Dominican Republic - Second Education Project

FILE COPY CIRULAINGCOP TO BE RET;RIIE TO BE RETURNED TO REPORTS DESK DOCUMENT OF INTERNATIONAL BAN TR CSTRUCTION AND DEVELOPMENT Not For Public Use Report No. P-1607-DO REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE DOMINICAN REPUBLIC FOR A SECOND EDUCATION PROJECT April 17, 1975 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  RATE OF ECCHAOE Currency Unit Dominican Pesos (RD$) US$1000 RD$1000 Fiscal Year 0 January 1 to December 31  CIRCULATING Copy IG IE RETURIVED TO REPORTS DESkS JMMTERATICJAL BAFK FOR RECONSTRUCTION AiD DEVELOPMENT REPORT AND RECOMPEJIDATION OF THE PRESIDRiT TO THE EXECUTIVE DIRkCTORS ON A PROPOSED LOAN TO THE DOMINICAN REPUBLIC FOR A SECONID EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed loan to the Dominican Republic for the equivalent of US$8.0 million to help finance a second education project. The loan would have a term of 30 years, including 10 years of grace, with interest at 8.5 percent per annum. PART I - THE ECONOMY 20 An economic mission visited the Dominican Republic in August/Sep- tember 19740 Its report which provides the Bank's analysis of the country's economic performance and prospects, will be distributed to the Executive Directors shortly. Available social and economic data are presented in Annex I. _;a The Dominican Republic has continued the rapid economic expansion which started in 19690 As a result of large inflows of private capital, particularly into mining, a dynamic public investment program and rapidly increasing exports, economic growth averaged almost 11 percent per year between 1969 and 1973, bringing the country's per capita GgP to US$540 in 19730 In 1974, GDP growth is estimated to have declined to about 605 percent because of a reduction in private industrial investment and the effects on agricultural output of a prolonged drought in the eastern part of the country. Exports grew from US$ 180 million in 1969 to US$ 41ho million in 1973; i.e., at 24 percent per year, The increase in exports was made possible by high prices for traditional export products, mainly sugar which has normally, accounted for about half of merchandise exports, by an increase in the ouantum of exports -- the Dominican Republic is one of the few sugar exporting countries which was able to expand output in recent years -- and by the start-up of a new ferronickel mining venture i-n 1972 (The Fa].conbridge Dominicana project which the Bank helped finance Loan 64G1-DO) which accounted for 19 percent of exports in 1973. The fast expansion of exports in recent years has relieved the foreign exchange constraint that restricted GDP growth prior to 1969, Since then it was possible for the authorities to eliminate the arrears on commercial pay- ments, which were as high as US$ 20 million in 1970, and to improve the international reserve position of the Republic (negative by US$ 38 million at the end of 1967)o However, because the iull impact of higher fuel prices was felt in 1974, addinig US$ loo million to the Republic's import  -2- bii-, the Central Bankts net international reserve positJor, remained weak at the end of 197T (equivalert to about one month's imports). L. The capital formation ratio, which in the 156C's averaged 13 per- cent, increased to 21 percent of GDP in 197C-73. The rapid increase in investment during the latter period was prudently financed from domestic savings with little recourse to external cormercial borrowing. Savings increased from 12 percent of GDP in 1970 tc 20 percent in 1973. Govern- ment current savings financed about 90 percent of Central Government capital expenditure in 1973. The high level of public savings was, how- ever, obtained to a large extent by severely restricting current expendi- tures with adverse effects on the quality of government services. The Government, which has in the past emphasized investments in physical infrastructure, is nowr taking measures to improve its health and education services particularly in rural areas. 5. llMining, industry (including sugar refining), construction and services accounted for the bulk of output growth between lc69 and 1973. Industrialization has been promoted by an extensive array of incentives including protective tariffs and. tax exemptions. This system, which is being reviewied by the authorities, has tended to direct private investment from agriculture and agro-industry into import-substituting consumer goods industries which have few linkages with other sectors of the economy and require a relatively high investment per job created. CGnstruction was stimulated by a high level of public investment in infrastructure and private investment in housing, while the growth of value added in services resulted from the rapid rise in urban incomes and the expansion of tourism. 6. Agricultural output has been growing at about half the rate of aggregate GDP. Output for domestic consumption has lagged behind that of export-oriented crops such as sugarcane, tobacco and coffee. There is a sharp contrast in this sector between a few, relatively modern, prof- itable and largely export-oriented enterprises and the mass of minifundia on which poor farmers strive to eke out a bare subsistence. The Govern- ment is trying to improve the conditions of small farmers by an expansion of supervised agricultural credit, by implementing irrigation schemes such as the IDA-financed Yaque del Norte Project, (Credit 352-DO of January 17, 1973) and through a land reform program that has led to the resettlement of some 20,000 families since the program was started in the late 1960's. 7. Widespread urder-employment in rural areas, where 60 percent of the population live, has resulted in rapid migration to towns and cities, especially to Santo Domingo where 20 percent of the labor force is estima- ted to have been unemployed in early 1973. Population growth has been among the highest in the hemisphere but has declined from 3.6 to 2.8 per- cent annually over the past decade, largely as a result of migration,  -3- mainly to. North America. The illiteracy rate for the country as a whole is estimated.:at 49 percent but is higher-in.rural areas where it is estimated, that-60 percent of the population cannot.read. High birth rates-in the past have resulted.in a'skewed age distribution of the population -- about 48 percent are under 15 years of age -- and have heightened.the'need to intensify efforts-.to extend. and improve education and increase emDlovment o-nortunities. 8. In the- recent past the creation of new.jobs failed-to expand at the same rate as GDP. For the'economy as a-whole the'ratio between rates of GDP growth and employment growth has been about 3:1. This imbalance has been the consequence of an industrial incentive system and publicc-expenditure policies that encouraged capital-intensive activities. To reduce the magnitude of the unemployment problem, the authorities are considering changes in the nature.and. direction.of public outlays and.of industrial incentives in order to bring about a significant reduction in this ratio. With the national labor force growing at :3 percent per annum, the minimum rate of GDP growth required to maintain unemployment rates' at present levels-would be around 6 per- cent per annum, provided that employment-creating strategies are suc- cessfullv imDlemented. c. Past economic growth has traditionally been closely linked. to balance of payments performance and the country's capacity to pay for essential'imports. The substantial current account deficits of the 1960's were financed'with large inflows of concessionary assistance, while in the last four years private capital- has-been playing a grow- ing role, Though significant progress has been-made in developing alternate sources -of foreign exchange earnings- (tourism, ferronickel and more.recently silver and. gold.mining) sugar is likely to remain the single most important generator of foreign exchange in the fore- seeable future. Since the Dominican Republic:sold a substantial part of its 1975 sugar crop oin the futures market at the record.prices nrevailing in-197h, a substantial balance-of payments surplus should occur in 1975. - - le. As sugar prices decline in response to increased'world. output, the balance -of payments may again constitute a-major constraint-to the growth of the. Dominican economy at the pace required. to reduce wide- spread rural poverty and urban unemployment. In the medium-term, the country's ability to cope with a decline in sugar prices will, to a large extent, depend on the authorities' success in implementing their announced objective of building up f'oreign exchange' reserves during the next-one to two years. Crucial, likewise, will be the Dominican Repub- licts ability to obtain external assistarice with long maturity to help finance urgently needed. development projects. In the longer run, the balance of.payments constraint can be reduced if the country succeeds- in developing its export potential in tourism and. agro-industryb The  impact of these new exports on the balance of payments, however, is not likely to be significant until the mid-1980's because at present they only account for less than 10 percent of total export earnings. Success in promoting exports, coupled with the adoption of employment- oriented policies and. with the continued availability of official development assistance, would enable the Dominican Republic to gradually reduce the under-employment problem in spite of lower sugar prices. 11. On balance, this analysis suggests that the Dominican Republic is creditworthy for continued Bank assistance and that it will continue to require substantial amounts of external assistance with long maturity and grace periods. PART II - BANK GROUP OPERATIONS IN THE DOMIF4CAN REPUBLIC 12. The World Bank Group has made two loans and three credits for projects in the Dominican Republic. A US$ 25 million loan was made by the Bank in FY70 for a ferronickel mining project (Falconbrid.ge), which was completed. on schedule. Two IDA credits were made in FY71; US$ h million for an education project and US$ 5 million for a livestock credit project. Some delays were encountered in initiating these pro- jects, but both are now proceeding well. The Education project is expected to be completed before the closing date at the end of 1975 but completion of the Livestock Credit project may be delayed some few months. A third IDA credit for US$ 13 million was approved. in FY73 for an irrigation project (Yaque del Norte) which is being jointly financed with the IDE . After some initial delays in starting imple- mentation, project work began in February 1974. A loan of US$ 21 million -for a tourisn, project was approved by the E~cecutive Directors i.n October 19Th and signed the followTing month. The loanr is expected to become effective by early May, 1975. 13. IS: committed US$ 7.4 million in FY7L to a cement factory project, construction of which is proceeding well. Annex II contains a suwmrar7,' stLatement of Bank loans, IDA credits and IFC investments as cf February 28, 1975 and notes on the execution of ongoing projects. iL. when the Bank Group began to lend to the Dominican Republic in the early 1970's, the country's precarious economic and financial situation required that external assistance be on highly concessionary terms. Therefore, with the exception of an enclave export project (Falconbr-idge) all lending up to the present fiscal year was on IDA terms0 Since the Dominican Republic's econony and balance of payments situation and prospects have improved considerably in the recent past, future lending wtLll be on Bank terns exclusively. Di order to ease the transition from IDA to Bank lending and because, as explained in Part I, current favorable export prices cannot be expected to persist, the amnortization and grace periods of Bank loans to the Dominican Repu b:lic should be longer than might somentimes be indicated on strictly project grounds.  15. Bank Group lending to the Dominican Republic has been primar- ily directed at three major obstacles to economic and social develop- ment+: the vulnerability of the balance of payments, high rates of rural under-eqployment and. urban unemployment and weakness of the ins- titutions responsible for sectoral policies, project preparation and project execution. The Tourism Project which was recently approved by the Executive Directors addresses itself primarily to strengthening the-Dominican Republic's balance of payments. The proposed Education Project is directed at upgrading the capabilities of the labor forces so helping to resolve the under-employment and unemployment Droblems. 16. The Government has been carrying out substantial investments in road construction. There is, however, an urgent need to rehabilitate existing roads which have been allowed to deteriorate, and to strengther maintenance services. The Government is conscious that unless mainte- nance admilnstration is improved, much of' -its road. investment will be wasted., and has requested. the Banik to consider financing a road. mainte- nance and rehabilitation projecte U.t The Dominican Republic's population density ranks among the highest in the hemisphere and the net pow~lation growth rate would. also be. among the hi-ghest were It not for substantial emigration to the United States and Puerto Rico. The Government has begun an active, though limi. ted., family planning program with the support of UNIFPA and AID and has requested Bank assistance tc complement the activities of these agencies by reinforcing its programs in the eastern part of the Pepublic. le. Sugar exports are likely to remain the Dominican Republic Is princi.al source of foreign exchange earnings in the foreseeable future. The Government has asked the Bank to consider a project aimed. at increas- i ng the productive capacity of the State Sugar Enterprise (CEA) by ima- proving its efficiency. Implementation of this project would enable the Dominican Republic to remain competitive when market conditions become less favorable, and to make more effective use of limited land. resources, C. The U. S. Government has in the past been the Dominican Repub- lic's major source of external financing, mainly for budget support and for projects in agriculture, education, health and for industrial credit. The IDB las been active in power, irrigation, water and. sewerage, indus- trial and agricultural credit and higher education. The principal sources of external financing to the Dominican Republic in the past are summarized. below:  - 6 - TaDble 1: -xternal Assistance to the Dominican Republic 1966-1974 ($ million; commitments) IBERD/IDA 1DB U.S. Government Power 67.0 - Education, Health and Housing L.G 3.L 12.4 Agriculture, Livestock and Fishing 18.0 45.2 37.8 Industry and Tourism 46.0 7.0 8.o .ater and Sewerage - 27.5 - Other _0__4 153.3 -__ Total 68.o 150.5 211.5 g/ US-AID and PL480; excludes PL480 grant funds and loans to.be repaid in local currency. b/ 1-;ainly budget support. Furure 1ending by IDB and AID is expected to be for ports, health, _n- dustry, tourism, highway construction and agricultural credit. 20. The Bank Group's share in the Dominican Republic's publicly- guarant,eed externTal debt outstanding and dishursed, amounted to less than 10 percent at the end of 1973. About four-fifths of the debt owed to the Bank Group corresponded to the loan made to the Falconbridge ferronickel operation. The Bank Group's share of public external debt+ se7rice was 13.4 percent. Its share in the Dominicarn Republic's exterrnal debt is likely to rise to 20 percent by the end of the 1970's and its share of external public debt service would be no more than 16 percent. The service of public exterral debt in 1973 was equivalent to about 4 percent of f'oreign exchange earnings, i.e., exports of goods and non- factor services plus transfer receipts. Though some increase in this ratio can be expected, it should.not exceed 10 percent in the early &cQls. PART III - THB SECTOR taii. Characteristics 21. The educational system in the Dominican Rep)ubilic consists cf' six years of primary education, followed by six years of secondary education, and higher education with courses ranginlg from two to seven years. Public education is f'ree except for university where a nominal  - 7 - fee is levied. Private schools are subsidized by the Government. Total expenditures on education in 1972 represented 3.0 percent of GDP, of which the Government provided 83 percent. Government expenditures on education have increased at 10.5 percent a year since 1966, a somewhat slower rate than that at which Government revenues have been growing. The proportion of government expenditures devoted to education is lower than that of other countries at comparable levels of development and there are indications that the quality of education has been adversely affected by insufficient government financing. 22. Salaries paid to primary school teachers which have no formal qualifications (70 percent of the teaching force) are low and often result in teachers having to find other jobs to complement their salaries, reducing their comr-itment to the profession and their effectiveness. Given the Dominican Republic's urgent need for skilled and semi-skilled labor and for middle level management to further economic development, spending for vocational training in agricultural and industrial skills, as well as on basic education, is too low in relation to requirements. 23. The enrollment ratio for primary education was 107 percent of the corresponding age group in 1973 but enrollment included a large number of overage children. Only 17 percent of the children entering primar- education completed. all six grades and about 65 percent dropped out before reaching maintainable literacy at fourth grade. Primary educaticn is most inefficient in rural areas where only 7 percent of the chi-ldren enrolled in first grade complete primary education. Sixty percent of rural schools offer three grades or fewer, and only 12 percent offer all six grades. Inefficiency in both rural and urban primary schools is due to the large number of repeaters in the system, a shortage of qualified teachers, which only account for 9 percent of all teachers in rural areas and 31 percent in urban areas, and inadequate facilities0 Schools in rural areas are often not well located and considerable dis- tances must be walked. to reach them; teaching materials are almost un- obtainable; classrooms are small and inadequate for multigrade teaching, which is essential to achieving teaching efficiency in rural areas. "24- Some primary teacher training is provided at the secondary educatilon level, but it is insufficient. The present output is about 3C0 while demand for teachers has averaged about 800 a year, the deficit being made up by hiring unaualified teachers. By helping construct two new primary teacher colleges and expanding three others, the First Education Project (Credit 235-Do) will increase teacher output to 950 annually by 1982. The curriculum for primary teacher training is also beinb revised and will include training in multigrad.e teaching techniques and community education.  25. As a result of a 1970 reform of secondary education, the tradi- tional system of a twio-year basic cycle followed by a four-year upper cycle, is being substituted by a system of four years' basic cycle and two years' diversified cycle. The reform is aimed at introducing the student to a range of practical, prevocational activities in industrial arts, commerce and agriculture at the lower secondary level, and at preparing students in the higher secondary level for entry to middle occupations in industry, cormerce, nursing and the service sectors, as well as for entrance to higher education. Only a small number of schools function on the reform system and they are poorly equipped for teaching practical courses. Facilities to implement the reformed system at twelve schools will be provided under the First Education Project; these schools will have capacity equivalent to 5 percent of total secondary enrollment by the end of 1975. 216. nrollment at secondary schools (grades 7-12) was equivalent to 21 percent of the 13-18 age group in 1973 and about 30 percent of enrolled stude:-s attended private or semi-private schools. The efficiency of general secondary education is low as repeaters and overage students com- prise over half total enrollment; only 48 percent of first year entrants complete the six-year course. Technical secondary education only accounts for 8 percent of secondary enrollment. The dropout ratio is high, with only one out of six entrants completing the course. The curriculum is unresponsive to occupational needs and though most graduates obtain em- ployment, intensive on-the-job training is often required. 27. Olly about 20 percent of the teaching staff of all types of sec- onda2- schools is qualified, and there is an acute shortage of teachers of science and vocational subjects Except in schools operating the reform curriculum, teachers are paid by the hour and many have to teach at several schools to earn a reasonable salary. This reduces teacher involvement and efficiency. Secondary school teachers are trained at three universities, and although enrollment reached 2700 in 1972 only 136 graduated, falling far short of demand for secondary school teachers. .qith the assistance of UMDP and UNIESCO, the teacher training progran is being expanded to reach the required level of about hGOC graduates per year as of 1978 and emphasis is being placed on training teachers for sciences. mathematics and technical subjects. 28. Various nonformal education and training programs are sponsored by public and private agencies but there is lack of coordination among them. Courses of varying intensity aimed at providing basic nonformal education to adults are either offered or sponsored by the Secretariat of Education and over 30,000 people a year ccmplete such courses. Courses for the rural population in agricultural production techniques and mana- gement; are offered by the Secretariat of Agriculture, various religious organizations, the Community Development Office (ODC) and the Office of  -9- the Presidency among others; however, these programs do not cover many important agricultural areas where settlement projects are being im- plemented and where crop diversification is being carried out, and some of the institutions offering farmer courses suffer from lack of funds and qualified personnel. -290 Courses to prepare skilled and semi-skilled workers for trades in the mechanical, electrical, construction and service fields are offered by vocational training centers in five cities in the South of the Republic. Most are financed by the Office of the Presidency and administered by the Supervisor of Labor Schools. Output has increased from 142 in 1966, when the program was started to retrain personnel leaving the armed forces, to 1030 in 1973. However, the number of graduates is still too low to satisfy national needs and the kind of training offered is not always in accord with manpower requirements. In order to improve the efficiency of vocational training for industrial arts, an institution to develop a national training strategy, establish trade standards and ensure coordination of training programs is required. Education Policies 3C. Technical assistance is being provided to the Government under the First Education Project for, inter alia, the preparation of a long- term plan for the entire educational system, with particular emphasis on objectives, the structure of the educational system and means of achieving goals. Implementation of this part of the First Education Project has been considerably delayed due to the difficulties experi- enced by UNESCO in recruiting the necessary staff. However, the team of specialists in education planning is now in the field and it is expected that the education plan will be completed by December 1975. 31. While the long-term education plan has yet to be ccmpleted, the Government considers that the proposed project should be implemented in order to pursue its urgent economic development objectives. It recog- niazes that basic education must be provided to a much higher proportion of the population as a first step in improving the productivity of both the rural and urban sectors. Accordingly, the Government intends to broaden the opportunity, especially in rural areas, for children to have at least four years of primary schooling, which is considered the minimum for attaining permanent literacy. 329 The national targets are that, of the children entering the first year of primary school by 1983, 74 percent in urban areas and 68 percent in rural areas should complete primary education. The location of new schools is to be planned in consideration of population densi- ties to ensure that maximum coverage is obtained. In the rural sector, school administration is to be decentralized by forming "nuclei" con- sisting of one central school offering up to eight grades of education  - 10 - (six of primary plus two of secondary), surrounded by several feeder schools offering six grades of schoolinig, which in turn would be surrounded by schools offering only the first four grades. 33. A significant and. lasting improvement in productivity, and a substantial reduction of the unemployment problem which faces the Domi- nican Republic, can only be achieved if work-oriented training is both broadened in scope and extended. To this end the Government has decided to emphasize nonformal vocational training for agricultural activities and industrial trades. In rural areas this is to be done chiefly by extending farmer training programs already offered by the Secretariat of Agriculture. For industrial trades, vocational training programs already available would be strengthened and expanded., and. it is pro- posed that their administration be centralized.so as to ensure that training provided.corresponds to needs and that proper standards are achieved. Bank Group Role in Education 31L. Credit No. 235-DO of US$ h.C million was approved on November 21h, 1^-70 for the First Education Project, the general objectives of which are to (i) initiate a reform of secondary education in order to improve its quality and relevance (paragraph 25 describes the nature of the reformed secondary education curriculum) and (ii) expand primary and secondary teacher training facilities which are insufficient to meet requirements (see paragraphs 24 and 27)e Technical assistance to prepare the previollsly mentioned long-term education plan, strengthen education administration and school organization and. for improvirng teaching methods is also being provided. 3ff.. A Project Unit was created within the Secretariat of Education to -mpiem-ent the project. It is functioning effectively and implementa- tion is proceeding satisfactorily. School construction is proceeding well and it is expected that all schools will be in operation in 1975, as scheduled. 36. The Second Education Project is a natural extension of the First insofa2 as primary- and secondary education are concerned. The teacher training facilities established under the First Project will make the primary school extension canponent of the Secorld Project possible. The secondary school component of the present project is an extension of the curriculum reform program started under the First Project, The National Vocational Training Scheme to be established under the Second Projec' is new, and has been included in consideration of its relevance to the Government's overall. econonic development goals, Under terms of the proposed Loan, the Government and the Bank would periodically review the Borrowerts education policies (Section 4.07 of the Draft Loan Agreement). These reviews would give the Bank the opportunit'y to discuss with the  Government such matters as teacher salaries, the availability of teaching materials and others which might constitute obstacles to the smooth devel- opmeent of primary and secondary education, and vocational training. PART IV - THE PROJECT 37. Sectoral work in preparation of the proposed project was carried out by a UNiESCO mission in August 1973. Ibitial discussions with the r,Overn- ment on the possible composition of a Second Education Project were held during April 1974 when a reconnaissance mission agreed with the Govern- ment on the possible items to be included. Preparation of the project was concluded by the Government with WUESCO assistance in June 1974. The project was appraised in July 1974 and negotiations were held in Washington on March 11 and 12, 1975. The Dominican Delegation was headed by the Secretary of State for Education, Arts and Religion and included the Secretiary of State for Agriculture and the Supervisor of Labor Schools as well as other representatives of the Ministries of Education and Agriculture. Annex III of this report summarizes the project and loan. An Appraisal Report (No. 676A) is being circulated separately to the Executive Directors. 3$. e The proposed Second Education Project would provide for (i) ex-panding and improving education and training opportunities in rural areas by establishing Rural Community Learning Centers, which would offer forral and nonformal education and training to both children and adults; (ii) agricultural training centers to serve farmers and other adults in rural areas; (iii) extending the reformed curriculum from 5 percent to 20 percent of the students enrolled in secondary education; (iv) expand- ing and improving vocational training facilities to meet the Dominican Republicls need. for skilled and semi-skilled manpower; and (v) technical assistance for implementing the vocational training program, for feasibi- lity studies on the development and production of books and teaching aids for both primary and secondary schools and for the preparation of a possible Third Education Project. '-. The 204 Rural Community Learning Centers would be grouped into 15 nuclei, each covering about 10,000 inhabitants in the most disadvantaged rural areas of the country. Miost areas have a recognized agricultural development potential. About 90 percent of 7-14 age group children in these areas could be enrolled in two shifts and no center would offer fewer than four years of primary schooling. Centers offering six grades o f schooling would have a workshop with simple tools for practical train- ing. To reduce the number of repeaters, automatic promotion would be introduced from grades one to four and from grades five to six. The Rural Community Training Centers would also be used to provide nonformal education and traiining to youths and adults. Accelerated primary educa- tion courses and short training courses in trades (plumbing, carpentry, farm machinery operation, etc.) would be offered.  - 12 - 40,e The four new Agricultural Trai.nirig Centers lfould be located in areas in which irrigation projects are being implemented and new crops are being introduced. The Centers would offer short courses in new agricultural production techniques to farmers and in health, nutrition., home management and family planning to women. A total of about 5,000 people would.be trained. annually. These Centers would also function as information points for agricultural credit and devel- opment and serve as centers for communiity self-help activites. 1*1. To assist the Government extend secondary education reform, equipment would be provided for science laboratories and industrial arts and home economics workshops in 14 existing lower secondary schools. Books and audio-visual aids would. be provided. 42. Two new Vocational Training Centers would be constructed in the north-central part of the Republic, which does not have such train- ing centers at the moment, and equiprment would be provided for the five eaisting centers in the South. All would be equipped to provice full-time training courses in 28 diverse occupations in mechanical, electrical, construction and service activities. They would also offer upgrading courses in the evening to employed.workers. Full-time courses would be of 20 weeks duration and upgrading courses would vary from 60 to 120 hours. Eight mobile training units would be provided under the project, the function of which would be to mak;e upgrading courses avail- able in towns too small to justify permanent training centers. The mix of occupations covered by the vocational training program would be based on occupational analyses and adjusted from time to time as required. Standards for the relevant occupations would be established, proficiency tests carried out and certificates would.be awarded.. Assur- ances were obtained during negotiations on the structure and execution of these programs (Section 4.06 of the Draft Loan Agreement). Project Execution and Operation 143. The project unit established in the Secretariat of Education f'or the execution of the First Education Project would also be respon- sible for supervising and administering the implementation of the physical aspects of the Second Project and for coordinating the activ- ities of the other Government agencies involved in the operation of the new facilities. In order to improve the Project Unitts capacity to supervise implementation, and to strengthen coordination between the mai.n Government agencies concerned with operation of the facilities, assurances ifere obtained. from the Government during negotiations that an additional architect and educator, both acceptable to the Bank, would be appointed to the Project Unit and that liaison officers of the Sec- re'tariat of Agricul ture and. the Office of Labor Sch-Gols would be named for the Unit, all within a period of three months of signing the Loan Agreement (see Section 3.05 of the Draft Loan Agreement).  - 13 - LL1. The general adninistration cf the Rural Connunity Learnin.- Centers, and of the primary education programs included in the Proeect, would be the responsibility of the Secretariat cf Education. 15. The decentralized approach to rural education will require the appointment of Nucleus Directors who will have the responsibility of sunervising formal education programs and coordinating nonformal programs. Assurarnces were obtained during negotiations that the Government would select these directors according to criteria accept- able to the Bank and establish a salary level for them commensurate with their responsihilities; their salary level would in no case be lover than that, of urban primary school directors (Section 4.05 of the Draft Loan Agreement ) Assurances were also obtained that only qual- ified primary teachers would be appointed to the positions created by the construction of Rural Communit- Learning Centers (Section 4.0L (b) of the Draft Loan Agreement). .' . Primary- school teachers will be trained in the teacher train- ing institutions being completed under the First Education Project, but in order to ensure that sufficient qualified. primar7y school teachers are available for the Rural Community Learning Centers, upgrading courses, including courses in multigrade teaching -techniques, would be provided under the project. Assurances were obtained during ne:-otiations that the Government would establish such courses by March 1976 (Section h.0L (a) of the Draft Loan Agreement). Since qualii'Jed teachers are paid about 4CI percent more than unqualified teachers, there will be sufficient incentive for teachers to seel: qualifi cations. Duringt negotiations assurances were also obtained that the programs implemented in the Rura.l Community Learning Centers would be evaluated on a regular and continuous basis (Section L.0i4 (c) of the Draft Loan Agreement), 71. Non-formal education and training prograrms provided through the 1Lral Community Learning Centers would be coordinated by the Adult Education Department of the Secretariat of Education, and would be off'ered with the assi.stance, in their respective fields, of the Office of Connnunity Development (ODC), the Secretariat of Agriculture, the Off'ice of Labor Schools and the Secretariat oi' Health. Responsibility for operating the Agricultural Training Centers would be with the Department of Research, Extension and Training of the Secretariat of Agriculture. Each Center would have a Manager and an Assistant Manager, both of which would be agricultural graduates wEith f'ield ex.perience. The Secretariat of Agriculture is receiving ade- quate technical assistance from FAO, IDB, USAID and the Inter-American Institute of Agricultural Sciences for implementing agricultural train- irng programs.  - 14 - 149. The extension of the reformed secondary school curriculum would be implemented by the Secretariat of Education. Teacher re- quireements would.be met from among trainees completing ongoing teacher training programs: vocational subject teachers are being trained urith the assistance of a specialist financed. under the first Education Project and. science teachers are being trained at three universities with UNDP/UNESCO assi.stance. 50. The Vocational Training Centers would be administered by the Office of Labor Schools which would. be reorganized for the purpose with Technical Assistance provided under the project. The institutional structure and. sources of finance for the national. vocational training scheme would be established in a form acceptable to the Bank as a condition of disbursement of funds for the voca- tional training component of the project (paragraph 4 (ii) of Schedule 1 of the Draft Loan Agreement). Agreement on the main features of the vocational training component was reached with the Gcvernment during negotiations. Recurrent Costs Related to the Project 51. Project related. recurrent costs would amount to US$ 1.4 million a year by 1978 when the new institutions and programs are in operation. While this expenditure is only estimated to amount to 2.L percent of public current expenditure in education by that date, ard should be borne without difficulty, assurances were obtained during negotiations that the Government would. provide sufficient resourc.es to satisfactorily carry out all programs under the project (Section 4.03 of the Draft Loan Agreement). Project Costs 52. Total project costs are estimated at US$ 13.5 million, in- cluding physical contingencies of US$ 1.0 million and price contingen- cies of US$ 2.9 million. The foreign exchange cost is estimated at US$ 7.6 million, including contingencies. A Bank loan of US$ 8.0 million is recommended to cover the foreign exchange cost of the pro- ject and about UtS$ 460,000 of school furni1ture which local suppliers are expected. to win under international competitive bidding. The balance of project costs, 'estimated at about Us$ 5.5 million, would. be provided from the Central Government's budget (Section 3.01 of the Draft Loan Agreement). Prccurement and Disbursements 53. Contracts for furniture and equipment would be awarded. under international competitive bidding according to Bank guidelines. Local manufacturers would be allowed a preferential margin of 15 percent of  - 15 - the c.i.f cost of competing imports or the current applicable import duty, whichever is lower. Contracts would be grouped to form sizable packages to benefit from the advantage of bulk purchasing. However, items which could not be grouped in packages of at least US$ 5,000 would be purchased in accordance with the Borrower's normal procure- ment procedures, which were found acceptable for this purpose during appraisal, but such items would not in the aggregate exceed US$ 320,000, or 10 percent of the cost of furniture and equipment. 54. Architectural design work would be assigned to consultant firms acceptable to the Bank. Because of the small amounts involved and dis- persion of the project schools, contracts for civil works would be awarded on the basis of competitive bidding advertised locally and in accordance with local procedures satisfactory to the Bank. Contractors would be prequalified and invitations to prequalify would be advertised locally. 55. Disbursements would cover 35 percent of the cost of civil works and furniture, 100 percent of the foreign exchange cost of equipment and 10C percent of the cost of professional services, technical assistance and training abroad, teacher training, feasibility studies, preparation of a possible third project and project administration costs up to US$ 50,0CC). The latter would include supplementary salaries for tyhe ProLEct.Unit Director and Educator and up to US$ 26,000 for office furniture and equipment. Project Justification 56. The proposed project is aimed at helping resolve some of the Dominican Republic's most basic development problems: inequities in the education opportunities offered to the rural and urban population; low degree of participation, due to lack of basic education, of a large proportion of the population in the development process which has been taking place over the past few years; and the low productivity of the labor force due to lack of training in skills which are elementary to the development of agriculture, industry, construction and the services. 57. Unemployment and under-enployment are high in the Dominican Republic and, though other factors are at play, this is in great measure due to the inefficiency of the education system which has failed to prepare the mass of the labor force for productive work which could be rewarded by the market. By extending basic education, making secondary education more work-oriented and extending vocational training, the project would not only contribute to increasing productivity but would set the stage for an improvement of income distribution. PART V - LEGAL INSTRUXENTS AND AUTHORITY 58. The Draft Loan Agreement between the Dominican Republic and the Bank, the Report of the Conmittee provided for in Article III, Section 4 (iii)  - 16 - of the Articles of Agreement and the text of a draft resolution approving- the proposed loan are being distributed to the Executive Directors sepa- rately. Besides the specific features mentioned elsewhere in the report, the Draft Loan Agreement conforms to the usual pattern of loans for educa- tion projects. 59. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMK01DATION 60. I recoimmend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments April 17, 1975  ANNEX I Pa-ge 1 of 3 Pages COUNTRY DATA - DOMINICAN REPUBLIC ARKA POPULATION LENSITy 48,734 k- 4.2 ~ill,o,i (7dc-l`72) 232 /a Per ket2of arable land - SOCIAL INDICATORS Raferenca Countries Domi.nican Republic aHi 5 ONiP PER CAPITA UiS$ (ATIAS BASIS) aI 310 /b 470 Ic 470 /c Sio In 1,210AI DECM0RAPHIC Crude brth rate (Par thousand) 37 40 /d 46 /d 35 Ia 20 Crude death rats (par thousan.d) 9 6 7- 17Mf 7- Safest mortality rate (per thousad live births) 101 So HE 45 7;e 26IA 28 Life axpectanry at birth (years) 58 ..50 7; 69 - 70 Gross reproduction rate Z2 ..3.5 3.3 Id 2.5 1.4 Population growth rate aT 3.6 2.8 Ijf