1 percent to 5 percent, while it decreased from 24 percent to 20 percent for graduates from EP2 andESG1. The share of s k i l l e d people increasedin2002, especially inpublic services, while inagriculture m o r e than 90 percent of workers remain with EP1educationlevel or less. The employment patterns andtrends show the labor demand in Mozambique moved from labor-intensive sectors and unskilled w o r k e r s employment to capital-intensive sectors andhighly skilled workers. 20. EmpZoyment is preva2entZy informa2 in Mozambiquezo.While no exact figures exist on this issue, on the basis of the 2002/2003 household survey, w e can roughly estimate the formal and informal share of workers inthe labor market. According to the data, family aidworkers m a k e up34 percent of workers while casual workers make up anadditional 2 percent. Bothcategories are within the informalsector. If the self-employed, who make up 46 percent of the workers, are added, the share of workers in the informal sector increasesz1. Of the salaried workers, who make up 18 percent of the employed workforce, around 35 percent of them work inpublic or government institutions while 65 percent work in the private sector. While the first type of salaried workers may b e considered contracted salaried workers, the proportion w o r k i n g for 20Informality is here defined as a worker without a regular contract and social benefits. 21Resolution adopted by the ILO Fifteenth International Conference of Labor Statisticians (ICLS) inJanuary1993. 103 the private sector may still b e injobs that exhibits certain degree of informality22.Inthe end, it is clear that the proportion of workers inthe formal sector is small, accounting for less than 10 percent of the whole labor force23. 21. While informality indeveloping countries provides an indispensable livelihood for many, it has a negative impact on the employee and on the overall system, including, among other aspects: (i) the majority of employees do not have social protection; (ii) majority of the goods the and services sold inthe informal sector fail to meet minimumhealth standards; and (iii) ost m informal firms are trapped ina low productivity operations cycle, with little access to finance, key government services and formal customers. Graph 1.Type of job contract among sectors, % in2002 0 salaried 0 casual Hfamily aid H self employment 100I n I 90 80 70 GO 50 40 30 20 10 0 agriculture industry construction trade services public services Source: IAF (Household Survey) 1996/2002 22. The sector of activity plays animportantrole inthe type of job contract. Inthe graph above, w e see that if a worker is employed in agriculture or trade is prevalently a self employed (respectively 55 percent and 72 percent), while if the worker is employed in industry (where registered and large enterprise dominate in terms of employment) or public services, such as education, health and public administration, the worker has a greater chance to b e a salaried worker. 23. Foreign worker demand is driven by high skilled workers. The Decree 57/03, w h i c h substituted the 25/99, writes downthat a firm before employing a foreign worker needs to m a k e the appropriate request to the Direcpo do Emprego do INEFP, Ministry of Labor. The Direcqlio do Emprego contacts the 21 employment centers located inthe whole country and if it does not find a worker with the same requested features, it emits a working permit for a two years period. Between April and June 2005, they have been issued 1050 n e w labor permission, 95 percent of the requested. 22The Mozambican legislation provides for a presumption of a written contract after a certain period for both formal and informal salaried worker, even if the worker i s not formally contracted, which basically means that the worker acquiresall the socialbenefits. However, this law is hardly enforced. 23See also World Bank (2004) 104 Table 3. Work permits for foreigners, 2005 April M a v Tune Total Requests 344 383 370 1097 Accepted 95% 96% 96% 96% Trade 170 190 162 522 Industry 25 25 43 93 Services 49 46 55 150 Construction 56 62 55 173 Agriculture 18 27 34 79 Transport 8 19 6 33 Source: INEFP, Direccao do Emprego 24. The highest demand comes from the trade sector with 50 percent, then construction (16 percent), Services (14 percent) and Industry (10 percent). However, m o r e than 50 percent are directors, managers and coordinators and about 25 percent technicians. T h e 80 percent of t h e m has at least a medium educational level andonly 1percent has a primarylevel of school. 25. Important actions have been taken with respect to improving labor marketflexibility. The Investment Climate Survey carried out by the World Bank (2003) highlights the labor market rigidity as an importantconstraint to doingbusiness inMozambique. A labor market reform is in process. Main point concerns the flexibility increase in the employee hiring and firing process. 26. The labor supply of skilled workers prevalently moved to public service sector. In the previous paragraph, it was illustrated that the market is actually demanding m o r e and m o r e for high skilled workers. But when one looks at the distribution of graduates among sectors, it emerges that the more educated people have moved prevalently to public service sectors. If one compares mines & manufacturing with services, it appears that ESG2 and m e d i u m TVE graduated students, both reduced their participation in manufacturing. Contrarily, they increased in public service. The TVE medium level students h a d the m o s t relevant change, almost disappearing from industry and doublinginthe public services. Table 4. Share of workers inthe educational groups by sectors of activity, 1996 and2002 I (E& 1 1 % of workers ineach educationallevc bv sector Industry Construct Trade Service service tot 1996 2002 1996 2002 1996 2002 1996 2002 96/02 Upto EP1 76 71 7 2 2 3 7 12 100 EP2& ESGl 33 23 12 3 4 7 14 22 100 ESG2 7 2 8 4 2 4 12 8 100 TVE el &bas 5 7 24 10 2 4 14 14 35 100 TVE med 4 7 24 2 5 10 7 3 100 Un I 15 5 1 3 2 I 12 12 0 0 - 100 Souuce: IAF 1996/2002 105 Section I1- Private Returns of TVET Years of agriculture industry trade construction Services public services education I Male Female I Male Female IMale Female IMale Female IMale Female I Male Female Iupto5 1996 11.44 10.12 14.08 12.32 15.62 13.86 15.4 13.42 16.06 14.08 14.52 12.76 2002 7.04 4.62 23.54 15.18 14.08 9.02 19.8 12.76 19.8 12.76 24.2 15.62 From6 to 10 1996 16.28 14.3 19.8 17.38 22.22 19.58 21.56 18.92 22.88 20.02 20.46 18.04 2002 11.66 7.48 38.94 25.08 23.1 14.74 32.78 21.12 32.78 21.12 40.04 25.74 From 11 to 12 1996 28.6 25.08 34.98 30.8 39.16 34.32 38.28 33.44 40.26 35.2 36.08 31.68 2002 21.56 13.86 71.72 45.98 42.46 27.28 60.5 38.72 60.5 38.72 73.1 47.3 I 1 More than I 1996 34.1 29.92 41.8 36.74 46.86 41.14 45.54 40.04 47.96 42.02 43.12 37.84 2002 35.2 22.66 117.48 75.24 69.52 44.66 98.78 63.36 99 63.36 120.56 77.22 24W e use income and not wages because w e want to include the self-employment income. The income, daily and spatially adjusted interms of prices, has been multiplied by an average working monthof 22 days. The 1996 i n c o m e is deflated at 2002 prices. The distribution has been trimmed at the 1 s tand 99t" percentiles so as to minimize measurement errors. 25The income regression includes standard independent variables such as age, age square, gender, rural, head, household size, region and sectors of activity. The model has been estimated in logarithm and then converted in absolute values after the prediction. 106 29. The income differential between public and private sector (table is not shown for brevity reason) indicates that, o n average, the public sector pays about 44 percent more than private firms to workers with less than 5 years of schooling and 52 percent more thanprivate to people with education up to 10years. The premium for the TVE medium level graduation is the only one which is higher in the private sector (35 percent more than inthe public sector), while an ESG2 graduate receives from the public sector 14 percent more than from the private one. For university graduates, the potential income i s almost the same in the two sectors. The public sector pays more inagriculture andless inindustrythan private firms. 30. Composition effects are relevant and they can raise inequality in the population. The predicted incomes do not demonstrate what workers really earn, but merely what they earn because they reach a certain educational level and they work in a partidm sector. The difference between demonstrated monthly incomes and real ones is due to the composition of workers' group. Female workers are highly represented among unskilled in agriculture, trade and services. However, they also represent an important share among skilled workers in manufacturing and public services sectors (respectively 43 percent and 29 percent) as far as their premium remains lower than male. In each educational category, there are also several differences in the group composition. The higher the educational level, the larger is the proportionof male, family head, urban and Southern workers. The lower level of education, the higher is the probability to meet a female and younger worker, located e.g. inrural areas or in the Center or Northernregions. 31. The wage analysis confirms and strengthens the positive correlation between the income returns and skills. The wagez6for salaried people in industry increased by 123 percent from 1996 to 2002 for male graduated with more than 10 years of educations and 115 percent for female workers with same level of education. Inagriculture, the increase during the period is only about 10 percent. Public service is close to industry in terms of wage growth, but in absolute terms skilled workers in industry receive the highest values among all the sectors. Finally, both women and men in industry experienced, in 2002, the most relevant wage gap between more educated and less educated workers: a male worker with more than 10years of schooling earned US$ 64 more per month than a worker with less than 5 years of education, while in the agriculture sector the more educated people earned US$ 26 more than the less educated. 32. A graduate in the TVET system achieves, on average,higher returns than a graduated in the general educational system. InMozambique, the general educational system has a great deal of equivalency with the technical and vocational education training system (apart that the medium vocational training provides for a longer attendance). A student i s allowed to move across systems, although inreality this is limited given the inadequate supply of places. However, a worker who has graduated from the medium level technical educational system earns, on the average, 32 percent more than an ESG2 graduate from the general educational system. An 26 The wage includes benefits and cash payments from the main job. The wage, weekly and spatially adjusted in terms of prices, has been multiplied by an average working month of 4.4 weeks (5 working days per week, 22 p e r month).The 1996wage is defIated at 2002 prices. The distribution has been trimmed at the lst 99th percentiles so and as to minimize measurement errors. Self employed are excluded form the analysis. 107 Agriculture industry trade construction Services public services Male Female Male Female Male Female Male Female Male Female Male Female EP2 & E S G l 1996 15.84 13.86 19.36 16.94 21.78 19.14 21.12 18.48 22.22 19.58 20.68 18.04 2002 11.22 7.26 38.28 24.64 22.66 14.52 32.12 20.46 31.9 20.46 40.7 25.96 Source: IAF 2002 34. In Table 6, the same model as in Table 5 was used to predict values from investment in education for the same groups. A s previously mentioned, this methodology allows isolating the educational effect on income from the other individual characteristics effects. The same m o d e l was also applied on the salaried workers wage and the results make the conclusion stronger: Wages for salaried worker graduated in TVE is 33 percent higher w h e n compared with the medium level graduated from ESG2 and46 percent more w h e n compared with TVE elementary and basic with EP2 and ESG2 graduates. 35. The probability of being under the absolute poverty line declines with educational attainment. The probability of being poor, if a worker is skilled, is only 10 percent in the General Educational System and 7 percent inthe TVE system, while the same probability is 55 percent for the unskilled workers and 37 percent for the low skilled (EP2 & ESG1). Apart from the unobservable individual characteristics, the evidence provided so far only reflects the educational influence on consumption, as illustrated in Tables 5 & 6. In Table 7, values are estimated applying a model which considers for each individual all the other average personal 108 characteristics of the samplez7. Table 7. Poverty line, predicted probability amongworkers (2002) %workers under poverty line Education All Male Female Urban Rural None & EP1 54 58 49 56 52 EP2,ESGl 40 44 36 42 38 ESG2 14 16 11 15 13 TVE el & bas 16 19 14 18 15 TVE medium 9 10 7 9 8 HE (University) 0 0 0 0 0 Source: IAF (Household Survey) 2002 36. InTable 7 w e reported the probability to be under the poverty line also for female and rural worker. Inboth cases, w e could find surprising results. Indeed female and r u r a l workers seem to perform better condition than male and urban worker. But the poverty line is based on consumption and women and rural workers are mainly family aid w o r k e r (respectively 40 percent and 50 percent). Therefore they probably receive lower income, but they have higher consumption rate thanmale andurbanworker. 37. The educational level is correlated with the type of job contract. Insofar as the vocational training will improve h e r h s skill, the worker will also have higher probability to have a job contract and to be in the formal labor market. Table 8 illustrates the probability to b e casual, family aid worker, own account and salaried workers in 2002. The probability of being in a particular workers category is then divided accordingly to the educational group. As w e are interested in isolating the effect of education on poverty, w e do not focus on observed probabilities. On the contrary, w e estimate a multinomial logit model in order to control for other individual characteristics, as for previous income models. The probabilities are then predicted by educational level in each of the four different job contracts positionsz8. The advantage of using such a model is that composition effects do not affect our conclusions. Table 8. Distribution of graduated byjob contract (2002) salaried casual family aid Self employed Total None & EP1 19 2 6 74 100 EP2,ESGl 43 2 52 100 2 l ESG2 85 1 1 12 100 TVE elem & bas 60 2 36 100 TVE med 71 2 0 27 100 H E (universitv) 100 Source: IAF 2002 ~ 27The probability of been poor is computed with a probit model with a poor dummy = 1andthe same specification as the other models: age, education, female, rural, head, household size, geographicalregions andindustries. 28The multinomial logit i s a maximum likelihood function here specified by the main individual characteristics as age, gender, rural, head andhouseholdsize, geographical region. 109 38. Intable 8, we see that the probability to b e a salaried worker increases with the educational level. After the University graduates, the ESG2 exhibits the highest share of people in w a g e employment immediately followed by W E . The difference is actually remarkable when these workers are compared with unskilled people, which are mainly self-employed. On the other hand, ifyou look at university graduate workers you can observe that almost all are salaried workers. Section 111- Householdand Public Expenditures and Financial analvsis TVET student household exuenditures 39. Household expenditures per student significantly differ among various educational levels and system. The student expenditure is positively correlated with the educational level: t h e higher is the level, the higher is the household expenditure for the student. It is also correlated with the system: a student pays more inthe private sector thaninthe public one. This reflects the fact that the public system is financed by the State budget, while the private one is mainly auto-financed. 40. Table 9 illustrates the household expenditure per student which each family affords at t h e different educational levels divided between private and public sector. It shows both t h e median value, e.g. the expenditure for the individual who stays in the middle of t h e expenditures' distribution, and the mean, which is the average expenditure of all the students. When the median is m u c h lower than the mean, it is because the distribution is skewed to t h e left, namely the bulk of the population spends less than few r i c h people. Because of this, both values are interesting. The difference between the two is a good indication of inequality in t h e distribution. 41. The cost for the family of studying in public educational training is higher than in the general educational system.According to the Household survey 2002/03, the medianhousehold expenditure for ESGl students is US$55 per year, while for the TVE basic level students i s US$ 77 per year. At the same time, the medianhousehold expenditure for ESG2 students is US$ 74, while in the W E medium level is US$ 149. Furthermore, the household expenditures in t h e private sector are m u c h higher: ESGl is US$638, ESG2is US$1,489 and TVE basic and m e d i u m levels go from US$3,277 up to US$4,085 . Table 9. Yearly household expenditure per student in2002, US$ N o nprivate Private EP1 median 6 77 mean 12 1023 EP2 median 21 346 mean 28 1996 ESGl median 55 638 mean 70 1443 ESG2 median 74 1489 mean 104 1503 TVE elementary median 74 Na 110 mean 212 Na TVE basic median 77 3277 mean 116 3277 TVE medium median 149 4085 mean 293 4216 H E median 485 10213 mean 892 12235 Note: 23,500 MTS=1US$, na is non available. Source: IAF (HouseholdSurvey) 2002/03 42. A brief students' survey was carded out in two TVE public schools (Instituto Industrial de Maputo and Instituto Commercial de Maputo). An analysis of the results shows that the household survey estimates are realistic, but also that each level includes different typologies of student andexpenditures. For example, regular students pay aroundUS$60/70 per year, while external students pay much more for exams, teachers, fees and so on. Some students are, however, exempted from paying fees due to their poverty status and ability to prove status with a poverty certificate. Finally, one has to distinguish between boarding and non-boarding students, andbetweenday and evening students. Among private schools, the heterogeneity is even higher. From the interviews it was found that (i) mainlyoffer relative short VT courses with very highdaily costs (inthe Escola they Professional do Electrotecnia the charge i s US$ 50 per day); (ii) students receive a full some scholarship from private firms, such as large enterprises (e.g. Mozal, Sasol, Empresa do Azucar) which employ the students after the course completion or send them for in-service skill upgrading; and (iii) the private school, there are the religious ones which, due to the among externalsupport they get, are financial sustainable. TVET student public expenditures 43. Both public expenditures per student (and per graduates) in the TVE and VT systems have increased substantially in the State Budget from 2002 to 2003. While in 2002, the public expenditure per student of TVE was US$95, in2003 it was US$164 (anincrease of more than70 percent) andthe public expenditure of each INEFP (VT) student was US$747in2002, but it was US$809 in2003. The public expenditures per graduate are higher since only about 60 percent of students enrolled successfully complete the general educational system (with a higher percentage inthe primary level) and only 45 percent inthe TVE system. Actually completion rate for ESGl and ESG2 i s quite high. The difficulty applies in getting into the ESG because there are too few places, but once in, most students complete. This i s not the case in W E T where a significant number of them drop out. The substantial difference between the public expenditure per student and the public expenditure per graduate inTVE is a clear inefficiency inthe educational system. Finally, the public expenditure per graduate may beevenhigher if one includes repetitionrate, which i s quite highinbothESG andW E . 44. The VT public spending per student is higher than the public expenditureper student in any 7'VE education levels. In2002, while the public expenditure per student inW E elementary level 111 was 205 US$, 61 in basic level and US$ 223 in the medium level, it was US$ 747 per INEFP student. The same applies in2003, when the public expenditure per student inTVE elementary level was US$487, US123 $ inthe basic level and US$308inthe m e d i u m level, but it was US$ 809 for each INEFP student. The INEFP budget does not include partnership with the p r i v a t e sector. This makes the interpretation more difficult. For example, in the schools that w e r e visited, the school pays 18 percent of its revenue to INEFP and the INEFP pays salaries to six teachers. 45. The elementary level is the most costly level in the TVE system. Even thoughthe basic level of TVE education in relation to the elementary and medium levels, receives the higher proportion of resources when compared to total TVE spending and total education spending, the higher public expenditure bothper student andper graduate in2003 w e r e inthe elementary level, US$487 and US$3,308 respectively. Table 10. Public expenditures per student (excludes off-budget funding), yearly US$ 2002 2003 Recurrent Capital Total Recurrent Capital Total - GE 40 7 47 45 16 61 EP 23 4 28 28 8 36 ES 124 6 130 122 4 125 91 4 95 161 3 164 Elementary 168 37 205 465 23 487 Basic 59 2 61 120 3 123 a(INEFP) Medium 217 7 223 306 3 308 694 53 747 673 136 809 Note:The analysis excludes the off-budget financial contributions of partners. Source: Conta Geral do Estado 2004. 46. The public expenditureper student is higher in the TVE and VT system than the GE System. In 2003, the state spent on the average US$ 61 on each student in the general educational system; this is an increase of about 30 percent from 2002. This corresponds to 37 percent of the unit public expenditure of a TVE student and only 8 percent of an INEFP student. The most inefficient is the elementary level. When it is compared with the primary level in GE, it can b e seen that the latter corresponds to only 7 percent of the public expenditure per student inthe TVE elementary level. Inthe ESG level, the state affords a public expenditure per student equal to 41percent of the public expenditureinthe TVE mediumlevel. Government resources allocation and financial sustainabilitv 47. The Government has been considering TVET more and more as a priority. Whereas in 2002 the Government allocated 0.55 percent of total public spending to the TVET system and 0.17 percent of GDP, in 2003 the TVET system spending represented 0.78 percent of total p u b l i c spending and 0.20 percent of GDP. In particular the TVE (under MEC) has increased its spending as a proportion of total public spending and GDP from 0.28 percent to 0.49 percent and from 0.09 percent to 0.13 percent respectively. Regarding the VT (under the Ministry of Labor), the allocation of funds as a proportion of total public spending slightly increased from 112 Medium 1,Ol 1,02 0,86 0,87 0,12 0,16 0,04 0,04 VT 2,31 1,88 1,96 1,61 0,27 0,29 0,09 0,07 INEF 0,62 0,53 0,53 0,46 0,08 0,08 0,03 0,02 50. Among sub-Saharan countries, Mozambique has one of the lowest spending in TVET, Available information indicates that the Mozambican Government spends less than Ethiopia (between US$200 and280 per student in2002), Tanzania (US$575 to 1,292 per student in2002), Malawi (between US$238 and 622 per student in 1998) and Botswana (between US$1,109 and 1,842 per student in 1996). The entire TVET system is under resourced, negatively affecting the quality of training and capacity utilization. 51. With specific TVET growth assumptions and with the recent macroeconomic trend, the financial scenario is considered sustainable.Based on the spending trends presented above and some assumptions about the macroeconomic frameworkz9,the next section evaluates a possible 29Following IMFprojections 2004 and PRSC2004. 113 Y (2003) Y+l Y+2 Y+3 Y+4 Y+5 GDP nominal inbillof MTS 102749 125776 144771 165447 190264 218804 GDP nominal growth rate 22.41 15.10 14.28 15.00 15.00 GDP real growth rate 7.80 7.20 7.70 7.40 8 8 MTSper US$ (Ex rate) 23895 22600 24000 25200 26460 27783 Publicexp / GDP (%) 26.50 23.70 25.60 24.40 23.11 21.89 Revenues/ GDP (%) 12.90 12.30 13.20 14.00 14.76 15.55 EducationExp. growth rate 30 25 20 15 10 Student unit cost growth rate 40 30 20 10 10 Student number growth rate 5 5 5 5 5 52. Based on previous assumptions, the following budget expenditure trends were calculated. The education expenditures will increase up to the third year and they will start to invert t h e trend as a percentage of the GDP in the following two years. However they will continue to grow with respect to the Total Public Expenditure, but slightly slowing down. With respect TVE, it will increase inthe first years as a GDP share and then it will invert the trend. It will increase its share on the total public expenditure and on the total education expenditure (both with andwithout HE), but with a decling growthrate. Finally, w e want to prove that there will be a decrease of the TVE spending proportion of the total internal revenue after the second year, as a consequence of the internal revenue increase. This is a sigruficant insight for the state's financial sustainability. Ifthe VT spendings are included in the calculations, the conclusion i s very similar. Table 14 sums up all of it. Tablel4. Medium-Term financial scenario (%) Y (2003) Y+l Y+2 Y+3 Y+4 Y+5 EducationExp. /GDP 4.62 4.91 5.33 5.60 5.60 5.35 30The Government participation inthe PIREPis 1US$US$million inthe first year, 0.9 the second, 1the third, 0.5 the fourth and 0.3 the fifth year for a total amount of 3.6 millions. See cost analysis annex for the details. 114 EducationExp. PublicExp. 17.85 21.19 21.30 23.47 24.78 25.02 TVE / GDP 0.13 0.17 0.20 0.21 0.21 0.20 W E / Public exp 0.49 0.74 0.78 0.90 0.92 0.96 W E / EducationExp. 2.75 3.47 3.67 3.83 3.70 3.83 W E / EducationExp. (no HE) 3.22 4.07 4.30 4.49 4.34 4.48 W E / Revenue 0.98 1.39 1.48 1.53 1.40 1.32 TVET / GDP 0.20 0.26 0.30 0.33 0.32 0.32 TVET / Public exp 0.78 1.12 1.20 1.39 1.44 1.51 TVET / EducationExp. 4.35 5.29 5.66 5.92 5.79 6.02 TVET / EducationExp. (no HE) 5.10 6.20 6.63 6.94 6.79 7.06 TVET / Revenue 1.56 2.11 2.28 2.37 2.20 2.07 53. Albeit the presented scenario is a simulation only, it is incouraging. In particular, it is importantto notethat the assumptionrefers to goodmacroeconomic preformancebothinterms of economic growth rate andinternal financial sustainability. Interms of educational spending, an increase inthe spending inthe sector, which is definetely under-resourced, is estimated. But a gradual increasing efficiency in the educational system and as a consequence a gradual decreasing cost per student was also considered. Section IV:Proiect Design and Components 54. The analysis from the previous sections highlights three importantprinciples which became the foundation of the project design. The primary principle is of course the rationale for p u b l i c intervention on the grounds of higher return and equity. Second, the importance of developing a WET system that is responsive to demand of the labor market i s incorporated in t h e Component A and D. Finally, the selection of pilot sectors inindustry and services i s based on the analysis of labor demand. This principle has been incorporated into the design of Component B andC. 55. Component A establishes the institutional framework for the future integrated TVET system and the implementation of TVET reform under the supervision of COREP. This report confirms the importance of having an independent and adequate structure able to dynamically respond to the rapid industrial structural changes which occurred to the national economic structure. As shown in section I,the manufacturing and services sectors w h i c h represents in 2002 more than 30 percent of the GDP, only employ 9 percent of the labor force, but assures the highest monthlyincome among all the sectors. 56. Component B commits the Government to transforming its w e n t subject based, annual curricula into a standards-based modular system to ensure that enterprises and experts of t h e world of work have a key roleinthe definition of training contents. This is particularly relevant especially in the light of the labor market analysis. The private sector, e.g. the labor demand, needs to b e involved inthis process, playing a main role inthe transformation to a demand-led system. 115 Cost beneficiaries 5 years 10 years 15 years (million) year 1(2003) interval: cost interval: cost interval: cost per students per students per students Total 45 113,943 1,672 1,039 644 Average Industry Services 1I Male Female Male Female Male Female (WEel & bas -EP2 & 1 ESG1) 125 80 242.9 155.8 205.9 132 (WE med -ESG2) 134 86 258.7 166.3 216.5 139.9 116 dynamic economy, such as the Mozambican one, could bring to hazardous conclusions. However even if the analysis can only b e considered an indication, it i s believed that these results have been rounded down. Indeed the analysis did not say anything about positive externalities, such as for example the positive correlationbetween the worker productivity (and wage) and the increase in the personal experience, an improvement in the overall economic system, including a GDP increase and a Government revenue expansion. These elements will probably reduce the estimated time of project cost recovery. Because of this, the projects components appear to be well designed andrelated with the actual country exigencies. 117 Annex 10: Safeguard Policy Issues The main safeguard policy issues identified under the proposed project relate to (a) potential soil and groundwater pollution, with a particular concern for unsafe asbestos disposal; and (b) potential loss of livelihoods due to land acquisition. A s a result, OP 4.01 Environmental Assessment and OP 4.12 Involuntary Resettlement have been triggered, and the appropriate safeguard documents - an Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (RPF), have been prepared, respectively. The ESMF has been prepared in consultation with numerous stakeholders such as various sector ministries as well as communities and the general public. They welcomed the rehabilitation activities as these would contribute to a hygienic learning environment and thus attract more students. Similarly, the RPF has been prepared in consultation will all relevant stakeholders, including potentially affected persons. Both documents have been disclosed inMozambique on September 15, 2005, and at the Bank's Infoshop on September 28,2005. OP 4.01 - PIREP's rehabilitation activities are expected to have limited negative environmental andsocialimpacts (loss of vegetation, soil erosion, air pollutionas well as soilandgroundwater pollution) due to, for example, unsafe disposal of asbestos, oils, paints, and the generation of solid and liquidwastes at the construction sites. To address these potential negative impacts, PIREP has prepared an Environmental and Social Management Framework (ESMF). The ESMF outlines the steps involved in the environmental and social screening process (screening, assigning the appropriate environmental category, carrying out environmental work, review and approval, public consultations and disclosure, environmental monitoring, monitoring indicates) as well as the institutional responsibilities for its implementation andthe related environmental trainingneeds and cost estimates. To carry out these steps, the ESMF provides tools such as the Environmental and Social Screening Form (Annex 2); an Environmental and Social Checklist (Annex 3); a sample List of Mitigation Measures (Annex 4); Environmental Guidelines for Contractors (Annex 5); a summary of the Bank`s Safeguard Policies (Annex 6) and draft EA terms of reference (Annex 8). Based on the results reflected in the environmental and social screening form, qualified personnel will determine whether (i) the implementation of simple mitigation measures will suffice; (ii)separate EA will have to b e prepared; or (iii) environmental work will b e a no required. Implementation of the ESMF will b e the responsibility of the Environmental Focal Point (EFP) located in the Planning and Monitoring Unit of the Executive Secretariat of COREP. The EFP will coordinate hisher activities with the relevant representatives of the (i) Directorates of t h e Ministry for the Coordination of Environmental Affairs (MICOA); (ii) Technical Services in those Municipalities where teaching facilities will b e rehabilitated; and (iii) Executive PIREP's Secretariat. To ensure effective implementation of the ESMF, PIREP will support environmental management training for the EFP; selected members of the Technical Services of the 118 Municipalities, and, as necessary, members of the Provincial Directorates of MICOA, and other agents, as outlined in the ESMF. Training topics will include (i) the environmental and social management process; (ii) environmental and social policies, procedures and guidelines; and (iii) selected topics on environmental protection. The latter willinclude safe asbestos disposal. Int h e event that separate EAs should b e necessary, the ESMF includes a financial provision for s u c h an activity. PIREP will further support the preparation of an environment section for the maintenance manuals to b e prepared for the rehabilitated teaching facilities to ensure effective environmental management during the operation and maintenance of these facilities. The ESMF has made financial provisions inthis regard. The ESMF includes an Environmental Management Plan (EMP) and environmental monitoring indicators inSection 9, as well as a summary table of the EMP inAnnex 7.The EMP outlines t h e institutional responsibilities for the implementation of the mitigation andmonitoringmeasures, their timing and cost estimates as proposed in the ESMF. This section also lists environmental and social indicators (i.e. compliance with the environmental guidelines for contractors, safe disposal of asbestos, and the number of people provided with environmental training to implement the ESMF). The EMP and the environmental and social monitoring indicators will b e included in the project's Operational Manual (OM). In addition, the OM will include t h e Environmental Guidelines for Contractors (Annex 5 of the ESMF) to ensure that any construction-related impacts are mitigated appropriately. OP 4.12 - The ESMF includes a reference to the effect that potentialnegative social impacts d u e to land acquisition, loss of livelihoods or loss of access to economic assets wouldbe addressed inthe context of the Resettlement Policy Framework (RPF). The RPF has been prepared as a separate document and outlines the policies, principles and procedures to b e applied in t h e event of landacquisition and/ or impact onlivelihoodunder PIREP. According to the RPF, the overall responsibility for the implementation of this Framework will b e under the COREP. The COREP, in liaison with MEC and MINTRAB will ensure that t h e framework is publicly disseminated and that project staff has the requisite skills andknowledge and, where necessary, appropriate trainingto implement the framework should be provided. The District Administration (including District Education Directors from MEC and MINTRAB) shall take responsibility for implementation of the Framework at District Level, with assistance from other line district directors in the affected ministries, which will include the Ministry of Lands and Valuation, the Ministry of Water Development, the Ministry of Housing, t h e Ministry of Local Government, and the Ministry of Agriculture and Rural Development. T h e District Administration will b e responsible for monitoring the resettlement and compensation plans drawn up for the potentially affected persons (PAPS). 119 The District Administration, with assistance from the District Education Director will assume the role of implementation of the plans, resettlement and compensation. They will work closely withtheVillage Government to ensurethat theresettlement andcompensation contractssigned by PAPSare timely executed and that the interests of the PAPSare protected. The District Administration will also be responsible for collection of data for updating t h e database. 120 Annex 11:Project Preparationand Supervision Planned Actual ~ PCNreview Oct. 12, 2004 October 12,2004 InitialPID to PIC Initial ISDS to PIC Appraisal Sept. 5,2005 October 17-28,2005 Negotiations Feb. 7,2006 February 7,2006 Board/RVP approval March21,2006 Planned date of effectiveness May 1,2006 Planneddate of mid-term review Oct. 30 2009 Plannedclosing date October 31,2011 Keyinstitutions responsiblefor preparation of theproject: Name Title unit H.E.Aires Aly Minister MEC Helena Taipo Minister MINTRAB Zefanias Muhate PermanentSecretary MEC Ana Chichava PermanentSecretary MEC Qmteria Mabote NationalDirector D I N E T M C ManuelRego NationalDirector MEC Antonio Chambal NationalDirector D A F W C GabrielMachado ExecutiveSecretary PIREP CastigoLanga Senior PolicyAdvisor PIREP RuiFuchini Consultant Component A PIREP Ernest0Mandate Consultant, Component B/C PIREP Leovigldo Faite Consultant, Policy Advisor PIREP Abida Remane Secretary PIREP JoseFilimone DepartmentChief D I N E T M C Lucas Balate DeDartment Chief D I N E T M C ~~Armando Banze TechnicalOfficer DINETNEC MariaHelena Gongalves TechnicalOfficer Escola de Pesca Teronimo Mahoaue NationalDirector INEFPMINTRAB JosePose TechnicalOfficer INEFPMINTRAB Agostinha Araujo TechnicalOfficer INEFPMINTRAB F. Manussi TechnicalOfficer INEFPWINTRAB Silvia Castillo TechnicalOfficer INEFP/MINTRAB 121 Bank staff and consultants who worked onthe project included: Alexandria Valerio Task Team Leader LCSHE Juan Prawda Lead Education Specialist LCSHE N o e l Kulemeka Senior Economist AFTHl Xiaovan Liane Sr. Education Specialist AFTHl Stella Manda AIDS and EducationRegionalCoordinator AFTHl DonBundy Lead Specialist. AIDSLEducation HDNED Toao Tinea Financial Analvst AFTFM IsabelMutambe Team Assistant AFC02 Maria Isabel Nhassengo Procurement Assistant AFC02 Brigida Arriaza Team Assistant AFTHl Luisa Moises Matsinhe Team Assistant AFC02 Adelia Chebeia PropramAssistant AFC02 Aniceto Bila Operations Officer AFC02 Michelle McCue Sr. ProgramAssistant AFCMZ Slaheddine Ben Halima Sr. Procurement Specialist AFTPC Kristine Schwebach Social Safeguards Specialist A F T S l Edeltraut Gilean-Hunt Environmental Suecialist AFTS2 MaryGreen ProgramAssistant AFTHl Albert0 Ninio Lead Counsel LEGAF Adam Shayne Sr. Counsel LEGOP Monica Sawyer Counsel LEGAF Mohammed Nadeem ETT Temporarv LEGAF Suzanne Morris Senior Finance Officer L O A G 2 Arvil VanA d a m TVET Advisor Consultant Mafalda Duarte Implementation Specialist Consultant Andrea Borearello Labor Market Economist Consultant Toraen Billetoft TVET Specialist Consultant Juan Diego Alonso Education Economist Consultant Tutta Franz TVET Finance Specialist Consultant Soila Hirvonen Gender Specialist Consultant MartenTreffers Architect Consultant Natalino Nascimiento Engineer Consultant Shiranthi Gnanaselvam M&E /Training Specialist Consultant Maria Elena Anderson Proiect Costh,~ Specialist Consultant Luis Pisani TVET Specialist Consultant Kent Kafatia Resettlement Policv Suecialist Consultant Faye Mbaye Environment Policy Specialist Consultant Manolo Sanchez Social Assessment Specialist Consultant Francesco Sarno Procurement Specialist Consultant 122 Cooperating Partners who worked on the project included: Malena Vaca Sotomayor Technical Advisor Spanish Cooperation Jeannette Vooglear ProgramManager The Netherlands Sara Buendia Technical Advisor The Netherlands Tulie Reviere ProsamManager GTZ Alastair M a c h Technical Advisor GTZ Susanna Heilbig Technical Advisor GTZ Per S. Holm Technical Advisor Danida Jorgen Friis ProgramManager Danida Eusebio M o r a Technical Advisor Rede Salesiana Jose Angel Rajoy Rede Salesiana Rede Salesiana Jose Guedes ProgramManager Portuguese Cooperation Pedro Muiambo Technical Officer Italian Cooperation Peer Reviewers: EduardoVelez Sector Manager, LCSHE Amit Dar Sr. Economist, SASHD Ernest0 Cuadra Lead EducationSpecialist, ECSHD Quality EnhancementReviewers: HarryPatrinos Senior EducationEconomist, LCSHE Jacob Bregman Lead EducationSpecialist, AFTH3 Luis Benveniste Senior Education Specialist, EASHD Florent Agueh Consultant, QAG Bank funds expendedto date on projectpreparation: 1. Bankresources: $350,000 2. Trust funds: $695,000 PHRD $505,000 NETF 3. Total: $1,550,000 EstimatedApprovalandSupervisioncosts: 1. Remainingcosts toapproval: $60,000 BB 2. Estimated annualsupervision cost: $95,000 BB 123 Annex 12: Documents inthe Project File Project Documents Project Concept Note Project Concept Note - Review meeting minutes Identification MissionAugust 2004, Aide Memoire, Annexes and Back to Office Report Preparation Mission November 2004, Aide Memoire, Annexes and Back to Office Report Follow up MissionMarch2005, Aide Memoire, Annexes andBack to Office Report Pre-appraisal Mission, Aide Memoire, Annexes and Back to Office Report Follow up Mission August 2005, Aide Memoire, Annexes and Back to Office Report Draft Project Appraisal Document, M a y 2005 Draft Project Appraisal Document, August 2005 Draft Project Appraisal Document, October 2005 Project Appraisal Document Datasheet-Technical Concept review package for Mozambique-ISDS Project Information Document, PID Project Concept Note Datasheet, PCN IntegratedSafeguard Datasheet, ISDS QuaIity Assurance Quality Enhancement Review FinalPanel Report, July2005. Quality Enhancement Review Presentation August 2005. Background Studies Anderson, Per-Ake (2001). `The impact of the mega projects on the Mozambican economy.' Discussion papers No. 18, Gabinete de Estudos, Ministerio do Plano e Finanias, Republica d e Moqambique. Maputo. Arndt, C. (2003). 'HIV/AIDS, Human Capital and Economic Growth prospects for Mozambique.' Africa RegionWorking Paper Series No. 48. The World Bank. Washington, DC. Billetoft, J. & Roque, S. (2004). 'Technical andvocational education and traininginMozambique: Better than its reputation .' Paper forthcoming. Billetoft, Jorgen (1998). 'Coping with uncertainty. Petty producers in postwar Mozambique.' Center for Development ResearchWorking Papers. Copenhagen. Danida (2003). 'Survey Report Technical Vocational Schools Cab0 Delgado, Tete andZambezia.' Report commissioned by DANIDA Programfor Education Sector Support Program.Maputo. Franz, J,; Maleta, M.& Mtambo, M.(1998).`A N e w Mechanism for Financing the TEVET System inMalawi.' A StudycommissionedbytheTEVETSecretariat, Ministryof LaborandVocational Training. Lilongwe/Malawi. 124 Fuschini, R. (2003). 'Quadro Legal da Formaqiio Profissional em Moqambique.' Report commissionedby GTZ Programfor Basic EducationD'ROETF. Maputo. Government of Mozambique (2005). Environmental and Social Management Framework (ESMF) for PIREP. Maputo, Mozambique. September 20,2005. Government of Mozambique (2005). Resettlement Policy Framework (RPF) for PIREP. Maputo, Mozambique. September 15,2005. Government of Mozambique (2001). 'Action Plan for the Reduction of Absolute Poverty (2001- 2005)' (PARPA). Maputo. Government of Mozambique (2001). 'Plano de Acqiio para a Reduqiio da Pobreza Absoluta' (PARPA). Maputo. GTZ-GFA Management (2003). 'Educational Needs Assessment in the Sector of Education Management Regarding Executive Personnel infurther Education and Training Institutions in Mozambique.' Report commissionedby GTZ Program for Basic Education. Maputo. GTZ-GFA Management (2003). 'Final Report on the Development of an M&E System for DINET.' Report commissioned by GTZ Program for Basic Education. Maputo. 94 GTZ-GFA Management (2003). 'Mozambique. Metals and Engineering Sector Study.' By Juan Carlos Balmas. Maputo. GTZ-GFA Management (2003). 'Organizational Design and Development Investigation - INEFP.' Report commissioned by GTZ Program for Basic Education. Maputo. GTZ-GFA Management (2003). 'Scoping Study for the Rural Development.' Report commissioned by GTZ Program for Basic Education. Maputo. GTZ-GFA Management (2003). 'Scoping Study for Tourism and Hospitality Training in Maputoflnhambane.' Report commissionedby GTZ Program for Basic Education. Maputo. Johanson, R. & Adams, A. (2003). 'Skills Development inSub-SaharanAfrica.' The World Bank. Washington, DC. Ministry of Education (2000). 'Secondary Education and Secondary Teacher Education Strategic Plan'. Draft for InternalConsultation. Maputo. Ministry of Education (2001).'Estrategia do Ensino Tecnico-Profissional e m Moqambique (2002- 2011)'. Aprovada pel0 Conselho de Ministros Maputo, 20 de Dezembro de 2001. 125 Ministry of Education (2001). 'Estrategia para o Ensino Secundario Geral e Formaggo d e Professores para o Ensino Secundario.' Maputo. Ministry of Education (2001). 'Professional Technical Education Strategy in Mozambique 2002- 2011.' Maputo. Ministry of Education (2002). 'Draft Education Sector Strategic Plan 2004 - 2008. (ESSP 11). Maputo. Ministry of Education (2003). 'Annual School Results, April 2003.' Planning Directorate. Maputo. Ministry of Education/Austral Consultoria e Projectos, Lda. (2003). 'Estudos de Custos e Eficacia Externa do Ensino Tecnico-Profissional e m Moqambique'. Maputo. Ministry of Education/Austral Consultoria e Projectos, Lda. (2003). 'Study of the Costs and ExternalEfficiency of Technical andVocational Education.' Final Report. Maputo. Ministry of Labor, National Institute for Employment and Vocational Training (INEFP) and Employment Promotion Bureau (GPE) (2004). 'Employment and Vocational Training Strategy inMozambique2004-2010'. Maputo. Muhamad, F. (2003). 'Estudo Rapido Sobre o Mercado de Trabalho in Inhambane.' Report commissionedby GFA/GTZ Programfor Basic Education. Maputo. Muhamad, F. (2003). 'Rapid Labor Market Assessment Study with a focus on the cities of Maputo, Beira, Chimoio andNampula.' Report financed by the ESSPIDA Cr. 32710. Maputo. World Bank (2005). Mozambique Skills Development: Issues and Options, The World Bank. Washington DC. Report No.29492-MOZ World Bank (2003). 'Mozambique Public Expenditure Review Phase 2: Sectoral Expenditures'. Washington, DC. Report No. 25969-MZ World Bank (2003a). 'Country Assistance Strategy for the Republic of Mozambique'.The World Bank. Washington DC. Report No.26747-MOZ Project Finances Mozambique PHRD Grant Agreement TF053734 PHRD Grant for preparation of TVET Norwegian Education Trust FundAgreement 126 Annex 13: Statementof Loansand Credits ~ ~~ Difference between expected and Original Amount inUS$ actual Millions disbursements Project FY Purpose IBRD IDA SF GEF Cancel.Undisb. Orig. Frm. ID Rev'd PO82618 2005 Beira Railway Project 0.00 110.00 0.00 0.00 0.00 110.95 0.00 0.00 PO69183 2004 MZ Energy Reformand 0.00 40.26 0.00 3.09 0.00 44.99 0.54 0.00 Access Project PO01807 2004 MZ-Decentralized 0.00 0.00 0.00 0.00 0.00 39.48 9.98 0.00 Planningand Fin. Proj PO78053 2003 HIV/AIDS Response 0.00 0.00 0.00 0.00 0.00 57.81 -3.60 0.00 Project PO72080 2003 PUBLIC SECTOR 0.00 0.00 0.00 0.00 0.00 26.89 15.81 0.00 REFORM PO69824 2002 MZ-Higher Education 0.00 60.00 0.00 0.00 0.00 48.09 -0.03 0.00 SIM(FY02) PO01785 2002 MZ-ROADS & BRIDGES 0.00 162.00 0.00 0.00 0.00 155.31 73.22 0.00 MMP PO73479 2002 MZ - Communication 0.00 14.90 0.00 0.00 0.00 11.66 3.92 0.00 Sector Reform PO01806 2002 MZ-MUNICIPAL 0.00 33.60 0.00 0.00 0.00 26.19 12.48 0.00 DEVELOPMENT PROJECT PO01808 2001 MineralResources 0.00 18.00 0.00 0.00 0.00 8.71 0.83 0.00 Project (NRMCP) PO70305 2000 Coastal& Marine 0.00 5.60 0.00 0.00 0.00 4.66 4.19 0.91 Biodiversity Mgmt PO49874 2000 ENTERPRISE 0.00 26.00 0.00 0.00 0.00 11.47 10.56 0.00 DEVELOPMENT PO42039 2000 MZ RAILWAY & PORT 0.00 100.00 0.00 0.00 0.00 53.28 48.52 16.29 RESTR PO35919 2000 MZ-GEF Coastal & 0.00 0.00 0.00 4.11 0.00 2.80 4.10 3.77 Marine SIL (FYOO) PO01799 1999 AGRIC SECTOR PEP 0.00 30.00 0.00 0.00 0.00 13.25 12.90 8.96 PO52240 1999 NATIONAL WATER I1 0.00 75.00 0.00 0.00 0.00 74.19 46.30 0.00 PO01786 1999 MZ-Edu Sec Strtgy Prgm 0.00 71.00 0.00 0.00 0.00 34.14 31.95 -2.90 ESSPTAL (FY99) 127 PO39015 1998 NATIONALWATER I 0.00 36.00 0.00 0.00 0.00 14.69 13.46 0.00 Total: 0.00 782.36 0.00 7.20 0.00 738.56 285.13 27.03 MOZAMBIQUE STATEMENT OF IFC's H e l d and Disbursed Portfolio InMillions of USDollars Committed Disbursed IFC IFC FY Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. Approval 1998 BI -I V M N 0.00 0.30 0.00 0.00 0.00 0.30 0.00 0.00 2000/03 BMF 0.00 0.20 0.00 0.00 0.00 0.20 0.00 0.00 2004 ENH 0.00 18.50 0.00 0.00 0.00 0.00 0.00 0.00 1997101 MOZAL 13.32 0.00 0.00 0.00 13.32 0.00 0.00 0.00 1999 MaragraSugar 10.30 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 SEF Ausmoz 0.72 0.00 0.00 0.00 0.72 0.00 0.00 0.00 1997 SEF CPZ 1.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 1997 SEF CTOX 0.73 0.00 0.00 0.00 0.73 0.00 0.00 0.00 2000 SEF Cab0Caja 0.58 0.00 0.00 0.00 0.51 0.00 0.00 0.00 2001 SEF Grand Prix 0.53 0.00 0.00 0.00 0.34 0.00 0.00 0.00 2000/04 SEF Merec 1.20 0.00 0.00 0.00 0.66 0.00 0.00 0.00 1999 SEF ROBEIRA 0.20 0.00 0.00 0.00 0.20 0.00 0.00 0.00 ~ Totalportfilio: 28.58 19.00 0.00 0.00 17.48 0.50 0.00 0.00 128 Annex 14: Mozambique at a Glance Sub- POVERTY and SOCIAL Saharan Low- Mozambique Africa income 3evelopment diamond* 2003 Population,mid-year(millions) 18.8 703 2,3n Lifeexpectancy GNIpercapita (Atlasmethod, US$) 21) 490 450 T GNI (Atlasmethod, US$ billions) 3.9 347 1038 Average annual growth, 1997.03 Population (99) 2.0 2.3 19 Laborforce (9'3) 2.1 2.4 2.3 Gross M o s t recent estimate (latest year available, 1997-03) --1 primary :apita enrollment Poverty (%ofpopulationbelownationalPOvertylinej 54 Urbanpopulation (?Aof totalpopulation) 36 36 30 Life expectancyat birth (years) 41 46 58 1 Infantmortality [per 1000live births) 131 133 82 Child malnutrition (%of childrenunder5) 24 44 Access to irnarovedwatersource Access to an irnprovedwatersource (%ofpopulation) 51 58 15 Illiteracy(990fpopulation age 69 60 35 39 Gross primaryenrollment ("9of school-agepopulation) n 6 87 92 Mozambique Male 137 94 99 Low-incomegroup Female 95 80 85 ~ KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1983 1993 2002 2003 Economic ratios' GDP (US$ billions) 3.2 2.0 3.6 4.3 Gross domestic investmentiGDP 11.6 25.5 30.3 21.9 Exports of goodsandservicesiGDP 6.1 0.2 23.5 22.8 Trade Gross domestic savingsiGDP -5.0 -9.6 15.6 113 Gross national savingsiGDP -3.9 -3.2 15.8 12.8 Current account balancelGDP 4 . 5 -25.8 -18.8 - E 2 Interest papents/GDP 0.0 3.8 4.9 3.8 TotaldebtiGDP V 0.0 221.8 02.2 1e.3 Total debt servicelexports V 0.0 19.0 26.1 8.0 PresentvalueofdebtlGDPV2i 24.8 23.2 1 Present value of debtiexpons 12/31 96.0 91.2 Indebtedness 1983.93 1993.03 2002 2003 2003-07 (averageannualgrovdh) GDP 3.6 8.1 1.4 7.1 7.6 Mozambique GDP Dercaoita 2.6 5.1 5.3 5.1 5.8 -Low-incomeomUD STRUCTURE of the ECONOMY 1983 1993 2002 2003 Growth o f investment and GDP (%) [%of GDP) Agriculture 31.6 29.5 26.6 26.1 100 Industry 21.5 20.1 28.9 31.2 Manufacturing .. 514-szT: 1.3 M.9 15.5 Sewices 34.9 49.8 44.6 42.8 Private consumption 84.3 95.4 13.4 77.3 -50 Generalgovernment consumption 20.8 14.3 11.0 115 imports of goods andsewices 22.8 48.4 38.2 39.4 GDI -GDP 1983-93 1993-03 (averageannualgroMh) Agriculture 2.9 6.1 7.2 industry -3.5 8.7 1.5 Manufacturing .. 18.1 4.0 Services 7.7 3.1 6.2 Private consumption 2.8 19 n.4 5.0 Genera government consumption 1.1 6.2 5.8 Gross domestic investment -0.3 14.4 2.5 0.5 Importsofgoodsandservices 0.0 4.0 0.9 5.8 Exports e l m p o r t s - 129 Mozambiuue PRICES and GOVERNMENT FINANCE :ikpd"l 1983 1993 2002 2003 [Inflation (%) c Domestic prices (%change) 20 Consumer prices 28.2 42.3 6 8 Q.5 Implicit GDP deflator 0.O 514 115 P.6 Government finance (%of GDP,includes current grants) 0 Current revenue 8.0 18.5 18.0 8.4 98 99 00 01 02 03 Current budget balance -2.1 3.6 2.2 2.5 Overallsurplusideficit after currentgrants -v.a -110 -15.8 - 11.4 GDPdeflator -CR Overallsurplusideficit after all grants -6.0 -3.6 -7.9 -4.9 TRADE 1983 1993 2002 2003 Export and import levels (US$ mill.) [USS millionsj Total exports (fob) 0 2 132 679 880 2.000 Cashewnuts and rawcashew 6 20 0 0 1,500 -. Pram 31 69 64 64 Aiurninum 361 519 Manufactures 7 Q 15 i Total imports (cif) 830 1351 1,445 Export price index(1995=WO) 96 90 74 78 97 98 99 00 01 02 03 Import price index[7995=WO) 99 89 a2 83 OExports olmports Terms of trade (1995=WO) Y 97 a 1 90 94 BALANCE of PAYMENTS 1983 1993 2002 2003 I [US$ milllonsj [Current account balance t o GDP (%) Exportsofgoods andsewices 222 3P 1058 1,230 0 Importsof goods andsewices 694 958 1745 1,820 Resource balance -472 -646 -687 -590 5 Net income -33 -779 -189 -213 .10 Current account balancebefore grants -437 -511 -678 -527 - 15 Financing items (net) 393 465 772 699 -20 Changes in net reserves 43 4a -94 -02 -25 M erno: Resewes includinggold (US$ millions) 15 8 7 825 1,007 Conversion rate (DEC,local/USS) 40.2 3,951 23,678 23,782 EXTERNAL DEBT and RESOURCE FLOWS 1983 1993 2002 2003 (US$ millions) Composition of 2002 debt (US$ mill.) Total debt outstanding anddisbursed21 422 4,5M 4,756 5,024 IBRD 0 0 0 0 IDA 0 5 P 985 1,232 Total debt sewice 21 0 71 286 TI2 IBRD 0 0 0 0 IDA 0 3 7 9 Compositionof net resourceflows21 Official grants 90 503 420 536 Official creditors 202 m 179 Private creditors 0 0 0 0 Foreign direct investment 0 32 380 342 E: 1,029 World Bank program Commitments 0 a 3 0 a i A IBRD E- Bilateral Disbursements 0 93 149 256 B IDA -- D .Othw multilateral F Private - Principal repayments 0 0 3 2 C - I M F G - Short-term Net flows 0 93 146 254 Interest payments 0 3 4 6 90 %7 130 Annex 15: Map 131 Annex 16 COREPDecree No. 29 Haverid0 nemssidade de mawrializar o pfograrns integrado de Refama da Educaeo Praiissional (REP), o qua?inciui o E~sinaSuperior Pol Ti?.cnica-P:afissional e a FQWnaglQProfissional.nos sectores pG Gonseiho de Ministros. aa abrtgo das allnsas fi e I) do no 1 do attigo 204 da ConstituiqSo da ReprjbEica,decreta: ARTlQCiI (Quadm inStitUGiOtYP!j I. criada a Comissao intarministerial a a Reforme da Edvca~aoProfissionat, doravante designada por CIREP, quem cebe propor ab Conselha de Nljnistros politicas da Re da Edurng~~ Profissionat e supentisar o processoda sua mipiernen 2. E criada a Carnisslo Execrstwa da Reforma Profissional,adiartb designadapor CQREP, responsavsi pela irnpfementaHo e estratc5gias d3 Reformade Educaqla Prafissional,abreviada epoifticas dasignada por REP. 3. e criada tltna Unidade de drnplementa@%o,respansew1 pefa execug~oda pmgrama a n d de irabalho e do orpmento aprovados pela GOREP. ARTIGO 2 (Gamposi5;So&aGIREP) 1. A Gomissso lnterrninisterial paw a R a da EducaGto Pmflssianai i presididapak Primaira-Ministrae integra: da Educa@o e Cultura; a doTrabaiho; c) 0 Ministro das Finanwas, d ) 0 Mulinistro da Pfanificaqm e DesenmPvirnento: e) 0 Ministroda Agricuftusa, f3. 0 Mfnistroda lnddstFiae CsrnBrcio: 9) 0 MiRiStfQ da Ciancia e TemQIOgia I 132 a] Assegurar o enquadramento do pmesso da REP na perspecttva do desenvolvimentonacional, b) Aprovar rndidas de pctltica adsquadas& mnsotidagm da REP: c) Assegurar o alinhamenlo do piano de execu@o cam as politicas e estrathiasdefinidaspara a REP; d) Promover a interacqio da REP corn os divsrsossubsisternasde Educa@io, no sentido da sua intagra@ionumsistema necional: e) Promover a participagao eguilibrada dos difarmles intervenientes do Governo. Sector Privsdo e Sodedade Civil em todas as actividados cla COREP. 2. A CIWEP dew submeter anualrnente urn reiat6rao das was actividados ao Conseiho be Minatms, dele conskindo as reccmendafles Iulgadas neoessariassobre as politicasszlacionadaswrn a REP. ARTlGO 4 (CornposlGiioda CDWEP) I . A ComissSCr Executivade Reforma da Educzqlo Profissional B psesidida pelo Ministroda EduqSo e Culture B integra: a) Urn representantedo Ministerto da Educago e Cukm: b) Urn representantsdo Ministhriu do Trabaiho; c) Urn repres@htantedo MinistBrieda Industriae Combrcio; d) Urn representantedo Ministcirioda nifim@cJe Desenirolvimento; e) Urn representantedo Ensino Superior; f) Dois representantes de diferentes atganiza@es de ernpwgadoses do sector privadcr; g) Bois representantesde diferentes organlzaNes de irabalhado h} Dois representantes de outras arganirai$ie?es da socledade envalvirnento relevanteda Educa@o Profission&. 2 133 3 134 2. A COREP ode delegar de forma expressa, campar&naas na LJnidade de !mplemen:a@o. 3. A COREP submeteerg tlm retat&Pia sernestraf das suas activioades ICIREP, nefe incluindo as recornendaqfiesque julgar necessarias ao born andarnerrto da Reforma ARTlGO6 (Funclanamentoda COREPj 4 .A COREP reline-= ordinasiarnenle de dois em dois meses e, sempre que necessano,em sesssc extraofdinaria, 2, Em funl&Po$a natureza das rnatkrias a tratsr, podergo Ser convidadas outras indrvidualidadesa participar nas sassbes da GOREP. 3 AS decis6es da COREP $30 tomadas par consenso. Na falta de wnsenscl, as decisOes sa5 tomadas par maioriasimples de votas. 4. 0 Presidente da COREP tern vota de qualidad&,ern cam de empate. {UnidadeART!OO f de trnplementat$o) 1. b Unidade de Irnplemsnta@o B cfirigida pot urn Director, designads pela CQREP, a quem prestamnfaa. 2. A Unidade de impiemen'a@o possuiuma esifrutusa organics rntema prbpria, a ser deflnidade acotdocorn as sua$ newssiciadese aprovada peia COREP. 3. A Unidada de Implementa@o prepara a program de ttabalho anual e respective oyarnento da REP pars apravagao peiaCQREP. 4. Sob a orientago e dire@o da COREP, a llnidads de lrnp!emen&@.io e o dr@o de execupio das potitias de edumc;ao profissicma!, fat a monktoriados resultadose aconseltra a GOREP ern termos de politicas de fotrnaqBo formal e n%oformal. 5. Os representantes dos parceiros de caopera@iio e as agdncias flnanciadoras prestaracr assessoria e apoie,i&cniceA Unidade, ern maldes a esta COREP. 4 135 . . - 5 136 ......... - 6 137 Annex 17:Letter of Sector Policy 138 139 140 4 141 142 143 MAP SECTION
Groupe de la Banque mondiale · Project Appraisal Document
Mozambique - Technical and Vocational Education and Training Project
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Organisation
Groupe de la Banque mondiale
Type de document
Project Appraisal Document
Pays
Mozambique
Source
Banque mondiale